TMI Tax Updates - e-Newsletter
August 26, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
TPA - It was not correct on the part of the TPO to include the cost of sales incurred by the AEs in respect of which the assessee company has rendered services and then to work out the profit for determination of the arm’s length prices. - AT
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Income Tax:
With the passage of time where India is becoming a global commercial hub with the advent of Multinational Companies new transfer pricing issues are thrown up and keeping the aim of transfer pricing in ensuring that the tax base of the country is not eroded the action of the TPO in referring to the International Guidance in order to determine the ALP of the international transaction cannot be faulted with unless we repeat the said action is contrary to the Indian Transfer Pricing Legislation which is not so in the facts of the present case - AT
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Income Tax:
Treatment given by AO of the expenses incurred for securing the business as capital expenditure and the receipt of compensation on termination of the agency business as revenue in nature is justified - AT
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Income Tax:
Expenditure on FCCB and debenture issue - The expenses in connection with public issue of shares or debentures of the company are allowable - QIB expenditure can be treated as revenue expenditure and eligible for deduction under section 35D - AT
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Corporate Law:
Revocation of order accepting highest bid – auction of property of company under liquidation - HNone of stake-holders of Company in liquidation ever objected to offer of appellant on ground that it is inadequate consideration for property –Value of property in question must have escalated substantially in view of developments subsequent but allowing such attempt, would rob sales conducted by Courts of all sanctity - SC
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Corporate Law:
Territorial jurisdiction to entertain suit – Since respondent was carrying on business within limits of jurisdiction of current Court through its regional office, it is not necessary to consider whether cause of action or any part thereof arose within territorial limits of current Court - HC
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Service Tax:
Underwriter service - Assessee contends that the underwriting was rendered by the foreign underwriting firms and the entire service was rendered outside India and no part of the service was performed in India - prima facie case is against the assessee - AT
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Service Tax:
Manpower recruitment and supply services - services rendered by the appellant of making arrangements for activities of harvesting of sugarcane, loading and unloading and transportation of sugarcane in and for various sugar factories - demand of service tax set aside - AT
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Service Tax:
Penalty u/s 78 - assess had collected the service tax but failed to deposit the same with the Government account due to financial crisis - entire amount of service tax has been discharged before issue of show-cause notice - penalty waived - AT
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Service Tax:
Denial of CENVAT Credit - Event Management Services - denial of Cenvat Credit of service tax paid by Nainital office of the appellant on the sole ground that the invoices issued are in the name of the appellants unregistered office at Delhi is unjustified - AT
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Central Excise:
Valuation of goods - inclusion of additional monetary consideration - transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement - additions confirmed - SC
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VAT:
Cancellation of Registration certificates – Petitioner had disclosed / declared only one Bank Account however, on inquiry it was found that all transactions by petitioner were from account, which was not declared / disclosed – Upon considering entire records alleged purchases by petitioner were not genuine and/or same were billing activities only - HC
Articles
Notifications
News
Case Laws:
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Income Tax
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2015 (8) TMI 931
Transfer pricing adjustment - TP Adjustments made in respect of the consideration for the services rendered to overseas holding company - selection of comparable as according to the Tribunal, no differentiation could be made between the entities rendering ITeS - Did the ITAT fall into error confirming the transfer pricing adjustment upholding the inclusion of two comparable, i.e., e-Clerx Services Limited and Vishal Information Technologies Limited, now called as Coral Hub Ltd.? - Held that:- We find it difficult to accept ITAT view as it is contrary to the fundamental rationale of determining ALP by comparing controlled transactions/entities with similar uncontrolled transactions/entities. ITeS encompasses a wide spectrum of services that use Information Technology based delivery. Such services could include rendering highly technical services by qualified technical personnel, involving advanced skills and knowledge, such as engineering, design and support. While, on the other end of the spectrum ITeS would also include voice-based call centers that render routine customer support for their clients. Clearly, characteristics of the service rendered would be dissimilar. Further, both service providers cannot be considered to be functionally similar. Their business environment would be entirely different, the demand and supply for the services would be different, the assets and capital employed would differ, the competence required to operate the two services would be different. Each of the aforesaid factors would have a material bearing on the profitability of the two entities. Treating the said entities to be comparables only for the reason that they use Information Technology for the delivery of their services, would, in our opinion, be erroneous. See Maersk Global Centers case [2014 (3) TMI 891 - ITAT MUMBAI ] Both Vishal and eClerx could not be taken as comparables for determining the ALP. Vishal and eClerx, both are into KPO Services. E-Clerx is engaged in data analytics, data processing services, pricing analytics, bundling optimization, content operation, sales and marketing support, product data management, revenue management. In addition, eClerx also offered financial services such as real-time capital markets, middle and back-office support, portfolio risk management services and various critical data management services. Clearly, the aforesaid services are not comparable with the services rendered by the Assessee. Further, the functions undertaken (i.e. the activities performed) are also not comparable with the Assessee. even Vishal could not be considered as a comparable, as admittedly, its business model was completely different. Admittedly, Vishal’s expenditure on employment cost during the relevant period was a small fraction of the proportionate cost incurred by the Assessee, apparently, for the reason that most of its work was outsourced to other vendors/service providers - Decided against the Revenue
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2015 (8) TMI 930
Validity of reopening of assessment - Held that:- AO has disposed of the said objections without deciding it on merits and solely on the ground that as the assessee has not filed the return pursuant to the notice issued under Section 148 of the Act within a period not less than 30 days from the date of receipt of the notice under Section 148 of the Act. Thus, considering the aforesaid decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd (2002 (11) TMI 7 - SUPREME Court) and the decision of Garden Finance Limited (2003 (10) TMI 17 - GUJARAT High Court) and the decision in the case of Arvind Mills Ltd. (2004 (8) TMI 97 - GUJARAT High Court) and the decision of Sahakari Khand Udyog Mandal Ltd (2014 (6) TMI 149 - GUJARAT HIGH COURT) impugned orders disposing of the objections without deciding the objections on merits cannot be sustained and same deserve to be quashed and set aside. The impugned orders passed by the AO disposing of the objections are absolutely on misinterpretation and / or misreading of the decision of the Division Bench in the case of Sahakari Khand Udyog Mandal Ltd (2014 (6) TMI 149 - GUJARAT HIGH COURT) - Decided in favour of assessee.
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2015 (8) TMI 929
Transfer of property - capital gain - scope and legislative intent of Section 2(47)(ii), (v) and (vi) of the Act - what are the essential ingredients for applicability of Section 53A of 1882 Act - meaning to be assigned to the term “possession”? - whether in the facts and circumstances, any taxable capital gains arises from the transaction entered by the assessee? - Held that:- Perusal of the JDA dated 25.2.2007 read with sale deeds dated 2.3.007 and 25.4.2007 in respect of 3.08 acres and 4.62 acres respectively would reveal that the parties had agreed for pro-rata transfer of land. No possession had been given by the transferor to the transferee of the entire land in part performance of JDA dated 25.2.2007 so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.2.2007 having been executed after 24.9.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2 (47)(v) of the Act does not apply. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land measuring 13.5 acres for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Court and the High Court in PILs. Therefore, the appeals are allowed.- matter is remanded to the Tribunal to pass fresh orders after hearing learned counsel for the parties and in view of the conclusions noticed herein above. Ordered accordingly. The appeals stand disposed of. See C.S.Attwal vs. The Commissioner of Income Tax, Ludhiana and another [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT]
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2015 (8) TMI 928
Question of libility - accrual of interest - Whether the assessee can be permitted to claim deduction for interest which was neither paid nor shown to have been incurred in the books of accounts ? - Held that:- The assessee before us has neither paid the liability nor has admitted the liability in its books of accounts. The assessee on the top of that has disputed the liability as indicated above. Therefore, the judgment in the case of Indian Metals & Carbide Ltd. [1991 (12) TMI 31 - ORISSA High Court ] is not applicable to the facts of this case. For the aforesaid reasons, the question formulated above is answered in the negative and in favour of the revenue
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2015 (8) TMI 927
TDS liability - Tribunal found that CIT(A) had rightly considered that tax had been deducted and deposited in the Government treasury - Held that:- The issue has been decided based on the material placed on record by the assessee before the appellate authorities which has gone into by both the appellate authorities, and it being essentially a finding of fact, in our view no question much less substantial question of law can be said to arise out of the order of Tribunal. However, while dismissing the appeal we direct the Assessing Officer and give liberty to check and verify correctness of the claim as to whether the tax had been deducted and deposited in the Government treasury account, which was claimed on the payment of ₹ 84,56,827/-, and the Assessing Officer is at liberty to initiate proceedings, in case not satisfied with the claim put forward before the appellate authorities, in accordance with law.
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2015 (8) TMI 926
Exemption under Section 10(23C)(vi) denied - Whether educational institution must itself move the Application is concerned - Held that:- When a society is running the educational institution, then, we would think that, both, for the reason that it is running the institution and also conceiving the impossibility of an institution as such de hors the society making an application, we would reject the contention. When an application is made by the society, it is being made on behalf of the institution. The society would be assessed, if it is denied the benefit of Section 10(23C)(vi), for running the institution and deriving an income out of it and it is the income from the educational institution derived by the society, which is to be excluded from the total income under Section 10(23C)(vi). Therefore, we reject the said contention. We are of the view that the contention of the appellant, which appears to be that they indicate that the society can earn from other objects which do not amount to imparting education, may not be correct. The objects appear to be ancillary to the main object of running the institution. We are not persuaded to hold that the objects can be anything, but ancillary to the main purpose, which is for imparting education. Therefore, we see no merit in the said contention. It is for the authority concerned to take a decision. The only limitation, which has been put on the authority, was that it should decide the matter in accordance with the observations. We see nothing in the observations, which will stand in the way of the authority to take a decision in accordance with law, which the authority is free to do.
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2015 (8) TMI 925
Reopening of assessment - Held that:- Re-opening of assessment under Section 143 of the Act was itself bad in law, we set-aside the order passed by the writ Court and as well as the re-assessment order dated 31.01.2014. Accordingly , this appeal as well as the writ petition stand allowed. The question of non-furnishing the reasons for re-opening an already concluded assessment goes to the very root of the matter. Besides this, it is not disputed that the statement of some other person which was recorded and the appellant was asked to explain the same, was itself not furnished to the appellant-assessee. As such, besides non-furnishing of reasons for re-opening, there was also gross violation of principles of natural justice and in view of the aforesaid, we are of the opinion that writ petition against the re-assessment order allowed - Decided in favour of assessee.
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2015 (8) TMI 924
Disallowance of expenditure debited by the assessee for construction of railway under-bridge in Ludhiana - CIT(A) deleted the addition - Held that:- We agree section 28 may not determine the allowability of expenditure under section 37 of the Income- tax Act, however, the amount in question is entirely paid to the northern railway for construction of underbridge as per the minutes duly approved by the authority. The assessee has furnished complete details for it. The project was approved by the assessee-authority and execution with its funds. Since the assessee has constructed the railway underbridge to overcome the traffic problem in Ludhiana and for creating access of the projects undertaken by the assessee, therefore, the purpose of raising construction of railway underbridge was commercial in nature for the purpose of achieving the objects of the assessee- authority. This expenditure has also made the marketability of the properties of the assessee-authority around the location where underbridge was constructed.The learned Commissioner of Income-tax (Appeals), therefore, correctly decided the issue in favour of the assessee holding that the amount is spent for the purpose of business activities of the assessee. There is, therefore, clear nexus between the amounts spent and the business activity of the assessee - Decided against revenue. Disallowance of payment made by the assessee to Punjab Mandi Board, Ludhiana for construction of bridge on the Sidhwan Canal at Dugari Road, Ludhiana - CIT(A) deleted the addition - Held that:- The assessee has correctly claimed deduction under section 37 of the Act. Therefore, following the reasons for decision on ground No. 1, we dismiss this ground of appeal of the Revenue.- Decided against revenue. Addition on account of treatment of external development charges as revenue receipts - Held that:- It was liability of the assessee to pay back the amount as per direction of the State Government or local authority. CIT(Appeals) admitted that external development charges kept pending and not used pending clearance from the State Government would prove it was not money of the assessee. Further, the facts disclose that the assessee may be a custodian of the amount of external development charges, therefore, how it could be treated as income of the assessee, is not explained by the authorities below. The assessee also in the paper book, filed certain correspondence to show that since external development charges were lying unutilised, therefore, due to financial constraints, request was made to the State Government to permit the assessee-authority to use external development charges for development projects in the larger public interest. This correspondence would reveal that the assessee was not entitled even to use this amount of its own for any purpose. Since the amount in question itself is shown as outstanding since long, would prove that the amount did not belong to the assessee and was shown as liability in the accounts. The above facts would clearly disclose that the assessee cannot use the external development charges account for any purposes unless it is approved by the State Government. The assessee since referred to the provisions of the Punjab Apartment and Property Regulation Act, 1995 by which external development charges are collected by the assessee and the provisions thereon state that the competent authority shall transfer the funds to the State Government or local authority (through authority) is competent authority and it did not carry out any development work of its own and only acts as nodal agency. These provisions have not been properly appreciated by the authorities below. The authorities below should also ascertain whether the similar type of authority like the assessee, how they have given the treatment of the external development charges in their records and what is the stand of the Revenue Department in the cases of the similar other authorities. The nature and character of receipt is not examined by the authorities below. Thus restore the issue to the file of the Assessing Officer with direction to re-decide the issue.- Decided in favour of assessee for statistical purposes . Addition on account of amount paid to Punjab State Development and Welfare Fund as per notification of Punjab Government for the welfare activities in the field of education, health and welfare - Held that:- The assessee has paid the amount in question, i.e., ₹ 1.86 crores to the Government of Punjab as per notification dated March 17, 2008 (paper book page 36). When the State Government has directed by way of notification to the assessee to deposit 5 per cent. of the bid amount on sale of the properties with the State Government towards the Punjab State Development Funds in the public account of the State, it is definitely connected with the business activity of the assessee on sale of properties. The assessee-authority is bound to follow the directions of the Punjab Government and has to act accordingly. The payment in question is, therefore not voluntary or gratuitous but is an obligation and primary charges as per the notification issued by the State Government. The amount of 5 per cent. is, therefore, directly related to the sales activities of the assessee-authority. The assessee has followed the directions of the State Government as per the existing laws and the notification as issued by the State Government. The non-compliance of the directions of the State Government would directly affect the business activities of the assessing authority. Therefore, the contributions to the welfare fund is in the nature of commercial expediency and has a nexus with the business activity of the assessee. We, therefore, hold that the amount in question is spent and incurred by the assessee wholly and exclusively for the purpose of business. Therefore, same is allowable as deduction - Decided in favour of assessee. Addition on account of amount paid to the Punjab Water Supply and Sewerage Board for sewerage work within the jurisdiction of assessee-authority as per its objects - Held that:- Commissioner of Income-tax (Appeals) considering the issue in the light of railway underbridge constructed by the assessee and following his findings on that issue, dismissed the appeal of the assessee. However, on said issue, we have already dismissed the Departmental appeal in the assessment year 2009-10 and allowed the appeal of the assessee in this year. Therefore, considering the totality of the facts and circumstances and aims and objects of the assessee in the light of the special Act under which the assessee-authority is created, it is clear that amount in question is incurred by the assessee for sewerage work within the jurisdiction of the assessee-authority. It is, therefore, clearly revenue in nature and has to be allowed as expenditure incurred wholly and exclusively for the purpose of business activities of the assessee. No capital is generated by assessee-authority for incurring the expenditure on this issue. - Decided in favour of assessee. Addition on account of amount paid to Punjab Infrastructure Development Board (PIDB) for construction of flyovers and bridges within the jurisdiction of the assessee-authority as per the objects of the assessee-authority. Addition being 10 per cent. of the earnest money received - Held that:- The earnest money collected is purely refundable amount which is duly refunded from time to time. It cannot be held to be the income of the appellant. In case any amount out of earnest money is adjusted towards sale in any year, it will be liable to be included in the income of that year. The addition made by the Assessing Officer on this account is deleted. - Decided in favour of assessee. Addition on account of building plan security - Held that:- The condition for refund of this security is that the construction should be in accordance with the approved plan and the person has to furnish a completion certificate. It is a matter of common knowledge that in most of the cases, construction is not in accordance with the approved plans and often there is some violation of the plan even if it is minor violation. In such circumstances builder does not apply for a completion certificate and prefers to forfeit the building plan security rather than inviting closure/ demolition of building. This is evident from the fact that during the period of eight years from 2006-07 to 2012-13, only ₹ 3,75,000 were refunded in the year 2009-10 and the balance in this account as on March 31, 2013, was ₹ 2,27,87,338. Thus although, initially the amounts of building plan security were received as refundable security, with passage of time these amounts have become a part of the appellant's funds with no likelihood of any claim for refunds. This amount would accordingly partake the character of the appellant's income under section 28(iv) of the Income-tax Act - Decided against assessee. Addition being deposits received by the appellant - Held that:- With respect to these receipts appellant has merely submitted that status was not clear and therefore these have been kept in suspense account. The appellant has not explained or given any evidence to show that these receipts were not revenue receipts. Merely because these receipts have been kept in suspense account it does not imply that these receipts do not form part of income. Reliance in this regard is placed on the case of CIT v. Tamil Nadu Industrial Investment Corporation Ltd. [1998 (4) TMI 78 - MADRAS High Court]. In this case it was held that interest, guarantee commission and commitment charges collected by the assessee and kept in suspense account is income.Keeping in view the aforesaid facts, the addition made by the Assessing Officer is confirmed. - Decided against assessee. Addition being security received from different departments - Held that:- Facts on this issue are similar to the facts on the issue of building plan security. Substantial amount of security has not been refunded by GLADA. On similar grounds as in the case of building plan security the balance lying under this head is income of the appellant. Keeping in view the aforesaid facts, the addition by the Assessing Officer is confirmed.- Decided against assessee. Addition being deposits received from customers against flats - Held that:- The income embedded in the receipts, carried to the balance- sheet in respect of the aforesaid kind of contracts, was liable to be taxed in this year. Keeping in view the aforesaid facts, the addition made by the Assessing Officer is confirmed - Decided against assessee. Building completion security refunded - Held that:- The refund of the security is to be done as per guidelines issued by the Punjab Urban Planning and Development Authority. No details have been brought on record if after passing of certain period, whether the assessee would be entitled to forfeit the amount in question. No detail is also brought on record as to how many parties have submitted completion certificate and in how many cases, some actions have been taken by the assessee-authority. Merely because only a small amount is refunded to the parties it would not prove that the assessee has forfeited the amount in question and earned it as income. The assessee has continuously shown the security amount as liability in the books of account and has never taken the amount in its profit and loss account. In the absence of complete details brought on record, the learned Commissioner of Income-tax (Appeals) was not justified in dismissing this ground of appeal of the assessee. Therefore, the matter requires reconsideration at the level of the Assessing Officer. - Decided in favour of assessee for statistical purposes. Addition on certain deposits - Held that:- The deposits received by the assessee and taken into suspense account due to certain confusions regarding the allotment of the property or the amount received from the concerned parties when amount is taken into suspense account would not prove that the amount lying in the suspense account has become income of the assessee. The decisions relied upon by the learned Commissioner of Income-tax (Appeals) are therefore, not applicable to the facts of the case and this matter also requires clarification from the side of the assessee and investigation by the Assessing Officer as to in how many cases, the clarification has been received and how further treatments have been given on this matter. Therefore, this issue also requires reconsideration at the level of the Assessing Officer. - Decided in favour of assessee for statistical purposes. Security amount received from different departments treated as income of the assessee - Held that:- This issue is same as is considered on building plan security on which the matter requires reconsideration at the level of the Assessing Officer. In view of the above and in absence of any specific finding by the authorities below, we set aside the orders of the authorities below and restore it to the file of the Assessing Officer with direction to redecide the grounds in detail considering the factual aspect by giving reasonable sufficient opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Addition being deposit received from the customers against flats - Held that:- Decided against the assessee by order of in the case of Punjab Urban Development Authority [2015 (3) TMI 681 - ITAT CHANDIGARH] in which on identical issue, the Tribunal in principle, confirmed the orders of the authorities below with regard to addition maintained on account of advances received from the customer by following cash system of accounting. - Decided against assessee. Treating share of employees to provident fund as income of the assessee under section 2(24)(x) - Held that:- Assessee is correct that since provident fund established by the assessee was in terms of the Indian Provident Funds Act, 1925, therefore, this has to be read into the exceptions and accordingly fetter for not allowing the deduction under section 40A(9) would not be applicable for the funds contributed towards provident fund as the employer share in terms of the Indian Provident Funds Act, 1925 which was adopted by the assessee. Therefore, we hold that the assessee is entitled to claim deduction in respect of contributions made towards provident fund even if such fund is not recognised. Whether deduction can be allowed even if the contribution was paid after the end of the year - Held that:- Assessing Officer is directed to follow the order of the Tribunal in the case of Punjab Urban Development Authority (supra) and pass consequential order accordingly.
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2015 (8) TMI 923
Disallowance of Marketing expenditure claims - Held that:- Constantly the Co-ordinate Benches have been restoring the issue to the file of the AO for earlier AY's with the direction to consider the issue afresh after affording a reasonable opportunity of being heard to the assessee. Respectfully following the orders of Tribunal on the said issue, ground no-3 is restored to the file of the AO with an identical direction. - Decided in favour of assessee for statistical purposes. Price Protection Policy - Held that:- Evidence filed before the DRP should be sent back to the AO for considering the same. The arguments advanced on behalf of the assessee that the confirmations filed in similar format are the result of guidance given to the distributors/dealers by the assessee to show how the confirmation should be filed. This fact does not necessarily lead to the conclusion that the statements in the confirmations are not true. However the correctness/genuineness of the same needs to be enquired into. We also hold that the fresh evidences which the assessee is now seeking to file should be admitted as the arguments that they could not be filed before the DRP in the absence of any fact on record cannot be disbelieved especially since the evidences filed before the DRP itself were filed during the fag end of the proceedings - Decided in favour of assessee for statistical purposes. Obsolescence of Inventory disallowance - Held that:- In the immediately preceding assessment years and the judgement of the Hon’ble High Court where for want of necessary evidences the action of the AO was confirmed. It is seen that the Hon’ble High Court while deciding against the assessee also observed that the assessee was not precluded from placing necessary evidences in subsequent years in support of its claim. Accordingly, following the orders of the Co-ordinate Benches which are supported by the judgement and order of the Jurisdictional High Court, the issue is restored to the AO. While doing so, it is directed that the assessee shall place necessary supportive evidences justifying its claim by way of it Global Obsolescence Policy, establishing that specific models/accessories etc. had gone out of the market based on their surveys and marketing Reports based on the sales data of the relevant period etc and any other information/material fact the AO may so desire. The assessee necessarily shall be at liberty to file fresh evidences in support of its claim and the AO shall be duty-bound to consider the same before the passing of his order. Transfer Pricing Issues - Advertising, Marketing, Promotional Expenses (AMP) - Held that:- We also concur with the departmental stand and hold that the application of bright line test applying the precedent settled by the Special Bench and so hold that the same has been correctly applied in principle in order to determine the nonroutine functions which have been performed by the assessee applying the mean AMP sales ratio of the comparables. It is also upheld that the assessee has contributed to building the brand of the AE who holds the legal rights of the brand as such the grounds assailing the action of the TPO and the DRP in upholding the bright-line test are dismissed; the ground that it is not an international transaction is also dismissed, relying upon the precedent settled by the Special Bench. The grounds assailing the application of the mark-up are also dismissed as nothing has been argued to show as to why the mark-up of 12.5% being the SBI PLR for the said year is excessive. In principle the application of mark-up to be calculated on the AMP spend on creating the marketing intangibles is also upheld as no un-related party would have blocked its funds and provided service to the AE for building the brand belonging to the AE without any expectation of remuneration over and above the cost incurred.There is no justification to deny oneself the benefit of jurisprudence available in the public domain. As long as these do not run contrary to the Indian Transfer Pricing Laws ignoring the same would be an act of cutting the nose to spite the face. With the passage of time where India is becoming a global commercial hub with the advent of Multinational Companies new transfer pricing issues are thrown up and keeping the aim of transfer pricing in ensuring that the tax base of the country is not eroded the action of the TPO in referring to the International Guidance in order to determine the ALP of the international transaction cannot be faulted with unless we repeat the said action is contrary to the Indian Transfer Pricing Legislation which is not so in the facts of the present case. - Decided in favour of revenue. Double Disallowance - Held that:- Accordingly in the light of the submissions advanced by the parties, we direct the AO to consider the submissions of the assessee that there may be no double disallowance qua the expenditure on cell phones and accessories given free of cost to service centres etc. and the AMP expenditure. Contract Software Development - TPO show caused the assessee to explain why the filters applied by the assessee for selecting the comparables be not rejected and substituted by the filters of the TPO as the assessee has used multiple years data and selected inappropriate 12 comparables with an average margin of 8.42% - Held that:- TPO/Revenue has resorted to ‘cherry picking” is found to be not supported by record. Since no arguments have been advanced to assail the appropriateness of the reasoning of the DRP to uphold the filters selected by the TPO and no arguments have also been advanced on facts assailing the reasoning of the DRP to retain the 13 comparables with arithmetical correction in OP/TC percentage, the correctness of the same is not being gone into. On the appropriateness of the filters and the comparables no finding is being given as the assessee has confined itself only to making a request for remand on the ground that the TPO has not confronted the assessee with the basis of the search process which on facts is found to be incorrect. It is seen that at no stage either before the TPO or the DRP, the assessee has sought to demonstrate applying the 7 filters of the TPO that the results would vary. It is also seen that no such request was made either before the TPO or the DRP despite sufficient opportunity and before us the request made is found to be incorrect on facts. It is further seen nothing has been placed before us to demonstrate that by carrying out a fresh search applying the 7 filters of the TPO the results would vary. In the absence of any cogent fact or arguments, the request for remand cannot be acceded to in vacuum. No doubt the Tribunal has the power to remand however the said request is to be exercised judiciously and matters cannot and should not be remanded for the mere asking and that too when the arguments on facts are found to be not borne out by record. There must be some evidence or fact available on record to justify the remand in order to set the machinery of the Government working and merely on casual requests and whim the process cannot be caused to be started. It is also a fact to be kept in mind while remanding that the entire demand qua the issue gets wiped out and such a drastic action should be resorted to only if justice demands that facts supporting the said request are available on record. Since no other arguments was advanced on behalf of the assessee. Benefit of deduction of 5% under proviso to Section 92C(2) for the purposes of bench-marking has to be rejected - Held that:- The amendment made with retrospective effect by the Finance Act, 2002 makes it clear that benefit of deduction of 5% under the proviso to Section 92C(2) shall not be allowed for the purposes of computation of arms’s length price.
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2015 (8) TMI 922
Transfer pricing adjustment - inclusion of cost of sales incurred by the AEs - Held that:- It was not correct on the part of the TPO to include the cost of sales incurred by the AEs in respect of which the assessee company has rendered services and then to work out the profit for determination of the arm’s length prices. Our view is also supported by the judgment of the Delhi Tribunal in the case of Sojitz India (P) Ltd. vs DCIT (2013 (6) TMI 550 - ITAT DELHI ) where a similar issue has come up. The adjustment as confirmed by the DRP is otherwise untenable in view of the proviso to section 92C of the Act. The TPO has included the cost of sales of the AEs while making adjustment to the arm’s length price. The cost base as determined by the learned TPO in the assessment year 2007-08 is ₹ 4558,90,44,859. The adjustment proposed after order from the DRP is ₹ 116,70,79,548. This amount is within 5% of the cost base of ₹ 5589044859/- determined by the learned TPO himself. The cost base as determined by the TPO in the assessment year 2008-09 is ₹ 4071,95,89,546. The adjustment proposed after order from the DRP is ₹ 114,82,92,425. This amount is also within 5% of the cost base determined by the TPO himself. Accordingly, no adjustment could have been made in view of the proviso to section 92C of the Act. The TPO is not right in including the cost of sales while determining arm’s length price and not considering the same while applying proviso to section 92C of the Act. According to provision of section 92C first arm’s length price has to be determined. Thereafter the same has to be compared with the price charged by the assessee and if the difference between the price determined by TPO and the price charged by the assessee is within ±5% then no adjustment is required to be made. - Decided in favour of assessee.
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2015 (8) TMI 921
Penalty under section 271(1)(c) - disclosure of income as the result of search operation on the assessee and not voluntary - CIT(A) deleted the penalty - Held that:- Provisions of Explanation 5 are applicable in the cases where during the course of search initiated on or before 1.6.2007 any money, bullion, jewellery or other valuable article or thing is found in the possession or under control of the assessee ; and in the instant case of the assessee, the search was conducted on 11.01.2007 and cash of ₹ 5,26,530/- was found from the possession of the assessee ; and so the cash was admittedly, not seized during the relevant assessment years before us. In other words, the assessee had surrendered undisclosed income and cash was seized during search in A.Y 2007-2008, and not in the relevant assessment years. However, in the relevant assessment year under consideration before us, the assessee has made an addition of ₹ 21,65,932/- in the return filed pursuant to section 153A notice. Explanation 5 to section 271(1) of the Act cannot be invoked in assessment years 2005-06 & 2006-07, which are before us, merely on presumption that the assessee might have been in possession of the seized cash throughout the period covered by search assessments. The income offered to tax u/s 153A for assessment years 2005-06 and 2006-07 cannot be said to be based on assets seized, because from the assessment order, it is clear that search was on 11.01.2007 (i. E AY 2007-08), the cash seized during search was only to the tune of ₹ 5,26,530/- and it is not emerging from the records that the assessee has claimed during search that the cash seized (on 11.01.2007), belonged to him and that was owned by him in the relevant assessment years i. E. AYs 2005-06 and 2006-07. Unless there is a clear finding in this respect, Explanation 5 of Section 271(1)(c) cannot be of any help to the department. As rightly pointed out by the Coordinate Bench in Prem Arora (2012 (6) TMI 480 - ITAT DELHI), the provisions of Explanation 5 cannot be invoked in assessment years 2005-06 and 2006-07 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2005-06 & 2006-07 is based on assumptions and presumptions. It is settled law that suspicion howsoever strong, cannot take the place of evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of assessment years under consideration has to be rejected. Thus even the amended provisions of Explanation 5 cannot be applied in assessment years 2005-06 & 2006-07. Consequently penalty u/s 271(c) cannot be imposed by invoking Explanation 5 of the Act in assessment years 2005-06 & 2006-07 in respect of cash found in previous year relevant to assessment year 2007-08.- Decided in favour of assessee.
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2015 (8) TMI 920
Registration under Section 12AA - CIT (Appeals) deleting the income from Voluntary contributions taxed by the Assessing Officer - whether voluntary contribution received by Trust (whether towards capital or revenue account) is income of the Trust as per section 2(24)(iia) - Held that:- Voluntary contributions received for a specific purpose cannot be regarded as income under Section 2(24)(iia) of the Act since they are capital receipts and tied up grants for specific purpose. From a perusal of the orders of the authorities below, it appears to us that the list of donors filed by the assessee has not been examined by the authorities below, since the Assessing Officer has extensively considered the legal issue in the order of assessment. We have already upheld the impugned order of the learned CIT (Appeals) on the legal principles / issues. However, since the facts have not been discussed, we are of the opinion that, in the interest of justice it is necessary to direct the Assessing Officer to examine and verify the donation receipts maintained by the assessee, to come to the conclusion as to whether the amounts credited as building fund corpus in the accounts are supported by donation receipts issued. Subject to the examination and verification of the donation receipts as directed above, the amounts credited cannot be regarded as income as the same has been credited to the corpus fund/building fund and the order of the learned CIT (Appeals) is upheld. - Decided partly in favour of revenue for statistical purposes.
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2015 (8) TMI 919
Penalty under section 271[1][c] - Held that:- The order of penalty is bad in law for the reason that the Notice for initiation of penalty as to whether it is concealment of income or furnishing of inaccurate particulars of income is not discernable from the notice issued and consequently the order of penalty passed under section 271[1][c] of the Act on an invalid notice does not have any legs to stand and the penalty levied under section 271[1][c] of the Act deserves to be deleted, under the facts and circumstances of the case. Issue raised by the assessee in the additional grounds with regard to the validity of the defective notices issued by the Assessing Officer under Section 274 rws 271 of the Act for Assessment Years 2007-08 to 2009-10 in the case on hand is a jurisdictional matter, a pure question of law in respect of a defect in the notice that is not curable in nature. In this view of the matter, we are of the opinion that the additional grounds in this regard are not required to be set aside to the file of the learned CIT (Appeals) as requested by the learned Departmental Representative. The fact that it is clear that the impugned notices under Section 274 rws 271 of the Act dt.29.12.2011 do not have the appropriate portions marked to specify as to whether the penalty is proposed to be levied for concealment of income or for furnishing of inaccurate particulars of income; which fact has not been disputed by Revenue and the defects being not curable, we are of the opinion that in view of the factual and legal reasoning rendered above, there is no requirement for us to set aside the additional ground to the file of the learned CIT (Appeals) for consideration. Since we have cancelled the penalties levied u/s.271(1)(c) of the Act for Assessment Years 2007-08 to 2009-10 in the case on hand on the basis of our adjudication of the preliminary issue of the validity of the defective notices issued under Section 274 rws 271 of the Act dt.29.12.2011 as raised in additional Grounds raised in the other grounds become academice. - Decided in favour of assessee.
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2015 (8) TMI 918
Addition of amount paid/payable to the vendor i.e. Star India Private Limited ('Star India') u/s 68 - Star India did not respond to the notice issued by the learned AO under section 133(6) - Held that:- Disallowance has been made and upheld by the authorities below merely on the basis that the Star India Pvt. Ltd. did not bother to respond the notices issued under sec. 133(6) of the Act by the Assessing Officer to them. The authorities below have not bothered to examine the veracity of the documents filed by the assessee in support of the genuineness of the claimed payment made to Star India Pvt. Ltd. It is a well established position of law that genuineness of the claim cannot be denied merely because the party to whom payment claimed to have been made is not responding the notice issued by the Assessing Officer especially when the assessee claimant had filed sufficient documents in support of the claimed payment. There may be several reasons for a party for non-appearance or non-compliance before the Assessing Officer, for which the assessee cannot be penalized. Though we are aware that it is second round of the appeal before the ITAT, still to meet the end of justice the only option left with us is to set aside the matter to the file of the Assessing Officer to examine the veracity of the documents filed by the assessee in support of the genuineness of the claimed payment of ₹ 4,55,41,557 to Star India Pvt. Ltd. after affording opportunity of being heard to the assessee and decide the issue afresh. It is ordered accordingly. - Decided in favour of assessee for statistical purpose. Non deduction of tax at source under section 40(a)(ia) - no bills or vouchers were filed by the Appellant to substantiate payments made to Star India - Held that:- Direction to the Assessing Officer by the Learned CIT(Appeals) to disallow payments made by the assessee under sec. 40(a)(ia) of the Act was a question of taxability of income from a new source of income which has not been considered by the Assessing Officer, hence it was exceeding of jurisdiction by the CIT(Appeals) in a set aside matter by the ITAT in the present case. The decisions relied upon by the CIT(DR) having distinguishable facts are not relevant as main thrust of the Learned CIT(DR) in his contentions is that the Learned CIT(Appeals) has coterminus powers as of the Assessing Officer, hence, he is empowered to do what an Assessing Officer can do for the assessment and the directed disallowance has bearing on the question of pass-through costs. It is, however, not in dispute that the directed disallowance was new source of income, which was not the subject matter of setting aside order by the ITAT, in compliance of which assessment under sec. 254 read with section 143(3) was framed. We thus decide the issue in favour of the assessee with finding that while directing the Assessing Officer to disallow payments made by the assessee under sec. 40(a)(ia) of the Act, the Learned CIT(Appeals) has exceeded her jurisdiction on an issue which was never raised by the Assessing Officer or remained the subject matter of the setting aside order of the ITAT. Similarly, the Learned CIT(Appeals) has also exceeded her jurisdiction by directing the Assessing Officer to initiate penalty proceedings under sec. 201(1) of the Act - Decided in favour of assessee.
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2015 (8) TMI 917
Unaccounted Cash deposits in Saving Bank account in the name of assessee and his brother - CIT(A) deleted the addition - Held that:- CIT(A) has held that no addition is called for, as the amount deposited in the joint bank account is agricultural income earned by the assessee. The ld. CIT(A) has also observed in his order that even after completion of the assessment, independent enquiry was also conducted in respect of receipt from the agriculture produces by the then Assessing Officer through an Inspector. Having taken note of all these facts, the ld. CIT(A) has deleted the addition. During the course of hearing, the ld. D. R. has simply placed reliance upon the order of the Assessing Officer and no defect was pointed out in the order of the ld. CIT(A). We, however, have carefully examined the order of the ld. CIT(A) and we find that the ld. CIT(A) has adjudicated the issue in the right perspective in the light of detailed evidence filed by the assessee. - Decided in favour of assessee. Addition made on account of difference of amount of difference of amount between the share profit from various firms shown in the return of income and copy of accounts - CIT(A) deleted the addition - Held that:- The difference of ₹ 9,15,044/- was duly explained by the assessee even before the Assessing Officer, but it was not accepted by him whereas the ld. CIT(A) has examined the difference in the light of explanations of the assessee and being convinced with it the addition was deleted. The ld. D. R. has not pointed out any infirmity in the order of the ld. CIT(A). Moreover, the ld. CIT(A) has taken cognizance of the correct facts while deleting the addition. Since we find no infirmity therein, we confirm his order on this issue. - Decided in favour of assessee. Deduction under section 24 - CIT(A) deleted the addition - Held that:- As before the AO the issue was with regard to the income from house property, as the assessee has claimed deduction under section 24 of the Act. The assessee was having two properties and one property was self-occupied and ALV was to be computed for another property on which according to the Assessing Officer rent was of ₹ 18,000/- per month and by applying the same, ALV was worked out at ₹ 2.16 lakhs and after allowing standard deduction, interest and borrowed capital as claimed by the assessee, the income from house property was computed to be at ₹ 1,200/-. The Assessing Officer has made addition of the same, but while deleting the same the ld. CIT(A) has given a relief of ₹ 1,51,200/- in which we do not find any merit. We accordingly set aside the findings of the ld. CIT(A) in this regard. However, the difference was of only of ₹ 1,200/- on the basis of the estimation of ALV by the Assessing Officer, therefore, this addition is also deserves to be deleted being nominal addition. Accordingly we delete the same. This issue is accordingly disposed of.- Decided in favour of assessee.
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2015 (8) TMI 916
Deduction u/s 10A - non maintaining separate books of account - CIT allowing the deduction - Held that:- There is no requirement of maintaining separate books of account u/s 10A and non maintenance of separate books of account cannot be basis for disallowing the claim of deduction u/s 10A of the Act. On this aspect, we do not find any infirmity in the order of learned CIT(A). See IBM India P. Ltd. v. Deputy Commissioner of Income Tax [2011 (6) TMI 735 - ITAT BANGALORE] New unit was using the point to point leased lines and the internet leased lines of the existing unit - Held that:- The report of the Income Tax Inspector outlines that the new unit was operated on the same place and there was no demarcation between new unit and old unit but as per the CBDT Circular No. 01 of 2013 and as per the Tribunal decision in the case of ACIT Vs Symantec Software India P. Ltd (2011 (11) TMI 631 - ITAT PUNE) it was held that physical demarcation is not a criteria to decide the eligibility of deduction under section 10A of the Act so long as the new unit is independent of the old existing unit. Hence, in our considered opinion, on this aspect also, there is no infirmity in the order of CIT (A). Percentage of old plant & machinery used by new unit was more than 20% - Held that:- A clear finding is given by the learned CIT(A) that the Assessing Officer has not correctly appreciated the facts. He has also given a finding that the provision of explanation 2 to section 80I of the Act prohibits transfer of more than 20% of old total plant & machinery to new unit but in the present case, there is no transfer of plant & machinery from old unit to new unit. He has also given a finding that the total assets purchased is separately shown at ₹ 29,20,233/- and therefore, this confusion of the Assessing Officer regarding transfer of more than 20% of the total plant & machinery of old unit to new unit is not correct. Even out of new computers installed in the present year, 8 computers out of 10 computers were put to use on or before 27/09/2008 whereas the STPI approval has been granted on 16/10/2008 - Held that:- DTA unit can be converted into STP unit but even if the assessee did not choose to get its DTA unit converted into STP unit, the deduction is allowable to the assessee. In the present case also, the assessee has not chosen to convert its STP unit to DTA unit and some of the machinery were put to use before the registration granted by STPI, but this factor alone cannot be a basis to deny the assessee deduction u/s 10A of the Act. See CIT and ITO Versus Expert Outsource (P) Ltd. [2011 (3) TMI 1428 - Karnataka High Court] There is no material brought on record by the Assessing Officer to prove that the new unit was formed by splitting up or reconstruction of an existing business or transfer of old plant and machinery of more than 20% to the new unit and therefore, there is no violation of the provisions contained in section 10A(2)(ii) and 10A(2)(iii) read with explanation 2 to section 80I of the Act and therefore, the assessee is eligible for deduction u/s 10A of the Act. These categorical findings of learned CIT (A) could not be controverted by Learned D. R. of the Revenue and hence, we do not find any reason to interfere in the order of learned CIT(A) in both the years because in assessment year 2010 – 11, the order of Assessing Officer and CIT(A) are in line with the respective orders in earlier year. Hence, we decline to interfere in the orders of CIT(A) in both the years. - Decided in favour of assessee.
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2015 (8) TMI 915
Disallowance of network support service charges - non deduction of TDS for payment of the same before due date of filing the return - Held that:- There is no dispute that the assessee is liable to deduct TDS on the amount paid to the parent company M/s. GAC Shipping Co., Vaduz, Greece towards international network support service charges and technical fees. The assessee made the provision in the books of account and credited to the party's account on the last date of the financial year. The time limit for remitting the TDS is upto May 31, i.e., the succeeding financial year. In this case, the assessee remitted the tax amount only on January 3, 2007 i.e., after May 31, 2006, which is belatedly remitted by the assessee. Being so, the provisions of section 40(a)(i) is applicable. Hence, in our opinion, the lower authorities are justified in disallowing the expenditure on this count. - Decided against assessee. Restriction of rate of depreciation to 50 per cent. on software - Held that:- In this case, the purchase bill for the software was dated December 31, 2005. However, the assessee took the plea that the software was installed before September 30, 2005. However, no evidence is placed before us to show that the software was installed and payment was made before September 30, 2005 so as to own the software and use it for business purposes. Hence, the applicable rate of depreciation is to be 50 per cent. of the prescribed rate arrived at by the lower authorities - Decided against assessee. Disallowance u/s 41(1) on the amount outstanding in the name of sundry creditors - Held that:- The assessee has drawn balance-sheet based on its books of account in which the above amounts were being claimed as liabilities due to the various parties as at the end of the accounting year under dispute. However, the assessee failed to establish the genuineness of these liabilities by citing credible evidence. Simply the liabilities being reflected against certain names in its books of account would not establish the genuineness of such liabilities. On the other hand, the Assessing Officer went to the root of the issue and came to the conclusion that the alleged creditors were not genuine. The assessee was not able to establish the existence of these liabilities. In the circumstances, the lower authorities are justified in treating the liabilities as income under section 41(1) of the Income-tax Act. Being so, the lower authorities are justified in holding that such liabilities did not exist at the end of the accounting year under dispute and rightly added the said liabilities which had ceased to exist - Decided against assessee. Treatment of the expenditure incurred for obtaining the linear agency business as capital expenditure and treatment of amount of compensation received for premature termination of the agency as revenue in nature - Held that:- In the present case, the expenditure was incurred with a view to bring in an asset or advantage in the nature of agency. It is not necessary that the assessee should have final result. Admittedly in this case, the business was secured by the assessee from Hamburg Sued Line Germany and was terminated for which the assessee has received compensation from the parent company. The purpose of incurring expenditure was to acquire a capital asset. In this case, an unforeseen cancellation of agreement and receipt of compensation cannot be set off against capital expenditure because such receipt can never go into the making of the expenditure incurred for securing the agency business. The compensation received by the assessee is not from the person to whom the payment of ₹ 1,30,17,000 was made for securing the agency business and has nothing to do with acquiring of agency. The compensation received by other than the person to whom payment was made and received on termination of the agency agreement has nothing to do with the expenditure made towards securing agency business. Being so, the compensation received on termination of the agency business cannot be said to be capital receipt. Hence the treatment given by AO of the expenses incurred for securing the business as capital expenditure and the receipt of compensation on termination of the agency business as revenue in nature is justified - Decided against assessee. Disallowance u/s 40(a)(ia) - payments made outside India, on which TDS is not made/remitted within the due date - software development and licences - CIT(A) deleted disallowance - Held that:- The expenditure was not in the nature of revenue expenditure and it was capitalised by the assessee as it was in nature of software development fee and licence fee for softwares and depreciation has also been claimed on such capital expenditure by the assessee. The assessee has produced evidence in support of its contention before the Commissioner of Income-tax (Appeals) and on obtaining the requisite evidence for treating it as capital expenditure, the Commissioner of Income-tax (Appeals) allowed the same. In our opinion, it is proper to remit the issue to the file of the Assessing Officer for fresh consideration in the light of the fresh evidence produced before the Commissioner of Income-tax (Appeals). Accordingly, this issue is remitted back to the file of the Assessing Officer for fresh consideration. - Decided in favour of revenue for statistical purposes. Addition being contributions to group gratuity fund - CIT(A) deleted the addition - Held that:- The expenditure was disallowed by the Assessing Officer on the reason that the amount was contributed to the group gratuity fund which was not approved by the Commissioner. Before the Commissioner of Income-tax (Appeals), the assessee took the plea that it has been paid to LIC of India towards gratuity. In our opinion, the payment to LIC towards gratuity is to be verified and accordingly, this issue is remitted back to the file of the Assessing Officer to see whether the payment has been made to the LIC towards gratuity fund. - Decided in favour of revenue for statistical purposes. Amount written off which represent amount advanced to an ex-employee of the assessee - CIT(A) delted addition - Held that:- If the debt has not been taken into account while computing the income of the assessee in the previous year or in any previous year in which the amount of such debt is written off, the bad debt claim of the assessee cannot be allowed. Being so, it cannot be treated as bad debt under section 36(2)(i) of the Act. However, it could be allowed under section 37 of the Income-tax Act. Accordingly, the nature of expenditure should be examined by the Assessing Officer. If it is a business expenditure, then the same should be allowed. Accordingly, this issue is remitted back to the file of the Assessing Officer for fresh consideration. Decided in favour of revenue for statistical purposes.
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2015 (8) TMI 914
Expenditure on FCCB and debenture issue - CIT(A) allowing expenditure under section 35D considering the expenditure as public issue - Held that:- Qualified Institutional Buyers (QIBs) are a class of investors as a part of the large investor community and the companies sought for QIB issues because the funds can be raised within a short span. This is an extremely important investment for larger investors and since the buyers are only a class of investors, the issue of shares to QIB have been considered as public issue. The expenses in connection with public issue of shares or debentures of the company are allowable. Reliance is placed on CIT v. Shree Synthetics Ltd. [1985 (11) TMI 45 - MADHYA PRADESH High Court]. Hence on the merits of the issue, the QIB expenditure can be treated as revenue expenditure and eligible for deduction under section 35D of the Income-tax Act is confirmed. - Decided against revenue. Expenditure on account of the editorial content and brand right expenditure - revenue v/s capital expenditure - CIT(A) allowed assessee claim - Held that:- Assessing Officer disallowed the expenditure on the grounds that the expenditure has not been claimed under section 35A. It is pertinent to note are ephemeral and transitory in nature in as much as they are a part of a continuous process and need to be expended in order to generate and increase the brand recall and sustain it in the minds of customer. The Supreme Court in the case of Alembic Chemical Works Co. Ltd. v. CIT [1989 (3) TMI 5 - SUPREME Court] has itself observed that the idea of 'once for all' payment and 'enduring benefit' are not to be treated as something akin to statutory conditions ; nor are the notions of 'capital' or 'revenue' a judicial fetish. What is capital expenditure and what is revenue are not eternal verities but must needs to be flexible so as to respond to the changing economic realities of business. The expression 'asset or advantage of an enduring nature', was evolved to emphasise the element of a sufficient degree of durability appropriate to the context. The expenditure is essentially revenue in nature and the decision to treat the same as deferred revenue only represents a management decision taken in view of the magnitude of the expenditure involved. The expense in question is to be treated a deferred revenue expenditure and allowed as claimed by the appellant. With respect to Asian age brand rights and editorial contends rights, we find that the Commissioner of Income-tax (Appeals) has allowed the Asian age brand rights and editorial contents rights in the assessment year 2006-07 and the department did not file appeal accepting the order of Commissioner of Income-tax (Appeals)and hence is estopped from filing appeal on the same issue in this year (being subsequent year). - Decided against revenue.
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2015 (8) TMI 913
Non deduction of TDS u/s.194A on the interest credited/paid by the assessee to the some depositors - time limit for initiating proceedings u/ss. 201(1) and 201(1A) - Held that:- Revenue has not brought on record any outstanding demand on the deductee/s, so that time limitation of six years from the end of the relevant assessment year shall obtain, i.e. for the purpose of initiation of recovery proceedings. Further, for all the years, the proceedings were initiated on 15.02.2008, following a survey u/s.133A concluding on 07.02.2008, by extending opportunity to the assessee to explain its case qua non deduction of tax at source, which was in fact followed by similar opportunity on 22.02.2008, 27.02.2008, 03.03.2008 and 07.03.2008 (refer para 1 of the order u/s.201(1) and 201(1A) of the Act dated 31.07.2008 for all the years). These dates fall within a period of six years from the end of the relevant year for all the years under reference. Accordingly, none of the impugned initiations suffers from the legal infirmity of being barred by time. The assessee’s case, accordingly, fails for all the years. On the merits of the demand raised, on which no arguments were made and, consequently, not urged or responded to by the other side as well, the matter stands squarely covered by the decision by the co-ordinate Bench in the assessee’s case (to which both of us are incidentally a party), confirming the impugned order. It is, however, as afore-stated, open for the assessee to lead evidence before the Assessing Officer (A. O.) as to the satisfaction of the tax demand on the interest income in the hands of the deductee/s, to which extent therefore no recovery can in law be effected. The recovery of interest demand u/s. 201(1A) would again follow the prescription of the tribunal’s order, rendered following the decision in the case of Hindustan Coca Cola Beverage (2007 (8) TMI 12 - SUPREME COURT OF INDIA) and CIT vs. ELI Lilly and Company (India) (P.) Ltd. [2009 (3) TMI 33 - SUPREME COURT]. We decide accordingly.
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2015 (8) TMI 912
Denial of registration u/s.12AA - membership of the assessee’s society is open only for members of a religious community, i.e., Muslims, or the followers of the Islam faith - Held that:- As explained in A. P. Christian Medical Association vs. State of Andhra Pradesh [1986 (4) TMI 343 - SUPREME COURT] it is important and imperative that there must exist some real positive index to enable the institution to be identified as an educational institution of the minorities. That is, there should be a nexus between the institution and the particular minority to which it claims to be belonging a right to regulate admission thereto is an important right of a minority institution. However, we do not find the same expressed in the charter of the assessee-society; there being no reference to any percentage or any restriction or mandate in respect thereof in its ‘Aims and Objects’. Whatever implication this may have for its status as a minority institution, we can hardly countenance or subscribe to a proposition which, despite there being nothing either in its memorandum of association (object clause) or its conduct, sanctions a presumption that it is established for the benefit of the minority (Muslim) community, solely on the basis of it being granted the status of minority educational institution – the only restriction in its charter being toward its membership extending only to the members of the said community. If the institution has, by admitting 90% non-minority (non-muslim) students, violated any specific provision or guideline in the matter and, accordingly, stands to lose its minority status, of which we have no clue, so be it. And which again does not help the Revenue’s case in any manner; rather, only goes against it. Though, therefore, appearing anomalous in-as-much as the minority status implies an inherent right to serve the minority interest, a finding to it being set up or established for the benefit of a particular (Muslim) community cannot be a matter of presumption and rendered de hors any material on record. Notwithstanding, therefore, a minority status being accorded to its educational institutions, we are, both on the facts and in law, unable to regard it as being established for the benefit of a particular religious community. Even though the relevant provision (sec. 13(1)(b)) provides for exclusion of ss. 11 and 12 of the Act, the same could well be taken into consideration for the purpose of grant or otherwise of registration u/s.12AA in-as-much as it impinges on its public character. What, we are unable to comprehend, effect or purpose the registration would have where, notwithstanding the same, no benefit u/ss. 11 and 12 can be allowed in view of an abiding feature of the applicant’s constitution or its’ inherent nature. The Revenue has also been unable to move us on the grounds of commerciality or as to the institution/s operating for the benefit – direct or indirect, of the excluded/ specified persons.Finally, a bare reading of this order would disclose several differences between the case as made out before us and that before the tribunal (SMC Bench) in the assessee’s case relied upon by the Revenue – which order we have perused, even as the same is not binding on us. We, therefore, decide the issue of registration as a charitable institution under the Act to the assessee-society in its favour. Validity of reopening of assessment - Held that:- The A.O. has an inherent right to assess the assessee’s income, which includes reassessment of income (s. 2(8)). The only restriction is that he has to, in doing so, observe the procedure prescribed in law in its respect, with attendant consequences where not, as in the first instance, whereat the assessment was held null and void in the absence of the jurisdictional notice u/s.143(2). The appellate order dated 16.01.2009 quashing the assessment as framed, which stood upheld by the tribunal, was thus on the jurisdictional issue, i.e., the absence of jurisdiction to frame the assessment u/s.143(3)/144 r/w s. 147. There was no adjudication qua the reasons recorded or the merits of the assessment and, accordingly, no merger qua the assessment on its merits or qua the reasons recorded as to the escapement of income. The same, thus, survive, and the A.O., as the assessing authority, was fully competent to initiate fresh proceedings u/s.147, observing of course the due process of law, and which he does. We do not find any infirmity in either the procedure adopted for framing the assessment or qua its legality. The ld. CIT(A) has not decided the assessee’s other grounds, on the merits of the assessment (i.e., the additions or the disallowances made), as he had quashed the assessment, which decision by him stands hereby reversed by us. The matter, accordingly, shall travel back to his file to decide the assessee’s grounds of appeal. - Decided in favour of assessee by way of remand.
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2015 (8) TMI 911
Annual value how determined - Held that:- If once, we have settled the legal principles and which have to be applied in the cases falling under section 23(1)(a) of the Income Tax Act, 1961, then, these Appeals do not raise any substantial question of law.
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2015 (8) TMI 910
Revision u/s 263 - commission paid to non-resident foreign companies without deduction of tax at source as concluded by CIT(A) - Held that:- Assessee is engaged in the trading of yarn with various countries. In order to sell its products, the assessee appointed agents on sales commission basis in various countries. The relationship between the assessee and the non-resident agents is alleged to be that of principal and agent. The said non-resident agent is a link between the foreign buyer and the assessee. The overseas agents of the assessee do not have any permanent establishment or place of business in India and they are rendering their services outside India. As such, charging commission on the services rendered outside India is not taxable in India. See ACIT Vs. M/s.Eagle Press (P) Ltd.[2011 (6) TMI 734 - ITAT CHENNAI ] Commissioner of Income Tax is erroneous. The provisions of section 195 and section 9 of the Act, relating to deduction of tax at source on payments made to foreign parties and levy of tax on payments so made are not applicable in the present facts of the case. - Decided in favour of assessee.
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2015 (8) TMI 909
Rectification u/s 254(2) - disallowance of an amount of ₹ 17,99,74,343/- on account of marketing expenses incurred by the assessee for various reasons which was restricted to ₹ 10 crores by the Ld.CIT(A) - Held that:- CIT(A) while sustaining the disallowance of ₹ 10 crores out of disallowance of ₹ 17,99,74,343/- made under the head marketing expenses by the Assessing Officer had categorised the disallowance on account of 4 items. While he had disallowed an amount of ₹ 4,42,81,637/- and ₹ 2,00,00,000/- under 2 specific heads he did not give the bifurcation for the balance amount under the remaining 2 heads being capital expenditure in the form of production TV, Cinema, Radio and posters development and disallowance on account of whole expenditure on marketing expenses and building equity and goodwill of TCCL Brands etc. We find the Tribunal while deciding the issue has taken the balancing figure of ₹ 3,37,18,863/- as against ₹ 3,57,18,363/-. Thus, there is an apparent mistake in the order of the Tribunal in the shape of arithmetical inaccuracy. We, therefore, direct that the figure of ₹ 3,37,18,863/- appearing at Para 34 to 37 of the order be read as ₹ 3,57,18,363/-. Further, Para 37 of the order be read as under : To conclude, the addition of ₹ 10,00,00,000 sustained by the CIT(A), in respect of ‘Marketing Expenses’ is reduced to ₹ 4,42,81,637/- (Rs.4,11,61,718 + ₹ 31,19,319). In other words, the assessee gets relief of ₹ 5,57,18,363/- (Rs.2,00,00,000 + ₹ 3,57,18,363) - Decided in favour of assessee. Disallowance of Service charges - Held that:- Mere filing of vouchers in the box files in our opinion is not sufficient for allowability of the claim since the same has to be thoroughly verified by the Assessing Officer. We find the CIT(A) had given a finding that there are expenses which have been claimed by CCI Inc. under the garb of service charge but the same are not allowable as per law as business expenditure under different provisions of I.T. Act and has further observed that such expenditure contain foreign travel expenses of the spouse of the employees, capital expenditure and expenses incurred for other than business consideration including security deposit written off etc. Therefore, the Tribunal following the order for A.Y. 1998-99 had taken the conscious decision by restoring the issue to the file of the Assessing Officer with a direction to examine the genuineness as well as allowability of the expenditure. Therefore, there is no apparent mistake in the order of the Tribunal. The first issue raised by the assessee in the Miscellaneous Application is accordingly dismissed.- Decided against assessee. Disallowance of reimbursement of traveling expenses to CCI Inc - Held that:- There is no apparent mistake in the order of the Tribunal by restoring the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate the claim to his satisfaction. Since the assessee had failed before the CIT(A) to prove that the amount of ₹ 9,59,49,374/- was reimbursed in terms of the service agreement, therefore, the Tribunal in the interest of justice had restored the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate the claim. There is no apparent mistake in the order of the Tribunal on this issue. The assessee through this Miscellaneous Application requests the Tribunal to rectify the order which amounts to review of its own order which in our opinion is not permissible under the law. We therefore find no merit in the above ground. Accordingly, the second issue in the Miscellaneous Application is dismissed. - Decided against assessee. Write-off of security deposit disallowed - Held that:- Tribunal while deciding the issue has simply upheld the order of the CIT(A) holding that this is a capital loss and not an allowable expenditure. However, the various arguments including the decision of the jurisdictional High Court in the case of Richardson Hindustan Ltd. (1987 (3) TMI 44 - BOMBAY High Court ) which was relied upon by the Ld. Counsel for the assessee at the time of hearing have not been considered. Non-consideration of submission including decision of jurisdictional High Court cited at the time of hearing in the order passed by the Tribunal constitute apparent mistake. We, therefore, recall the order of the Tribunal for the limited purpose of adjudicating issue No.III of the Miscellaneous Application, i.e. disallowance of security deposit - Decided in favour of assessee. Depreciation on coolers disallowed - Held that:- Tribunal while deciding the issue has upheld the order of the CIT(A) on the ground that for claiming depreciation the asset must be owned by the assessee and must be used for the business purposes and held that in the instant case although coolers are owned by the assessee but these are not used by the assessee but used by vendors or bottlers who sold the beverages manufactured by concerns other than assessee. However, the alternate contention that once an asset is part of the block, the user of the block has to be seen and not that of individual asset has not been considered. Therefore, to this extent a mistake apparent from record has crept in the order of the Tribunal which in our opinion requires rectification.- Decided in favour of assessee.
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Customs
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2015 (8) TMI 939
Afresh Consideration of Matter – Revenue praying that previous orders be set aside and Appeal against order of commissioner be re-heard and in accordance with law whereby he confirmed re-determined value, confiscated rough diamonds absolutely and imposed penalties upon respondent – Held that:- Appeal to be restored to file of CESTAT for being decided afresh in accordance with law and after giving opportunity of being heard in person to all parties thereto – Tribunal to administer caution while adjudicating matter – Petition disposed off – Decided in favour of Revenue.
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2015 (8) TMI 938
Appeal against Conviction – Possession of controlled substance – Appellant assailing order of trial court convicting him for offences under section 9A and 25A of NDPS Act, 1985 and sentencing to undergo rigorous imprisonment with fine – Held that:- appellant was admittedly carrying controlled substance when she was detained – Also controlled substance was being carried in secret compartment of her luggage – Supreme Court in case of Union of India vs. Kuldeep Singh [2003 (12) TMI 628 - SUPREME COURT OF INDIA] held that it is duty of every court to award proper sentence having regard to nature of offence and manner in which it was executed or committed – Offence relating to narcotic drugs or psychotropic substances were more heinous than culpable homicide because latter affects only individual while former affects and leaves its deleterious impact on society – In view of said observation, present court would fail in duty, if offenders such as appellant, were shown any leniency in matter of sentence – Thus, impugned order of conviction upheld – Decided against appellant.
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2015 (8) TMI 937
Benefit of Indo-Sri Lanka Free Trade Agreement – Detention of Consignment – Customs authorities detained consignment of Respondent, as it was alleged that goods were manufactured in China and had been imported to India via Sri Lankan route to avail the benefit of Indo-Sri Lanka Free Trade Agreement – High Court vide impugned judgment directed respondent to deposit customs duty and to furnish bank guarantee of 20 per cent in order to release goods – Held that:- Admitted that show cause notice was issued by authorities – In view of stand taken by respondent in show cause notice, it would be appropriate for customs authorities to proceed with said show cause notice and decide case on merit – Respondent contested averments that certificate which was received from Sri Lankan authorities pertains to some other party, respondent has also filed some more documents on basis of which it was claimed that matter to be given quietus – Thus, adjudicating authority to decide matter after hearing respondent – Matter remanded back for re-consideration – decided against revenue.
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2015 (8) TMI 936
End-Use of components – Manufacture of Watches – Vide impugned order reported in [2004 (11) TMI 259 - CESTAT, BANGALORE] tribunal remanded case back to Commissioner for deciding matter afresh – However one issue, relating to end-use of components that were imported by respondent for manufacture of watches, there was some dispute between parties – Whether respondent had used those parts for manufacture of watches in its own factories or not – Held that:- End-use certificate was produced and filed along with additional affidavit before tribunal – Revenue was given time to file response thereto, however no reply was filed which means that averments made in additional affidavit were accepted – Therefore that part of order passed by tribunal would not call for any interference – Order to consider matter afresh sustains – Decided against Revenue.
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2015 (8) TMI 935
Inclusion of charges in CIF cost - Tribunal vide impugned order reported in [2003 (9) TMI 692 - CESTAT, BANGALORE] while relying upon decision of Apex court in M/s. Coromandal Fertilizers Limited [1999 (12) TMI 59 - SUPREME COURT OF INDIA] deleted inclusion of Berth hire charges, Pilotage charges, Port dues, Wharfage charges in CIF cost - Aggrieved by said order revenue appealed - Supreme court held that Tribunal had rightly allowed appeal of respondent relying upon decision of current Court in M/s. Coromandal Fertilizers Limited - Thus, no merit found in appeal.
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2015 (8) TMI 934
Refund claim - Vide impugned order of tribunal reported in [2014 (3) TMI 245 - CESTAT MUMBAI] allowed refund claim of respondent under Notification No. 21/2002-Cus., and Notification No. 1/2011-C.E. - In view of judgment delivered in case of M/s. Ralson (India) Ltd. Versus Commissioner of Central Excise [2015 (4) TMI 74 - SUPREME COURT], current court dismissed appeal of revenue.
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Corporate Laws
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2015 (8) TMI 933
Revocation of order accepting highest bid auction of property of company under liquidation - High Court vide impugned order recorded that Company Judge s order accepting bid of appellant was vitiated as Judge failed to take note of potential value of land and bid of appellant was inadequate price to property in question Held that:- It was well settled principle as opined in case of Navalkha Sons Versus Sri Ramanya Das Ors. [1969 (10) TMI 41 - SUPREME COURT OF INDIA] that company court had discretion to either accept or refuse highest bid at auction, it also emphasizes obligation of Court to see that price fixed at auction is adequate price even though there is no irregularity or fraud in conduct of sale Equally well-settled principle that once Company Court recorded its conclusion that price is adequate, subsequent higher offer cannot be ground for refusing confirmation Highest bid of appellant was accepted by Company Court and all stake-holders of company in liquidation were heard before such acceptance Nobody ever objected including first respondent at that stage on any ground whatsoever No doubt, property in question became more valuable in view of subsequent development None of stake-holders of Company in liquidation ever objected to offer of appellant on ground that it is inadequate consideration for property Value of property in question must have escalated substantially in view of developments subsequent but allowing such attempt, would rob sales conducted by Courts of all sanctity Thus, he High Court was not justified in recalling order accepting highest bid Decided in favour of Appellant.
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2015 (8) TMI 932
Territorial jurisdiction to entertain suit – location of registered office of the company or location of carrying business or location of directors or location of regional office - Cause of action arising at principle place – Whether Trial Judge was right in taking view that respondent having only regional office in Mumbai, part of cause of action must also arise in Mumbai – Held that:- Supreme court in case of Jindal Vijaynagar Steel [2006 (8) TMI 594 - SUPREME COURT OF INDIA] rejected argument of reading explanation to Section 20 into Clause12 of Letters Patent, because section 120 of CPC expressly provides that Section 20 shall not apply to High Court in exercise of its original civil jurisdiction – As per settled position, principles of CPC should nevertheless be applied, as far as possible, to proceedings of civil nature, even where application of CPC has been barred – Since respondent was carrying on business within limits of jurisdiction of current Court through its regional office, it is not necessary to consider whether cause of action or any part thereof arose within territorial limits of current Court – Requirements of clause 12 are clearly satisfied once defendant is stated to be carrying on its business through regional office within territorial limits – Impugned order set aside and summary suit is maintainable under Clause12 of Letters Patent – Decided in favour of Appellant.
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Service Tax
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2015 (8) TMI 958
Waiver of pre deposit - Underwriter service - Assessee contends that the underwriting was rendered by the foreign underwriting firms and the entire service was rendered outside India and no part of the service was performed in India - Held that:- as per RBI Clarification No.13 relating to guidelines for ADR/GDR issues by the Indian Companies the appellants are free to access the ADR/GDR markets through an automatic route without the prior approval of the Ministry of Finance, Department of Economic Affairs. - Section 66A of the Finance Act, 1994 prescribes levy of service tax on services provided by service provider abroad having fixed establishment thereat to a person in India having fixed establishment in India. It is fundamental principle of that section to treat the recipient of such service as provide thereof and levy tax on such service. This is with a view to obviate the difficulty of bringing a foreign service provider to the Indian law for taxation. Therefore provision of taxable service by a party outside India to the recipient in India is sufficient compliance to taxability. Prima facie looking into various aspects of the case and without prejudice to the grounds of appeal of appellant as well as contentions of Revenue and also taking into consideration the limitation aspect, it appears that the service provided having "relation to" underwriting of shares of the Indian Company (appellant) provided "in any manner" brings that service to fold of section 65 (105)z of the Finance Act, 1994 and also considering the scheme of Reverse charge mechanism, appellant is directed to deposit ₹ 7,00,00,000 within eight weeks from the date of receipt of the order - stay granted partly.
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2015 (8) TMI 957
Manpower recruitment and supply services - services rendered by the appellant of making arrangements for activities of harvesting of sugarcane, loading and unloading and transportation of sugarcane in and for various sugar factories - Revenue alleges that appellant receives the payment from sugar factories and retains a part of the amount while paying the sub-contractors and also charges the sugar factory an amount of Management fee - Held that:- involved in this case is now squarely covered by the decision of this bench in the case of Godavari Khore Cane Transport company Private Ltd. - [2015 (4) TMI 79 - CESTAT MUMBAI] where an identical issue was agitated before the bench. Aggrieved, that in that case decision went in favour of the assessee, revenue preferred an appeal to the Honourable High Court of Bombay and their Lordships by judgement d[2015 (3) TMI 483 - BOMBAY HIGH COURT] dismissed the appeal of the revenue - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (8) TMI 956
Denial of CENVAT Credit - Credit on sales commission - Invocation of extended period of limitation - Held that:- Gujarat High Court in the case of Cadila Healthcare Ltd (2013 (1) TMI 304 - GUJARAT HIGH COURT), after considering the decision of Hon’ble Punjab & Haryana High Court [2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT], held that CENVAT Credit on overseas commission would not be admissible and hence, the denial of CENVAT Credit on merit is sustainable. Vide Boards Circular No.943/4/2011-CX, dt.29.04.2011, it was clarified that the definition of input service allows all credit on services used for clearance of final product upto the place of removal. Moreover, the activity of sales promotion is specifically allowed and on many occasions, the remuneration for same is linked to actual sale. Reading the provision harmoniously, it is clarified that the credit is admissible on the services of sale of dutiable goods on commission basis. The Hon’ble Gujarat High Court in the case of Cadila Healthcare Ltd (supra) differed with the view of Hon’ble Punjab & Haryana High Court in the case of Ambika Overseas (supra). It is also noted that the Tribunal in various decisions during the material period held that the CENVAT Credit is available on overseas sales commission. - there is sufficient material to take up the view that the Appellant was holding a bonafide belief of the admissibility of CENVAT credit on overseas sales commission. We have also noticed that the Appellant has taken the credit and duly recorded in the CENVAT account. Thus, there is no material available to invoke the extended period of limitation. Accordingly, the demand of CENVAT Credit alongwith interest and penalty for the extended period cannot be sustained. Denial of CENVAT Credit alongwith interest and penalty is set aside, as barred by limitation - Decided partly in favour of assessee.
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2015 (8) TMI 955
Penalty u/s 78 - assess had collected the service tax but failed to deposit the same with the Government account due to financial crisis - Held that:- Assessee has discharged the entire service tax liability with interest. On a specific query from the Bench it was informed by the department that the entire amount of service tax has been discharged before issue of show-cause notice - invoking of Section 80 of Finance Act, was discretionary power used by adjudicating authority and recording reasonings for doing so. The appeal against the discretionary powers to set aside penalty is incorrect as the reasoning as recorded by the adjudicating authority are acceptable reason for invoking the provisions of Section 80 of the Finance Act, 1994 - Decided against Revenue.
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2015 (8) TMI 954
Business Auxiliary Service - Display of exhibitions - amount received from members and non-members of the Association / Chamber - Held that:- Appellant has received an amount from the members of the association as well as from non-members. We find strong force in the contention raised by the learned Counsel as regards the service tax liability on the amount received from the members, no tax liability arises and is covered by the judgement of Hon’ble High Court of Gujarat in the case of Karnavati Club Ltd (2009 (9) TMI 561 - GUJRAT HIGH COURT) and by the Hon’ble High Court of Jharkand in the case of Ranchi Club Ltd. (2012 (6) TMI 636 - Jharkhand High Court). To that extent appeal needs to be allowed and the impugned order needs to be set aside. Consequently the liability of interest and penalty also needs to be set aside; as the appellant is an association of Housing Industry and conducts various exhibitions for benefit of builders etc. who are members. - Decided in favor of assessee. As regards the demand raised on the amount received by the appellant from the non-members, the service tax liability does arise - While upholding the demand of service tax and interest, levy of penalty waived invoking the provisions of section 80 - Decided partly in favour of assessee.
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2015 (8) TMI 953
Denial of CENVAT Credit - Event Management Services - Invoices in the name of unregistered branch office - whether the appellants are entitled to avail the Cenvat Credit on the strength of invoices/bills issued to their Delhi office which is unregistered with Service Tax Department - Held that:- there is no allegation that the input services were not received/utilized by the appellant. So also there is no dispute that such input services were not properly accounted. In the absence of any such dispute regarding availment of services and their utilization for payment of service tax or proper accounting of the same, the denial of Cenvat Credit of service tax paid by Nainital office of the appellant on the sole ground that the invoices issued are in the name of the appellants unregistered office at Delhi is unjustified. - denial of Cenvat Credit by the authorities below is not justified - Penalty imposed is also set aside - However, late fee imposed under section 70 of Finance Act for late filing of ST-3 returns is reduced - Decided partly in favour of assessee.
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Central Excise
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2015 (8) TMI 949
Application to not arrest and detain the petitioner - Held that:- The power of arrest has been conferred upon the excise authorities on existence of certain conditions. It is well protected inasmuch the excise authorities would have to satisfy certain conditions as provided in Section 13 of the Act, 1944. There is no factual foundation in the writ petition to demonstrate that the apprehension of the petitioner is founded of any material on record. Moreover, if the power is exercised validly under the statute, the law does not permits this Court to interfere in exercise of such statutory power by issuing mandamus. - writ of mandamus would lie only if the petitioners are enforcing a legal right and the respondents are under statutory obligation to do or not to do something but have failed to do so. - petitioner is not entitled for any relief. - Decided against Petitioner.
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2015 (8) TMI 948
Refund - unjust enrichment - payment of duty initially on captive consumption of intermediate product which were exempt from duty - Held that:- Tribunal having not dealt with the matter satisfactorily and while rendering the conclusions against the assessee, having failed to note the Commissioner’s findings that we are of the view that the impugned order deserves to be quashed and set aside. In order to give complete opportunity to both sides and to rely on the materials before the Commissioner and assail them or support them totally, interest of justice would be served if we restore the Revenue’s Appeals, on which the impugned order has been passed, to the file of the Tribunal, for being dealt with afresh on their own merits and in accordance with law.
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2015 (8) TMI 947
Valuation of goods - inclusion of additional monetary consideration - transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement - Held that:- As per the definition of 'transaction value' contained in this very section, i.e. Section 4(3)(d), certain charges can be added to the price at which the goods are actually sold, under certain circumstances. These include the provision for advertising or publicity, marketing and selling organization expenses, storage, outward handling, servicing, warranty commission etc. However, Rule 6 of the Rules specifies that if the goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section 4, then the value of such goods shall be deemed to be the aggregate of such transaction value plus the 'amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee'. The implication of this Rule is that any form of additional consideration which flows from the buyer to the assessee, monitory value thereof is to be included while arriving at the transaction value. It is not necessary that such an additional consideration is to flow directly and even indirect consideration is includible. It is in this context we have to examine as to whether the consideration in the form of drawback, which accrued in favour of the assessee, could be connected with the buyer. It was possible if the transaction between the buyers and the assessee was seen in isolation. However, in the present case, it needs to be emphasized at the cost of repetition that the resultant effect of invalidating the advance licence by the buyer was issuance of licence for intermediate supply in favour of the assessee and the said licence enured certain benefits in favour of the assessee. - Commissioner has rightly come to the conclusion with regard to the fact that additional monetary consideration, in addition to the price being paid for the goods, i.e. transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement, is a consideration, the monetary value of which has to be considered under the provisions of the Rules, i.e. Rule 6 thereof. Case is squarely covered by the judgment of this Court in IFGL's case [2005 (8) TMI 112 - SUPREME COURT] - Decided in favour of Revenue.
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2015 (8) TMI 944
Classification of unprocessed and dipped nylon tyre cord fabric - Whether the respondent-assessee would be entitled to avail exemption from excise duty leviable under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 - Held that:- CESTAT has, without discussing the facts of this case or analyzing the same, allowed the appeal of the respondent herein following the order of this Court in Commissioner of Central Excise, Goa and Chennai Vs. M.R.F. Ltd., Chennai [2005 (1) TMI 110 - SUPREME COURT OF INDIA], with the observation that the said judgment settles the matter of classification of dipped nylon tyre cord fabric under heading 5905 upto 16.3.1995 and under heading 5906 after the aforesaid date. - After going through the judgment in M.R.F. Ltd. (supra) Court finds that classification dispute was not decided and on the contrary for this very purpose the matter was remitted to the Commissioner - order of the Tribunal is set aside and the matter is remitted to the Commissioner for fresh consideration - Decided in favour of Revenue.
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2015 (8) TMI 943
Classification of goods - whether the goods manufactured by them are classifiable under sub-heading No. 3921.10 of the Schedule to the Central Excise Tariff as claimed by them or under Heading No. 94.04 of the Tariff - Supreme Court dismissed the appeal as withdrawn. The appeal was filed by the assessee agains the decision of Tribunal [2003 (9) TMI 443 - CESTAT, NEW DELHI]; wherein Tribunal held that where PU Foam sheets cut to size of mattresses have been affixed with industrial tape on the edges, the products have become mattresses classifiable under Heading 94.04.
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2015 (8) TMI 942
Duty demand - Manufacture of goods or not - conversion of incomplete or unfinished article into a complete finished article - Supreme Court dismissed the appeal due to nominal tax effect. The appeal was filed by the Revenue aganst the decision of Tribunal [2003 (8) TMI 264 - CESTAT, MUMBAI], wherein Tribunal held that There is no allegation in the notice or finding by the adjudicating authority that the various firms which were undertaking these activities are same as the respondent. The notice itself proceeds on the footing that the various processes which resulted in the completion of the incomplete product or the finishing or the unfinished product are undertaken by persons other than the respondent. Therefore, if duty is payable, it is one or more of these persons that would be liable and not the respondent.
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2015 (8) TMI 941
Classification of goods - Classification of fabric under Heading 52.07 or under Heading 59.06 - Held that:- issue involved in the present appeal is covered in its order dated 23-2-2015 wherein the Court has affirmed the findings of the Tribunal in the case of ASHISH ENTERPRISES [2002 (6) TMI 79 - CEGAT, MUMBAI] holding that the fabric in question shall be classifiable under Chapter Heading 52.06 of Central Excise Tariff and not under Heading 59.06. Since the issue of classification stands settled in the aforesaid case which is also the issue involved in the present case, finding no merit in this appeal - Decided against Revenue.
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2015 (8) TMI 940
Denial of refund claim - original payment of duty at the time of clearance of the goods from the factory was based on sales price and since those sales prices constituted the correct assessable value, no excess payment of duty has taken place - Supreme dismissed the appeal fled by the Revenue holding that there is no reason to interfere with the impugned orders - The appeal was filed against the decision of Tribunal [2003 (7) TMI 234 - CESTAT, NEW DELHI], wherein Tribunal held that Since original payment of duty was based on amounts higher than the transaction value, the appellant was rightly eligible for refund of duty paid on the excess amounts. Since the credit notes indicated not only revised prices, but also Cenvat amounts, there could also be no question of the appellant passing on higher amount of excise duty to the buyers. Both price and duty were settled taking into account credit notes. All payments, both price and duty, were net of credit note amounts.
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CST, VAT & Sales Tax
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2015 (8) TMI 959
Benefit of set-off /Input Credit Tax – Whether input credit of taxes paid on purchase of cotton seed used in manufacture of cotton seed oil can be denied proportionately merely because during process of manufacture by-product (cotton seed cake) is also produced, so when taxable and tax-free goods are simultaneously manufactured, appellant dealer would be entitled to input-tax credit of total tax paid on purchase and same cannot be reduced on pro rata basis – Held that:- it is clear that manufacturer is eligible for benefit of set-off on entire amount of tax paid on purchase of raw material and principle of proportionate liability has been found to be unsustainable –Therefore purchase made by manufacturer with regard to raw material, he is entitled to benefit of set-off on entire amount of tax and principle of apportionment cannot be invoked –Impugned order imposing liability is quashed – Decided in favour of Assesse.
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2015 (8) TMI 952
Pre-Deposit Amount – Non-Deposit – Petitioner-dealer praying for direction to quash and set aside impugned order of tribunal by which order of Appellate authority directing dealer to deposit sum as pre-deposit was upheld – Despite service of order of pre-deposit, dealer failed to deposit amount of pre-deposit and dealer submitted application requesting to reconsider order of pre-deposit – Application and appeal filed against order of pre-deposit was dismissed – Held that:- Admitted that first appellate authority had given numerous opportunity so as to enable dealer to produce necessary documents / evidences before determining amount of pre-deposit – Despite aforesaid opportunities, dealer failed to produce any document and only thereafter, first appellate authority passed order directing dealer to deposit sum as pre-deposit –When dealer was asked to accept copy of order of pre-deposit, he refused to accept its copy – Aforesaid conduct on part of dealer dis-entitles him discretionary relief – Even otherwise on merits also it cannot be said that tribunal committed any error in directing dealer to deposit of pre-deposit as directed by first appellate authority – While passing impugned order tribunal did considered communication / reply submitted by dealer – In view of reasons, impugned order does not require any interference – Decided against Assesse/Dealer.
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2015 (8) TMI 951
Revision of Assessment order – Validity – Commissioner by invoking suo moto revisional powers as per section 63A of KVAT act, revised order of assessment – Aggrieved by revision of assessment order petitioner filed appeal before tribunal which was rejected – Held that:- Section 63A makes it clear that Joint Commissioner has power to exercise revisional jurisdiction for which was not prior to four years from date of order sought to be revised – Rule against retrospective operation was fundamental rule of law that no statute shall be construed to have retrospective operation unless such construction appears very clearly in terms of Act – Therefore Commissioner had power to revise assessment order – No ground to interfere with order of Tribunal – Petition dismissed – Decided against Assesse.
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2015 (8) TMI 950
Cancellation of Registration certificates – Billing activities – After giving opportunity to petitioner, concerned authority cancelled registrations, both under VAT Act and CST Act – By impugned judgement tribunal confirmed orders cancelling registration certificates – Held that:- registration certificates of petitioner under VAT Act as well as CST Act was cancelled ab-initio, as it was found that they had indulged into billing activities only – Petitioner had disclosed / declared only one Bank Account however, on inquiry it was found that all transactions by petitioner were from account, which was not declared / disclosed – Upon considering entire records alleged purchases by petitioner were not genuine and/or same were billing activities only – Therefore, it cannot be said that tribunal has committed any error in confirming order passed by authority cancelling registration certificates of petitioner dealer under VAT Act and CST Act ab-initio – No reason to interfere with impugned orders passed of tribunal – Decided against Assesse.
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2015 (8) TMI 945
Valuation - Price fixation of rectified spirit - Earlier HC has declared the provisions of Rule 17 unconstitutional in the case of Gowri Industries [1993 (10) TMI 354 - KARNATAKA HIGH COURT] as, Rule 17 in so far as it empowers of the fixation of price of rectified spirit, is therefore, declared as unconstitutional, and ultra vires the provisions of the State Act. Held that:- The contention of learned counsel for the Appellant is that the State is not entitled to take away the extra profit of ₹ 1/- per litre which the Appellant earns because molasses is available in its own premises. This argument, however, conveniently ignores the fact that the Respondent State had made it incontrovertibly clear that it would permit the Appellant to sell rectified spirit at the common fixed rate of ₹ 6/- provided it transferred ₹ 1/- per litre to the State. If the Appellant was serious in questioning the legal capacity of the Respondent State recover the said ₹ 1/- per litre, it perforce had to challenge the Government Order dated 12.5.1992. Having failed to do so it cannot, thereafter, challenge the Demand dated 15.12.1993 which is predicted on the Government Order itself. There were three Appellants before the Division Bench of the High Court of Karnataka in the case of but only one of them, i.e. the Appellant before us, has decided to further challenge the Demand of ₹ 13,32,000/- being accorded at ₹ 1/- per litre sold by the Appellant. It is also relevant to mention that the Appellant has not challenged the Demand of transportation charges of 1/- per litre for any subsequent charges - Appellant had full knowledge of the fact that it had been permitted to supply rectified spirit to third parties who are engaged in the business of production of arrack on the condition that of the general fixed price of ₹ 6/- per litre, ₹ 1/- per litre would have to be made over to the Respondent State. - Decided against assessee.
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Indian Laws
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2015 (8) TMI 946
Entitlement to pay proportionate annual rental for the year 1999-2000, instead of full annual fee of 13 lakhs which was applicable for that year in respect of an FL3 licence granted - Held that:- the legal principle to the effect that no person can be prejudiced because of an act of a Court is apposite and relevant in the present case. We say this keeping in perspective the position that although the Appellant had applied for the FL3 licence which would ordinarily run the course of one financial year, due to interim orders passed by the Courts, the Appellant could only utilize it for a fraction of that period. We hasten to clarify that the Appellant’s application was not made in the duration of that year and was thus initially not for a fraction of the financial year. This Court has already held in R.Vijaykumar, in the circumstances prevailing in that case, that the Department could not interfere with the utilization of the FL3 licence, provided that the licensee complied with all other conditions as well as “payment of annual rental proportionately”. It is therefore clear that Rule 14 would not impede or inhibit the charging of annual proportionate fee so long as no failure is placed on the licensee or it is blameworthy itself. Licensee was entitled to remission of payment of kisht because of being disabled to conduct its business on account of the interim orders passed by the Court. We affirm the conclusions arrived at in these decisions. We hold that a party is entitled to seek a remission in the payment of licence fee if it is precluded from transacting business on the strength of that licence because of factors and reasons extraneous to it and/or if it is granted the licence on the direction of a Court for only a portion of the financial year. In order to eradicate any possibility of misunderstanding our present Judgment, we hasten to clarify that had the Appellant’s application for renewal of the FL-3 licence found approval instead of rejection on 4.9.2002, the Appellant would have been liable to pay the entire fee for the year 2001-2002. This is so for the simple reason that there was no third party interference or intervention which led to the non-utilization of that licence for the previous portion of that year; it may be reiterated that the Appellant had to locate fresh premises. However, after 4.9.2002, the Appellant cannot be held responsible in any way for the non-utilization of the licence up to the date it was eventually renewed i.e. 25.3.2003 - It would be fair to cogitate upon whether the Appellant should have declined the licence for virtually a week in that year, and since it failed to exercise that option, whether it should be burdened with the fee for the full year. It seems to us that any person placed in the position of the Appellant would not be in a position to decline to accept the renewal of the licence even though it was for less than a fortnight, since that would have led to the licence being rendered defunct; which may have then led to consequence of disentitlement for grant or renewal of the FL3 licence in the future. - Decided in favour of appellant.
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