TMI Tax Updates - e-Newsletter
June 3, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Whether the income by way of return on ‘equity’ accrues to the assessee from day to day, i.e., on the basis of the holding period, for each previous year comprising the holding period, or shall accrue only on the sale of shares, i.e., on the exercise of the put option or, equivalently, call option by AT & T Global - income to be computed @ 11% p.a., compounded annually with reference to the date of the investment- AT
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Income Tax:
Levy of penalty under section 272A(2)(k) - TDS return not filed within time - Since the levy of penalty is not mandatory in each and every case and depends upon facts of the case, therefore, considering the explanation of the assessee, levy of penalty set aside - AT
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Income Tax:
Royalty - Existence of Permanent Establishment in India - TDS liability - software purchase - assessee during the relevant period prior to the insertion of explanation 4 to section 9(1)(vi) of the I.T. Act, was not liable to deduct TDS - AT
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Income Tax:
Addition of capitation fees/donation made on protective basis in the hands of the assessee - Since the additions has been made in the hands of another person, no addition to be made in the hands of assessee - AT
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Income Tax:
Assessee was liable to TDS u/s 195 while making payment thereof, since the export activities have been fulfilled in India, source of income was located in India and not outside India, and the mere fact that export proceeds emanated from persons situated outside India did not constitute them as source of income - AT
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Income Tax:
The provision of Section 43B overrides the method of accounting consistently followed and provides for the deduction of statutory liabilities in the year of payment irrespective of the year in which the liability is incurred. - AT
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Income Tax:
The assessee has failed to prove the transaction to be genuine and also failed to establish the capacity of the creditors to advance loan to the assessee. - Additions u/s 68 confirmed - AT
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Income Tax:
TDS u/s 195 - payment to abroad (USA / UK) of communication charges, commission charges, legal and professional charges, marketing & selling charges and business development charges - Not liable to TDS - AT
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Service Tax:
Waiver of penalty is pleaded as the penalty under Section 78 ibid has been imposed and for an option to pay 25% (reduced) mandatory penalty under Section 78 ibid as the option was not given at the lower levels. - Levey of penatly in excess of penalty u/s 76 set aside- AT
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Central Excise:
The case is established against the appellants at least on the yardstick of preponderance probability. Revenue is not required to prove its case with mathematical precision specially in cases involving deliberate and well-thought out modus operandi to evade duty. - AT
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VAT:
Disallowing the input tax credit on capital goods - KVAT - There is no provision under the Act and Rules to carry forward the rejected input tax credit to the subsequent year. The claim made by the assessee is not in consonance with Section 12 of the Act read with Rule 133(e) and the proviso thereto. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (6) TMI 105
Reopening of assessment - disallowance under section 40(a)(ia) - Held that:- Tax audit report not only contains all necessary information but gives an insight into the business and financial affairs of the assessee for the relevant financial year. Therefore, tax audit report is not only the primary and most important document but is the foundation on which assessment proceeds. That being the case, it is totally unacceptable that the Assessing Officer at the time of completing original assessment has not examined the tax audit report. On the contrary, presumption should be, at the time of completing original assessment, the Assessing Officer must have examined the tax audit report. Even otherwise also, if the Assessing Officer at the time of original assessment failed to examine the information contained in a document having statutory forces, the assessee cannot be penalized for such lapse on the part of the Department with re–opening of assessment. Thus, in absence of fresh tangible material there cannot be formation of belief in vacuum for re–opening the assessment under section 147 of the Act. Therefore, re–opening on mere reappraisal / review of material already considered at the time of original assessment tantamount to change of opinion and review of the order passed earlier. For this reason alone, impugned assessment order deserves to be quashed. As far as merits of the issue are concerned could be seen it is clearly evident that the payment of ₹ 8,79,32,213 by the assessee to RPPL is towards reimbursement of expenditure incurred on behalf of the assessee and not towards fee for managerial services. What RPPL received from the assessee towards services rendered is service charges of ₹ 8,79,322 being 1% of the actual expenditure. It is seen from the material placed on record that RPPL has raised two separate debit notes i.e., one for ₹ 8,79,32,213 towards advertisement expenses incurred on behalf of the assessee and another of ₹ 8,79,322 towards service charges. It is also evident, on the service charges of ₹ 8,79,322 paid to RPPL assessee has not only deducted tax at source but RPPL has declared such amount as its income. Therefore, in the aforesaid facts and circumstances of the case, when it is evident that the payment made by the assessee to RPPL is towards reimbursement of cost of expenditure incurred on behalf of the assessee such payment cannot be subject to deduction of tax. Consequently, no disallowance under section 40(a)(ia) can be made. - Decided in favour of assessee
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2016 (6) TMI 104
Disallowance u/s 14A - Held that:- Disallowance made by the Assessing Officer without recording any satisfaction as required by the mandate of Sub Section (2) of Sub Section 14 A of the Act cannot be held as sustainable. Disallowance u/s 14A when no exempt dividend income was received during the period under consideration - Held that:- In this case in hand neither the A.O nor the CIT(A) has controverted this fact that the assessee has not earned and claimed any exempt dividend income during the year. At this juncture, it would be relevant appropriate to consider the ratio of the recent decision of Hon'ble High Court of Delhi in the case of Chemnivest Ltd Vs. CIT(A) (2015 (9) TMI 238 - DELHI HIGH COURT) wherein their lordships speaking for the jurisdictional High Court held that when no exempted income was earned by the assessee in the relevant assessment year, and since the genuineness of the expenditure incurred by the assessee in not in doubt then no disallowance could be made u/s 14A of the Act. - Decided in favour of assessee
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2016 (6) TMI 103
Non-competition fee paid - whether was revenue expenditure or capital expenditure? - Held that:- The non-competition agreement entered into by the assessee with M/s KHPL was to prevent K.Raghu Ramakrishna Raju from establishing a power plant in Andhra Pradesh for a period of three years. The agreement, in the present case, prevented Sri K.Raghu Ramakrishna Raju from establishing a power plant only for a period of three years from the date of the agreement. The restrictive covenant was neither permanent nor was the advantage derived by the assessee therefrom of an enduring nature. The Tribunal was, therefore, justified in holding that the assessee did not acquire any capital asset by making payment of a non-competition fee; and it merely eliminated competition in its business for a while thus to be treated as revenue expenditure - Decided in favour of assessee.
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2016 (6) TMI 102
Disallowance u/s 14A on interest expenditure - Held that:- We find that the Commissioner of Income Tax (Appeals) has given a finding to the effect that during the year, no new investments in mutual funds and shares, were made by the assessee as the investments as on 31/03/2011 which stood at ₹ 6.78 crores was reduced to ₹ 6.75 crores as on 31/03/2012. He further gave a finding to the effect that the assessee had shown profits after tax in the financial years 2008-09, 2009-10 & 2010-11 at ₹ 4.74 crores, ₹ 5.36 crores and ₹ 3.77 crores respectively and therefore, it is the normal presumption that the investments were made by the assessee in mutual funds and shares, out of its own funds. The Department has brought no material before us to controvert the above findings of the Commissioner of Income Tax (Appeals) therefore, we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) which is confirmed and the ground of appeal of the Revenue against the deletion of disallowance of interest expenditure under sec. 14A is dismissed. Disallowance under the head ‘administrative expenses’ under sec. 14A - Held that:- Departmental Representative could not bring any material on record to show that the 0.5% of the administrative expenditure worked out under sub-part (iii) of sub-clause (2) of Rule 8D on the basis of average value of the investment income from which does not form part of the total income as appearing in the balance sheet as on the first day and in the last day of the previous year was more than ₹ 2 Lac. We find that the Assessing Officer while calculating the disallowance for administrative expenditure has taken the average value of total investments as appearing in the balance sheet as on the first day and in the last day of the previous year, hence, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) which is confirmed and the ground of appeal of the Revenue is dismissed. Computation of book profit under sec. 115JB - Held that:- In view of the specific provision in sec. 115JB of the Act which states the book profits shown in the profit & loss account is to be increased by the amount of expenditure relatable to any income to which secs. 10, 11 or 12 apply, the order of the Commissioner of Income Tax (Appeals) has to be reversed and the ground of appeal of the Revenue has to be allowed. Accordingly, we set aside the order of the Commissioner of Income Tax (Appeals) and allow this ground of appeal of the Revenue.
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2016 (6) TMI 101
Rejection of books of accounts - estimation of income - Held that:- In earlier years, Assessing Officer have accepted the books of account and disallowed certain portion of expenditures upto assessment year 2008- 09. Therefore, there is no problem in accepting the opening figures etc. in the later years. But assessee has accepted rejection of books of account, similarly audited, in the immediately preceding year, whose entries are carried over to this year, like certain work in progress, etc. Once books of account in that year was rejected, consequently on same reasons this year also, books are to be rejected as the same cannot be relied on. Assessee cannot approbate and reprobate on the same facts situation. The estimation can be done at 12.5% and thereafter depreciation and interest can be allowed depending on facts or the net profit can be estimated at 8% on the works undertaken. On sub-contract works, it is generally at 5% which was not disputed in many cases.As already stated, Assessing Officer has estimated the incomes at the same rate not only generally accepted in various cases relied on, but also in the immediately preceding year which assessee has accepted. Keeping these in mind, we do not find any reason to differ from the order of Ld. CIT(A), which is in tune with the various orders of this forum. - Decided against assessee
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2016 (6) TMI 100
MTA including the exclusion of interest income for the purpose of computing the ALP - Held that:- It was not the case of the TPO that surplus funds of the company were parked with the bank, that the advance received against the exports were immediately placed in FDR with the bank for the purpose of taking letter of credit in favour of the overseas sellers. A perusal of the balance sheet of the assessee reveales that the reserve and surplus of the assessee for the year under consideration was at ₹ 63. 06 crores. Therefore, it could not be said that the surplus funds were parked in the FDRs to earn interest income. It is a fact that import/ export of the goods did not take place from or to India and the assessee came into picture to participate in the trading of international trade documents only. The participation by the assessee at a particular juncture resulted in earning of interest income which would not have been earned if the trade would have taken place completely and directly outside India. In our opinion, the interest income was an inherent an integral part of the assessee is business activity and same was rightly considered as an operating income for the purpose of calculation of operating margin, by the FAA. So, we endorse the views of the FAA that the interest income emanated from MTA and that same could not be excluded from calculating the operating margin of such activities for the purpose of section 92 of the Act. Thus held that the assessee’s international transactions of MTA were at arm’s length - Decided in favour of assessee Addition with regard to import of raw material and related issues including the treatment to be given to the segmental accounts - Held that:- TPO had made an adjustment of ₹ 48. 65 crores to the entire segment of manufacturing activities instead of making the adjustment to only international transactions, that it had an effect of reducing the import price by 54. 27%, that the FAA had reworked the adjustment after considering the extra ordinary items that would affect the profit margin of the assessee for the year under consideration, that the factors like underutilisation of capacity and non-operating expenditure was given due importance by the FAA, that the assessee had he calculated revised margin of the 20 comparables selected by the TPO, that the arithmetic mean arrived at by the assessee was not considered by him, that FAA had held that TPO was incorrect in not considering the revised caL/Culation of margins, that the FAA had objected to the treatment given to the six comparable where the TPO had not taken the segments based on their economy profile, that the FAA had mentioned that revised margin (1. 07%) had to be adapted for determining adjustments and the resultant ALP. In our opinion, the TPO was not justified in making adjustment to the entire segment of manufacturing activity and not restricting the same to the international transactions. We find that while reworking the adjustment, the FAA had taken the margin at the rate of 2. 36%. We find that the assessee had not filed any application before the FAA pointing out the apparent mistake in adopting the revised margin i. e. adopting the rate of 2. 36% instead of rate of 1. 07%. Considering these facts, we are of the opinion that matter should be restored back to the file of the AO/TPO to verify the fact and decide the value of the adjustment by taking appropriate revised margin rate Treatment to interest income as business income - Held that:- Placing of money in the banks in the forms of FDRs was directly linked with the carrying out of business of the assessee. We further find that interest income and by the assessee has been accepted to be taxable under the head income from dismiss a profession in the earlier as well as in the subsequent AY. s i. e. AY. s. 2003-04, 2004-05, 2008-09 and 2011-12. The AO has not brought anything on record to prove that the facts of the earlier and subsequent years were different from the facts for the year under consideration. The rule of consistency stipulates that in absence of distinguishing facts and circumstances, the AO should not deviate from the stand taken/followed in the earlier years. Allowability of expenditure on non-compete fee - Held that:- Expenditure incurred under the head non-compete fee is to be treated as capital expenditure, that same is eligible for depreciation. Disallowance of market research expenses - Held that:- We are of the opinion that the expenditure incurred by the assessee on market research was a revenue expenditure and that it could not be treated capital expenditure Disallowance of expenditure incurred on land and site development - Held that:- As no further amounts were incurred during the previous year relevant to AY. 2006-07, that the onus was on the appellant to produce evidence if it claimed deduction on any item that same was not produced, that it had made general arguments without any reference to specific material data or evidence. Thus we confirm the disallowance. Disallowance of premium on payment of leasehold land - Held that:- A lump sum was paid at the time of obtaining a lease. We are of the opinion, that it is a capital expenditure by its nature itself. The lease was for a period of twenty years. So, we are not inclined to disturb the findings of the FAA and hold it to be a capital expenditure. However, we want to allow the alternate claim made by the assessee i. e. allowing depreciation as per the provisions of section 32 of the Act Disallowance of provision towards obsolete stores - Held that:- We find that though the assessee had claimed that it had followed a scientific method with regard to the obsolete stores, but it has not furnished any documentary evidence before the AO or the FAA or even before us. Making a claim is not sufficient it has to be backed by hard core evidences. In the case under consideration, the assessee has made only a provision. Historical data or analysis which could have tilted the scale in favour of the assessee, is not available. Therefore, we are of the opinion that the FAA had rightly upheld the order of the AO. The was not able to rebut the fact that the amount in question was only a provision. As far as the case relied upon by the assessee is concerned it is found that the assessee in that matter was a government owned company and had changed its method of valuation as per the directions of the C&AG. The facts of the present case are totally different. Disallowance confirmed Disallowance of expenses being provision made for Employee Stock Option Plan(ESOP) - Held that:- We find that the issue of allowability of expenditure related with ESOPs has been deliberated upon and discussed extensively in the case of Biocon Ltd [2013 (8) TMI 629 - ITAT BANGALORE]wherein held that once it is held as a consideration for employment, the natural corollary which follows is that such discount (i) is an expenditure (ii) such expenditure is on an ascertained (not contingent) liability and (iii) it cannot be treated as short capital receipt. In view of the foregoing discussion, we are of the considered opinion that discount on shares under the ESOP is an allowable deduction
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2016 (6) TMI 99
Accrual of income - nature of income - whether right to receive the return (or income) on the shares had accrued to the assessee during the relevant year? - irrevocable option to sell these shares at the option price to AT & T Global (or its affiliates), which had the right to first refusal. The option by either could be exercised on or after three years of investment or the elimination of the Indian Government regulation on foreign equity holding levels, whichever is earlier. The option price for the purpose of the afore-said purchase and sale is defined as the equity contribution plus return at 11% p.a. compounded annually on the said contribution over the period of holding. - The assessee-company is also entitled to, besides option price, so determined, what is termed as ‘call option fee’, on each anniversary of the capitalization date @ 5.5% of its equity contribution. - whether the income by way of return on ‘equity’ accrues to the assessee from day to day, i.e., on the basis of the holding period, for each previous year comprising the holding period, or shall accrue only on the sale of shares, i.e., on the exercise of the put option or, equivalently, call option by AT & T Global Held that:- The transfer of shares in the manner including the price determined there-under, is made the essence of the agreement, so that any contravention thereof constitutes a breach thereof, which may result in its termination. The assessee-company, which has no right to management, cannot sell, assign, transfer or otherwise dispose of its’ shares (or interest therein) in any manner, or otherwise encumber the same in any manner. The assessee’s investment in shares, has to be considered in conjunction with the said agreement, being in fact itself only pursuant thereto, i.e., having regard to the reality and the entirety of the facts and circumstances of the case. The same, as evident, is qualitatively very different from the shareholding of, or the rights as a shareholder of, AT&T. The provision of ‘call option fee’ and ‘compounding’ in the Agreement are considered inconsistent with investment in shares proper. It is the substance that is to prevail over form. The arrangement is accordingly found to be the only a manner of investment, akin to a financing arrangement, yielding return (income) as a function of time. No doubt or uncertainty with regard to the realization or the ultimate collection of the income – by way of option price on transfer of shares, obtaining (i.e., reckoned in a realistic manner), the income (by way of return on investments in shares) is found to have accrued by way of inflow of or giving rise to a receivable. The arrangement is in fact – AT & T not requiring any financer, but entering the arrangement all the same only to comply with the GOI policy as to a cap on the foreign equity participation in the telecom sector for the time being, not even a financing arrangement. The agreement and the rights accruing thereby was further examined from the stand point of and in the light of a provision of the compound rate of return (on annualized basis – so that the same increases in geometric progression with time); discounting for net present value, only to find further endorsement of the said view and, further, of not impacting the valuation (of the right to receive) or the accrual of the income in any manner. Even de hors the character of the arrangement as a financing arrangement or any other, the nature of the investment would not be of much consequence as long as there is accrual of income in the facts and circumstances of the case, i.e., by way of right to receive – a receivable, resulting in a debt, realizable even if in future. The fact that the income is realizable as a part of the sale price of shares, i.e., an investment by the assessee, a investment company, as a part of and in regular course of its business, to fetch return, i.e., along with redemption or liquidation of the investment, as only representing the form in which the income, imbedded in the increased share value, is realized. The same is only a manner of realization of the income, since accrued, as is the case (in other common day examples of) with interest on (cum) debentures or Bank FDR, etc. and, thus, by itself of little moment. Could it be material, one may ask, if the interest of Debenture or FDR stands to be received, over the tenure of the investment, separately, or along with redemption of the investment? The increase in the share price to the defined extent would arise irrespective of the performance of the company during the holding period or its’ intrinsic value (net worth) at the time of transfer of shares. Would it therefore matter even if (say) some management rights were also attached to the shareholding – which we observe as not. In our view – not. The investment is in a private company, shares in which are severely restricted for transfer, making it highly illiquid, i.e., but for the arrangement, in pursuance to which only in fact the investment in shares stands made. That is, considerable uncertainty would otherwise exist as to the realizability of the income. The income being also in agreement with the matching principle of accountancy, also judicially approved, is thus found to accrue from year to year, i.e., on time basis and, thus, for the relevant year. The same, further, is only by way of business income, i.e., as assessed, on which we again observe no dispute; rather, the two returns ensuing on investment, i.e., by way of call option fee (returned and assessed as business income) and the annualized return (over the holding period), found to be para materia, forming part of an integrated revenue model and, further, only in the nature of interest income as defined both in the accountancy as well as by statute. There is no law that interest could be assessed only as ‘income from other sources’, partake as it does its’ character from the underlying transaction from which it arises (CIT vs. Govinda Choudhury [1992 (4) TMI 8 - SUPREME Court ]. The case law cited stands also considered, only to find the same to be in agreement with the view expressed herein, confirming the stand of the Revenue, being essentially a question of fact, to be determined on an appreciation of the facts of the case, with the law being well settled. Finally, we observe the income arising has not been worked out by the A.O. in the manner provided for in the agreement, i.e., @ 11% p.a., compounded annually with reference to the date of the investment. The A.O. shall do so, of-course after allowing opportunity to present its working with regard thereto and consider the same. We consider ourselves competent to issue such a direction - Decided against assessee.
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2016 (6) TMI 98
Disallowance of interest paid up by applying the provisions of section 36(1)(iii) - Held that:- In the present case, there is no dispute about the fact that the amounts have been advanced to the wholly owned subsidiaries of the assessee company and there is no fact brought on record by any of the lower authorities that the amounts have been used by these subsidiary companies for any purpose other than their business purposes. In view of this, we are inclined to hold that the amounts given to subsidiary companies were on account of commercial expediency. Therefore, no disallowance invoking the provisions of section 36(1)(iii) of the Act can be made in this case. - Decided in favour of assessee TDS u/s 195 - Disallowance u/s 40(a)(i) - payment of communication charges, commission charges, legal and professional charges, marketing & selling charges and business development charges - Held that:- In the present case, this is not in dispute that the amount is not received or deemed to be received in India. The second situation under which the receipt of non-resident is taxable is if the income accrues or arises or is deemed to accrue or arise in India. Undoubtedly, in the present case no income has accrued to the nonresident person in India. The dispute may be only with regard to the impugned amount being income 'deemed to accrue or arise in India'. Various instances of income considered to be deemed to accrue or arise in India to a non-resident are provided in section 9 of the Income Tax Act. On going through the relevant article provided in the DTAA, we observe that invariably in all the DTAAs to which we are concerned, the income is taxable in India only if that foreign entity carries on business in India through a permanent establishment situated in India. We again observe that no such finding with regard to existence of any permanent establishment in India has been brought on record by any of the lower authorities or even by the learned D.R. at the time of hearing before us. In view of this, the position emerges that the payment to a person who happens to be a resident of country with whom India has entered into DTAA and where the business profits are taxed only in the country and does not have a permanent establishment in India, the said payments are not chargeable to tax in India. In view of this also, even as per DTAA, the income being not exigible to tax in India in the hands of non-resident entity, the assessee is not required to deduct tax at source. Therefore, the provisions of section 40a)(i) of the Act cannot be invoked. - Decided in favour of assessee Whether the payments are in the nature of 'fees for technical services' or not? - Held that:- All the relevant agreements and invoices were filed before the lower authorities. In view of this, the assessee cannot be punished at this stage without there being any fault of his, specially in view of the fact that even at the time of hearing before us, the learned D.R. could not bring any material or evidence in support of his claimed that the impugned payments were in the nature of 'fees for technical services'. His only argument is that in the absence of the nature of services being rendered by non residents, coming out from the evidence filed by the assessee, the same should be presumed to be in the nature of 'fees for technical services'. No such presumption exists in the Income Tax Act. No such presumption can be raised without any backing material or evidence on record. The argument of the learned D.R. that even if the provisions of DTAA are applied, in the absence of any services coming out from the evidences, it should be presumed that non-residents have 'made available' certain technical services to the assessee, is too farfetched. We are not inclined to entertain such a plea at this stage. In view of this also, we hold that the services rendered by the non-residents are not in the nature of technical services, no income deemed to have accrued to the non-resident entities, there is no liability on the assessee to deduct tax at source on such payment. Therefore, the provisions of section 40(a)(i) of the Act are not exigible in the present case. - Decided in favour of assessee Allowability of payments made to IMCS as per provision of Explanation 1 to section 37(1) - Held that:- In this regard, no clear-cut finding of fact has been arrived at by any of the lower authorities as to what offence or an act prohibited by law has been done by the assessee. Even the Assessing Officer has made just a cursory mention of some search from CBI being carried out at the directors' residence only. Even during the course of hearing before us, no clear facts were stated in this regard. In view of all this, we find it proper to send this limited issue to the file of the Assessing Officer to give a clear finding as to whether the provisions of Explanation 1 to section 37(1) of the Act are applicable to the facts of the case or not. The assessee should be given a proper opportunity of being heard in this regard. We would like to clarify here that the outcome of this ground will not effect our findings on other grounds of appeal, as the issue here is the allowability of expenditure while the other issues are disallowance of expenditure in view of the provision of section 40 (a)(i) of the Act. - Decided in favour of assessee for statistical purposes.
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2016 (6) TMI 97
Levy of penalty under section 272A(2)(k) - TDS return not filed within time - Held that:- The assessee explained that since most of the clients of the assessee -bank did not intimate permanent account number on time, therefore, TDS return could not be filed as per rule which provides that 70 per cent. to 85 per cent. permanent account numbers should be quoted in the e-return for filing the TDS return. Therefore, there appears reasonable cause in favour of the assessee for failure to file TDS return within time. It may also be noted here that penalty order has been passed on September 25, 2012, and, according to the second proviso to section 272A(2), no penalty shall be levied under this section for failure referred to in clause (k), if such failure relates to a statement referred to in section 200(3) or the proviso to section 206C(3) which is to be delivered or caused to be delivered for tax deposited at source or tax collected at source, as the case may be, on or after July 1, 2012. Thus, no penalty is leviable after July 1, 2012, as is specified in the second proviso to the aforesaid section. Since the levy of penalty is not mandatory in each and every case and depends upon facts of the case, therefore, considering the explanation of the assessee in the light of above order in the case of State Bank of Bikaner and Jaipur (2015 (10) TMI 1396 - ITAT CHANDIGARH) and reasonable cause in favour of the assessee, we set aside the orders of authorities below and cancel the penalty. - Decided in favour of assessee
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2016 (6) TMI 96
Royalty - Existence of Permanent Establishment in India - TDS liability - software purchase - DTAA - payment made to M/s. Paradigm Geophysical Pty.Ltd., Australia (Paradigm) for supply of certain Geological and Seismic Data Interpretation Software - Held that:- The purchase orders were made by the assessee for the softwares as mentioned in column No.5, prior to the bringing of amendment vide Finance Act, 2012, though the amendment has been made with retrospective effect from 01.06.1976 By the introduction of the said Explanation 4, computer software has been specifically included in the definition of ‘right, property or information‘ which was never assumed to have been included by any court of law prior to the insertion of Explanation 4 vide amendment of Act of 2012. The Hon‘ble Supreme Court in the case of “Sedco Forex International Drill INC. & Others vs. Commissioner of Income Tax & another” (2005 (11) TMI 25 - SUPREME Court ) has held that if an explanation added to a provision changes the law, then it is not to be presumed to be retrospective irrespective of the fact that the phrase used are ‘it is declared‘ or ‘for the removal of doubts‘. As it is an admitted position that in the earlier years, not only the various High Courts but also the Tribunal in the cases of the assessee has taken a view that the consideration paid for the purchase of the software cannot be treated as royalty; the assessee was, thus, under the bonafide belief that no TDS/withholding of tax was required to be done in respect to said purchases. The assessee had no reason to believe or to foresee a subsequent event vide which the definition of royalty has been extended to include the consideration for the use of or right to use the software has been included in the definition of royalty under the Act. As per the existing law which was in operation at the time of purchase of software, the assessee was under the bonafide belief that there was no liability to deduct tax in respect of the consideration paid for the said purchase of software. It may be further observed that as the definition as was in existence before the insertion of Explanation 4, there was a remote possibility to give a broad interpretation to the definition of ‘right, property or information‘ so as to include the right to use or right for use of the software in the said definition. The Explanation 4 has brought and added a further meaning to the provision which was not supposed to be foreseen by the assessee The co-ordinate bench of the Tribunal in the case of “Rich Graviss Products (P.) Ltd. vs. ACIT” (2014 (9) TMI 165 - ITAT MUMBAI ), while relying upon various other decisions of the Tribunal, has held that the disallowance cannot be made under section 40(a)(ia) on the basis of a subsequent amendment brought into the Act with retrospective effect. In view of this, even otherwise, the Explanation 4 inserted vide Finance Act, 2012 cannot be applied retrospectively to the case of the assessee as the said Explanation 4 has the effect of change in law and the assessee was not expected to foresee such change at the time of making the remittance in consideration of purchase of the software in question. Hence, under such circumstances, even otherwise, the assessee was not supposed to deduct TDS on such purchases. In the light of the law laid down by the Hon‘ble Supreme Court in the case of “Sedco Forex International Drill INC. & Others vs. Commissioner of Income Tax & another” (supra) and in view of the observations made above, we hold that the assessee during the relevant period prior to the insertion of explanation 4 to section 9(1)(vi) of the I.T. Act, was not liable to deduct TDS - Decided in favour of assessee
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2016 (6) TMI 95
Addition of capitation fees/donation made on protective basis in the hands of the assessee - CIT(A) deleted the addition - Held that:- We find that the learned CIT(A) on examination of the composition of the Managing Council of SPM, Pune and the Admission Committee for the period relevant to assessment years 2005-06 to 2011-12 found that the name of the assessee in the case on hand does not appear in any of these two lists of Managing Council and Admission Committee members for the said period. It is also a matter of record that neither was any unexplained/ unaccounted cash found in the personal custody of the assessee in the course of search nor were any unexplained assets found in his case. We concur with the observations of the learned CIT(A) that while the assessee may have had a role to play in the admission process in respect of management seats at 'Welingkar' alongwith several other persons, there was no material evidence brought on record by the AO to indicate that the assessee was solely authorized or responsible for finally deciding the admissions for management quota seats and for receiving the cash as capitation fees and donations thereof. No additions on account of cash receipts as capitation fees/donations for management quota seats for MMS/PGDM courses at 'Welingkar' are to be made in the hands of the assessee in the case on hand for assessment years 2005-06 to 2011-12, since the substantive additions of the same income have been made in the hands of SPM, Pune who have challenged these additions on merits and have not so far challenged their assessments in appeal on the technical issue of in whose hands these additions are to be made and incomes are to be assessed. We also reiterate and uphold here the caveat laid down by the learned CIT(A) that in case the learned CIT(A) at Pune holds that the said income should be assessed in the hands of the assessee in the case on hand and not SPM, Pune, then the AO of Shri Uday N. Salunkhe will issue a show cause notice and can make the substantive assessment in this case after considering the assessee’s submissions in this regard. It is accordingly ordered. - Decided against revenue
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2016 (6) TMI 94
Disallowance u/s.40(a)(ia) - payment made to Central Power Research Institute of Bangalore, Ministry of Power, Government of India - main contention of the ld.A.R is that nothing is payable at the end of the close of the Financial year, as such the issue is squarely covered by the order of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ]- Held that:- There is a force in the argument of the ld.A.R and the Special Bench cited supra considered this issue and decided the issue in favour of the assessee. As decided in Shri N.Palanivelu Vs. ITO reported in [2015 (10) TMI 1415 - ITAT CHENNAI ] if the impugned amount is not outstanding at the end of the close of the assessment year in respect of the expenses either as outstanding expenses or as sundry creditors, this amount cannot be disallowed.In view of the order of the Tribunal, we are inclined to remit this issue to the file of the ld. Assessing Officer with similar direction. These grounds raised by the assessee u/s.40(a)(ia) of the Act is partly allowed for statistical purposes TDS u/s 195 - Disallowance u/s.40(a)(i) on payment made to M/s.Korea Electro Technology Research Institute - withholding tax liability - Held that:- The services availed by the assessee is nothing but technical services and the fees paid for technical services only and the assessee is liable for deduction of TDS u/s.195 of the Act. As decided in the case of M/s.Havells (India) Ltd., [2012 (5) TMI 449 - DELHI HIGH COURT ] wherein held that the fees paid by the assessee to the US Company on account of testing and certification services is taxable in the hands of the US Company in India and assessee was liable to deduct tax at source while making payment thereof, since the export activities have been fulfilled in India, source of income was located in India and not outside India, and the mere fact that export proceeds emanated from persons situated outside India did not constitute them as source of income. - Decided against assessee
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2016 (6) TMI 93
Disallowance made u/s.43B - amount of excise duty paid - Held that:- CIT(A) while deciding the issue in favour of assessee has given a finding that the amount of excise duty paid by the assessee was eligible for deduction in view of the decisions cited in his order. We also find that A.O. in his order has noted that the facts in the impugned year A.Y. 2009-10 are similar to that of A.Y. 2008-09. We further find that the Co-ordinate Bench in assessee’s own case for A.Y. 2008-09, while deciding the appeal of Revenue has decided the issue in favour of assessee by holding that the Section 43B is not restrictive of prohibiting section by the Revenue but it is equally an enabling provision under which deductions are allowed on the payment of duties and taxes. In other words, the provision of Section 43B overrides the method of accounting consistently followed and provides for the deduction of statutory liabilities in the year of payment irrespective of the year in which the liability is incurred. - Decided against revenue
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2016 (6) TMI 92
Addition u/s 68 towards unexplained credits - proof of creditworthiness - Held that:- On verification of the bank statement filed by the assessee, we noticed that the parties have deposited cash on the same day when the money has been transferred to the assessee bank acount. The parties have not explained how a person working in abroad has deposited cash in to the normal savings Bank account maintained in India, when he is not permitted to operate normal bank account in India. Similarly, his wife Smt. G. Vijaya Lakshmi stated to have advanced the loan out of her husband’s savings. On verification of her bank statement, we find that the same day she had deposited cash and transferred the money to the assessee bank account. Except these two transactions, she had not made any substantial transactions in her bank account. We further observed that she has not assessed to income tax and she does not have any source of income to advance loan to the assessee. When she does not have any source of income to justify the loan of ₹ 5 lakhs, the assessee has failed to discharge his initial burden of proving creditworthiness of the parties. The creditors have deposited cash and transferred the same to the assessee bank accounts. Except these two transactions, they are not having any considerable bank transactions in their bank account. Under these circumstances, we are of the opinion that the assessee has not discharged its burden by proving the creditworthiness of the parties. We further observed that although the parties have filed the confirmation letters, the other ingredients of the section i.e. the genuineness of the transactions and creditworthiness of the parties remain in doubtful. The assessee has failed to prove the transaction to be genuine and also failed to establish the capacity of the creditors to advance loan to the assessee. Therefore, we are of the opinion that the CIT(A) has rightly upheld the additions made by the A.O.- Decided against assessee
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2016 (6) TMI 91
Computation of deduction u/s.10A - deduction of travelling expenses in foreign currency and certain other expenses - Held that:- In view of Explanation 2(iv) to Section 10A of the Act, which defines 'export turnover', we are unable to accede to the contention of the Ld. AR that travelling expenditure had to be included in the export turnover for computation of deduction u/s.10A of the Act. However in so far as the claim that amounts which were excluded from export turnover has to be deducted from total turnover as well, we are inclined to agree in view of the law laid down in the case of Tata Elxsi Ltd (2011 (8) TMI 782 - KARNATAKA HIGH COURT ). Accordingly, we direct that such amounts which were excluded from export turnover be excluded from total turnover also while computing the deduction allowable u/s.10A - Decided partly in favour of assessee Adjustment of loss incurred in non-STP units with the profits earned in the STP units before granting deduction u/s.10A of the Act - Held that:- Hon'ble jurisdictional High Court in the case of Yokogawa India Ltd (2011 (8) TMI 845 - Karnataka High Court ) had held that profits eligible for relief u/s.10A of the Act was to be excluded from the total income before giving effect to set off mandated u/s.70 of the Act. . Accordingly, we hold that the claim of deduction u/s.10A of the Act has to be calculated without setting off the loss incurred by the assessee in its non- STP units - Decided in favour of assessee Transfer pricing adjustment - selection of comparable - Held that:- Assessee has to succeed in its pleading for exclusion of the following companies :- Avani cincom Technologies Ltd,Bodhtree Consulting Ltd,Celestial Biolabs,E-Zest Solutions Ltd,Infosys, Kals Information Systems Ltd (seg),Persistent Systems Ltd,Quintegra Solution Ltd,Tata Elxsi (seg),Thirdware Solution Ltd,Wipro Ltd (seg) and Lucid Software Ltd.6. We also find that the above mentioned companies were considered by the Tribunal in assessee's own case for A. Y. 2006-07 were directed for exclusion, due to functional incompatibility. Accordingly we direct exclusion of the above companies from the list of comparables. TPO is directed to rework the PLI of the comparables after excluding the above companies and considering the working capital adjustment and proceed in accordance with law
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2016 (6) TMI 90
TDS u/s 194J OR 194C - service provided by the contractor as technical services - assessee in default u/s 201(1)- whether the contract entered into by the assessee with M/s. Divine Establishment, is one for supply of manpower for execution of works contract attracting TDS provisions of section 194C or is the contract for providing technical services attracting the provisions of section 194J? - Held that:- whether the contract entered into by the assessee with M/s. Divine Establishment, is one for supply of manpower for execution of works contract attracting TDS provisions of section 194C of the Act or is the contract for providing technical services attracting the provisions of section 194J of the Act Once the recipient assessee has paid the taxes on the considerations received from the deductor, than the A.O. cannot hold the assessee as an assessee in default in view of the provisions of section 191(1) of the Act and also in view of the circular issued by the CBDT vide circular no.275/201/95/IT(b) on 29.1.1997. This position has further strengthened by the decision of Hon’ble Supreme Court, in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA ) wherein held that no demand can be visualized, once the assessee proved to the satisfaction of the officer incharge of TDS that the recipient has considered the payment and discharged the tax liability. In the present case on hand, on perusal of the documents available on record, we find that the assessee has furnished the income tax returns on the recipient for the relevant assessment years. The assessee also furnished a certificate from the recipient, wherein the recipient has categorically stated that he has paid the taxes on the consideration received from the assessee company. Therefore, we are of the opinion that the A.O. was not correct in coming to the conclusion that the assessee as an assessee in default u/s 201(1) of the Act. Therefore, we are of the view that on both counts, the demand raised by the A.O. cannot sustain in the eyes of law. - Decided in favour of assessee
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2016 (6) TMI 89
Disallowance being expenditure incurred towards public issue - Held that:- As decided in case of Brook Bond India Ltd. Vs. CIT [1997 (2) TMI 11 - SUPREME Court] expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital, is directly related to the expansion of the capital base of the company and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making. - Decided against assessee. Disallowance being the amount written off as bad debt - Held that:- The assessee had written off ₹ 2,80,000/- as bad debt being the loan given to Mr. Anup Kumar. The learned Assessing Officer disallowed the same because the conditions laid down in section 36(1)(vi) of the Act was not fulfilled. On appeal, the learned Commissioner of Income Tax (Appeals) confirmed the order of the learned Assessing Officer because the assessee did not furnish any details regarding the amount advanced to Mr. Anup Kumar. We also do not find it necessary to interfere with the orders of the Revenue because even before us at this stage, the assessee has not furnished any details in regard to the loan extended to Mr. Anup Kumar. Therefore we are not able to ascertain whether the loan was given during the course of the business of the assessee and for the business purpose of the assessee or due to its credit sale. - Decided against assessee. Disallowance being the amount written off as miscellaneous expenditure - Held that:- We find merit in the order of the learned Commissioner of Income Tax (Appeals) because he has rightly disallowed the expenditure incurred towards issue of share capital because it was incurred towards issue of equity share capital and therefore falls in the field of Capital expenditure.- Decided against assessee. Disallowance being the amount written off as loss on investment - Held that:- No scope to interfere with the orders of the Revenue because from the facts of the case it is apparent that the company has invested in the shares of M/s Money Shopee Network Ltd., and shown under the head investment . Only when such shares are sold, capital gain/loss will arise in the case of the assessee. However in this case before us, the assessee has neither sold the shares nor converted the investment into stock-in-trade. Therefore, we confirm the order of the learned Commissioner of Income Tax (Appeals) on this issue - Decided against assessee. Addition being the Keyman s Insurance Bonus - Held that:- Commissioner of Income Tax (Appeals) confirmed the order of the learned Assessing Officer because as per the provisions of section 10(10D) of the Act, the amount received on the maturity of the keyman insurance policy is taxable along with the bonus received by the assessee company. We find merit in the orders of the Revenue because the provisions of section 10(10D) of the Act specifically excludes any sum received under keyman insurance policy from the income which do not form part of the total income under Chapter III of the Act. Therefore, we hereby confirm the order of the Revenue on this issue.- Decided against assessee.
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2016 (6) TMI 88
Set off interest income with expenditure - non commencement of business - Held that:- Assessing Officer relied on Supreme Court decision of Tuticorin Alkali Chemicals and Fertiliser Limited (1997 (7) TMI 4 - SUPREME Court) were it was held that interest on bank deposits received before commencement of operations of the business should be offered separately as income from other sources. The assessee has acquired the property and also invested in bank deposits further yet to commence its business operations and freehold land was disclosed in schedule of fixed assets as at 31.03.2005 and the assessee incurred general and administrative expenses debited to profit and loss account as the pre-operative expenditure and setoff with interest income cannot be considered. Considering the provisions, financial statements, judicial decisions, written submissions and material papers filed, the action of set off interest income with expenditure is not permitted in the circumstances were assessee has not set up the business or commenced the business and also not submitted commencement of business certificate issued by Registrar of Companies under Companies Act, 1956. We are of the opinion that the ld. Commissioner of Income Tax (Appeals) has elaborately dealt on the disputed issue in confirming the order of Assessing Officer and we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and uphold the same and dismiss the grounds of appeal. - Decided against assessee.
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2016 (6) TMI 87
Levy of penalty u/s.271(1)(c) on the additions made while framing the assessment u/s.153C - Held that:- There can hardly be any dispute about the settled legal position that quantum and penalty proceedings stand on different footing and each and every addition of undisclosed income does not lead to imposition of penalty. We observe in these facts and circumstance that we are dealing with a tax statute wherein levy of penalty by invoking a penal provision after finalization of quantum is not automatic. We view the case from this angle and hold that the present one is an instance where assessee has not been able to substantiate his explanation of having spent the impugned expenditure limit for his employer company for the purpose of the business and also the Revenue has failed to refer to the employer's books so as to negate the same by holding that the very sums have not been claimed as expenditure. We reiterate: that this is a penalty case liable to be strictly interpreted. This factual position leads us to a conclusion that the authorities below have wrongly imposed the impugned penalty u/s.271 (1)(c) of the Act. - Decided in favour of assessee
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2016 (6) TMI 86
Invoking powers u/s. 263 by CIT against claiming deduction u/s. 80P - Held that:- From the facts of the case it is apparent that the ld. Principal CIT has invoked his powers u/s. 263 because the identical issue was pending before the Hon’ble Chennai High Court though the same was decided in favour of the assessee by this Bench of the Tribunal and also by other the higher judiciary. In these circumstances, it can be only considered, as another possible view on the issue. In the case of CIT vs Greenworld Corporation, reported in [2009 (5) TMI 14 - SUPREME COURT OF INDIA] it has been categorically held that the order of the learned Assessing Officer cannot be interfered only for the reason that another view is possible while invoking the powers U/s.263 of the Act by the learned CIT. Relying on the above decision of the Hon’ble Apex Court, we are of the considered view that the ld. Principal CIT is not justified in invoking the powers U/s. 263 of the Act in the relevant case before us. Therefore, we hereby quash the order passed by the ld. Principal CIT. - Decided in favour of assessee
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2016 (6) TMI 85
Addition on unexplained cash credit under section 68 - Held that:- additional evidences are admitted at this stage, therefore, the issue on the merits shall have to be decided afresh by the Assessing Officer because Assessing Officer did not have any opportunity to consider these additional evidences on the merits. We, accordingly, set aside the orders of the authorities below and restore this issue of addition of ₹ 35 lakhs under section 68 of the Act to the file of the Assessing Officer with direction to re-decide the issue of addition of ₹ 35 lakhs on account of unexplained credit in the light of the additional evidences admitted above, with direction to the assessee to produce copies of these additional evidences before the Assessing Officer for final determination of the issue on the merits. The Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Addition of agriculture income - Held that:- The assessee filed the original return of income under section 139 of the Act on October 10, 2008, declaring the agriculture income of ₹ 58,384 and shown the total income at ₹ 14,43,163. The same total income was declared in the return filed under section 153A of the Act on September 5, 2012. The assessee failed to explain how the assessee could have substituted the agricultural income in return filed under section 153A of the Act by increasing the agriculture income. It is an afterthought story created by the assessee after search is conducted in the case of the assessee. The agriculture income declared by assessee now have not been supported by any evidence or material on record and no plausible explanation have been filed why additional agriculture income of ₹ 5,50,000 was not shown in the return of income filed under section 139 of the Act. The assessee never filed any revised return to claim higher agriculture income under section 139 of the Act. Therefore, considering totality of the facts and circumstances, we do not find any merit in this ground of appeal of the assessee. The same is accordingly dismissed. - Decided against assessee
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2016 (6) TMI 84
Reopening of assessment - Addition u/s 68 - bogus cash credit being the cash paid as commission for obtaining accommodation entries - Held that:- After going through the reasons recorded by the Assessing Officer/ITO-4(2), New Delhi, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed - Decided in favour of assessee.
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2016 (6) TMI 83
Validity of assessment u/s 153C - Satisfaction note for proceedings u/s. 153C - Held that:- Exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out. On the other hand, the Assessing Officer recorded the satisfaction in the case of such other person which does not satisfy the condition of assuming jurisdiction under Section 153C. Therefore, the above satisfaction note cannot be said to be a valid satisfaction note within the meaning of Section 153C. Jurisdiction under Section 153C has been assumed only on the basis that during the course of search of one of the persons of. It is not in dispute that the assessee had filed the return for AY 2004-05 alongwith the original copy of the audited profit & loss account and balance sheet. Search had taken place on 31.07.2008 while the return of income alongwith the original profit & loss account and balance sheet was already filed more than three and a half years before the date of search. In the remand report dated 23.07.2010, the Assessing Officer has also not disputed the above fact but he tried to justify action under Section 153C on the ground that for issue of notice under Section 153C, it is not necessary that the document found and seized should be of incriminating nature. Therefore, we hold that the underlying condition for invoking the jurisdiction under Section 153C is not satisfied in the case of the assessee. - Decided in favour of assessee
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2016 (6) TMI 82
Non-deduction of TDS on freight payment - Held that:- As the appellant could not produce all cash vouchers as a result of which it is held that 20% of the total payment was in excess of ₹ 20,000/- to a single party. Thus, 20% of the total freight payment amounting to ₹ 71,218/- is disallowed as per provisions of Section 40(a)(ia) of the Income Tax Act Non deduction of TDS on rental payment - Held that:- As payment was less than ₹ 1,20,OOO/- p.a. and thus TDS provisions were not to be invoked. Hence the addition on account of non-deduction of TDS in respect of rental payment is restricted to the payments made to Shri Om Prakash. Hence, the addition made by the AO in Para 3 of the assessment order is partly allowed Addition on account of non-declaration of receipts - Held that:- During the course of appellate proceedings, the appellant gave a detailed paper book in which a copy of sales register for the period 01.04.2007 to 31.03.2008 was given. As per the sale register duly reconciled by the appellant, the gross sale for the period under consideration were ₹ 1,67,79,883/-. Out of these receipts, the appellant had also included receipt of ₹ 1,08,815/- from M/s Jindal Mectec and ₹ 16,759/- received from M/s Timplex Industries. Hence, there is no force in the contention of the AO, that these two amounts were not shown by the appellant in his return of income. Thus the addition made in assessment order is hereby deleted Addition on account of capital introduced - Held that:- Considering the facts of the case together with the remand report of the AO and the detailed submissions of the appellant together with the evidence filed by the learned counsel for the appellant. The appellant not only gave the affidavit of Shri Ram Kishan Saini, father of the appellant, but also, a copy of the relevant bank accounts from which the money had been withdrawn and deposited to the bank account of the appellant together with the evidence regarding the source from which the money was received by his father. Considering all these evidences. Thus hold that the appellant has been able to prove the genuineness of transaction and the creditworthiness of the lender. Hence, the addition of ₹ 10 lacs made by the AO on account of capital introduced by the appellant is hereby deleted Addition of unexplained addition to building account - Held that:- On a perusal of relevant supports the same were found to be in order. However, there was one major discrepancy noted on a perusal of relevant bills/vouchers. The discrepancy was in respect of a bill of M/s Gaurav Steels, which was for an amount of ₹ 48,947/- instead of ₹ 4,89,424/-. When asked to give an explanation of the difference between the two, the appellant was not in a position to explain the difference. As a result, the difference between the two accounts, to the tune of ₹ 4,40,477/-, is regarded as unexplained investment and is thus added to the income of the appellant. Thus the addition is limited to this amount Addition on account of unexplained additions to Plant and Machinery - Held that:- During the course of appellate proceedings, the appellant gave detailed break-up of the said addition along with relevant bills/vouchers, which were found to be in order. The AO'S comments with regard to addition f the order have already been incorporated in his report while discussing addition made in Para 7 of the order. Accordingly, the addition made by the AO of the order stands deleted.
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2016 (6) TMI 81
Disallowance of Directors foreign travel expenditure - Held that:- On perusal of the financial statements of the assessee for the relevant financial year, we find that in the Director report attached to financial statements, the assessee has reported the name of Mr. Ruchirans Jaipuria in the key managerial personal. The other Director Smt. Payal Jaipuria’s name did not find in the key managerial, personal position. Therefore, we are of the view that the assessee has filed to prove that Mrs. Payal Jaipuria is a Director actively involved in the business of the assessee to say that she had attended the meetings in abroad to discuss about the future plan of the company. Under these circumstances, we are of the considered view that the assessee has failed to discharge the onus cast upon it to prove the expenditure incurred exclusively for the purpose of business of the assessee. Therefore, we are of the view that the A.O. has rightly disallowed the foreign travel expenditure. The CIT(A) after considering the relevant details filed by the assessee uphold the order of the A.O. We do not see any error or infirmity in the order passed by the CIT(A) - Decided against assessee TDS u/s 194A - non TDS on finance charges - Held that:- Considering the ratio of the coordinate bench decision, in the case of M/s. Merilyn Shipping & Transporters (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ), we are of the opinion that no disallowance can be made u/s 40(a)(ia) of the Act for the amounts which have been already paid during the same financial year. The CIT(A) without appreciating the facts, simply uphold the additions made by the A.O. Therefore, we set aside the order passed by the CIT(A) and direct the A.O. to delete the additions made u/s 40(a)(ia) of the Act.- Decided against revenue
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2016 (6) TMI 80
Reopening of assessment - TDS deduction u/s. 194C(2) - section 40(a)(ia) disallowance - Held that:- The Revenue fails to highlight even a single case involving payment exceeding the threshold pecuniary limit of ₹ 50,000/- u/s. 194C(5) proviso of the Act. We hold in these facts and circumstances that the Revenue’s contentions in support of both of its substantive grounds are devoid of merits. We reiterate our findings hereinabove that the Assessing Officer had called for specific details, assessee filed the same followed by assessment order noting that the assessing authority had perused all the material in record. We are of the opinion that the impugned reopening on this TDS issue amounts to change of opinion not sustainable as per hon’ble apex court decision in Kalvenator’s case (2010 (1) TMI 11 - SUPREME COURT OF INDIA ). Coupled with this, the Revenue is unable to make out a case in support of invoking TDS provision u/s. 194C of the Act (supra). We affirm CIT(A)’s order on validity of impugned reopening as well as merits. - Decided against revenue
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2016 (6) TMI 79
Rectification of mistake - adhoc disallowance of 20% labour expenditure - Held that:- Section 154 of the Act provides for rectification of mistake apparent from the records. As per the said section, mistake not confined to mere clerical or arithmetical mistake. The only point is that the mistake must be obvious and patent and not involving a debatable point. Similarly, the word record has not been defined u/s 154 of the Act or in the definition section. Therefore, the said word will have to be given a wider import by including the records that is available with the A.O. In the present case on hand, on perusal of the assessment records, we find that the A.O. at the time of finalization of assessment u/s 143(3) of the Act, intend to disallow 20% labour expenses for which the authorized representative of the assessee has agreed. However, while finalizing the assessment order, the A.O. has made addition of ₹ 17,76,410/- without any basis. Therefore, in our considered view, the said mistake is a mistake apparent from the records which needs to be rectified u/s 154 of the Act. The assessee’s contention is that records means only an assessment order is not acceptable for the reason that record means not only the assessment order, but also includes any records available with the A.O. at the time of passing assessment order. Therefore, we are of the opinion that the A.O. has rightly rectified the assessment order u/s 154 of the Act. Hence, we inclined to uphold the order passed by the CIT(A) and reject the ground raised by the assessee. - Decided against assessee.
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Customs
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2016 (6) TMI 70
Seeking setting aside of impugned order-in-original and Commissioner (Appeals) order - Rejected as infructuous on the ground of merger - Held that:- Government finds merit in the contention of the Department that question of merger does not arise as the issue on which the impugned Order-in-Original is challenged by them was not a matter of consideration in Order-in-Appeal 331/2015 date 24.06.2015. In this regard, government finds support in several judicial pronouncements. Government, therefore, holds that the Department and passenger appealed against the Order-in-Original on distinct grounds, the doctrine of merger is not attracted as it would tantamount to points raised by department remaining unanswered. The commissioner (Appeals) has thus erred in rejection Department’s appeal as infructuous on ground of merger and the same cannot be held as legal and proper. Therefore, Government one proceeds to decide both the revision Applications filed by the Department on merit. Absolute confiscation of gold and imposition of penalty - Illicit import of gold - Gold smuggled by way of concealment and by ways of non-declaration knowing well that she was not an eligible passenger to import gold - Whether the import of impugned goods is prohibited or not - Held that:- the respondent was not eligible to import gold either in terms of Notification 12/2012-Cus dated 17.03.2012 nor under Rule 6 of Baggage Rules ibid. She also did not declare the impugned gods that were in a substantial/ commercial quantity. Hence, the some cannot be treated a bona fide baggage in terms of Section 79 of the act ibid. the said gold Imported in violation of foreign Trade provisions of Sections 77,79,11 of Customs Act, 1962; para 2.20 of Exim policy of 2009-14 and provisions of Section 3(3) and 11(1) of Foreign trade (Development & regulation) Act, 1992. The same would thus appropriately constitute “prohibited goods” liable to confiscation under Section 111 (d) and (i) of the Customs Act, 1962. Therefore, the Government upholds the Department’s contention that absolute confiscation is legally warranted. Whether the respondent is the owner or carrier of the impugned gold - Held that:- there is no dispute about the fact that in her statement, the respondent has clearly admitted that she imported 1375 grams of 24 carat gold which was given to her by her husband who asked her to conceal it in her bra by wrapping it in a tissue paper and polythene cover and take them to India without declaring to customs, to be handed over to Shri Shaik Mahaboob Basha who would come to their home in India and in turn would give her ₹ 1,00,000/-. therefore, it is clear from her statement that respondent is not the owner of the goods and has acted as a carrier merely for a consideration. Government also notes that statement given before Customs is a valid evidence and any subsequent submission is only an afterthought in a attempt to get goods released on payment of fine. Government further finds that the provision for re-export of baggage is available under Section 80 of the Customs Act, 1962. However, this Section is applicable only to cases of bonfire baggage declared to Customs, which the applicant failed to do. Thus the applicant is not eligible for re-export of impugned goods. There is force in Department’s contention that allowing ridding of offending goods and allowing re-export even when caught by Customs has the effect of making smuggling an attractive proposition. Hence, the Government is of the view that the order of commissioner (Appeals) allowing and upholding the request of the respondent for re-export of goods is not legal and proper and cannot be allowed. Therefore, Government holds that both the original and appellate authorities have erred in allowing re-export of the impugned goods on payment of redemption fine and therefore, allows Department’s appeal for absolute confiscation of the impugned gold. Considering the gravity of the offence, the penalty of ₹ 2,50,000/- imposed on respondent under Section 112 of the Customs Act, 1962 by the original authority is also restored and upheld. - Decided in favour of revenue
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2016 (6) TMI 69
Period of limitation - Demand of already sanctioned drawback and imposition of penalty - Applicant were initially granted drawback for exports made by him - Sale proceeds in respect of export made by the applicants were realized within the prescribed time limit through the nominated bank - Appeal filed after 90 days (stipulated initial 60 days period plus 30 days condonable period). Held that:- as per Section 128 of customs Act, 1962, commissioner (Appeals) is empowered to condone delay upto 30 days in filling appeal. There is no provision in Section 128 ibid to condone delay exceeding 30 days. Hon ble Allahabad High Court in the case of M/s Doaba Rolling Millls (P) Ltd. Vs. CESTAT, New Delhi [2004 (2) TMI 77 - HIGH COURT OF JUDICATURE AT ALLAHABAD], has also held that the Commissioner (Appeals) under Section 128(1) ibid cannot condone delay in filling appeals beyond 30 days, as the statute itself provides for a period of limitation, and further maximum period for which delay can be condoned, the authority cannot extend the same. Government also notes that Hon ble Supreme court in the case of Singh Enterprises vs. CCE Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] has held that commissioner (Appeals) is empowered to condone delay upto 30 days and has no power to allow appeal to be presented beyond the delay 30 days. The proviso to sub-section (1) of Section 35 makes the position crystal clear that the appellate authority has no power to allow the appeal to be presented beyond the period of 30 days after the expiry of 60 days which is the normal period for preferring appeal under Section 35 of the Central Excise Act, 1944. The provisions of section 128 of the Customs Act, 1962 and Section 35 of the Central Excise Act, 1944 are identical and the ratio of above said judgments squarely applicable to this case. Therefore, the Commissioner (Appeals) has rightly rejected the appeal as time barred. - Revision applications are rejected
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2016 (6) TMI 68
Demand of ineligible duty drawback with interest and imposition of penalty - Section 117 of the Customs Act, 1962 - Applicant were initially granted drawback for exports made by him - Sale proceeds realized beyond the stipulated period - Applicant claimed that sale proceeds were received by their bank within stipulated period and they have submitted the copies of Bank Realization Certificates (BRCs) in reply to impugned SCN but the same were not taken into consideration. Held that:- the BRCs are required to be verified to determine its authenticity, validity and as to whether the export proceeds were received within stipulated period including any extensions by RBI as claimed by the applicant. Also, the BRCs submitted by the applicant must conform the manner and format as prescribed by the DGFT. As such, the cases are required to be remanded for fresh consideration. It was the responsibility of the applicant to submit evidence of receipt of sale proceeds immediately upon receipt which they admittedly failed to do. However, in the interest of justice, the applicant will submit these BRCs in original along with evidence that these were indeed submitted in response to the Show Cause Notice to enable verification of the same to the satisfaction of the original authority within 4 weeks of the receipt of this Order before the original Adjudicating Authority for consideration in accordance with provisions of law and passing suitable orders. The penalty in terms of Section 117 of customs Act, 1962 will also be re-determined accordingly by the original authority, subject to the outcome of the verification. Government therefore, sets aside impugned order and remands the case back to original authority for fresh consideration. - Revision Application disposed of
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2016 (6) TMI 67
When such act on the part of the importer has to be held as mala fide so as to attract the violation of mis-declaration, as regards quantity - Import of PU Leather Cloth - Interchange of number of rolls of two different types of thicknesses - Held that:- we have examined the commercial invoice which also interchanges the two types of thicknesses of the fabrics imported by the assesse. It is based upon the said invoice itself that wrong declaration was made by the importer. There is otherwise no evidence on record to reflect upon any mala fide of the assesse. As such by extending benefit of doubt to the appellant has also attributing the said inadvertent mistake to human error, we hold that there was no mis-declaration in respect of the quantum of the fabrics, in as much as the total number of rolls match with the quantity imported by the appellant. Enhancement of value - Held that:- in the present case, it is found that there is neither any allegation nor any evidence produced by the Revenue to suspect the correctness of the transaction value. If that be so, the transaction value has to be accepted as the correct assessable value. Further, it is again well settled that NIDB data cannot be adopted as a ground for enhancement of the value. As such in the absence of any other evidence on record, we find no merits in the Revenue’s stand. However, it stands admitted by the appellant that 293 rolls declared as 0.5 mm thickness were, in fact, 0.9 mm thickness and 127 rolls declared as 0.9 mm thickness were, in fact, of 0.5 mm thickness. The price per meter stands given on the invoice raised by the foreign supplier. We also not further that marginal increase in the price done by the Customs Authorities on first check basis does not stand appealed against the assesse. As such the value adopted for assessment by the Revenue Department on the first check basis is required to be taken as the correct assessable value on per meter basis and the total assessable value of the consignment is required to be re-calculated based upon the total number of rolls of two different thicknesses. For the said purpose, we set aside the impugned order and remand the matter to the Original Aujudicating Authority for calculating the duty demand, if any. Therefore, the enhancement of the imported goods as adopted by the Revenue is set aside. Also no justifiable reasons found for confiscation of goods or for imposition of penalties. - Appeal disposed of
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2016 (6) TMI 66
Confiscation of goods and imposition of penalty - Import of old and used photocopier machines of Cannon brand - Enhancement in the value of imported goods - Held that:- it is a settled law that in terms of provisions of Rule 3 of the Customs Valuation Rules, the transaction value has to be accepted as the correct assessable value unless country evidence is available to show that the payments made by the importer to the exporter stand influenced by the other compelling circumstances. In view of the fact that Revenue has not advanced any evidence to show that transaction value was not correct and has in fact have not rejected the transaction value and in view of clear legal position as emerging from the various decisions of Supreme Court and Tribunal, we are of the view that transaction value was required to be adopted as correct assessable value. Accordingly, the impugned order is set aside. - Decided in favour of appellant with consequential relief
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2016 (6) TMI 65
Imposition of penalty of Rs. One Crore - Section 112 of the Customs Act, 1962 as the same was higher than the penalty under Section 114A - Held that:- the duty liability for the entire quantity of goods totalling 606MT amounted to ₹ 94,50,292/- only. Therefore, the equivalent penalty under Section 114A, even if imposed, would have been lower than the penalty of one Crore imposed under Section 112. Hence, no reason found for the Revenue being aggrieved by the decision of the adjudicating authority. Moreover, it is also not open to Revenue to agitate at the present juncture that the penalty should be imposed under Section 114A of the Customs Act, 1962, when Para 17(d) of the show cause notice itself proposed imposition of penalty under “the provisions of 112/114A of the Customs Act, 1962.” - Decided against the revenue
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Corporate Laws
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2016 (6) TMI 61
Sanction of the Amended Scheme of Amalgamation - Held that:- On the consideration of all the relevant facts and the procedural requirements contemplated under Sections 391 & 394 of the Act and the relevant Rules and on due consideration of the report of the Regional Director Northern, Ministry of Corporate Affairs, New Delhi and Official Liquidator, the Amended Scheme is hereby sanctioned subject to sanction of the aforesaid Amended Scheme by the High Court of Delhi in the case of Non-petitioner/Transferor and Transferee companies, and as a result thereof, the assets and liabilities of the petitioner/5th Transferor Company shall stand vested in the Transferee Company and the petitioner/5th Transferor Company shall be dissolved without being wound up. The Transferee Company shall comply with the procedural requirement as per the Accounting Standard 14 (AS 14) issued by the ICAI from time to time as undertaken in Clause 4.10 of Part IV of the Amended Scheme. The Amended Scheme shall be binding on the Transferor and Transferee Companies, their respective Shareholders, Creditors and all concerned.
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2016 (6) TMI 60
Sanction of the Scheme of Arrangement of demerger - Held that:- The procedural requirements contemplated under Sections 391 & 394 of the Act, the relevant Rules and on due consideration of the report of the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi, the Scheme of Arrangement is hereby sanctioned and as a result thereof, the assets and liabilities of the “KPO Business” of Quatrro Global Services Private Limited (Petitioner Company No.1) shall stand vested in the Scope e-Knowledge Solutions Private Limited (Petitioner Company No.II). The Scheme shall be binding on the Quatrro Global Services Private Limited (Petitioner Company No.1) and Scope e-Knowledge Solutions Private Limited (Petitioner Company No.II), their respective Equity Shareholders, Creditors and all concerned. Let formal order of sanction of the Scheme be drawn in accordance with law and its certified copy be filed with the Registrar of Companies within 30 days from the date of receipt of the same. A notice of the order be published in the newspapers, namely, “Financial Express” (English), “Jansatta” (Hindi) both Delhi/NCR Edition and in the Official Gazette of Government of Haryana.
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2016 (6) TMI 59
Sanction of the Scheme of Arrangement - Held that:- On the consideration of all the relevant facts, the procedural requirements contemplated under Sections 391 & 394 of the Act and the relevant Rules and on due consideration of the reports of the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi and Official Liquidator, the Scheme of Arrangement is hereby sanctioned and as a result thereof, the assets and liabilities of the Scope e-Knowledge Center Private Limited/Transferor Company shall stand vested in the Quatrro Global Services Private Limited/Transferee Company and the Transferor Company shall be dissolved without being wound up. The Scheme of Arrangement shall be binding on the Scope e-Knowledge Center Private Limited/Transferor Company, Quatrro Global Services Private Limited/Transferee Company, their respective Equity Shareholders, Creditors and all concerned. Let formal order of sanction of the Scheme be drawn in accordance with law and its certified copy be filed with the Registrar of Companies within 30 days from the date of receipt of the same.
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FEMA
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2016 (6) TMI 58
Sealing of office premises challenged - case registered under Sections 420, 120-B, 467, 468, 471, 406/34 of the Indian Penal Code (for short ‘IPC’) and Sections 3, 4 and 13 of the Foreign Exchange Management Act, 1999 - Held that:- The office premises of the Company, which was sealed by the police in connection with the police case, is neither a stolen property nor the object of the crime nor has any link with the commission of any offence. It is not a property which is covered by Section 102(1) of the CrPC. Hence, the sealing of the premises in exercise of power under Section 102(1) of the CrPC by the police was patently bad in the eyes of law in view of the decision of the Supreme Court in M.T. ENRICA LEXIE (2012 (5) TMI 696 - SUPREME COURT). Keeping in mind the ambit and scope of Section 102 of the CrPC and the ratio laid down by the Full Bench of the Bombay High Court in Sudhir Vasant Karnataki Mohideen Mohammed Sheik Dawood (2010 (11) TMI 1019 - BOMBAY HIGH COURT) and the Kerala High Court in Kuriachan Chacko (2012 (7) TMI 979 - KERALA HIGH COURT), this Court is also of the considered opinion that under Section 102(1) of the CrPC the police have no power to seal the immoveable property and the word seize under Section 102 of the CrPC used under Section 102 of the CrPC would mean only actual taking possession of the moveable property. Find myself in complete agreement with the ratio laid down by the Full Bench of the Bombay High Court and the Kerala High Court in the aforementioned decisions with regard to the powers of the police officer to attach immoveable property under Section 102(1) of the CrPC. Even otherwise, find it a bit surprising as to how the learned Chief Judicial Magistrate could have passed the impugned order dated November 04, 2015 negating the prayer made by the petitioner for unsealing the premises. Thus the Superintendent of Police, Motihari is directed to unseal the premises of the Company in question forthwith and allow the Company to run its legally operated business of the said Branch.
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PMLA
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2016 (6) TMI 57
Compensation for causing mental and physical harassment to the petitioners - show cause notices under Section 13 of the Prevention of Money Laundering Act, 2002 challenged - Held that:- Having seen the matter in the light and having gone through the contents of the order dated 4th November, 2015 and the contents of the impugned show cause notices, in my opinion, no interference at the show cause notice stage is warranted in the interest of clean and honest administration. NSEL, as aforesaid, vide order dated 4th November, 2015 has already been held to be a “reporting entity” and guilty of failure to comply with the provisions of PMLA. The petitioners were admittedly Non-executive Directors of NSEL. Section 13 empowers the respondent to issue directions to any of the employees of a reporting entity to comply with specific instructions or to send reports at such intervals as may be prescribed on the measures it is taking and to impose monetary penalty on any of the employees of a “reporting entity”. In exercise of such power, the respondent is within its right to issue impugned show cause notices to the petitioners. At this stage, need not say anything further for the fear of affecting the proceedings before the respondent.
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Service Tax
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2016 (6) TMI 78
Eligibility of Cenvat credit - wrongly taken and utilized - House Keeping Services, Pest Control Service etc. - proper documents not furnished - Appellant contended that the service provider has erroneously raised an invoice on their Mumbai Branch - Held that:- this appears to be a mistake committed by the Service Provider for which the Appellant should not be punished. Credit is eligible as long as the duty payment particulars are genuine by applying the Tribunal Ruling in the case of Tool Tronics Vs CCE, Mumbai-II [2004 (5) TMI 526 - CESTAT, MUMBAI]. Therefore, the Credit is held to be eligible. Cenvat credit availed on the basis of invoices issued by the Service Receiver - Appellant contended that this amount was not availed as cenvat credit but by mistake, there was an excess payment which was adjusted under Rule 6(4A) of the Service Tax Rules and payment made for internet subscription - Held that:-there is no scope before the Tribunal to examine the veracity of the documents and therefore the matter is remanded back to the Adjudicating Authority in so far as the issue pertaining to the alleged excess payment of service tax. As all the above issues being purely interpretative in nature with no malafides, penalty is set aside. - Appeal disposed of
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2016 (6) TMI 77
Period of limitation - Demand of Service tax - maintenance and repair service - Held that:- the period of dispute was 01/7/2003 to 31/3/2004 and the matter went up to the Tribunal which decided the case in their favour. Hence demand, if any, for the subsequent period should be within normal period of limitation. Show cause notice dated 14/5/2007 covered a period from 16/6/2005 to 17/4/2006. It is clear that the demand for the period prior to 01/4/2006 is clearly hit by time bar in terms of Section 73 of Finance Act, 1994 during the relevant period. As such, no demand can be sustained for the period prior to 01/4/2006. Eligibility of Cenvat credit on inputs - Held that:- it is clear that the legal entitlement of the appellant cannot be rejected on technicalities. As the appellants have discharged the service tax on the taxable service, all the demands being within normal period, the eligibility of appellant for input credit subject to verification by the Original Authority is to be upheld. The Jurisdictional Assistant Commissioner/the Original Authority is directed to examine the documentary evidences that may be submitted by the appellant in support of their claim for Cenvat credit on inputs used for providing the taxable service during the material time and allow the same subject to satisfaction of the provisions of Cenvat Credit Rules, 2004. Imposition of penalties - Section 76 and Section 78 of the Finance Act, 1994 - bonafide belief on appellant's part regarding tax liability - Held that:- the appellants paid the demanded service tax in September 2009 well before the adjudication of the case in January 2010. Therefore, this is a fit case for invoking the provisions of Section 80 for waiver of penalties imposable under Section 76. The penalty imposed under Section 78 is not sustainable in the facts of the present proceedings, as the ingredients required for imposition of penalty under the said Section are not invokable in these proceedings. - Appeals disposed of
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2016 (6) TMI 76
Entitlement for rebate claim - Notification No. 11/2005-ST dated 19/04/2005 - facilitating sale of coal for a UAE based company and for such arranging a client in Singapore - category of service rendered is not clear - no taxable service rendered in the taxable territory of India - services, if any rendered were consumed by company in UAE - Held that:- the tax paid by the appellant is apparently not attributable to any taxable activity as held in the impugned order. If that be so, irrespective of the manner of claim by the appellant, they are entitled for return of money. This aspect requires a fresh consideration by the Original Authority who after giving adequate opportunity to the appellant will decide the case afresh on the eligibility of the appellant for return of their amount paid to the Government in view of the finding of the first Appellate Authority. At this juncture, learned Counsel for the appellant pleaded for a direction on appropriate interest to be paid for the delayed refund. The refund in consequence of this direction shall also be considered for payment of interest as per the applicable law. - Appeal allowed by way of remand
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2016 (6) TMI 75
Stay application for withholding refund - Demand dropped in order-in-original - Respondent stated that once demand has been dropped, even as per the board's circular F, No. 276/186/2015-CX.8A dated 1.6.2015 the refund should not be withheld - Held that:- even CBEC circular advises field formations to try and obtain stay only where orders have been passed by Commissioner (Appeals). In this case the order has been passed by Commissioner of Central Excise (and not Commissioner of Central Excise (Appeals)). - Stay applications dismissed as misconceived and infructuous
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2016 (6) TMI 74
Waiver of penalty under Section 76 of the Finance Act, 1994 - Demand of Service tax and imposition of penalty under Section 76,77 and 78 - Business Auxiliary Service - Reverse charge mechanism - Commission paid to overseas agents - Waiver of penalty is pleaded as the penalty under Section 78 ibid has been imposed and for an option to pay 25% (reduced) mandatory penalty under Section 78 ibid as the option was not given at the lower levels. Held that:- by following the law laid down by the Gujarat High Court in the case of CCE, Surat Vs. Rajeshree Dyg. & Ptg. Mills (P) Ltd. [2014 (9) TMI 291 - GUJARAT HIGH COURT] held against the assessee which was again appealed by assessee in the Supreme Court reported in [2016 (5) TMI 130 - SUPREME COURT] and the decision of Delhi High Court in the case of Pr. CST-II Vs. Top Security Ltd. [2015 (12) TMI 443 - DELHI HIGH COURT], the impugned order is upheld except for penalty under Section 76 ibid. - Decided partly in favour of appellant
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Central Excise
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2016 (6) TMI 73
Confiscation of goods and imposition of penalty - Clandestine removal of goods - Empty trucks coming in the factory premises are not entered in the register - Auto Head Lamps and Halogen Bulbs seized had been labelled as having been manufactured in Pant Nagar and there was no evidence that the same were brought from Pant Nagar - Held that:- appellant indulged in modus operandi of manufacturing goods at Jaipur and put labels to show their manufacture by Pant Nagar unit to evade payment of duty. Shri Mahipal Gupta, Managing Director and Shri Naresh Kumar Gupta, Chief Manager actively involved themselves in this modus operandi. The truck drivers also colluded with the appellant–assesse inasmuch as they tried to weave a cock and bull story claiming to have brought the goods from Pant Nagar when they were fully aware that they had not brought goods from Pant Nagar and had taken empty trucks into the factory for loading the impugned goods. Thus the trucks were correctly held liable to confiscation. The said trucks drivers could not have colluded in this modus operandi in the manner aforesaid without the consent and knowledge of the transport company and therefore the transport company is also liable to penalty along with the drivers. Therefore, it is found that the case is established against the appellants at least on the yardstick of preponderance probability. Revenue is not required to prove its case with mathematical precision specially in cases involving deliberate and well-thought out modus operandi to evade duty. - Decided against the appellant
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2016 (6) TMI 72
Demand of duty based on the circular dt.21-11-2001 - Circular has been examined by the Larger Bench of the Tribunal - Fate of the judgment of Larger Bench of the Tribunal - Circular dt.21-11-2001 which was the source of raising demand against the present petitioner & a subject matter of challenge in the instant proceedings came to be withdrawn by the department keeping in view order of the Larger Bench of the Tribunal by their subsequent circular no.870/08/2008- CX dt.16-5-2008. Held that:- after taking note of the circular dt.16-5-2008 of which we have made a reference and the very source of the circular dt.21-11- 2001 which stands withdrawn, in our considered view the demand raised by the Adjudicating Authority vide order dt.8-3-2002 does not hold good and deserves to be quashed. It is brought to our notice that a office note no.1/2016 has been issued from the office of Commissioner, Central Excise, Jaipur dt.26-2-2016 entrusting the senior officers to personally brief the department counsel. It is expected that henceforth necessary steps will be taken by the department to assist the Court in the light of the office note no.1/2016 dt.26-2-2016. Therefore, the order of the Adjudicating Authority impugned is hereby quashed & set aside. - Decided in favour of petitioner
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2016 (6) TMI 71
Whether the permission granted by the Development Commissioner allowed DTA clearances of Synthetic Yarn - Demand of duty - Clearance of Polyester Synthetic Yarn in the DTA on payment of duty - Notification No. 8/97-CE dated 01.03.1997 as amended on the basis of DTA clearance permission granted by the Development Commissioner on 15.04.2002 - Held that:- the only harmonious interpretation of the scope of condition 1 of the permission is that the clearances in the DTA for Cotton Yarn and Synthetic Yarn is subject to the condition that similar goods i.e. goods namely Cotton Yarn and Synthetic Yarn should have been manufactured and exported from the unit in the past. It is not disputed and indeed it is demonstrated by the various AR-4 application copies submitted by the appellant that the unit had exported both Cotton Yarn and Synthetic Yarn in the past. Seen in this context it become evident that condition No. 1 in the DGFT's Permission letter does not disallow domestic clearances of synthetic yarn granted by the Development Commissioner in the opening paragraph of the said permission letter. Indeed, this interpretation is in conformity with para 6.8 (c) & (d) of the Hand Book Procedure 2002/2007. As is evident that, the entitlement for domestic clearances is determined in totality and not with reference to specific items. The contention of the Ld. DR that Synthetic Yarn and Cotton Yarn do not belong to the same class of goods nor are they similar goods is not germane to the present case because the appellant asessee had manufactured and exported both Cotton yarn and Synthetic Yarn from the same unit and therefore clearance of Synthetic Yarn for DTA sales as per the DGFT's Permission letter dated 15.04.2002 was in conformity with its condition No. 1 also. Consequently, the impugned duty demand becomes unsustainable. As a result, the question of any penalties is rendered preposterous which in turn renders the Revenue’s appeal also infructuous. Accordingly, the impugned orders are set aside. - Decided in favour of assessee
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CST, VAT & Sales Tax
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2016 (6) TMI 64
Whether the Tribunal is justified in confirming the orders passed by the authorities, disallowing the input tax credit on capital goods during the tax periods 2006-07 for the purchase of capital goods made in the tax periods 2005-06 - Forms VAT 170 were filed on 19.04.2006 and 19.05.2006, the assessee purchased the capital goods during September 2005 to December 2005 and revised returns were filed during the year 2005-06 claiming input tax credit on these capital goods. Held that:- it is held that no reconsideration of the concluded issue is warranted and the claim is not maintainable. Thus, the claim of input tax credit was negated which cannot be found fault with. There is no provision under the Act and Rules to carry forward the rejected input tax credit to the subsequent year. The claim made by the assessee is not in consonance with Section 12 of the Act read with Rule 133(e) and the proviso thereto. Therefore, we do not see any illegality or infirmity in the order passed by the Tribunal. - Decided against the assessee
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2016 (6) TMI 63
Seeking quashing of Assistant Commissioner's order under Section 31 of the Bihar Value Added Tax Act, 2005 - Imposition of penalty - Petitioner is not making any direct sale in the State of Bihar, rather imported certain spares and supplied the same free of cost under warranty scheme - entire Entry Tax already paid. Held that:- that levy of penalty is a serious matter, that too in a case where the petitioner has paid entry tax on the entire value of the goods which have been brought in by the petitioner and, in any case, if the said import of goods was ultimately treated as a sale then the set off would have had to be granted, but the same was not claimed by the petitioner simply because it was not sale and the petitioner as per its case merely supplied the goods free of cost under the warranty scheme and therefore had not made claim for the set off of the Entry Tax. Therefore, the order passed by Assistant Commissioner is quashed and the matter is remanded to the respondent no.2, Assistant Commissioner, Commercial Taxes, South Circle to pass an order in accordance with law after giving proper opportunity to the petitioner to be heard in the matter. - Writ Application disposed of
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2016 (6) TMI 62
Declining to issue Form H declarations - Limitation of assessment - Section 40 of the Karnataka Value Added Tax Act, 2003 - Export obligations are fulfilled and receipt of income in foreign currency - Held that:- the learned Government Advocate would submit that the impugned order is an appealable order and hence, the present petitions are misconceived, however, the endorsement issued merely claiming that the petitioner is not entitled to such Form H declarations when there is no legal presumption, it is incumbent on the first respondent to explain himself and pass a reasoned order. The impugned endorsement is a non speaking order and therefore, the petitioner being constrained to approach this Court would require the petitions to be allowed. Therefore the impugned order is quashed. - fresh orders to be passed - Decided in favour of petitioner
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