TMI Tax Updates - e-Newsletter
August 20, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Clarifications on the Income Declaration Scheme, 2016 - Circular
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Income Tax:
Income Declaration Scheme (Third Amendment) Rules, 2016 - Notification
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Income Tax:
TDS liability on payments made out of accumulated balances in the EPF a/c - it cannot be said that there was no mechanism prescribed for deduction of TDS in respect of payment of accumulated balance due to employees. However, it is true that with the insertion of section 192A from 1.6.2015, the position has become more clear in respect of Employees Provident Fund Scheme, 1952. - AT
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Income Tax:
As the assessee being eligible u/s 80IAB for a particular block of years it will not make any impact to the Revenue if the deduction u/s 80IAB is allowed for prior period water charges also when the raw water charges in the year under appeal has not been questioned by the AO - AT
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Income Tax:
Determine the character of subsidy in hands of recipient - Having gone through the preamble of the “Incentive Scheme 2001 for Economic Development of Kutch District” come to the conclusion that the incentive given in the present case to the assessee was capital in nature. - AT
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Income Tax:
Addition u/s 40A(3) - cash payment in excess of ₹ 20,000/- - Recipients are illiterate and does not have permanent place of Business and also vendors and Hawkers deliver the sand, jelly at the working sites of assessee during odd hours in remote areas - no addition - AT
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Income Tax:
Cash expenditure exceeding ₹ 20,000/- - the paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions and section does not eliminate considerations of business expediencies - AT
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Income Tax:
The question of addition u/s 69C shall arise only if it is shown that the assessee has incurred any expenditure outside the books of account. In the instant case, we notice that the assessing officer has not brought any material on record to show that the assessee has made any payment through illegal sources to cover up the amount of under invoicing - AT
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Income Tax:
Disallowance of commission paid to agents - There are some holes in this investigation. The first being the statements recorded from the 3 lady agents are stereo typed and the languages of all three are exactly similar. The Revenue has not brought out whether the agents who denied, has done any service to the assessee had filed their return of income, if filed, whether they have declared the commission as their income and taken the tax credit - AT
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Customs:
Deemed export - TED refund - Supply of intermediate goods by the DTA unit to 100% EOU unit - When there is an exemption, then, this refund claim was rightly disallowed - HC
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Customs:
Refund - duty paid on export of goods - whether refund claim can be lodged by an assessee without contesting the original assessments made - original authority directed to decide the issue of refund on merit and also to vacate the protest lodged by the Appellant - AT
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Service Tax:
On the contract for construction of BPL houses, as awarded by the Board to the petitioners, no service tax is leviable w.e.f. 1.7.2012 - The Board is not entitled to pass on the burden of service tax payable on its part, if the tax is leviable, upon the contractors. - HC
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Service Tax:
Cenvat Credit - eligible input services - recovery of common shared expenses from the group company - Credit cannot be denied at the service recipients end, alleging that no service has been provided - AT
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Service Tax:
Claim of refund of service tax on bad debts recovered - period of limitation - when there is no levy in accordance with the provisions of service tax law the claim for refund cannot be denied on the ground of limitation in terms of Section 11(B) of Central Excise Act. - AT
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Service Tax:
Service tax liability in case of hiring of goods without the transfer of the right to use goods - Circular
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Central Excise:
Export of goods without payment of duty under letter of undertaking - failure to submit a proof of export within a period of six months - No provision is pointed out which lays down the consequences of imposition of penalty and interest on non submission of proof of export. - HC
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Central Excise:
Cenvat credit - service tax paid on rent-a-cab service - the appellant is not eligible to avail cenvat credit for the period subsequent to 1.4.2011. The said amount is to be recovered from the appellant along with interest. - AT
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Central Excise:
Cenvat credit - job work - input services used in the manufacture of job worked goods exempted under Notification No.214/86-CE is admissible. - AT
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VAT:
Levy of service tax or sales tax - legislative competence - The agreement between Subway and its franchisees is not a sale, but is in fact a bare permission to use. It is, therefore, subject only to service tax. - HC
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VAT:
Jurisdiction for surprise inspection or record statement or seize records - Section 48 of the Tamil Nadu Value Added Tax Act, 2006 - there is delegation of power, this Court is not inclined to quash the inspection report or the statement, at this juncture - HC
Articles
Notifications
Central Excise-
43/2016 - dated
18-8-2016
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CE (NT)
Giving the powers of Chief Commissioner to Principal Commissioner who have been given the additional charge vide office orders No. 79/2016 dated 14.07.2016 and 86/2016 dated 26.07.2016
Customs-
45/2016 - dated
17-8-2016
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ADD
Seeks to levy provisional anti-dumping duty on Cold -rolled flat products of alloy or non-alloy steel originating in or exported from China, Japan, Korea RP and Ukraine
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112/2016 - dated
18-8-2016
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Cus (NT)
Rate of exchange of conversion of the foreign currency with effect from 19th Aug., 2016
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111/2016 - dated
18-8-2016
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Cus (NT)
Giving the powers of Chief Commissioner to Principal Commissioner who have been given the additional charge vide office orders No. 79/2016 dated 14.07.2016 and 86/2016 dated 26.07.2016
Income Tax-
74/2016 - dated
17-8-2016
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IT
Income Declaration Scheme (Third Amendment) Rules, 2016
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73/2016 - dated
17-8-2016
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies Uttarakhand Environment Protection and Pollution Control Board, a body constituted by Government of Uttarakhand, in respect of the following specified income arising to that Board
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72/2016 - dated
17-8-2016
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies Tamil Nadu Electricity Regulatory Commission, a body constituted by Government of Tamil Nadu, in respect of the following specified income arising to that Commission
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71/2016 - dated
17-8-2016
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IT
Section 10(46) of the Income-tax Act, 1961 – Central Government notifies National Skill Development Corporation, a body constituted by Central Government, in respect of the following specified income arising to that Corporation
Service Tax-
37/2016 - dated
18-8-2016
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ST
Giving the powers of Chief Commissioner to Principal Commissioner who have been given the additional charge vide office orders No. 79/2016 dated 14.07.2016 and 86/2016 dated 26.07.2016
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (8) TMI 697
TDS liability on payments made out of accumulated balances in the EPF a/c - AO estimated that 50% of the withdrawals were made before rendering five years of continuous service and, therefore, in view of Rule 8(1) the said withdrawals were liable to TDS in terms of Rule 10 of Part A of Fourth Schedule to the Income-tax Act - assessee contended withdrawals from EPF a/c under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 are covered u/s 10(11) of the Income-tax Act and not under the Fourth Schedule to the Income-tax Act - Held that:- Inadvertently amendment in section 9 of Employees Provident Fund and Miscellaneous Provisions Act, 1952 could not be made replacing ‘1922’ by ‘1961’. From this plea it is evident that ld. counsel wants the Tribunal to read something in the Act which is not there. Be that as it may, when Fourth Schedule has been incorporated in the Income-tax Act, 1961, dealing with cases of recognized provident fund, the Tribunal cannot go beyond that. The submission of ld. counsel primarily revolves around a case of casus omisus but the court cannot fill the gap and read ‘1961’ instead of ‘1922’ in the Employees Provident Fund and Miscellaneous Provisions Act, 1952, particularly when the said provision is not under consideration before us. Be that as it may, Tribunal is not empowered with such powers. Therefore, we hold that the provisions of section 10(11) are not applicable to the present proceedings but Schedule IV to the Income-tax Act is applicable, this being a case of recognized provident fund. We are also in agreement with ld. CIT(DR) that Rule 69 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 dealing with circumstances in which accumulation in the funds are payable to a member are much broader than Rule 8 of Part A of Fourth Schedule of the Income Tax Act and in no way repugnant to Rule 8,9 and 10 of Part A of Schedule IV. Rule 69 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 only specifies the circumstances in which the accumulation in the funds are payable to a member but that does not impinge upon the deduction of tax as per Rule 10 of Part A of Schedule IV to Income Tax Act. Rule 69 of the Employees Provident Fund scheme nowhere prohibits deduction of TDS from the accumulated balances to the members of the scheme. Therefore, there is no repugnancy between Rule 69 of EPF Scheme and Rules 8,9 and 10 of part A of Schedule IV. Considering the argument regarding there being no mechanism for deduction of TDS being prescribed in the Act and only after the introduction of section 192A w.e.f. 1.6.2015, tax deduction scheme has been prescribed. The submission of ld. counsel is that as far as section 192(4) is concerned, the same deals only with specifically recognized provident funds which are private in nature and for Employees Provident Fund Scheme 1952, the provisions for the first time have been made in section 192A. We do not find much substance in this plea of ld. counsel because as per Rule 10 of the Part A of Schedule IV, deduction is required to be made from the amount payable under Rule 9 as per provisions of Chapter XVII B by treating accumulated balance being income chargeable under the head “salary”. Whenever assessee fails to furnish the necessary information as required by deductor then the TDS is to be made at the maximum marginal rate and that is how the AO had made the TDS at maximum marginal rate. Therefore, it cannot be said that there was no mechanism prescribed for deduction of TDS in respect of payment of accumulated balance due to employees. However, it is true that with the insertion of section 192A from 1.6.2015, the position has become more clear in respect of Employees Provident Fund Scheme, 1952. As regarding computation of amount deduction of tax. In this regard we find considerable force in the submission of ld. counsel for the assessee that AO was not justified in estimating 50% of the withdrawals as being of employees who had rendered less than five years of continuous service thereby coming within the ambit of Rule 9 & 10 of Part A of Schedule IV of the Income-tax Act. We, therefore, set aside the order of ld. CIT(A) and restore the matter to the file of AO with a direction that assessee will furnish the required details before the AO in respect of withdrawals made by employees within 5 years of rendering continuous service with his employer. The AO will also take into consideration the effect of decision of Hon’ble Supreme court in the case of Hindustan Coca Cola [2007 (8) TMI 12 - SUPREME COURT OF INDIA ]. Accordingly, if employee has included the accumulated balance in its total income, then the same is to be excluded while making the computation. Further, he will take guidance from the provisions of section 192A and, accordingly, no deduction should be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than ₹ 30,000/-. The short deduction is to be computed @ 10% in all the cases where the PAN number is furnished by assessee in respect of the employees from whose income tax was to be deducted. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 696
Addition u/s.41 - Held that:- The impugned creditors were having regular business transactions in subsequent years also and the actual payments were made to these parties in the subsequent years and the very foundation called for an addition u/s 41(1) of the Act gets demolished if an assessee proves that the impugned liabilities were paid off. From going through the observation of ld. CIT(A) and also the fact that the impugned creditors were paid in subsequent years, we find no reason to interfere with the order of ld. CIT(A), we uphold the same. This ground of Revenue is dismissed. Depreciation on application software license @ 60% - Held that:- It is almost a settled issue that software application which are having validity for long term period are basically system software on which computer hardware runs and it is impossible to use computer without having such software installed on it and, therefore, such licensed software are subject to depreciation @ 60% and ld. CIT(A) has done so. We find no reason to interfere with the order of ld. CIT(A) on this issue. Deduction u/s.80IAB - income earned from operation and maintenance of SEZ - Held that:- From going through the proviso (2) of section 80IAB of the Act which says that if the work of operation and maintenance of SEZ is transferred from one developer to another then the deduction allowable in sub-sec.(1) of sec.80IAB will be allowed to transferee developer for the remaining period of the remaining of consecutive 10 years. This proviso gives a very clear picture that when the transferee is eligible for deduction u/s 80IAB for the income from operation and maintenance of SEZ then certainly transferor i.e. developer is eligible for deduction u/s 80IAB from operation and maintenance. Further from going through the letter issued by Government of India Ministry of Commerce & Industries dated 21st June, 2006 to the assessee for setting up of a sector specific Special Economic Zone for Pharmaceuticals at Ahmedabad, we find that in clause (ii) under the main clause (III) referring to general condition it reads that operation and maintenance of the facilities will be met as per the standard in the specific manner and proposition of the user. We are of the view that assessee being a developer of SEZ is eligible for deduction u/s 80IAB for income earned from operation and maintenance of SEZ. In the result ground no.3(a) of Revenue is dismissed. Deduction u/s 80IAB on the income received from sale of scrap and professional fees - Held that:- On the basis of submissions made by ld. AR we understand that fixation of water charges was approved in the Developer Committee meeting held on 22nd April, 2009 in which a specific agenda relating to fixation of water charges was taken up for consideration for the first time and the charges for use of water were approved and fixed at ₹ 25 kl effective from the beginning of SEZ. On the basis of this decision necessary effect was given in books of account for F.Y.2008-09 and as far as F.Y.2007-08 was concerned, the income relating to water charges was impossible to be incorporated in the account of F.Y. 2007-08 as they were already closed and finalised and, therefore, this amount of ₹ 23,09,372/- was shown as a prior period income from water charges. In the given facts and circumstances, we are of the view that as the assessee being eligible u/s 80IAB of the Act for a particular block of years it will not make any impact to the Revenue if the deduction u/s 80IAB of the Act is allowed for prior period water charges also when the raw water charges in the year under appeal has not been questioned by ld. Assessing Officer for being eligible for deduction u/s 80IAB of the Act. We, therefore, find no reason to interfere with the order of ld. CIT(A) on this issue. - Decided against revenue.
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2016 (8) TMI 695
Determine the character of subsidy in hands of recipient - whether Revenue or capital - Held that:- The subsidy in the present case under the incentive scheme 2001 for economic development of Kutch District was aimed at making the economic environment of Kutch District live as the economic activity in the District of Kutch came to a stand still on account of the devastating earth quack in the state on 26th January 2001 and the aim was to create new employment opportunities if new investment takes place. Having gone through the preamble of the “Incentive Scheme 2001 for Economic Development of Kutch District” come to the conclusion that the incentive given in the present case to the assessee was capital in nature. We thus while setting aside the orders of the authorities below in this regard direct the Assessing Officer to allow the claim of assessee.
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2016 (8) TMI 694
Addition u/s 40A(3) - payments to the hawkers and vendors - Held that:- The payments to the hawkers and vendors by cash by the assessee firm other than account payee cheques was never doubted by the Revenue. The assessee firm is following prevailing business practice from earlier years. Further, provisions of Sec. 40A(3) of the Act must not be read in isolation or exclusion of Rule 6DD of Income Tax Rules, 1962. The section must be read alongwith Rule and on reading together, it is very clear that provisions are not intended to restrict the business activities. The ld. Assessing Officer cannot restrict the Business of the assessee firm on application of the Rule 6DD, further provisions of Sec. 40A(3) of the Act empowers the ld. Assessing Officer to disallow deduction claimed as expenditure were payments are not by account payee cheque/draft. The ld. Assessing Officer should analysis the payments either by Crossed Cheque or Bank Draft and ascertain whether the payments are genuine considering business expediency, genuineness and bonafide peculiar transactions of the business. The assessee firm makes cash payments in the circumstances as per the intention of the vendors/supplier who transact on cash basis and no credit facility is available in the remote villages. So, considering the apparent facts and nature of business of the assessee being laying of roads, building bridges and culverts in the remote village and purchase of sand, jelly from the local vendors and lorry brokers who are illiterate and does not have permanent place of Business and also vendors and Hawkers deliver the sand, jelly at the working sites of assessee during odd hours in remote areas and we support our opinion with the decision of Anupam Tele Services vs. ITO (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and we set aside the order of the Commissioner of Income Tax (Appeals) and delete the addition made by the ld. Assessing Officer on this ground. Disallowance being expenses for tea, coffee, freight charges and diesel expenditure - Held that:- The fact that nature of expenditure being tea, coffee, freight charges and diesel expenditure, the assessee has claimed these expenditure incurred wholly and exclusively for the purpose of activities of the business and the findings of the ld. Assessing Officer they are not supported with vouchers and doubted the genuineness and disbelieved the transactions. The ld.CIT(A) has confirmed the findings of the ld. Assessing Officer. Considering the apparent facts and material, we are of the opinion that the consent cannot be a reasons for sustaining the addition in exceptional circumstances of the working conditions of the firm and the nature of expenditure incurred. Further their shall not be laxity on the part of the assessee firm in maintenance of vouchers for due compliance of Income Tax provisions. we found that it would be reasonable to restrict the disallowance to 50% due to external circumstances of works and we direct the ld. Assessing Officer to restrict the disallowance of said expenses to 50% only and the ground of the assessee is partly allowed. Disallowance of expenses on account of labour charges, jelly purchase, sand purchase and gravel purchase and vouchers are self made could not be verified - Held that:- The fact that labour charges, jelly purchase, sand purchase and gravel purchase incurred wholly and exclusively for the purpose. Since, the vouchers are self made the ld. Assessing Officer has doubted the transactions and made disallowance. The ld.CIT(A) has confirmed the findings of the ld. Assessing Officer. Considering the facts and nature of expenditure and the laxity on the part of the assessee firm on non maintenance of record and compliance of Income Tax provisions, we found it Reasonable to restrict the disallowance at 50% due to Business activities at remote areas as discussed. We direct the ld. Assessing Officer to restrict the disallowance to 50% only and the ground of the assessee is partly allowed.
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2016 (8) TMI 693
Disallowance u/s.40A(3) - AR’s submission that as during relevant assessment year, the provisions of the Act were only attracted when each payment exceeded a sum of ₹ 20,000/- and the Act did not stipulate about the clubbing of payments made in the entire day for determining the disallowance - Held that:- fore us, Revenue has not placed any material on record to demonstrate that the amendment made to sub-section(3) to section 40A by Finance Act, 2008, would be applicable to AY 2008-09. Further, there is no finding of lower authorities as to whether each of the payment made by the assessee exceeded ₹ 20,000/- or the aggregate payment in the year exceeded ₹ 20,000/-. Apart from aforesaid, we find that the Hon’ble Jurisdictional High Court in the case of Anupam Tele Services vs. ITO reported at (2014 (2) TMI 30 - GUJARAT HIGH COURT ) has held that the paramount consideration of section 40A(3) is to curb and reduce the possibilities of black money transactions and section does not eliminate considerations of business expediencies. In view of the aforesaid facts, we are of the view that the issue needs to be reexamined at the end of ld.CIT(A). We, therefore, restore the issue back to the file of ld.CIT(A) to decide the issue afresh - Decided in favour of assessee for statistical purposes. Disallowance u/s.40(a)(ia) - non deduction of tds on payment of labour expenses, crane hire charges, interest payment and audit fee - Held that:- here is no finding of the lower authorities on the issue as to whether the payments made by the assessee to the payees have been being considered by them as their income. In view of the aforesaid facts, we are of the view that the issue needs to be restored back to the file of ld.CIT(A) to decide the issue afresh in the light of our aforesaid discussion, the decision of the Coordinate Bench in the case of Rajeev Agarwal (2014 (6) TMI 79 - ITAT AGRA ) and in accordance with law. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 692
Rejection of books of accounts - estimation of gross profit consequent to the same - Held that:- The are of the view that there is merit in the contentions of the assessee that the rejection of books of accounts was not justified. Accordingly, we set aside the order of Ld CIT(A) on this issue. Since we have set aside the orders of tax authorities passed in respect of rejection of books, the consequent estimate of gross profit and addition thereof are also liable to be deleted. Further, the AO has modified only Gross profit and he has accepted the expenses claimed by the assessee, meaning thereby he did not find any defects in the books. Accordingly we direct the AO accept book results. Addition made u/s 69C - Held that:- We notice that the assessing officer has fully relied upon the show cause notice issued by the Customs officials to make this addition. The admitted fact is that the assessing officer did not make any independent enquiry to confirm the allegation of under invoicing of invoices. The question of addition u/s 69C of the Act shall arise only if it is shown that the assessee has incurred any expenditure outside the books of account. In the instant case, we notice that the assessing officer has not brought any material on record to show that the assessee has made any payment through illegal sources to cover up the amount of under invoicing. Thus the assessing officer has entertained belief that the assessee has made the payments through illegal channels, only on the basis of presumptions. In our view the presumptions so entertained would not satisfy the condition prescribed in sec. 69C, viz., the assessee incurred any expenditure, source of which was not explained.In view of the foregoing discussions, we are of the view that the Ld CIT(A) was not justified in confirming the addition made u/s 69C of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Deduction claimed u/s 80IB - A.R contended that the interest income should be netted off against the interest expenditure and accordingly the deduciton u/s 80IB should be worked out - Held that:- The netting off sought by the assessee could be given, if it is shown that there is nexus between the borrowed funds and loans given/deposits made. Since this factual aspect requires verification, we set aside this issue to the file of the AO for examining the same. Accordingly, the order passed by Ld CIT(A) stands modified.
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2016 (8) TMI 691
Disallowance of commission paid to agents - Held that:- The assessee had used the services of 15 agents and only 3 have declined to have made any services to the assessee. In the given case, there are certain issues such as there exist only oral agreements, the agents are from different field of activities and the customers are denying the presence of agents in the transaction. At the same time, the Revenue had investigated this issue independently without involving the assessee but it has carried out the investigation partially. There are some holes in this investigation. The first being the statements recorded from the 3 lady agents are stereo typed and the languages of all three are exactly similar. The Revenue has not brought out whether the agents who denied, has done any service to the assessee had filed their return of income, if filed, whether they have declared the commission as their income and taken the tax credit. In the absence of such details the case is peculiar and the assessee had submitted the details of the agents, who had agreed that they had provided services, the assessee must be given the advantage, even though there is no written agreement. Accordingly, we allow the commission to the extent of those agents who had confirmed before the Assessing Officer to have provided the service to the assessee and at the same time, we cannot overlook the point of view of the Department that the agents have declined to have any business connection with the assessee. Accordingly, we direct the Assessing Officer to allow the commission to the extent of 12 agents and uphold the disallowance of commission to the extent of 3 agents, who denied to have done any services to the assessee. - Decided partly in favour of assessee.
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2016 (8) TMI 690
Referring the matter to the Valuation Officer under section 55A - reopening of assessment - Held that:- There was no finding of the Assessing Officer that there was variation in the valuation report given by the government approved valuer. The original assessment order was passed. Thereafter, the case was reopened and while reopening the assessment, the Assessing Officer observed that since there were discrepancies in the valuation report of the government approved valuer, the matter was referred to the Valuation Cell. Since the matter was getting time barred, on the basis of the report of Asst. Valuation Officer, the Assessing Officer determined capital gain and added the same to the total income of the assessee. However, taking into account the observations of this court in the case of Commissioner of Income-tax v. Gauranginiben S. Shodhan Indl. (supra), the subsequent ascertainment of fair market value by the Asstt. Valuation Officer will not apply in the present case since the valuation of the property as per the valuation report of the government approved valuer is on the higher side. Had the valuation of the Asst. Valuation Officer been on the lower side, the matter would have been standing on a different foot. In that view of the matter, the authority ought not to have referred the matter to the Valuation Officer by applying provisions of section 55 A of the Income-tax Act by reopening of the assessment. Thus, in view of the decision of this court in Commissioner of Income-tax v. Gauranginiben S. Shodhan Indl. (2014 (2) TMI 78 - GUJARAT HIGH COURT ) and keeping in mind the above facts, the reopening of the assessment is not permissible. Therefore, the issues are required to be answered in favour of the assessee and against the revenue.
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2016 (8) TMI 689
FMV as on 01/04/1981 as per the valuation Report of a registered valuer - assessee had calculated indexed cost of acquisition as per the relevant cost inflation index - AO had adopted the cost of acquisition based on the Wealth tax value mentioned in the probate application - Held that:- For computing the LTCG provisions of section 55 of the Act have to be considered and not the Rule 1D, as envisageed by the Wealth tax Act. See Smt. B. Subhadra. Versus Income-Tax Officer [2004 (7) TMI 308 - ITAT HYDERABAD-B ]. Wealth Tax cannot be imported for determining the FMV for LTCG purposes. - Decided in favour of assessee. Exemption u/s. 54F - Held that:- We find that the assessee had invested the entire consideration received on sale of the office premises for purchasing the plot of land and construction of a residential unit. The AO has not contravened both the facts-his only objection was that the unit was not completed within the period of three years of the sale. Here, we would like to refer to the case of Smt. Rajneet Sandhu (2010 (7) TMI 806 - ITAT CHANDIGARH ). In that matter, the Tribunal has held that there was no merit in the plea of Revenue authority that exemption u/s. 54F of the Act can be denied to an assessee on the ground that construction of the house had not been completed. It was further held that the requirement of section 54/54F was that the assessee should have either purchased a residential house being a new asset within a stipulated period or should have constructed a residential unit within 3 years from the date of transfer.
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2016 (8) TMI 688
Interest u/s 244A - granting lesser amount of interest u/s 244A by the AO while computing refund arising as a result of passing impugned order for giving effect to CIT(A)’s order - Held that:- Where the amount of tax demanded is paid by the assessee then it shall first be adjusted towards interest payable and balance if any whatever tax payable. Now, if we go through section 244A, we find that no specific provision has been brought on the statute with respect to adjustment of refund issued earlier for computing the amount of interest payable by the revenue to the assessee on the amount of refund due to the assessee. Thus, the law is silent on this issue. Under these circumstances, fairness and justice remands that same principle should be applied while granting the refund as has been applied while collecting amount of tax. The revenue is not expected to follow double standards while dealing with the tax payers. The fundamental principle of fiscal legislation in any civilized society should be that the state should treat its citizens (i.e. tax payers in this case) with the same respect, honesty and fairness as it expects from its citizens.It is further noted by us that assessee is not asking for payment for interest on interest. It is simply requesting for proper method of adjustment of refund and for following the same method which was followed by the department while making collection of taxes. Whatever money has been received by the department, it ought to be refunded ex aequo et bono. It is a Latin phrase which means ‘what is just and fair’ or ‘according to equity and good conscience’. Something to be decided ex aequo et bono is something that is to be decided by principles of what is fair and just. A decision-maker who is authorized to decide ex aequo et bono is not bound by legal rules but may take account of what is just and fair. Thus, if we decide the issue before us ex aequo et bono, then it would be decided by the principles of what is fair and just and not necessarily as per strict rule of law. Thus, since the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for refund of taxes, especially when no contrary provision has been provided. Under these circumstances and aforesaid discussion, we find that the judicial proprietary demands that order of the Tribunal of earlier years must be followed and therefore we direct the AO to re-compute the amount of interest u/s 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Thus, with these directions, the appeal of the assessee is allowed.
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2016 (8) TMI 687
Allowance of professional expenses - Held that:- From relevant operative part 3.1 of the Assessing Officer, we observe that the Assessing Officer made this addition by the only alleging that travelling expenses claimed by the assessed which were not reimbursed to him by the said companies cannot be allowed and the AO treated the same of personal in nature and not linked to the assessee’s professional receipt. We are not in agreement with this conclusion because when the assessee is offering to tax entire professional receipt from consultancy profession amounting more then ₹ 1.54 crores and if some amount of travelling expenses which could not be reimbursed from the clients and which is not expressly linked with his personal use or used by the family members then the same deserves to be allowed as professional expenses. Thus, we inclined to demolish conclusion to the authority below and direct the AO to allow the same as professional expenses. Disallowance for personal uses of telephone, car maintenance and car lease - Held that:- The assessee could not show us, the assessee was having any other telephone or car exclusively for his personal use. Therefore, the element of personal use cannot be ruled out and part disallowance in this regard is obvious. However, we made pointed out that the 1/3rd amount was disallowed is very high after careful consideration and entire facts and circumstances of the case, we are of the view that the 15% of the claimed expenditure would be justified for making disallowance in this regard for the use of telephone and car by the assessee for his personal and family purposes. Therefore, the AO is directed to reduce the disallowance to the 15% of the total claim of the assessee on telephone, car maintenance and car lease. Accordingly, this issue is partly allowed in favour of the assessee. Business promotion expenses disallowed - Held that:- CIT(A) has noted that it is possible that he may be using these facilities, further, his professional interest but in absence of details to link these expenses with the profession of the assessee this amount is disallowed. The CIT(A) has not doubted the quantum of amount incurred by assessed but on the possibility of personal use this claim has been dismissed which is not a proper and justified approach of a tax authority. In totality of facts and circumstances of the case, we satisfied that when on one hand the assessee offering ₹ 1.54 crore income from consultancy business and if against said huge amount the assessed is claiming 1,60,194/- as business promotion expenses which was incurred for meetings various clients then the same cannot be disallowed on the basis of surmises and conjectures without bringing out any allegation or element or fact of personal use. Consequently we direct the AO to allow the same as business and promotion expenses of the assessee
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2016 (8) TMI 686
Assessment u/s 153C - Held that:- The block period, in view of first proviso to section 153C, had to be determined for the purposes of second proviso to section 153A from the date when the books of a/c were handed over to the AO of person other than the searched person. Respectfully following the aforementioned decision of Hon’ble Delhi High Court in the case of RRJ Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT )we hold that assessment for AY 2007-08 was outside the ambit of the block period and the AO had no jurisdiction to make assessment of the assessee’s income for that year. Accordingly, assesse’s appeal for AY 2007-08 is allowed. - Decided in favour of assessee. Now coming to the appeals for AY 2008-09 and 2009-10, where the regular assessments were completed u/s 143(3) on 30.12.2010 and 30.12.2011 respectively u/s 143(3), the plea of ld. counsel for the assessee is that they were completed assessments and, therefore, the assessee’s total income could be tinkered with only when some incriminating material was found during the course of search. He referred to the assessment order passed by the AO and pointed out that both the additions made by AO have no relation with the seized material and therefore, additions could not be made to the income assessed under the regular assessment. We have considered the submissions of both the parties and have perused the record of the case. We find that as far as addition u/s 14A made for both the assessment years is concerned, the same has no relation with the seized material and since this was a case of completed assessment on the date of construed search, therefore, the addition could not be made.
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2016 (8) TMI 685
Penalty levied by the AO u/s 271AAA - Held that:- In the present case, it is an admitted fact that excess stock of gold & diamond amounting to ₹ 1,24,40,928/- and excess cash of ₹ 54,81,173/- were found which the assessee offered for taxation during the course of search in the statement recorded u/s 132(4) of the Act. The AO levied the penalty u/s 271AAA of the Act for the reason that the manner in which the undisclosed income was derived was not substantiated. In the present case, it is noticed from the statements of the partner of the assessee firm recorded u/s 132(4) of the Act during the course of search that no specific query was raised relating to the manner in which the undisclosed income was derived by the assessee. On the contrary, the assessee explained that the earning of undisclosed income had been generated from the sale of unaccounted/undisclosed jewellery. The assessee was engaged in bullion trading and gold & diamond jewellery, therefore, the source of the unaccounted excess cash, gold & diamond jewellery was the business activity of the assessee. In the present case, no specific query was raised by the authorized officers during the course of recording of statement u/s 132(4) of the Act about the manner in which the undisclosed income had been derived and about its substantiation. The said query was raised during the course of recording the statement of Sh. Surender Kumar Jain Son of Late Sh. Suraj Parkash Jain partner of the assessee on 21.07.2011, copy of the said statement is placed at page nos. 5 to 7 of the assessee’s paper book. In that statement no query was raised relating to the manner in which the undisclosed income was earned. Therefore, in the absence of any such query raised by the authorized person, the AO was not justified in taking the adverse view and imposing the penalty u/s 271AAA of the Act - Decided in favour of assessee.
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2016 (8) TMI 684
Denial of deduction u/s. 54G - Held that:- The capital gains have to be utilized for the claim of deduction within a specified period. Since the capital gains has to be utilized, the logical conclusion would be the capital gains arising on the date of sale, therefore, in our understanding of the law, although the transfer took place on 10.04.2006 but the capital gain arose on the date of sale of the capital asset. The capital gains so arose was utilized by the assessee for the purpose of business of industrial undertaking and, therefore, the assessee fulfils the mandatory condition. The assessee purchased the land at village Duttpura which is a non-urban area, put up the factory and purchased new plant and machinery before one year of date of transfer. The assessee has utilized the LTCG for the period from 06.08.2006 to 31.03.2008 The assessee has fulfilled the mandatory conditions making itself eligible for deduction u/s. 54G of the Act. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O. to allow deduction u/s. 54G of the Act to the assessee. The common grievance in both these appeals is allowed in favour of the assessee and against the revenue. Disallowance u/s. 14A - Held that:- We find that at clause (i), the A.O has himself mentioned that the amount of expenditure directly relating to income which does not form part of total income as Nil which means that there is no element of borrowed funds. However, in clause (ii), the A.O. has computed the disallowance of expenditure by way of interest during the previous year. This stand of the A.O. is contradictory. Therefore, in our considered opinion, the element of interest taken for consideration of the disallowance for computing ₹ 2.04.538/- is uncalled for and deserves to be deleted. The balance amount remains is ₹ 37,699/-. Since, admittedly the assessee has suo motu disallowed ₹ 1,81,902/-, no further disallowance is required. We accordingly direct the A.O. to delete the addition of ₹ 60,335/-. - Decided in favour of the assessee
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2016 (8) TMI 683
Reopening of assessment - change of opinion - Held that:- Notice under section 148 was issued upon the assessee after the expiry of four years from the end of the assessment year. The proviso appended to section 147 of the Income Tax puts an embargo upon the power of the AO to issue notice under section 148 in the cases, where, scrutiny assessment was made and four years have expired after the end of the relevant assessment year. He cannot issue notice in such cases unless it is established that income chargeable to tax has escaped on account of failure of the assessee to disclose all material facts fully and truly. A perusal of the reasons would nowhere show that the AO has made out his case exhibiting the fact that the assessee has failed to disclose any material particulars fully and truly regarding assessment of its income. The ld.CIT(A) has made a detailed analysis of the facts already disclosed by the assessee, and thereafter, recorded a finding that the AO has sought to reopen the assessment on the basis of change of opinion. After going through the well reasoned order of the ld.CIT(A), in the light of various authoritative pronouncements, we are of the view that no interference is called in the order of the ld.CIT(A). Accordingly, appeal of the Revenue is dismissed.
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2016 (8) TMI 682
Disallowance under section 14A - Held that:- A person may make investment in shares and the shares so purchased may be held either as stock-in-trade or investment. The word "investment" in Rule 8D refers to the making of purchase of shares and not holding it as investment. The applicability of Rule 8D to compute the disallowance to be made under section 14A on account of expenditure in relation to the exempt dividend income earned by the assessee from shares held as stock-in-trade thus was upheld by the Tribunal in its Third Member decision rendered in the case of DH Securities (P.) Ltd. (2015 (9) TMI 373 - ITAT MUMBAI) and respectfully following the same, we reject the contention of the ld. counsel for the assessee that the disallowance in the case of the assessee can be restricted only to direct expenses incurred in relation to the earning of exempt dividend income by applying Rule 8D(2)(i). We direct the Assessing Officer to compute the disallowance as per Rule 8D by taking into consideration only those shares, which have yielded dividend income in the year under consideration. The alternative contention of the ld. counsel for the assessee is accordingly accepted. Interest income - business income or income from other sources - Held that:- There was a direct nexus between the earning of interest income in question as well as the business income of the assessee, inasmuch as the same was earned on Fixed Deposits kept by the assessee as margin money with NSE through its broker in order to enable it to trade in Future & Options. The interest income earned on the said Fixed Deposits thus was directly attributable to the business of the assessee and the ld. CIT(Appeals), in our opinion, is fully justified in treating the same as business income of the assessee instead of income from other sources by relying on the decision of the Hon'ble Supreme Court in the case of Govinda Choudhury & Sons (1992 (4) TMI 8 - SUPREME Court) as well as Chinna Nachimuthu Constructions (2007 (11) TMI 40 - HIGH COURT, KARNATAKA ).
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2016 (8) TMI 681
Reopening of assessment - disallow the deduction under section 80-IB - Held that:- We find that the original assessment was made by the Assessing Officer under section 143(3) on March 7, 2006, and the reasons recorded on March 26, 2008, there is not even a whisper of the original assessment order and the disallowances made therein. We also note that the deduction under section80-IB amounting to ₹ 10,13,828 had been disallowed in the original assessment itself. As per the reasons recorded under section 148, the reopening was made to disallow the same deduction of ₹ 10,13,828 under section 80-IB which had already been disallowed in the original assessment. Thus, there was no income which has escaped assessment. This is also evident from the fact that the total income determined in the original assessment as well as the reassessment is the same, i.e., ₹ 20,64,503. It is a settled law that in the absence of any income escaping assessment, no reassessment can be made. We note that the Assessing Officer in the reasons recorded has referred to the record as well as case law which were already available at the time of original assessment. No fresh or tangible material came into the hands of the Assessing Officer when reasons were recorded. In the circumstances, the reopening was sought to be made only to review the original assessment which was actuated by change of opinion by the Assessing Officer, which is clearly impermissible - Decided in favour of assessee
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2016 (8) TMI 680
Reopening of assessment - non-registration of the trust - Held that:- It is admitted case that the assessee was incorporated in the year 1986 and thereafter has been continued to discharge its function as registered trust and was looking after the affairs of Khatu Shyamji. By virtue of order of the Tribunal dated January 28, 2010, the registration was granted with effect from April 1, 2008, however have held that the assessee, though was not registered and the application was not processed but the benefit of being the registered trust were required to be extended to the assessee under sections 11 and 12 of the Income-tax Act. In view thereof, the assessee is required to be treated as registered trust with effect from April 1, 2007. Since we have already held that the assessee is required to be treated as registered trust with effect from April 1, 2007, therefore, in our view, if we read the second proviso to sub-section (2) of section 12A, then it is clear that the reopening under section 147/148 is not permitted. No reopening can be made on account of non-registration of the trust. In view thereof, we hold that the reopening made by the Assessing Officer under section 147/148 of the Act was ill founded and was not in accordance with law. In view thereof this ground is decided in favour of the assessee and against the Revenue.
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2016 (8) TMI 679
Addition on advance from customer as unexplained cash credit u/s 68 - Held that:- As rightly contended by the ld. DR there was complete failure on the part of the assessee to furnish any evidence either before AO or before CIT(A) and even before the Tribunal. The request for a remand is made without any basis or evidence being shown to the Tribunal to justify the order of remand. We have already seen that the AO afforded as many as 8 opportunities in the course of assessment proceedings. In these circumstances we are of the view that the request made on behalf of the assesee cannot be accepted. On the evidence on record, we are of the view that the conclusions of the CIT(A) are just and proper and calls for no interference - Decided against assessee. Addition as unsecured loan as un explained cash credit u/s 68 - Held that:- As far as the loan received from Shri Hakimuddin Behmat is concerned the position remains the same that even today confirmation of having given the loan has not been filed. It is therefore not possible to remand the issue on the presumption that Mr.Hakimuddin Behmat would file the confirmation to enable to the AO to make proper investigation. The request made by the ld. Counsel for the assessee in this regard is therefore rejected. As far as the cash deposits in the bank account of S.D.Dugar and M.K.Dugar & Sons HUF is concerned, we are of the view that the AO ought to have summoned and examined those two persons with regard to the cash deposits in their bank account prior to issue of cheques to the assessee. We therefore accept the prayer for remanding the issue to the AO in so far as the two creditors are concerned. The AO will examine those two aforesaid parties and decide the issue in accordance with law. Expenditure towards interest on cash credit loan of SBI - Held that:- From the details given to us it appears that the assessee had deposited a sum of ₹ 26,00,000/- in his bank account in which the credit facility in question was availed by the assessee. There are two questions that need to be answered before accepting the claim of the assessee namely what is the outstanding amount of interest and whether the sum of ₹ 26,00,000/- paid would cover the interest of ₹ 8,86,927/- which was claimed as deduction by the assessee in computing its total income. The second aspect that needs to be seen is as whether this deposit of ₹ 26,00,000/- was prior to the accrual of interest on the loan amount in question in which case the benefit of payment of ₹ 26,00,000/- cannot be attributed to the repayment of interest of ₹ 8,86,927/-. We are of the view that these two issues have to be re-examined by the AO and for this purpose the order of CIT(A) on this issue is set aside and the AO is directed to examine these in accordance with law after affording the assessee opportunity of having heard.
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2016 (8) TMI 678
TDS - assessee in default - assessing authority has issued certificates authorizing the payment without deduction of tax - after the issuance of the said certificate the assessee made payments as against each invoices without any deductions – Held that:- We are not inclined to interfere with the order(s) of the High Court[2012 (7) TMI 118 - KARNATAKA HIGH COURT]. The special leave petitions are dismissed.
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Customs
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2016 (8) TMI 713
Withholding of duty drawback - only those drawbacks are not sanctioned where shipping bills are under investigation - Held that:- The claimants ought to know as to, when the State facilitates export and when valuable foreign exchange has been brought in the country, why his rebate or drawback claims have not been processed, why they are held back and if there are certain investigations initiated, when would they be completed and any information is required about such export. There should be complete transparency and openness in this regard. We do not approve of the tendency of the authorities in not conducting the investigation expeditiously although they have noticed that false and bogus claims are being raised by certain exporters. There is no need to treat all exporters alike if it is only some exporters who are indulging in a wrongful act. Until such investigations against some entities are in progress, there is no need to hold back all drawbacks and by a wholesale direction or some internal communication, the details of which are not available for consumption of exporters. We hope and trust that the pending investigation would be concluded expeditiously by 30.09.2016.
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2016 (8) TMI 712
Import of textile - assessed to be cloth used for manufacturing umbrella by the Customs Authorities - re-testing of samples - Held that:- The issue here is as to whether it is reasonable that a solitary test be conducted in respect of any particular goods without there being any latitude for mistake. Indeed, there may be a case where the Customs authorities may be aggrieved by the result or where the result may have been tailor-made to suit the interests of the assessee. The important feature of the matter is that the applicable provisions do not prohibit the conduct of a second test. Thus, since the petitioner is dissatisfied with the test conducted on the goods by IIT, Delhi, a second test may be conducted. The parties have agreed that the same goods be sent for examination by the Textiles Committee Laboratory under the Ministry of Commerce. The exercise of sending the goods or the samples to the Textiles Committee Laboratory under the Ministry of Commerce should be completed within a week from date and the result obtained within a fortnight thereafter.
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2016 (8) TMI 711
Refund - duty paid on export of goods - whether refund claim can be lodged by an assessee without contesting the original assessments made - Held that:- In the present case once the duty was paid under protest, the onus was on the department to vacate the protest lodged by the Appellant giving an appealable order that the assessment made was in order and view of the appellant was incorrect, so that Appellant could redress their grievance. - In the interest of justice and principles of equity Order-in-Appeal dated 01.09.2014 passed by the first appellate authority is set aside and the matter is remanded back to the original authority for deciding the issue of refund on merit and also to vacate the protest lodged by the Appellant as per their letters dated 11.04.2012 and 12.04.2012. - Matter remanded back.
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2016 (8) TMI 710
Deemed export - Supply of intermediate goods by the DTA unit to 100% EOU unit - claiming refund of the TED paid by the petitioners' DTA unit on the goods supplied to the petitioners EOU. - Payment of duty on exempted goods by the DTA unit - Held that:- When there is an exemption, then, this refund claim was rightly disallowed. We do not think that any individual decision and in the case of a distinct assessee would, therefore, be of assistance to the present petitioners. Though in the past such claims have been granted does not mean that the practice or the past orders should govern the issue necessarily. When the petitioners themselves were aware of a policy circular and sought to urge that it would not be governing the controversy and for the period for which refund is claimed, then, it is clear that they were required to overcome the said stipulations and the circular itself. That having found rightly to be clarifying the obvious position, we have no hesitation in concluding that the refund applications were properly and correctly disallowed. - Decided against the assessee.
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2016 (8) TMI 709
Misuse of advance licence/advance authorisation scheme - proper officers - undue haste in issuance of show cause notice - we do not find any impediment to the Customs Authorities issuing show cause notice on the basis of materials gathered/input received from Excise Authorities. In fact, Custom notification No.31/97 – Cus (NT) dated 07.07.1997 and the amendment of Section 28 of Customs Act, 1962 by introduction of sub-section 11 is only indicative of the legislative intent that various wings of revenue act closely and cohesively towards avoiding loss thereof. Central Excise Officers deemed to be Customs Officers had gathered material which forms the basis of the show cause notice. Such Excise officials/ Customs officers are deemed to be proper officers for the purposes of Sections 17 and 28 of the Customs Act, 1962. Thus, when viewed through the prism of Section 28(11) of the Customs Act, 1962, it can be seen that what petitioners are complaining about is what really is in the nature of intra departmental communications, a course not open to them. It is for the company to respond to the show cause notice and satisfy the authority concerned that the allegations against them are unfounded. The contention of the company having met its export obligations with the consequence that it was free to dispose of imported materials is also to be raised only before the authority concerned. We find no merit either in the W.P.(MD) No.626 of 2015 or W.A.(MD) No.705 of 2011. Accordingly, both the writ petition and writ appeal are dismissed. No costs.
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Service Tax
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2016 (8) TMI 722
Taxability of construction services - service of construction etc. provided to the Government, a local authority or a governmental authority - BPL houses constructed by the petitioners for the Board - reverse charge mechanism - Held that:- On a plain reading of the notification dated 20.6.2012, in our view, the service being provided by the petitioners would clearly fall in the exemption clause, as the Board is a governmental authority having been set up under a State Act, i.e., Haryana Housing Board Act, 1971. It is wholly controlled by the State Government. BPL houses constructed by the petitioners are meant for residential purpose and not for commerce, industry or any other business or profession. For the kind of contract entered into between the petitioners and the Board, no service tax is leviable, hence, the action of the Board in deducting part of the service tax, though payable in the hands of the Board, if tax is leviable, from the bills of the petitioners is declared to be illegal. Whether service tax burden can be passed - Held that:- The case of neither of the parties is that the liability, which may be put on the contractor/service provider, if tax is leviable, is being passed on to the Board, as the scheme of the Act provides for levy of tax 50:50 on service provider and the service recipient. Hence, the action of the Board, even if it is assumed that tax is leviable, to pass on their share of burden as per the provisions of the Act on the contractors is not envisaged in the clause. On the contract for construction of BPL houses, as awarded by the Board to the petitioners, no service tax is leviable w.e.f. 1.7.2012 - The Board is not entitled to pass on the burden of service tax payable on its part, if the tax is leviable, upon the contractors.
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2016 (8) TMI 721
Condonation delay in filing an appeal before tribunal - Business auxiliary services (BAS) - commission agent - commission income earned by way of distribution and marketing units of mutual funds - Held that:- Admittedly the appeal is delayed by 146 days and the appellant filed an application for condonation of delay of the aforesaid period on the premise that he was suffering from bachache as referred to hereinbefore. It is true that the appellant has to be vigilent to avail the remedy which law permits and to take appropriate steps within the period prescribed under the law but the facts which have been noticed, is that a medical certificate is already on the record to show that the appellant was sufferring from backache which may have even continued prior to the period of obtaining the medical certificate. Tribunal while dismissing the appeal has become rather harsh in rejecting the appeal of the appellant which in the facts and circumstances of the case was not required to be rejected on this premise. - Tribunal to decide the matter afresh on merit.
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2016 (8) TMI 720
Promoting and marketing services for international airlines in India - Business Auxiliary services (BAS) - receipt of additional Overriding Commission (ORC) and target incentives - BTPL are engaged in the business of providing travel related services. - Extended period of limitation - Held that:- there is no ambiguity that legislature in terms of Export of Services Rules, 2005 intended that services consumed outside India shall be exported. It was further held that service that is sought to be taxed is the service provided to the person paying for the service and not the service which is provided to a person in India who is not paying for the service thought he may be beneficiary of such arrangement. Here, in the present case the admitted facts are that the business of foreign airlines are promoted by BTPL. If such airlines do not have any office / establishment in India and consideration is paid in convertible foreign currency we find BTPL are not liable to service tax under BAS as services are covered by export. The question involved is one of close interpretation of the legal provisions and there is nothing on record to show that there is a positive act of suppression or wilful mis-statement of any relevant facts by BTPL to enable the department to sustain the demand for longer period. We do not find any justifiable reason to interfere with the findings of the lower authority on the question of time bar. The tax liability, if any, is upheld only where the conditions are not fulfilled. - Decided in substantially in favor of assessee.
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2016 (8) TMI 719
Cenvat Credit - eligible input services - recovery of common shared expenses from the group company - A show cause notice was served on appellants raising the allegation that the transactions in the invoices were mere commercial transactions to share common expenditure between the group companies and proposing to deny credit availed on the input services and demanding recovery of the same along with interest and proposing to impose penalty. Held that:- When ARBL and MPPL have paid service tax under the category of BAS/BSS, the strong inference that can be drawn is that they have provided services as per the invoices raised by them. Revenue has not been able to adduce any evidence that there is no service rendered. The said issue, whether the transactions are services or not, should be agitated by the department against service providers viz. ARBL and MPPL, from whom the service tax has been collected. Credit cannot be denied at the service recipients end, alleging that no service has been provided. - Decided in favor of assessee.
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2016 (8) TMI 718
Claim of refund of service tax on bad debts recovered - period of limitation - The period being prior to 15-03-2005 was governed by Notification No.21/2003-ST dated 20-11-2003 exempting the taxable services from the levy of service tax in respect of which payments were received in convertible foreign exchange. That the payment having received from Onconova, in convertible foreign exchange, the services provided by appellant was not liable to service tax. The appellants then filed refund claim on 15-10-2009 in the prescribed Form-R for refund of the Service Tax amount erroneously paid by the appellants. Held that:- In the present case, the appellants have been all along contesting that the consideration received by them for export of service is not taxable. They deposited the amount only due to pressure from department and investigation was started by DGCEI. The Hon'ble High Court of Karnataka in the case of CCE(Appeals) Bangalore Vs KVR Construction [2012 (7) TMI 22 - KARNATAKA HIGH COURT] has taken a similar view in a a similar set of facts. Following the proposition laid by the Hon'ble High Courts of Kerala and Karnataka, when there is no levy in accordance with the provisions of service tax law the claim for refund cannot be denied on the ground of limitation in terms of Section 11(B) of Central Excise Act. - Refund allowed.
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Central Excise
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2016 (8) TMI 708
Valuation - captive consumption of goods - whether Rule 6(b)(ii) as per appellant or Rule 6(b)(i) as per Revenue of the Central Excise (Valuation) Rules, 1975 would be applicable - period in question is October, 1997, to June, 2000 - Held that:- the Revenue took into consideration sales made by the assessee to its customer and passed orders on that basis. However, it transpires that sale of goods to the said Goan company by the assessee was only up to June, 1997. Thereafter, no supplies were made and, therefore, for the period in question, the price on which the sales were made to Goan company could not have been the basis. The Tribunal, on the other hand, found that during this period, there was a solitary sale transaction which was at ₹ 100 per k.g. in December, 1997. In these circumstances, since that was the only comparable price available with the Tribunal, we find nothing wrong in adopting that solitary sale as the basis for arriving at the valuation for the period in question as well. - Decided against the appellant
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2016 (8) TMI 707
Liquidation of company - company do not have any money for payment - respondent submitted that even if this appeal is allowed and the Excise Department is held entitled to recover the amount, it would not be in a position to recover any amount - Apex Court for the aforesaid reason dismissed the appeal without going into the merits of the case.
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2016 (8) TMI 706
Enlargement of scope of remand - entitlement of appellant to claim exemption even under Clause (e) of Notification dated 10.09.2004 - Held that:- we see no reason to decline that limited prayer and dispose of the appeal enlarging the scope of remand. We accordingly allow this appeal but only in part and to the extent that while the Tribunal shall examine whether the appellant is entitled to exemption in terms of Clause (d) of the notification mentioned above, it shall not be prevented from examining the applicability of Clause (e) relied upon by the appellant nor shall the impugned order prevent the appellant from claiming exemption in terms of clause (e) of the notification. - Apex Court allowed the appeal
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2016 (8) TMI 705
Validity of settlement order - petitioner cleared the finished goods from the factory with cover of statutory invoice and without payment of duty - failed to maintain proper accounts of finished goods manufactured and cleared from its factory premises - petitioners have paid duty as demanded in the show cause notice i.e. more than amount which has been settled by the Settlement Commissioner. Held that:- Settlement Commissioner had conducted enquiry on 02-12-2014 and, thereafter, granted ten days more time to make further submissions, if any. Perusal of impugned order, it is manifest that revenue subsequently relied on letters dated 08-12-2014, 13-12-2014, 27-01-2015 and 05-02-2015. These letters were much subsequent to the date of hearing conducted by Settlement Commissioner. The copies of said letters/documents were also never provided to the petitioners. The petitioners had filed specific application seeking documents. Provisions of Section 32-J of the Excise Act clearly entitles the applicant to provide certified copies of any such report or part thereof. Considering the above, the said letters appear to have been read while passing the impugned order without giving copies of the same to the petitioners and also without bringing it to the knowledge of petitioners. Such an order is certainly not in consonance with the cardinal principles of natural justice, also considering the fact that petitioners have paid duty as demanded, we are inclined to exercise our discretion. Therefor, the impugned order is quashed and set aside. The Settlement Commissioner shall decide said proceedings afresh after giving opportunity to the petitioners to put forth their case so also furnish certified copies of the relevant letters/documents to the petitioners. - Petition disposed of
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2016 (8) TMI 704
Demand - manufacture of Rubber lined Steel Tanks/Pipes - Section 2(f) of the Central Excise Act, 1944 - Held that:- in the Assessee's own case the Tribunal held that the very same process was not manufacturing. The said order passed by the Tribunal has become final. Subsequently, in another appeal came up for consideration before the CESTAT in Final Order No.692 of 2005 dated 28.04.2005, in which the Tribunal after taking into consideration the decision of the Hon'ble Supreme Court in Tega India Ltd., Vs. Commissioner of Central Excise, Calcutta-II [2004 (2) TMI 61 - SUPREME COURT OF INDIA], and the earlier order passed by the CESTAT, held that the issue is already covered by the decision of the Tribunal and the Hon'ble Supreme Court and there is no manufacture involved in the present case. - Decided in favour of assessee
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2016 (8) TMI 703
Demand of duty, interest and penalty - export of goods without payment of duty under letter of undertaking - failure to submit a proof of export within a period of six months - Held that:- the authorities, after undertaking the process of adjudication under Section 11AF of the Central Excise Act, imposed penalty as the petitioners failed to pay the interest also. It is disclosed that CENVAT credit is taken by the petitioners after furnishing the proof of export. There is no dispute between the parties that the duty has been debited correctly and the authenticity of the export is established and proof of export has been accepted by the Department. No provision is pointed out which lays down the consequences of imposition of penalty and interest on non submission of proof of export. - Decided in favour of appellant
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2016 (8) TMI 702
Condonation of delay - 190 days - Order in Original was received by Mr.P.Babu, who is an employee of M/s.Hometech Services P. Ltd and Mr.P.Babu misplaced the Order in December 2012. No one was in the company to guide the management to file an appeal - Held that:- it is true that the appellant ought have been more vigilant. The fault of the employee cannot be a reason normally for the condonation of the delay. But, considering the fact, according to the appellant, that the business is already closed, we are of the view that the some leniency can be shown. - Appeal allowed
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2016 (8) TMI 701
Dismissal of restoration application by the CESTAT - non-compliance with the directions contained in the stay order - Held that:- the appellant had not taken due steps to prosecute the appeal after it was dismissed for default, such situation was also during the period while the company was before the BIFR. As of now, the company has been given a revival package as approved by BIFR. This means that every little opportunity and support that could be extended to the company to make it revive have to be permitted to flow through whatever system that it can take in. We, therefore, are of the view that the learned Tribunal, on the totality of the facts and circumstances of the case, ought to have considered the case as one where imposition of costs would have been sufficient to grant restoration of the appeal to file, particularly when the condition imposed, that is to say, deposit of ₹ 10,00,000/- was also complied with. - Decided in favour of appellant
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2016 (8) TMI 700
Refund of rebate - in the form of cash rather than reversal of Cenvat credit - Petitioner unit has discontinued its manufacturing activity and that therefore, the Cenvat credit is of no further use - Held that:- the petitioner had not made any detailed submissions bringing it to the notice of the authorities special grounds why as an exception to the normal rule of refund of rebate in form of reversal of Cenvat credit, the same should be paid in cash. Had the petitioner built case of delay on part of the Department in deciding the rebate application, due to which in the meantime, the petitioner unit having closed down, the cash refund was justified, we would have examined the case further on light of the submissions of the Counsel for the petitioner that Rule 5B of the Cenvat Credit Rules, 2004, though does not specifically provide for it, also does not prohibit it. Decided against the petitioner
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2016 (8) TMI 699
Cenvat credit - service tax paid on rent-a-cab service - rent-a-cab service are employed for logistical purposes of employees of the factory of the assessee - period in dispute is January 2011 to June 2012 - Held that:- as regards the cenvat credit for the period January 2011 to 31.3.2011, it is found that the issue is fairly settled in favour of the appellant in the case of Kakinada Seaports Ltd. v. C.C.E. & ST & Cus., Visakhapatnam II - [2015 (11) TMI 51 - CESTAT BANGALORE] which stands confirmed by Hon’ble Karanataka High Court in the case of C.C.E., Bangalore v. Stanzen Toyotetsu india (P) Ltd. - [2011 (4) TMI 201 - KARNATAKA HIGH COURT ]; John Deere India Pvt. Ltd. v. C.C.E., Pune III - [2015 (9) TMI 261 - CESTAT MUMBAI]. Therefore, the cenvat credit availed on service tax paid for the period January 2011 to 31.3.2011 is eligible to be availed as cenvat credit. As regards the cenvat credit on the service tax paid on the rent-a-cab for the period from 1.1.2011 it is found that the provisions of Rule 2(l)(B) of Cenvat Credit Rules , 2004, excludes the category of rent-a-cab for availment of cenvat credit. Therefore, in view of an unambiguous provisions,it is found that the appellant is not eligible to avail cenvat credit for the period subsequent to 1.4.2011. The said amount is to be recovered from the appellant along with interest. Imposition of penalty - Held that:- it is found that the said penalty is upheld has not reversed the cenvat credit which he has improperly availed; as the provisions of Rule 2(l) were effective from 1.4.2001 and they should not have availed the cenvat credit of the service tax paid on the rent-a-cab service. - Appeal disposed of
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2016 (8) TMI 698
Cenvat credit - job work - received iron ore on behalf of its sister unit, converted the same into concentrate and returned the same to its sister unit without payment of duty - no evidence that appellant was operating under job work procedure and as the concentrate was cleared at nil rate of duty - Held that:- the appellant has been able to demonstrate by citing letter written to Superintendent of Central Excise, Jagdalpur on 07.09.2007 intimating the Range officer that it would be operating under Rule 4(5)(a) of CENVAT Credit Rules, 2004 and challans for the movement of goods to and from the appellant that it was essentially working as a job worker entitled to the benefit of Notification No.214/86-CE. In such a situation, judgement in the case of JBF Industries Vs. CCES&T, Vapi [2014 (2) TMI 769 - CESTAT AHMEDABAD] covers the issue in favour of the appellant as in that judgement it was held that input services used in the manufacture of job worked goods exempted under Notification No.214/86-CE is admissible. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (8) TMI 717
Levy of service tax or sales tax - legislative competence - Subway franchise - scope of franchise agreement - Article 366 (29A) read with Item 54 of List II of constitutions of India - Held that:- The agreement between Subway and its franchisees is not a sale, but is in fact a bare permission to use. It is, therefore, subject only to service tax. In our opinion, the fact that the agreement between Subway and its franchisee is limited to the precise period of time stipulated in the agreement is vital to Subway’s case. At the end of the period of the agreement, or before in case there was any breach of its terms, the right of the franchisee to display the mark ‘Subway’ and its trade dress, and all other permissions would also end. This is what sets this agreement apart from the case of Monsanto and its sub- licensee. There, the seed companies could do as they pleased with the seeds; they could alienate or even destroy them. In Subway’s case, there are set terms provided by the agreement which have to be followed. A breach of these would result in termination of the agreement. We believe that there is no passage of any kind of control or exclusivity to the franchisees. In fact, this agreement is a classic example of permissive use. It can be nothing else. For all the reasons in law and fact that the sub-licensing of technology in Monsanto is held to be a transfer of right to use, this franchising agreement must be held to be permissive use. We do not mean to suggest that every franchise agreement will necessarily fall outside the purview of the amended MVAT Act. There is conceivably a class of franchise agreements that would have all the incidents of a ‘sale’ or a ‘deemed sale’ (i.e., a transfer of the right to use). - the Subway franchise does not meet these tests. - There is no such exclusivity. The introduction of the word ‘franchise’ in the amended MVAT by notification will have to be read to mean those franchises that can reasonably and plausibly be construed to have the effect of a sale; it cannot be widened to include agreements styled as ‘franchise’ agreements simply because of the nomenclature. Indeed, it seems to us clear that if we accept that a franchise agreement is, by definition, one that requires territorial exclusivity, then the Subway agreements are not franchise agreements at all, but purely licensing agreements. Subway’s franchise agreement grants to the franchisee nothing more than mere permissive use of defined intangible rights. It is therefore a service, and is not amenable to VAT. We also hasten to clarify that we are not determining whether any particular kind of arrangement is or is not a franchise. Any examples we have given are merely illustrative, and not binding or final findings. Provisions of the MVAT Act are not applicable in respect of the franchisee given by the 1st Petitioner or in respect of the franchise fee or royalty received by it from the franchisees.
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2016 (8) TMI 716
Issuance of eligibility certificate for availing the benefit of exemption from payment of tax - Extension of eligibility period Held that:- The exemption certificate was issued in favour of the petitioner on 3.1.2001. At that stage, the petitioner did not raise any plea regarding extending the period of eligibility from the date of issuance of eligibility or exemption certificates, rather, the conduct of the petitioner shows that it was not interested in availing the benefits. As is evident from the fact that exemption certificate was issued in favour of the petitioner on 3.1.2001, but for the reasons best known to the petitioner, it started availing the benefit only from 1.4.2003, after a gap of more than two years. Though the issue regarding provisional eligibility and exemption certificates was sought to be raised, but the fact remains that the petitioner made no effort for issuance thereof. The case of M/s Godrej & Boyce Mfg. Co. Ltd. cannot be compared as for granting the benefit to that company, there is a provision made in the Rules. This court in exercise of extra-ordinary jurisdiction cannot direct the authorities to frame the Rules. - Writ petition dismissed.
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2016 (8) TMI 715
Nature of the contract - Works contract activity or mere sale activity - doors and windows - levy tax on the entire turnover of ₹ 70,59,413/- at the rate of 12% under Section 3(2) of the TNGST Act, 1959. - Held that:- we are satisfied that a single composite contract of fabrication, supplying and fixing, at the site has been executed between the parties, we are of the considered view that the judgment of the Hon'ble Apex Court in Kone Elevator India Private Limited vs. State of Tamil Nadu [2014 (5) TMI 265 - SUPREME COURT] to the case on hand, squarely applies, and in such circumstances, the order impugned before us, is liable to be set aside. - writ appeal is allowed - Decided in favor of assesee.
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2016 (8) TMI 714
Jurisdiction for surprise inspection or record statement or seize records - Section 48 of the Tamil Nadu Value Added Tax Act, 2006 - Held that:- The petitioner would state that the officer does not posses the jurisdiction to record the statement or prepare the inspection report or seize the documents. But however, it appears that the documents were seized from the place of business of the petitioner. Therefore, if the petitioner has any reservations on the statement given by them before the Enforcement Officials, it is always open to the petitioner to raise contention before the assessing officer and it is a settled legal position that the assessing officer, while completing the assessment, cannot solely be guided by the statement recorded by the Enforcement Officials. Therefore, the petitioner need not have any apprehension that their rights and remedies will stand foreclosed, if they allow the impugned inspection report and the statement to stand. It is always well open to the petitioner to contest the merits of the matter, when the assessing officer takes up the issue. Since the petitioner has raised the question of jurisdiction and the respondents have stated that there is delegation of power, this Court is not inclined to quash the inspection report or the statement, at this juncture. - Writ petition dismissed.
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