TMI Tax Updates - e-Newsletter
August 3, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Penalty u/s 271D - share application money exceeding ₹ 20,000/- was received in cash - assessee has squarely failed in pointing out any reasonable cause as why the money was received in cash despite both the subscriber and assessee company having enjoyed bank facilities - penalty confirmed - AT
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Income Tax:
Real income - co-operative society - The interest paid on the share capital goes to reduce the interest collected by the society from its members and it did not form part of the profit. The making provision for the payment of interest on the share capital and paying the interest on the share capital will not make any change in the application of law - AT
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Income Tax:
Levy of fees under section 234E - adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. - AT
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Income Tax:
TPA - This is a case in which transfer pricing provisions cannot be applied because the application of ALP adjustment will indeed result in erosion of Indian tax base- as visualized by the scheme of Section 92(3) inasmuch for every rupee of ALP adjustment in intra group service, the revenue of the assessee, on the basis of application of arm’s length price, will stand reduced by one and one fifth times of the ALP adjustment. - AT
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Income Tax:
Rectification of mistake - chargeability of interest u/s 234B - the inconsistency on the part of Revenue does not lend any credence to its objection of not rectifying the order with respect to the interest charged u/s 234B of the Act. - AT
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Income Tax:
Exemption u/s 54 - Transfer u/s 2(47) - Reckoned from the date of possession i.e. 14-05-2011 the assessee is entitled for treatment of sale of flat as long term and capital gain will be treated as long term capital gain because the property was acquired by assessee”s father on 16-04-2008 and assessee handed over the possession to the purchaser only on 14-05-2011, it means the holding period is more than thirty six months. - AT
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Income Tax:
Addition u/s 69C - purchase of goods - It is not the case of expenditure that was incurred by the it was not entered in the books of accounts. The AO has nowhere held that as to how the explanation offered by the assessee about the source of the expenditure was unsatisfactory. - No addition - AT
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Customs:
Claim of exemption on import - the “goods intended for use” in a notification is not to be construed as used. The appellant not having abused the imported goods upon clearance, but were lost in transit beyond control of the appellant, it cannot be denied the benefit of the notification. Accordingly, differential duty is not recoverable. - AT
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Customs:
Levy of penalty - use of IEC code of others for import of goods - penalty under two different provisions of law is leviable. - AT
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Customs:
Refund of duty in excess, under protest - importer had not challenged the assessment - The dispute on taxability stands settled in favour of the importer for the period from 2001 to 2005. That resolution of the dispute is equally applicable to subsequent imports. - AT
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Service Tax:
Outdoor catering services or not - running a restaurant/canteen at the hospitals rented place - While confirming service tax demand for the normal period, penalty waived - AT
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Service Tax:
Demand on interest on delayed payment of service tax - period of limitation - The period of limitation applies to the claim for principle amount and also applies to the claim for interest thereon. - AT
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Service Tax:
Refund of un-utilized cenvat credit - When time limit of refund claim is one year, there is no requirement that input credit claimed as refund should correspond to months in which exports have taken place. - merely because part of the amount claimed in each refund related to credits on input, which have not been used in the same month, the credit cannot be denied - AT
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Central Excise:
Classification of pictures, graphics and images printed on selected material like vinyl coated fabric and films which are non-adhesive and which are used on bill boards and hoardings in outdoor advertisements - The product in question are to be classified under 49.01 - AT
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Central Excise:
Interest on delayed payment of differential duty - period of limitation - demand of interest issued after 3 years, hence barred by limitation - AT
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Central Excise:
SSI exemption - use of brand name - though the trade mark BONNE was registered in favour of the appellant-assessee with effect from 27.4.2004, they were clearly entitled to use the brand name in their territories assigned to them from 1990 onward - exemption allowed - AT
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Central Excise:
Classification - Effect of conversion from 6 digit classification to 8 digit classification w.e.f. 1.3.2015 - From a reading of the circular dated 25th February 2005, supra, it appears that the exercise of transiting to eight digit code in the tariff was not intended to alter the effective duty structure in any manner. Implementation of this intent was possible only by harmonious reading of the two notifications. - AT
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VAT:
Refund - delay in issuance of refund - Responsibility should be fixed on derelict officers and disciplinary proceedings initiated where there is a clear breach of the statutory duties. - HC
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VAT:
The mere consent of the counsel for the revisionist to produce the relevant books of accounts would clearly not confer the Deputy Commissioner with jurisdiction or authority to reopen or reassess the order of assessment bearing in mind the fact that he was exercising powers of revision - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (8) TMI 65
Penalty under section 271D - violation of the provisions of section 269SS - share application money exceeding ₹ 20,000/- was received in cash - Held that:- The authorized share capital of the assessee company was already paid and nothing was left further against which the assessee could receive the share application money and, therefore, the argument of the assessee that the share application money exceeding ₹ 20,000/- was received in cash under bonafide belief that section 269SS do not prohibit so, is fallacious and devoid of any merit. We agree with the learned Departmental Representative that the assessee has squarely failed in pointing out any reasonable cause as why the money was received in cash despite both the subscriber and assessee company having enjoyed bank facilities. In view of the above discussion, we are of the considered opinion that the assessee failed to prove that there existed a reasonable cause for failure to comply with the provisions of section 269SS of the Act. Accordingly, we are not inclined to grant any immunity from levy of penalty under section 271D of the Act on the ground of existence of reasonable cause for failure to comply with the provisions of section 269SS of the Act. - Decided in favour of revenue
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2016 (8) TMI 64
Accrual of income and expenditure - Real income - co-operative society - Provision on interest on share capital by assessee society - addition to profit of assessee trust - Held that:- We are of the opinion that the order passed by the authorities below are required to be set aside and the appeal of the assessee is required to be allowed. In our view, in case of Cooperative Society, there is a liability to repay the share capital to the members concerned. Once he ceases to be a member, therefore, the share capital in the hands of Cooperative Society cannot be treated with the share capital of the company, it could be treated as a borrowed capital. Further the assessee was following the mercantile system of accounting and any business expenditure relating to a financial year which is not paid during the financial year is required to be provided in the P&L account and the said provision will be set up with actual payment paid in the subsequent year. On the same analogy, the assessee made the provision for ₹ 23,97,359/- towards the interest on share capital in the P&L account for the financial year 2008-09 and the same was paid in the subsequent year. The interest paid on the share capital goes to reduce the interest collected by the society from its members and it did not form part of the profit. The making provision for the payment of interest on the share capital and paying the interest on the share capital will not make any change in the application of law. - Decided in favour of assessee.
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2016 (8) TMI 63
Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. The impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.
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2016 (8) TMI 62
Transfer pricing adjustment - intra group services - ALP adjustment - Held that:- In the light of the factual position coupled with the relief granted by the DRP on the ALP adjustment in the mark-up rate of the cost plus basis billing to the AE in respect of revenues for the IT enabled services, and in the light of the provisions of section 92(3), the transfer pricing provisions cannot be invoked in respect of intra group services, which admittedly form part of the cost base of the assessee, availed by the assessee. This is a case in which transfer pricing provisions cannot be applied because the application of ALP adjustment will indeed result in erosion of Indian tax base- as visualized by the scheme of Section 92(3) inasmuch for every rupee of ALP adjustment in intra group service, the revenue of the assessee, on the basis of application of arm’s length price, will stand reduced by one and one fifth times of the ALP adjustment. Section 92(3) does not permit computation of income on the basis of arm’s length price in such a situation; as a matter of fact, it prohibits application of arm’s length principle in such a situation. - Decided in favour of assessee.
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2016 (8) TMI 61
Rectification of mistake - chargeability of interest u/s 234B - whether the Assessing Officer could not have set-aside levy of interest u/s 234B of the Act while dealing with an application made by the assessee u/s 154 ? - Held that:- According to the assessee, during the previous year related to the assessment year under consideration, it could not have visualized the subsequent amendment made by Finance Act No. 2 of 2009 to Sec. 115JB of the Act with retrospective effect from 1.4.2001 whereby the Provision for bad and doubtful debts was liable to be assessed for determining the income u/s 115JB of the Act. The aforesaid argument of the assessee cannot be faulted.Accordingly, we set-aside the order of CIT(A) and direct the Assessing Officer not to levy interest u/s 234B of the Act with respect to the addition relating to Provision for bad and doubtful debt made while computing the tax liability u/s 115JB of the Act. Thus, the assessee succeeds on this aspect. The action of Assessing Officer in the course of disposing of assessee’s impugned application u/s 154 of the Act belies the stand of the Revenue. Notably, in its application seeking rectification of the interest charged u/s 234B of the Act, assessee also claimed that interest u/s 234D of the Act was wrongly charged, and also that the credit for tax was not correctly granted. The impugned order of the Assessing Officer dated 2.4.2013 reveals that so far as assessee’s pleas for rectification relating to charging of interest u/s 234D of the Act and non-granting of credit of tax is concerned, same have been accepted. Thus, the inconsistency on the part of Revenue does not lend any credence to its objection of not rectifying the order with respect to the interest charged u/s 234B of the Act. Thus, on this aspect also, we find no reason to uphold the stand of the Revenue. - Decided in favour of assessee.
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2016 (8) TMI 60
Exemption u/s 54 - Transfer u/s 2(47) - whether the handing over of the possession of the property is vital to decide the transfer in term of the provision of Section 2(47) of the Act so as to decide whether the property is held as long term asset or short term asset? - Held that:- As in the case of the assessee, who entered into agreement to sell dated 07-01-2011 and in this agreement a specifically mentioned Clause 2(b) states that the possession of the flat was to be given to the purchaser in the next 10/30 days and eventually the possession of the said flat was granted on 14-05-2011 with the mutual consent. Reckoned from the date of possession i.e. 14-05-2011 the assessee is entitled for treatment of sale of flat as long term and capital gain will be treated as long term capital gain because the property was acquired by assessee”s father on 16-04-2008 and assessee handed over the possession to the purchaser only on 14-05-2011, it means the holding period is more than thirty six months. The assessee has invested a sum of ₹ 89,22,500/- in purchase of new flat, the proceeds out of sale of the flat. In our view the assessee is entitled for deduction u/s 54 of the Act and assessment of this transaction is to be made in assessment year 2012-13 and not in assessment year 2011-12. We direct the AO accordingly. Appeal of the assessee is allowed partly in favour of assessee.
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2016 (8) TMI 59
Addition u/s 69C - source of the expenditure - purchase of goods - accommodation entries - Held that:- Section 69C of the Act stipulates that the deemed income(where the source of the expenditure is not explained)cannot be allowed as a deduction under any head of income. In other words, even if the assessee can justify the expenditure, but cannot explain its source, the section disentitles him from claiming a deduction on the deemed income under any head of income. In short, what is postulated in section 69C of the Act is that first of all the assessee must have incurred that expenditure and thereafter, if the explanation offered by the assessee about the source of such expenditure is not found satisfactory by the AO, the amount may be added to his income. In the case before us, expenditure has been incurred for purchasing goods and the assessee had explained the sources. It is not the case of expenditure that was incurred by the it was not entered in the books of accounts. The AO has nowhere held that as to how the explanation offered by the assessee about the source of the expenditure was unsatisfactory. Therefore, in our opinion, the AO had wrongly invoked the provisions of the section 69C of the Act. Considering the above, effective GOA, raised by the AO is decided against him. - Decided in favour of assessee
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2016 (8) TMI 58
Disallownace of interest paid to nonconvertible debenture portion of public issue - Held that:- CIT (A) deleting the disallownace made by the A.O. in respect of interest paid to nonconvertible debenture portion of public issue came to be confirmed, as also considering the decision in case of Core Health Care Ltd. (2008 (2) TMI 8 - SUPREME COURT OF INDIA ), this Court while adopting the said view does not think it proper to discuss the issue elaborately and accordingly answer the question in favour of the asseesse and against the department
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2016 (8) TMI 57
TDS u/s 195 - disallowance u/s. 40(a)(ia) - Held that:- We find that the income and expenses recorded in the books of Subex Ltd. in the intervening period between 1.9.2007 and 31.3.2008 were recorded in the assessee’s books by way of journal entry. We have perused the relevant ledger account extracts of the expenses of ₹ 624,983,348 by virtue of such journal entry. We are of the opinion that the impugned payment of ₹ 624,983,348 to STI is merely a journal entry and hence the need for tax deduction at source u/s. 195 of the Act does not arise and the lower authorities have erred in disallowing the impugned amount u/s. 40(a)(ia) of the Act.
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2016 (8) TMI 56
Addition u/s 14A - Held that:- As during the year under consideration, assessee has not earned any exempt income in order to invoke the provisions of section 14A of the Act. Thus we find no reason to uphold the impugned disallowance made by the income tax authorities by invoking section 14A of the Act - Decided in favour of assessee Addition invoking the provisions of section 36(1)(iii) - Held that:- Following the judgment of Hon'ble Bombay High Court in the case Reliance Utilities And Power Limited (2009 (1) TMI 4 - BOMBAY HIGH COURT ), it can be presumed that no borrowed funds were used to make such investments. As per Hon'ble Bombay High Court, the principle is that, if there are funds available both interest free and interest bearing, then a presumption can be drawn that investments are made out of interest free funds, so long as such interest free funds are sufficient to meet the investments. In our considered opinion, having regard to the fact position brought out by the CIT(A), the proposition laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities And Power Limited(supra) is fully attracted in the present case. Such fact-situation has been enumerated by the CIT(A) in Para 3.4 of his order, which depicts the summarized fund flow position of the assessee, and the same has not been controverted by the Revenue before us, rather the same is also borne out of the material placed in the Paper Book filed before us. Therefore, on this count itself, we find no reason to interfere with the ultimate conclusion of the CIT(A) in deleting the addition - Decided in favour of assessee
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2016 (8) TMI 55
Capital gain computation - determination by the stamp duty valuation authorities for stamp duty purpose - reference matter to DVO - Held that:- In case the assessee disputes the value as adopted by the stamp duty valuation authorities for stamp duty purposes, the AO is bound to refer the matter to DVO for determining the fair market value of the property and in case DVO valued the fair market value of the property at a value higher than stamp duty value adopted by Stamp duty valuation authorities, then the value adopted for stamp duty by stamp duty valuation authorities shall be taken as full value of consideration for computing capital gains. In our considered view, the value of ₹ 1,77,12,000/- as determined by the stamp duty valuation authorities for stamp duty purposes shall be adopted as full value of consideration for the purposes of Section 48 of the Act for computing long term capital gains in the hands of the assessee due to deeming fiction of Section 50C of the Act, instead of the value of the land of ₹ 2,09,28,000/- as determined by the DVO, while on the other hand the actual sale consideration is ₹ 72,00,000/- . The assessee’s share in the land is 13.5417% and hence full value of consideration will work out to ₹ 23,98,500/- which for the purposes of Section 48 of the Act shall be adopted as full value of consideration of sale of land as per provisions of Section 50C of the Act for computing long term capital gains chargeable to tax.
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2016 (8) TMI 54
Set off of unabsorbed expenses of earlier years against the income of the current year of Trust - Held that:- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and that such adjustment will have to be excluded from the income of the trust under section 11(1)(a) of the Act. See CIT v. Institute of Banking [2003 (7) TMI 52 - BOMBAY High Court ] - Decided in favour of assessee Disallowance of depreciation to assessee trust - Held that:- Depreciation to assessee trust is to be allowed as depreciation would not amount to double deduction. See CIT v. Society of the Sisters of St. Anne [1983 (8) TMI 44 - KARNATAKA High Court ] .- Decided in favour of assessee
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2016 (8) TMI 53
Unexplained purchase u/s 69C - unexplained purchases - admission of additional grounds - Held that:- No incriminating material belonging to the assessee was seized and in both the cases additions were made for unexplained purchases under section 69C of the Act on the basis of the statement of third-party recorded subsequent to the search. Thus, respectfully following the judgment of the Hon’ble Jurisdictional High Court in the cases of R.R.J. Securities Ltd. (2015 (11) TMI 19 - DELHI HIGH COURT ) and Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ), we hold that since in the case, as on the date of search, the assessments already stood completed, therefore, no addition could have been made in the year under consideration in absence of any incriminating material, and accordingly, the additions made by the Assessing Officer are directed to be deleted. - Decided in favour of assessee.
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2016 (8) TMI 52
Delay in deposit of tds - Addition U/s 40(a)(ia) of payment made towards Labour Charges - Held that:- Amendment to the provisions of Sec.40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant to and from AY 05-06 can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, then no deduction u/s.40(a)(ia) of the Act can be made. Admittedly in the present case, the Assessee had deposited the tax deducted at source on or before the due date for filing return of income u/s.139(1) of the Act and therefore the impugned disallowance deserves to be deleted. - Decided in favour of assessee. Addition under the head ‘purchase discount’ - Held that:- An enquiry from the three parties ought to have been made by the AO to find out the truth of claim made by the assessee. The CIT-A also did not make such enquiries. We therefore, set aside the order of CIT-A on this issue and remanded the same to the AO to make enquiries from the aforesaid three parties and affording opportunities to the Assessee and decide the issue afresh Disallowance on motor car and telephone expenses and other expenses - Held that:- Taking into consideration the fact that there were some defects pointed out in the TAR [Tax Audit Report] and keeping in mind that there is always an element of estimation involved in making such disallowances, we are of the view that the disallowance should be sustained at 10% of expenses as against 20% disallowance made by the revenue authorities. Disallowance made u/s. 24 - Held that:- The disallowance cannot be sustained. It appears that the CIT-A has accepted the assessee’s contention, but due to typographical error, it has been mentioned that addition is sustained. The submission made by the assessee before the CIT-A clearly shows that the assessee will be entitled to claim deduction u/s. 24(b) of the Act on the ground even if the assessee is assumed to be a coowner, yet u/s. 26 of the Act the claim of assessee for deduction ought to have been allowed - Decided in favour of assessee.
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2016 (8) TMI 51
Disallowance u/s. 14A - whether disallowance can be made under Rule 8D? - Held that:- Following the principles laid down by the Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd., [2009 (1) TMI 4 - BOMBAY HIGH COURT] we are of the opinion that no part of the interest paid on the borrowed funds can be disallowed under Rule 8D(2)(ii). Moreover, if at all there is any diversion of funds that should trigger disallowance u/s. 36(1)(iii) i.e., for diversion of funds from the business. AO has not disallowed any amount u/s. 36(1)(iii). In view of this, we are of the opinion that the interest paid on term loans obtained cannot be considered as interest which is not directly attributable to any particular income or receipt under Rule 8D(2)(ii). In view of this, disallowance of ₹ 11,49,176/- invoking the sub-Rule 2(ii) is set aside. Coming to the disallowance invoking Sub- Rule (2)(iii) of 0.5% of average value of investment, Rule 8D(2) (iii) specifies that an amount equal to ½% of the average value of investment, income from which does not or shall not form part of the total income, as appear in the balance sheet of assessee on the first day and the last day of the previous year has to be attributed. Working has to be made on the investment as specified, without segregating them on income yielding or non-income yielding during the year. The investment in Bill Roth Hospitals Ltd., has potential to earn dividend in a later year. Thus AO is correct in disallowing 0.5% of the average investments as available in the balance sheet. To that extent, assessee’s contentions are rejected. - Decided partly in favour of assessee
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2016 (8) TMI 50
Deduction u/s 36(1) - provision for bad and doubtful debt - Held that:- Considering the reasoning of the AO in confining the deduction claimed u/s 36(1)(viia) only to the provision made towards rural advances, in our view, is not in accordance with the statutory provision. On the other hand, the view expressed by ld. CIT(A) while allowing assessee’s claim of deduction is as per the statutory provision. Accordingly, we do not find any infirmity in the order of ld. CIT(A) in allowing assessee’s claim of deduction for ₹ 616.55 crores u/s 36(1)(viia). - Decided in favour of the assessee
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2016 (8) TMI 49
Validity of assessment u/s 153C - Held that:- The satisfaction recorded by the A.O. is lacking in material particulars and only the cryptic mechanical direction was issued for issuance of notice U/s 153C of the Act without recording of proper satisfaction. Ironically, in the present note, the word “satisfaction" has also not been used by the AO. Therefore, there is no question of even the cryptic of mechanical recording of satisfaction also. In the light of the above, we are left with no other option but to allow the appeal of the assessee.
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2016 (8) TMI 48
Disallowance made u/s. 40(a)(ia) in respect of expenditure on account of hiring of trucks - Held that:- The assessee has already paid the entire expenses and nothing was payable as on 31st March, 2010, therefore the provisions of section 40(a)(ia) cannot be applied. Disallowance made u/s. 40A(3) - Held that:- We find that the CIT(Appeals) has given the full details of the payment in the impugned order, which is more than the minimum limit of exemption provided under the provisions of section 40A(3). Therefore, in the absence of any contrary fact or material, we find no reason to interfere with the findings of fact given by the CIT(Appeals), wherein all the individual amounts were found to be more than the minimum prescribed limit of ₹ 20,000. There is no dispute that all these payments were made in cash. Therefore, the assessee has failed to substantiate its claim. Accordingly the order of the CIT(Appeals) qua this issue is upheld.
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2016 (8) TMI 47
TDS u/s 195 - Royalty Income chargeable to tax - payment for purchase of shrink wrapped readymade software from salesforce.com, Singapore - taxability in India - Held that:- The said payment does not fall with the purview of royalty as well as Article 12 of DTAA. Respectfully following the ratio laid down in the case of DIT Vs Ericsson AB [2011 (12) TMI 91 - Delhi High Court] and Others and Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT ] by Hon'ble Jurisdictional High Court, we hold that the purchase of software is not royalty and hence not liable to tax deduction at source. - Decided in favour of assessee.
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2016 (8) TMI 46
Allocation of common expenditure between the rental income and service income - Held that:- There is no dispute that the income earned from rendering services to tenants has been assessed as business income and the primary source of assessee’s activities was to earn rental income. It was assessed under the head “Income from house property”, against which assessee got statutory deduction and, therefore no expenditure relating to earning of rental income could be allowed any further. Therefore, in principle, we agree with the AO’s action that common expenditure had to be allocated between the rental income and service income. As far as auditors’ remuneration is concerned, the said expenditure have to be incurred by assessee company to meet the statutory requirements. But since assessee was deriving income, both rental as well as service income, therefore, the entire auditors’ remuneration could not be allocated only towards service income, because auditors have audited the rental income also, which was reflected in the P&L A/c. Therefore, AO as well as ld. CIT(A) were justified in proportioning this expenditure. As far as legal charges are concerned, before ld. CIT(A) the assessee had pointed out that the amount was paid to Associates Law Advisors, but it is not pointed out for which purpose the amount was paid. Therefore, both the lower revenue authorities rightly allocated this expenditure between rental income and service income. As far as travel & conveyance expenses are concerned, we find that before ld. CIT(A) the assessee had pointed out that this amount was expense on day to day travelling of the officials of Knight Frank for maintenance and operation of common area. Therefore, this amount was directly attributable to the service income derived by assessee and hence could not be allocated between rental income and service income and had to be allowed in full against the service income. As far as rates and taxes are concerned, merely because the amount has been paid to Registrar of Companies for statutory compliance, will not entitle the assessee to claim the entire expenditure against the service receipts, because against rental income statutory deduction has been allowed, which includes expenses incurred for all such statutory compliances. As regards bank charges, since the assessee has not specifically pointed out that the same was paid to bank where only service income was deposited, therefore the same has to be allocated between rental income and service income. Capitalization of lease rent paid to DDA towards plant and machinery or to the cost of the land - Held that:- We are not inclined to accept the proposition advanced by the ld. counsel for the assessee for the simple reason that no depreciation is allowable in respect of cost of land in respect of which the lease rent was paid to DDA and, therefore, was to be capitalized. The lease rent paid could not be capitalized to the cost of land to plant & machinery but to the cost of the land. We, accordingly, uphold the order of ld. CIT(A) on this count. Additional depreciation on purchase of DG set - Held that:- The basic ingredient of the section is that the assessee should be engaged in the business of manufacture or production of any article or thing or in the business of generation or generation and distribution of power. Admittedly, the assessee was not at all engaged in the generation or generation and distribution of power but had only installed DG set for providing electricity to the tenants at the time of power failure. The term ‘or in the business of generation or generation and distribution of power’ was inserted by the Finance Act, 2012 w..e.f. 1.4.2013. Prior to that the requirement was that the assessee should have been engaged in the business of manufacture or production of any article or thing. We fail to appreciate what article or thing the assessee produced so as to be entitled for additional depreciation as per section 32(iia). This section is meant for those assessees, who installed plant and machinery after 31.03.3005 for manufacture or production of any article or thing. The assessee was not producing any such article or thing. It was only supplying electricity through D.G. Set installed by it.
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2016 (8) TMI 45
Validity of assessment u/s 153C - necessity of satisfaction note for initiating the action - Held that:- As it is apparent that the CIT (Appeals) has reproduced the reasons recorded/satisfaction note for initiating the action under Section 153C of the Act however, it is not clear whether the satisfaction was recorded in the assessment proceedings of the searched person or it was recorded by the Assessing Officer at the time of initiating the proceedings under Section 153C of the Act. As we have discussed in foregoing paras that recording of satisfaction by the Assessing Officer of the searched person either during the assessment proceedings or just on completion of the assessment proceedings of the searched person is a mandatory requirement before handing over the seized material for initiating the proceedings under Section 153C of the Act. Neither the CIT (Appeals) has given any finding about the stage and assessment proceedings in which the alleged satisfaction is recorded nor any record has been produced before us to ascertain the correct factual position of the satisfaction recorded by the Assessing Officer. Accordingly, in the facts and circumstances of the case, we set side this issue to the record of the CIT (Appeals) for deciding the same by giving a detailed factual finding as well as the validity of assessment under Section 153C of the Act to the extent of the enhancement of assessment made by the CIT (Appeals). Since the jurisdictional issue has been set aside to the record of the CIT (Appeals) for fresh adjudication, therefore the other issues raised by the assessee are kept open.
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Customs
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2016 (8) TMI 31
Levy of redemption fine - excess quantity of fuel oil, diesel oil and lube oil found in the ship stores in the vessel - In addition penalty of ₹ 10.00 Lakhs has also been imposed upon the Master of the vessel under section 112(a) and 112(b) of the Customs Act, 1962. - Held that:- One of the arguments given by the ld.Advocate of the Appellants is that vessel was anchored at Sandheads on 05.08.2009 whereas vessel arrival report was filed on 11.08.2009. That the difference is due to oil consumption when the vessel was anchored at the Sandheads from 05.08.2009 to 11.08.2009. The explanation given by the ld.Advocate can hold to explain consumption of lube oil and other oils and the resultant quantity during physical measurement should have been lesser than the quantities indicated in vessel arrival report when some quantities of oil are consumed during anchoring at the sandheads. The argument given by the ld.Advocate is not convincing. The goods found in excess are liable to confiscation under Section 111(f) of the Customs Act, 1962. The verbal requests and written undertakings given by the Appellants can be considered as a bond/undertaking given by the Appellants for the release of the vessel with respect to excess quantities of oils found by the department. The redemption fine and penalties are correctly imposed by the adjudicating authority upon Appellant Mr.Chen Gao Sheng (Master of vessel M.V. Medi Firenze) by holding that undertakings given before the adjudicating authority are legally enforceable to recover redemption fine and penalties. Demand confirmed - Decided against the appellant.
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2016 (8) TMI 30
Duty drawback - export of Bulk Drugs. - Classification of Metformin HCL USP/PH EUR - Tariff item no. 2925209002 in the drawback schedule or Tariff item no. 2925000099 (others) - Held that:- Pharmacopeia IP, BP, EP, JP, or USP may be treated as interchangeable. The Circulars are binding on the department and the contention of the department, that basing on pharmacopeia suffixed the product has to be reclassified as ‘other’ is not tenable. The Tariff item 2925209002 pertains to Metformin HCL BP. Mere difference in pharmacopeia cannot make the product fall under others. The Circulars as well as letter from the office of DGFT makes this clear. Therefore the benefit of 4% at the rate on FOB value in drawback schedule cannot be denied. The restriction of drawback claim to ₹ 1,34,820/- (calculating @ 1%) by classifying the product as 'others' is not legal or proper. Decided in favor of assessee.
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2016 (8) TMI 29
Claim of exemption on import - goods intended for use - loss of goods after import - Held that:- Law is well settled by the apex court in the case of State of Haryana Vs Dalmia Dadri Cement Ltd., [1987 (11) TMI 94 - SUPREME COURT OF INDIA] that the “goods intended for use” in a notification is not to be construed as used. The appellant not having abused the imported goods upon clearance, but were lost in transit beyond control of the appellant, it cannot be denied the benefit of the notification. Accordingly, differential duty is not recoverable. - Demand set aside - Decided in favor of assessee.
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2016 (8) TMI 28
Levy of penalty - use of IEC code of others for import of goods - It was contended that once the goods have suffered duty and interest and penalty has been paid, this appellant should not suffer another penalty of ₹ 2,00,000/- imposed under section 112 (a) of the Customs Act, 1962. - Held that:- Revenue is correct to say that there were two different offences committed by two different persons. While Shri M. Gouri Shanker was lender of IEC code and Shri K. Harish Gandhi, present appellant was an abuser thereof, penalty under two different provisions of law is leviable. Law is well settled that any leniency to the breach of law and in subject like Customs shall perpetuate fraud and that shall be a bonus to evaders. - Decided against the appellant.
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2016 (8) TMI 27
Refund of duty in excess, under protest - The claim had been rejected by the Assistant Commissioner (Refund) on the ground that the importer had not challenged the assessment, an essential pre-requisite laid down in the decision of the Hon’ble Supreme Court in Priya Blue Industries Ltd v. Commissioner of Customs (Prev.) [2004 (9) TMI 105 - SUPREME COURT OF INDIA]. - Held that:- It is seen that the refund application made on 9th April 2012 was returned as premature . At that time, after holding the claim for 14 months, the original authority did not consider the application to be violative of the decision of the Hon’ble Supreme Court in re Priya Blue Industries (supra). That it was raised upon re-submission of the application after the decision of the Tribunal upholding the dropping of proceedings by Commissioner of Customs throws light on the motive for doing so. By not raising that principal objection at the first stage, the original authority forfeited the right to do so when the alteration in circumstances favoured the importer's claim. The dispute on taxability stands settled in favour of the importer for the period from 2001 to 2005. That resolution of the dispute is equally applicable to subsequent imports. Refund allowed - Decided against the revenue.
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Service Tax
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2016 (8) TMI 44
Outdoor catering services or not - running a restaurant/canteen at the hospitals rented place - Held that:- such type of providing of services at a place acquired by way of tenancy in the premises of the particular institution, would amount to providing outdoor catering services. - Decision in the case of in the case of Indian Coffee Workers’ Co-op. Society Ltd. vs. CCE & ST, Allahabad [2014 (4) TMI 407 - ALLAHABAD HIGH COURT]. followed. As regards penalties, learned Advocate submits that there was no malafide on their part in as much as the outdoor caterers services were introduced w.e.f. 01/3/2006 when the earlier exemption notification were withdrawn. The period involved in the present appeals start from 01/4/2006 and the issue being a legal issue of interpretation of the definition and being the subject matter of the litigation before various courts, there was a bonafide belief on the part of the Assessee, in which case imposition of penalty would not be justifiable. While confirming service tax demand for the normal period, penalty waived - Decided partly in favor of assessee.
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2016 (8) TMI 43
Waiver of penalty u/s 80 - reasonable cause - bonafide mistake - it was submitted that appellant had misinterpreted the provisions and hence erred in depositing the service tax in time - Held that:- The ld. Commissioner (Appeals) denied the relief from penalty in terms of Section 80, as they were not able to substantiate failures to pay the service tax and of non-filing of ST-3 return. I find that both the authorities below dealt the issue in detail and were not satisfied with the reason adduced by the appellant for their failure to pay the service tax and for non-filing of return. - However, the appeal is remanded back to the adjudicating authority to decide the quantum of penalty on ₹ 1,02,367/- under Section 76. As regards imposition of penalty under Section 77 of the Finance Act, 1994, it is upheld since the appellants have failed to submit the ST-3 returns for the period under dispute.
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2016 (8) TMI 42
Demand on interest on delayed payment of service tax - period of limitation - they were paying service tax under provisional assessment as per Rule 6(4) of Service Tax Rules, 1994 - Held that:- During the disputed period, the appellant has deposited more service tax than provisional assessment. But still it was less than the actual liability and further, interest cannot be demanded under Section 75 of Finance Act, 1994, because the appellant is not liable to pay interest in accordance with the provisions of Section 68 of the Finance Act, 1944 and the Rules made there-under i.e. Rule 6(4) which is made under Section 68 of the Act. The period of limitation applies to the claim for principle amount and also applies to the claim for interest thereon. Demand of interest set aside - Decided in favor of assessee.
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2016 (8) TMI 41
Import of services or not - reverse charge - Project Management Services avaled from Netherland Operating Co., BV, Netherlands (NOC BV) through their Indian establishment. - Held that:- The Indian establishment of NOC BV, Netherlands have registered themselves with the service tax department and remitted the full tax liability with reference to the impugned contract. The original authority while taking cognizance of the existence of NOC BV in India, proceeded to confirm the service tax demand on the basis that the agreement is with NOC BV, Netherlands and the consideration is paid in foreign exchange. We find that Explanation 1.- under Section 66A stipulated that “a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country.” In the instant case, NOC BV Netherlands is admittedly having a business establishment in India recognized by various law. The service is rendered through such establishment in India. The reliance placed by the original authority on Board’s Circular dated 06.05.2011 is misplaced. The said Circular is not on the scope of Section 66A. We find that the original authority has misdirected in his finding despite of his recognition of the Indian establishment of NOC BV as service provider. - Demand set aside - Decided in favor of assessee.
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2016 (8) TMI 40
Refund of un-utilized cenvat credit - 100% EOU - eligible input services - nexus with the output services - export of Information Technology Software Services (ITSS) - Held that:- the input service required in one establishment may differ from the input service required in another establishment, even though the output services rendered by both establishments may be similar - the contention of the Revenue that the judgment in Maruti Suzuki case [2009 (8) TMI 14 - SUPREME COURT] should be applied and the functional utility of the input and integral nexus has to be established in the case of input service also, is without merits. When time limit of refund claim is one year, there is no requirement that input credit claimed as refund should correspond to months in which exports have taken place. - merely because part of the amount claimed in each refund related to credits on input, which have not been used in the same month, the credit cannot be denied. Further, denial of refund on the ground that these services do not qualify as input services is not justified. Both grounds are answered in favour of the appellant. Claim of refund allowed - Decided in favor of assessee.
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Central Excise
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2016 (8) TMI 39
Classification of pictures, graphics and images printed on selected material like vinyl coated fabric and films which are non-adhesive and which are used on bill boards and hoardings in outdoor advertisements - classifiable under Chapter 4901.90 or 9405 of CETA - Held that:- In the case of Tanzi Screen Arts Vs. CCE, Mumbai reported in [2001 (3) TMI 149 - CEGAT, MUMBAI] , it was observed that, texts, graphics, etc printed on the translucent plastic sheets by means of screen printing to advertise goods and services are classifiable under 49.01 as product of printing industry and not under heading 94.05 as part of illuminated signs not elsewhere specified. - The product in question are to be classified under 49.01 - Decided against the revenue.
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2016 (8) TMI 38
Interest on delayed payment of differential duty - period of limitation - demand of interest issued after 3 years - At the time of clearance, the Appellants adopted the CAS-4 data of previous year to arrive at the cost of production, and on receipt of the actual data, they re-determined the assessable value and paid the differential duty. - Held that:- It is the contention of the Appellant now before this forum is that the demand for interest since issued in 2012, hence barred by limitation. - following the decision in the case of Hindustan Insecticides Ltd (2013 (8) TMI 225 - DELHI HIGH COURT), demand of interest set aside - Decided in favor of assessee.
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2016 (8) TMI 37
Reversal of credit taken on capital goods - removal of capital goods after use of 10 years - period from 1.9.2004 to 13.11.2007 - Held that:- the appellants are only required to reverse the credit calculated in terms of CBE&C Circular cited above. If that is a case then the liability of the appellants is limited to around ₹ 10,000/- whereas they have already reversed over ₹ 97,000/-. In these circumstances, no demand can be sustained against the appellants. The appeal is accordingly allowed. - Decided in favor of assessee.
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2016 (8) TMI 36
Recovery proceedings against the person who is not alive to defend himself - Evasion of duty - by resorting to under-invoicing and clandestine removal of excisable goods - Held that:- the appellant was sole proprietorship concern and Shri Harilal M. Patel was the sole proprietor of the appellant-firm and he died on 27.12.2011 when the appeal was still pending. Further we find in view of the law cited supra no recovery proceedings can be initiated against the dead person. Therefore keeping in view the facts and circumstances of the case and the decisions cited supra, we set aside the impugned order by allowing the appeal of the appellant.
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2016 (8) TMI 35
Cenvat Credit - input service - out-door catering services - Held that:- In the instant case, as per Factories Act, 1948, the appellants are compelled to provide food facilities inside the factory. It is more importantly used by the appellant to comply with the mandatory requirement under Factories Act. If they do not comply with such provision of the Factories Act, the appellants will definitely not be able to engage in the production / manufacture of final products. Therefore outdoor catering services are used by appellant in relation to the business of manufacture and not for any personal use or consumption of employee. - Credit allowed. - Decided in favor of assessee.
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2016 (8) TMI 34
Refund - unjust enrichment - valuation dispute was decided in favor of assessee - Pan Masala not containing tobacco and beetle nut not more than 10% - Held that:- In as much as various invoices clearly indicate the quantum of duty charged and passed on to the customers, it is to be inferred that the excess amount of duty now arrived at as refundable has been passed on to the ultimate customers. The various case laws relied upon by the appellant deal with various cases in which the MRPs have remained constant even though there have been variation in the duty rates. In the cited decisions, under different circumstances it has been held that the duty element has not been passed on. But on careful consideration of these case laws we find that the facts of the present case are totally on a different footing from those. Therefore, these case laws are of no help to the appellant. Appellant failed to passed the test of unjust enrichment - Decided against the assessee.
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2016 (8) TMI 33
SSI exemption - use of brand name - Held that:- though the trade mark BONNE was registered in favour of the appellant-assessee with effect from 27.4.2004, they were clearly entitled to use the brand name in their territories assigned to them from 1990 onwards as has been confirmed by the Hon’ble Delhi High Court by way of judgment dated 18.12.91. As such, there is no valid reason to deny the benefit of SSI notification benefit during the period of dispute on account of use of the brand name belonging to some other person. Our conclusion is further firmed up in the light of the fact that the other branch of the family has already been allowed the benefit of SSI exemption notification while using the same brand in the respective territories assigned to them. SSI exemption allowed - Decided against the revenue.
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2016 (8) TMI 32
Classification - Effect of conversion from 6 digit classification to 8 digit classification w.e.f. 1.3.2015 - continuity of exemption for fruit preparations put up in unit containers and bearing a brand name - Held that:- the appellant claimed that the notification of 2005 was not a substitute for earlier notification but was necessitated to give effect to nil rate of duty in the erstwhile tariff as notification No. 6/2002-CE was related to goods packed and presented in the manner described in the tariff; hence the contention of the appellant that the 2005 notification supplemented the earlier notification. It was also brought to our notice that the 2002 notification was rescinded by notification no.2/2006-CE dated 1st March 2006 to convince us that the interpretation placed by Revenue was not tenable. From a reading of the circular dated 25th February 2005, supra, it appears that the exercise of transiting to eight digit code in the tariff was not intended to alter the effective duty structure in any manner. Implementation of this intent was possible only by harmonious reading of the two notifications. From the factual matrix, it would therefore, appear that notification 3/2005-CE excludes goods of upto 20 put up in a unit container and bearing a brand name because that being already covered by the existing notification 6/2002-CE did not require reiteration. That the two were intended to operate as mutually exclusive exemptions is also amply clear from the rescinding of the 2002 notification by notification no. 21/2006-CE dated 21st March 2006. The said notification goes on to grant immunity to all acts prior to the rescinding by incorporation of except as respects things done or omitted to be done before such reasons. Benefit of exemption allowed - Decided in favor of assessee.
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CST, VAT & Sales Tax
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2016 (8) TMI 26
Refund - delay in issuance of refund - The grievance of the Petitioner is that despite the lapse of over two months since the filing of the quarterly returns, the refunds were not issued in terms of Section 38(3)(a)(ii) of the DVAT Act. The Petitioner also points out that Circular No. 6 dated 15th June 2005 issued by the Commissioner, VAT requires refund claims to be processed and refund orders issued in Form DVAT-22 within a period of 15 days from the date of receipt of the return unless it has been picked up audit or where additional information sought that has not been furnished. Held that:- the Court finds no valid explanation for the failure by the DT&T to process and issue to the Petitioner the refunds for the fourth quarter of 2010-11 and first quarter of 2011-12 within the time frame set out under Section 38 of the DVAT Act. The Court would urge the Commissioner VAT to review the issue of grant of refunds on priority basis so that the process is streamlined and his instructions regarding speedy disposal of refunds is strictly followed. He must initiate disciplinary action against those officers of the DT&T who are found disobeying the instructions issued by the Commissioner from time to time in this regard. The Commissioner should undertake a periodic review, at least once in two weeks, as to how many refund applications have been processed and within what time. Responsibility should be fixed on derelict officers and disciplinary proceedings initiated where there is a clear breach of the statutory duties. The collective failure of such officers is imposing a huge interest burden on the exchequer which is clearly avoidable. Revenue directed to release refund with interest. - Decided in favor of petitioners.
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2016 (8) TMI 25
Validity of notice for revision - notice issued u/s 74A(2) of the DVAT Act - notices of default assessments of tax, interest and penalty - Held that:- It is obvious that the notice dated 4th April 2013 issued under Section 74A (1) of the DVAT Act reproduces the mere words of the above provision without indicating the specific ground on which the Respondent proposes to revise the order dated 9th October 2009. As explained in Commissioner of C. Ex, Bangalore v. Brindavan Beverages (P) Limited (2007 (6) TMI 4 - SUPREME COURT OF INDIA), unless the grounds in the show cause notice (SCN) are specified it is not possible for the Assessee to answer such SCN. In other words, “if the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the notice was not given proper opportunity to meet the allegations indicated in the show cause notice.” The impugned notice dated 4th April 2013 under Section 74A(2) of the DVAT Act is held to be bad in law and is accordingly quashed. The Petitioner is entitled to the refund claimed for the said periods along with interest. - Decided in favor of assessee.
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2016 (8) TMI 24
Validity of revision assessment - powers under Section 10-B of the U.P. Trade Tax - Held that:- The mere consent of the counsel for the revisionist to produce the relevant books of accounts would clearly not confer the Deputy Commissioner with jurisdiction or authority to reopen or reassess the order of assessment bearing in mind the fact that he was exercising powers of revision. - order set aside - Decided in favor of appellant.
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