TMI Tax Updates - e-Newsletter
July 18, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility - HC
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Income Tax:
Addition u/s 68 - The burden is upon the assessee to prove the necessary ingredients of section 68. Once the assessee failed to do so the consequences were bound to follow. - HC
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Income Tax:
Expenditure towards bank charges - revenue or capital - when did business is set up? - That eventuality cannot arise unless the business has actually been set up. Business was admittedly set up on 7th May, 2006 when it started its business, or may be on 6th May, 2006 when it was ready for starting its business - HC
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Income Tax:
Commission expenditure - When the primarily evidence of nature of services rendered for which Assessee paid commission is not on record, it is not possible to say whether the expenditure was wholly and exclusively incurred for the purpose of business and also as to whether explanation to Sec.37(1) of the Act would be attracted. - AT
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Customs:
Claim of refund of duty involved in procurement of High Speed Diesel (HSD) - HSD is being used for various operations in SEZ unit (Dahej Special Economic Zone) - Jurisdiction - Assistant Commissioner, Central Excise & Customs, Bharuch Division directed to consider the refund applications filed by the petitioner on its own merits and to pass appropriate orders. - HC
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Customs:
Classification - import of heavy duty crane cum pipe laying ship - self propelled ship or not - the classification of the vessel LTS 3000 would be correct under 8901 or 8906 but not definitely under 8905 as has been held by the Adjudicating Authority. - AT
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Customs:
Diversion of goods meant for export to DTA - export of High Carbon Ferro Chrome (HCFC) - The delay in informing the department in our opinion is only an inadvertent lapse as found by the Commissioner. The goods were rightly not confiscated as they were not physically available - AT
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Service Tax:
Extended period of limitation - The show-cause notice issued beyond the period of one year from the date of acquiring knowledge is time barred. As there is no allegation in the show-cause notice that appellant caused delay in furnishing information or did not co-operate with the investigation/inquiry, the findings of the Commissioner(Appeals) that the details furnished was insufficient to compute liability is based on mere assumptions. - demand set aside - AT
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Central Excise:
Rabte / refund claim - Export of goods after 6 months from the date of clearance of goods from factory - violation to permission of Notification No.19/2004-CE(NT) dated 06.09.2004. - claim was rightly rejected - CGOVT
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Central Excise:
Rebate / refund claim - applicant exported the goods procured from the manufacturer and filed rebate claim - original authority has rightly rejected the rebate claims filed by the applicant on the ground that the declaration given at Sr. No.3(a)(b) & (c) is incomplete. - CGOVT
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Central Excise:
Extended period of limitation - it cannot be held that the appellant had willfully suppressed the fact of irregular cenvat credit in case of input service of traveling. It is, therefore, right to conclude that the subject demand and recovery would be legally unauthorized beyond the normal period of one year from the relevant date. - AT
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Central Excise:
Claim of refund after surrender of registration certificate - un-utilized cenvat credit - export of goods - there is no express prohibition in terms of Rule 5 - refund allowed - Tri.
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Central Excise:
Refund claim - valuation - price escalation - the customers have refused the payment of the price escalation invoices raised by the appellants. From this, it is evident that the appellants have not recovered the duty incidence from their customers - refund allowed - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (7) TMI 681
Addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility - Held that:- As in the case of Riddhi Steel and Tubes (2013 (10) TMI 291 - GUJARAT HIGH COURT) it is held by this Court that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. Accordingly, the question is answered in the affirmative i.e. against the appellant revenue and in favour of the assessee. We hold that the Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility. - Decided in favour of the assessee
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2016 (7) TMI 680
Addition u/s 68 - burden of proof - Held that:- As during the penalty proceedings assessee had furnished particulars of 19 creditors who had allegedly advanced money to him. Even that letter does not disclose any address with respect to 8 of the creditors and the creditors whose addresses were furnished by the assessee were not available, according to the finding recorded by the learned Tribunal at the address indicated by the assessee. We, as such, are unable to attach any importance to the submission advanced by Mr.Jhunjhunwalla. The burden is upon the assessee to prove the necessary ingredients of section 68. Once the assessee failed to do so the consequences were bound to follow. In that view of the matter, both the additions are upheld and the questions formulated at the time of admission of the appeal are, accordingly, answered against the assessee
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2016 (7) TMI 679
Expenditure towards bank charges - revenue or capital - when did business is set up? - Held that:- We are of the opinion that the view taken by the learned Tribunal treating the expenditure towards bank charges as capital expenditure does not require any interference. The fact that the assessee was already in business or that the assessee had gone in for expansion of the business by diversifying it, does not alter the situation that the hotel business was a new business undertaken by the assessee. Any expenditure incurred for that business has to be allowable in accordance with law. That eventuality cannot arise unless the business has actually been set up. Business was admittedly set up on 7th May, 2006 when it started its business, or may be on 6th May, 2006 when it was ready for starting its business. - Decided in favour of revenue
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2016 (7) TMI 678
Addition on account of international transactions of payment of royalty - ITAT not confirming the action of the AO in restricting the payment of royalty to 30% of the actual sales as against 56% claimed by the assessee confirmed - Held that:- It has been rightly noted by the ITAT, once the liberalized policy did away with the requirement of computing the royalty with reference to the list price (Indian Published Price), the Assessee moved from the regime of royalty payment as a percentage of the list price to the actual license and support review. In the circumstances, the conclusion arrived at by the ITAT appears to be perfectly justified. It is based on facts and does not give rise to any substantial question of law. It may also be noticed that in the AYs 2008-09 and 2009-10, the TPO has accepted the royalty payment at 56% of the actual sales. Also, the Dispute Resolution Panel has accepted the Assessee’s case for AYs 2006-07 and 2007-08. - Decided against revenue
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2016 (7) TMI 677
Interpretation of Section 92B - Held that:- ALP was arrived at by the Transfer Pricing Officer (TPO) by not adopting any of the methods prescribed under Section 92C of the Act. The method to determine the ALP adopted was not one of the prescribed methods for computing the ALP. It was not even any method prescribed by the Board. At the relevant time, i.e. for A.Y. 200809 Section 92C of the Act did not provide for other method as provided in Section 92C(1)(f) of the Act. The impugned order of the Tribunal holds that the method adopted by the Revenue to determine the ALP was alien to the methods prescribed under Section 92C of the Act. In the above circumstances, the Tribunal declined to restore the issue to the Assessing Officer for re-determining the ALP by adopting one of the methods as listed out in Section 92C of the Act. This finding of the Tribunal has also not been challenged by the Revenue. In view of the fact that the Revenue has accepted the order of the Tribunal on its finding on facts on the two issues as pointed out hereinabove as well as the refusal of the Tribunal to restore the issue of determination of ALP to the TPO by following one of the methods prescribed under Section 92C of the Act. Thus, the questions as formulated for our consideration even if answered in favour of the Revenue would become academic in the present facts. Thus, we see no reason to entertain this appeal. However, we make it clear that the issues of law which has been raised in the present appeal are left open for consideration in an appropriate case.
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2016 (7) TMI 676
Application to Settlement Commission - validity of notice u/s 142(1) - petitioner's grievance is that the impugned notices are without jurisdiction, as the assessment for the A.Ys. 2008-09 and 2009-2010 have been admitted for consideration by the Settlement Commission - Held that:- The concluding paragraph in the order of the Settlement Commission dated 10th May, 2016 allowing the application for settlement to proceed with further, the impugned notices are without jurisdiction. However, the distinction which is sought to be made on behalf of the Revenue does not find any mention in the operative part of the order dated 10th May, 2016. Therefore according to us, the impugned notices are without jurisdiction as it is not open to an Assessing Officer to oust the jurisdiction of Settlement Commission in the face of Section 245F(2) of the Act. In case the Revenue reads the order differently particularly in view of the sentences extracted herein above relied upon by Mr. Suresh Kumar then the appropriate remedy would be to seek a clarification and/or rectification of the order dated 10th May, 2016 from the Commission before issuing the impugned notices. The Assessing Officer is a creature of the statute and must not act in a manner which would denude the Commission of the powers bestowed upon it under the Act. Therefore at this stage, we see no reason to let the impugned notices continue and therefore, we quash and set aside the impugned notices dated 8th June, 2016, 14th June, 2016 and 23rd June, 2016. - Decided in favour of assessee
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2016 (7) TMI 675
Reopening of assessment - entitlement to deduction under Section 80 IA without setting off the losses/unabsorbed depreciation pertaining to the windmill - Held that:- Once the losses and other deductions are set off against the income of the assessee in the previous year, it should not be re-opened again, for the purpose of computation of current year income, under Section 80-I and 80-IA of the Act. M/s.Velayudhaswamy Spinning Mills (P) Ltd., v. Assistant Commissioner of Income-Tax [2010 (3) TMI 860 - Madras High Court ] - Decided in favour of the assessee.
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2016 (7) TMI 674
Rejection of books of accounts - valuation of gross profit ratio - Held that:- The submission of revenue that the rejection of books of accounts under Section 145(3) of the Act by the Assessing Officer was justified as there was discrepancy in valuation of closing stock of work in progress is not sustainable. This for the reason that the CIT(A) had in his order deleted the addition made on the above account and the Revenue has accepted it. This is evident from the fact that no appeal from it has been preferred by the Revenue to the CIT(A). So far as the other basis viz. fall in gross profit ratio is concerned, we find that the same is found by the Tribunal attributable to increase in turnover by more than 100% with prices of its products remaining stagnant due to increase in competition and no fall in prices of inputs/raw materials. Further, the finding of the Tribunal as recorded herein above in respect of the respondent assessee's accounts shows that it found as a fact that the accounts were correct and complete. In fact, even quantitative details were also mentioned. As the finding of the Tribunal in the impugned order is shown to be perverse or arbitrary, it does not call for any interference. - Decided against revenue
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2016 (7) TMI 673
Rectification of mistake - applicability of provisions of Section 115JB - Held that:- Applicability of Section 115JB of the Act was in issue before the Tribunal, and was decided by the Tribunal, the same could not be revived in subsequent proceedings; and the present application could not be entertained, and the order of the Tribunal dated 19.03.2010 could not recalled, as it would amount to review. The Tribunal held that the so-called mistake, pointed out in the M.A, was not in the nature of a mistake envisaged under Section 254(2) of the Act. The M.A. was dismissed. No mistake necessitating its rectification under Section 254(2) of the Act
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2016 (7) TMI 672
Commission expenditure - deduction u/s.37(1) - whether services were provided or not - Held that:- In the absence of any evidence to show that services were in fact rendered by the persons to whom the Assessee paid commission, all these considerations fade into insignificance. The CIT(A) has proceeded under the assumption that it is the revenue that has to prove that services were in fact not rendered by the person to whom commission was paid. This approach is legally not correct. When the primarily evidence of nature of services rendered for which Assessee paid commission is not on record, it is not possible to say whether the expenditure was wholly and exclusively incurred for the purpose of business and also as to whether explanation to Sec.37(1) of the Act would be attracted. For the reasons given above, we reverse the order of the CIT(A) and restore the order of the AO. In the result, appeal by the Revenue is allowed.
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2016 (7) TMI 671
Transfer pricing adjustment - segmental P & L Account in relation to transaction with associated enterprises (AE) and Non-AE’s - Held that:- In the present case it is noticed that the assessee requested the TPO to consider the segmental P & L Account in relation to transaction with associated enterprises (AE) and Non-AE’s for the revenue of associated cost for arriving at segmental P & L vide letter dated 08.01.2015. However, the TPO did not accept the request of the assessee since the segmental data relating to internal comparables were not audited. Now the assessee got the segmental profit and loss account audited by M/s. S.S. Kothari Mehta & Co. in pursuance of the provisions of Income-tax Act, 1961 and the provisions of Companies Act, 1956 for the year ended on 31st March, 2011 and furnished the copies of the same as an additional evidence. Thus to resolve the present controversy, the additional evidences furnished by the assessee are relevant and go to the root of the matter, so these deserves to be admitted. Accordingly, the additional evidences is furnished by the assessee are admitted under Rule 29 the Income-tax (Appellate Tribunal) Rules, 1963. However, these evidences furnished by the assessee first time before this bench of the Tribunal were not available to the authorities below. We, therefore, deem it appropriate to set aside the issue under consideration to the file of the TPO to be adjudicated afresh inaccordance with law, after providing due and reasonable opportunity of being heard to the assessee. We also direct the TPO to consider the additional evidences, furnished by the assessee while adjudicating the issues under consideration.
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2016 (7) TMI 670
Eligibility of deduction under section 80 IB (10) - income derived from the sale of flats - Held that:- There is no quarrel on the point that the income derived from the sale of flats developed under the housing development project is eligible for deduction under Section 80IB (10) of the Act. However, such deduction is available only on the income arising from the development activity. In the case of the assessee the income offered by the assessee consist of two elements - the difference in the cost of acquisition of the land and fair market price of the land as on 15.10.2004 being the capital gain and the second element is the profit being the difference between the market price of the land and the sale price of the constructed portion of the share of the assessee in the project. Consequently, there are two components of income one is capital gain on land and other is business income from sale of flats in the housing project. There is no dispute that the land in question was part of block of assets of the assessee and therefore the treatment given by the assessee to the land in question in the books of accounts was capital asset and therefore at the time of joint development agreement the capital asset owned by the assessee was transferred to the undertaking under the joint development agreement for construction and development of housing project. Therefore, on transfer of land for the housing project it gives raise to the income being capital gains. The assessee has claimed to have incurred certain expenditure. However, we note that the alleged expenditure by the assessee does not pertain to the development / construction activity of the project because as per the terms of the agreement, the entire cost of construction or other development activities was to be borne by the developer. Even otherwise the alleged expenditure if any incurred by the assessee is post development and post ear-marking of the built up share in the project. When the assessee was under no obligation to incur any expenditure except to contribute the land for the project then this claim of the assessee is inconsistent with the terms and conditions of the agreement as well as the facts and circumstances of the case. Hence the said finding of the CIT (Appeals) is contrary to the basic fact and agreed terms of the agreement. However, we find that the income which is derived from the sale of flats, exclusion of capital gain towards the land would be eligible for deduction under Section 80IB(10) of the Act as held by the Hon'ble High Court in the case of Shreevani Constructions (2012 (7) TMI 88 - KARNATAKA HIGH COURT). Accordingly, we set aside the matter to the record of the Assessing Officer to recompute the income in the above terms. As regards the issue of the area of certain flats exceeding 1500 sq. ft., the Assessing Officer is directed to compute the correct area and allow proportionate deduction as held by the Tribunal in the series of decisions relied upon by the CIT (Appeals). - Decided partly in favour of revenue for statistical purpose.
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2016 (7) TMI 669
Reopening of assessment - Eligibility of exemption from income tax U/s 10(20) - Held that:- Assessing Officer was duty bound to furnish the reasons within the reasonable time on receipt of the request from the assessee, since the ld Assessing Officer has failed to provide the reasons for issuing the notice within reasonable time, therefore, we are left with no other option but to set aside the proceedings to the file of the Assessing Officer with direction to provide reasons for issuing notice U/s 148 to the assessee within four weeks from the date of receipt of the order in respect of A.Y. 2005-06 to 2009-10. Thereafter the assessee shall find the objections to the assessing officer and the assessing officer shall pass a speaking order in accordance with law in that the reasonable period deciding the objections of the assessee which may be filed against notice under section 148. Therefore we hereby set aside the orders passed by the authorities below and allow the appeals of the assessee for statistical purposes only.
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2016 (7) TMI 668
Reopening of assessment - Undisclosed investment made in purchase of colour and chemical - Held that:- The information has been gathered from the record held with the department which were submitted by assessee only during regular course of assessment proceedings u/s 143(3) r.w.s. 153A of the Act and they were very much available before the ld. Assessing Officer who has thereafter framed the assessment order. Certainly there was no failure on the part of the assessee company to disclose fully and truly all the material facts necessary for assessment and as there being no new or fresh material before the Assessing Officer, mere change of opinion cannot form the basis of reopening the assessment. Therefore, appeal of the department can be dismissed on this ground. With the help of rule 27 of ITAT Rules, respondent can raise an argument qua an issue which has been decided against him in the impugned order. The respondent may not get further positive relief. For example the ld. CIT(A) has decided certain additions against the assessee and assessee did not file appeal against confirmation of those additions, meaning thereby that those issues have become final. They cannot be deleted by quashing the assessment order on the ground of reopening. In other words revenue cannot be put in more disadvantageous situation except dismissal of its appeal. In the appeal of revenue, respondent assessee can not get positive relief. He can only get the appeal dismissed on the ground that CIT(A) has erred in appreciating the issue of re-opening. On merits also we are of the view that ld. CIT(A) has rightly observed that the difference between purchase figures as per audited financial statements and as per consolidated monthly details furnished by assessee during assessment proceedings, pertained only to the adjustment of cenvat credit, discount on purchases, adjustment on account of octroi and paid on purchases and all these adjustments were duly given effect in the books of account maintained by assessee and there is no other evidence brought on record by the ld. Assessing Officer to prove that there was any unaccounted purchases. - Decided in favour of assessee
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2016 (7) TMI 667
Trading addition - G.P. rate application - Held that:- Whatever defects pointed out by the AO are sufficient to reject the book results as purchases as well as payments of expenses were made in cash which has not been controverted by the AR. Therefore, we upheld the rejection of books of account u/s 145(3) of the IT Act. The Co-ordinate Bench has considered the assessee’s cases from A.Y.2006-07 to 2008-09 for identical additions made by the AO by rejecting the books of accounts. It is general that GP rate cannot be constrained. The assessee has given cogent evidence for decline of the GP rate which has been accepted partly by the ld. CIT(A). The sales are constitute 56.70% of total sales. The reasons given by the assessee for decline of GP are verifiable from the bill which shows that grey stone purchase price has increased from 11.54% to 31.21% whereas brown stone price increased from 5.88% to 17.65% compared to preceding year. However, sale price had not increased proportionately as evident by the AR of the assessee which has not been controverted by the ld. AR. - Decided against revenue
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2016 (7) TMI 666
Reopening of assessment - reasons to believe - difference between the sub-contract income shown by the assessee in its P&L Account and that reflected in the TDS certificates - Held that:- On perusing reasons for reopening of the assessment as noted in the assessment order, it is seen that reassessment was initiated on account of under assessment of income to the extent of ₹ 3,38,508/-, being the difference between the sub-contract income shown by the assessee in its P&L Account and that reflected in the TDS certificates submitted by the assessee. The aforesaid addition was made by the AO while framing assessment u/s.148 of the Act but the same were deleted by the ld.CIT(A) vide order dated 30/05/2007 as those receipts were duly declared by the assessee and further we find that the ld.CIT(A) has also noted that AO in the Remand Report dated 28/03/2012 and opined that the impugned suppressed receipts were declared by the assessee in the income-tax return. Also in the assessment order framed u/s.144 r.w.s.254 of the Act vide order dated 14/12/2010 in the second round of appeal also, no addition of suppressed receipts has been made by the AO. Thus, there is no addition of suppressed receipts of ₹ 3,38,508/- in the reassessment proceedings, meaning thereby that no addition was made on the ground which was the basis for reaching the conclusion of escapement of income in the reasons recorded for issuance of notice u/s.148 of the Act. We find that the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. reported at (2010 (4) TMI 431 - HIGH COURT OF BOMBAY ) on the issue as to whether addition on other grounds could be made when no addition has been made of the income, which was initially the basis of reopening has decided the issue in favour of assessee.
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2016 (7) TMI 665
Reopening of assessment - invoking the provisions of section 131(1) - Held that:- In the present case, no proceeding was pending before the ITO when he issued the letter of inquiry on 13.03.2008, requiring the assessee to, inter-alia, produce evidence, such letter of inquiry is not valid in the eye of law. It does not require any cognizance to be taken of. And that being so, the assessee was not obliged to respond to this invalid and non est so-called letter of enquiry, requiring the assessee, inter-alia, to produce evidence. Quod erat demonstrandum. Therefore, finding no merit in the contention of the Department that the assessment of the assessee under section 147 was preceded by the issuance of a letter of inquiry by the ITO, the same is rejected. A mere suspicion of the AO, that prompted him to initiate assessment proceedings under section 147, which is neither countenanced, nor sustainable in law. Too, the AO proceeded on the fallacious assumption that the bank deposits constituted undisclosed income, over-looking the fact that the source of the deposits need not necessarily be the income of the assessee. That being so, in keeping with ‘Bir Bahadur Singh Sijwali’ (2015 (2) TMI 60 - ITAT DELHI) the reasons recorded to initiate assessment proceedings under section 147 of the Act and all proceedings pursuant thereto, culminating in the impugned order, are cancelled. - Decided in favour of assessee
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2016 (7) TMI 664
Allowability of expenditure - mere accommodation entry or not - Held that:- As there being no change in facts and circumstances of these cases respectfully following the order of the Tribunal in Konichiva Builders Ltd. [2014 (4) TMI 533 - ITAT DELHI ] the issue of allowability of expenses in similar lines is restored to the AO herein also requiring the assessee to prove its claim with cogent material the limited plea of the assessee is accepted
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2016 (7) TMI 663
Profit from transaction of units and shares - STCG on transaction of purchase and sale of units of mutual funds and shares - Capital Gain or Business income - Held that:- It is not in dispute that the Assessee had treated the shares and units as investments in its books of accounts. Similar transactions have been accepted by the revenue in assessments for AY 2001-02 to 2003-04 as giving raise to capital gains and not as business income. In fact the assessment in AY 2003-04 was completed u/s.143(3) of the Act after scrutiny. In the light of the above circumstances prevailing in the case of the assessee, we are of the view that the conclusion of the CIT(A) that the income from sale of shares and units declared by the assessee as capital gain has to be accepted is correct and calls for no interference. As we have already seen that the AO in AY 03-04 accepted similar income as capital gain. It is not disputed by the revenue that the facts and circumstances in the AY 03-04 & 04-05 are identical. Though the rule of res judicata is not applicable but the principle of consistency will definitely apply and on that basis the claim of the Assessee should be held to be proper. - Decided against revenue Denial of the claim of the assessee for deduction u/s 80HHC - Held that:- The prayer of the learned counsel for the assessee that the decision on this issue was rendered by the Hon’ble Supreme Court in the case of Topman Exports (2012 (2) TMI 100 - SUPREME COURT OF INDIA ) which was after passing the of the impugned order of the CIT(A) and therefore the issue should be directed to examined by the AO in the light of the decision rendered above is acceptable. Accordingly the issue is remanded to the AO for fresh consideration in the light of the decision cited above. Disallowance u/s 14A - Held that:- The Hon’ble Calcutta High Court in the case of CIT Vs. M/S.R.R.Sen & Brothers Pvt.Ltd. [2013 (7) TMI 260 - Calcutta High Court] held that computation of 1% of exempt income as disallowance u/s.14A of the Act was proper. In view of the aforesaid decisions, we are of the view that the request made by the learned counsel is acceptable. The disallowance u/s.14A is accordingly directed to be restricted to 1% of the exempt income.
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2016 (7) TMI 662
Penalty u/s 271(1)(c) - whether the assessee firm has discharged its onus by establishing the identity of the creditors who are the partners of the firm, creditworthiness of the creditors / partners and genuineness of the transactions? - Held that:- Where there was no intention on the part of the assessee to conceal income and the assessee had agreed to offer sundry credits which were carried forward from the previous year as income as a measure of purchasing peace, imposition of penalty u/s 271(1)(c) of the Act was not justified. In the instant case also, the assessee had clearly disclosed the reasons on account of which, it agreed to treat the contribution made by the partners towards capital as its income. In our opinion, there was almost a measure to purchase peace. It is not a case where the assessee had furnished inaccurate particulars of its income. Viewed from any angle, in the facts and circumstances of the present case, no penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income can be validly levied in this case. In that view of the matter, impugned penalty cancelled. - Decided in favour of assessee.
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2016 (7) TMI 661
Addition on account of transfer pricing adjustment - TNMM applied as the most appropriate method - assessee used OP/VAE as its profit level indicator, by impliedly treating base of 'Value added expenses’ as akin to `any other relevant base’ - Held that:- Having held that the assessee is a 'Commission agent’ as regards its transactions under the Indent model and a 'Trader’ as regards its transactions under the Buy-Sell model, we again revert to the moot point of determination of ALP. It is noticed that the assessee clubbed transactions under both the models and determined their ALP by computing OP/VAE on consolidated basis and then compared the same with OP/OC of comparables. The TPO adopted denominator of ‘Operating Costs’ in the computation of operating profit margin of the assessee from combined international transactions under both the models with similar base of comparables. We have noticed above that operating costs of a `Commission agent’ are always exclusive of cost of goods sold, whereas a 'Trader’ has to have them as an essential element. Albeit a `Trader’ can ascertain his operating profit margin as a percentage of VAE to be designated as `any other base’, but in our considered opinion that can not be described as a 'relevant’ base, so as to fall within the ambit of the expression `any other relevant base’ as used in sub-clauses (i) and (ii) of rule 10B(1)(e). The corollary, which ergo follows, is that whereas 'any other relevant base’ under the TNMM in case of a `Commission agent’ can be 'Value added expenses’, which, in fact, represents his total operating costs alone, but in case of a `Trader’, it can be cost of goods sold plus other operating expenses, which represents his total operating costs and not 'Value added expenses’ to the exclusion of cost of goods sold. It can be seen that the assessee tried to demonstrate that its combined international transactions under both the models were at ALP by comparing its PLI of OP/VAE on overall basis with OP/OC of comparables, which is an incorrect approach. In the like manner, the TPO, though compared the assessee’s PLI of OP/OC with OP/OC of the comparables, but he also fell in error by jointly considering the international transactions of both the business models, namely, Indenting and Trading, under one umbrella. We thus hold that both the assessee as well as the TPO fell in error in considering the international transactions under both the models as of uniform character. It has been noticed supra that the ingredients of Operating costs under the Trading model are different from those under Indenting model. Ex consequenti, transactions under both the models are required to be benchmarked separately. We find that there is insufficient information available on record facilitating the determination of ALP of the international transactions under these two business models separately at our end. Following the view taken for the preceding year, we set aside the impugned order and remit the matter to the file of AO/TPO for processing the international transactions of 'Indenting’ and 'Trading’ separately under Chapter X of the Act in consonance with our above analysis. Needless to say, the assessee will be allowed an adequate opportunity of hearing in such a de novo determination. - Decided in favour of assessee for statistical purposes
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2016 (7) TMI 660
Inclusion of reimbursable cost as operating cost by TPO - Held that:- Exclusion of reimbursement cost from the operating cost for determining the ALP confirmed. Deduction u/s. 10A computation - Held that:- We direct the AO to re-compute the reduction u/s. 10A after reducing the communication charges both from the export turnover as well as total turnover Reduction of foreign exchange gain from business profits while computing deduction u/s. 10A - Held that:- We are considered that this issue is no longer res integra. In the case of ITO Vs. Banyan Limited [2008 (12) TMI 296 - ITAT AHMEDABAD ] it was held that the foreign exchange gain on account of fluctuation qua export business is eligible for exemption u/s. 10B. Since the foreign exchange gain is on account of fluctuation on foreign exchange received for the services rendered by assessee, this has to be treated as ‘profits of business’ for computing the reduction u/s. 10A. Non setting off the carried forward un-absorbed depreciation, business loss relating to non- STPI business - Held that:- Even on the principles of law, the issue was decided in favaour of assessee in the case of CIT Vs. Yokogawa India Ltd., by the Hon'ble High Court of Karnataka reported in [2011 (8) TMI 845 - Karnataka High Court ], wherein it was held that exemption u/s. 10A has to be allowed without setting of brought forward unabsorbed losses and depreciation from earlier assessment year, in the case of non-STP units. Applying the principles therein, the un-absorbed losses and depreciation in the case of non-STP units are to be separately considered and AO is directed to allow the same with reference to income of non-STPI units.
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2016 (7) TMI 641
Revision u/s 263 - as per CIT(A) assessee has wrongly claimed the benefit of indexation on cost of acquisition from the date on which the allotment letter was issued to the assessee - AO ought to have treated the gain on sale of flat as Short Term Capital Gains (STCG) by treating the date of possession/registration as the date of acquisition of flat - Held that:- The assessee acquired the ownership right in the flat on the date of letter of intent when the assessee booked the flat and paid booking amount and not on the date of registration and thus held the property for more than 36 months and is entitled for indexation while calculating the gain. In view of the above observations, we are of the considered view that revisionary powers exercised by the PCIT for setting aside the order framed by the AO u/s 143(3) that the date of ownership is the date of registration of flat of in the name of assessee and not the date of allotment is wrong and therefore, we set aside the order of PCIT. - Decided in favour of assessee.
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2016 (7) TMI 640
Addition under section 69C - addition on the basis of the report provided by the State Sales Department and the statements of the parties, as recorded by the Sales Tax Department - Held that:- As find from the record that though the assessee has provided documentary evidences but these documents have not been considered by the authorities below and they made the addition only on the basis of third person evidence without giving any opportunity to the assessee. Therefore, as felt that if the assessee be given opportunity before the AO to substantiate its case, it will meet the ends of justice and no prejudice would be caused to the revenue. - Decided in favour of assessee for statistical purposes.
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Customs
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2016 (7) TMI 649
Terminal Excise Duty (TED) refund - SEZ unit - Claim of refund of duty involved in procurement of High Speed Diesel (HSD) - HSD is being used for various operations in SEZ unit (Dahej Special Economic Zone) - Jurisdiction - Assistant Commissioner, Central Excise & Customs, Bharuch returned the refund application only on the ground that the factory of the petitioner is not under its jurisdiction. - Thereafter, the petitioner company approached the Development Commissioner of Kandla Special Economic Zone (KASEZ), Ministry of Commerce and Industry. The said authority has passed an order dated 8.2.2013 rejecting the application of the petitioner company for refund claim stating that SEZ units are not eligible for Terminal Excise Duty (TED) refund. Held that:- the the competent authority, that is, Assistant Commissioner of Central Excise & Customs, Bharuch Division has not considered the claim of the petitioner on merits and returned the claim on the ground that the unit of the petitioner is not situated within the SEZ, and thus, he is not having jurisdiction to entertain the refund claim. In view of the Division Bench judgment of this Court with which we are in agreement, such application for refund ought to be considered by the competent authority under the Customs Act alone. Assistant Commissioner, Central Excise & Customs, Bharuch Division directed to consider the refund applications filed by the petitioner on its own merits and to pass appropriate orders. - Decided in favor of appellant.
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2016 (7) TMI 648
Import of baggage without declaring the goods - 13300 nos. micro SD cards of 2 GB capacity used in mobile phone. - two bottles of Glenmorangi Signet Single Malt Scotch whisky 70 CL (700 ml) were also recovered - Government.notes that the statement of Shri Darshan Lal recorded under Section 108 of the Customs Act, 1962 is a corroborative evidence that the respondent is associated in a case of smuggling activity with the accused as much as calls had been made by him to the pax at the time coinciding with the smuggling event. Government finds that the Commissioner (Appeals) has basically relied only on the lack of evidence without taking into consideration the statement of Shri Darshan Lal, the main accused and ignoring that statement recorded under Section 108 before a Customs Officer has evidentiary value and is binding. Moreover, the statements have not been retracted at any stage. Government thus notes that the plea of the department that there is enough evidence to establish Shri Raj Kumar Sabharwal has willingly colluded with Shri Darshan Lal in abetting and facilitating the smuggling of the impugned goods, has force. Considering the gravity of the offence and value of the smuggled goods the Commissioner (Appeals) has erred in reducing the quantum of penalty upon the respondent from ₹ 2,00,000 /- to ₹ 19,000/- only.
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2016 (7) TMI 647
The applicant was not eligible to import gold either in terms of Notification No. 31/2013-Cus dated 01.03.2013 nor under rule 6 of Baggage Rules ibid. He also did not declare the impugned goods that were in a substantial/commercial quantity. Hence, the same cannot be treated as bona fide baggage in terms of Section 79 of the Act ibid. The said gold is imported in violation of Foreign Trade provisions of Section 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 goods" liable to confiscation under Section 111 (d) and (l) of the Customs Act, 1962. The applicant has also requested to permit re-export of impugned goods. Government 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 bonafide baggage declared to Customs, which the applicant failed to do, thus the applicant is not eligible for re-export of impugned goods. Also being an Indian National, this is nothing but an attempt by the applicant to avoid the burden of duty, In similar circumstances, Central Government has denied re-export of goods. The goods which are liable for confiscation cannot be allowed to be re-exported. Hence the Government is of the view that the request of the applicant for re-export of goods is not legal and proper and cannot be allowed.
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2016 (7) TMI 646
Department argued that department proceedings and criminal proceedings are separate and merely because there was acquittal in the latter, it would not entail in nullification of the former. - Held that:- the judgments in the criminal proceedings cited supra, will have the effect of neutralizing the order of the lower authority in respect of the two notices (appellants). We have no quarrel with the legal position that departmental proceedings and criminal proceedings are separate. However in the instant case, the judgments in the criminal proceedings have gone into considerable detail with regard to the actions of the two noticees, their eligibility or otherwise to import the gold and have arrived at a conclusion that the two noticees only are the owners of the gold carried by them in the result the two noticees 'have been found not guilty of the offences charged against them. Therefore, entire raison d'être of the impugned order will necessarily crumble and becomes redundant. - Decided in favor of appellant.
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2016 (7) TMI 645
Classification - import of heavy duty crane cum pipe laying ship - self propelled ship or not - classifiable as vessel under CTH 89 05 or not - Held that:- The finding of the Adjudicating Authority that the said vessel LTS 3000 merits classification under chapter 8905 is totally incorrect inasmuch the chapter heading starts with the clause that it covers light vessel, fire floats, dredgers, etc. the navigability of which is subsidiary to the main function. The understanding of the ld. Adjudicating Authority that vessel LTS 3000 having a crane fitted to it would fall under floating cranes seems to be incorrect as it is on record that vessel LTS 3000 is self navigating ocean going vessel. In our view the classification of the vessel LTS 3000 under 8905 by the revenue authorities is totally incorrect. - We are fortified in this view by the HSN explanatory notes to chapter 8905, which states that the vessels covered under this heading normally function or perform other main function in a stationary position. In the case in hand, it is admitted fact that the vessel is continuously moving while laying the pipes and undertaking any operation in relation to the petroleum exploration. In our considered view, the classification of the vessel LTS 3000 would be correct under 8901 or 8906 but not definitely under 8905 as has been held by the Adjudicating Authority. If the classification of the vessel falls under chapter heading 8901 or 8906, the duty liability is 'nil' is undisputed. - Demand set aside - Decided in favor of assessee.
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2016 (7) TMI 644
Diversion of goods meant for export to DTA - export of High Carbon Ferro Chrome (HCFC) - the exporter or CHA failed to inform the department till the matter came to light through news papers - The adjudicating authority refrained from confiscating the missing cargo as it was not physically available for confiscation. It was observed further that though M/S GMR Industries acted in a negligent manner in not insisting on weighing the cargo when it reached the port premises, however, as they applied for DEPB credit only for actual quantity exported the same established their bonafide that they did not intend to benefit in any unjust manner. The adjudicating authority did not impose penalty on M/S GMR Industries on such finding. Held that:- There is absolutely no evidence to show that M/S GMR Industries had any direct involvement in short shipment or that they had tried to make any illegal gain. In fact as soon as they came to know of the less quantity, they have initiated internal enquiry by seeking explanation from CHA, surveyor, transporters etc. They also filed police complaint. The delay in informing the department in our opinion is only an inadvertent lapse as found by the Commissioner. The goods were rightly not confiscated as they were not physically available. We find no merit in the appeal. - Decided against the revenue.
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Corporate Laws
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2016 (7) TMI 643
Winding up - non-payment of dues - inclusion of outstanding debt as part of the advertisement for sale proclamation - notice of sale of the immovable properties of the Company (in liquidation - auction purchases - Held that:- Held that:- As far as the terms and conditions are concerned as quoted hereinabove, the purchaser is clearly informed that he would be liable for all the dues. As far as present applicants are concerned, it is an admitted position that the electricity Companies under the provisions of the regulations and/or supply code as applicable have already disconnected the electricity connections of the Company (in liquidation) in the instant case and therefore, there is no question of reconnection. As regards the contention raised by learned counsel for the applicants that as per amended supply code, and more particularly Regulation 4.1.11 would apply to all intending purchaser, it is to be noted that the provisions of the Indian Electricity Act, 2003 and Supply Code has no bearing on the proceedings under the Companies Act and the same would apply to purchaser as and when he becomes consumer of the electricity Company. So on both the counts, the applicants are not entitled to say that in the advertisement itself, it is required to be mentioned that some amount is due and payable towards electricity charges to the applicants – electricity Companies. It is not the case of the applicants that they have any other additional or special right as far as the amount of due is concerned and therefore, the applicants have no right to insist that there has to be inclusion of their debts as part of the advertisement for sale proclamation. In opinion of this Court, on the contrary the applicants are required to lodge their claim before the Official Liquidator in accordance with the provisions of the Act and Rules. As far as applicability of Supply Code, more particularly clause 4.1.11 of the Regulation is concerned, the same would be a case between intending purchaser and the electricity Company and therefore, the Official Liquidator is not duty bound to bring to the notice of the purchaser and/or auction purchaser of the Company (in liquidation) that there is outstanding dues of the electricity Company along with interest thereon at the rate of 15 % per annum and that unless and until such dues are paid, no connection would be provided by a special mention in the sale proclamation as prayed for by the applicants. The same is therefore, de hors the provisions of the Act and the Rules and misconceived in law and facts. While giving an advertisement, list of secured, unsecured, or preferential is not to be provided or made part of the public advertisement especially when other clauses as enumerated hereinabove and a specific clause that sale is subject to the conditions “as is where is and whatever there is basis”. Thus both the applications fail and are hereby dismissed. The applicant of Company Application No.5 of 2011 is not entitled for any of the reliefs/claims as prayed for in the Judge's Summons.
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2016 (7) TMI 642
Breach of provisions of the Collective Investment Regulations - whether respondent nos. 1 and 2 – Gaurav Varshney and Vinod Kumar Varshney, had violated Section 12(1B), by incorporating M/s. Gaurav Agrigenetics Ltd., under the provisions of the Companies Act, 1956, on 3.7.1995, in the capacity of its first directors and promoters - sole allegation levelled against the respondents was, that they were guilty of having breached the provisions of the Collective Investment Regulations, by failing to make any application to ‘the Board’ for registration of the collective investment scheme(s) being operated by them, and by failing to wind up their existing collective investment scheme(s), and/or in repaying the amounts collected from the investors Held that:- Having given our thoughtful consideration to the contentions advanced at the hands of learned counsel for the respondents, we are satisfied, that the quashing of the proceedings initiated by ‘the Board’, against respondent nos. 1 and 2, calls for no interference, for the simple reason, that they relate to an alleged breach by M/s. Gaurav Agrigenetics Ltd., of the Collective Investment Regulations, by treating them as existing collective investment undertaking. Those belonging to the proviso category, could only be proceeded against for having continued their activities relating to collective investment, without obtaining registration, after the notification of the Collective Investment Regulations (see paragraph 29 above). The said regulations came into existence with effect from 15.10.1999. By the time the Collective Investment Regulations were notified, respondent nos. 1 and 2 – Gaurav Varshney and Vinod Kumar Varshney, had already severed their relationship with M/s. Gaurav Agrigenetics Ltd. In view of the uncontroverted factual position expressed by learned counsel for the respondents, we find no difficulty in concluding, that proceedings which were initiated against respondent nos. 1 and 2, and were quashed by the High Court, call for no interference. Ordered accordingly.
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Service Tax
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2016 (7) TMI 658
Extended period of limitation - Validity of SCN issued after one year from the date of knowledge - Maintenance & repair services - failure to discharge service tax liability or file ST-3 returns. - Held that:- In the show-cause notice, it is not stated that there was delay on the part of appellant in furnishing the details necessary for computation. There is no whisper in the show-cause notice that due to delay caused on the part of appellant, it was not possible to collect details. In any case, after issuance of summons on 02/09/2008, the statement of Mr. Viswanathan was recorded on 15/09/2008. Therefore it can be said that Department had acquired knowledge at least on 15/09/2008. The show-cause notice issued beyond the period of one year from the date of acquiring knowledge is time barred. As there is no allegation in the show-cause notice that appellant caused delay in furnishing information or did not co-operate with the investigation/inquiry, the findings of the Commissioner(Appeals) that the details furnished was insufficient to compute liability is based on mere assumptions. It is proved that Department acquired knowledge on 15/09/2008. Demand set aside - decided in favor of assessee.
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2016 (7) TMI 657
Business Auxiliary Services (BAS) - Activity of data processing of electricity consumers for Andhra Pradesh Central Power Distribution Company (APCPDCL) - Extended period of limitation - Held that:- The appellant was engaged in processing electricity consumer's data for APCPDCL. The job was to maintain computerized data base of APCPDCL, on computers and furnish the required output data on magnetic tapes/file transfers/hard copies. The appellant defended the show cause notice contending that the services would fall under Information Technology Service, while department is of the view that such services fall under BAS. As it is seen that the copy of the Order-in-Original was not served upon the appellant, as a sequitur, we are of the considered view that the matter is deem fit to be remanded to the original authority for denovo adjudication. The impugned order is set aside and case is remanded to the original authority for denovo adjudication after giving reasonable opportunity to the appellant for personal hearing. - Decided in favor of assessee.
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Central Excise
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2016 (7) TMI 656
Rabte / refund claim - Export of goods after 6 months from the date of clearance of goods from factory - violation to permission of Notification No.19/2004-CE(NT) dated 06.09.2004. - Held that:- The applicant has contended that the case laws relied upon by them vide their submission dated 15.04.2011 before the original authority has neither been analysed nor distinguished in the order. A perusal of the impugned Orders-in Original shows that in para 11, the adjudicating authority has given a specific finding that "the contention of the claimant as above is not acceptable in the present case since all the three case laws pertain to exports made under Bond or under other schemes and have little bearing on the facts of the assessee". Government finds nothing to the contrary has been placed on record to interfere with this observation of the original authority. Claim rejected - Decided against the applicant.
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2016 (7) TMI 655
Rebate / refund claim - applicant exported the goods procured from the manufacturer and filed rebate claim - original authority rejected the rebate claims filed by the applicant on the ground that the declaration given at Sr.No.3(a)(b) & (c) is incomplete. - Held that:- Commissioner (Appeals) has given detailed findings with regard to factual aspect of each AREs-1 and observed that there has been mismatch in details given in AREs-1 and Shipping Bill with regard to quantum of duty/quantity of goods. Such detailed factual findings have not been controverted in grounds of Revision Application by means of any factual submission, duly supported by any relevant documentary evidences. Under such circumstances, the conclusion of appellate authority, based on such incontrovertible factual observation required to be acceded to. - Revision application dismissed - Decided against the applicant.
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2016 (7) TMI 654
Extended period of limitation - Levy of penalty - Cenvat Credit - input services - nexus with manufacturing activity - service tax paid on Travel Services relating to transport of their employees though transport of employees - Held that:- the appellant’s action of taking cenvat credit even on the part amount, which was recovered from the employees in case of facility of travel to and fro, is only a bonafide action; no malafides cannot be attached to the said action of taking cenvat credit. In the present appeal period involved is from 2005-06 to 2009-10. When the certainty for the principle that 'cenvat credit is not to be allowed in case of service tax paid on the component of the payment made by the employees for input service of travel' was decided by Hon'ble Bombay High Court by its pronouncement dated 25.10.2010 in the case of CCE, Nagpur Vs. Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], it cannot be held that the appellant had willfully suppressed the fact of irregular cenvat credit in case of input service of traveling. It is, therefore, right to conclude that the subject demand and recovery would be legally unauthorized beyond the normal period of one year from the relevant date. The case is remanded to the original adjudicating authority, who will freshly adjudicate and arrive at the revised liability of 'disallowed' cenvat credit along with liability of interest for the normal period of one year after following the observations and the conclusions made by the Tribunal in above paras. - Decided in favor of assessee.
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2016 (7) TMI 653
Claim of refund after surrender of registration certificate - un-utilized cenvat credit - export of goods - Held that:- there is no express prohibition in terms of Rule 5 - refund allowed - Decided in favor of assessee.
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2016 (7) TMI 652
Eligibility of notification No. 7/2003 exempting articles of apparel or clothing if manufactured or got manufactured for personal use not intended for sale - assessee pleaded that the Commissioner (Appeals) having decided availability of exemption notification, in their favour, should have set aside the order in original in its totality instead of remanding the matter back to him for verification - Held that:- After having gone through the impugned order of the Commissioner (Appeals), we find that the matter stand remanded by him for examining and verifying the factual position which in our view is necessary to extend the benefit of notification. It is only in particular circumstances, the exemption is available to the assessee and fact that wherever they have claimed the exemption for manufactured garments which are meant for individual use or not are essential for extending benefit of such notification. As such, we do not find any infirmity in the views of appellate authority and accordingly, direct the adjudicating authority to do the verification in terms of the directions as contained in the order of Commissioner (Appeals). In the foregoing discussion, the appeal is rejected.
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2016 (7) TMI 651
Refund claim - valuation - price escalation - Held that:- As decided in assessee's own case refund can be granted to the assessee in a situation where the assessments were not made provisional but the price of excisable goods was reduced downward after clearance of the goods as per price variation clause which was in existence in the contract under which goods were being cleared and the buyers adjusted the amount, from the sale prices to be paid on the goods subsequently sold. As such, find that the issue stands decided in favour of the assessee on merits. On the unjust enrichment angle, we find that in the instances before us, the customers have refused the payment of the price escalation invoices raised by the appellants. From this, it is evident that the appellants have not recovered the duty incidence from their customers. - Decided in favour of assessee
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2016 (7) TMI 650
Supply of goods against ICB - Eligibility of exemption under Notification No. 6/2006-CE dated 01.03.2006 r/w amended Notification No. 46/2008-CE dated 14.08.2008 treating that the goods supplied are for setting up of ultra mega power project - need to Maintain separate accounts when common inputs are used in manufacture of both dutiable and exempted goods - Held that:- On perusal of records it is seen that competant authority has issued certificate that the goods are exempt from duty as per Notification No.46/2008 dated 14.08.2008. This Notification says that the goods are exempted from duties of customs leviable under First Schedule of Customs Tariff Act, 1975 and additional duty leviable under Section 3 of the CTA when imported into India. When goods manufactured in India are supplied against ICB, such goods would be eligible for full duty exemption as per this notification. This point has been clarified by the Co-ordinate Bench of Tribunal in the case of Bharat Heavy Electricals Ltd., case (2015 (7) TMI 225 - CESTAT NEW DELHI). Commissioner (Appeals) has erred in holding that the provision of Rule 6(6)(vii) is applicable only w.e.f. 27.02.2010. Also see Areva T & D India Ltd. [2014 (3) TMI 703 - CESTAT CHENNAI ] - Decided in favour of assessee
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Wealth tax
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2016 (7) TMI 659
Wealth tax assessment on the properties owned by the assessee - as assessee’s contention that the properties cannot be considered to be an asset within the meaning of term asset as “wealth” defined under Wealth Tax Act - Held that:- We find that the ld.CWT(A) while deleting the addition has given a finding that assessee was receiving rent from the profits which has been considered by WTO as “wealth” and the properties were covered under Exception four –Section 2(ea)(i)(4) & (5) of the Act. Before us, Revenue has not placed any material on record to controvert the findings of ld.CWT(A). As far as Revenue’s ground with respect to admission of additional evidence in violation of Rule 46A is concerned, we find that Revenue could not point out the documents which have been considered by ld.CWT(A) and were in the nature of additional evidences. In view of the aforesaid facts, we see no reason to interfere with the order of ld.CWT(A) and thus the grounds of Revenue are dismissed. - Decided in favour of assessee
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