TMI Tax Updates - e-Newsletter
June 8, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Order passed by the Settlement Commission - “conclusive" test theory - This court's jurisdiction under Article 226 of the Constitution of India is both, extraordinary and discretionary. It is equitable as well. It should not be exercised so as to allow a defaulter like the petitioner to derive benefit or take advantage of his own wrong. - HC
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Income Tax:
Computation of capital gains - transfer of property when sold in 2004 but registered only during the year 2008 - CIT(A) has observed that the assessee’s name in the deed of Transfer of lease hold rights was mentioned only because the original allotment was in his name, hence, the assessee did not have ownership of the said property during the year under consideration - AT
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Income Tax:
Credit of TDS without filing revised return after assessment - rectification u/s 154 - CIT(A) was fully justified in directing the AO to give credit to TDS on the basis of fresh claim in an application u/s.154 - AT
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Income Tax:
Revision u/s 263 - CIT's notice proceed on incorrect assumption with regard to the character and nature of the IT Park building which he erroneously considered to be "Trading Stock". The CIT therefore could not proceed u/s 263 by assuming incorrect facts which are not borne out from records - AT
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Income Tax:
Addition u/s 2(22)(e) - determination of shareholding of the assessee - shareholding of the Assessee’s subsidiary M/S.Hooghly Mills Projects Ltd., should not be considered and it is irrelevant. - AT
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Income Tax:
Addition on account of rent free accommodation provided to the assessee which was valued u/s. 28(iv) - part-time director in the company - the value of rent free accommodation determined by the AO on the rent fetched by the property in the earlier years cannot applied - to be determine as per the guidelines of Municipal Corporation - AT
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Income Tax:
Disallowance of expenses - the mere fact that the vouchers are self made with the observation that proper bills and vouchers qua the expenditure is not maintained, cannot be said to be a sufficient reasoning as what was improper in the vouchers, has not been spelt out. - AT
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Income Tax:
Eligibility to exemption u/s 10(23FB) - For AY 2008-09 and 2009-10 there is an ammendment in section 10(23FB) - Assessee’s case does not fall under exemption category - Therefore, the assessee has to be assessed under normal provisions of law and hence, the business loss has to be set off against the other incomes. - AT
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Income Tax:
Fees for technical services - made available or not - The contention that the technology is not made available to ONGC is incorrect as the agreement not only contemplates participation but also training and collaborative research between the personnel of the non-resident and ONGC - Taxable in India as per India-Canada DTAA - AT
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Customs:
Goods were imported without payment of duty - stock transfer to sister concern in contravention to rules - demand confirmed with interest - penalty set aside - AT
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Corporate Law:
Winding up petition - company is unable to pay its debts - The respondent is not able to avoid statutory demand by raising any specific dispute and thus deserves to face consequence of winding up on the ground that the respondent is unable to pay its debts. - HC
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Corporate Law:
Winding up petition - respondent is unable to pay its debts - The disputed facts and the allegations of fraud, forgery and fabrication cannot be considered in the winding up petition - HC
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Service Tax:
Refund claim - excess duty paid on 100% of the freight charges without availing the benefit of abatement of 75% of freight - the bar of unjust enrichment is not applicable because the appellant has paid the service tax under reverse charge - AT
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Service Tax:
Liability of tax - GTA service - reverse charge - "any person" referred in Rule 2(1)(d)(v) is not qualified by category (a) to (g) of the Rules and therefore even individual or partnership firm can fell under the category of "any person" specified in the said rule - AT
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Service Tax:
Valuation of GTA service - reimbursement of toll taxes - The service tax is not chargeable on any statutory levy whereas it is chargeable only on the service charge. The toll tax being a statutory levy cannot attract the service tax - AT
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Service Tax:
Renting of Immovable Property - the appellant had a bona fide belief that the Renting of Immovable Property Service is not taxable and therefore he did not pay the service tax - no penalty - AT
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Central Excise:
CENVAT credit - input services - tyre re-treading services - maintenance of vehicles - the subject services are used in relation to dumpers which are used in mines for producing coal on which excise duty has been paid - credit allowed. - AT
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Central Excise:
Valuation - quantity discount - includibility - there is no scope for deducting the value of M.R.P goods which are supplied along with identical goods in the same packing as quantity discount - AT
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Central Excise:
CENVAT credit - destruction of raw materials and semi-finished goods by fire - the input or semi-finished goods did not reach the stage of finished goods and the input/semi-finished goods destroyed - the provision of reversal of CENVAT Credit, which is with reference to Rule 21 in respect of finished goods is not applicable. - AT
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Central Excise:
Manufacture - the dia-meter of the pipes are different and the same has been joined by the process of swaging. Moreover, the pipes were welded with the base plate to make it pole and on the top on the pole a cap is fixed - to be held as manufacturing activity - AT
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Central Excise:
Classification of goods - Milk Treat does not contained any Cocoa or Chocolate but only contained Cocoa butter - the White Chocolate cannot be said as Chocolate - the product “Milk Treat” is not covered under Tariff Heading 19053211. - AT
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VAT:
Levy of sales tax on liquor Vendors - merger of sales tax with excise duty - where vendors have already collected the sales tax pursuant to these notifications/circulars, there remain no doubt that they have to make the payment of sales tax to the Department in accordance with law. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (6) TMI 300
Order passed by the Settlement Commission - “conclusive" test theory - Held that:- Principal Commissioner dismissed the petitioner's appeal. We do not think that the view taken by the Principal Commissioner was either perverse or vitiated in law. It is a possible view of the matter. We equally agree with the Principal Commissioner when he faults the petitioner for having not disclosed the communication dated 30th January, 2017. The demand was computed on the basis of the petitioner's rectification application. The penalty under section 221 was also computed together with interest. In the affidavit in reply, the Principal Commissioner says in clearest terms that this letter intimates the final and revised demand for the block period 2003-04 to 2008-09. The final and conclusive demand is intimated by this letter, which includes the demand after giving the effect to the petitioner's rectification application and interest under section 220(2) and 245-D(6A) of the IT Act. This letter having been brought on record that the Department's action is justified, according to this Principal Commissioner. We see much force in this stand of the Revenue. On facts, we find that this is not a case which requires our interference in writ jurisdiction. This court's jurisdiction under Article 226 of the Constitution of India is both, extraordinary and discretionary. It is equitable as well. It should not be exercised so as to allow a defaulter like the petitioner to derive benefit or take advantage of his own wrong. We think that the writ petition deserves to be dismissed on this ground alone. In the present case, the facts are eloquent enough. They clearly spell out the position that in the order of the Settlement Commission, there was a request noted. That was a request made by the petitioner and for payment of the tax in installments. That request was granted and time was stipulated for payment by installments. All this is incorporated in the order of the Settlement Commission. It is the petitioner, who could not abide by the time limit and applied for extension. It is the petitioner, who proceeded on the footing that such an application for extension could have been filed and pressed. It is in these circumstances that the petitioner cannot now raise a technical plea. That too by relying upon the period prescribed by Rule 68B(1). That rule itself and as clarified above, does not end with the words “after the expiry of three years from the end of financial year”, but states further that “demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive”. In any event, the word “conclusive” itself has to be understood in the context. It means “bring or come to an end”. In Advanced Law Lexicon, 3rd Edition Reprint 2007, this word is understood as final, finishing, ending. The word “conclusive” means the closing, settling or finally arranging of a treaty, contract, deed etc. It is in that sense the word has been understood and must be, therefore, given that meaning. In these circumstances, we do not think that the view taken is in any way perverse or contrary to law. Writ petition dismissed.
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2017 (6) TMI 299
Bogus purchases - Held that:- It is settled law that when the sales are not disputed, the entire purchases to make the sales cannot be disallowed. It is true that assessee has not at all been able to prove that the purchases from the parties booked on the accounts are genuine. No book and records have been shown. However, in the absence of any finding that sales are also bogus, the purchases to make the corresponding sales cannot be held to be completely bogus. This points out to the practice that assessee had made purchases from grey market. Operating in the grey market leads to various savings on account of non-payment of various taxes by use of unaccounted money to the assessee. On a similar situation, Hon’ble Gujarat High Court in the case of Simit P.Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) has upheld the disallowance of 12.5% of the bogus purchases. Since the proposition that when sales are not disputed, entire purchases cannot be held to be bogus is supported by Hon’ble jurisdictional High Court decision in Nikunj Exim Enterprises [2013 (1) TMI 88 - BOMBAY HIGH COURT], in considered opinion, the interest of justice will be served if the addition in this case is restricted to 12.5% of the bogus purchases. Appeal filed by the assessee stands partly allowed.
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2017 (6) TMI 298
Penalty u/s.271(1)(c) - denial of natural justice - Held that:- Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. This, deprives the assessee of a fair opportunity to explain its stand, thereby, violates the principles of natural justice. Notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. - Decided in favour of assessee.
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2017 (6) TMI 297
Computation of capital gains - transfer of property when sold in 2004 but registered only during the year 2008 - application of provision of 50C - Held that:- CIT(A) has observed that the assessee’s name in the deed of Transfer of lease hold rights was mentioned only because the original allotment was in his name, hence, the assessee did not have ownership of the said property during the year under consideration and therefore, there is no question of transaction of sale of the said property during the year under consideration and capital gains is not accrued. However, the Capital Gains should be taken into account only after deducted the price of the plot from the value of the property i.e. ₹ 99,20,000 (-) Minus ₹ 16,75,000/- i.e. the cost of the plot (to be paid to the Noida Authority) = ₹ 82,45,000/-. Accordingly, we set aside the issue in dispute to the file of the AO with the direction to compute the capital gains on the difference of the Stamp duty amount and price of the impugned property after applying the relevant provisions of the Act. Accordingly, the order of the Ld. CIT(A) is reversed. - Appeal filed by the Revenue stands allowed for statistical purposes.
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2017 (6) TMI 296
Addition made in respect of share capital - Held that:- We find that all the payments were received by assessee through account payee cheques. Shares were allotted to the assessee on making payment through account payee cheque. The assessee has also followed proper returns before ROC. We also found that entire share application money was received by assessee through account payee cheques. The details filed with ROC with regard to allotment of shares were also filed before the lower authorities. It appears that without conducting full enquiry and without giving opportunity to cross-examine Mr. Mukesh M Choksi, the AO has made addition. We restore the matter back to the file of the AO for deciding afresh after making due enquiry and also giving opportunity to cross-examine Mr. Mukesh M Choksi on whose statement the AO has made the impugned addition.
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2017 (6) TMI 295
Credit of TDS without filing revised return after assessment - rectification u/s 154 - Held that:- CIT(A) was right in accepting the revised claim regarding grant of credit for TDS. This was a process of determination of correct tax liability of an Assessee and therefore the first appellate authority was fully justified in directing the AO to give credit to TDS on the basis of fresh claim in an application u/s.154 of the Act, supported by TDS certificate. We find no grounds to interfere with the order of the CIT(A).
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2017 (6) TMI 294
Revision u/s 263 - deduction permissible u/s 35(1)(iii), u/s 35(I)(ii) & u/s 35AC - Held that:- Along with the details of payments made to qualifying institutions the Assessee had also disclosed copies of the Receipts & certificates issued in the prescribed form by the respective entities, wherein the particulars prescribed for claiming deduction u/s. 35AC were provided by the Payee institutions. The ld. DR in his submissions has pointed out that in col.29 of the return of income with regard to deduction u/s 35AC of the Act the assessee has shown a sum of nil. It is also explained by the assessee that the assessee under the impression that filling up of claue-29 was necessary only if the amount allowable as deduction u/s 35AC of the Act was more than the sum debited in the profit and loss account that the assessee was required to mention the excess figure in that column and therefore had shown the figure as nil in the return of income. In our opinion, this explanation of the assessee is a plausible explanation and in any even the AO before completing the assessment was fully conscious of the fact that the assessee had made a claim of deduction u/s 35AC and 35(1)(iii) of the Act and therefore it cannot be said that order of the AO was erroneous on this count. Disallowance of interest u/s 14A - Interest expenses debited in the profit and loss account - Held that:- Disallowance of interest u/s 14A of the Act was the subject matter of the appeal by the assessee before CIT(A) against the order of assessment and the CIT had already decided the said issue prior to the impugned order of CIT and therefore the CIT cannot exercise jurisdiction on an issue which is already merged with the order of CIT(A). In the order passed u/s.14A of the Act when the Assessee pointed out that interest disallowance u/s.14A of the Act was already subject matter of appeal filed by the Assessee before CIT(A) and that the order of the AO had merged with the order of the CIT(A) and therefore jurisdiction u/s.263 of the Act cannot be invoked by the AO in view of Explanation (c ) to Sec.263(1) of the Act, the CIT has taken the plea of lack of full enquiry on applicability of Sec.14A of the Act. In this regard it is seen that the show cause notice u/s.263 of the Act issued by the CIT was dated 20.9.2016. The Assessee had filed his reply to the said show cause notice on 12.1.2017 and on the very same date, the CIT had passed the impugned order. It is thus clear that the Assessee was not put on notice that the CIT intends to invoke jurisdiction u/s.263 of the Act on the ground of lack of enquiry by the AO. Therefore exercise of jurisdiction u/s 263 of the Act on the issue of disallowance u/s.14A of the Act cannot be sustained. Computation of long term capital gain - as per CIT-A AO did not call for any details or documentary evidence with regard to long term capital gain and he did not examine anything on this aspect - Held that:- In the proceedings before the AO vide record of proceedings (order-sheet entry) dated 04.09.2014, the AO directed the Assessee to submit details of LTCG appearing in the computation of income. The Order-sheet entry dated 08.09.2014 further shows that in the hearing conducted on that date, the Assessee had filed details of LTCG and also furnished related valuation report. The supporting documents with reference to long term capital gain are available at page 128 to 135 of the assessee’s paper book. At pages 128 to 130 of the paper book the assessee has given complete history of the fact giving rise to long term capital gain. Page 131 of the paper book is the notification in the official gazette by Government of West Bengal increasing the permission fee for transfer of lease hold rights in respect of lease granted by the Government of West Bengal. Page 133 is the statement of expenses incurred on the capital work in progress for the period upto 31.03.2011. Pages 134 and 135 are the letter of handing over the possession to the assessee by Godrej Waterside Properties Pvt. Ltd., the person who carried out the development. Pages 136 to 155 is the report of the valuer in support of the long term capital gain in the light of the documentary evidence filed by the assessee it cannot be said that there was no failure on the part of AO to make proper and adequate enquiries with regard to the computation of long term capital gain. The exercise of jurisdiction by CIT on this ground is therefore held to be unsustainable. Non examination of commission and brokerage expenses - Held that:- The evidence filed by the Assessee in the course of assessment proceedings the assessee were details with regard to brokerage and commission namely copy of ledger of revenue expenditure at page 156 of the paper book, details of brokerage and commission paid during the year ended 31.03.2012 at page 157 of the paper book, details of legal fees paid for the year ended 31.03.2012 at page 158 of the paper book. In the light of the evidence filed as above it cannot be said that there is any failure on the part of the AO to make adequate and proper enquiries before completing the assessment on the aforesaid issue. Exercise of jurisdiction on this issue is therefore held to be not sustainable and the order u/s.263 of the Act to this extent is quashed. Depreciation on unsold building wrongly allowed by the AO - Held that:- Since the initial year of operation of IT Parks, the cost of developing IT Parks has always been disclosed in the books as "Fixed Assets" and is never considered or regarded either by the assessee or by the Department to be part of 'Trading Stock". Since first year of operation i.e. A.Y. 2002-03, the assessee has been claiming and the Department is allowing depreciation on the actual cost / WDV of the “Fixed Assets" comprised in IT Parks, i.e., building, P&M and fixtures. This is evident from the assessment orders from AY 2004-05 and onwards [See Pages 161 to 164 of PB]. As such the CIT's notice proceed on incorrect assumption with regard to the character and nature of the IT Park building which he erroneously considered to be "Trading Stock". The CIT therefore could not proceed u/s 263 by assuming incorrect facts which are not borne out from records. It is also noticed that on same incorrect assumption of facts, the CIT for AYs 2007-08 & 20. 11 had similarly revised the assessment orders u/s 263 which was cancelled by the ITAT When CIT’s specific objection in the show cause notice u/s 263 of the Act was met with adequate explanation he ought to have given his own specific finding on those objections and without doing so, the CIT cannot exercise jurisdiction u/s 263 of the Act. Even on this ground the order u/s.263 of the Act, in so far it concerns, issues other than the issues for which the allegation in the show cause notice was lack of enquiry on the part of the AO before concluding the assessment rendering the order of the AO erroneous and prejudicial to the interest of the revenue. - Appeal decided in favour of assessee.
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2017 (6) TMI 293
Addition u/s 2(22)(e) - determination of shareholding of the assessee - Held that:- We are of the view that the Assessee was a registered and beneficial shareholder of shares of M/S.Mega Resources Ltd., that conferred voting rights of only 1.7%. It is only this share holding that has to be considered for applying the first limb of Section 2(22)(e) and the shareholding of the Assessee’s subsidiary M/S.Hooghly Mills Projects Ltd., should not be considered and it is irrelevant. The question in the present case is not even as to whether the Assessee is a beneficial shareholder of the shares held by M/S.Hoogly Mills Projects Ltd. We therefore uphold the order of CIT(A) and dismiss ground no.1 raised by the revenue. Disallowance of expenses incurred in earning exempt income u/s 14A - Held that:- As far as the disallowance u/r 8D(2)(iii) is concerned, we are of the view that the CIT(A)’s direction to direct the AO to consider, while working out the average value of investments, only investments that yielded tax free income is correct and is line with the decision of the ITAT, Kolkata Benches in the case of REI Agro Ltd. Vs DCIT [2013 (9) TMI 156 - ITAT KOLKATA] which has since been approved by the Hon’ble Calcutta High Court. We therefore confirm the order of the CIT(A) and dismiss Gr.No.2 raised by the revenue.
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2017 (6) TMI 292
Addition on account of rent free accommodation provided to the assessee which was valued u/s. 28(iv) - Held that:- The assessee is a part-time director in the company from 01.04.2005 and he was not given any salary by POL. Admittedly the assessee was given rent free accommodation by POL in the capacity of director. From the submission of Ld. AR, we find that assessee was acting as a part-time director as well as employee in the company as evident from the meeting of Board of Directors which is placed on pages 7 and 8 of the paper book filed along with CO No.3/Kol/2015. As the assessee was not drawing any salary from POL then in our considered view the perquisites cannot be determined in terms of the provision of Sec. 17(2) r.w.r. 3 of the Rules. The perquisites of rent free accommodation can be determined only in pursuance of the provisions of section 23(1)(a) of the Act which requires to determine the same as per the guidelines of Municipal Corporation in the above facts & circumstances. Thus, the value of rent free accommodation determined by the AO on the rent fetched by the property in the earlier years for ₹ 96 lacs cannot applied in the case before us. In view of above, we find no infirmity in the order of ld. CIT(A). Hence the ground of appeal of the Revenue is dismissed.
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2017 (6) TMI 291
Addition on bogus loan entries - assessment proceedings initiated against the assessee u/s. 158BD - Held that:- In the present case since proceeding u/s. 158BC have been dropped there is no question of initiation proceedings u/s. 158BD of the Act. The road to Section 158BD pass through Section 158BC. In the present case since there is no assessment u/s. 158BC, the proceeding u/s. 158BD has to fail. Considering the provisions of section 158BD r.w.s. 158BC and the decision in the case of Commissioner of Income Tax Vs. Smt. Annapoornamma Chandrashekar (2011 (9) TMI 751 - KARNATAKA HIGH COURT ) we are of the considered view that the assessment proceedings initiated against the assessee u/s. 158BD are invalid and are liable to be quashed. Accordingly, the appeal of the assessee is allowed and that of the Department is dismissed.
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2017 (6) TMI 290
Validity of assessment u/s 153C - addition in the hands of person other than searched person - Held that:- There is no merit in the initiation of proceedings under section 153C of the Act in the case of assessee. In the absence of any incriminating material found during the course of search of the person, who is covered under section 153A of the Act, which in turn, belongs to the person, other than the searched person i.e. assessee before us, then the proceedings under section 153C of the Act cannot be triggered. Accordingly, we hold so. Accordingly, the proceedings completed thereafter i.e. the order passed under section 143(3) r.w.s. 153C of the Act is invalid and without any jurisdiction and the same is cancelled. - Decided in favour of assessee.
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2017 (6) TMI 289
Approval of exemption granted to the assessee u/s 10(23C)(vi) withdrawn - assessee has been constituted not for sole and exclusive purpose of education and it has incurred the expenses with the sole motive of benefit to the trustees - Held that:- As there is not sufficient material that is brought on record to take a definitive view in the matter on withdrawal of approval granted to the assessee u/s 10(23C)(vi) of the Act. The matter is accordingly set-aside to the file of the Ld. CIT(E) to examine the same a fresh in light of above discussions after providing reasonable opportunity to the assessee society. Appeal of the assessee is allowed for statistical purposes.
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2017 (6) TMI 288
Disallowance of Traveling & Conveyance Exp., Staff Welfare Exp., Office Exp., Vehicle Running & Maintenance Exp.,Business Development Exp. and Function Exp. - Held that:- AO has made general observations while making disallowance what is the basis for concluding that the expenditure claimed is not subject to verification qua the traveling and function expenses, staff welfare expenses, office expenses is not coming out from the order except qua vehicle running and maintenance expenses where no Log Book is found to have been maintained. Similarly qua the function expenses, business and office expenses, the mere fact that the vouchers are self made with the observation that proper bills and vouchers qua the expenditure is not maintained, cannot be said to be a sufficient reasoning as what was improper in the vouchers, has not been spelt out. As before the CIT(A), assessee has also merely relied upon the order of the CIT(A) in the immediately preceding assessment year and necessary facts have not been properly canvassed namely the fact that the assessee claims that in the year under consideration, it had 18 centres all over the country. Similarly the justification on the above fact that traveling and conveyance expenses, staff welfare expenses and function etc. for honouring the successful candidates and celebrating the Sthapna Diwas etc. are all arguments unsupported by specific evidences and thus not coming out from the orders. Since the issue is of a recurring nature and both the tax payer as well as the tax authorities have treated claim of expenses in a perfunctory manner, it is deemed appropriate to set aside the same back to the file of the ld. CIT(A) with direction to decide the same by way of a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. Appeal of the assessee is allowed for statistical purposes.
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2017 (6) TMI 287
TPA - ALP determining nil by applying benefit test - rendering the services to AE - Held that:- TPO has erred in holding the ALP nil by applying benefit test. In the instant case, issue as to rendering the services has already been admitted by the DRP. So, the TPO has erred in determining the ALP at nil by holding that the services were actually not rendered nor such services were needed by the assessee company nor any benefit has been accrued to the assessee company by availing such services from its AE. Determining the ALP of intra group services - Held that:- TPO while determining the ALP of intra group services at nil by using CUP method has not brought on record any comparable. Moreover the transactions are interlinked and the TPO himself aggregated the agency services and marketing support services and benchmarked the operating result of such combined activity, therefore, in these circumstances, we are of the considered view that the TNMM may be used for determining the ALP of intra group services. Accordingly, this issue is restored to the TPO to decide afresh in the light of the findings recorded herein above. Adjustment by clubbing commission income with market support services in allocating the expenses to the agency services in the ratio of sales - Held that:- TPO/DRP/AO have erred in making adjustment by clubbing commission income with market support services in allocating the expenses to the agency services in the ratio of sales. So, following the decision rendered by coordinate Bench of the Tribunal, the ld. TPO is directed to allocate expenses on the basis of gross margin in the agency segment and not in the ratio of sales for the purpose of computing the ALP transaction. No doubt, assessee by making benchmarking analysis of marking support services in the TP study considered 11 comparables with weighted average operating profit margin of 7.32% as against assessee’s margin of 5.00% but the said transfer study has been rejected by the TPO who has rejected 9 comparables out of 11 comparables chosen by the assessee and after introducing 6 new comparable companies computed the average OP/OC at 21.8% and computed the TP adjustment on account of difference in the arm’s length price of the international transactions of agency commission and marketing support services fee at ₹ 1,98,16,836/-, which has been restricted to ₹ 1,64,90,548/- by the ld. DRP by allowing the working capital adjustment to the assessee. Since the basis for allocating the expenses to the agency segment is ordered to be changed, it would be futile to examine the suitability of the comparables considered by the TPO for benchmarking the international transactions as it would change the entire scenario and for that purpose, fresh TP study analysis is required to be done by the TPO. Consequently, we direct the TPO to make fresh TP study analysis after providing an opportunity of being heard to the assessee company to benchmark the international transaction undertaken by the assessee. Adjustment on account of delay in proceed of receipts of AEs beyond 30 days by treating the same to be unsecured loans - Held that:- As from the findings returned by ld. DRP and assessment order passed in this case, it has become apparently clear that ld. DRP has given specific directions to the AO to verify the amount of receivables as well as on the payables due to / from AE, outstanding beyond the period of 30 days only and calculate the interest of net balance of the same. AO without verifying the factual position proceeded to make an addition. So, in these circumstances, we are of the considered view that AO is to recompute the amount after verifying any of receivables in view of the findings returned herein above and after verifying the amount of receivables as well as payable due to / from the AE outstanding beyond a period of 30 days only for the purpose of calculating the interest.
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2017 (6) TMI 286
Eligibility to exemption u/s 10(23FB) - Interest income earned from Fixed Deposit and STCG arising on investment in Mutual fund - whether the assessee has not earned any income from venture capital undertaking? - CIT-A deleted the addition - Held that:- assessee is entitled to claim exemption on any nature of income of a venture capital fund, which fulfill the conditions relating to the purpose for which it is set up i.e. raising of funds for investment in venture capital undertakings - The intention of the legislature is clear to treat any income of venture capital fund as exempt from tax u/s 10(23FB) of the Act irrespective of its nature. There is a reason for this that this income will be taxed in the hands of investors at the time of distribution u/s 115U of the Act on a pass through basis. Accordingly, we are of the view that the CIT(A) rightly deleted the addition. For this we are also relying on the co-ordinate Bench decision of Kshitij Venture Capital Fund (2011 (3) TMI 387 - ITAT, Mumbai). Accordingly, the appeal of Revenue for AY 2007-08 is dismissed. For AY 2008-09 and 2009-10 there is an ammendment in section 10(23FB) of the Act and there are certain specified business eligible for exemption under this provision. Assessee s case does not fall under exemption category and hence, out of the purview of this provision of section 10(23FB) of the Act. Therefore, the assessee has to be assessed under normal provisions of law and hence, the business loss has to be set off against the other incomes. We find no infirmity in the orders of CIT(A) for both the years and hence the same are confirmed. - Decided against revenue Addition u/s 14A r.w.r. 8D - Held that:- We find that this issue is covered by the decision of the Hon ble Delhi High Court in the case of Joint Investment [2015 (3) TMI 155 - DELHI HIGH COURT ] as held that by no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income . This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. - Decided against revenue
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2017 (6) TMI 285
Validity of reopening of assessment - disallowance/addition made u/s 40(a)(ia) - Held that:- No action can be initiated under section 147 after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason for the failure on the part of the taxpayer to disclose fully and truly all material facts necessary for his assessment. Recently in the case of Bayer Material Science Pvt. Ltd. v. DCIT (2016 (3) TMI 179 - BOMBAY HIGH COURT) held that non-disposal of objections and providing the assessee with the recorded reasons towards the end of the limitation period and passing a reassessment order without dealing with the objections results in gross harassment to the assessee which the Pr. CIT should note and take remedial action. In the present appeal also, the Assessing Officer issued notice u/s 148 of the Act, one day before, expiry of extended period of six years. Thus, considering the ratio laid down in the aforementioned judicial pronouncement and the material facts, we allow the appeal of the assessee by holding that reopening of assessment was not valid, beyond four years, when the material facts were duly disclosed by the assessee and the tax deducted at source was deposited in the state exchequer before due date of filing of return. So far as, the deposit of tax deducted at source and invoking section 40(a)(ia) of the Act is concerned, we have made an elaborate discussion in the earlier paras of this order while disposing off the appeal of the for Assessment Year 2005-06 in favour of the assessee by holding that the amendment is retrospective in effect w.e.f. 01/04/2005. The Hon'ble Calcutta High Court in the case of Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT] held that the payment of TDS can be deposited in the state exchequer on or before the last date of filing of return u/s 139(1) of the Act for the relevant Assessment Year and the such deduction has to be allowed. No contrary facts were brought to our notice by the Revenue establishing that the deduction has been granted twice to the assessee. Mere claim/allegation is not enough and it has to be substantiated with facts. Therefore we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, the appeal of the Revenue is having no merit, therefore, dismissed. - Decided in favour of assessee.
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2017 (6) TMI 284
Addition u/s 68 - addition in respect of sundry creditors representing the amount advanced by them as trade advance - respective parties had chosen not to respond to summons issued by the AO, where the assessee responded and the parties have denied advancing money - Held that:- From a perusal of the assessment order, it is clear that the AO had not confronted the assessee with the material gathered by him by exercise power of commission u/s 131. The AO, no doubt, gathered information by issuing summons to the AO of the party in case of Shri Prashanth. Shri Prashanth, though admitted having purchased timber from the assessee, had denied having lent any advance in the financial year 2010-11. But the principles of natural justice demands that the assessee should be given an opportunity of rebutting this evidence which the AO has failed to do so. In case of other party i.e. K.B.Ramakrishna, he appeared in response to summons issued by the AO but denied having advanced many of ₹ 3 lakhs. But this information was also not put to the assessee for rebuttal. Thus, these two additions have been made by the AO in gross violation of the principles of natural justice. Recently in the case of Andaman Timber Industries [2015 (10) TMI 442 - SUPREME COURT] held that not granting of opportunity to cross examine witness whose statement were relied upon in making assessment is a serious flaw which makes the order nullity inasmuch as it amounts violation of principles of natural justice. Because of which assessee was adversely affected. Thus we hold that addition made in respect of Prashanth and K.B.Ramakrishna should be deleted. As regards addition of ₹ 5 lakhs standing in the name of B.Krishappa, AO made addition simply because he has not responded to the inquiry instituted against him. The AO had chosen not to seek further seek further from the assessee to enforce attendance of creditors is enforced. See CIT. CENTRAL – III Versus CHANDELA TRADING CO. (P) LTD.[2014 (11) TMI 409 - CALCUTTA HIGH COURT ] - Decided in favour of assessee.
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2017 (6) TMI 283
Rejection of books of accounts - trading addition - Held that:- Admittedly, the rejection of books of accounts is not challenged by the assessee. We are in agreement to the observations of the ld. CIT(A) where the books of account are rejected the Assessing Officer is required to make best judgment and this best judgment should be based on the material on record and after conducting through enquiry a fair and just estimate of profit should be deduced from the materials so placed before him. We find that the ld. CIT(A) sustained an addition of ₹ 5,00,000/- considering the fact that turnover had increased and also taking into consideration, the past history of the assessee qua the Gross Profit. He estimated. Gross Profit at 4.12 % which is lower than the Gross Profit of assessment year 2009-10 and 2008-09 where the Gross Profit was 5.13% and 5.34% respectively against turnover of ₹ 154.37 crores and 150.39 crores respectively. Under these facts. we are of the view that the ld. CIT(A) estimated at the lower side of the Gross Profit, it would be fair to adopt Gross Profit at 4.20%. The ld. Assessing Officer is directed to adopt which the Gross Profit at 4.20% and re-compute the trading addition accordingly. Thus ground No. 1 of Revenue’s appeal is partly allowed Addition involving the provisions of section 40A(2)(b) - CIT-A deleted the addition as A.O.has not established that the payment to relatives is excessive compared to prevailing market rate - Held that:- We find that admittedly, there is increase in turnover of the asssessee company. Moreover, the Assessing Officer has not demonstrated as to how the salary paid is excessive to the Fair Market Value of the services rendered by the Director of the Company under this, which condition precedent for making such disallowance. Therefore, we do not see any infirmity in the order of the Ld. CIT(A), same is hereby upheld. - Decided against revenue Addition u/s 36(1)(iii) - CIT-A allowed claim - Held that:- The Assessee has sufficient other interest free funds available for investment carried for long term business. Assessing Officer was not able to prove anything to the contrary by bifurcating the interest bearing and free funds and their respective use. This finding of fact is not rebutted by the revenue by placing any contrary material on record. We do not see any infirmity in the order of the Ld. CIT(A). As it is not disputed that the assessee has sufficient interest free funds available for advancing money to sister concerns. - Decided against revenue
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2017 (6) TMI 282
Fees for technical services - made available or not - payments made to the M/s University of Calgary, Canada (non-resident) in terms of contract dated 23.06.2008 for long term collaboration, participation, training, maintenance of air injection equipment - Receipts taxable in India - India-Canada DTAA - Held that:- We agree with the findings arrived at by the AO and the CIT(A) that the know how possessed by the non-resident appellant has been shared and made available to the ONGC personnel. The same is evident from clause 1.2 of the scope of project extracted herein above. The contention of the Ld. AR that the technology is not made available to ONGC is incorrect as the agreement not only contemplates participation but also training and collaborative research between the personnel of the non-resident and ONGC. Article 12(4) of the DTAA thus becomes applicable in the present facts and circumstances of the case. In view thereof, Ground No.1 raised by the appellant is dismissed. Receipts taxable under section 44BB - Held that:- The appellant has no PE in India. Section 44BB of the Act applies in a case where consideration is for services relating to exploration activity which are not in the nature of technical services. If, the consideration is in the nature of fee for technical services, the provisions of either section 44DA or section 115A will be applicable. The said position remained same even after the amendment brought by Finance bill 2010. The agreement shows that the personnel of the non-resident are not engaged in extraction or production of mineral oils. The appellant is not receiving any consideration for mining, assembly or other like projects undertaken by it. Thus, the appellant falls within the purview of Explanation 2 of Section 9(1)(vii) of the Act. The judgment of the Apex Court in ONGC Vs. CIT (2015 (7) TMI 91 - SUPREME COURT) is not applicable to the present case as in that case the non-resident recipient of income was engaged in drilling operations. The facts of this case are distinguishable. We agree with the reasoning given by the AO and CIT(A) and in view thereof, Ground no. 2 raised by the appellant is dismissed. - Decided against assessee.
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2017 (6) TMI 281
Disallowance u/s. 14A r.w.r. 8D - computation of claim - Held that:- Perusal of the profit and loss account would show that the assessee has incurred expenditure towards salaries to the tune of ₹ 84,000/- only. Administrative expenses incurred by the assessee consisted of, inter alia, freight forwarding expenses of ₹ 1.60 lakhs and loss on investment of ₹ 1.90 lakhs. If we exclude both these items, total expenses incurred by the assessee on account of salaries and administrative expenses worked out to around ₹ 96,000/- only. Sales turnover reported by the assessee was ₹ 2.57 crores and hence the above said expenditure of ₹ 96,000/- might relate entirely to business activities. Under these set of facts, we are of the view that there is no requirement for making any disallowance u/s. 14A of the Act and hence we agree with the view taken by the learned CIT(A) on this issue. Accordingly, we uphold his order. - Decided against revenue
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Customs
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2017 (6) TMI 309
Development of CFS - validity of public notices - compulsory imposition of DPD facility - importers find it difficult to make the logistical arrangements necessary to evacuate RMS facilitated containers through DPD from the terminal - Held that: - silence of the petitioners and parties like them for more than 8 years is eloquent enough. This only indicates that so long as there is no threat to their business opportunity or their commercial interest, the petitioners or their representative association do not complain. The complaint now is motivated by pure commercial considerations. In these circumstances, the contesting respondents are right in their submission that we cannot take into account the petitioners’ commercial consideration or business prospects in dealing with the challenge raised in the writ petition. Validity of Public Notice No. 161 of 2016 dated 28th November, 2016 - Held that: - The designation of Speedy in Public Notice No. 161 of 2016 read with Public Notice No. 66 of 2008 has the effect of arbitrarily and unreasonably discriminating against the members of the association. They do not enjoy a level playing field for providing their services. However, it is apparent from a reading of this representation at page 107 of the paper book that the same refers to the earlier Public Notice No. 66 of 2008 dated 11th September, 2008. We have already set out as to how no grievance was raised for more than 8 years when the arrangement and particularly of designation of respondent no. 9 was holding the field. Suddenly, on account of the Public Notice No. 161 of 2016 that such a representation was addressed. Public Notice No. 180 of 2016 dated 19th December, 2016 - Held that: - This public notice refers to the prior public notices and states that the DPD facility reduces the time and cost for importers considerably. In order to reduce dwell time and cost associated with import at Nhava Sheva, it has been decided to extend DPD permission to importers as mentioned in Anexure ‘A’ enclosed to this public notice. The other conditions mentioned in public notice dated 28th November, 2016 will remain the same. Therefore, there is an enlargement and extension of facility to those importers whose names are mentioned in Annexure ‘A’. Public Notice Nos. 8 and 9 of 2017 - Held that: - In the first notice of 2017 (Public Notice No. 8 of 2017 dated 16th January, 2017), the office of the Commissioner of Customs refers to the representations by various stakeholders/members from trade and then states that as a measure of trade facilitation and ease of doing business, the points raised by these persons have been examined and point-wise clarification/procedural requirements are set out in this public notice - In Public Notice No. 9 of 2017, there is a reference made to meetings with the CFSs within the jurisdiction of JNCH, at which, their views were solicited in order to find a solution to logistic arrangements. It was discussed that the JNPT is already preparing a logistic solution in the form of engaging 5-7 major transporters, who will provide transport services to DPD clients in efficient manner and evacuation of containers from terminal will take place on best pick up basis. This will facilitate further rationalisation of shifting charges being charged by terminal operators. The DPD clients can avail the aforesaid logistic solution. Public Notice No. 16 of 2017 - Held that: - Point wise clarification/procedural requirements set out in this Public Notice No. 16 of 2017 dated 9th February, 2017, therefore, carries the matter further. However, the basic policy decision has already been taken by earlier public notices. This point-wise clarification further elaborately sets out the procedural requirements. There are meetings held with the stakeholders as well. As far as this Public Notice No. 27 of 2017 is concerned, it came to be issued because there was a request from the stakeholders to devise a system so that container is released to DPD importer only after issue of delivery order even in case where CFS is logistic service provider. Therefore, the further documents that are required to be obtained by DPD importer, before the consignments are cleared, would ease the movement in the sense if advance intimation is submitted by DPD importer to shipping lines, then, the shipping lines can access the CFS. That is how this public notice has been issued. The limited tender notice dated 17th March, 2017 is really in furtherance of the policy measures and enunciated in the public notice. That is why when that limited tender notice was published, it referred to the relevant paragraphs of the public notices and states that the detailed terms and conditions of the limited tender notice are mentioned in Annexure ‘A’. The limited tender is to invite offers under the bids especially for designation of CFSs for delivery of DPD containers from port terminals of JNCH, Nhava Sheva to CFSs, if not cleared beyond prescribed period and certain other circumstances as specified in the public notices. It is in that sense the participation in the limited tender is not restricted nor does it perpetuate the alleged monopoly of respondent no. 9. Even the respondent no. 9 cannot claim a absolute right simply because it can only receive such containers/goods which are not cleared by the importers within the above time limit of 48 hours. Thus, there is a arrangement devised to move such cargo/goods out of the port. If such is the intent and purpose and which is sought to be achieved and when we find that even the members of respondent no. 8 association and some of the petitioners have favourably responded to this tender, then, all the more, we are disinclined to interfere in writ jurisdiction. Petition dismissed - decided against petitioner.
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2017 (6) TMI 308
Revocation of CHA licence - forfeiture of security deposit - under invoicing of goods - bar of time limits specified under the Regulation 20 - Held that: - The specified time limit of 90 days for issue of SCN is to be determined from the date of offence report - In the present case, the offence report is in the form of a letter issued by the Mumbai Customs to Delhi Customs which has been enclosed with the SCN issued for the alleged customs offence. Since the date of the letter is 01.12.2014, it is reasonable to presume that the same has been received by the Delhi Customs shortly thereafter. Consequently the show cause notice dated 03.03.2015 cannot be held as issued beyond the time limit specified in the regulation 20 - the impugned order is required to be considered on merits and on the ground of violation of principle of natural justice - appeal allowed by way of remand.
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2017 (6) TMI 307
Smuggling of gold - 18 gold bar of 1 kg. each with foreign mark was recovered - penalty - Held that: - the appellant cannot disassociate himself from the recovered gold stating that he was an innocent bystander and was a curious lookers. Chander Parkash Verma was the readymade recipient of the smuggled gold - Being an employee it cannot be said that Sh. Verma was not helping to his master i.e. appellant. In these circumstances, we are of the view that the appellant has committed the crime of smuggling. The crime of justice never dwells together as per the maxim FRAUS ET JUS NUNQUAM COHAMBITANI - In the instance case, the facts and circumstances speaks itself as per the maxim RES IPSA TAX QUITER - penalty on appellant justified - appeal dismissed - decided against appellant.
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2017 (6) TMI 306
Goods were imported without payment of duty - stock transfer - Notification No. 12/2012-Cus dated 17.03.2012 read with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. - Held that: - the imported goods have been diverted by the Appellants to their sister unit situated in Ambarnath (Maharashtra), which is in contravention of the relevant Rules in terms of which the Appellants imported the goods without payment of Customs Duty - This charge is not being contested by the Appellants. Accordingly, there is no hesitation in holding that the Appellants are liable to pay the applicable Customs Duty along with interest payable thereon. Penalty u/s 112 and 114A of CA - Held that: - It is evident from the facts and circumstances of the case that diversion of the goods to their sister concern has not been done with intention to evade the Customs Duty concession. Consequently, there is no justification to impose the penalty on the Appellants. Appeal allowed - decided partly in favor of appellant-assessee.
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Corporate Laws
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2017 (6) TMI 303
Winding up petition - respondent is unable to pay its debts - Held that:- It is held that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bonafide disputed debt. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under section 439 in reliance of the presumption under section 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption. In view thereof, in this case the defence of the respondent is totally spurious, speculative, illusory or misconceived and moonshine and not bonafide dispute on specific ground. The respondent is not able to avoid statutory demand by raising any specific dispute and thus deserves to face consequence of winding up on the ground that the respondent is unable to pay its debts. A perusal of the record clearly indicates that the respondent is unable to pay its debts and deserves to be wound up.
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2017 (6) TMI 302
Winding up petition - respondent is unable to pay its debts - Held that:- In the facts of this case, the agreement entered into between the parties including the corporate guarantees submitted by the respondent clearly indicates that in the event of foreign customers of the respondent would have refused to make payment to the petitioner, the respondent was liable to pay to the petitioner for such transaction. The respondent had agreed to pay to the petitioner upon those foreign parties paying directly to the respondent subsequently and has also issued cheques which were dishonoured with remark “stop payment.” In view therof, there was a clear debt which was agreed to be paid by the respondent to the petitioner which the respondent failed and neglected to pay and was unable to pay to the petitioner. Winding up petition accepted.
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2017 (6) TMI 301
Winding up petition - respondent is unable to pay its debts - allotment of shares to the petitioner in lieu of debt - Held that:- A perusal of all the documents clearly indicates that the respondent had passed an appropriate resolution in the meeting held by the respondent resolving to allot 41300 equity shares to the petitioner in lieu of the outstanding loan of ₹ 4,13,00,000/-. The respondent had also filed various returns from time to time informing the authority such as Ministry of Company Affairs about the resolution passed by the respondent and allotting 41300 equity shares to the petitioner which returns and forms were filed immediately after making such allotment to the petitioner. In my view, filing of such returns and forms immediately after allotment of those 41300 equity shares to the petitioner clearly indicates that the respondent had alloted such shares to the petitioner and had informed the petitioner about such allotment by letter dated 30th September 2006. A perusal of the record further indicates that even in the balance sheet of the respondent for the relevant years, the share capital of the respondent was increased in view of the allotment of 41300 equity shares to the petitioner and simultaneously the loan amount reflected in the balance sheet of the respondent taken from various parties was correspondingly reduced in view of the conversion of the loan amount of ₹ 4,13,00,000/- given by the petitioner. None of such balance-sheets of the respondent are disputed by the petitioner. A perusal of the record indicates that the relationship of the petitioner with the Pankaj Extrusion Ltd. which is denied initially has been accepted by the petitioner belatedly in the rejoinder. The case of the petitioner is totally inconsistent and contradictory. There are several disputed facts. Various triable issues are raised by the parties in this company petition and the affidavits. In my view, the defence raised by the respondent is bonafide and not moonshine and is supported by various documentary and circumstantial evidence. There is no merit in the submission of the learned counsel for the petitioner that the documents relied upon by the respondent which are alleged to have been filed by the Registrar of Companies are unilateral documents and cannot be considered by this Court. Those documents relied upon by the respondent are statutory records demonstrating that the respondent had complied with various provisions of law for allotting equity shares to the petitioner, for converting the loan amount into equity shares and for charging premium. This Court is empowered to consider such statutory documents to consider the allegation of the petitioner that the shares were not allotted to the petitioner with its consent or with the knowledge of the petitioner. There is no legal bar under Section 81(1A) of the Companies Act, 1956 for making allotment of any shares. The jurisdiction of the Company Court while deciding the company petition for winding up is a discretionary jurisdiction. The disputed facts and the allegations of fraud, forgery and fabrication cannot be considered in the winding up petition. Be that as it may, the respondent has produced sufficient documents on record to controvert the allegations made by the petitioner. Thus not inclined to exercise the discretion in favour of the petitioner and against the respondent. - Petition dismissed.
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Service Tax
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2017 (6) TMI 328
Refund claim - excess duty paid on 100% of the freight charges without availing the benefit of abatement of 75% of freight under N/N. 32/2004 ST dated 03.12.2004 - denial on account of time limitation and also on the ground that mere rubber stamp affixed on the bills do not fulfill the condition stipulated under the said notification - Held that: - the refund claim is not hit by limitation of time - the declaration contained in the rubber stamp affixed on the bills and consignment notes issued by the GTA are valid declaration by the GTA and it satisfies the requirement of the notification because in the notification no specific format has been prescribed for the declaration and it is only the CBEC Circular dated 12.03.2007 which prescribed such kind of endorsement. The findings of the Commissioner in the impugned order that no documents have been supplied by the appellant is not tenable as it has been recorded that the appellants have supplied the documents/worksheets evidencing as to how the refund amount was arrived at - the bar of unjust enrichment is not applicable because the appellant has paid the service tax under reverse charge. Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 327
Liability of tax - GTA service - reverse charge - It was argued by the respondent that freight is paid by consignee and therefore respondent are not liable to pay service tax - whether persons specified under category (a) to (g) under Rule (v) are only the consignor or consignee, which is a criteria for liability to pay service tax? - Held that: - in respect of taxable services provided or agreed to be provided by goods transport agency, where the consignor or consignee falls in all the categories (a) to (g) prescribed thereunder, any person who pays or liable to pay freight would be liable to pay service tax - "any person" referred in Rule 2(1)(d)(v) is not qualified by category (a) to (g) of the Rules and therefore even individual or partnership firm can fell under the category of "any person" specified in the said rule - appeal allowed - decided in favor of Revenue.
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2017 (6) TMI 326
Valuation of GTA service - reimbursement of toll taxes - includibility - demand on the ground that the toll tax reimbursed to the transporter should be part and parcel of the gross value of the transportation charges - Held that: - In the case of GTA service, respondent though a service recipient by virtue of legal fiction, they are the deemed service provider. In such case, total amount of transportation is chargeable to service tax as a value of GTA. Therefore, the value on which the service tax on GTA is payable is deemed to be a value of the respondent. If this is so, then out of the total value a part of the value is toll tax - The service tax is not chargeable on any statutory levy whereas it is chargeable only on the service charge. The toll tax being a statutory levy cannot attract the service tax - appeal dismissed - decided against Revenue.
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2017 (6) TMI 325
Renting of Immovable Property - non-payment of service tax - demand - Held that: - the appellants have been paying the service tax on Renting of Immovable Property upto April 2009 and he stopped paying service tax on Renting of Immovable Property from April 2009 onwards on account of the decision of the Delhi High Court in the case of Home Solution Retail India Ltd. [2009 (4) TMI 14 - DELHI HIGH COURT], wherein the Delhi High Court has held that Renting of Immovable Property does not fall in the definition of service - the appellant had a bona fide belief that the Renting of Immovable Property Service is not taxable and therefore he did not pay the service tax and the conduct of the appellant has been stated by Clause 75 of the Finance Bill 2010. Penalty not justified - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (6) TMI 324
CENVAT credit - inputs - lubricants / lubricating oils which have been used by the appellant for dumpers which have been used in mines - Held that: - For the production of coal, the entire mine becomes the place of manufacture and since the disputed goods are no doubt used in relation to the manufacture of excisable goods, the said goods will fall under the purview of the definition of input for availment of CENVAT credit - credit allowed. Water sprinkler system - Held that: - it is evident that the use of water sprinkler systems is within the mine area and these goods are very much covered under the definition of inputs - credit allowed. CENVAT credit - input services - tyre re-treading services - maintenance of vehicles - The essence of the ground is that heavy earthmoving vehicles such as dumpers are not considered as capital goods and hence the services incidental to their maintenance will not be eligible to take credit - Held that: - The definition of input service is inclusive and wide in nature and includes any service used in or in relation to the manufacture of final products. It is not in dispute that the subject services are used in relation to dumpers which are used in mines for producing coal on which excise duty has been paid - credit allowed. Security services - penalty - Held that: - the appellant has taken credit for the Security service used for housing colony by mistake. Upon realization of their mistake, they have promptly reversed the said amount along with applicable interest even before the same was noticed by the Department and SCN was issued for reversal of the same - the availment of credit was by mistake and no penalty is imposable. Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 323
Valuation - job-work - whether the commercial arrangement, comprising of a lease agreement, rent agreement and a job work contract, entered into between M/s. Suzuki Textiles Ltd. and M/s. PGO Processors was a sham arrangement to evade payment of central excise duty? Held that: - reliance was placed in the case of RAJASTHAN SPG. & WVG. MILLS LTD. Versus COMMISSIONER OF C. EX., JAIPUR [2001 (4) TMI 118 - CEGAT, COURT NO. I, NEW DELHI], where it was held that such lease agreement for process house cannot be considered as a sham and process house owner cannot be regarded as real manufacturer. Accordingly, it was held that demand was not sustainable. The various aspects of this case need to be re-adjudicated in the light of the cited decision. On perusal of the impugned orders, we find that the adjudicating authority did not appear to have considered the said decision. Hence, we consider it appropriate to set aside all the impugned orders and remand the entire matter for reconsideration by the jurisdictional Commissioner - appeal allowed by way of remand.
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2017 (6) TMI 322
SSI exemption - use of brand name of others - N/N. 1/1993 dated 28.2.2003 - is ‘ALASKA’ brand is owned by entity other than the assessee appellant? - Held that: - during the relevant period, the brand ‘ALASKA’ was owned by the entity namely M/s. Vinko Auto Industries Ltd., Jalandhar, who is a different entity than the assessee-appellant, namely ALASKA Tyres Pvt. Ltd. When it is so, the appellants are not entitled to SSI benefit for the relevant period. The appellants have taken the plea that under the provisions of Trademark Act, 1999, such registration is to be treated as their brand retrospectively and therefore, they should be given the benefit of SSI exemption during the relevant period - Held that: - reliance was placed in the case of MEGHRAJ BISCUITS INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., UP [2007 (3) TMI 5 - SUPREME COURT OF INDIA], where it was held that issuance of registration certificate with retrospective effect from 30-9-91 will not tantamount to conferment of exemption benefit under the Excise Law once it is found that the appellants had wrongly used the trade mark of M/s. Kay Aar Biscuits (P) Ltd. - the assessee- appellant is not entitled to the benefit of SSI exemption during the said period, as during the said period, the brand name ‘ALASKA’ was owned by another party, namely, M/s. Vinko Auto Industries Ltd., Jalandhar. Penalty on Shri Ravi Gupta, who is director of the assessee appellant, u/r 209 A of CER, 1944 - Held that: - Shri Ravi Gupta was found to be instrumental in preparing the assignment deed in connivance with M/s. Vinko Auto Industries, in order to evade the duty of Central Excise. Thus there has been active involvement of appellant Shri Ravi Gupta in evasion of duty of Central Excise in the present proceedings making him liable to imposition of penalty under Rule 209 A of CER, 1944 - penalty upheld. Appeal dismissed - decided against appellant.
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2017 (6) TMI 321
Valuation - quantity discount - includibility - whether the appellant is liable to pay duty on the quantity discount offered to dealers/distributors? - Held that: - This Tribunal has analysed the very same issue in appellant's own case Pharm Products Pvt. Ltd. Versus Commissioner of Customs & Central Excise, Tiruchirapalli [2017 (6) TMI 155 - CESTAT CHENNAI] and held the issue in favor of Revenue and held that there is no scope for deducting the value of M.R.P goods which are supplied along with identical goods in the same packing as quantity discount - appeal dismissed - decided against appellant.
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2017 (6) TMI 320
CENVAT credit - destruction of raw materials and semi-finished goods by fire - denial of credit on the ground that the appellant has applied for remission of duty - case of appellant is that in the case of destruction in fire in respect of inputs, no CENVAT Credit is required to be reversed - Held that: - As per the remission provisions provided u/r 21 of the CER, 2002 the reversal of CENVAT Credit in respect of input is required to be made only when the remission of duty is sought for in respect of finished goods, which is liable for duty - In the present case, the input or semi-finished goods did not reach the stage of finished goods and the input/semi-finished goods destroyed. Therefore, the provision of reversal of CENVAT Credit, which is with reference to Rule 21 in respect of finished goods is not applicable. If the credit at the time of receipt of inputs was availed correctly and legally, recovery of the same in absence of any machinery provisions cannot be made. Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 319
Manufacture - activity of manufacturing Steel Tubular Poles - demand has been confirmed against the appellant holding that the process undertaken by the appellant does not amount to manufacture relying on the decision of the Hon’ble Apex Court in the case of Hindustan Poles Corporation [2006 (3) TMI 2 - SUPREME COURT], where it was held that the activity of the appellants of merely joining of three pipes, one with other, of different dimensions to obtain a desired length can by no stretch of imagination be brought within the category of manufacture - whether the activity undertaken by the appellant is same as in the case of M/s Hindustan Poles Corporation or not? - Held that: - the process undertaken by the appellant is not the same process in the case of the M/s Hindustan Poles Corporation Wherein, the process is only joining of three different length of pipes but in the case in hand, the dia-meter of the pipes are different and the same has been joined by the process of swaging. Moreover, the pipes were welded with the base plate to make it pole and on the top on the pole a cap is fixed. As the process undertaken by the appellant altogether different from the process undertaken by the M/s Hindustan Poles Corporation - In that circumstance, the decision of the M/s Hindustan Poles Corporation cannot be relied on in the facts and circumstances of the case, therefore, the activity undertaken by the appellant results in a new distinct product with distinct identifiable product - the appellant has correctly availed the benefit of exemption N/N. 56/2002 - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 318
Existence of manufacturing facility or not - there is no evidence on record that Central Excise officers visited those premises and there is no evidence that there was no electricity connection there during the period prior to 1.8.2005 in the name of M/s Mittal Packers - validity if demand for the period prior to 1.8.2005 - Held that: - As the duty has been confirmed for the period from 1.8.2005 to 29.3.2006, this demand is to be requantified by the original adjudicating authority for which the case is being remanded to him/her - the penalty imposed on the other appellant, Shri Sanjay Mittal also requires reduction accordingly - appeal allowed by way of remand.
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2017 (6) TMI 317
Refund of AED (T & TA) - time limitation - whether, the time limit prescribed in Section 11B ibid would be applicable for refund of accumulated cenvat credit under Rules 5 ibid? - Held that: - refund application in Form A is to be filed with the jurisdictional Central Excise authorities before the expiry of period specified in Section 11B of the CEA, 1944 - Since the notification dated 14.03.2006 clearly prescribes that for claiming refund of CENVAT credit, the application has to be filed within the stipulated time prescribed under Section 11B, the refund claim in this case filed beyond such specified time limit is barred by limitation of time. Refund rightly denied - appeal dismissed - decided against appellant.
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2017 (6) TMI 316
CENVAT credit of amount of CVD paid through DEPB - whether the CENVAT Credit of the additional custom duty debited through DEPB against import licenses issued under earlier policy in respect of the bills of entries pertaining to year 2003 can be allowed in December, 2004 under the new Foreign Trade Policy? - Held that: - the Board Circular dt. 21.10.2004 has clarified that the said facility would be available only in respect of the licences issued under the new Foreign Trade Policy. It was also clarified in the said circular that licence under the previous policy would be governed by the provisions of earlier policy. The penalty of ₹ 10,000/- has been rightly imposed u/r 15(1) of the CCR, 2004 by correctly interpreting the said Rule. Appeal dismissed - decided against appellant.
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2017 (6) TMI 315
Clandestine removal - Shortage of stock - demand of duty with penalty - Held that: - the department has not taken full pains to make fool proof case against the assessee. The whole case is made mainly on the mere statement of the Director of the Company - the charge of clandestine removal by an assessee is itself a serious charge which needs to be proved beyond reasonable doubt. Revenue is required to go to the customers to whom the said non-duty paid goods were cleared. When there is no record of such clearances in any form (loose slips or printed record) found, department’s charge is mere statement. Penalty u/s 11AC of the CEA - Held that: - the Revenue fails to offer any substantial evidence against the appellants to prove fraud, collusion, willful misstatement with intent to evade duty - the present case appears to be covered by Tribunal’s decision in the case of Ranjan Processors vs. CCE, Jaipur II [2009 (9) TMI 867 - CESTAT NEW DELHI] where the penalty imposed under section 11AC was modified and a reduced penalty was imposed u/r 27 of CER, 2002 - the penalty of of ₹ 71,893/- imposed on the appellant-assessee is reduced to a penalty of ₹ 5,000/-. Imposition of Penalty on Shri Surendra Kumar Bhura, Director of the assessee company - Held that: - when there are no malafides established in case of the appellant Director, penalty under Rule 26 in his case cannot be sustained. Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 314
Turnover tax - eligibility for deduction - Held that: - turnover tax is not of admissible deduction has been rejected by the Commissioner(Appeals) by relying upon the following decision in the case of Bangalore Paints Ltd. Vs. CCE [2001 (3) TMI 165 - CEGAT, BANGALORE]. The adjudicating has finalised provisional assessment on the basis turnover of top 10 depots. As there was no clearance from 4 depots, the assessments were finalised based on the basis of documents produced by the respondent in respect of these depots. Appeal dismissed - decided against Revenue.
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2017 (6) TMI 313
SSI exemption - use of brand name of third party - unregistered trade mark - The Trade Mark authorities in the year 2001 refused to register the word “CHAMRIA” as a Trade Mark by observing that it is a surname and the same cannot be registered as a Trade Mark and is free for all to use - Held that: - the word “CHAMRIA” is being used as a Trade Mark by the assessee-Appellants since the origin of the business in Rajasthan. One of the brothers has established the unit with the same brand name in Delhi, who is the assessee-Appellants in the present case. Thus, the assessee-Appellants are entitled to use the Trade Mark “CHAMRIA” which was originally belongs to them since the inception of business in Rajasthan, especially when it is free to all - reliance placed in the case of Kali Areated Water Works vs Commissioner of Central Excise, Madura [2015 (6) TMI 226 - SUPREME COURT] - the assessee-Appellants are entitled for the SSI exemption under N/N. 1/1993 dated 28.02.1993 - appeal allowed - decided in favor of appellant-assessee.
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2017 (6) TMI 312
Utilization of CENVAT credit - benefit of N/N. 30/2004 - Rule 3(4) of the CCR - denial of utilization of credit on the ground that since the appellant had opted out of the CENVAT credit scheme, the credits of CENVAT lying unutilized shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for exports - Held that: - by going through the N/N. 30/2004, there is no provision for lapsing of credit. Even when goods in question were being exported, there is clear provision under CENVAT Credit Rules 2004 that Rule 6 is not applicable for exports - the impugned order has been passed on the basis of N/N. 30/2004 wherein there is a restriction on availment of cenvat credit on inputs or capital goods but subsequently vide corrigendum 334/3/2004 dated 09.07.2004, the corrigendum was issued by which the restriction was only on inputs and not on capital goods which means that the cenvat credit on capital goods is permissible under the said notification - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 311
Reversal of CENVAT credit - electricity sold outside - Rule 6 of the CCR 2004 - demand on the ground that the appellants have not produced the details in respect of the proportionate credit on inputs used in or in relation to the manufacture of the said quantity of electricity - Held that: - the issue is no more res integra and has been settled in favour of the appellant in the case of Venkateshwara Power Project Ltd Versus Commissioner of Central Excise, Customs and Service Tax [2016 (10) TMI 32 - CESTAT BANGALORE], where it was held that the issue involved is no more res integra in terms of the decision of Hon'ble Allahabad High Court in the case of Balrampur Chini Mills Ltd Vs UOI [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] wherein the Board Circular No. 904/24/2009-CX dated 28/10/2009 requiring reversal of credit or payment of amount in terms of Rule 6 stands quashed. Demand set aside - appeal allowed - decided in favor of assessee.
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2017 (6) TMI 310
Classification of goods - Milk Treat - classified under CTH 19053211 or under CTH 19053219? - Held that: - the wafers coated with Chocolate or containing Chocolate are classifiable under Tariff Heading 19053211, therefore, it has to be found out whether the product in question has been coated with Chocolate or containing Chocolate - The explainery notes clearly states that Sugar confectionary including White Chocolate and not containing Cocoa is classifiable under Chapter Heading 1704 and it includes White Chocolate compressed of Sugar, Cocoa butter, Milk Powder, flavoring agents but not containing more than mere traces of Cocoa (Cocoa butter is not regarded as Cocoa). Admittedly, the ingredients used in manufacturing of Milk Treat does not contained any Cocoa or Chocolate but only contained Cocoa butter and Cocoa butter is specifically excluded and does not cover under Chapter 18 of the Central Excise Tariff Act, therefore, the White Chocolate cannot be said as Chocolate - the product “Milk Treat” is not covered under Tariff Heading 19053211. The product in question under Tariff Heading 19053219 which has been correctly classified by the appellants - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (6) TMI 305
Interpretation of any entry - filter fabrics - the competing entries are CI17 and A15 and whether the product falls in one or the other is a question of law - whether the product HDPE woven cloth which is used as filter fabric can be said to be an impregnated, coated, covered or laminated textile fabrics or textile articles of a kind suitable for industrial use or technical usage? - Held that: - It is a settled position that the burden is on the department to prove that the product falling under particular subheading is not covered by A.D.E. Act and, therefore, fails to qualify as one covered by Schedule Entry A15 as fabrics described in A.D.E. Act - There is nothing to show that “Filtered Fabric” is a textile article of a kind suitable for use in a factory or an industry or an article of technology and, therefore, it is difficult to agree that the impugned product falls in a heading 54.06 covering fabrics in A.D.E. Act. Whether the impugned product is covered by Central Excise Head 54.06 being manufactured out of raw material covered by Central Excise Heading 54.04? - Held that: - The Tribunal has considered the rival contentions and relied upon several decisions including the opinion of an expert tendered by the original appellant and the Tribunal has opined that it is not possible to accept the contentions of the Commissioner of Sales Tax that the impugned product is not obtained by either of the two processes referred to therein and that therefore cannot be considered as material described in heading 54.05 and, therefore, not covered by Central Excise Tariff Head 54.04. Whether the Tribunal was justified in holding that the Commissioner has rejected the prayer and has adjudicated upon that prayer in exercise of the appellate powers, under Section 55 of the Bombay Act? - Held that: - once the orders are appealable by exercise of power under Section 55(6), the Tribunal has to pass the order as it deems just and proper. When despite making specific prayer, the said relief was not granted i.e. indirectly refused without giving reasons, it becomes the subject matter of Appeal, if such inaction on the part of Commissioner to consider the said relief has been challenged in Appeal. The opponent has taken a specific ground in the Appeal to grant prospective effect. The order further justifies the finding of the Tribunal in order dated 30th April, 2003 for granting prospective effect. Sales Tax Reference No. 31 of 2009 is returned unanswered.
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2017 (6) TMI 304
Levy of sales tax on liquor Vendors - merger of sales tax with excise duty - case of petitioner is that by the Notification dated 8th December, 1998 and 9th December, 1998, the Petitioners are being subjected to double taxation since the initial levy of sales tax which was levied on liquor had not been withdrawn - Held that: - There is no issue that such licensees are collecting the sales tax based upon the impugned provisions/circulars/notifications from the date of advertisement dated 3.2.1999 as recorded in order dated 8.2.1999. The challenge, though raised through the grounds contending that imposing of such sales tax is amounting to double taxation, but the fact that since the date of notification/circular, the members have been collecting the sales tax from the consumers regularly. The vendors are under obligation to collect and pay the sales tax accordingly. Ultimately, the consumers who are required to make the payment of the sales tax so imposed and not the vendors directly from their profit. The Petition, as recorded above, is not by the consumers. The challenge is only by the vendors. In a case, where vendors have already collected the sales tax pursuant to these notifications/circulars, there remain no doubt that they have to make the payment of sales tax to the Department in accordance with law. Petition dismissed - decided against petitioner-assessee.
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