TMI Tax Updates - e-Newsletter
July 20, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
TDS - Sale of pre-packaged software - What the licensee has acquired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used in their business and no right is granted to them to utilize the copyright of a computer programme and thus the payment for the same is not in the nature of royalty - HC
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Income Tax:
Claim of expenditure of the amount forfeited by the Seller for non-fulfillment of the purchase agreement - assessee is dealer in immovable property and it is for a businessman to decide the manner in which he should conduct his business and take steps which are in the best interest of his business. A mere loss in a venture does not mean that the transaction is not genuine. - HC
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Income Tax:
Transfer pricing adjustment - interest free advances granted by the assessee to its Indian AE - base erosion theory - Tribunal rejected the the contention of the assessee that, in principle, no arm’s length price adjustments can be made in respect of the interest free advances granted by the assessee to its Indian AE, i.e. Datex Ohmeda India Pvt Ltd. - AT
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Income Tax:
Transfer pricing adjustment - The assessee is not really correct in contending that when the assessee has not reported any income from a particular international transaction, the ALP adjustment cannot compute the same. - AT
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Income Tax:
The trading loss claimed by the assessee is not a genuine trading loss and the entire transactions have been carried out in a circuitous route among the group concerns by doing paper work in the form of purchase and sales invoices only to give the colour of genuinity - AT
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Income Tax:
Website development is nothing but creation of new asset and the entire expenditure was incurred for the future of the company and also for a long term impact, which is of enjoying enduring benefit - claim of expenses was rightly disallowed - AT
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Income Tax:
Penalty u/s 271(1)(c) - In our country’s legal and constitutional frame work, the role assigned to the income tax department is to act like a ‘watch dog’ to ensure that tax evasion is checked and legitimate tax collection is augmented, but not to act like a ‘scare crow’. - AT
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Income Tax:
Deemed dividend addition u/s 2(22)(e) - computation of accumulated profits - it shall not include current year’s proportionate profit, since the current years profit shall be deemed to accrue only when the books of account are closed at the year end - AT
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Income Tax:
Depreciation on motor car - car purchased in the names of the Directors of the assessee-company - t the assessee company has, in fact, made the investment in purchase of the vehicle and such vehicle is being used for its business - depreciation allowed - AT
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Income Tax:
TDS liability - The contention of the Revenue that assessee followed cash system of accounting in respect of the expenses in reference is not correct as the expenses have been accounted for as and when ascertained and TDS was also deducted at that point of time. - AT
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Income Tax:
Expenditure incurred under the head land reclamation and afforestation - As soon as the assessee has dug the pits, he is duty bound under the contract to fill those pits before restoring the leased land to the farmers in its original shape. - claim of expenditure allowed - AT
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Income Tax:
TPA - payment of royalty - Since the nature of payment was examined by DRP and it was found as revenue expenditure and the direction of the DRP attained finality, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the payment was revenue in nature. - AT
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Income Tax:
Disallowance of excess claim of loss - sale of right of film - assessing officer has not brought on record any material to show that identical transaction with identical set of facts could have fetched more price at the relevant point of time, we are of the view that there is no reason to disbelieve the consideration disclosed by the assessee - AT
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Income Tax:
Profit on sale of deficit stock outside the books - whether the entire deficit stock has to be taken as profit of the assessee or the profit element embedded in the deficit stock has to be taken as income of the assessee? - AO is directed to take 15% on the deficit stock - AT
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Income Tax:
Additional depreciation on ATMs - whether Automated Teller Machines are substantially in the nature of computers - Held Yes - AO directed to allow depreciation @ 60% to ATMs - AT
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Income Tax:
TPA - where the variation between the arm’s length price determined u/s 92C and the price at which the international transaction or specified domestic transaction has actually been undertaken does not exceed 1% of the latter in respect of wholesale trading and 3% of the latter in all other cases, the price at which the international transaction or specified domestic transaction has actually been undertaken shall be deemed to be the arm’s length price for Assessment Year 2016-2017.
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Customs:
Validity of policy decision - Imposing prohibition on export of Shark fins of all species of Shark - The rationality of the decision cannot be adjudged on a proof of validity as a pre-requisite. The decision makers need not establish or demonstrate that the decision would secure its objectives. The ultimate decision by passage of time may prove the decision was right or wrong. The freedom of the decision makers to have the choice must be left to their discretion. - HC
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Indian Laws:
Rights of secured creditor - It is plain and clear that a secured creditor is not authorised to exert force while taking possession and that is left only to the CMM/DM, as the case may be, in the sound exercise of his discretion under sub-section (2) of section 14. - HC
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Service Tax:
Refund of service tax paid on BAS services - Notification No. 18/2009-ST, dated 07-07-2009 - the non-fulfilment of the conditions is only a procedural lapse and can be condoned. - Refund allowed - AT
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Service Tax:
Cenvat Credit - eligible input services - appellant have taken membership of Mumbai Cricket Association for the purpose of availing the facility of the club such as Waiting Rooms, Conference Hall etc., since they did not have an office in Mumbai - Credit not allowed - AT
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Central Excise:
Claim of rebate/ refund - export consignment was not sealed - ARE-Is, did not have a certification of the Central Excise Officer that the export goods were sealed with Central Excise seal before the Officers. - The ARE-Is also did not bear a declaration of the exporter that the consignment has been packed and sealed in his presence by the seal, indicating that the goods claimed to have been cleared for export, had been cleared from the factory without any sealing - claim was rejected - CGOVT
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Central Excise:
Manufacture - process undertaken by the respondents do not amount to manufacture as the MS rods, plates, angles etc. remain the same even after the process have been carried out. Therefore, there is no new manufacturing process involved. - Demand set aside. - AT
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Central Excise:
Cenvat Credit on capital goods - the definition of factory as contained in Section 2(e) of CEA, 1944 does not anywhere use the word 'registered premises'. Registration of the premises is only a procedure for application of the Act in practice. - credit allowed on capital goods installed outside the factory premises, in the neighboring unit - AT
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Central Excise:
MRP based duty - original authority to ascertain from the relevant invoices if the goods have, indeed, been cleared as multi-piece packs with retail selling price affixed on them and to limit demand of differential duty only to the extent that the clearances not made in multi-piece packs or in multi-piece packs that do not bear the retail selling price - AT
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VAT:
Recovery of dues - power of enforcement wing officials to collect cheques - It is very clear that the enforcement wing officials cannot usurp the powers of the assessing officers and collect cheques. Therefore, the petitioner is entitled to refund of the cheque amount. - HC
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VAT:
Attachment of personal property of the employee / nominal director of the company - recovery of dues - GVAT - personal property of the director is not permissible to be attached - HC
Articles
Notifications
Circulars / Instructions / Orders
News
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Income Tax Department signs contract with L & T Infotech Ltd for implementation of Project Insight
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Information Technology – New Gauntlets for Banks
(Shri R. Gandhi, Deputy Governor - July 18, 2016 - at the 12th IDRBT Banking Technology Excellence Awards, Hyderabad)
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IDRBT Banking Technology Excellence Awards: Governor’s Remarks
(Dr. Raghuram Rajan, Governor - July 18, 2016 - at the IDRBT Banking Technology Awards function)
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The Changing Paradigm for Financial Inclusion
(Dr. Raghuram Rajan, Governor - July 18, 2016 - at the National Seminar on Equity, Access, and Inclusion - Transforming Rural India through Financial Inclusion organised by NIRD and PR, Hyderabad)
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Levy of taxes on large Airlines
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Rs.22, 915 crore allocated for the capitalization needs of Public Sector Banks during the year 2016-17
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RBI Reference Rate for US $
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Kick off meeting with Mission team from World Bank Group on Doing Business Report 2017
Case Laws:
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Income Tax
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2016 (7) TMI 762
Sale of pre-packaged software - ‘royalty or ‘fee for technical services’ - whether not taxable as business income? - Held that:- It is not in dispute that Article 12 (3) of the Double Taxation Avoidance Agreement (‘DTAA’) between India and the United States of America (USA) is relevant for deciding the above issue. Section 90 (3) of the Act makes it clear in the context of an agreement ('treaty') for avoidance of double taxation, that it is only when the provisions of the Act are more beneficial to the Assessee the Act will prevail over the treaty. Conversely, where the provision of the treaty is more beneficial to the Assessee, the treaty would prevail over the Act. the right to use a copyright in a programme is totally different from the right to use a programme embedded in a cassette or a CD which may be a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA. What the licensee has acquired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used in their business and no right is granted to them to utilize the copyright of a computer programme and thus the payment for the same is not in the nature of royalty. See Director of Income Tax v. Infrasoft Limited (2013 (11) TMI 1382 - DELHI HIGH COURT )
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2016 (7) TMI 761
Claim of expenditure of the amount forfeited by the Seller for non-fulfillment of the purchase agreement - ITAT deleted the addition - Held that:- The sale agreement between the respondent-assessee and his vendor M/s. Emtech Solution (P) Ltd. is collusive. We find that the CIT (A) as well as the Tribunal have rendered concurrent findings of fact that the parties had entered into agreement which was genuine. In fact, the vendor M/s. Emtech Solutions (P) Ltd. had itself confirmed the transaction and also of having received the sum of ₹ 2.40 crores from the respondent. The transaction could not be completed as a ready buyer one Mr. Gandhi had withdrawn his offer to purchase the subject property. The further cheques issued by the respondent had been dishonoured, which led the respondent to permit forfeiting the advance/part payment. In respect of the manner in which the vendor has shown the receipt, we asked Mr. Pinto whether it has shown its receipt on capital account to avoid paying taxes. Mr. Pinto responded by stating he is not aware. In any case it is a settled position that nature of receipt in the hands of the payee will not determine the nature of payment i.e. capital or revenue in the hands of the payer. The respondent – assessee is dealer in immovable property and it is for a businessman to decide the manner in which he should conduct his business and take steps which are in the best interest of his business. A mere loss in a venture does not mean that the transaction is not genuine. Therefore, the revenue has not been able to show that the findings of fact rendered by the CIT (A) and the Tribunal are perverse and/or arbitrary. - Decided against revenue
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2016 (7) TMI 760
Transfer pricing adjustment - interest free advances granted by the assessee to its Indian AE - base erosion theory - Held that:- We are not inclined to accept the base erosion argument, in principle, nor do we find anything in the facts on record to even support the factual elements embedded in the plea of the assessee. We reject this plea. The intervener has picked up an aspect of the matter totally “divorced from its context” and proceeded to treat the same as “a full exposition of law on a question when the question did not even fall to be answered in that judgment”. The approach adopted by the learned counsel for the intervener, therefore, does not merit our approval. The commercial expediency of a loan to subsidiary is wholly irrelevant in ascertaining arm’s length interest on such a loan. There is indeed no bar on anyone advancing an interest free loans to anyone but when such transactions are covered by the international transactions between the associated enterprise, Section 92 of the Act mandates that the income from such transactions is to be computed on the basis of arm’s length price. The assessee is not really correct in contending that when the assessee has not reported any income from a particular international transaction, the ALP adjustment cannot compute the same. The computation of income on the basis of arm’s length price does not require that the assessee must report some income first, and only then it can be adjusted for the ALP. Section 92(1) is not an adjustment mechanism; it is a computation mechanism. The arm’s length price principle requires that an arm’s length price is assigned to the transactions between the associated enterprise, and if the income in computed, if any, on the basis of the arm’s length price so assigned. The ALP adjustments cannot be treated as income per se. However, the assessee does not derive any support from this decision since consideration for a loan, i.e interest, is inherently in the nature of income. There is no, and there cannot be any, dispute or controversy about this character of income. The point of dispute is whether zero interest, or no interest, is good enough for computing the income or whether an arm’s length interest must substitute this zero interest. The answer is obvious. As long as the transaction is an international transaction between the AEs, the computation of income has to be on the basis of arm’s length interest. Therefore, in our considered view, even when no income is reported in respect of an item in the nature of income, such as interest, but the substitution of transaction price by arm’s length price results in an income, it can very well be brought to tax under Section 92. This plea of the assessee is also, therefore, unsustainable in law. In view of the above we reject the contention of the assessee that, in principle, no arm’s length price adjustments can be made in respect of the interest free advances granted by the assessee to its Indian AE, i.e. Datex Ohmeda India Pvt Ltd. However, so far as quantification of the arm’s length price adjustment is concerned, the same will have to be dealt with the division bench as no arguments, with respect to the quantification part, were advanced before us. It is also open to the parties to take up any other issue, not specifically dealt with above, before the division bench in accordance with law.
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2016 (7) TMI 759
Disallowance of loss on account of trading in cotton knitted fabrics - Held that:- The trading loss claimed by the assessee is not a genuine trading loss and the entire transactions have been carried out in a circuitous route among the group concerns by doing paper work in the form of purchase and sales invoices only to give the colour of genuinity. We hold that the assessee had adopted merely a colourable device with an intent to evade payment of taxes. We find that the decision rendered by the co-ordinate bench of this tribunal in the case of Smt Indra Jalan vs ITO supra is squarely applicable to the facts of the instant case before us and respectfully following the same, we dismiss the grounds raised by the assessee - Decided in favour of revenue
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2016 (7) TMI 758
TDS u/s 195 - Disallowance made under section 40(a)(I) - expenditure incurred on subscription paid to nonresidents abroad - Held that:- The authorities below have not checked with the invoices submitted by the assessee as to whether the services rendered by the non-residents are in the nature of fee for technical services or pure business transactions. Under the above facts and circumstances, we set aside the order passed by the ld. CIT(A) and remit the matter to the file of the Assessing Officer to verify the nature of services rendered by the non-residents and decide the issue afresh in accordance with law after allowing opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes. Disallowance of the claim of deduction towards software purchases - revenue or capital expenditure - Held that:- The test of enduring benefit is not certain or conclusive test in determining the expenditure as capital or revenue. The real intent of the expenditure and whether the expenditure results in creation of fixed capital for the assessee are to be examined. Thus, in view of the ratio laid down by the Hon’ble Delhi High Court in the case of CIT v. Asahi India Safety Glass Ltd.(2011 (11) TMI 2 - DELHI HIGH COURT ), we hold that the software expenses should be treated as revenue in nature and accordingly, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to delete the disallowance made on this account. - Decided in favour of assessee. Disallowance of the claim of depreciation at 60% for UPS attached to computers (restricted to 15%) - Held that:- We direct the Assessing Officer to allow 60% depreciation on UPS. See DCIT v. Indian Bank [2016 (7) TMI 728 - ITAT CHENNAI] TDS u/s 194J - expenses incurred on website development - non-deduction of TDS - Held that:- Website development is nothing but creation of new asset and the entire expenditure was incurred for the future of the company and also for a long term impact, which is of enjoying enduring benefit. Therefore, we find no infirmity in the order passed by the ld. CIT(A). - Decided against assessee.
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2016 (7) TMI 757
Penalty u/s 271(1)(c) - allowability of claim of bad debts - eligiblility to carry forward loss - Held that:- The levy of penalty and its confirmation has far reaching serious implications upon an assessee, since it may also invite prosecution of the assessee. Thus, matters with regard to ‘levy’ of penalty cannot be taken lightly or casually as it may cause unintended and avoidable hardship to the tax payers. Further, it is well settled law that levy of penalty is not automatic upon the making of disallowance itself by the AO in the assessment order. Any disallowance/addition in the assessment order would not necessarily lead to levy of penalty ‘ipso facto’ as a natural consequence. In our country’s legal and constitutional frame work, the role assigned to the income tax department is to act like a ‘watch dog’ to ensure that tax evasion is checked and legitimate tax collection is augmented, but not to act like a ‘scare crow’. In the facts of the case before us nothing has been brought by the authorities to show that the claim of the assessee was bogus. Nothing has been shown to establish whether there was concealment of income or furnishing of inaccurate particulars of income and how. It has been merely mentioned by the AO in the last para of the penalty order that in case return of the assessee was not selected for scrutiny, then it would have resulted in excess carry forward of the losses to be adjusted against the income of future years. But, here also, Ld. AO went factually wrong, since return of the assessee was filed beyond time limit prescribed u/s 139(1) and therefore, the assessee was not eligible to carry forward loss claimed in the return. Thus, whole premise of the AO was built under misconception of facts and incorrect understanding of law. Above all, Ld. CIT(A) also miserably failed in his duty, by passing a casual order and collapsing the ‘check and balance’ mechanism envisaged by the statute. The levy of penalty was highly unjustified and the same is directed to be deleted. - Decided in favour of assessee.
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2016 (7) TMI 756
Deemed dividend addition u/s 2(22)(e) - assessee is a share holder holding more than 10% stake in some private limited companies - Held that:- A careful perusal of the Ledger account copy of the assessee as available in the books of M/s KBJ Jewellery Pvt. Ltd shows that the same has been operated as a current account, i.e., there has been credit of Director’s remuneration; Rent, rates & taxes etc., Besides that there has been repeated deposit and withdrawal of cash. When the credits in the nature of income payable to the assessee are credited to the account of the assessee, the same signifies that those credits constitute liability in the hands of the above said company and hence the above said company is liable to pay those amount to the assessee. Under these set of facts, we find merit in the contentions of the assessee. Accordingly, we are also of the view that the amount withdrawn by the assessee, either by way of advance or as subsequent payment, to the extent of the liability of the company towards Directors Remuneration, Rent, other income items etc. credited to the account, should be considered as payment made towards settlement of those liabilities. Accordingly, in our view, withdrawals to that extent cannot be considered as loan taken by the assessee, which would attract the provisions of sec. 2(22)(e) of the Act. Accordingly, we modify the orders passed by the Ld CIT(A) and direct the AO to compute the loan amount by excluding the withdrawals as stated above in the case of KBJ Jewellery (P) Ltd and also in other two companies referred above. With regard to the computation of accumulated profits, we hold that it shall not include current year’s proportionate profit, since the current years profit shall be deemed to accrue only when the books of account are closed at the year end. Accordingly we direct the AO to compute the accumulated profit in the manner discussed above - Decided partly in favour of assessee
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2016 (7) TMI 755
Reopening of assessment - quantum of expenses to be deducted from the gross dividend for allowing the benefit of Section 80M - Held that:- From the reading of the reasons as a whole, it is very clear that the Assessing Officer has not alleged any failure on the part of the petitioners to disclose truly and fully all material facts necessary for assessment. In the above view and bearing in mind that the assessments were finalized for each of the five years under Section 143(3) of the Act, the proviso to Section 147 of the Act would be applicable. Therefore, in the absence of any allegations of failure on the part of the petitioner-assessee to disclose truly and fully all material facts necessary for the assessment, the impugned Notices are without jurisdiction. Further, our attention was invited to the assessment orders passed in regular assessment proceedings in each of the five assessment years. We find that each of them discusses the issue raised in the reasons in support of the impugned notices namely, the quantum of expenses to be deducted from the gross dividend for allowing the benefit of Section 80M of the Act. It was on consideration of this very issue that the Assessing Officer in all the five assessment years held that 1% of the gross dividend received would be deductible for the purposes of claiming benefit under Section 80M of the Act. Therefore, in view of the aforesaid fact, it is very clear that the impugned Notices seeking to reopen the assessment is only on account of change of opinion. Thus, the impugned notices are without jurisdiction on the above count also. The issue of quantum of expenses to be reduced from gross dividend for allowing deduction under Section 80M of the Act was also a subject matter of consideration in appeal for all five assessment years by the CIT(A), who partly allowed the petitioners' appeal. Thus, issuing of the impugned notices cannot also be sustained as it would amount to the Assessing Officer seeking to review the order of the Appellate Authority on the very issue which was considered by the Appellate Authority. Thus, on the above ground also the five impugned notices are without jurisdiction - Decided in favour of assessee.
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2016 (7) TMI 754
Validity of reopening of assessment - petitioners' contention that no notice was issued to the petitioners - Held that:- The submission made before us about the notice of reopening being properly addressed in view of the computer generated notice and window envelope, not requiring the writing of the address, prima facie stand belied. Normally, one proceeds on the basis that the acts done by the Officers of the State in normal course of its activities is validly done. But in this case a cloud of uncertainty covers the actual facts. Therefore, in these peculiar facts, the suggestion made by the Addl. Solicitor General of appointing a Senior Officer of Income Tax to determine this issue bearing in mind that the Assessing Officer has already taken a stand on the issue that a reopening notice has been issued prior to 31st March, 2015. In the above view, Mr.Singh, on instructions informs us that the Principal Commissioner of Income Tax-15 would decide whether or not the alleged impugned notice was issued and of the date of its issue within a period of eight weeks from today. Needless to state as pointed out above, the Principal Commissioner of Income Tax-15 would decide the issue in consonance with principles of natural justice which would include allowing the leading of affidavit-evidence and cross examination of persons who would tender evidence and the evidence already tendered before this Court, by the other side. We must make it clear that the Commissioner of Income Tax-15 would only determine the factual aspect of issuance of notice to the assessee. If he decides the issue in favour of the Revenue, the notice would be restored to the Assessing Officer to proceed further from that stage. The alleged notice dated 27th or 28th March, 2015 will be stayed for a period of 12 weeks from today. The impugned notices dated 9th February, 2016 and 18th March, 2016 will not be acted upon till expiry of 12 weeks as aforesaid from today.
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2016 (7) TMI 753
Rectification of mistake - whether Tribunal's order is perverse while recording findings contrary to the respondent department's stand for accepting the claim of the appellant qua the allowance of deduction for interest on unsecured loans against the income under head 'income from other sources? - Held that:- We do not wish to express any opinion at this stage in respect of either the correctness or the effect of the orders under Section 154 or the communications addressed by the Department to the CIT (Appeals). It is possible that at the hearing itself the same may not have been brought to the attention of the CIT (Appeals) or the Tribunal. Suffice it to state that these are orders and documents which ought to have been taken into consideration by the CIT (Appeals) as well as by the Tribunal. Be that as it may. The orders, the documents and the effect thereto ought to have been taken into consideration. It would be open for the appellant to contend that the appeals before the CIT (Appeals) and the Tribunal ought to be allowed to be withdrawn or dismissed as infructuous in view of the orders passed under Section 154. In the event of the appellant's being satisfied and accepting the revisional orders under Section 154, they may well not be interested in pursuing the appeal. If such an application is made it is for the Tribunal to decide the same.The appeal is, therefore, disposed of by setting aside the impugned order and remanding the matter to the Tribunal.
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2016 (7) TMI 752
Stay application - recovery of tax - demand issued consequent to the assessment orders passed for the two assessment years 2012-13 and 2013-14 were stayed subject to petitioners paying 15% of the demand raised in each of the two assessment years as a condition precedent - Held that:- As in the present facts, the ends of justice would be met if the petitioner files an application with the Principal Commissioner of Income Tax / Commissioner of the Income Tax within a period of one week from today seeking a review of the order dated 6th April, 2016 passed by the Assessing Officer. Needless to state that if such an application is made for review by the petitioners, the Principal Commissioner of Income Tax / Commissioner of Income Tax would consider and dispose it in accordance with the parameters as laid down by this Court in KEC International Ltd. (2001 (3) TMI 32 - BOMBAY High Court ) for disposing applications for stay. Further, in case the petitioner files its applications for review of the two orders dated 6th April, 2016 before the Commissioner of Income Tax within a period of one week from today, the Officers of the Revenue will not act further upon the Notices issued under Section 226(3) of the Act to the petitioners' bankers till such time as the Commissioner of Income Tax disposes the petitioners' applications and for a further period of two weeks from the receipt of the orders of the Commissioner of Income Tax by the petitioner. However, it is made clear that though the attachment of the petitioners' Bank Accounts made by the Notices dated 8th June, 2016 would continue, the Revenue is restrained from acting further consequent to the attachment i.e. withdrawing the amounts and / or giving any further directions in respect of the frozen / attached account.
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2016 (7) TMI 751
Penalty imposed u/s. 13 of the Interest Tax Act 1974 - Held that:- The ingredients/ basis for imposition of penalty are different and distinct from the ingredients in a taxing provision. Section 13 of the Interest Act provides that penalty is imposable only if the Assessing Officer is satisfied that the person has either filed inaccurate particulars or concealed the chargeable interest. In the present facts, the respondent-assessee has made a complete disclosure of the interest recovered from the borrowers including the interest amount of ₹ 91.21 Crores which was sought to be excluded.Thus in the present facts, two authorities viz: CIT(A) and the Tribunal have on the basis of the disclosure made in the interest tax return have found, no concealment or filing of inaccurate particulars on the part of the respondent-asseseee. In fact, the Assessing Officer has itself accepted that all particulars had been disclosed as is evident from the order dated 2nd March, 2006 passed on reassessment proceedingss, for quantum. The claim made by the Respondent-assessee is a bona fide claim after having made a full disclosure by filing accurate particulars. Thus, no concealment. Therefore, no penalty under Section 13 of the Interest Act, can be imposed. - Decided in favour of assessee
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2016 (7) TMI 750
Profit from the sale of residential units - taxability - non assessability in the hands of assessee as per ITAT - Held that:- We find that both the CIT(A) as well as the impugned order have found that the shares of the respondent-assessee company carry with it right to occupy the premises in the building constructed by the respondent-assessee. In this case, M/s. Calico Associatesone of its shareholders had right to occupy 67 flats in the building constructed by the respondent-asseseee in subject assessment year in its capacity as its shareholder. Both the CIT(A) and the Tribunal have rendered a finding of fact that during the subject Assessment Year, the respondent-asseseee had not sold any asset including any flat. The only sale which took place was of its shares by M/s. Calico Associates i.e. it shareholder. Thus, shares which carry its right to occupy the flats has already been subjected to tax in the hands of the shareholder. Thus, the concurrent findings of fact rendered by the CIT(A) and the Tribunal not being shown to be perverse and/or arbitrary, no interference is called for. The questions as raised before us in respect of impairment of land (use of FSI) was not canvassed before the Tribunal. Therefore, the question as raised does not arise out of the Tribunal's order. In any case, the finding of fact rendered by the CIT(A) that land continues to be owned by the respondent-assessee and there is no transfer of any FSI attached to the land is not shown to be perverse and/or arbitrary. - Decided aainst revenue
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2016 (7) TMI 749
Addition invoking sec 41(1) - remission or cessation of liability - ITAT deleted the addition - Held that:- There is nothing on record to suggest that there was any remission or cessation of liability in the previous year relevant to the assessment year under consideration. Even if the submission advanced by the learned counsel for the revenue that some of the creditors had written off the liability in their books was to be accepted, even then, such liability would have ceased in the year in which such amounts were written off in the books of those creditors. However, it is not the case of the Assessing Officer that the amounts were written off in the year under consideration. In these circumstances, the question of invoking section 41(1) of the Act would not arise. Moreover, this court is in agreement with the view adopted by the Commissioner (Appeals), as confirmed by the Tribunal, that a unilateral act on the part of the parties does not in any way translate into income in the hands of the assessee. As is evident from the material on record, the assessee has shown these liabilities in its books and continues to show the same. Thus, the assessee has not written off the liabilities in its books of account. There is nothing on record to indicate that the creditors have given up their rights to recover such amounts from the assessee. Under the circumstances, it is clear that the addition is based upon an assumption on the part of the Assessing Officer that the liabilities have ceased to exist. The Tribunal, therefore, did not commit any error in upholding the deletion made by the Commissioner (Appeals). - Decided against revenue
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2016 (7) TMI 748
TDS u/s 194A - whether Co-operative Bank was required to deduct tax while paying interest to its members on time deposits? - Held that:- The Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015- TPL, has held that the Co-operative Banks are not required to deduct tax at source on time deposits of its members paid or credited on or before 1.7.2015. In view of the aforesaid circular, this appeal does not survive for consideration and is according ly dismissed. - Decided in favour of assessee
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2016 (7) TMI 747
Revision u/s 263 - allowability of additional depreciation u/s 32(1)(iia) - Held that:- It is undisputed that no opportunity was afforded to the assessee in the instant case before us by the ld CIT to address on the aspect of ‘lack of enquiry’ on the allowability of claim of additional depreciation. We hold that the ld CIT in concluding that lack of enquiry with regard to allowability of additional depreciation on the part of the ld AO would automatically make the order of ld AO erroneous and prejudicial to the interest of the revenue, is palpably illegal in the facts and circumstances of the case in as much as no opportunity of hearing was given to the assessee in that regard. - Decided in favour of assessee
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2016 (7) TMI 746
Revision u/s 263 - profit on sale of mutual funds and derivatives to be assessed under the head ‘income from business’ - Held that:- In the instant case, we find that the ld AO had accepted the profit on sale of mutual funds and derivatives to be assessed under the head ‘income from business’ which is also accepted by the ld CIT. The ld AO had allowed the claim of deduction towards keyman insurance premium in the sum of ₹ 2,28,780/- by placing reliance on the CBDT Circular No. 762 dated 18.2.1998 which is binding on him. In fact, we find that the ld AO though had reopened the assessment initially on the pretext that there was no business carried on by the assessee and accordingly keyman insurance premium and depreciation are not allowable business expenditure, was thoroughly convinced on the fact that the assessee was carrying on business and allowed the deduction towards keyman insurance premium by placing reliance on the CBDT Circular No. 762 dated 18.2.1998 which Circular is actually binding on him. However, he proceeded to disallow the portion of the claim of depreciation on car as not used for business purposes as assessee had not substantiated the usage of the same for the purpose of business. These facts go to prove beyond doubt that the ld AO had duly applied his mind on the aspect as to whether the assessee had indeed carried on any business during the year or not. It is not in dispute that the ld AO had allowed the claim of other administrative expenses as allowable business expenditure. Hence it could be safely concluded that the ld AO had indeed made requisite enquiry in the given set of facts and circumstances of the case and had taken a judicious view on the entire issue. Hence his order cannot be termed as erroneous within the meaning of section 263 of the Act. We find that even the ld CIT had not disturbed the claim of administrative expenses to be allowed under the head ‘income from business’. Hence either way, no prejudice is caused to the interest of the revenue by the order of the ld AO. Hence the twin conditions required for section 263 of the Act are not satisfied. - Decided in favour of assessee.
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2016 (7) TMI 745
TDS u/s 194C - Disallowance u/s 40(a)(ia) - tds on Transportation Charges - CIT(A) deleted the addition - Held that:- We find that the Ld. CIT(A) had categorically given a finding that the assessee sufficiently owned number of trucks and depreciation has been granted to the assessee by the AO on the same. We find that the Ld. CIT(A) had verified the P&L Account of the assessee and had come to a conclusion that the “Transportation Charges” includes only fuel expenses, tyre expenses, trip expenses and driver’s salary. We find that the Ld. AO had not brought any material on record to suggest that there was indeed any contract or sub-contract in existence entered into by the assessee. No infirmity in the order of Ld. CIT(A) - Decided against revenue
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2016 (7) TMI 744
Taxability of income in India - PE in India - business connection in India - Chargeability of income under section 44B - India-Singapore DTAA - Held that:- As decided in assessee company’s own case for assessment year 2009-10 we hold that income of the assessee company was liable to be taxed as business income and that in absence of Permanent Establishment in India , no income was taxable in India , that the provisions of Section 44B of the Act were wrongly invoked by the A. O. Reversing the orders of learned CIT(A), we decide effective grounds of appeal in favour of the assessee
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2016 (7) TMI 743
Rectification of mistake - validity of service of notice u/s.143(2) of the act and decide the said issue afresh after giving proper opportunity of being heard to the Assessee - Held that:- The date of filing of return in response to notice u/s.148 by the Assessee has been wrongly mentioned as “15.5.2008” whereas the correct date is “15.5.2007”. This is the first apparent factual error in the order of the Tribunal. The second error is that the tribunal after noticing the time limit for service of notice u/s.143(2) of the Act for return of income filed in response to notice u/s.148 of the Act between the period 1.10.1991 to 30.9.2005 has wrongly applied that time limit to the case of the Assessee. Such time limit was not applicable to the case of the Assessee at all because the Assessee filed return of income in response to notice u/s.148 of the Act on 15.5.2007. Therefore the time limit laid down in Sec.143(2) of the Act as discussed would alone apply. The Tribunal has taken the date of filing of the return as 1.8.2005 which was the original return of income filed by the Assessee and applied the amendment to the provisions of Sec.148(2) which was applicable for return filed between the period 1.10.1991 to 30.9.2005. The date of filing of the return referred to in Sec.148(2) is the date of filing of the return in response to notice u/s.148 of the Act, which in the present case is 15.5.2007 and not 1.8.2005. This was a mistake apparent on the face of the record. The question that the Tribunal ought to have considered was therefore, whether the law as it prevailed when the return of income was filed i.e., as on 15.5.2007 which gives a time limit of 12 months from the end of the month in which the return of income was filed by the Assessee i.e., on or before 31.5.200 or the law that prevails when the AO conducts the Assessment proceedings when the AO issued notice u/s.143(2) of the Act on 5.9.2008 i.e., after the insertion of proviso to Sec.143(2)(ii) of the Act by the finance Act, 2008, w.e.f. 1.4.2008 whereby the time limit for service of notice was 6 months from the end of the financial year in which the return of income was filed by the Assessee i.e., on or before 30.9.2008. Therefore the order of the Tribunal suffers from a mistake apparent on the face of the record. The order dated 09.12.2015 is recalled in so far as it relates to validity of service of notice u/s 143(2) of the Act. The appeal is directed to be fixed for hearing to decide the said issue after notice to the parties.
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2016 (7) TMI 742
Penalty u/s 271(1)(c) - claim of depreciation at the rate of 100% on centering material - Held that:- AO has demonstrated as to how the claim of the assessee was factually incorrect. In other words, he has demonstrated that it was a false claim. He made reference that originally the item was purchased by P.C. Snehal Construction Company and not the assessee. Thus, the disallowance was not made merely on the basis of difference of opinion between the assessee and the AO. FAA has made reference to the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Zoom Communications [2010 (5) TMI 34 - DELHI HIGH COURT ] for holding that the penalty required to be imposed upon the assessee. The assessee nowhere rendered an explanation that what has operated in his mind while filing the return for claiming depreciation at the rate of 100%. The provision of allowing 100% depreciation on the items valued less than ₹ 5,000/- has been omitted from the statute book by Finance Act, 1995 w.ef. 1.4.1996. Thus, there were two fallacies, viz. (i) in spite of non-availability of depreciation by virtue of amendment carried out in the Act, the assessee had made out a claim, and (ii) the AO has demonstrated that its claim was not factually admissible. The cases laws referred by the assessee are not applicable on the given facts of the case. Therefore, it is of the view that the ld.CIT(A) has rightly confirmed penalty upon the assessee - Decided against assessee.
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2016 (7) TMI 741
Rectification of mistake - expenses so incurred being inextricably linked to NPA were held by the Tribunal to be the part of the work-in-progress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled - Held that:- Tribunal vide its order dated 30th October, 2015 has duly considered the entire factual matrix surrounding the business of the assessee in acquiring and dealing in NPA’s and level of uncertainty w.r.t. length of period of recovery and amount of recoveries to be made out of these NPA accounts and there-after the Tribunal has taken the conscious and well reasoned decision to consider these expenses incurred which are inextricably linked to the NPA’s so acquired which NPA’s were already treated by the assessee as work-in-progress and hence the expenses so incurred being inextricably linked to NPA were held by the Tribunal to be the part of the work-in-progress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled. Keeping in view of the peculiar factual matrix of the assessee’s business, the Tribunal has arrived at a decision looking into the facts and circumstances surrounding the assessee’s case. Thus, we conclude that no error has crept in the order of the Tribunal dated 30-10-2015 which can be rectified under the mandate of the provisions of Section 254(2) of the Act as there is no mistake apparent from records. Thus, in the result the miscellaneous application filed by the assessee stand dismissed.
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2016 (7) TMI 740
Penalty under Section 271(1)(c) - sale of agricultural land - as per assessee capital gain arising on sale of agricultural land located at a village in Goa was exempt as the agricultural land did not constitute ‘capital asset’ which was liable to capital gain tax - Held that:- This fact is not denied that the land was situated in a village. Further, this fact is also not denied that the impugned land is described as agricultural land in the land records maintained with the local authorities. This fact is also not denied that the assessee belonged to a rural background and he is not well educated. The assessee apparently acted on the advice of other persons, who were indeed not competent enough to advise the assessee. These facts have nowhere been denied by the AO or Ld. CIT(A). The conduct of the assessee has been such that the moment he came to know that agricultural land may be situated within 8 kms of the municipal limits, and therefore, it may not be exempt from income-tax, he immediately revised the return of income and paid tax thereon. Although, the assessee withdrew the claim and paid taxes, the precise location of land and its distance from the municipal limit is still unknown. During the penalty proceedings also nothing was brought on record by the AO to prove that the claim of the assessee was false and distance of the land was actually less than 8 kms from the municipal limits. This facts still remains under shadow of doubts. During the penalty proceedings also, nothing was brought on record by the AO to prove that the claim of the assessee was false and distance of the land was actually less than 8 kms. The addition has been made solely relying upon the revised computation sheet filed by the assessee. In the given circumstances, we find that it cannot be said that the claim was not bonafide at all.The only reason for disallowing the claim was the possibility of its location within the 8 kms radius of the municipality. The exact answer to this question is not available on record. Under these circumstances, the addition itself remains under the shadow of doubts. Under these circumstances, we do not find it to be a case of concealment of income or furnishing of inaccurate particulars of income, and thus not fit for levy of penalty. - Decided in favour of assessee
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2016 (7) TMI 739
Entitlement for exemption under section 80P(2)(a)(i) - Held that:- The assessee is a cooperative society. It has earned interest of ₹ 55,42,074/- in addition to the interest earned on loans and advances made to its members. The alleged interest was earned on fixed deposits with commercial banks and others. The ld.AO denied the benefit under section 80P(2)(a)(i) of this interest income. In view of the decision of the Co-ordinate Bench in the Asstt.Year 2009-10, the assessee is entitled for exemption under section 80P(2)(a)(i) of the Income Tax on this income also. The ld.CIT(A) has rightly granted the deduction, and no interference in the order of the ld.CIT(A) on this issue is called for, and the appeal of the Revenue is dismissed. - Decided in favour of assesssee
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2016 (7) TMI 738
Depreciation on motor car - car purchased in the names of the Directors of the assessee-company - Held that:- It is an undisputed fact that though the car has been purchased in the name of the two Directors of the Company, but it is reflected in the balance-sheet of the assessee. We find that on identical facts, on similar issue the Coordinate Bench in the case of Afflon Alpast [2015 (1) TMI 1234 - ITAT AHMEDABAD] wherein held that mere non-registration of a vehicle in the name of the company under the Motor Vehicles Act, cannot disentitle it in regard to its claim of depreciation, when the facts on record are undisputed that the assessee company has, in fact, made the investment in purchase of the vehicle and such vehicle is being used for its business. - Decided in favour of assessee
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2016 (7) TMI 737
Penalty under section 271(1)(c) - excess depreciation claimed in plant and machinery purchased under the TUF Scheme - Held that:- The facts and circumstances of the case being identical to the assessment year 2006-07, respectfully following the above precedent in the case of the assessee itself wherein it was held that merely because claim of the assessee was not accepted or not found to be acceptable by the Revenue does not amount to concealment of particulars of income or furnishing of inaccurate particulars of income we hold that no penalty under section 271(1)(c) of the Act can be sustained on the issue of excess depreciation claimed by the assessee on plant and machinery purchased under the TUF scheme and hence same is deleted. - Decided in favour of assessee
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2016 (7) TMI 736
Rectification of mistake - Penalty u/s 271(1)(c) - claim of depreciation on Temporary Wooden structures like interiors, glow signs etc; taken over from Erstwhile GTB upon amalgamation pursuant to GOI notification @ 100% - Held that:- In assessee’s own case, it is observed that the order passed u/s 154 of the Act date 30.11.2007 has been quashed by this Tribunal. This Tribunal has observed that the issue relating to depreciation is a debatable issue as it requires examination of details and cannot be rectified u/s 154 of the Act. As the order under which disallowance of depreciation was made, stands cancelled by this Tribunal, the penalty proceedings initiated in respect of the same cannot be sustained. We accordingly quash the penalty order passed by the Assessing Officer. - Decided in favour of assessee.
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2016 (7) TMI 735
TDS liability - penal action under section 201(1) and interest under 201(1A) - Held that:- The assessee expenses were debited on the accrual basis on monthly estimate in a common basket and not to the account of specific party/payees. As pleaded that the provisioning of expenses did not result in any constructive credit to a specific Payee and the purpose was to manage reporting on monthly results for monitoring and tax was deducted on receipt of bills/invoices from the parties after rendering of services and only after due approval of services, the credit was given to the payee account and TDS was accordingly deducted and deposited in the government account. The system was regularly followed by the assessee and the Department has also accepted this practice in assessment year 2010-11. The contention of the Revenue that assessee followed cash system of accounting in respect of the expenses in reference is not correct as the expenses have been accounted for as and when ascertained and TDS was also deducted at that point of time. Moreover, we find that the Department itself in the assessment year 2010-11 has accepted the accounting followed in respect of the expenses and no penal action under section 201(1) and interest under 201(1A) of the Act was considered. The learned Commissioner of Income Tax(Appeal) has followed the finding of the Tribunal in the case of Pfizer Ltd Vs. ITO(TDS) (2012 (11) TMI 164 - ITAT MUMBAI) wherein the Tribunal has held that since the payee was not identifiable in the case at the time of making the provision, no TDS was required to be made and further the entire provision had been written back the next year and the actual amounts paid/credited were subjected to TDS as per the detailed statement filed before the authorities, on which there was no dispute - Decided against revenue.
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2016 (7) TMI 734
Expenditure incurred under the head land reclamation and afforestation - leased land - Held that:- The assessee by following the mercantile system of accounting has made a provisions for the expenditure to be incurred on land reclamation and afforestation on reasonable estimate basis. It is also an admitted fact that the assessee has incurred the said expenditure on every year in a systematic manner. As per the terms of lease agreement and also terms of conditions of the Government of India environment clearance letter, the assessee require to restore surface land used by it for excavating the minerals by refilling the land and make it suitable for agricultural operations. As soon as the assessee has dug the pits, he is duty bound under the contract to fill those pits before restoring the leased land to the farmers in its original shape. The moment assessee digs pits, a liability arises and he is entitled to deduction for the expenses which he is supposed to incur for filling those pits when the assessee is following a mercantile system of accounting. Therefore, we are of the view that the A.O. was not correct in holding that the expenditure claimed by the assessee under the head land reclamation and afforestation is not an allowable deduction. Considering the facts and circumstances of the case and also respectively following the decision of High Court of Rajasthan, in the case of Udaipur Mineral Development Syndicate (P) Ltd vs. DCIT (2002 (8) TMI 26 - RAJASTHAN High Court) we are of the view that the assessee is eligible for deduction towards land reclamation and afforestation expenses on accrual basis, whether or not, said expenditure is paid during the relevant financial year. The assessee has made a provision in the books of accounts based on the terms of lease agreement and also conditions stipulated by the Ministry of Forest & Ecology, Government of India on reasonable estimate basis. It is also an admitted fact that the assessee has continuously incurred the above expenditure towards the rehabilitation and reclamation programme. Therefore, we direct the A.O. to delete the additions made towards land reclamation and afforestation expenditure. - Decided in favour of assessee
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2016 (7) TMI 733
Eligibility for exemption as per section 11 - Held that:- The status of the assessee in the earlier years was accepted by the Revenue as a charitable in nature having income allowable for exemption u/s 11 of the Act. There was no change in the facts and circumstances during the present assessment year. The Assessing Officer never denied the fact that the assessee is registered u/s 12AA of the Incometax Act. During the year under consideration the activities of the assessee were charitable in nature and as per its object. The main object of town planner has been held to be charitable and at the time of registration u/s 12A was in very much existence. Thus, the Revenue has not made out the case that the condition on which the registration was allowed has changed from earlier year or in subsequent year as well as in the present year. Allahabad High Court ruling in case of CIT vs. Lucknow Development Authority relied upon wherein it was held that the development authorities will not be hit by the proviso to Sec 2 (15). There was no change in the charitable purpose while doing the activity of development by the assessee. It is part of development only which is the object of the assessee since the beginning. - Decided against revenue
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2016 (7) TMI 732
Transfer pricing adjustment - whether the international transaction made by the assessee was at arm’s length? - Held that:- AO as well as the DRP found that the assessee has not received any service from the parent company. In fact, the Chief Financial Officer of the parent company was summoned under Section 131 of the Income-tax Act, 1961 (in short 'the Act'). He admitted before the Assessing Officer that it is not possible to provide the details of the administrative services provided to the Indian company. Considering the functions performed by the joint venture partners as shareholders of the Indian company, the DRP found that the services rendered by the shareholders does not require any compensation from the assessee-company even as per the OECD guidelines. The DRP further found that the contribution said to be made by the joint venture partners to the sales of the existing business of the assessee-company was not available on record. In the absence of any material to indicate that services were rendered by the joint venture company, this Tribunal is of the considered opinion that the DRP has rightly confirmed the order of the Transfer Pricing Officer. Disallowance of payment of royalty - revenue v/s capital nature - Held that:- The DRP found that the payment was made by the assessee for right to use the technology and technical information for a prescribed period and it is not perpetual. The DRP has also found that the assessee does not obtain any enduring benefit. The payment is also recurring in nature. Therefore, the DRP for the assessment year 2009-10 found the payment as revenue expenditure. Admittedly, this direction of the DRP was not challenged by the Revenue further. Therefore, it attained finality. Since the nature of payment was examined by DRP and it was found as revenue expenditure and the direction of the DRP attained finality, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly found that the payment was revenue in nature. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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2016 (7) TMI 730
Increasing sales consideration on account of dumb documents found - Held that:- Addition on similar allegation in the hands of the purchaser payer has been deleted by the ld. CIT(A) and the order of the ld. CIT(A) has also been upheld by the ITAT, Allahabad and there is no further appeal by the Revenue. Therefore, similar issue attained finality in favour of the purchaser Shri Pradeep Kumar Baranwal and thus the allegation has no legs to stand that there was over and above DD payment amounting to ₹ 49,56,108/- as concealed income of the assessee and the same deserves to be taxed u/s 28 of the Act. In view of the above, we decline to uphold the action of the AO and impugned order wherein the addition made by the AO has been upheld and thus we demolish the same as and when it has been adjudicated by the ld. CIT(A), Varanasi that no over and above cash payment was made by Shri Pradeep Kumar Baranwal towards purchase of shop No. 123 in the Mall constructed by the assessee Company, then similar addition in the hands of the seller payee cannot be held as sustainable. Consequently, addition made by the AO and upheld by the ld. CIT(A) is dismissed. - Decided in favour of assessee Addition under the head ‘other sources’ - whether there is no inextricable link between the FDs and the business of the assessee, therefore, the interest income earned from therefrom should be taxed under the head ‘income from other sources’? - Held that:- There were some fixed deposits by the assessee company with the bank and the assessee chose to utilise its FDs towards its obligations of keeping some margin money for bank guarantee. Therefore, we decline to accept allegation of the ld. CIT(A) that keeping some margin money for bank guarantee and having fixed deposits with the bank are two distinct and separate transactions. At the same time, we are satisfied that when the assessee chose to utilise its fixed deposits towards its obligation of keeping margin money towards it business obligation, then it has to be held that there is inextricable link between the fixed deposits and business obligation of keeping margin money. Hence the interest income has to be treated as business income and not income from other sources. - Decided in favour of assessee Income under the head business income - profitability calculation - Held that:- AO assessed income from business viz calculation of profitability on project completion basis at ₹ 1,37,10,343/- whereas while passing order for A.Y 2009-10 he reduced the amount of ₹ 87,51,902/- as profit already declared for the preceding A.Y 2008-09 which is not a proper and correct approach of the AO. In view of the above noted facts and circumstances, we are in agreement with the conclusion of the ld. CIT(A) which granted relief to the assessee and directed the AO to give effect accordingly. We are unable to see any ambiguity or perversity or any other valid reason to interfere with the order of the ld. CIT(A). - Decided against revenue
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2016 (7) TMI 729
Profit on sale of deficit stock - whether the entire deficit stock has to be taken as profit of the assessee or the profit element embedded in the deficit stock has to be taken as income of the assessee? - Held that:- The Assessing Officer himself has taken only 20% of gross profit on the deficit stock arrived by him. Therefore, it is obvious that the Revenue intended to take only the profit element embedded in the deficit stock. In other words, the presumption was that the deficit stock was sold by the assessee outside the books and the profit on such sale is liable for taxation. Therefore, what we have to do is, we have to estimate the profit on the so-called sale of deficit stock to the extent of ₹ 55,75,603/- Coming to the gross profit, the Assessing Officer determined the gross profit at 20%. The Assessing Officer has not taken the past history of the assessee or the profit, etc. of the similarly placed industries. The Assessing Officer without any basis determined the profit at 20%. The assessee otherwise claims before this Tribunal that the profit in this kind of industry is 12 to 15%. Therefore, this Tribunal is of the considered opinion that estimation of profit at 15% of the deficit stock of ₹ 55,75,603/- would meet the ends of justice. Accordingly, the orders of the authorities below are modified and the Assessing Officer is directed to take 15% on the deficit stock of ₹ 55,75,603/- as income of the assessee for the year under consideration. - Decided partly in favour of assessee
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2016 (7) TMI 728
Additional depreciation on ATMs - whether Automated Teller Machines are substantially in the nature of computers - Held that:- Similar issue on identical facts has been decided by the Coordinate Bench of the Tribunal in assessees own case for earlier assessment years, we direct the Assessing Officer to allow depreciation @ 60% to ATMs subject to recomputation of WDV for each assessment year. Accordingly, the ground raised by the assessee is allowed subject to the above for both the assessment years. Depreciation on UPS at the rate of 60% allowed Disallowance made under section 36(1)(viia) - Held that:- As decided in assessee's own case for the assessment years 2005-06, 2007-08 & 2010-11, and hold that the allowable deduction u/s.36(I)(viia) of the Act is @ 10% of the 'total average aggregate advances' made by the rural branches and not on the incremental average aggregate advances, as contemplated by the Assessing Officer. The assessee's appeals in this regard are allowed
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Customs
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2016 (7) TMI 778
Validity of policy decision - Imposing prohibition on export of Shark fins of all species of Shark. - Petition challenge the notification on the ground that the notification issued is without any application of mind or without any basis. They also challenge it on the ground that the notification is issued by the Director General of Foreign Trade, who is not the competent authority to issue such notification. Held that:- While exercising the power of judicial review under Article 226 of the Constitution questioning policy decision, this Court cannot convert its power as that of an Appellate Authority to re-appraise the assessment of finding of facts leading to the above decisions. This Court cannot also review the decisions because of the possibility to have a different determination. The Court must concede the dominant authority of the executive over the policy making. Therefore, the legality of the policy rests on the factors relating to the decision making process. It is to be noted that the Central Government deliberated the issue and the relevant factors have been taken into account for the decision. The rationality of the decision cannot be adjudged on a proof of validity as a pre-requisite. The decision makers need not establish or demonstrate that the decision would secure its objectives. The ultimate decision by passage of time may prove the decision was right or wrong. The freedom of the decision makers to have the choice must be left to their discretion. It is also possible for the executive authority to have policy experiment provided such exercise is made bona fide accentuated to promote the State interest. The policy makers might have thought that consequent upon ban, the necessity of capturing Sharks would dwindle and they may achieve its objectives to protect marine environment. These objectives cannot be termed as irrational. - Decided against the petition.
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2016 (7) TMI 777
Maintainability of revision application - Import of baggage without declaring the goods - passing through green channel - recovery of non bonafide baggage items such as 2000 pieces of memory cards and 426 pieces of assorted wrist watches - Held that:- the case matter primarily pertains to the refund of sale proceeds where the goods were already disposed off under Section 150 of the Customs Act, 1962 and the adjustments that can be made there against. The applicant has challenged the adjustment of duty on goods which are not available for redemption under Section 125. The basic issue for decision is whether duty is chargeable on goods which have been disposed off under Section 150 ibid and are not available for redemption and not whether duty is chargeable on goods imported as- baggage. Hence, the instant case does not 'fall within the ambit and scope of provisions contained for Section 129DD read with proviso to Section 129 A(l) of the Customs Act, 1962 under which the instant revision application has been made. Government therefore finds that the Revision Application filed before Central Government in terms of Section 129DD of Customs Act 1962 is beyond jurisdiction. As such, this Revision Application is dismissed for being non-maintainable.
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2016 (7) TMI 776
Import of baggage without declaring the goods - passing through green channel - electronic goods - Held that:- Government finds that in the present case the applicant failed to declare the impugned goods imported as baggage thereby violating the provisions of Section 77 of the Customs Act, 1962. The said goods were undisputedly chargeable to appropriate duty under Section 12 read with Section 78 of the Act. The applicant has imported the impugned goods chargeable to duty as baggage as laid down under Section 12 of the Customs Act, 1962 and failed to pay the duty at the time of import. He carried the said goods with an intention to evade payment of the Customs duty leviable on these goods. Therefore duty was rightly demanded under Section 28 of the Act ibid and the demand confirmed after following due process of law. When duty was not paid at the time of import, the interest is chargeable on the duty amount where duty has not been paid on the goods in terms of Section 28 AA (now 28AB) of the Act, ibid. Hence interest is also rightly held to be payable by the impugned order on the duty demanded. Government also finds no merit in the argument of the applicant that no interest is leviable on goods placed under seizure. Section 110 the Act ibid provides for seizure of goods liable for confiscation for improper importation into the country in terms of Section 111. Seizure and confiscation of goods does not absolve such goods from levy of duty and interest in turn is charged on such duty not paid. - Decided against the applicant.
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2016 (7) TMI 775
Levy of penalty for making an attempt to export of broken rice - Validity of statement of Driver the truck - Held that:- Penalties have been imposed upon the Appellants with respect to seized goods under Section 114 of the Customs Act, 1962 which according to the Revenue were meant for export to Bangladesh. However, it is observed from the statement of the driver of the intercepted truck that nowhere it is stated that the seized goods were being taken out of the country to Bangladesh. As per Notification No.31/2008-CUS(NT) dated 25.03.2008, an area of 50 kms. in width from the land border with Bangladesh is treated as a specified area. On a specific query from the Bench, the Ld.AR could not explain as at which stage the goods under seizure were within 50 kms. distance from the land border with Bangladesh. In the absence of any documentary evidence, suggesting that seized goods were meant for export to Bangladesh, it cannot be held that the Appellants can be visited with penalties under Section 114 of the Customs Act, 1962. Accordingly Appeals filed by the Appellants are required to be allowed. - No penalty.
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Corporate Laws
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2016 (7) TMI 767
Default of Director of the company in liquidation - non filing of statement of accounts of the company in liquidation within 21 days of the winding up order - Held that:- The respondents, the ex-directors of the company in liquidation are guilty of breach of their obligation under Section 454 of the Act of 1956 to file a statement of accounts of the company in liquidation within 21 days of the winding up order dated 17- 10-2003. The default is intentional or in any event for reason of their recklessness negligence and disregard of the statutory provisions of law. The defence set up by the respondents for not filing a full and complete statement of affairs for 12 years is wholly untenable. The respondents did not have a “reasonable excuse” to do so. No plausible reason therefor obtains in the facts of the case with the respondents. And when the compliance was sought to be purportedly made belatedly in January, 2016 and on 5-2-2016 it was defective and incomplete, and hence no compliance in the eye of law. The respondents having been found guilty of contravention of Section 454 of the Act of 1956, the question of sentence remains. The respondents have been in default/ non compliant with the provisions of section 454 of the Act of 1956 for a period over 4380 days from the date of winding up order dated 17-10-2003. Section 454(5) of the Act of 1956 provides for a fine of ₹ 1000/- per day till the currency of the default. By a simple arithmetical calculation the amount of fine comes to ₹ 43,80,000/-. But that is the maximum fine. In the facts of the case, it is of the considered view that the ends of justice would be served in holding the respondents directors Pawan Kumar Lath and Bimal Kumar Lath of the company in liquidation being liable to a fine of ₹ 2 lacs, jointly/ severally as punishment for the reckless contravention of Section 454(3) of the Act of 1956. The said amount ₹ 2 lacs fine be deposited in the Common Pool Fund with the Official Liquidator within a period of six months from today. However, in the event of non payment of the amount of fine as aforesaid, the respondents directors of the company in liquidation shall be liable, in the alternative, to serve simple imprisonment for a period of six months.
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2016 (7) TMI 766
Winding up orders - Held that:- The applicant company is entitled to stay outside winding up and realize of the mortgaged assets of the company in winding up as per the Act of 2002. It is however directed that the official liquidator as a representative of the workers of the company in liquidation would be associated with the sale of the immovable assets of the company in winding up-now in possession with the applicant-company under the Act of 2002. The applicant company should inform the official liquidator about the date of sale by registered post at least 10 days prior thereto. And on the sale of assets in issue Section 13(9) of the Act of 2002 would attract.
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2016 (7) TMI 765
Default in making repayment to the depositors as per undertaking given by the Managing Director of the company - Held that:- When the petitioner company could not repay ₹ 30 crores of money in the time given by this Bench as asked by the company on 11-3-2016, it could not be possible for the company to clear ₹ 550 crores dues payable to the depositors in near future. Seeing the developments so far taken place in this case, this Bench is of the opinion that this company would not be in a position to repay the depositors even it further time is extended; therefore this Bench, for having the company defaulted complying with the order dated 11-3-2016, dismissed the petition leaving it open to the depositors to pursue their remedies as per law. Accordingly, this Bench hereby suggests RoC concerned to take appropriate action against the company u/s. 74(3) of the Companies Act, 2013.
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Service Tax
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2016 (7) TMI 781
Waiver of pre-deposit - it was submitted that inspite of promptly making the payment the First Appellate Authority had continued to upheld the penalties imposed upon the Appellant. - Held that:- It is observed that the Appellant paid service tax amount demanded only after the show cause notice was issued. At the same time the service tax demand was recovered from the service recipients as argued by the Ld.A.R. The Appellant has not been able to make out the prima facie case for complete waiver of the confirmed dues/penalties and is accordingly required to be put to certain conditions. - stay granted partly.
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2016 (7) TMI 780
Refund of service tax paid on BAS services - commission paid to foreign agents for the taxable service of business auxiliary services availed for export of goods - Refund claim was rejected on the ground taht, appellant had not complied with or fulfilled any of the conditions prescribed under the applicable Notification No. 18/2009-ST, dated 07-07-2009 and instead had claimed refund under Notification No.17/2009-ST which was not at all applicable in respect of the BAS provided by foreign agents. Held that:- The procedures prescribed in the notification are to facilitate verification of the claims. Since there is no dispute with regard to the export made or the service tax paid, the non-fulfilment of the conditions in my view is condonable. - the non-fulfilment of the conditions is only a procedural lapse and can be condoned. - Refund allowed
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2016 (7) TMI 779
Cenvat Credit - eligible input services - appellant have taken membership of Mumbai Cricket Association for the purpose of availing the facility of the club such as Waiting Rooms, Conference Hall etc., since they did not have an office in Mumbai. - Held that:- Mumbai Cricket Association has charged Lifetime Membership Fees to the appellants and it is this amount which the appellant is claiming as input service credit. We find force in the arguments of the learned Authorised Representative that the same cannot be treated as charges related to business activities for the output service provided by the appellant, namely Chartered Accountant Services. - Credit not allowed - Decided against the assessee.
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Central Excise
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2016 (7) TMI 772
Claim of rebate/ refund - export of goods - ARE-Is, did not have a certification of the Central Excise Officer that the export goods were sealed with Central Excise seal before the Officers. - The ARE-Is also did not bear a declaration of the exporter that the consignment has been packed and sealed in his presence by the seal, indicating that the goods claimed to have been cleared for export, had been cleared from the factory without any sealing. - Held that:- Government observes that any export clearance, intended to be made for claiming duty rebate, will be subject to Rule 18 ibid read with Notification No.19/2004-CE (NT) dated 06.09.2004. ARE-I is the principle document under the said notification that establishes that the applicant has either followed the procedure for sealing of goods and examination of goods at place of dispatch either by Central Excise Officer or by self-sealing. If the clearances have been made without following the procedure described above, it cannot be established that goods which were cleared from factory were the ones actually exported or that goods exported cannot be correlated with goods cleared from the factory. Leniencies in the sealing procedure could lead to possible fraud of claiming an alternatively available benefit which may lead to additional/double benefits. Therefore, Government notes that requirement and procedure of sealing either by Central Excise Officers or by self sealing is both a statutory condition and mandatory in substance for removal of goods for exports under claim for rebate of duty in the present case the applicant has admittedly failed to comply with the provisions by neither following the provision for scaling of goods at place of dispatch under excise supervision nor the self sealing procedure. - Claim rejected - Decided against the applicant.
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2016 (7) TMI 771
Manufacture - Demand of differential duty - appellants have taken CENVAT credit on the bars/strips and paid duty on the said final products @16% ad valorem till 28-02-2004 and @ 8% ad valorem from 01-03-2004 to 30-06-2004. However they stopped paying duty from July 2004 onwards and sought to classify the said final products under CETH 7206.90 of the Tariff on the contention that the processes carried out by them do not amount to manufacture. The department however entertained the view that the said final products correctly fall under Chapter heading 7308 of the Tariff and not under Chapter 72 and hence a show cause notice dated 08-04-2005 was issued to the appellant proposing demand of differential duty for the period March 2004 to June 2004 Held that:- process undertaken by the respondents do not amount to manufacture as the MS rods, plates, angles etc. remain the same even after the process have been carried out. Therefore, there is no new manufacturing process involved. - Demand set aside.
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2016 (7) TMI 770
Valuation - cash discount - short payment of duty - it was observed that the assessable value shown in the Central Excise invoice was 4% less than the assessable value shown in the commercial invoices for the same goods - Held that:- Though the appellants have taken a categorical stand before the authorities below that the complete reconciliation was being made by them at the end of manufacturer, during the period involved in the present appeal, and wherever the cash discounts offers were not availed by the customers, they were paying duty, we, at this point of time, are of the view that reconciliation has become the secondary issue in view of the legal issue having been settled in favour of the assessee. If the cash discounts offered by the appellant, are required to be considered and the assessable value has to be recalculated based upon such offers of discounts, in terms of the Supreme Court decision, the present demand of duty on the ground that such cash discounts do not stand availed by the appellants’ customers in most of the cases, falls to the ground. - Demand set aside.
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2016 (7) TMI 769
Cenvat Credit on capital goods - boilers and Water Treatment Plant (WTP) not installed within the factory premises of appellant but in the neighbouring unit - Held that:- Undeniably the WTP is an essential part of the manufacturing process undertaken by appellants. Further the definition of factory as contained in Section 2(e) of CEA, 1944 does not anywhere use the word 'registered premises'. Registration of the premises is only a procedure for application of the Act in practice. The WTP in the GAIPL premises is transferred to the appellant by lease agreement and appellant is paying rent. Non-registration of the premises, in which the WTP is situated in the appellant's name or adding it to the appellant's factory premises at the most can only be a procedural lapse, which can be cured. In view thereof, I hold that credit on WTP is admissible. - Credit allowed
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2016 (7) TMI 768
MRP based duty - undervaluation - clearance from unit-I to unit-II - branded chewing tobacco - pouches, weighing 5 gms each - whether the multi-piece packs from the factory are intended for retail sale as claimed by the appellant and whether such goods intended for retail sale are required to be printed with Maximum Retail Price under the Standards of Weights & Measures (Packaged Commodities) Rules, 1977. Held that:- Tax arbitrage is a reality that cannot be wished away or suppressed by executive action. It is a legitimate strategy that is bound to be adopted, if, as in the present instance, a minor tweaking of marketing practice will gain that financial advantage. It is the favourable valuation outcome that weighs with the assessee in complying with the prescription of the Standards of Weights and Measures (Packaged Commodity) Rules, 1977 and which cannot be resisted if otherwise compliant. Enforcement is the responsibility of officials of both Legal Metrology and the Central Excise at the retail sale point. As long as consumer interest is served, higher revenue from the alternative valuation cannot be a determinant of proper valuation. It is thus, unambiguously clear that the manner of retail packing - whether as a pouch of less than 10 gm/ 10 ml or as multi-piece packet is a marketing decision of the manufacturer. Being an ascertainable fact, the Tribunal has constantly held that affixing the retail selling price on the multi-piece packet is a clear indication of intent for retail sale. As long as such multi-piece packs are cleared from the factory with retail selling price, its compliance with Standards of Weights and Measures (Packaged Commodity) Rules, 1977 is not arguable. The lower authorities erred in brushing aside the clarification given by an official of Legal Metrology department without confirming the veracity of its contents at appropriate levels in that department. Matter remand back to the original authority to ascertain from the relevant invoices if the goods have, indeed, been cleared as multi-piece packs with retail selling price affixed on them and to limit demand of differential duty only to the extent that the clearances not made in multi-piece packs or in multi-piece packs that do not bear the retail selling price. - Decided partly in favor of assessee.
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CST, VAT & Sales Tax
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2016 (7) TMI 774
Attachment of personal property of the employee / nominal director of the company - recovery of dues - GVAT - With persuation of Mr.Sunil Kakkad, had agreed to become nominal director of the company in the year 2007. However, it is the case of the petitioner at no point of time, the petitioner had any share holding in the company nor even was drawing salary from the company. The petitioner had also stated that he was not even in charge of day to day affairs of the company. As per the say of the petitioner he ceased to be Director of the company with effect from 8.7.2011 and necessary formalities of filling up form no.32 before ROC had also been completed. Held that:- it emerges that under the provisions of the VAT Act, personal property of the director is not permissible to be attached. In view of section 10(2) of the VAT Act, a director of the company is not to be presumed as a dealer who can be proceeded with by the authority. Resignation has also been reflected in form no.32 which would indicate that the petitioner has remained no longer as a director of the company and cannot be held responsible and therefore, could not be proceeded with by way of attachment of property. It emerges that the challenge in the petition appears to be just and proper. No material is brought on record to permit lifting of corporate veil. In fact no such case has been put forth before us by the respondents. The petitioner's personal property could not have been attached by the impugned order.
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2016 (7) TMI 773
Levy of interest u/s 47(4A) of Gujarat sales tax - Levy of penalty u/s 45(6) - the dealer at the time of filing of the sales tax return had not deposited the entire amount payable thereunder - but the amount was paid before the sales tax assessment - Held that:- In the present case, since the dealer had already paid the entire amount prior to the date of the assessment order, the dealer was liable to pay interest on the differential amount till the date such amount was actually paid and not till the date of assessment order, as is sought to be contended by the learned Assistant Government Pleader on behalf of the appellant. Regarding penalty - Held that:- Tribunal upon appreciation of the material on record has found the explanation tendered by the dealer to be acceptable, namely, that the dealer was under a bonafide belief that the turnover tax was not required to be paid and was required to be deferred, which has resulted in the difference of tax assessed and tax paid. It is in these circumstances that the Tribunal has exercised discretion and reduced the penalty to 10%. In the light of the fact that the order passed by the Tribunal is merely a discretionary order, in the opinion of this court, the same would not give rise to any question of law warranting interference. - Decided against the revenue.
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Indian Laws
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2016 (7) TMI 764
Exemption from payment of stamp duty on the sale deed - Held that:- In the instant case the sickness certificate with regard to sick unit of HSGL purchased by the petitioner was issued on 29-1-2008, albeit by the Commissioner Industries i.e. prior to the sale deed dated 25-6-2008. It is not in dispute that the Commissioner Industries is an authority superior to the General Manager, DIC in the same department, and is of the considered view that such a certificate issued by the Commissioner Industries ought to have supplied the condition for exemption of stamp duty. However, in any event, subsequently a rectification qua the certificate of sickness issued by the Commissioner Industries on 29-1-2008 has been issued on 4-12-2012 by the General Manager, DIC. Thus, in considered opinion, the certificate dated 29-1-2008, in any event now holds good even on the literal reading of the notification dated 26-7-2003, as the rectification of 4-12-2012 would relate back to the original certificate of sickness dated 29-1- 2008. In the circumstances, the impugned judgments dated 10-10- 2013 and 21-8-2015 passed by the Tax Board are liable to be quashed and set aside. They are so. The matter is remanded to the Tax Board for deciding the revision petition afresh with reference to rectification dated 4-12-2012 issued by the General Manager, DIC relating to the certificate of sickness dated 29-1-2008 earlier issued by the Commissioner Industries. The revision petition be decided within a period of eight weeks from the date of receipt of a certified copy of this order.
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2016 (7) TMI 763
Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - right of creditors - Held that:- Section 14 of the Act of 2002 requires that where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, request in writing to the Chief Metropolitan Magistrate or the District Magistrate to take possession of such property. For taking possession of the assets mortgaged itself, in no way require that the borrower or guarantor should be heard. District Magistrate while issuing certificate under Section 14 of the Act of 2002 is performing non-adjudicatory ministerial function. It has been held in Jawahar Singh 's case (2015 (8) TMI 1304 - CALCUTTA HIGH COURT) that Section 14 of the Act of 2002 only provides an avenue for the secured creditor when faced with resistance by the borrower or anyone else, or when the borrower simply refuses to surrender possession, to seek administrative assistance of District Magistrate to facilitate taking of possession of a secured asset for sale and to recover its due.
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