TMI Tax Updates - e-Newsletter
July 6, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
TMI SMS
Highlights / Catch Notes
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Income Tax:
Penalty u/s 271(1(c) - With the omission of the expression ‘deliberately’, mens rea is no longer a prerequisite for imposition of penalty - penalty under Section 271(1)(c ) is a civil liability and the wilful concealment is not an essential ingredient - HC
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Income Tax:
The satisfaction note is administratively approved by the DGIT (Investigation) who independently should also have reason to believe that the provisions of Section 132 are complied for issue of warrant of authorization to carry out a search and seizure action. Thus there is no illegality - HC
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Income Tax:
Penalty levied u/s.271(1)(c) - The tax paid on such undisclosed income has gone waste as no benefit out of such income has been availed by the assessee. - this is not a fit case for levy of penalty u/s.271(1)(c) - AT
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Income Tax:
Penalty levied u/s.271(1)(c) - the assessee has substantiated the manner in which the undisclosed income was derived and the immunity provided u/s.271AAA(2) are applicable. - AT
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Income Tax:
Expenditure paid to Pune Municipal Corporation(PMC) for regularizing the excess area constructed for a building called "MODI MALL" - Is in the nature of penalty - not allowable u/s 37(1) - AT
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Income Tax:
Allowance of depreciation at 50% - Only because the inauguration took place in October, 2007 that cannot be a sole criteria to deny assessee’s claim of depreciation at the full value when there is no material brought on record by the department to show that the plant and machinery and electrical installations were not ready for use prior to 22.10.2007 - AT
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Income Tax:
Addition made u/s 145A - adjustment of closing stock value with Excise duty amount - Compliance of provisions of sec. 145A in part only, would give misleading result. - AT
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Income Tax:
Addition on account of interest income - The interest income was diverted at source. It was not assessable in its hands. So the income did not belong to the assessee, but that was of the Govt. of Gujrat, and therefore, it cannot be taxed in the hands of the assessee - AT
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Income Tax:
Service PE in India - India Singapore DTAA - Service PE or Not - the threshold of the time limit as calculated by the AO from the date of signing of agreement cannot be accepted. - the number of days is far below than 183 days - project does not constitute service PE in India - AT
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Income Tax:
Addition towards the notional interest - Onus is on the Revenue to prove that the assessee has earned the income. On the contrary, onus is on the assessee when the assessee claimed that an income is exempt from tax. - AT
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Income Tax:
There is no dispute that the assessee has under priced its services to AE’s and therefore made transfer pricing adjustment suo moto. This peculiar conduct of the assessee, if allowed to claim deduction u/s 10B of the Act will go against the legislative intention. - AT
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Income Tax:
TDS on payment made for Internet services i.e. leased line benefits/broadband services - the expression 'technical service' would have reference to only technical service rendered by a human. It would not include any service provided by machines or robots - No TDS u/s 194J - AT
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Customs:
Valuation of goods - Old and used second hand imported monitors and computer parts - keeping in view the element of wiping out of profit in the interface of expenditure incurred on detention and demurrage charges as also in defraying of legal expenses and interest, redemption fine of 10% of the value assessed by the department and penalty of 5% of such value would suffice. - AT
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Service Tax:
Translation service and interpretation service - whether the appellant is liable to pay service tax on translation service and interpretation service provided by them - prima facie case is against the assessee - AT
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Service Tax:
Levy of penalty - entire amount of tax along with interest was paid as soon as pointed out - In the absence of indication of fraud, suppression etc. with intention to evade payment of duty - penalty waived - AT
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Service Tax:
Penalty u/s 76 - Even though there was no claim made earlier for application of Section 80, I find that this is a case where one of the partners even though was ignorant of law, has fulfilled the obligation even before issuance of show-cause notice - penalty waived - AT
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Central Excise:
Clandestine removal of goods - the cross-examination of person from whose premises these documents had been recovered was necessary, more so when the same had been requested and as such the denial of his cross-examination has resulted for denial of natural justice - AT
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Central Excise:
Denial of rebate claim on export of goods - whether payment of CESS would constitute duty and eligible for refund claim - Automobile Cess, Education Cess on Automobile Cess and Secondary and Higher Education Cess (for short SHE Cess) on Automobile Cess - Held Yes - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (7) TMI 147
Rejection of the books of account of the assessee for the reason that assessee is not maintaining qualitative stock tally - Held that:- It is not disputed that the assessee's yield commensurate to the industrial GP disclosed by the assessee is comparable and satisfactory. In our considered view, when no palpable inconsistency in the books of account they cannot be rejected merely on the basis of assumption that assessee is not producing quantitative tally. Had there been any quantitative tally, assessee has produced stock register but in the absence of day-to-day stock tally at various places of business by itself cannot be a conclusion to give that assessee is shine away from producing the day-to-day tally. In view of these facts, we see no justification in rejection of books of account. The assessee has demonstrated that its yield of rice, bran and faak is as per the industry norm and the GP rate in all the years is favourably comparable. Under these circumstances, it cannot be held that the assessee's book results are unsatisfactory. Merely because a search is carried on it is not automatically meant that assessee is indulging in some nefarious activities. This is the burden of the revenue to prove in this behalf with material and cogent reasons. Rejection of audited books of account otherwise properly maintained cannot be recourse to by Assessing Officer in a casual and wishy vice manner. The ad hoc disallowance, rejection of books and taking support of this fact which we are not able to subscribe the ad hoc addition of 1% of sales is again without any basis whatsoever. Stock tally cannot lead to an ad hoc assumption that 1% of sales are liable to be added in the income of the assessee. Our findings are supported by Gotan Lime Khanji Udyog (2001 (7) TMI 19 - RAJASTHAN High Court ) and ITAT, Amritsar Bench in the case of Asha Mehra cited [2012 (10) TMI 989 - ITAT AMRITSAR]. In view thereof, we delete the ad hoc addition of 1% sales. - Decided in favour of assessee. Addition made on account of undisclosed sales of pulses - Held that:- Assessee has pleaded that it is a market practice that no debit of milling expenses are made in the profit & loss account of the person who get milled the pulses. The additional evidences are confirmations from the millers located at Indore (M.P.) with regard to the processing losses. The pulses are re-exported after processing. These confirmations from miller go to the root of the controversy with regard to the shortage of pulses. One of the major reasons for making the addition by the Assessing Officer was not furnishing the names and addresses of these milling parties. In our considered view, the issue cannot be properly decided without admitting and verifying the veracity of these confirmations from millers located at Indore. We find these as necessary for proper and fair decision on this ground of appeal. Therefore, in the interest of justice and equity, we find it appropriate to admit the same and restore the issue to the Assessing Officer as the issue requires a re-look/reexamination at the level of the Assessing Officer. Accordingly, we restore this issue to the file of the Assessing Officer to be decided afresh after providing adequate opportunity of being heard to the assessee.- Decided in favour of assessee for statistical purposes. Addition on account of undervaluation of closing stock - Held that:- The details of valuation of closing stock (rice/paddi) is placed at page 230 of the paper book which clearly states that stock of non-Basmati rice at Port was of 2,46,308.40 qtls. which is valued totalling to ₹ 14,06,83,500.03. Similarly, the description of non-Basmati rice which is stocked at factory at Muthal and Amritsar is shown at 71461.8 qtls. valued ₹ 4,06,61,764.20. The stock with FCI was of 90,000 qtls. valued ₹ 5,40,00,000.00. Thus, the total valuation of non-Basmati rice comes to ₹ 23,53,45,264.23. In our considered view, the assessee was able to explain the closing stock of non-Basmati rice. The Assessing Officer has made this addition by not considering the stock of non-Basmati rice at the port and the stock with the FCI. Besides this addition becomes academic in nature as the closing is to be allowed to be carried over to next year as opening stock and the profits of next year will get correspondingly reduced. Therefore, in our considered view, there is no justification in making this addition. Accordingly, we direct to delete the same.- Decided in favour of assessee. Disallowance on account of excess deduction claimed u/s 80HHC and not allowing the deduction on sale of licences - Held that:- Assessing Officer has not followed the direction of the DRP by not allowing the deduction u/s 80HHC in respect of sale of Replacement of Export Policy Licences in the light of the judgment of Hon'ble Supreme Court in the case of Topman Export (2012 (2) TMI 100 - SUPREME COURT OF INDIA ). Thus we restore this issue to the file of the AO to give effect of the direction of DRP as per law.- Decided in favour of assessee. Disallowance of reimbursement of advertisement expenses - Held that:- M/s. Nashar Trading Company is a distributor of the assessee and has been reimbursed 50% of the advertisement of the promotional expenses incurred as per the mutual understanding of the assessee. In our considered view, the revenue has failed to bring on record anything which can show that this expenditure was not incurred wholly and exclusively for the purpose of business. The assessee is selling Basmati rice through its distributor in Saudi Arabia. The sales have been increased for the year. In such circumstances and in absence of any adverse material, we find that this expenditure was incurred for commercial expediency and it is allowable u/s 37 (1) of the Act. Further such expenditure was not liable to be taxed in India as it was reimbursed to a non-resident, therefore, we direct to allow this expenditure and delete the addition. Decided in favour of assesses. Charging of interest u/s 234B is mandatory in view of the decision of CIT v. Anjum M.H. Ghaswala [ 2001 (10) TMI 4 - SUPREME Court] - Decided against assessee. Disallowance of credit of cash seized during search operation - Held that:- We direct the AO to give credit of ₹ 27 lacs of cash seized during the search operation according to law and procedure. Decided in favour of assessee. Addition made on account of unexplained purchases - Held that:- Both the sides have agreed that this issue may go back to AO to decide de novo where the assessee shall have the opportunity to file all the relevant documents whichever it wants to rely upon to prove the genuineness of the purchases. Therefore, this issue is restored to the file of AO.- Decided in favour of assessee for statistical purposes. Enhancement of value of closing stock - Held that:-This is the consequential result of enhancement of the opening stock on the basis of addition made in the preceding year. Since we have deleted the addition made in the closing stock for assessment year 2002-03, therefore, there is no question of making any enhancement in the opening stock for the assessment year 2003-04. - Decided in favour of assessee . Addition made on account of unaccounted stocks - Held that:- The assessee has tried to explain the discrepancy by way of showing non-Basmati rice. Besides, the facts about availability of non-Basmati rice in the stock needs verification at the level of Assessing Officer. Therefore, it will be in the interest of justice that this issue is restored back to the file of the AO. We restore the issue to the file of Assessing Officer.- Decided in favour of assessee for statistical purposes. Addition on account of trade mark expenses - Held that:- As these expenses were mostly incurred on petty expenses of renewal of trademarks. Therefore, in our considered view, there was no creation of intangible assets which could give enduring benefit to the assessee. After considering these facts, we direct to allow these expenditure as revenue expenditure. - Decided in favour of assessee. Addition on account of unaccounted cash receipts - Held that:- The affidavits of Shri Gopal Manchanda and Shri Anil Sapra were filed as additional evidences during the proceedings before the DRP. These affidavits were also containing the PAN of Shri Gopal Manchanda and other details. After hearing both the sides, we find that this issue requires a relook at the level of AO as the correct facts are needed to be brought on record to decide the issue. Therefore, we restore this issue to the file of the AO for deciding de novo. - Decided in favour of assessee for statistical purposes. Depreciation on intangible assets like trade mark registration - Held that:- While deciding ground no.15 for Assessment Year 2006-07, we hold that expenses incurred for renewal of trademark was allowable as revenue expenditure. Since we have already allowed whole of expenditure as revenue, therefore, there is no question of allowing any depreciation thereon. Rather we also draw the attention of the Assessing Officer to withdraw the depreciation allowed in Assessment Year 2006-07. Decided against assessee. Addition made on account of loss in forex derivatives - Held that:-The export invoices also establish that there are underlying contracts. The assessee has covered exchange risk against these outstanding foreign exchange convertible bonds. The assessee has also covered the exchange fluctuation risk against outstanding foreign currency convertible bonds, import of commodities and machinery and also outstanding PCFC loans drawn in EURO and US Dollar. The Assessing Officer without examining the details filed by the assessee and without making specific enquiries simply brushed aside the evidences and mentions that no specific underlying assets/liabilities/transactions which were hedged. In our considered view, all the relevant details were filed by the assessee before the Assessing Officer and Assessing Officer was not justified in the absence of any particular derivative transaction was for hedging for any assets/liabilities/expenditure/income/transaction. It is also a fact that assessee has made profit on similar hedging transactions in the Assessment Year 2006-07 and 2007-08 of ₹ 3.72 crores and ₹ 1.34 crores respectively and the same have been offered as business profit in the respective year. Thus the revenue was not justified in not allowing the loss incurred by the assessee on the hedging transactions and holding the same as speculative loss. - Decided in favour of assessee. Restatement of foreign currency loans to subsidiaries - Held that:- This is the loss incurred by the assessee on account of restatement of foreign currency loans to the subsidiary companies. This loss has been calculated by the assessee on account of restatement of the foreign currency loan to the subsidiary companies. The assessee company is not engaged in the business of granting the loans. Therefore, this loss calculated by restatement of the foreign currency loan to the subsidiaries cannot be held to be a revenue loss. In our considered view, such loss calculated on the restatement of the loan is a capital loss and cannot be held to be allowable expenditure u/s 37 of the Income-tax Act, 1961. Therefore, we dismiss this ground of assessee's appeal by holding that the loss calculated on the restatement of the foreign currency loss was a capital loss. Decided against assessee. Unaccounted investment in stock - Held that:- This issue requires a further examination with regard to the methodology of stock taking at the time of search at Murthal and Alipur. Further it also requires details with regard to the assessee's claim that goods were transferred from one place to another place. Since there was excess stock calculated at one place and shortage at other place, a detailed factual aspect with regard to the transfer from one place to another place requires further examination. Keeping these facts in view, we find it appropriate to restore the issue to the file of the Assessing Officer to be decided de novo. - Decided in favour of assessee for statistical purposes. Transfer pricing adjustment - Held that:- During the course of these regular assessments, the TP working as submitted by the assessee was accepted by the TPO, thus the report remains accepted by the department on the issues of corporate guarantee, interest free loans and export of goods to AEs. It is not disputed by the department that no incriminating material has been found whatsoever in respect of assessee's TP working indicating that assessee's working of TP was flawed or inconsistent in any manner. In the absence of any incriminating material and any material finding that TPO's earlier acceptance of working of assessee's TP report was questionable in any way; merely because search was conducted, a new TP report cannot be substantiated with a new one by department. It will be wholly unjustified for TPO to review his own acceptance of assessee's TP report. In view thereof, we see no justification in making TP adjustments in Assessment Years 2002-03, 2003-04 and 2005-06. We find merit in the arguments of ld. Counsel in this behalf. Thus, the TP related grounds in Assessment Years 2002-03, 2003-04 and 2005-06 are decided in assessee's favour Interest free loans to AEs - Held that:- Re-coursing straightaway to CRISIL, which deals in hardcore institutional finance transactions that too with clear commercial object of earning out of loans bereft on other considerations, is wholly inapplicable. There is no dispute on the issue that the real income theory has no application to a fictional working as provided by section 92 but this being part of the Income-tax Act, the valid consideration for properly assessing a transaction cannot be given a go by. Every fiction has limits to its application. In view thereof, we hold that the rate of 13.49% applied solely relying upon a third party opinion by applying on uncontrolled set of transaction is factually not correct and cannot be accepted. The correct comparable which can be applied in these facts and circumstances is of LIBRO rate which is internationally recognized. It is the most appropriate comparable for the relevant periods and being reasonable and scientific uncontrolled comparable to be applied to the assessee's loan transactions. We direct the AO/TPO to work out the TP adjustment accordingly depending on the LIBOR rate applicable to year from year. In view thereof, the grounds raised by the assessee on this issue are partly allowed. Adjustment for corporate guarantee - assessee charged 1% rate from one AE and nil from other for providing such guarantee - Held that:- There is prevalence of various types of guarantee services in the commercial parlance, which carry different type of obligations, commitments and risk. In this case, the AO applied CUP method and first held that SBI rates an uncontrolled comparable transaction. The SBI replied as 2.25% to be the rate charged by the bank as its commercial activities while providing the bank guarantee, Ld. TPO went beyond the information called upon by him from SBI. Similar information from no other institution has been called and further mark up of 2% is added by TPO on reasons of his own that SBI may be setting off losses in giving the bank guarantees at 2.25%. In our consideration, the TPO's action, in first going to SBI and then further enhancing it, is based on surmises and conjectures. His adjustment has no basis or corroboration whatsoever from any authentic source. The assessee having itself charged the guarantee fee of 1% from one AE, in our considered view, in the given facts and circumstances, the guarantee commission adjustment under TP at the rate of 1% is fair and reasonable. The Assessing Officer will work it out accordingly. Decided in favour of assessee for statistical purposes. Export Turnover Adjustments - Held that:- TPO having earlier adopted the TNMM method should not have reviewed his own report in the first place without giving cogent reasons. The business model, agreement, relationship of parties remaining the same, there is no justification in switching to CUP method. The reasons given by TPO for applying CUP method are totally vague and bereft of any cogent reasons. There is a perceptible difference in the risk between the sales made to related parties as the surety of repayments is within the control of the assessee and in case of sales to unrelated parties, the recovery of repayment of goods bears potentially high risk. In our considered view, the TNMM method as adopted earlier by TPO is the most appropriate method which deserves to be first applied. In view thereof, we direct the AO to apply adjustments based on TNMM method on export sales and work out the adjustments accordingly. Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 145
Registration sought by the assessee-trust u/s 12AA refused - Held that:- Going through the orders of the authorities below as well as the Order of the Co-ordinate Bench in the case of Shree Chargam Dasha Porwad Mahamandal v. DIT (Exemption) [2015 (7) TMI 105 - ITAT AHMEDABAD] wherein it was held that when the assessee-trust is registered with the sub-registrar as a charitable trust, in the event of failure of the trust the net assets/income would obviously be taken over by the Charity Commissioner and the rejection of registration on this ground was held not on a sound footing. The books of accounts can be examined at the time of assessment. Therefore allow the appeal of the assessee and direct the ld. Commissioner of Income-tax, Rajkot-III, Rajkot to grant the registration u/s 12AA of the Income-tax Act, 1961. - Decided in favour of assessee.
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2015 (7) TMI 144
Validity of reassessment proceedings u/s. 147/148 - assessment of deemed sales consideration u/s. 50C - Held that:- The case was reopened u/s. 148 after recording the reasons within 4 years. The assessee had not disclosed long term capital gain in the computation of income even there was no long term capital gain on sale of land. The A.O. recorded the reasons as per law and issued notice u/s. 148. The ld. A.R. had not controverted the findings given by the ld. CIT(A) on this issue by relying upon various decisions on this issue by the various Courts. There is no material with the assessee to show that he has challenged the proceeding u/s. 148 before the A.O. and asked to give the copy of reasons recorded to the A.O. He had co-operated in the proceeding with the A.O. without any objection. Therefore, at the stage of appellant, he cannot take other route to defend his case. Further, the assessee himself admitted that the show cause notice was issued for making addition u/s. 50C by letter dated 02.02.2011 by the A.O., whereas assessment was completed on 25.10.2011 by the A.O. Therefore, there is no justification of challenging the 148 proceeding by the assessee. - Decided against assessee. Long term capital gain u/s. 50C - A.O. made addition on the basis of valuation of stamp authority for stamp purposes u/s. 50C - CIT(A) confirmed the addition by observing that the appellant had failed to furnish the report of Government Approved Valuer before the A.O. to support the claim of index cost acquisition - Held that:- The assessee claimed that he had valued the property for cost of acquisition as on 01.04.1981 from Government Approved Valuer, submitted before the A.O. by letter dated 16.02.2011. It does not indicate that assessee had filed this report before the A.O. but value was stated at ₹ 20,80,000/- as on 01.04.1981 which prima facie indicates that assessee had obtained the Valuation Report and claimed cost of acquisition at ₹ 20,80,000/- as on 01.04.1981. For computation of capital gain cost of acquisition as on 01.04.1981 is required in case of property held before 01.04.1981. The copy of report was filed before the ld. CIT(A). Therefore, in the interest of justice, we direct to A.O. to consider the Valuation Report as on 01.04.1981 and verify the veracity of the Valuation Report obtained by the assessee and take decision as per law. Accordingly, we set aside these grounds. - Decided in favour of assessee for statistical purposes.
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2015 (7) TMI 143
Registration under section 12AA denied - DIT(E) refused the registration to the trust for the reason that there was no clause with respect to transferring the assets - Held that:- As decided case of Shri Chargam Dasha Porwad Mahamandal [2015 (7) TMI 105 - ITAT AHMEDABAD] this issue of refusing registration in the absence of dissolution clause in the trust-deed is covered in favour of the assessee with the decision of Co-ordinate Bench of Delhi Tribunal in the case of Shri Sai Samarpan Trust Co.(2007 (6) TMI 507 - ITAT DELHI), wherein held that when the assessee- trust is registered with the sub-registrar as a charitable trust, in the event of failure of the trust the net assets/income would obviously be taken over by the Charity Commissioner and the rejection of registration on this ground was held not on a sound footing and the orders of the DIT(Exemptions) were reversed. We find that the case of the assessee is on more sound footing since it has already applied to the Charity Commissioner for amendment of the trust-deed vide application submitted on 26/02/2013, whereby inserting the dissolution clause providing that the trust shall be irrevocable and in the most unlikely situation, if trust practically stops functioning, it can only be merged/amalgamated with other one or more public charitable trusts or bodies having similar objects subject to the approval of the Office of the Public Charity Commissioner, etc. No other material has been produced on behalf of the Revenue before us to suggest that the aims and objects of the trust are not charitable in nature. Thus there is no justification for refusing the registration u/s.12AA and 80G(5) to the assessee - Decided in favour of assessee.
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2015 (7) TMI 127
Penalty under Section 271(1(c) - additional income due to the search operation u/s 132 - assessee disclosed the additional income only after he was confronted by the D.I (Inv), New Delhi with certain evidence - Held that:- In the case, before us the assessee on his own showing had furnished inaccurate particulars. The assessee admitted that the return originally filed by him included expenditure disallowable under Section 37(1) which occasioned the revised return filed by him by which a sum of ₹ 3.40 crores was added by the assessee himself to his total income originally returned. The submission advanced by Mr. Kapoor that the Assessing Officer did not call for any explanation from the assessee is not factually correct because it would appear from the assessment order dated 30th March, 2007 quoted above that a notice under Section 271(1)(c) was issued to which the assessee duly replied by its letter dated 1st June, 2006 and offered an explanation that there was no deliberate concealment which was not acceptable to the Assessing Officer. He as such passed an order under Section 271(1). It is, therefore not correct to say that the exercise calling for an explanation from the assessee was not undertaken. Clause (c) of Section 271(1) originally qualified an act of concealment of income or furnishing of inaccurate particulars with the expression ‘deliberately’ which was omitted by the Finance Act, 1964 w.e.f. 1.4.1964 as a result concealment of income or inaccurate particulars need not originally have been furnished deliberately. The use of the expression ‘deliberately’ was a pointer to show that mens rea was a necessary element. With the omission of the expression ‘deliberately’, mens rea is no longer a prerequisite for imposition of penalty. It is now a case of strict liability. In the case of Dilip N. Shroff – Vs- CIT reported in (2007 (5) TMI 198 - SUPREME Court), mens rea was considered to be a necessary ingredient for levy of penalty. But in the case of Union of India –Vs- Dharmendra Textile Processors reported [2008 (9) TMI 52 - SUPREME COURT ] it was held that the view in the case of Dilip. N. Shroff was not correct. It has been held that penalty under Section 271 (1) (c ) is a civil liability and the wilful concealment is not an essential ingredient. - Decided in favour of the Revenue.
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2015 (7) TMI 126
Legality of search and seizure operations under Section 132 - Held that:- We see no reason to entertain this writ petition mainly for the following facts and reasons: (i) This petitioner has close connection with Ex. Chief Minister of the State. (ii) There was ample materials with the Income Tax Authorities that this petitioner has not disclosed huge income. On the basis of information with the Income Tax Authorities they found need of carrying out search and seizure at the premises of the petitioner. Before issuance of warrant of authorization by the Director of Income Tax to carry out search and seizure under Section 132 of the Act, in detail the procedure prescribed under Section 132 of the Act has been followed. To carry out any search and seizure activity u/s 132 of the Income Tax Act, 1961, the concerned ADIT or DDIT has to write a satisfaction note along with supporting documents proposing an action u/s 132 if he has reasons to believe that such an action is justified. The said satisfaction note is then forwarded by JDIT(Inv.)/Addl DIT(Inv) to the DIT(Inv.) and both these officers should independently have reason to believe on the basis of information in possession that a search and seizure activity u/s 132 of Income Tax Act, 1961 is justified.The satisfaction note is administratively approved by the Director General of Income Tax (Investigation) who independently should also have reason to believe that the provisions of Section 132 of the Income Tax Act, 1961 are complied for issue of warrant of authorization to carry out a search and seizure action. Thus no illegality has been committed by the respondents in issuing the summons under sub Section (1A) of Section 131 of the Act, 1961. See Neesa Leisure Ltd. & Anr Vs. Union of India & Ors reported in [2011 (3) TMI 706 - Gujarat High Court] - Decided against assessee.
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2015 (7) TMI 125
Transfer pricing adjustment - selection of comparable - Held that:- For M/s E-Infochips Bangalore Ltd. profit margin of such entity in the immediately preceding year(s) may also be taken into consideration and the FAR analysis in such cases may be reviewed to ensure that the potential comparable earning higher profit satisfies the comparability condition. Since this exercise has not been done either by the AO/TPO or the DRP in the present case, we are of the view that the matter should go back to the Assessing Officer/TPO for fresh consideration. See M/s Electronics Arts Games vs. ACIT [2015 (5) TMI 754 - ITAT HYDERABAD] INFOSYS LTD a captive unit of a comparable company which assumed only a limited risk, cannot be compared with a giant company in the area of development of software who assumes all types of risks leading to higher profits. The facts of the appellant are akin and therefore, do not warrant any different conclusion. The appellant is also captive service provider to its AE and as such, M/s. Infosys Ltd. is not a valid comparable with the appellant. M/S PERSISTENT SYSTEMS LTD should not be regarded as a comparable as relying on Agnity Technologies case [2010 (11) TMI 852 - ITAT DELHI] Treatment of foreign exchange fluctuation gain/loss as operating item - Held that:- As relying on Westfalia Separator India Pvt. Ltd. vs. ACIT [2015 (3) TMI 140 - ITAT DELHI] the forex gain or loss is the difference between the price at which an import or export transaction was recorded in the books of account on the basis of rate of foreign exchange then prevailing and the amount actually paid or received at the rate of foreign exchange prevailing at the time of actual payment or receipt. Since such forex loss or gain is a direct outcome of the purchase or sale transaction, it partakes of the same character as that of the transaction to which it relates. When we read the ratio of the case of Sutlej Cotton (1978 (9) TMI 1 - SUPREME Court) in juxtaposition to that of the Special Bench in case of Prakash I Shah (2008 (8) TMI 387 - ITAT BOMBAY-K ), there remains no doubt that forex gain or loss from a trading transaction is not only an item of revenue nature, but is, in fact, a part of the price of import or value of export transaction, as the case may be. Thus we direct the AO/TPO to treat the foreign exchange gain/loss as an operating item - Decided in favour of assessee.
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2015 (7) TMI 124
Transfer pricing adjustmeent - arm's length price of the international transactions representing software development services provided to the associated enterprises (AE) is determined by applying transactional net margin method (TNMM) - selection of comparable - Held that:- Since the assessee company is engaged in software development services; whereas M/s. Bodhtree Consulting Ltd. was engaged into software product development, we find force in the argument of the ld counsel for the assessee that M/s. Bodhtree Consulting Ltd. is functionally different from assessee company. A captive unit of a comparable company which assumed only a limited risk cannot be compared with a giant company in the area of development of software who assumes all types of risks leading to higher profits. The facts of the appellant are akin and therefore, do not warrant any different conclusion. The appellant is also captive service provider to its AE and as such, M/s. Infosys Ltd. is not a valid comparable with the appellant. M/S THIRDWARE SOLUTIONS assessee is not having any license sale of its products and, the annual report of the Thirdware does not reveal the bifurcation of sale of ₹ 47 crores and ₹ 16 cores from SEZ of STPI Unit. Therefore we direct the exclusion of this company from the list of comparables. SONATA SOFTWARE - In the instant case, aggregate related party transactions are roughly around 95 crores which is approximately about 40% of the total service income of ₹ 243.57 crores.As such, the said comparable is not a valid comparable and hence is directed to be excluded as it fails the RTP filter of 25% applied by the TPO. Mindtree - we direct in the interest of justice that this fact may be taken into account to adjudicate whether this event of amalgamation will effect in treating this company as a comparable to the assessee company. The precedents relied upon on by the learned counsel for the assessee may be taken into account before the TPO decides whether to include the company as comparable or not. Kals Information System should not be regarded as a comparable as this company was developing software products and not purely or mainly software development service provider. Treatment of foreign exchange fluctuation gain/loss as operating item - Held that:- As relying on Westfalia Separator India Pvt. Ltd. vs. ACIT [2015 (3) TMI 140 - ITAT DELHI] the forex gain or loss is the difference between the price at which an import or export transaction was recorded in the books of account on the basis of rate of foreign exchange then prevailing and the amount actually paid or received at the rate of foreign exchange prevailing at the time of actual payment or receipt. Since such forex loss or gain is a direct outcome of the purchase or sale transaction, it partakes of the same character as that of the transaction to which it relates. When we read the ratio of the case of Sutlej Cotton (1978 (9) TMI 1 - SUPREME Court) in juxtaposition to that of the Special Bench in case of Prakash I Shah (2008 (8) TMI 387 - ITAT BOMBAY-K ), there remains no doubt that forex gain or loss from a trading transaction is not only an item of revenue nature, but is, in fact, a part of the price of import or value of export transaction, as the case may be. Thus we direct the AO/TPO to treat the foreign exchange gain/loss as an operating item - Decided in favour of assessee.
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2015 (7) TMI 123
Penalty levied u/s.271(1)(c) - undisclosed income in the hands of director - CIT(A) deleted penalty levy - Held that:- CIT(A) deleted the penalty holding that the profit offered to tax by the directors of the different companies including the assessee in their hands in fact belongs to the said companies which have been earned by the said companies from their manufacturing activity. Therefore, such income has to be taxed in the hands of the respective companies and not in the hands of the directors. According to the Ld.CIT(A) it is the settled proposition of law that in order to levy penalty u/s.271(1)(c) there has to be income of the assessee in respect of which particulars have been concealed. Since in the instant case it is not the income of the assessee and the income belongs to that of the respective companies, therefore, penalty u/s.271(1)(c) of the I.T. Act cannot be levied by invoking either Explanation 1 or Explanation 5A to provisions of section u/s.271(1)(c) of the I.T. Act. No infirmity in the above finding given by the Ld.CIT(A). In the instant case the income declared and accepted by the assessee in the return filed in response to notice u/s.153A as undisclosed income is actually belongs to the company and he is not the owner of such income. The Ld. Counsel for the assessee also made a statement at the Bar that the assessee has not taken any benefit out of the amount disclosed. The tax paid on such undisclosed income has gone waste as no benefit out of such income has been availed by the assessee. Therefore, we are of the considered opinion that this is not a fit case for levy of penalty u/s.271(1)(c) read with Explanation 5A - Decided in favour of assessee.
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2015 (7) TMI 122
Disallowance u/s 40(a)(ia) - Non deduction of TDS on the labour charges paid - whether payment has been made for centring, tiling and fabrication work amounts to payment to contractor or sub-contractor so as to invoke provisions of section 194C (2) for the purpose of TDS? - Held that:- Since the argument that the assessee is not liable to deduct tax u/s.194C(2) is advanced before us for the first time and the lower authorities have no occasion to decide the issue from this angle, therefore, we in the interest of justice, deem it proper to restore the issue back to the file of the Assessing Officer with a direction to decide the issue afresh in the light of the decision of the Tribunal in Mr. Vijay Ramchandra Shirsth (2011 (9) TMI 904 - ITAT PUNE) wherein held that for a contract to qualify as a subcontractor, the subcontractor should spend their time and energy and also undertake the risk attached with the main contract. As the element of risk was missing, the contract could not be held as subcontract. and in accordance with law. Needless to say the Assessing Officer shall give due opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance u/s.40(a)(ia) - non deduction of tax from account writing charges and audit fees - Held that:- As nothing was brought to our notice by the Ld. Counsel for the assessee so as to take a contrary view. Therefore, the order of the CIT(A) upholding the disallowance u/s.40(a)(ia) on account of account writing charges and audit fees is upheld. - Decided against assessee
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2015 (7) TMI 121
Penalty levied u/s.271(1)(c) - undisclosed income in the hands of director - CIT(A) deleted penalty levy - Held that:- CIT(A) deleted the penalty holding that the profit offered to tax by the directors of the different companies including the assessee in their hands in fact belongs to the said companies which have been earned by the said companies from their manufacturing activity. Therefore, such income has to be taxed in the hands of the respective companies and not in the hands of the directors. According to the Ld.CIT(A) it is the settled proposition of law that in order to levy penalty u/s.271(1)(c) there has to be income of the assessee in respect of which particulars have been concealed. Since in the instant case it is not the income of the assessee and the income belongs to that of the respective companies, therefore, penalty u/s.271(1)(c) of the I.T. Act cannot be levied by invoking either Explanation 1 or Explanation 5A to provisions of section u/s.271(1)(c) of the I.T. Act. No infirmity in the above finding given by the Ld.CIT(A). Even in the hands of the company, the assessee in principle has not accepted the result of such unaccounted sale which has been categorically stated by Shri Ghanshyam C. Goyal in his reply to Question No.4. As per the provisions of Explanation 5A to section 271(1)(c) penalty cannot be levied if search took place on or after 01-06-2007 and the assessee is found to be the owner of any asset such as money, bullion, jewellery or other valuables etc or owner of any income based of any entry in books of account and he claims that such entry in the books of accounts represents his income.In the instant case the income declared and accepted by the assessee in the return filed in response to notice u/s.153A as undisclosed income is actually belongs to the company and he is not the owner of such income. The Ld. Counsel for the assessee also made a statement at the Bar that the assessee has not taken any benefit out of the amount disclosed. The tax paid on such undisclosed income has gone waste as no benefit out of such income has been availed by the assessee. Therefore, we are of the considered opinion that this is not a fit case for levy of penalty u/s.271(1)(c) read with Explanation 5A - Decided in favour of assessee. Penalty proceedings u/s.271AAA - assessee has declared an amount of ₹ 1,63,58,750/- being Hundi, petty loans, sales receivable etc. - CIT(A) deleted penalty levy - Held that:- Considering the fact that the assessee has filed the return disclosing the income declared during the course of search on the basis of seized material and paid the taxes thereon we are of the considered opinion that the assessee has substantiated the manner in which the undisclosed income was derived and the immunity provided u/s.271AAA(2) are applicable. In this view of the matter and in view of the detailed order passed by Ld.CIT(A) relying on various decisions, we find no infirmity in his order cancelling the penalty levied u/s.271AAA of the I.T. Act. See CIT vs. Radha Kishan Goel (2005 (4) TMI 47 - ALLAHABAD High Court) and DCIT Vs. Pioneer Marbles & Interiors Pvt. Ltd. [2012 (2) TMI 261 - ITAT, KOLKATA] - Decided in favour of assessee
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2015 (7) TMI 120
Disallowance of expenditure paid to Pune Municipal Corporation(PMC) for regularizing the excess area constructed for a building called "MODI MALL" by invoking the Explanation to sec 37(1) - Held that:- Compounding fee paid by the assessee to the Municipal Corporation on account of deviations from original sanctioned plan is in the nature of penalty and therefore would not be allowable as deduction in view of provisions of Explanation to section 37(1) of the I.T. Act. The above view of ours also finds support from the decision of Nahar Spinning Mills Vs. CIT reported in (2014 (11) TMI 898 - PUNJAB & HARYANA HIGH COURT ) and the decision of Millennia Developers Pvt. Ltd. Vs. DCIT reported (2010 (1) TMI 223 - KARNATAKA HIGH COURT - Decided against assessee. Disallowance of payment of interest u/s 40(a)(ia) - Whether the interest is payable to the NBFC's which are granted exemption for no IDS u/s 194A(3)(iii)(f) and also the entire interest has been paid in the previous year as submitted by assessee - Held that:- So far as the argument of the Ld. Counsel for the assessee that no disallowance u/s.40(a)(ia) is required since no amount is payable at the end of the year, we find the Pune Benches of the Tribunal following the decisions of Hon’ble Gujarat High Court and Hon’ble Calcutta High Court are taking the consistent view that provisions of section 40(a)(ia) are applicable for TDS default even if no amount is payable at the end of the year. The above view of the Tribunal also finds support from the decision of the Hon’ble Punjab & Haryana High Court in the case of PMS Diesels Vs. CIT reported (2015 (5) TMI 617 - PUNJAB & HARYANA HIGH COURT ). The Hon’ble High Court after considering the decision of Hon’ble Allahabad High Court in the case of Vector Shipping Services (P) Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT ] and the dismissal of the SLP before Hon’ble Supreme Court has held that provisions of section 40(a)(ia) are applicable even if no amount is payable at the end of the year. Therefore, the first limb of argument of the Ld. Counsel has to be rejected. So far as the alternate argument of the Ld. Counsel for the assessee that disallowance u/s.40(a)(ia) could not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act whereof the payees have filed the return showing such income in the return of income, we find the same is acceptable.However, the assessee has made a new legal argument that the Finance Act, 2010 has amended the first proviso to section 40(a)(ia) w.e.f. 01-04-2010 and it has been held by various judicial authorities that such amendment is retrospective in nature. It is the submission of the Ld. Counsel for the assessee that the second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 01-04-2013 wherein it is stated that disallowance u/s.40(a)(ia) of the Act need not be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the I.T. Act., therefore, this should also be held as retrospective since it has been introduced to eliminate unintended consequences which may cause undue hardship to the tax payers.Since the above arguments are being advanced before the Tribunal for the first time and the correctness of the contention has not been examined by the tax authorities, therefore restore this issue to the file of the Assessing Officer with a direction to examine the above contention of the assessee - Decided in favour of assessee for statistical purposes. Interest to be capitalized to the qualifying assets by relying on proviso to sec. 36(1)(iii) - whether the said proviso is applicable to the capital assets and to the current assets”? - AO disallowed the interest claimed u/s.24(b) on the ground that such interest has not been used for construction of the property on which rent is received. The alternate contention of the assessee that such interest has been utilised for business and therefore allowable u/s.36(1)(iii) was also rejected by the Assessing Officer by referring to the Accounting Standard-16 - Held that:- Ld.CIT(A) upheld the action of the Assessing Officer so far as the disallowance u/s.24(b) is concerned. As regards the alternate claim that such interest should be allowed u/s.36(1)(iii) he gave certain directions to the Assessing Officer to find out the qualifying assets and compute the interest attributable to such qualifying assets in terms of paragraphs 12 of the Accounting Standard-16 according to which the interest so computed as per Accounting Standard-16 attributable to qualifying asset shall be capitalised to form part of the cost of the work-in-progress. Only the interest not so capitalised is allowable deduction u/s.36(1)(iii). We find after such direction of the CIT(A) the Assessing Officer called for the details from the assessee and after due verification held that there is no qualifying asset as per Accounting Standard-16 and the entire interest is allowable. A copy of the order of the Assessing Officer giving effect to such direction of the CIT(A) is placed at page 23 of the paper book. We find the Assessing Officer has allowed relief of ₹ 2,02,91,840/- being interest which was earlier claimed as deduction from house property income. Even otherwise also, the business of the assessee is that of purchase and sale of land, investment in land, real estate, commercial and residential plot etc. The funds borrowed have been utilised for such business activity, therefore, the entire interest paid has to be allowed as deduction u/s.36(1)(iii) of the I.T. Act. The same is also borne out from the record after the order of the Assessing Officer giving appeal effect to the order of the CIT(A). - Decided in favour of assessee.
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2015 (7) TMI 119
Legality of assessment u/s.153A - Held that:- There are certain additions made by the Assessing Officer on the basis of information which was available with the assessing authorities in the form of earlier returns of income and financial statement attached thereof. In our opinion, additions could be made in the case of completed assessments (assessment years which were not abated) only on the basis of incriminating material found during the course of search. Admittedly, the Assessing Officer did not found any incriminating material warranting addition. Being so, we are inclined to direct the Assessing Officer to make addition only on the basis of incriminating material if any found during the course of search. Further, regarding addition on account of cash disclosed by Sheeba Prince for the assessment year 2011-12, if the said cash belongs to her family members, addition cannot be made in the hands of the assessee (Sheena Prince) if it is disclosed in their respective return of income. Regarding jewellery, we make it clear that if the assessee has already disclosed jewellery in the regular return of income, it cannot be considered for addition in assessment completed u/s.143(3) of the Act r.w.s.153A of the Act. Accordingly, we direct the Assessing Officer to pass fresh order in the light of the order of the Special bench in the case of All Cargo Global Logistics Ltd (2012 (7) TMI 222 - ITAT MUMBAI(SB) ). With these observations, all these appeals filed by the assessees are remitted to the Assessing Officer to make addition only on the basis of seized material found during course of search action in these cases. Decided partly in favour of assessee for statistical purposes. Penalty u/s.271(1) (c) - genuineness of the gift unproved - Held that:- In this assessment year, the assessee said to have received cash of I5,30,000/- as gift in the name of minor sons (i.e I2,65,000/- each from his sons Joseph Prince and Antony Prince). The assessee was not able to properly explain the source. The Assessing Officer stated that the gift has been received by the assessee from a person who is a close relative to him. According to the Assessing Officer, the assessee filed a gift deed on the stamp paper of I20/- which was purchased on 27.05.2006 and this document does not have complete address of the donor and the gift which was issued in the form of cash only. The assessee explained that he received the gift from Shri. T.P. Joseph who is his close relative. After verifying original return of income, it was clear that there is no incriminating material found in the course of search. Being so, in our opinion that the assessment cannot be made u/s.153A of the Act without any incriminating material found during the course of search and levying of penalty on the basis of some record which was filed by the assessee is not proper. Being so, in our opinion levy of penalty is not justified consequent to assessment u/s.143(3) r.w.s 153A of the Act. Accordingly, the penalty is deleted. - Decided in favour of assessee.
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2015 (7) TMI 118
Disallowance u/s.14A - Held that:- There is no dispute in assessee’s appeal that the authorities below have invoked Rule 8D(2)(ii) and (iii) of the Income Tax Rules in computing the impugned section 14A disallowance. The assessment year in question is 2006-07. It does not require much discussion that Rule 8D is applicable from assessment year 2008-09 onwards. The case law of Godrej Boyce and Co.[2010 (8) TMI 77 - BOMBAY HIGH COURT] is quoted in support. The Revenue is not able to point out any exception to the same. Therefore, the very basis adopted by the Assessing Officer as well as CIT(A) in computing the impugned disallowance under Rule 8D (2)(ii) and (iii) is held to be not as per the settled law. At the same time, we are of the view that reasonable computation method is arriving at such a disallowance has to be adopted in assessment years prior to 2008-09. It has come on record that the assessee’s exempt income in question from dividends reads a sum of ₹ 24.42 lacs. There is no other dispute involved in its appeal on facts and figures narrated in the CIT(A) order comprising of Assessing Officer’s findings hereinabove. We observe in these circumstances that larger interest of justice would be met in case a lumpsum adhoc disallowance of ₹ 2.5 lacs is made in these peculiar facts with a rider that the same shall not be treated as a precedent. Ordered accordingly. The assessee gets part relief. The Assessing Officer is directed to pass a consequential order. - Decided partly in favour of assessee.
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2015 (7) TMI 117
Disallowance made u/s.40(a)(ia) - TDS remittance made before the due date of filing of return of income was not in conformity with the provisions of section 40(a)(ia) - Held that:- The department has not disputed the fact that the expenditure claimed by the assessee which is the subject matter of disallowance under section 40(a)(ia) was entirely paid during the relevant previous year and nothing remained payable on the last day of the previous year. Therefore, in view of the principles laid down by the ITAT, Vizag Special Bench in the case of Merlyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM), the disallowance under section 40(a)(ia) is not sustainable. The Ld. CIT(A) having deleted the addition by following the decision of the ITAT, Vizag Special Bench as aforesaid, we do not find any infirmity in the order of the Ld. CIT(A), which is accordingly upheld - Decided against revenue. Disallowance of depreciation claimed by the assessee - reasons recorded that the newspaper publication was inaugurated by the Governor and Chief Minister of A.P. on 22.10.2007, the A.O. has formed an opinion that the business of the assessee has commenced from that date. Hence, depreciation @ 15% will not be allowed as the assets on which depreciation has been claimed is put to use for less than 180 days - Held that:- The term ‘used’ as employed in section 32(1) has to be given a wider meaning and will also include passive user of the asset. It has been held that if the machinery or plant is ready for use but it is not actually used, still then assessee will be eligible for depreciation. If we apply the aforecited principle to the facts of the present case, it is to be seen that the plant and machinery and electrical installation on which assessee has claimed full depreciation were acquired in the preceding assessment year. Therefore, it can be safely concluded that the plant and machinery as well as electrical installation were ready for use in the impugned assessment year. Only because the inauguration took place in October, 2007 that cannot be a sole criteria to deny assessee’s claim of depreciation at the full value when there is no material brought on record by the department to show that the plant and machinery and electrical installations were not ready for use prior to 22.10.2007. Therefore, considering the totality of the facts and circumstances of the case, we hold that disallowance of 50% out of the total depreciation claimed by the assessee on the opening WDV is without any reasonable basis. Hence, we delete the addition made on that account. - Decided in favour of assessee.
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2015 (7) TMI 116
Transfer pricing adjustment - the TPO determined the ALP of Royalty and Technical knowhow fee as NIL as the assessee did not furnish the details that were called for - Held that:- The decision of the TPO to determine the ALP as NIL is also not in accordance with the provisions of sec.92C of the Act on the reasoning that the assessee did not furnish relevant details that were called for by him. We notice that the assessee had contended before the TPO/AO that it had capitalized the technical knowhow fee and hence the Transfer pricing provisions are not applicable to it. Under these set of facts, it appears that the assessee did not furnish the relevant details. In the preceding paragraph, we have rejected the contentions of the assessee and hence the ALP of the technical knowhow payment is required to be determined as per the provisions of the Act. Accordingly, we are of the view that the issue relating to the determination of ALP of Technical knowhow payment requires fresh examination. Accordingly, we set aside the decision rendered by the Ld CIT(A) in respect of the issue relating to Technical knowhow payment and restore the same to the file of the AO/TPO for fresh consideration. Addition made u/s 145A - adjustment of closing stock value with Excise duty amount - Held that:- the provisions of sec. 145A mandates that the value of purchase and sale of goods and inventory shall be adjusted to include the amount of tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Hence, for the purposes of Income tax, an assessee is required to follow only inclusive method of accounting the tax, duty etc. In the instant case, we notice that the AO has adjusted the value of closing stock only, to include the amount of tax, duty etc., where as the provisions of sec. 145A requires that the value of purchases and sales should also be adjusted to include the amount of tax, duty etc. Thus, the action of the AO, which was approved by Ld CIT(A), was not in accordance with the mandate of the provisions of sec. 145A of the Act. Compliance of provisions of sec. 145A in part only, would give misleading result. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to apply the provisions of sec. 145A of the Act to purchases, sales and inventory and make addition, if any, is found to be made. T.P adjustment of Royalty payment - Held that:- The disallowance to be made u/s 40(a)(i) of the Act would be restricted to ₹ 3.00 lakhs only. This example would make it clear that the disallowance to be made u/s 40(a)(i) is influenced by the T.P adjustments and not vice versa. Accordingly, in our view, the disallowance made/to be made u/s 40(a)(i) would not debar the AO/TPO from determining the ALP of international transactions. In view of the above said contentions, it appears that the assessee did not furnish the relevant details. Since we have rejected the contentions of the assessee, the ALP of the royalty amount is required to be determined as per the provisions of the Act. Accordingly, we are of the view that the issue relating to the determination of ALP requires fresh examination. Validity of assessment order passed by the AO. - Held that:- Illegality which has occurred after proper initiation of proceedings vitiates the order and hence the proceedings should be restored back to the stage at which the illegality has occurred. In any case, in the instant case, we have noticed earlier that the revenue was under the impression that the provisions of sec. 144C shall have application from AY 2010-11 and subsequent years and the AO has also acted in a bona fide manner in accordance with the view entertained by the revenue. Under these set of facts, we are of the view that the impugned assessment order suffers from illegality in not following the procedures prescribed under sec. 144C of the Act and hence the said illegality needs to be corrected by restoring the matter to the file of the assessing officer at the stage at which the illegality has occurred. - All the appeals of the assessee are allowed for statistical purpose.
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2015 (7) TMI 115
Addition on account of interest income - revenue v/s capital receipt - diversion of interest at source - Held that:- The interest earned on FDR before commencement of project was to be treated as capital receipt to be adjusted preoperative expenses, since it had a direct link with setting up power project. The interest was not assessable as income from other sources. Section 4 and Section 56 of the Income Tax Act, 1961. We also find that similar decision was also relied upon by the assessee’s counsel in the case of Gujrat Corporation Ltd.[2012 (11) TMI 181 - Gujarat High Court] wherein it was held that “the assessee corporation was promoted by Government for augmenting power supply. The share capital was provided by Government. The interest on short term deposits from share capital was paid to Government as per agreement. The interest income was diverted at source. It was not assessable in its hands. So the income did not belong to the assessee, but that was of the Govt. of Gujrat, and therefore, it cannot be taxed in the hands of the assessee. we find considerable cogency in the submissions and the case laws relied upon by the Ld. Counsel of the assessee, therefore, we are of the view that the interest received on FDR’s of ₹ 5,91,850/- in the present case is not to be taxed as income from other sources in the hands of the assessee company, hence, we delete the addition made by the AO and confirmed by the Ld. CIT(A) - Decided in favour of assessee. Addition on account of sale consideration of the assessee treated as unexplained income under section 68 - Held that:- as per the Ld. CIT(A) it is the immediate requirement of cash that had made the assessee to bring in picture the entire paper transaction of sale and purchase of cloth, though in effect no such transaction took place. In view of the above, the genuineness of sales transaction as well as purchase transaction remaining unproved, we find considerable cogency in the finding of the Ld. CIT(A) wherein he has observed that the addition made by the AO uls 68 of IT Act is correct on account of unproved purchases and subsequent unproved sales thereby leading to unexplained cash credit u/s 68 of IT Act, 1961 at ₹ 49,28,006/-. Keeping in view of the aforesaid facts and circumstances of the case as explained above, in our considered opinion, the Ld. CIT(A) has passed a well reasoned on the issue in dispute - Decided against assessee.
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2015 (7) TMI 114
Unexplained deposits in bank account - appellant is a housewife - Held that:- Ld. Counsel for the assessee contends that ld. CIT(A) has given clear findings of facts and held that the opening cash of 2.75 lacs and withdrawal of ₹ 1 lac contributed towards construction were not considered, besides there was no justification in ignoring the cost of material of ₹ 1,32,176/- as indicated by ld. CIT(A). The factual discrepancies in AO’s working of Annex. B have been demonstrated by ld. CIT(A), his order deserves to be upheld on this issue. Un-explained investment in the construction of residential house - Held that:- CIT(A) from the bank statement, endorsed the correct fact that investment in the construction works was made partly in the Financial Year 2007-08. This has been impliedly acknowledged by the learned AO while discussing this addition in the body of the assessment order. These vital facts emerging from record cannot be ignored on ipsi-dixit by manufacturing some lacunae in assessee’s reply. Therefore ld. CIT(A)’s clear finding of fact that the investment in construction of house was made in AY 2008-09 & 2009-10 is based on proper verification of facts on record and there is no reason to disturb such findings of facts. It is further contended that ground iv of the revenue has no meaning inasmuch as the merits of all the credit entries stand proved by the assessee which is manifest from the order of ld. CIT(A). consequently there remains no issue about identity, genuineness and creditworthiness of these entries. In the light of above observations and working, the conclusions so arrived at by the learned CIT (A) are very fair, reasonable and logical so we rely upon such findings of the learned CIT (A). No reason to interfere with ld. CIT(A) order who has co-terminus powers with AO and can do what AO failed to do; except the alternate plea of the assessee about the Axis bank a/c being joint account. This becomes more relevant in the peculiar background of assessee’s being a house maker, having no knowledge of construction, debit and credit entries in the bank and prolonged and terminal illness of the husband. None of which is questioned by lower authorities Therefore, if at all it is held that ₹ 8,01,050/- remained unexplained then assessee being a joint a/c holder cannot be saddled with entire addition. The same is to be treated equally half in the hands of husband and wife. In view thereof we hold that the sustainable addition in the hands of assessee be restricted to 4,00,550/-. - Decided partly in favour of assessee.
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2015 (7) TMI 113
Service PE in India - India Singapore DTAA - whether in the case of the assessee, the Service PE can be said to be established/constituted within the scope of Article 5(3) or Article 5(6)? - Held that:- The threshold period under this para is 90 days and more; or if such activities are performed for a related enterprise, then period of more than 30 days. The Article 5(6) explicitly provides that it applies to “services” other than those covered by Article 5(4) and 5(5), however, the said article is silent as regards its relationship with Article 5(3). Thus, Article 5(6) cover various services which are not covered by para 4 and 5 of Article 5 and technical services as defined in Article 12. What kind of services have been contemplated in para 6 of Article 5 have not been elaborated in the treaty or elsewhere. In contradistinction, para 3 of Article 5 is very specific and therefore, such specific activities cannot be read into para 6 of Article 5. There cannot be a overlapping of activities carried out within the ambit of Article 5(3) and furnishing of services as stated in Article 5(6). Both should be read independent of each other, or else there was no requirement of enshrining separate provisions. If the activities relating to construction or installation are specifically covered under Article 5(3), then one need not to go in Article 5(6). Thus, the activity of the assessee which is purely installation services has to be scrutinized under Article 5(3) only and not within Article 5(6). Project relating to contract with Allseas - finding of the DRP is that employees of the assessee who have stayed in India were for duration of minimum 3 days to 101 days and on second trip the duration ranges from 14 days to 48 days which aggregates to less than 183 days - Held that:- The DRP has not given any finding that the period of stay of employees has crossed 183 days. The only case of the DRP is that, the assessee constitute a service PE within Article 5(6) which prescribed for 90 days and 30 days. Thus, so far as contract with Allseas, the same do not constitute a service PE as period of stay in India is less than 183 days. So far as contract with Swiber GB Gaslift Project also, the number of days as per the finding of DRP itself is much less than 183 days and therefore, this project also do not constitute Service PE in India. Contract with Swiber BG Hydra Project - Held that:- Though the finding of the DRP is that it is less than 183 days, but the AO in the final assessment order has mentioned that it has crossed 183 days as the contract was signed on 01.08.2009 and the project was completed on 12.02.2010. In this regard the observation of the AO is that, date of signing of the contract has to be reckoned for calculating the number of days. Such an observation of the Ld. AO cannot be upheld, because at the time of the signing of the contract no actual activity for the installation purpose had yet started. The date of signing of contract merely signifies that the parties have agreed to terms and conditions for carrying out the work. The actual date should be reckoned from the preparatory activities letting to the performance of the contract of the core business activity i.e. the installation activity in the present case. In support of this proposition, the reliance placed by the learned senior counsel in the case of Cal Dive Marine Construction (2009 (6) TMI 21 - AUTHORITY FOR ADVANCE RULINGS) is clearly applicable wherein, the Authority had held that date of signing of contract cannot be treated as the starting point. Thus, the threshold of the time limit as calculated by the AO from the date of signing of agreement cannot be accepted. Accordingly, in the case of Swiber BG Hydra Project also, the number of days is far below than 183 days which fact been accepted by the DRP and therefore, this project also does not constitute service PE in India. The installation activity carried out by the assessee in terms of various contracts in India separately do not constitute PE in India under Article 5(3) as the threshold time limit of 183 days for each project is much less. Accordingly, the revenue from assessee’s contract for installation activity in India is not taxable in India, either under Article 7 or under the Act, as the assessee does not have PE in India. Levy of interest u/s 234B - Held that:- This ground as admitted by both the parties is covered by the decision of Hon’ble jurisdictional High Court in the case of NGC reported in [2009 (1) TMI 174 - BOMBAY HIGH COURT]. Accordingly, we hold that no interest u/s 234B is leviable in the case of the assessee. - Decided in favour of assessee.
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2015 (7) TMI 112
Estimation of net income at the rate of 16% - Held that:- The estimate of net income from the contract work at the rate of 16% of the turnover was without any basis. We find that as per the provisions of section 44AD of the Income Tax Act, net profit from contract work declared by the assessee at the rate of 8% of the turnover would be accepted if the turnover of the assessee is less than the limit specified in that section. Though the said section is not applicable in the instant case, as the turnover of the assessee is more than the turnover specified in that section, however, taking a cue from the provision of this section and taking into consideration normal trend that the percentage of net profit is generally less when the turnover is higher, in our considered view, it shall meet ends of justice, if the net profit is estimated at 8% of its turnover. - Decided partly in favour of assessee. CIT(A) ought to have sustained the disallowance of ₹ 1,25,00,000/- made by the AO on the ground that the expenditure was not genuine, and ₹ 60,00,000/- on account of section 40(a)(ia) of the Act - Held that:- When the CIT(A) has estimated the net profit, question of allowing or disallowing of any specific expenditure does not arise. The DR could explain as to why after estimation of net profit, still the disallowance of certain expenses of ₹ 1,25,00,000/- and ₹ 60,00,000/- was warranted, and how it can be held that such expense was allowed by the CIT(A). As we have already estimated the net income of the assessee of the contract work executed by the assessee, question of any further disallowance does not arise. - Decided against revenue. Addition made on the alleged ground of retraction of income admitted during the search - Held that:- merely on the basis of admission of the assessee, the additions cannot be made unless and until some corroborative evidence was found in support of such admission. Therefore, in our considered view, in the absence of any corroborative material to support the admission made during the course of search under section 132(4) of the Act addition cannot be sustained, especially when such admission was later on retracted by the assessee by filing the return of income as well as by filing a separate retraction letter also. We, therefore, delete the addition of ₹ 1,78,00,000/- and allow this ground of the appeal of the assessee. See Kailashben Manharlal Chokshi Vs. CIT [2008 (9) TMI 525 - GUJARAT HIGH COURT] - Decided in favour of assessee. Disallowance u/s.40(a)(ia) - Held that:- CIT(A) on estimate basis by assuming net income at the rate of 16% of the turnover. Thus, it is observed that the business income of the assessee was not computed as per the normal computation provision contained in sections 28 to 43AC of the Income Tax Act, but the net income was estimated after rejecting the book results. Once this alternative method of estimating the net income was utilized, question of making allowance or disallowance as per provision of sections 28 to 43AC does not arise. In the instant case, we have upheld the computation of business income on the basis of estimation in ground no.3 of the appeal of the assessee, though, at the rate of 8% of the turnover in replace of 16%, and therefore, the question of further disallowance by invoking the provisions of section 40(a)(ia) of the Act does not arise. See CIT Vs. Banwari Lal Banshidhar(1997 (5) TMI 37 - ALLAHABAD High Court ) - Decided in favour of assessee.
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2015 (7) TMI 111
Disallowance u/s.14A read with Rule 8D - CIT(A) deleted 50% disallowance - Held that:- It is not the case of the assessee that the AO has applied rule 8D, while computing the disallowance under section 14A without complying with the provisions of section 14A(2), whereas the AO has complied with the provisions of section 14A(2). We are of the view that the disallowance has to be made in accordance with rule 8D. CIT(A) cannot reduce the disallowance merely on the basis that the disallowance made by the AO is on the higher side. It is not the plea of the assessee that the AO has not recorded any satisfaction by rejecting the claim of the assessee on the basis of the accounts maintained by the assessee. We, therefore, set aside the order of the CIT(A) and restore the order of the AO. - Decided in favour of revenue. Addition in respect of transactions in shares treating them by the AO as speculative transaction, as per Explanation to section 73 - CIT(A) deleted the addition - Held that:- addition of ₹ 3,24,76,185/- in respect of transactions in shares treating them by the AO as speculative transaction, as per Explanation to section 73. Derivatives are assets, whose values are derived from values of underlying assets; in the present case, by all accounts the derivatives are based on stocks and shares, which fall squarely within the explanation to Section 73 (4). Therefore, it is idle to contend that derivatives do not fall within that provision, when the underlying asset itself does not qualify for the benefit, as they (derivatives - once removed from it and entirely dependent on stocks and shares, for determination of their value). See CIT-vs- DLF Commercial Developers. [2013 (7) TMI 334 - DELHI HIGH COURT] . Therefore the assessee was not entitled to carry forward its losses; the question framed is answered in favour of the revenue Addition towards the notional interest - CIT(A) deleted the addition - Held that:- The income under the Income Tax Act is leviable, as per the provisions of section 4 on the real income. This is not a case of the AO to disallow the interest claimed by the assessee as deduction. Until and unless the income has been received or accrued to the assessee, it cannot be regarded to be the income of the assessee. Income-tax is leviable on the real income. Onus is on the Revenue to prove that the assessee has earned the income. On the contrary, onus is on the assessee when the assessee claimed that an income is exempt from tax. It is a case where the AO has added the interest assuming as if the assessee has earned the income. Before us, the ld. DR even though vehemently relied on the order of the AO but could not adduce any evidence that any real income has been received by the assessee by way of interest on that count. We, therefore, confirm the order of the CIT(A) deleting the addition - Decided against revenue.
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2015 (7) TMI 110
Enlargement of the scope of the order passed by the CIT - 1 under section 263 - Held that:- Admittedly in this case the original assessment was set aside by the CIT -1 vide his order dated 27-9-2007. We have carefully gone through the directions issued by the CIT-1 confirmed by the Tribunal. There is no dispute that the CIT-1 has issued directions firstly in respect of the claim of deduction u/s 10B of the Act keeping in mind the provisions of section 10B(3) of the Act and subsequently the CIT -1 directed the A.O. to refer the matter to the TPO. Considering the assessment order made by the A.O. pursuant to the directions of the CIT-1 u/s 263 of the Act, we have no hesitation to hold that the A.O. has enlarged the scope of the order of the CIT-1. The observation of the ld. CIT(A) that the power of the CIT(A) are plenary power and the CIT(A) can do what the A.O. can do is misplaced for the simple reason that the CIT(A) cannot do what the A.O. cannot do. In the case in hand, the A.O. cannot enlarge the scope of the directions of the CIT issued u/s 263 of the Act, therefore, the CIT(A) also cannot enlarge the same. We, accordingly, set aside the findings of the ld. CIT(A)- Decided in favour of assessee. Disallowance of deduction u/s 10B in respect of the addition suo motu made by the assessee u/s 92-C - Held that:- In our considered opinion and understanding of the law and the understanding of the legislative intention, we cannot permit the assessee to stretch the benevolent provision to avail the benefit which the legislature never intended to. In the case in hand, there is no dispute that the assessee has under priced its services to AE’s and therefore made transfer pricing adjustment suo moto. This peculiar conduct of the assessee, if allowed to claim deduction u/s 10B of the Act will go against the legislative intention. We, therefore, decline to interfere with the finding of the lower authorities. In our considered opinion, the assessee is not entitled for deduction u/s 10B in respect of the addition of ₹ 4,09,54,804/- suo moto made by the assessee as per Form 3CEB. The cases relied upon by the assessee have not considered the relevant provisions of the Act with legislative intent and are therefore distinguished from peculiar facts and modus operandi of the case in hand.- Decided against assessee. Computation of amount eligible for exemption u/s 10B of the Act by setting of the losses of non-STPI unit - Held that:- This issue is squarely covered in favour of the assesse and against the Revenue by the decision of the Hon’ble High Court of Bombay in the case of CIT vs. Black and Veatch Consulting Pvt. Ltd., [2012 (4) TMI 450 - BOMBAY HIGH COURT ] wherein held the deduction under section 10A has to be given at the stage when the profits and gains of business are computed in the first instance. The Tribunal was right in holding that the deduction under section 10A in respect of the allowable unit under section 10A has to be allowed before setting off brought forwarded losses of a non-section 10A unit - Decided in favour of assessee.
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2015 (7) TMI 109
TDS on payment made for Internet services i.e. leased line benefits/broadband services - Whether are not in the nature of technical services and do not attract the provisions of sec.194J - Held that:- The issue is covered in favour of the assessee by the decision of this Tribunal in the assessee's own case for assessment year 2009-10 to which both of us are signatories. The interconnect/port access facility is only a facility to use the gateway and the network of MTNL/other companies. MTNL or other companies do not provide any assistance or aid or help to the respondents/assessees in managing, operating, setting up their infrastructure and networks. No doubt, the facility of interconnection and port access provided by MTNL/other companies is 'technical' in the sense that it involves sophisticated technology. The facility may even be construed as a 'service' in the broader sense such as a 'communication service'. But, when we are required to interpret the expression 'technical service', the individual meanings of the words 'technical' and 'service' have to be shed. And, only the meaning of the whole expression 'technical services' has to be seen. Moreover, the expression 'technical service' is not to be construed in the abstract and general sense but in the narrower sense as circumscribed by the expressions 'managerial service' and 'consultancy service' as appearing in Expln. 2 to s. 9(1)(vii) of the said Act. Considered in this light, the expression 'technical service' would have reference to only technical service rendered by a human. It would not include any service provided by machines or robots. The interconnect charges/ port access charges cannot be regarded as fees for technical services - Decided against revenue. Exclusion of reimbursement of certain expenses both from the export turnover as well as from the total turnover for the purpose of computation of deduction u/s 10A - Held that:- This issue also is covered in favour of the assessee by the decision of the jurisdictional High Court in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] it is held whatever is excluded from the export turnover should also be excluded from the total turnover for the purpose of computing deduction u/s.10A of the Act. - Decided against revenue.
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2015 (7) TMI 108
Exemption U/s 10B denied - assessee in its return of income had claimed deduction under Section 10B in respect of export of computer software in its STPI unit since it is registered as a 100% EOU exporting software products - whether the assessee is eligible for deduction under Section 10B of the Act in the absence of requisite approval from the Board of Approval ratifying the permission granted by the Development Commissioner? - Held that:- Admittedly, the assessee had not obtained the required approval envisaged under Section 10B of the Act. The assessee's alternate claim raised in appellate proceedings before the learned CIT(A) was that it be allowed deduction under Section 10A of the Act, for which it had the required approvals, which was not accepted. With regard to the question as to whether the assessee can be allowed to shift its claim for deduction under Section 10B to Section 10A of the Act; in our considered view the decision rendered in the case of Valiant Communications Ltd.,[2013 (1) TMI 734 - DELHI HIGH COURT] allowing the change of the alternate claim of that assessee to consider its eligibility deduction under Section 10A in place of 10B of the Act, squarely covers the issue in favour of the assessee. We find that from a perusal of the orders of the authorities below, since this issue of the assessee's alternate claim for deduction under Section 10A of the Act has not been considered by them, we are of the view that in the interest of equity and justice, this issue be examined by the Assessing Officer afresh in the light of the findings and observations thereon in the decisions of the Hon'ble High Court of Delhi in the case of Valiant Communications Ltd. (supra) - Decided in favour of assessee for statistical purposes
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Customs
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2015 (7) TMI 148
Valuation of goods - Old and used second hand imported monitors and computer parts - Held that:- Commissioner (Appeals) has already reduced the redemption fine from ₹ 3.30 Lakhs to ₹ 2.50 Lakhs and penalty from ₹ 1.30 Lakhs to ₹ 75,000/-. Ld. Advocate has brought to our notice the other decision of the Tribunal where the redemption fine was reduced to 10% and penalty to 5%. Our attention stands drawn to a latest decision of the Honble Punjab & Haryana High Courts decision in the case of B.E. Office Automation Products vide final order dated 18.11.2013, wherein the Honble High Court has held that keeping in view the element of wiping out of profit in the interface of expenditure incurred on detention and demurrage charges as also in defraying of legal expenses and interest, redemption fine of 10% of the value assessed by the department and penalty of 5% of such value would suffice. By adopting the same criteria, we reduce the redemption fine to 10% and penalty to 5% of the value of the imported goods. - Decided partly in favour of assessee.
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2015 (7) TMI 132
Demand of differential duty - Rate of duty - Maintainability of appeal - Held that:- In view of the provision of Section 130, which exempts appeal to be entertained by the High Court in relation to rate of duty, the objection as raised by the respondent as regards maintainability is liable to be sustained in view of the decision of the Supreme Court in Navin Chemicals case (1993 (9) TMI 107 - SUPREME COURT OF INDIA), which decision has been followed by this Court in Commissioner of Central Excise Vs - Vadapalani Press (2015 (1) TMI 318 - MADRAS HIGH COURT). - Appeal not maintainable - Decided against Revenue.
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2015 (7) TMI 131
Denial of refund claim - whether the Tribunal was justified in dismissing the restoration application on the premise that COD clearance is required - Held that:- Court extended the concept of dispute resolution by High-Powered Committee to amicably resolve the disputes involving State Government and their instrumentalities. The appeal in this case was filed on 25.09.2004 and therefore, prima facie the appellant is justified in saying that there was no requirement for clearance by the High Powered Committee. The Tribunal was at error in dismissing the appeal at the first instance. Even otherwise, subsequent to the decision of the Supreme Court in the case of Electronics Corporation of India Vs. UOI, reported in [2011 (2) TMI 3 - Supreme Court], the restoration application has been filed on 30.5.2011. The law as it stands on and after 17.2.2011 is that there is no requirement of getting clearance from the COD. The Tribunal had failed to note the decision of the Supreme Court and therefore, the order of the Tribunal is erroneous. - when the restoration application was filed on 30.5.2011 by the appellant, the decision of the Supreme Court in the case of Oil and Natural Gas Commission v. Collector of Central Excise reported in [1994 (1) TMI 88 - SUPREME COURT OF INDIA] does not apply to the State Government and its instrumentalities - Decided in favour of assessee.
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2015 (7) TMI 130
Clandestine removal - Warehoused goods, date of clearance thereof - Evidence - Supreme Court granted leave to withdraw the appeal filed by the assessee against the decision of high court [2015 (6) TMI 906 - KARNATAKA HIGH COURT] wherein High court dismissed the appeal for non prosecution filed against the decision of Tribunal [2004 (7) TMI 217 - CESTAT, BANGALORE].
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Corporate Laws
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2015 (7) TMI 129
Irregularities in trading in scrip - Self trade - Held that:- It is stated in para 8 of SCN that, Appellant No.1 due to his self trades and resultant monetary profit gained, has violated Regulations 3(a), (b), (c), (d) and 4(1), 4(2)(a), 4(2)(b), 4(2)(e) and 4(2)(g) of Prevention of Fraudulent and Unfair Trade Practices(PFUTP) Regulations, 2003. In reference to gain from self trades, it is not clear how Appellant No.1 gained from self trades, since sale and buy price are the same. This aspect of allegation cannot be appreciated. Moreover, how acts of self trades have resulted in violation of regulations of SEBI (PFUTP) Regulations, 2003 and SEBI Act, 1992, has not been explained. Self-trades are the acts that violate provisions of SEBI (PFUTP) Regulations, 2003 and SEBI Act, 1992, but how these Regulations and Act can be imputed to acts of self-trades of Appellant No.1 has to be explained explicitly; which is not done in SCN. It is evident, that Appellant No.1 did indulge in manipulative trades by executing 375 trades, involving 1206 shares in scrip of VIL and contributed to increase/decrease in LTP and also played crucial role in establishing new high/low in the same scrip and also executed six self-trades, two of these being executed by Appellant No.2 as broker and counter-party broker – and hence it will not in interest of justice to discharge the two Appellants from alleged violations as stated against them, due to improper handling of entire adjudication proceedings by Ld.A.O. - Case is remanded back to Respondent.
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2015 (7) TMI 128
Substitution of Land security with Personal guarantee - Security given as an interim arrangement only till final implementation of court order - Review power of CLB - Held that:- The finding of this Bench that the land in Mantankurichi Village ad- measuring 20.18 acres shall stand as security for discharge of the amount due to the 2nd respondent is upheld by the Hon`ble High Court of Karnataka. Without going into the merits of the implementation of the order of this Bench dated 11.01.2012, I am of the view that the filing of this application and seeking permission of this Bench to substitute the land with a personal guarantee is nothing but seeking to review the order of this Bench dated 11.01.2012. This Bench has no power to review of its order. - Found futile exercise & dismissed.
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Service Tax
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2015 (7) TMI 150
Waiver of pre deposit - translation service and interpretation service - whether the appellant is liable to pay service tax on translation service and interpretation service provided by them - Held that:- Decision in the case of Mayflower Languages Service Pvt. Ltd. [2013 (10) TMI 1239 (CESTAT-Bang.)] would be applicable in respect of translation service. The only difference which we noticed in this case is in the case of Mayflower Languages Service Pvt. Ltd., they have taken expert opinion as to the liability and this was considered while passing the order. In this case there is no such claim made by the appellant. Nevertheless having regard to the fact that according to the learned CA the appellants are partnership firm and after 2006 the business is nowhere functioning and appellants have a financial difficulty, they can pay an amount of ₹ 50,000/-. We consider that if the appellant deposits ₹ 50,000/- that would be sufficient for hearing the appeal. Since the appeal has been dismissed for non-compliance with the Stay Order which required the appellant to deposit the entire amount of service tax and 50% of the penalty, and in our opinion deposit of ₹ 50,000/- would be sufficient, we consider it appropriate that the matter should be remanded to the Commissioner (Appeals) to decide the appeal after the appellant deposits an amount of ₹ 50,000/- without insisting on any further pre-deposit. - Decided conditionally in favour of assessee.
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2015 (7) TMI 149
Levy of penalty - Demand of service tax - Commercial Construction Services - Held that:- Appellant is not contesting the issue of payment of duty and interest thereon even though according to the appellant they have an arguable case on merits. The contention of the appellant is that the entire amount of tax along with interest was paid as soon as pointed out, therefore, no penalty is imposable as there is no fraud, collusion or suppression with intention to evade payment of duty on the part of the appellant - appellant is a small time contractor and did not collect the service tax payable from its service recipients. The service tax was paid by the appellant, along with interest, by backward calculation from the total receipts of the contracted price. Learned AR could not produce any document from the records that service tax payable was recovered by the appellant separately in the invoices and kept the same with him. In the absence of indication of fraud, suppression etc. with intention to evade payment of duty the case laws [2014 (10) TMI 483 - MADRAS HIGH COURT] relied upon by the appellant are applicable to the facts of the present case - Decided in favour of assessee.
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2015 (7) TMI 142
Maintainability of appeal - photography service - exemption under Notification No.12/2003-ST dated 20.06.2003 - Monetary limit - Held that:- It is seen from the records that the adjudicating authority initially imposed ₹ 52,417/- as service tax with applicable interest and penalty equivalent to the demand of ₹ 52,417/-. Therefore, it is very clear from the records that the monetary limit having been fixed at ₹ 2 Lakhs, even as per the order of the Adjudicating Authority, the interest and penalty being less than ₹ 2 Lakhs, the appeal is not maintainable. - Decided against Revenue.
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2015 (7) TMI 141
Penalty u/s 78 - Technical know-how - Held that:- Appellant has discharged the service tax liability and the interest thereof before the issuance of the show-cause notice. In our view, this should have been considered as enough compliance by the appellant and provisions of Section 73(3) of the Finance Act, 1994 should have been invoked and show-cause notice need not have been issued. - appellant had given justifiable reason for non-discharge of the service tax liability on the services rendered by them. We find that the demand on the appellant is based upon the figures worked out from balance sheet which indicates that the appellant had not suppressed any information from any authorities. In our view, this is a fit case for invoking the provisions of Section 80 of the Finance Act, 1994. - Impugned order is set aside - Decided in favour of assessee.
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2015 (7) TMI 140
Demand of service tax - Manpower Recruitment or Supply Agency - Held that:- Respondents herein were charged with non-discharge of service tax liability under the category of 'Manpower Recruitment or Supply Agency' service for the work undertaken by them for one S.S. Fabricators. It is seen from the records and undisputed that S.S. Fabricators had issued work orders in favour of the respondent for fabrication of boiler column, tower assembly, inlet nozzle, outlet nozzle etc. on job work basis and paid them the amounts on the basis of work completed by them. - The first appellate authority was correct in relying upon the decision of the Tribunal in Ritesh Enterprises [2009 (10) TMI 182 - CESTAT, BANGALORE] and reversing the order of the Adjudicating Authority - No reason to interfere in the order passed by the first appellate authority. - Decided against Revenue.
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2015 (7) TMI 139
Denial of CENVAT Credit - Whether or not the appellants are entitled to CENVAT credit of service tax paid on the premium of group medi-claim and group accident policies of the employees - Held that:- CENVAT credit on group accident and group mediclaim policies for employees and the service tax paid thereon are admissible as input service and input service tax credit. - Issue of admissibility of credit is covered by the decision of the Hon'ble High Court relied upon by the learned counsel, the appellant is eligible for the benefit of credit of service tax paid on insurance premium for group mediclaim and accident. - Decision in the case of CST Bangalore Vs Team Lease Services Pvt Ltd [2014 (4) TMI 948 - KARNATAKA HIGH COURT] followed - Decided in favour of assessee.
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2015 (7) TMI 138
Penalty u/s 76 - business auxiliary services - Held that:- Even though there was no claim made earlier for application of Section 80, I find that this is a case where one of the partners even though was ignorant of law, has fulfilled the obligation even before issuance of show-cause notice and it can also be seen that the concern was a partnership firm. Having regard to facts and circumstances and the approach of the assessee, I consider that this is a fit case for invocation of provisions of Section 80 of Finance Act 1994 and accordingly, the penalties imposed on the appellants are waived by invoking the provisions of Section 80 of Finance Act 1994. - Decided in favour of assessee.
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Central Excise
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2015 (7) TMI 146
Clandestine removal of goods - Penalty u/s 11AC - Held that:- Duty demand for the period from April ’05 to Aug. ’06 is in respect MS Ingots which are manufactured by the appellant. The raw material for the MS Ingots is Sponge Iron, Pig Iron, Steel Scrap and Ferro Alloys. The MS Ingots are manufactured by using two induction furnaces each of 6 MT capacity manufactured by M/s. Inductotherm. The allegation of un-accounted manufacture and clandestine removal of 21082 MT MS Ingots during period of April ’05 to Aug. ’06 is based on the assumption that power consumption per MT of MS Ingots is 830 units of electricity which according to the Department, is based on Technical Literature of M/s. Inductotherm. - It is well settled law that when duty demand against an assessee is based on opinion given by an expert and his cross-examination is requested, it has to be allowed. As opinion given by the technical expert is only an opinion evidence and its evidentiary value has to be ascertained by permitting his cross-examination. Similarly documents recovered from the premises of M/s. Manu Steels which are one of the main corroborative, evidence are in the nature of third party documents, and, therefore, in view of Apex Court’s judgment in the case of Kishanchand Chellaram v. CIT, reported in [1980 (9) TMI 3 - SUPREME Court], the cross-examination of Sh. S.K. Pansari from whose premises these documents had been recovered was necessary, more so when the same had been requested and as such the denial of his cross-examination has resulted for denial of natural justice - Matter remanded back - Decided in favour of assessee.
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2015 (7) TMI 137
Waiver of pre deposit - quantum of amount to be deposited - Held that:- The circular dated 16.09.2014 was issued on the same day when the impugned order was passed. It becomes operative from the date it was issued and, accordingly, the appellant was only required to pay 10% of the duty or penalty in pursuance to the decision for filing an appeal against the order of the Commissioner (Appeal). We are, prima face, of the opinion that in view of the circular dated 16.09.2014, the appellant was required to deposit only 10% of the amount of duty i.e. ₹ 1,72,17,199/-. Since the appellant has already deposited ₹ 11,00,000/-, the differential amount is required to be deposited by him. - Decided partly in favour of assessee.
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2015 (7) TMI 136
Denial of rebate claim on export of goods - whether payment of CESS would constitute duty and eligible for refund claim - Automobile Cess, Education Cess on Automobile Cess and Secondary and Higher Education Cess (for short SHE Cess) on Automobile Cess - Rule 18 of central excise Rules, 2002, read with notification No.19/04 -CE(NT) dated 06.09.2004 - Held that:- For purpose of levy of Automobile Cess, "value" as defined in section 9(1) of Industries (Development and Regulation) Act, 1951 would not apply insofar as it applies to the valuation of goods to be made for the purposes of computation of Automobile Cess, Education Cess on Automobile Cess, SHE Cess on Automobile Cess to be levied and calculated as if it was excise duty as prescribed under Rule 3 of Automobile Cess Rules, 1984 - Explanation-I of the Notification 19/2004 acquires significance, whereunder the word "duty" has been defined for the purposes of said Notification to mean duties of excise collected under the enactments enumerated under Explanation-I. As to whether Automobile Cess, Education Cess on Automobile Cess and SHE Cess on Automobile Cess levied pursuant to levy of excise duty and paid on the goods exported can also be construed as duty and entitled to rebate or the authorities were right in rejecting the rebate claimed by petitioner on the ground that it is not a duty specified in Explanation-I to the notification or Cess levied and paid falls outside the purview of exemption Notification is the issue in question. It would indicate that the phrase "duties of excise" and "duty of excise" were used interchangeably namely sometimes in plural and sometimes in singular i.e., prior to 12.05.2000. However, said phraseology came to be substituted by new phrase viz., 'CENVAT' with effect from 12.05.2000. In order to overcome the difficulty of replacing these words in entire Central Excise Act, 1944, Section 2A was introduced with effect from 12.05.2000 by Finance Act, 10/2000 whereunder expression "duty", "duties", "duty of excise" and "duties of excise" was to be construed to include a reference to "Central Value Added Tax (CENVAT)". Thus, intention of the legislature is clear and an unambiguous. An exporter in order to claim the benefit flowing from the notification No.19/04 -CE (NT) dated 06.09.2004 will have to establish that the rebate claimed is in respect of the "duty" collected under the enactments enumerated thereunder and in the instant case, petitioner has clearly established that such duty has been levied and collected under the Central Excise Act, 1944 together with Cess. In view of the discussion with regard to Rule 3 of Automobile Cess Rules, 1984 it has to be necessarily held that provisions of Central Excise Act relating to levy and collection of duty as applicable would also be applicable to Cess levied under the Automobile Cess Rules, 1984 which came to be levied on the goods exported by petitioner by virtue of notification No.923(E) dated 28.12.1983 which came to be superseded by SO No.247(E) dated 22.03.1990 and therefore it has be necessarily held that Automobile Cess collected is "duty of excise" in terms of the provisions of the Central Excise Act, 1944 and thereby, Automobile Cess, Education Cess on Automobile Cess and SHE Cess on Automobile Cess is a "duty of excise" and is part of the duties paid by the petitioner and thereby petitioner is entitled to the rebate. - impugned order No.401- 404/2013 dated 20.05.2013 - Annexure - Z passed by fifth respondent would not be sustainable and petitioner would be entitled to the relief sought for. - Decided in favour of assessee.
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2015 (7) TMI 135
Constitutional validity of Rule 5 of the Hot-Rolling Steel Mills Annual Capacity Determination Rules, 1997 - Whether Rule 5 of the Hot-Rolling Steel Mills Annual Capacity Determination Rules, 1997 would apply to a case where annual capacity of production has been redetermined in terms of Rule 4(2) on account of change in parameters even though re- determined annual capacity is less than the annual production for the financial year 1996-97 - Held that:- Writ Petition has been filed by the petitioner in the High Court challenging the constitutional validity of Rule 5 of the Hot-Rolling Steel Mills Annual Capacity Determination Rules, 1997. It is obvious that High Court shall consider that Writ Petition appropriately in accordance with law. If the petitioner is aggrieved by the order that may be passed by the High Court in that Writ petition, it may pursue appropriate remedy in challenging that order. - Decided against assessee.
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2015 (7) TMI 134
Valuation of goods - Inclusion of sales tax collected in the assessable value of goods - Whether the assessee was entitled to claim deduction under Section 4(4)(d)(ii) of the Act in respect of full amount of sales tax payable at the rate of 2% - Supreme Court dismissed the review petition filed by the assessee against the decision [2014 (3) TMI 42 - SUPREME COURT], whrein it was held that Unless the sales tax is actually paid to the Sales Tax Department of the State Government, no benefit towards excise duty can be given under the concept of “transaction value” under Section 4(4)(d), for it is not excludible. As is seen from the facts, 25% of the sales tax collected has been paid to the State exchequer by way of deposit. The rest of the amount has been retained by the assessee. That has to be treated as the price of the goods under the basic fundamental conception of “transaction value” as substituted with effect from 1.7.2000. Therefore, the assessee is bound to pay the excise duty on the said sum after the amended provision had brought on the statute book.
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2015 (7) TMI 133
Whether conversion of motor spirit into motor spirit power and of HSD into HSD turbojet by mixing small quantities of multifunctional additives would amount to manufacture or not - Supreme Court permitted the revenue to withdraw the appeal filed by them against the decision of Tribunal [2014 (3) TMI 828 - CESTAT NEW DELHI], wherein Tribunal held that mixing of polymers and additives to base bitumen does not result in manufacture of a new marketable commodity - Revenue has not been able to show any other contrary decision on the issue. As such, by following the earlier decision, we set aside the impugned order, confirming demand against the oil company and imposing penalties on various officials of the oil company.
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