TMI Tax Updates - e-Newsletter
August 27, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Penalty under Section 271D - violation of provisions of Section 269SS - the funds were urgently required for conversion of the property, a loan was taken from the Samajwadi Party, which was deposited in her account and, subsequently, the loan was paid back to the Samajwadi Party - as the genuineness of the transaction has not been disputed by the AO - No penalty - HC
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Income Tax:
TDS liability - ITAT was not required to decide whether the amount paid was liable to be deducted u/Sec. 194J or 194C but whether on non-deduction of TDS, penalty was leviable u/Sec. 271C of the Act or not - ITAT to re-adjudicate the matter - HC
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Income Tax:
Liability for deduction of TDS u/s 195 r/w S.197 - the income earned by M/s Sheraton International, USA in India was not liable for deduction of TDS u/s 195 r/w S.197 of the Act, in respect of payments made by the assessee as they did not have a permanent establishing in India as per S.9 r/w its explanation - HC
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Income Tax:
Addition under the head of 'fraud payment'- The failure by the Assessee's employees to do so resulted in a legal liability on the Assessee to make good the loss to IHCL - claim of expnediture u/s 37 allowed - HC
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Income Tax:
Interpretation of Section 139(5)- whether Tribunal is right in law in holding the 'revised return' of income filed by the assessee beyond the time limit prescribed under section 139(5) of the Income Tax Act is admissible? - Held Yes - HC
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Income Tax:
TPA - the assessee cannot seek to raise an issue before the Tribunal in respect of which he has not filed any objection before the Dispute Resolution Panel nor has the Dispute Resolution Panel considered the issue in exercise of their powers u/s 144C(8) - AT
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Income Tax:
Profit on transfer of development rights to the fully owned subsidiary company - since the said profit does not fall under the definition of “income” at all and since it does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB - AT
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Income Tax:
Expenditure claimed under the head “provision towards SOBM and drill cutting disposal expenses” - the said provision is offered as income in the succeeding year in the form of reduction of corresponding expenditure - claim is tax neutral in nature - deduction allowed - AT
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Income Tax:
Transfer pricing adjustment - there is no justification for inclusion of the future year’s profit margins while determining the ALP of the current year’s international transactions. - AT
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Income Tax:
Addition relating to shifting of profits made - AO has not brought any material on record to show that the assessee had received back corresponding amount equivalent to the amount of profit claimed to have been shifted to the clients. The AO has mainly relied upon the report given by the MCX and has drawn adverse conclusions without bringing any material to support his view. - AT
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Income Tax:
Addition made u/s 69C - the vary basis for making the addition i.e. the Sale Deed was declared as Null & Void and there was no evidence available on the record to substantiate that the cash transaction had ever passed hands - no addition - AT
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Income Tax:
Revision u/s 263 - According to the scheme of the Act, the revenue is entrusted with the levy and collection of tax in accordance with law. If due to an erroneous order of the Assessing Officer, the revenue is deprived of tax lawfully payable by an assessee, it would certainly be prejudicial to the interests of the revenue. - HC
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Income Tax:
Disallowance of exemption claimed u/s 54EC on investment in REC Bonds - Claim of the assessee cannot be denied on the only ground of delay in investing in the REC Bonds due to non-availability of REC Bonds. - AT
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Income Tax:
Transfer pricing adjustment - in the earlier year once these two companies have been found to be functionally similar, then in this year they cannot be rejected on functional analysis. - AT
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Customs:
Prohibition on import of Palm oil – Violation of Article 14 – Revenue have been able to demonstrate intelligible basis for issuing impugned Notifications having rational nexus with objectives sought to be achieved – Thus, it cannot be said that notification was violative of Article 14 of Constitution - SC
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Customs:
Precondition to Appeal – Reproduction of Commissioner’s findings show that there was no conclusion reached that assessee had violated any comprehensive policy or any provisions in Customs Manual –That itself made out arguable case - Tribunal was not justified in imposing condition of deposit on assesse - HC
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Customs:
Attempt to export controlled substance – Both convicts have young children to look after and it is also to be borne in mind that convicts are women - Appeal disposed off with direction that both accused be deported to their country - HC
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Corporate Law:
Registration for operating CIS scheme - sham CIS – Winding up of scheme and refund on non-compliance – Whether SEBI was justified in holding that schemes floated by Applicant constitute Collective Investment Schemes (CIS) under SEBI Act, 1992 and that Applicant and its promoters and directors, were liable to wind up said schemes – Held Yes - SAT
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Service Tax:
Condonation of delay - Inordinate delay of 536 days - the appeal should not have been dismissed merely on the ground of delay because a litigant should not suffer because of ill health of the Advocate - HC
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Service Tax:
Job Work activity - lumpsum contract of carrying out the job in the factory premises - This activity will not be covered under the category of "Manpower Supply Recruitment Services" - AT
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Service Tax:
Business Auxiliary Service - Sale of SIM cards - activity of purchase and sale of SIM Card belonging to BSNL where BSNL has discharged the Service Tax on the full value of the SIM cards does not amount to providing Business Auxiliary Service - HC
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Service Tax:
Business Auxiliary Services - Space provided to banks - mere providing of table space will not give valuable inputs to identify as to what taxable service is rendered. - Demand set aside - AT
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Central Excise:
Valuation - what is paramount is that the value of the excisable goods even on the basis of “transaction value” has only to be at the time of removal, that is, the time of clearance of the goods from the appellant’s factory or depot as the case may be - “cash discount” has therefore to be taken into account in arriving at “price” even u/s 4 - SC
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Central Excise:
Classification of Vaseline - the product was formulated and essentially used for treatment of 'cracked heels' - smoothing the skin was secondary in nature - it was to be treated as a medicament and classified under Chapter 30 - SC
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Central Excise:
Invocation of extended period of limitation - When the authorities ask the appellants to take licence in the year 1983 itself and the respondents did not comply, nothing prevented the authorities to take action against the respondents immediately, rather than waiting for number of years before issuing the show cause notice - SC
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Central Excise:
Recovery of excise duty - since Last 2 years the case has been listed number of times and getting adjourned - Keeping in view the conduct of appellant/advocate Revenue is free to recover the adjudged liability. - AT
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Central Excise:
Valuation - Short payment of excise duty - appellant had acted under bona fide belief that VAT amount collected by them from the customers and retained was not includible in the assessable value - longer limitation period would not be available and as such - AT
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VAT:
Reversal of Input Tax Credit on issuance of credit note – nothing has been brought on record by Department to show that arrangement by which discounts/incentives were offered to purchasing dealers by selling dealers was with view to "defeat the application or purposes of" any provision of DVAT - ITC not be reversed - HC
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VAT:
Interest on refund of Tax demand – Interest to be granted from date of deposit or from the date of assessment order – Revenue suffers no loss thereby for it has enjoyed benefit of money during period - interest allowed from the date of deposit - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (8) TMI 992
Penalty under Section 271D - violation of provisions of Section 269SS - assessee filed her reply stating that since she did not had the requisite funds at that point of time and the funds were urgently required for conversion of the property, a loan was taken from the Samajwadi Party, which was deposited in her account and, subsequently, the loan was paid back to the Samajwadi Party - ITAT deleted penalty - Held that:- Even though the assessee had taken a loan in cash, nonetheless, the loan transaction was a genuine transaction and was routed through the bank account of the assessee which clearly shows the bonafides of the assessee. The cash given by the lender was not unaccounted money but was duly reflected in their books of account. The Assessing Officer also accepted the explanation and found the transaction to be genuine. The contention of the learned counsel for the appellant that since there was no urgency, the assessee could have taken the loan through cheque and should have processed the matter through regular banking channels is immaterial, inasmuch as the genuineness of the transaction has not been disputed by the Assessing Officer. Further, we find that the cash was deposited in the bank account of the assessee and the money was thereafter, routed through the banking channel for payment to the government for converting the land into free hold property. Thus as reasonable cause had been shown by the assessee and the provisions of Section 273B of the Act was applicable. The appellate authorities were justified in holding that no penalty could be imposed since a reasonable cause was shown by the assessee - Decided in favour of assessee.
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2015 (8) TMI 991
Income earned from export of exhibition rights of cinematographic films - whether would not constitute undisclosed income as per Section 158B(b) as the said amount has been declared in the regular return of income for the assessment year 1994-95 filed belatedly as held by ITAT - Held that:- In the present case, the disclosure by the assessee had been made to the Department by way of a disclosure under the Scheme (VDIS) of the respondent as well as by its communication dated 20.08.1998 and also the return of income filed by the assessee on the same date, which was duly acknowledged by the Department and hence it cannot be said that there was no disclosure of such income made by the assessee prior to the search conducted by the Department. Such income of the assessee which had not been disclosed and was found during the search conducted at its premises to have been earned by the assessee would certainly attract the provisions of the Chapter XIV-B. However, if there was information of such income already given by the assessee to the Department much prior to conduct of the search, as is so in the present case, the same cannot be termed as undisclosed income. It is not disputed by either of the parties that search was conducted by the Department on 29.05.2001, whereas disclosure by way of information or by way of filing of the return of income (both on 20.08.1998) was already there with the Department, which was given by the assessee nearly three years prior to the search. In fact, it was that very communication of the assessee dated 20.08.1998 which was the basis on which the Department claims the said income to be an undisclosed income. We cannot thus accept the situation where the very communication of the assessee disclosing certain information regarding its income to the Department itself is treated as undisclosed income of the assessee, attracting the provisions of Chapter XIV-B of the Act. - Decided in favour of assessee.
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2015 (8) TMI 990
Sale of land - business income or capital gain - Tribunal held that the income from the sale of undivided share in land and sale of flats separately in different years cannot be subjected to computation of capital gains and said income is to be treated as business income - Held that:- The respondent is an individual. Unlike the companies incorporated under the Companies Act, 1956, whose articles of association contain the object clauses, an individual need not necessarily confine his activity to a particular line of business. It is an admitted fact that the respondent was a partnership firm, which purchased the property only as a part of its business assets. Therefore, there cannot be a presumption that the respondent cannot carry on any activity other than that of manufacture and sale of pharmaceutical products. Hence, the Commissioner of Income Tax (Appeals) and the Tribunal were right in holding that the assessee was entitled to treat it as a business income. - Decided against revenue. Valuation report submitted by the DVO - reliance placed by the Assessing Officer under Section 69C - Tribunal held that the addition of difference in cost of construction based on DVO's valuation report made by the Assessing Officer under Section 69C cannot be sustained - Held that:- The value adopted for the purpose of executing sale deeds to convey the undivided share of right in the land was only for the purpose of registration, which is evident from the fact that the guideline value was adopted by the assessee to register such documents. It is to be seen therefore that the consideration paid by the buyers of the apartments is wholesome consideration for a dwelling unit. The Assessing Authority has no case that the assessee had received any consideration in excess of the consideration reflected in the registered documents and in the books of accounts. No buyer has ever told the Assessing Officer that he has paid something more to the assessee than what was stated in the accounts. Therefore, there cannot be a case that the assessee had spent something more and realized something more from the buyers. When such a case is not possible, there is no basis for dissecting the superstructure from the wholesome transaction and attempt to adopt a different valuation for the said superstructure. The whole exercise of the Assessing Authority in this regard is irrational. We do not see anything wrong with the opinion of the Tribunal in this regard - Decided against revenue. Eligibility of benefit of deduction u/s 080IB - whether the Tribunal was right in holding that the assessee had developed the land to the extent of one acre and above to be eligible for the benefit of Section 80IB(10)? - Held that:- The Tribunal has rightly pointed out that it is not necessary for the developer to convey the entire extent of one acre and above to the purchasers. If a property is lawfully developed by a buyer, one third (1/3) of the total extent of land should necessarily be reserved for public utility such as roads, etc. It is not possible for a developer to convey the entire land in favour of the purchasers, as he is obliged by the Town and Country Planning Act, 1971 and the Development Control Rules to leave spaces earmarked for public purposes. Therefore, this question has also been rightly answered against the Department by the Tribunal. - Decided against revenue.
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2015 (8) TMI 989
TDS liability - payments made to Channel Providers u/Sec. 194C OR u/Sec. 194J - whether ITAT was justified in law and has not acted perversely in holding that the payments made by the assessee to Channel Providers were liable for deduction of tax at source u/Sec. 194C and not u/Sec. 194J of the Income Tax Act, 1961 when the said issue was not before them and the assessee has only assailed the penalty ? - Held that:- We find merit in the arguments of counsel for the appellant-revenue that the ITAT was not required to decide whether the amount paid was liable to be deducted u/Sec. 194J or 194C but whether on non-deduction of TDS, penalty was leviable u/Sec. 271C of the Act or not. It has not been disputed that fault of the assessee-respondent was detected only on account of survey carried out by the department. However, this issue needs to be gone into by the ITAT once again. Therefore, we quash & set aside the order of the ITAT impugned herein and remit the matter back to the ITAT for reconsideration afresh in accordance with law on merits after affording hearing to the parties without being influenced or inhibited by any of the observations made herein above. - Decided in favour of revenue for statistical purposes.
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2015 (8) TMI 988
Exemption under Section 10(37) - compensation received on compulsory acquisition of agricultural land - claim denied on the ground that assessee had not fulfilled the second condition laid down under said provision for availing exemption - Held that:- We are of the view that since the finding of fact has been given by all the authorities that the appellant was not carrying on any agricultural activity in the plot in question in preceding two years prior to 07.10.2008, the appellant would not be entitled to the benefit of Section 10(37) of the Act. - Decided against assessee.
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2015 (8) TMI 987
Liability for deduction of TDS u/s 195 r/w S.197 - assessee did not have a permanent establishing in India as per S.9 r/w its explanation - Held that:- Revenue itself had given No Objection Certificates consistently for several years and allowed the respondent assessee to make payment to Sheraton without deducting tax at source and it was only after the decision of the Assessing Officer at Delhi in the case of Sheraton [2009 (1) TMI 27 - DELHI HIGH COURT] holding that payment made to it would be liable for payment of income tax in India, the proceedings in question had been initiated against the respondent assessee herein. However, once the said order of the Assessing Officer itself has been set aside by the Delhi High Court, the very foundation of initiating proceedings against the respondent asses see disappears and once the foundation goes, the structure cannot remain, i.e., proceedings against the respondent assessee cannot go on. Tribunal was correct in holding that the income earned by M/s Sheraton International, USA in India was not liable for deduction of TDS u/s 195 r/w S.197 of the Act, in respect of payments made by the assessee as they did not have a permanent establishing in India as per S.9 r/w its explanation and consequently provisions of Ss.201(1) and 201(1A) of the Act was not attracted - Decided in favour of assessee.
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2015 (8) TMI 986
Transfer of two properties - capital gains v/s income from business - CIT (A) concluded that the two residential bungalows sold would result only in long term capital gain also confirmed by ITAT - Held that:- It is not possible to evolve a single test or formula which can be applied in determining whether the transaction was an adventure in the nature of trade. It was also noted that in the case of purchase and sale of land, generally speaking, the original intention of the party in purchasing the property, the magnitude of the transaction of purchase, the nature of the property, the length of its ownership and holding, the conduct and subsequent dealing of the assessee in respect of the property, the manner of its disposal and the frequency and multiplicity of transactions, afford valuable guides in determining whether the assessee is carrying on a trading activity and whether a particular transaction should be stamped with the character of a trading adventure. See CIT v. V.A.Trivedi (1987 (1) TMI 12 - BOMBAY High Court ) Tribunal, as a final fact finding authority has confirmed the findings of fact returned by the CIT (A). While doing so, it did not look at any solitary fact to determine as to whether the transactions in question resulted in capital gains or in business income. Several factors were considered, which included the intention of the assessee in purchasing the property, the length of time the property was kept by the assessee (which in this case is more than fifty years), the lack of any transactions of sale or purchase of property throughout this period of time etc. The CIT (A) as also the Tribunal have examined the case in the correct perspective - Decided in favour of assessee.
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2015 (8) TMI 985
Addition under the head of 'fraud payment'- Held that:- The Court notices that Clause 3.5 of the agreement between the Assessee and IHCL, titled 'Handling of Financials', stipulates that the membership fee collected by way of cash will be deposited on the same day with the cashier of IHCL. Cheques could be collected in the name of IHCL. In the light of the above clauses, the explanation offered by the Assessee that some of its employees had effected sales of Diners Club cards of and failed to deposit the amount collected appears to be plausible and ought to have been accepted by the AO and the CIT (A). There was a legal liability on the Assessee in terms of the agreement entered into with IHCL to ensure that the money collected on sale of the Diners Club cards was deposited with the IHCL. The failure by the Assessee's employees to do so resulted in a legal liability on the Assessee to make good the loss to IHCL. Consequently, the money paid by the Assessee to IHCL should have been allowed as business loss by the AO and the CIT(A). In the circumstances, the ITAT was justified in directing the AO to allow the deduction claimed by the Assessee. - Decided in favour of assessee.
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2015 (8) TMI 984
Interpretation of Section 139(5)- whether Tribunal is right in law in holding the 'revised return' of income filed by the assessee beyond the time limit prescribed under section 139(5) of the Income Tax Act is admissible? - Held that:- It is open to an assessee to point out mistakes committed by it in the return filed and that the authorities under the Income Tax Act are bound to assess the income and loss of the assessee in terms of the provisions of the Act. Accordingly, the Tribunal concluded that it was open to the assessee to bring to the notice of the authorities the finalised accounts and the variation that has occurred in the loss in the return originally filed by it on 30.11.2004. It was on that reasoning that the Tribunal has directed the Assessing Officer to reconsider the matter. Although it is true that by the time audited accounts and the revised return was submitted, the time limit provided in Section 139(5) of the Income Tax Act had expired that, in our view, did not stand in the way of the assessee in taking advantage of the principle laid down by the Apex Court in its judgment in Shelly Products (2003 (5) TMI 4 - SUPREME Court ). It is true that the learned Senior Counsel for the Revenue contended that the law declared by the Supreme Court is understood in the light of the provisions of Section 139(5). In our view, that principle does not in any manner come in conflict with the view taken by the Tribunal and, therefore, in the facts of the case, we are unable to accept the contention. - Decided against revenue
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2015 (8) TMI 983
Validity of reopening of assessment - unexplained investments in the construction of the building - Tribunal upholding notice issued under section 148 as valid - Held that:- Limitation for reopening of assessment provided under Section 149 read with Section 150 of the Act would be six years, which would be expiring on 31.3.2004 and thus reopening notice issued after 31.3.2004 would be barred by limitation, as the extended time limit would not be available for the present case because the order of Tribunal passed on 7.4.2006 was itself passed beyond the said period. Thus reopening on the basis of an order passed by the Tribunal beyond the period of limitation specified in Section 149 of the Act, the reopening was held to be in valid. - Decided in favour of assessee.
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2015 (8) TMI 982
Assessment u/s 153C - Held that:- It may be noted that in the present case satisfaction note was prepared by the AO on 25th February 2010. Consequently, the finding of the ITAT in the present case that the assessment made under Section 143(1) of the Act for the AY 2009-10 was not valid, calls for no interference. No substantial question of law arises in the facts and circumstances of the present case.
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2015 (8) TMI 981
Transfer pricing adjustment - adjustment for capacity under utilisation - Held that:- Respectfully following the case of Ariston Thermo India Ltd. (2015 (8) TMI 977 - ITAT PUNE) we are of the considered opinion that the assessee should be given the benefit of low capacity utilisation. We therefore restore the ground of appeal No.2 to the file of the AO/TPO with a direction to consider the appropriate adjustment after necessary verification on the basis of material supplied by the assessee. The Assessing Officer shall recompute such adjustment after giving due opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Adjustment for inappropriate calculation of TPO - Held that:- Identical issue had come up before the Coordinate Bench of the Tribunal in the case of Demag Cranes & Components (India) (P.) Ltd. (2012 (1) TMI 60 - ITAT Pune) where it has been held that TP adjustments are to be computed not considering the entity level sales rather it should be done ideally considering the relatable sales drawing the quantitative relationship to the imports from the AEs, i.e. controlled cost. The Mumbai Bench of the Tribunal in the case of Emersons Process Management India (P.) Ltd. (2011 (8) TMI 427 - ITAT MUMBAI) has held that transfer pricing adjustment is to be made with respect to international transactions and not the entire sales. Similar view has been taken by various other coordinate Benches of the Tribunal. In view of the above, we agree with the contention of the Ld. Counsel for the assessee that transfer pricing adjustment has to be made with respect to international transactions only and not on the entire sales. However, this adjustment also requires verification at the level of the Assessing Officer. We therefore restore this issue to the file of the AO/TPO with a direction to recompute the adjustment, if any, on the basis of material provided by the assessee.- Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 980
Transfer pricing adjustment - selection on comparable - Held that:- Respectfully following the decision of Trilogy E-Business Software India P. Ltd. (2013 (1) TMI 672 - ITAT BANGALORE), we hold that the following companies should be excluded from the list of comparable companies, i.e. Flextronics Software Systems Ltd.,iGate Global Solutions Ltd., Mindtree Ltd., Persistent Systems Ltd., Sasken Communication Technologies Ltd. (Seg.), Infosys Technologies Ltd., Tata Elxsi Ltd., KALS Information Systems Ltd.. M/s. Lucid Software Ltd., M/s. Celestial Biolabs Ltd. E-Zest Solution Ltd., Thirdware Solutions Ltd.,M/s. Softsol India Ltd. and M/s. Avani Cincom Technologies Ltd. - This Tribunal in the case of 3DPLM Software Solutions Ltd. v. Deputy CIT [2014 (12) TMI 612 - ITAT BANGALORE] held that this company is not functionally comparable with a software development service provider. Also see E-Gain Communications P. Ltd. case [2008 (6) TMI 299 - ITAT PUNE-A ] Method of computation of deduction under section 10A - Held that:- Taking into consideration the decision rendered by the hon'ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that it would be just and appropriate to direct the Assessing Officer to exclude telecommunication charges and travelling expenses incurred in foreign currency both from export turnover and total turnover, as has been prayed for in the alternative by the assessee. - Decided in favour of assessee. Non deduction of TDS - According to the assessee the payment in question was reimbursement of expenses incurred by the non-resident on behalf of the assessee and therefore there was no obligation to deduct tax at source as the payment does not constitute income of the non-resident - assessee did not raise any objection on the proposed addition in the draft assessment order before the Dispute Resolution Panel - Held that:- A perusal of the above provisions of section 144C of the Act makes it clear that the draft assessment order of the Assessing Officer will attain finality to the extent that the assessee does not object to the proposals in the draft assessment order. The Dispute Resolution Panel is at liberty to consider any issue after due opportunity to the Assessing Officer and the assessee. The directions issued by the Dispute Resolution Panel are binding on the Assessing Officer.We are of the view that in the light of the above statutory provisions, the assessee cannot seek to raise an issue before the Tribunal in respect of which he has not filed any objection before the Dispute Resolution Panel nor has the Dispute Resolution Panel considered the issue in exercise of their powers under section 144C(8) of the Act. - Decided against assessee.
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2015 (8) TMI 979
MAT - Profit on transfer of development rights to the fully owned subsidiary company - Whether it is required to be included in the book profit u/s 115JB ? - Held that:- We find merit in the contentions of the assessee that the profit arising on transfer of capital asset to its wholly owned Indian subsidiary company is liable to be excluded from the Net profit., i.e., the Net profit disclosed in the Profit and Loss account should be reduced by the amount of profit arising on transfer of capital asset and the amount so arrived at shall be taken as “Net profit as shown in the profit and loss account” for the purpose of computation of book profit under Explanation 1 to sec. 115JB of the Act. Alternatively, since the said profit does not fall under the definition of “income” at all and since it does not enter into the computation provisions at all, there is no question of including the same in the Book Profit as per the scheme of the provisions of sec. 115JB of the Act. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to exclude the above said profit from the computation of “Book Profit” for the reasons discussed above. - Decided in favour of assessee. Disallowance made u/s 14A - Held that:- A perusal of the orders of the tax authorities would show that they have not considered the submission about the availability of interest free funds. Before us, the ld A. R has contended that the interest free funds available with the assessee is sufficient to cover the value of investments and it was further submitted that the interest bearing funds were used for specific purposes. Accordingly, it was contended that there was not requirement of making any disallowance out of interest expenditure. Since this aspect has not been examined, we are of the view that this issue requires fresh examination. Thus restore the issue to the file of the AO with the direction to examine this issue afresh by duly considering all the contentions of the assessee, including the contention with regard to the availability of interest free funds and the average value of investments - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 978
Expenditure claimed under the head “provision towards SOBM and drill cutting disposal expenses” disallowed - CIT(A) deleted disallowance and held that the provision so made by the assessee is in the nature of ascertained liability and same is deductible both under the normal provisions of the Act and also while computing the book profit under section 115JB of the Act. - Held that:- In the present case, the undisputed fact remains that the contract receipts cannot be considered to be free money available with the assessee, since there is obligation to discharge the responsibility to process the waste materials. Hence the gross contract receipts cannot considered to be the net income of the assessee, i.e., the income arising from the said contract alone can be brought to tax, in which the corresponding expenditure is required to be allowed as deduction. Hence the liability to process the materials constitute ascertained liability in praesenti and hence the assessee is justified in providing for those expenses in order to arrive at the net profit. In respect of liability already accrued, the actual date of incurring of expenses is irrelevant and hence the payment could be postponed in subsequent years. Even otherwise, it is submitted that the assessee has reversed the provision in the immediately succeeding year, i.e., the said provision is offered as income in the succeeding year in the form of reduction of corresponding expenditure. As observed by Hon’ble Supreme Court in the case of Excel Industries Ltd. (2013 (10) TMI 324 - SUPREME COURT ), accounting policy adopted by the assessee is tax neutral in nature, No infirmity in the order of the ld CIT(A) on this issue and, accordingly, we uphold the same. - Dcided against revenue.
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2015 (8) TMI 977
Transfer pricing adjustment - low utilization of capacity - Held that:- In order to arrive at an appropriate adjustment, the entire factual matrix is required to be examined at the appropriate level. The TPO as well as the DRP did not accept the plea of the assessee in principle, while the same has been accepted by us. Therefore, in order to allow an appropriate adjustment, necessary verification on the basis of the material to be furnished by the assessee, deserves to be carried out by the Assessing Officer. Therefore, while upholding the plea of the assessee, we restore the matter back to the file of the Assessing Officer who shall allow the assessee a reasonable opportunity to make submissions and produce relevant material in support of its stand and thereafter the Assessing Officer shall allow an appropriate adjustment in the operating margins of the assessee for low capacity utilization and high fixed operating costs incurred in the initial year of operation. - Decided in favour of assessee for statistical purposes. Computation of assessee’s margin for the purposes of comparability analysis - As per the assessee, future year’s actual margins be also considered to determine its profit margins in order to determine the ALP. The aforesaid plea is sought to be justified on the basis that due to exceptional circumstances of being the initial year of set-up, the assessee has incurred loss during the year, while it has earned profits in the subsequent two years. Therefore, assessee submitted that future year’s actual margins be also considered for analyzing the comparability of current year’s margin with the comparable uncontrolled transactions. The TPO as well as the DRP have not accepted the plea of the assessee and held that having regard to rule 10B(1)(e) of the Rules, there is no scope to consider data of the subsequent assessment years. In our considered opinion, the assessee has to fail on this aspect for the reasons assigned by the lower authorities. Also the earning of profits in the future two years by the assessee may be a good ground to justify the loss being incurred in this year because of the exceptional circumstances of being the initial year of set-up, under capacity utilization, etc., but there is no justification for inclusion of the future year’s profit margins while determining the ALP of the current year’s international transactions. - Decided against assessee. Non providing adjustment on account of working capital differences vis-à-vis the comparable uncontrolled entities - Held that:- We are inclined to remit the matter back to the file of the Assessing Officer who shall examine as to whether or not in the present case the working capital requirement constitute an item of difference so as to require adjustment as per the para-meters laid down by rule 10B(1)(e)(iii) r.w.rule 10B(3) of the Rules for the purposes of analyzing the comparability of the comparable uncontrolled transactions with the international transactions of the assessee. Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity to put-forth material and submissions - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 976
Website development expenditure - Revenue v/s capital expenditure - Held that:- Undisputedly the Assessing Officer while treating the claimed Revenue expenditure as capital in nature has not examined properly as to whether the expenditure brought into existence any asset/s, or the usage period of the expenditure is of enduring nature. In absence of such verification by the Assessing Officer, we fully concur with the finding of the Learned CIT(Appeals) that the Assessing Officer was not justified in denying the claimed expenditure incurred on software/website development as Revenue expenditure. - Decided against revenue. Legal and professional consultancy expenditure - Revenue v/s capital expenditure - Held that:- This expenditure was held to be capital in nature by the Assessing Officer on the ground that the said expenditure was for development of website and the expenditure was of enduring nature. The submission of the assessee on the other hand remained that the expenditure was not for new project nor of enduring nature and it was incurred for the services rendered by the major consultant on day to day basis. In absence of rebuttal of these submissions of the assessee by the department, we are of the view that the Learned CIT(Appeals) has rightly treated the claimed expenditure as Revenue in nature on the basis that the Assessing Officer has treated the same as capital in nature without examining the material aspects of the claim as to whether the expenditure brought into existence any asset/s or the used period of the expenditure. - Decided against revenue. Computer repair/maintenance expenditure - Revenue v/s capital expenditure - Held that:-CIT(Appeals) has rightly deleted the disallowance with this finding that expenditure incurred on computer repair/maintenance are revenue in nature. The same is upheld.- Decided against revenue. Disallowance of deduction claimed u/s 36(1)(vii) on account of bad debts written off - CIT(A) deleted addition - Held that:- CIT(Appeals) has allowed the claimed deduction with this finding that after calling for the details required, if the Assessing Officer was satisfied that the amounts in question were offered for taxation in the earlier years and the accounts of the debtors were written off as claimed by the AR, no disallowance was called for. See TRF Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT) & Vijaya Bank vs. CIT [2010 (4) TMI 46 - SUPREME COURT ]. Under the facts, the issue is covered in favour of the assessee Disallowance of expenditure incurred on subscription fees paid to Internet Online Association - CIT(A) deleted addition - Held that:- The amount in question has been paid to Internet & Online Association Professional for subscription of web portal. Considering the nature of the business of the assessee, we are of the view that the Learned CIT(Appeals) has rightly treated the nature of the claimed expenditure as Revenue and has accordingly deleted the disallowance made by the Assessing Officer - Decided in favour of the assessee Disallowance of expenditure on marketing rights - holding the same to be prior period expenditure, hence, not allowable in the present year - Held that:- The authorities below have not disputed the genuineness of the above expenditure and their only finding is that the said expenditure pertains to previous assessment year i. E. 2004-05. We are of the view that when tax rate for the assessment years 2004-05 and 2005-06 is the same, the approach of the authorities below on the issue is not appreciable and it is also contrary to the established position of the law that year of crystallization of the liability is more important for the purpose of assessment of income in that year. We thus while setting aside the orders of the authorities below direct the Assessing Officer to allow the claimed expenditure during the year. - Decided in favour of the assessee
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2015 (8) TMI 975
Cessation of liability under Section 41(1) - Held that:- There is nothing on record to show any cessation or remission of liability by the creditor or even an unilateral act to this effect by the Assessee in this regard. In view of the above, we are of the opinion that the impugned addition u/s. 41(1) in respect of the addition M/s. Tool Masters cannot be sustained and the same is directed to be deleted. See Sugauli Sugar Works (P) Ltd. case [1999 (2) TMI 5 - SUPREME Court ] - Decided in favour of assessee.
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2015 (8) TMI 974
Unaccounted cash credit - Non existent credit claims made in the books of the assessee - assessee was unable to obtain confirmation from the 21 creditors regarding the balances shown against them inspite of several opportunities - Held that:- n almost identical facts, the Hon’ble Delhi High Court in the case of Shri Vardhaman Overseas Ltd. (supra), has clearly laid down that neither section 41(1) nor section 68 of the Act can be applied. On the applicability of section 68, we are of the view that those provisions will not apply as the balances shown in the creditors account do not arise out of any transaction during the previous year relevant to AY 2009-10. The provisions of sec. 68 are clear inasmuch as they refer to “sum found credited in the books of account of an assessee maintained for any previous year”. Since the credit entries in question do not relate to previous year relevant to AY 2009-10, the same cannot be brought to tax u/s. 68 of the Act. The proper course in such cases for the Revenue would be to find out the year in which the credits in question were credited in the books of account and thereafter make an enquiry in that year and make an addition in that year, if other conditions for applicability of section 68 are satisfied. It must be held that there was a cessation of the debts bringing the case within the scope of s. 41(1). A unilateral action cannot bring about a cessation or remission of the liability because a remission can be granted only by the creditor and a cessation of the liability can only occur either by reason of operation of law or the debtor unequivocally declaring his intention not to honour his liability when payment is demanded by the creditor, or by a contract between the parties, or by discharge of the debt There is nothing on record to show any cessation or remission of liability by the creditor or even an unilateral act by the Assessee in this regard. In view of the above, we are of the view that the impugned addition cannot be sustained and the same is directed to be deleted. - Decided in favour of assessee.
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2015 (8) TMI 973
Addition relating to shifting of profits made - trading activity at MCX - CIT(A) deleted addition - Whether the client code modification has resulted into shifting of profits, otherwise earned by the assessee? - Held that:- A careful perusal of the order passed by the Ld CIT(A) would show that the Ld CIT(A) has met each and every point raised by the assessing officer. The Ld CIT(A) has pointed out that the AO has not brought on record any material to show that the client code modification made by the assessee was not genuine one. It was further noticed that none of the clients examined by the tax authorities has disowned the transactions carried on by the assessee. As noticed by the Ld CIT(A), the MCX, the stock exchange, is very much aware about client code modifications and hence in order to discourage frequency of modifications, it has brought in penalty mechanism. Even under the penalty mechanism also, no penalty shall be leviable if the modification was less than 1% of the total transactions, meaning thereby, the MCX is also accepting the fact that such kind of client code modification is inevitable. None of the clients was shown as related to the assessee herein. Normally the question of shifting of profit would arise between the related parties only. If the assessee had really shifted the profits to an outsider, then the human probabilities would suggest that the assessee would have received back corresponding amount from the recipient of profit. However, in the instant case, the AO has not brought any material on record to show that the assessee had received back corresponding amount equivalent to the amount of profit claimed to have been shifted to the clients. The AO has mainly relied upon the report given by the MCX and has drawn adverse conclusions without bringing any material to support his view. CIT(A) has also pointed out that modifications carried out by the assessee works out to around 3% of the total transactions only and in our view, the said volume, in fact, vindicates the explanation of the assessee. Further none of the clients has been found to be bogus and all of them have complied with KYC norms, meaning thereby the identity of all the clients stand proved. None of them has disowned the transactions and all of them have also declared the income in their respective returns of income. All these factors, in our view, support the contentions of the assessee. CIT(A) was justified in deleting the additions made in both the years under consideration. - Decided in favour of assessee.
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2015 (8) TMI 972
Addition made u/s 69C - addition under head of property purchase on the sale consideration in cash from her husband in proper state of mind without any coercion, in ignoring the facts that the AO has given sufficient opportunity to explain - CIT(A) deleting an addition - Held that:- In the present case, it is noticed that the transaction on the basis of which the addition was made by the AO was declared as Null & Void by the Ld. Sub-Judge, Ghaziabad vide his order dated 16.10.2010. Thereafter, the assessee and her husband moved an application dated 22.10.2010 before the Ld. Sub Registrar, Ghaziabad that the Sale Deed in question may be cancelled with immediate effect as per the order of Ld. Sub-Judge, Ghaziabad. Since the order of the Ld. Sub-Judge, Ghaziabad was delivered after the order of the A.O., the assessee moved an application for admitting the additional evidences under Rule 46A of the I.T.Rules. In the present case, it is noticed that the Ld. CIT(A) received a remand report from the AO vide his letter no. 431 dated 12.01.2011 which is apparent from the Page no. 1 of the impugned order. Thus, it is clear that the vary basis for making the addition i.e. the Sale Deed was declared as Null & Void and there was no evidence available on the record to substantiate that the cash transaction had ever passed hands, therefore, the impugned addition made by the A.O. was rightly deleted by the Ld. CIT(A). We do not see any infirmity in the order of Ld. CIT(A) on this issue. - Decided against revenue.
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2015 (8) TMI 971
Unexplained deposits in the bank account - CIT(A) deleted addition - Held that:- In the present case it is noticed that the AO in his remand report had stated that the withdrawals and deposits were verifiable from the bank statements of the assessee. He had not made any adverse comments to the submissions of the assessee and the ld. CIT(A) after verifying from the various bank accounts came to the conclusion that the explanation given by the assessee during the appeal proceedings that the cash deposits were sourced out of withdrawals made from the bank account was correct. The said findings of the ld. CIT(A) has not been rebutted by bringing any adverse material on record. Therefore, we do not see any valid ground to interfere with the findings of the ld. CIT(A), accordingly, do not see any merit on this issue of the departmental appeal. - Decided in favour of assessee. Unexplained sources of the investment for the purchase of NSC - CIT(A) deleted addition - Held that:- CIT(A) rightly deleted the impugned addition because the amount received on maturity of the old NSC was deposited in the bank and the investment was also made by withdrawing the same from the bank account. In the present case, the ld. CIT(A) after verification from the bank accounts found merit in the submissions of the assessee and deleted the impugned addition. We, therefore, do not see any infirmity in the order of the ld. CIT(A) on this issue.- Decided in favour of assessee.
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2015 (8) TMI 968
Revision u/s 263 - detail of the contracts/work done was not filed before the Assessing Officer and the details of expenses and their genuineness was not examined by the Assessing Officer - Tribunal allowed the assessee appeal holding that the assessment has been framed under Section 143(3) after examination of various papers and due application of mind and the CIT was not justified in invoking his jurisdiction under Section 263 - Held that:- Assessing Officer had failed to apply his mind to the case in all perspective and the order passed by him was erroneous. He had accepted the returned income by making an addition of ₹ 98,500/- in the absence of verification of the accounts, examining supporting material and without making any enquiry. The present is a case of lack of enquiry made by the Assessing Officer as has been recorded by the CIT in detail in his order passed under Section 263 of the Act. The irresistible conclusion on these facts would be that the assessment order passed by the Income Tax Officer was erroneous. According to the scheme of the Act, the revenue is entrusted with the levy and collection of tax in accordance with law. If due to an erroneous order of the Assessing Officer, the revenue is deprived of tax lawfully payable by an assessee, it would certainly be prejudicial to the interests of the revenue. The CIT had rightly invoked revisional power under Section 263 of the Act. The Tribunal while setting aside the revisional order passed by CIT has dealt with the scope of Section 263 of the Act in general without examining the details which had been examined by the CIT. Learned counsel for the respondent was unable to displace the discussion made by the CIT in the order passed under Section 263 of the Act. The Tribunal was, thus, in error in negating the order of CIT passed under Section 263 of the Act. - Decided in favour of revenue.
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2015 (8) TMI 966
Validity of assessment under Section 153C - set of documents relied upon by the Revenue pertain to sale deeds executed by the petitioners in favour of the purchases viz., M/s. Sanghvi Infracon Private Limited and agreements entered into between the erstwhile tenants of the said lands and the petitioners - Held that:- The portion of land in question were occupied by tenants. In order to not only give a clear marketable title to the purchaser but also give the vacant possession of the entire land, the petitioners before executing the Sale Deeds entered into agreements with the tenants under which, the tenants vacated the premises and handed over possession to the petitioners in consideration of seizable amount paid to them. This was done through several agreements executed between the tenants and the petitioners. Later on, the lands were sold to M/s. Sanghvi Infracon Private Limited by a registered sale deed dated 16th September 2010. The document executed between the erstwhile tenants of the petitioners regarding eviction of the tenants upon acceptance of sizeable payment by the petitioners definitely thus belong to the petitioners. It may be that as an evidence of passing on vacant and peaceful possession of the property, the petitioners handed over such documents to the purchasers to protect the interest of the purchasers against any action that may be initiated by the erstwhile tenants. The nature of the document or the fact that it belongs to the petitioners would not in any manner change. Likewise, the documents of sale also can be stated to belong to the petitioners. It is not in dispute that the petitioners were the sellers of the lands. The receipts of payments also are documents belonging to the petitioners. They are alleged to have received various payments in cash from the purchasers. If there are documents evidencing such particulars and if such documents are also signed by the petitioners, it can certainly be stated that such documents do belong to the petitioners. Thus the action initiated under Section 153C of the Act cannot be quashed on the ground on which writ petitions are presented before us - Decided in favour of revenue.
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2015 (8) TMI 961
Disallowance of exemption claimed u/s 54EC on investment in REC Bonds - delay in making investment - Held that:- Claim of the assessee cannot be denied on the only ground of delay in investing in the REC Bonds due to non-availability of REC Bonds. By respectively following the decision of the Hon’ble Bombay High Court in the case of CIT v. Cello Plast (2012 (8) TMI 527 - BOMBAY HIGH COURT ), we reverse the order passed by the CIT(Appeals) and allow the ground raised in the appeal of the assessee. - Decided in favour of assessee.
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2015 (8) TMI 960
Transfer pricing adjustment - addition on account of adjustment made in arm’s length price on the value of international transactions - whether the five comparable companies which has been rejected by the TPO on the ground that they are functionally different from the assessee can be included for comparability analysis for benchmarking the ALP of the assessee company? - Held that:- In the case of ITDC Ltd., it is seen that this company is mainly engaged in the business of running of hotel and restaurants at various tourist places besides providing transport facilities. Its main business activities revolve around promotion of tourism in India.The SEL i.e. sound and light activities carried on by this company are also different. The segmental details and also income from such service goes to show that income from services rendered have been classified into several categories which are entirely different from each other. The contentions raised by the learned Departmental Representative that the functional profile of the company is entirely different from the activities carried on by the assessee appears to be acceptable. Therefore, in our opinion, going by the functional profile as available on record before us, this company has rightly been rejected by the TPO and cannot be included as a comparable entity even at a segmental level for conducting any comparability analysis. Accordingly the assessee’s contention for including the said company is rejected. EDCIL and ICRA Management Consulting Services, we find that these companies were accepted as a comparable by the TPO in the immediately preceding assessment year 2007–08 and there was no dispute among the parties in that year for taking them as a comparable company. Therefore, this company on merits also is includable in the set of companies. In the case of EDCIL, though main activities are functionally different, however, its technical assistance segment can be broadly considered to be functionally similar to the assessee. Since this company has been accepted as a comparable by the Department as well as by the assessee, therefore, following the rule of consistency, we hold that this company should also be included as comparable. We also find merits in the contentions of the Ld. Counsel that in the earlier year once these two companies have been found to be functionally similar, then in this year they cannot be rejected on functional analysis. Thus, both the aforesaid companies i.e. ICRA Management and EDCIL are directed to be included as comparable for the purpose of comparability analysis for determining the ALP of the international transactions of the assessee company. Overseas Manpower Corp. Ltd., it is seen that it is purely recruitment and placement company and its main revenue is from recruitment services only. Thus, not only the functional profile, the other test of comparability analysis also fails in this case. Therefore, we fully agree with the contention of the Ld. CITDR that this company has rightly been rejected by the TPO for the purpose of comparability analysis and is to be excluded. Inhouse Productions Ltd., it is seen that this company is mainly engaged in the business of Knowledge Process Outsourcing (KPO) in the field of healthcare and is also engaged in media. The functions and the business activities of this company as seen from the records is not comparable to that of the business activities carried on by the assessee and the functional profile is also different. Therefore, this company has rightly been rejected by the TPO. Thus, besides four companies, accepted both by the TPO as well as by the assessee, two more companies should also be included namely EDCIL and ICRA Management Services for the purpose of comparability analysis for determining the ALP. The balance three companies are to be excluded. The TPO is directed to work out the arithmetic mean for the finally selected six companies and determine the ALP. - Decided partly in favour of assessee. Failure of the Assessing Officer to grant credit for advance tax - Held that:- We direct the Assessing Officer to give credit of the advance tax paid after verifying it from AS26 or as per the challan. - Decided partly in favour of assessee.
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Customs
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2015 (8) TMI 997
Prohibition on import of Palm oil – Violation of Article 14 – Vide Notifications No. No.39 and 63 (RE-2007)/2004-2009 import of palm oil was prohibited through all ports of Kerala – Appellants challenging validity of these Notifications on ground that they were ultra vires provisions of Section 3 of Foreign Trade (Development and Regulation) Act, 1992 and unconstitutional as offending Article 14 of Constitution – Held that:- Since import price of crude palm oil has been much less than price of coconut oil, perception of Coconut growers in State of Kerala was that it was affecting their livelihood – Huge import of palm oil had led to price decline in coconut – It is more than abundantly clear that restriction is imposed keeping in view welfare of farmers in the State – Respondents have been able to demonstrate intelligible basis for issuing impugned Notifications having rational nexus with objectives sought to be achieved – Thus, it cannot be said that notification was violative of Article 14 of Constitution – No material produced on record to show how impugned Notification would affect interests of consumers – Section 3 empowers Central Government to make provision for: (i) prohibiting; (ii) restricting; or (iii) otherwise regulating 'the import or export of goods or services or technology', such action cannot be arbitrary or irrational and should be backed sound reasons – Calcutta High Court in Kalindi Woolen Mills (P) Ltd. [1994 (2) TMI 70 - HIGH COURT AT CALCUTTA] overlooked aforesaid pertinent aspect which gives sufficient powers to Central Government to act in manner it has acted – Therefore, no fault found with view taken by High Court upholding Notifications in question – Decided against Appellant.
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2015 (8) TMI 996
Waiver of pre-deposit - Precondition to Appeal – Remission of duty on lost, destroyed and abandoned goods – Commissioner vide impugned order confirmed payment of duty demand and imposed penalty, also precondition to deposit sum for filing appeal was also imposed – Whether imposing such pre-condition was justified – Held that:- Reproduction of Commissioner’s findings show that there was no conclusion reached that assessee had violated any comprehensive policy or any provisions in Customs Manual –That itself made out arguable case, therefore there were no basis for imposing precondition for hearing of appeal on merits and stay of recovery – Conditions imposed ought to be reasonable and not excessive –They must have bearing on nature of reliefs that assessee claimed and to which it was held disentitled –In matters of natural calamities where customs manual or terms and conditions of bond prima facie ought not guide, Customs Commissioner to decide appeal – Thus, Tribunal was not justified in imposing condition of deposit on assesse – Appeal allowed and matter resotred before the Tribunal – Decided in favour of Assesse.
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2015 (8) TMI 995
Retrospective Effect of Notification 28/2004 – Determination of Rate of Duty – Maintainability of appeal – Respondent imported capital goods/plant and paid duty at concessional rate under Notification No. 28/97-Cus., – However show-cause Notice for recovery of balance duty amount was issued on allegations that respondent failed to fulfill conditions of said Notification – Tribunal vide impugned order upheld order of commissioner holding that condition for demand had been amended by Notification No. 29/2004-Cus., giving retrospective effect to said notification – Held that:- even if question was whether Notification No. 29/2004-Cus., could be given retrospective effect for purpose of fulfillment of export obligation, it had direct co-relation with rate of duty of Customs for purpose of assessment –Thus, impugned order passed by Tribunal relates specifically to determination of questions having direct relation to rate of duty of Customs – When order impugned as passed by Tribunal relates, inter alia, to determination of questions having relation to rate of duty of Customs, appeal was not maintainable in high court, instead could be maintained only before Supreme Court per clause (b) of Section 130E of Customs act, 1962 – Therefore, preliminary objection of respondent upheld – Decided against Revenue.
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2015 (8) TMI 994
Warehousing charges - High court vide impugned order [2002 (12) TMI 92 - HIGH COURT OF JUDICATURE AT BOMBAY] held that delay in clearance of goods cannot be attributed to Customs Department and petitioner cannot be absolved of their obligation to pay demurrage charges payable on goods imported by petitioner - After hearing counsel for parties Supreme court was of opinion that case of appellant was squarely covered by judgment of International Airports Authority v. Grand Slam International & Others [1995 (2) TMI 70 - SUPREME COURT OF INDIA] and Trustees of Port of Madras v. Nagavedu Lungi and Co. & Ors. [1995 (4) TMI 70 - SUPREME COURT OF INDIA] - In view of said decision, High Court has not committed any error in dismissing petition of appellant - Appeal dismissed.
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2015 (8) TMI 970
Attempt to export controlled substance – Investigation Officer conducted search of luggage of both accused and pseudoephedrine (controlled substance) weighing its 28.750 kg and 20.900 kg were recovered – Trial court after taking into consideration nature of offence and reasons for which they appear to have committed offence imposed sentence of rigorous imprisonment with fine on both convicts – Whether punishment awarded by trial court was just – Held that:- sole purpose of punishing offender is not retribution alone and that Courts while sentencing offender must make attempt, within parameters of law, to afford opportunity to offender to reform himself and lead life of normal, useful member of society – Convicts have no previous criminal antecedents and it does appear from totality of attendant circumstances and material on record that they are not at all hardened criminal but were forced due to their economic conditions to indulge in illegal trafficking of controlled substance – Both convicts have young children to look after and it is also to be borne in mind that convicts are women –Both convicts had themselves admitted at stage of recording their statement under Section 313 Cr.P.C that they were making attempt to transport same at behest of some other persons –Appeal disposed off with direction that both accused be deported to their country – Decided against Revenue.
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Corporate Laws
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2015 (8) TMI 993
Registration for operating CIS scheme – Winding up of scheme and refund on non-compliance – Whether SEBI was justified in holding that schemes floated by Applicant constitute Collective Investment Schemes under SEBI Act, 1992 and that Applicant and its promoters and directors, were liable to wind up said schemes – Held that:- By inserting Section 12(1B) to SEBI Act legislature has made it mandatory for any person to obtain certificate of registration for operating CIS – Thus, operating CIS without obtaining certificate of registration from SEBI was illegal after CIS Regulations came into force and that person shall be directed to either wind up CIS or comply with CIS Regulations – Admittedly, some of schemes floated by applicant were existing, when regulation was enacted – SEBI vide two communication informed applicant that said schemes were CIS and to get registration in terms of regulations 5 or wind up schemes – On non-compliance, direction to wind up existing CIS and refund money collected from investors cannot be faulted – Thus, Appellants directed to comply with directions contained in impugned order of SEBI – Application dismissed – Decided against Applicant.
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Service Tax
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2015 (8) TMI 1016
Condonation of delay - Inordinate delay of 536 days - Delay due to ill health of advocate - Held that:- the reasons stated by this petitioner for the delay, it appears that there were reasonable grounds for condonation of delay, which were not appreciated by the CESTAT, Kolkata and the Appeal [2015 (8) TMI 1015 - CESTAT KOLKATA] preferred under Section 35 B (3) of the Central Excise Act, 1944, was dismissed without going into its merit. But, Since a huge liability of Tax and penalty have been imposed upon this petitioner vide the Order in Original and therefore, in our view, the points taken in the Order in Original should have been decided on merits. - in the present case all possible steps were taken by the appellant and had there been a timely intimation by its Advocate, delay would not have occurred and therefore the appeal should not have been dismissed merely on the ground of delay because a litigant should not suffer because of ill health of the Advocate - Delay condoned.
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2015 (8) TMI 1015
Condonation of delay - Inordinate delay of 536 days - Held that:- affidavit filed in support of the application that they have received all the documents from the Advocate as on 30.11.2012, whereas, in the undated letter of the Advocate Shri Nirmal Kr. Singh that the papers were handed over to the Applicant on 01.11.2011. Thus, there are contradictions in the claims of the Applicant. Besides, except the undated letter of the junior advocate to Mr.R.N.Sarkar, no other correspondences of the Advocate has been produced. Even though the Appeal was filed alongwith the Misc. Application for condonation of delay, no letter/affidavit from the Advocate Shri R.N.Sarkar has been enclosed, who expired almost a year later. These circumstances, lead to an inevitable inference that the reasons cited by the Applicant are neither bona fide nor sufficient warranting condonation. We agree with the Ld.A.R. for Revenue that delay could be condoned only when sufficient cause is shown by the Applicant as laid down in various decisions of the Hon ble Supreme Court including in Living Media India Ltd.'s case (2012 (4) TMI 341 - SUPREME COURT OF INDIA). Following the said principle, we do not find any merit in the Application of the Applicant - Condonation denied.
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2015 (8) TMI 1013
Job Work activity - Manpower Supply Recruitment Agency Services - lumpsum contract of carrying out the job in the factory premises - Held that:- Grounds of appeal basically relies upon the license issued to the respondent-assessee by the office of the Licensing Officer, Government of Maharashtra, holding that Amitasha Enterprises Pvt. Ltd. is a principal employer. In our considered view, this may not change complexion of the services in any way as the entire records clearly indicate that the respondent-assessee was given a lumpsum contract of carrying out the job in the factory premises of Amitasha Enterprises. This activity will not be covered under the category of "Manpower Supply Recruitment Services". This view is expressed by the Bench in the case of Seven Hills Construction vs. Commr. Of Service [2013 (12) TMI 961 - CESTAT MUMBAI]. - Decided against Revenue.
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2015 (8) TMI 1011
Security services - appellant neither obtained registration, filed returns nor remitted service tax - Cum tax benefit - Held that:- The appellant failed to produce any material, either before the primary or the lower appellate authority in support of its plea of having received a lesser amount as consideration than what was billed. No material was also produced before the authorities below in support of its claim that ₹ 3,81,691/- was for rendition of construction service and not security service. A mere plea without probative evidence in support of such plea would not suffice. - appellant shall be entitled to cum-tax benefit. The authorities below have confirmed imposition of penalties under Section 76 and 78 as well. In view of several decisions it is clear that there is a discretion available, even prior to amendment of Section 78 for not imposing penalties under Sections 76 & 78 simultaneously. We therefore set aside imposition of penalty under Section 76 and confirm penalty under Section 78. Section 78 also requires that the assessee should be informed of the facility of remitting service tax and interest along with 25% of penalty within 30 days towards compliance of liability - Matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 1010
Waiver of pre deposit - Denial of CENVAT Credit - input services and capital goods - Held that:- There appears to be a decision of the Andhrapradesh High Court in the case of Commissioner of Central Excise, Visakhapatnam-II Vs. Sai Sahmita Storages (P) Ltd. reported in [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT]. In any event, on this arguable issue, the Tribunal, Ahmedabad Bench had earlier granted waiver of pre-deposit in the case of Navratna S.G.Highway Properties Pvt. Ltd. Vs. Commissioner of service Tax, Ahmedabad reported in [2012 (7) TMI 316 - CESTAT, AHMEDABAD]. Therefore, insofar as the claim of cenvat credit in respect of input services of erection, commissioning or installation service and construction services, the appellant had prima facie case on hand. - Predeposit amount reduced - Decided partly in favour of assesee.
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2015 (8) TMI 1009
Waiver of pre deposit - Financial hardship - Held that:- Except the demand raised in this matter, other facts in the present appeal and the one decided by this Court are one and the same and there is no dispute in this regard. The issues raised in this appeal are also no different from the one decided by this Court in [2015 (8) TMI 1010 - MADRAS HIGH COURT]. It is to be noted that the demand raised in this matter with regard to the cenvat credit on tower and shelter material is ₹ 10,39,78,568/- and with regard to the cenvat credit on input services related to towers and shelters - Partial stay granted.
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2015 (8) TMI 1008
Demand of service tax - Invocation of extended period of limitation - Assessee preferred the appeal before supreme court - held that:- The assessee’s appeal against the order of the learned Tribunal, having been entertained by the Supreme Court, there can be no question of this Court entertaining the appeal of the Revenue. The grounds on which the Revenue intends to prefer the appeal, is not material. In our view the Revenue should also approach the Supreme Court and not this Court. - Decided against Revenue.
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2015 (8) TMI 1007
Business Auxiliary Service - Sale of SIM cards - Held that:- No substantial question arises in the instant appeal, in view of the decisions in the case of Martend Food & Dehydrates Pvt. Ltd. vide [2013 (6) TMI 339 - CESTAT NEW DELHI], wherein it was held that activity of purchase and sale of SIM Card belonging to BSNL where BSNL has discharged the Service Tax on the full value of the SIM cards does not amount to providing Business Auxiliary Service - Decided against Revenue.
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2015 (8) TMI 1006
Business Auxiliary Services - Space provided to banks - Held that:- Facts regarding nature of services rendered by the appellant to the banks is not clear. No statement/contract entered between the appellant and the banks has been brought on record by the Department regarding the exact nature of services provided. - mere providing of table space will not give valuable inputs to identify as to what taxable service is rendered. There is no evidence on record in the present proceedings that commissions paid to the appellant are with respect of facilitating loans to the prospective customers on behalf of the banks. The ratio laid down by the Larger Bench in the case of Pagariya Auto Center vs. CCE, Aurangabad (2014 (2) TMI 98 - CESTAT NEW DELHI (LB)) is squarely applicable to the facts of this case. - Decided in favour of assessee.
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2015 (8) TMI 962
Extension of stay already granted - Held that:- Stay extended in the light of the Larger Bench decision in the case of IPCL vs. C.C.E., Vadodara reported in [2004 (6) TMI 52 - CESTAT, NEW DELHI] as upheld by the Hon’ble Supreme Court and also as held by Hon’ble High Court of Allahabad [2013 (10) TMI 1194 - ALLAHABAD HIGH COURT], the stay is extended for a period of six months.
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Central Excise
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2015 (8) TMI 1014
Valuation of goods - Section 4 - deduction towards Sales Tax, Cash Discount and Volume Discount on excise duty payable - Held that:- Section 4 as amended introduces the concept of transaction value so that on each removal of excisable goods, the transaction value of such goods becomes determinable. Whereas previously, the value of such excisable goods was the price at which such goods were ordinarily sold in the course of wholesale trade, post amendment each transaction is looked at by itself. However, transaction value as defined in sub-clause (3)(d) of Section 4 has to be read along with the expression for delivery at the time and place of removal . It is clear, therefore, that what is paramount is that the value of the excisable goods even on the basis of transaction value has only to be at the time of removal, that is, the time of clearance of the goods from the appellant s factory or depot as the case may be. Judgment in the case of Super Synotex [2014 (3) TMI 42 - SUPREME COURT] was concerned with sales tax incentives that were given under the Rajasthan Sales Tax Incentives Scheme. On the facts of that case, 25% of the sales tax was paid to the Government, and 75% of the said amount of sales tax was retained by the assessee and became the assessee s profit. - Court did not deal with Section 4(1)(a) as amended in the year 2000 insofar as it speaks of delivery of goods at the time and place of removal. - This judgment does not in any manner deviate from the settled legal position so far as cash discounts are concerned as has been laid down in Union of India v. Bombay Tyre International (1983 (11) TMI 70 - SUPREME COURT OF INDIA) and Government of India v. MRF (1995 (5) TMI 28 - SUPREME COURT OF INDIA) - Decision in the case of Super Synotex distinguished. It is clear that cash discount has therefore to be taken into account in arriving at price even under Section 4 as amended in 2000. - Matter remanded back - Decided in favour of assessee.
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2015 (8) TMI 1012
Classification of Vaseline - Classification under Chapter Heading 3304.00 or under Chapter Heading 3003.10 - whether Vaseline Intensive Care Heel Guard is to be treated as merely a skin care preparation or it is a medicament having curing properties - Held that:- if a particular product is substantially for the care of skin and simply because it contains subsidiary pharmaceutical or antiseptic constituents or is having subsidiary curative or prophylactic value, it would not become medicament and would still qualify as the product for the care of the skin. There would be certain products which would be purely for the care of skin and certain other products would be clearly medicament and such cases may not pose any problem. Whenever product has curative or prophylactic value as well, but the Department still wants the said product to be brought under Chapter Heading 3304.00, onus is on the Department to show that it is not medicament. For this, it will have to demonstrate that curative or prophylactic value is only subsidiary in nature or that the product is covered by the description under chapter notes 5, namely, either it is chiropody or barrier cream to give protection against skin irritants. If the Department fails to discharge this onus, the product has to be treated as medicament and would be covered under Chapter 30. Tribunal, while deciding that the aforesaid product is a medicament, pointed out that the product was formulated and essentially used for treatment of 'cracked heels', protection from further cracks in the human heels due to extreme climatic conditions and low humidity, constant exposure of feet to water and due to absence of shoe or other protection while walking. It also found that this product was manufactured under a drug licence as drug authorities had treated the same as a medicament. The Tribunal found that the usage of this product was related to the effect of therapeutic or mitigating substance of prophylactic substances added. Thus, the effect of mitigation of an external condition is primary effect and the effect of smoothing the skin was secondary in nature and, therefore, it was to be treated as a medicament and classified under Chapter 30. - , all the aforesaid features of the product are accepted by the Department. However, only on the ground that salicylic acid contained in the product is marginal, the Department took the view that it was a subsidiary substance. Having regard to the exposition of law narrated above, this was clearly an erroneous approach on the part of the Revenue as percentage of the said substance is immaterial to label it as subsidiary. Decision of the Tribunal holding the product in question to be a medicament and, therefore, covered by Chapter Heading 3003.10 is perfectly justified and does not call for any interference. - Decided against Revenue.
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2015 (8) TMI 1003
Denial of CENVAT Credit - Whether Cenvat Credit is admissible on Welding Electrodes (falling under Chapter Heading No. 8311.00) as Capital goods used in the repair and maintenance notwithstanding the ruling of the Hon'ble Supreme Court - Held that:- The items which fall under certain chapters of Central Excise Tariff Act are specifiably mentioned in Rule 2(a)(A)(i) of Rules, 2004. Then comes pollution control equipment', moulds and dies, jigs and fixtures, refractories and refractory material, tubes and pipes and fittings thereof and storage tank. All these things, if used in the factory of manufacturer of final products, or, for providing output service, would mean 'capital goods'. However, it would not include any equipment or appliance used in office. There is one more aspect, i.e., Rule 2(a)(A)(iii) of Rules, 2004, which says that in respect to items mentioned in Rule 2(a)(A)(i) and (ii) of Rules, 2004, components, spares and accessories of the goods specified thereunder would also fall within the category of 'capital goods'. - 'capital goods' as defined under Rule 2(a) of Rules 2004, in substance, are pari-materia with the 'capital goods' specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein. - Decision in the case of M/s Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise [2015 (5) TMI 569 - ALLAHABAD HIGH COURT] followed - Decided in favour of Revenue.
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2015 (8) TMI 1002
Waiver of pre deposit - Valuation - Related person - Mutuality of interest - Held that:- Prima facie, order that the Commissioner has not founded the order only upon the circumstance that 50% of the share holding in the Appellant is held by L & T Limited. The order of the Commissioner indicates that several other circumstances of a factual nature have been relied upon including among them the fact that L & T Limited bears the salaries and other expenses of officers and directors of the Appellant, that under the selling agency agreement it has been stipulated that the products of the Appellant are obliged to be sold by L & T Limited at such price as it may fix and that L & T shall endeavour to foster the interests and trade of the Appellant and will not directly or indirectly be concerned or engaged in any business of the same nature as that of the Appellant. In effect, L & T Limited is a sole selling agent of the Appellant. Until 1 July 2006, as a matter of fact, the Appellant was paying the duty of central excise on the selling price of L & T Limited. - The Tribunal has observed that the submissions addressed by the Appellant would require consideration. This is indicative of the fact that the matter requires deliberation. - Therefore, while a complete waiver is not warranted, in order to protect the interests of the Revenue, yet the quantum of deposit should be commensurate with an over all assessment of a prima facie case. - Pre deposit amount reduced - Time to make pre deposit extended - Decided partly in favour of assessee.
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2015 (8) TMI 1001
Classification of goods - Duty demand on waste filaments - Supreme Court dismissed the appeal due to nominal tax effect filed by the Revenue against the decision of Tribunal [2003 (1) TMI 467 - CEGAT, BANGALORE], wherein Tribunal held that since the waste has arisen before the raw material has been converted into filament, that waste does not partake of the qualities of filament. Therefore, it cannot be classified as filament or filament waste. That the waste has arisen in the process of manufacture of filament is wholly irrelevant to its classification. Goods have to be dealt with as they are at the time of classification and not what they could become after further processing.
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2015 (8) TMI 1000
Denial of exemption claim - exemption under Notification No. 1/93 - whether the appellant-company, a fully owned Government of Kerala Undertaking, satisfy the definition of as “belonging to or maintained by State Government”, in terms of the Explanation VIII of the Notification No. 1/93, dated 28-2-93 as amended - Supreme Court dismissed the appeal due to low tax effect. The appeal was filed by the Revenue against the decision of Tribunal [2003 (5) TMI 436 - CEGAT, BANGALORE]; wherein Tribunal held that When 100% share capital of KSCDC is owned by the Kerala State Government though registered as a company under the Companies Act, it is a fully owned State Government Undertaking satisfying the definition of as “belonging to or maintained by State Government” mentioned in Explanation VIII of Notification No 1/93 and thus two factories of the appellant are separately eligible for exemption under Notification No. 1/93.
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2015 (8) TMI 998
Invocation of extended period of limitation - SCN issued beyond the period of 6 months - Applicability of exemption Notification No. 208/83, dated 1-8-1983 - Non fulfillment of conditions of notifications - Held that:- It would be clear from the judicial journey that the issues involved in the present case remained entangled in judicial battle for quite some time and only in the year 2002, the hazy picture was clarified. In such a scenario, if the appellants took the decision that they were fulfilling the conditions mentioned in the Notification No. 208/83 and had not taken the licence under the Act, it cannot be stated that the aforesaid steps taken by the appellants were not bona fide. It is more so when the judicial opinion prevailing at that time was in favour of these persons. - When the authorities ask the appellants to take licence in the year 1983 itself and the respondents did not comply, nothing prevented the authorities to take action against the respondents immediately, rather than waiting for number of years before issuing the show cause notice. - show cause notices were time-barred and extended period of limitation was not available to the respondents - Decided in favour of assessee.
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2015 (8) TMI 969
Validity of summons issued - Non appearance of petitioner - Apprehension of arrest and detention - Held that:- summons issued under Section-14 is for the purpose that the petitioner also give evidence which is within the scope of Section-14 of the Central Excise Act. There is no illegality in the issuance of the summons. The apprehension that the petitioner would be detained is not well founded but is based on surmises and conjuncture. - Decided against Appellant.
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2015 (8) TMI 967
Remand order - Apprehension that objections may not be heard - respondent shall have no objection if the Adjudicating Authority proceeds to decide the matter on its own merit and consider all objections those would be raised by the appellant herein, touching legality and correctness of show cause notice. - Held that:- appeal stands disposed of with a direction to the Adjudicating Authority to consider all the objections, those may be raised by the appellant to the demand notice issued by revenue and proceed to decide the appeal in accordance with Law. - Appeal disposed of.
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2015 (8) TMI 964
Recovery of excise duty - Held that:- Last 2 years the case has been listed number of times and getting adjourned - Keeping in view the conduct of appellant/advocate Revenue is free to recover the adjudged liability.
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2015 (8) TMI 963
Valuation - Short payment of excise duty - whether the VAT which was exempt and which the appellant have collected from the customers and retained in terms of a Scheme of the State Government, is to be included in the assessable value or not - Invocation of extended period of limitation - Held that:- appellant during the period of dispute were liable to pay duty on the assessable value including amount of VAT collected by them from their customers and retained by them and since the VAT amount was not included in the assessable value, there has been short payment of duty. However, the duty demand for the 2006-07 period has been issued only on 28.4.2011 by invoking extended period of five years under proviso to Section 11 A(1) and this demand would survive only if it can be proved that the appellant had not acted under bona fide belief or that they had committed fraud or wilful misstatement or suppression of facts with intent to evade payment of duty. However, we find that during the period of dispute, the Board s Circular No.378/11/98-CX dated 12.3.98 and No.671/62/2000-CX dated 9.10.2002 were in favour of the appellant, as these circulars clarified that sales tax/VAT collected by an assessee but retained and not paid to the Government is not includible in the assessable value. - appellant had acted under bona fide belief that VAT amount collected by them from the customers and retained was not includible in the assessable value and hence, in these circumstances, in view of the Apex Court judgement in the case of CCE, Vs. Continental Foundation Joint Venture (2007 (8) TMI 11 - SUPREME COURT OF INDIA), the longer limitation period would not be available and as such, the duty demand would have to be held as time barred. - Decision in the case of Super Synotex (India) Ltd. (2014 (3) TMI 42 - SUPREME COURT) followed - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (8) TMI 1005
Reversal of Input Tax Credit on issuance of credit note – Tribunal-VAT vide impugned order held that appellants were required to reverse input tax credits claimed on purchases made by them, on account of credit notes issued by selling dealers, despite selling dealers having confirmed that they have not reduced their output tax liability – Whether it can be said that returns filed by appellants were false, misleading or deceptive, attracting penalty under DVAT act – Held that:- Appellants have been able to produce certificates from selling dealers who have clarified that they are not claiming any output tax credit or seeking any refund – Therefore, there is no question of selling dealer resorting to procedure under Section 51(a) of DVAT Act to raise credit note – If purchasing dealer is not given credit note by selling dealer, question of purchasing dealer adjusting input tax does not arise – Settled legal position was that if by virtue of insertion of explanation in taxing statute “a substantive law is introduced, it will have no retrospective effect” – Any reduction in tax payable by selling dealer on account of reduction in sale price would correspondingly result in reassessment of tax credit claimed by buyer in cases where goods have been sold by one registered dealer to another – Same would necessarily involve issuance of credit notes as without issuance of such credit notes, it would not be open for buying dealer to adjust tax credit. In assessment order, nothing has been brought on record by Department to show that arrangement by which discounts/incentives were offered to purchasing dealers by selling dealers was with view to "defeat the application or purposes of" any provision of DVAT Act – Thus, Tribunal erred in holding that Appellants were required to reverse Input Tax Credit claimed on purchases made by them and returns filed by Appellants could not be held to be false, misleading or deceptive – Impugned judgment of Tribunal unsustainable in law and hereby set aside – Decided in favour of Appellant.
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2015 (8) TMI 1004
Interest on refund of Tax demand – Interest to be granted from date of deposit or from the date of assessment order – Petitioner filed appeal before Appellate Authority claiming interest on refund of tax as demanded, appellate authority merely directed assessing authority to pay interest amount – Petitioner challenged order before Tribunal – Whether petitioner is entitled to interest from dates on which petitioner paid amounts to respondents as condition precedent to maintainability of appeal – Held that:- In view of Section 39(5), petitioner was compelled to pay tax assessed in order to have its appeal entertained – Petitioner had admittedly paid amounts to authorities – Revenue suffers no loss thereby for it has enjoyed benefit of money during period – Petitioner restricted his claim for interest from date of assessment order under which he was entitled to refund –Admittedly Interest was granted on basis of Section 12 of Punjab General Sales Tax Act, 1948 which is not same as HGST Act which is involved in case – Therefore interest is payable from date of deposit – Impugned order modified by directing respondents to pay interest on amounts deposited from dates on which deposits were made till payment – Petition disposed of –Decided in favour of Petitioner.
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2015 (8) TMI 999
Denial of refund claim - abkari business - Amount paid in addition to renewal fees of FL-3 License - Held that:- Appellant is not entitled to receive refund of ₹ 50 Lacs on account of subsequent deposit of required percentage of principal dues under the Amnesty Scheme of 2008. The amnesty earned in 2008 must be confined to the arrears of interest outstanding at the relevant time in 2008 and by that date the earlier deposits of ₹ 50 Lacs had already been appropriated towards interest. No fault can be found in appropriating that amount because there is no dispute regarding the actual outstanding amounts of principal and interest which clearly find mention in the certificate dated 10.11.2008 to I.A. No.1 on which appellant itself has placed reliance. - since there was no challenge to the proviso to Rule 13A(5) of the Foreign Liquor Rules, the respondents were well within their legal rights to insist that at least 50% of the excise dues against the partners of the appellant was required to be paid in accordance with the proviso, to get the desired renewal. Such decision of the High Court in our considered view does not require any interference. Factum of excise dues of one of the partners of the appellant and its subsequent payment under the Amnesty Scheme is not in dispute or controversy. This is apparent from the certificate dated 10.11.2008. Though large part of the interest amounting to several crores could not be recovered but that was on account of grace shown by the Government itself by formulating the Amnesty Scheme of 2008. In such circumstances exercise of writ jurisdiction to help the defaulter would be inappropriate. It would be unjust to direct for refund of ₹ 50 Lacs on the premise that its recovery in the manner made is being questioned by the appellant. - Decided against assessee.
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2015 (8) TMI 965
Applicability of Act – Imposition of Penalty – Case of petitioner is that in spite of fact that transaction between Petitioner and 4th respondent, is covered by CST Act, 4th respondent deducted tax due under Kerala Value added Tax Act from their bills – Petitioner sought for clarification however while orders are awaited, petitioner apprehended that 4th respondent would deposit tax deducted to Commercial Taxes Department – Held that:- Taking note of pendency of clarification sought, court directed designated authority to pass orders on Ext.P6 – Meanwhile, interim order directing 4th respondent not to deposit tax deducted from petitioner will continue – Petition Disposed of.
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