TMI Tax Updates - e-Newsletter
August 8, 2017
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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GST:
Changes in GST - New crop insurance schemes Pradhan Mantri Fasal Bima Yojana (PMFBY) introduced from Kharif 201617 in place of National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS), and Restructured Weather Based Crop Insurance Scheme (RWCIS) introduced in place of Weather Based Crop Insurance Schemes , shall be extended exemption from GST.
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GST:
Changes in GST - Goods required by FIFA and Services provided by and to FIFA and its subsidiaries in connection with FIFA U17 World Cup to be hosted in India in 2017 shall be exempted from GST
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GST:
Changes in GST - To clarify that legal services (including representational services) provided by an individual advocate or a senior advocate or a firm of advocates (including LLP) provided to a business entity in taxable territory are covered under reverse charge mechanism
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GST:
Changes in GST - Partnership firm or a firm includes LLP ( Limited liability Partnership) for the purposes of levy (including exemption therefrom) of GST on legal services.
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GST:
Changes in GST - In case of small house-keeping service providers (plumbers/carpenters) providing services through Electronic Commerce Operators (ECO), liability to pay GST placed on ECO
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GST:
Changes in GST - Goods Transport Agency Service (GTA) - Allowed option of 12% GST with full ITC under forward charge. 5% GST with no ITC will also continue - However, the GTA has to give an option at the beginning of financial year
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GST:
Changes in GST - Rent-a-cab service - Allowed option of 12% GST with full ITC. - 5% GST with no ITC will also continue
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GST:
Changes in GST - Admission to planetarium - GST rates reduced from 28% with full ITC to 18% with full ITC
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GST:
Changes in GST - Margin/commission payable to Fair Price Shop Dealers by Central/ State Governments - GST rate reduced from 18% with full ITC to Nil
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GST:
Changes in GST - Works contract services provided to Government, local authority or governmental authority and in respect of post-harvest storage infrastructure for agricultural produce, mechanized food grain handling system - GST rates reduced from 18% with full ITC to 12% with full ITC
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GST:
Changes in GST - Services by way of printing of newspapers, books (including Braille books), journals and periodicals using physical inputs owned by others (including an unregistered publisher/supplier) - GST rate reduced from 18% with full ITC to 5% with full ITC
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GST:
Changes in GST - Services by way of printing of newspapers, books (including Braille books), journals and periodicals where only content is supplied by the publisher and the physical inputs including paper used for printing belongs to the printer - GST rates reduced from 18% with full ITC to 12% with full ITC
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GST:
Changes in GST - Job work services in respect of the textiles and textile products (including MMF yarn, garments, made-ups, etc. falling in Chapters 50 to 63) - Rate of GST reduced from 18%/5% to 5%
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Income Tax:
Penalty levied on the assessee/Trust under Section 273(2)(a) and under Section 140A(3) - filing NIL estimate of advance tax and nonpayment of the self assessment tax - penalty confirmed - HC
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Income Tax:
TDS U/S 194J - payment for providing SMS services as well as technical support services - There is no technical or professional services - No TDS liability - HC
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Income Tax:
Deduction u/s 80IB(9) - eligible undertaking - Tribunal cannot be faulted for deciding not to proceed further with the bunch of appeals till the Supreme Court finally cleared the issues. - HC
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Income Tax:
Imposition of penalty u/s 271D and 271E - acceptance and repayment of loans in cash - The creditors from whom the cash was received and repaid were held to be genuine and confirmation to that act was obtained from the said persons and the transactions were not made for attempting to evade tax - No penalty - HC
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Income Tax:
Exemption u/s 54B denied - capital gain from sale of agriculture land - investment in the new land made in the name of wife of the assessee - the new asset has to be in the name of the assessee himself. - HC
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Income Tax:
Levy of penalty u/s 221 - reasonable cause for non compliance - the assessee had shown good and sufficient reasons for not deducting tax at source (TDS) within the prescribed time - No penalty - HC
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Income Tax:
When the transactions are multiple and inter-related then if a particular transaction out of the composite transactions cannot be tested under CUP then it is not proper to apply separate methods for determining the ALP for each of the transaction.
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Income Tax:
TPA - Comparability - the segmental results taken by the TPO of this company have been influenced by the mergers and acquisitions taking place during the year, thereby making such financial results as incomparable - the same is directed to be excluded from the final list of comparables.
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Income Tax:
Penalty u/s 271(1)(c) - disallowance of liasoning commission - satisfaction regarding concealment of income - Merely because the commission expenses have been disallowed in the assessment year under appeal and confirmed by the appellate authority, by itself is no ground to levy the penalty.
Articles
Notifications
News
Case Laws:
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Income Tax
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2017 (8) TMI 296
Non-payment of self assessment tax by assessee trust - Penalty levied on the assessee/Trust under Section 273(2)(a) and under Section 140A(3) - proof of charitable activities - filing NIL estimate of advance tax and nonpayment of the self assessment tax - Held that:- The quantum of its income is not the test to determine whether the Trust is created for a charitable purpose. What is relevant is the object and purpose of creation of the Trust. The act of the assessee/Trust in not paying self assessment tax by returning its income and filing “NIL” estimate of the advance tax cannot be said or termed as bonafide act. If the assessee had taken due care and acted authentically or genuinely by keeping in its mind the verdict of the learned ITAT in respect of assessment years 1962-63 onwards, then it would not have acted in such a manner of declaring “NIL” estimate of the advance tax and nonpayment of the self assessment tax while returning its income for the assessment year 1983-84. The excuse sought to be given by the assessee/Trust that it was swayed by the verdict of the Apex Court in the matter of Surat Art Silk Cloth Manufacturers Association (1979 (11) TMI 1 - SUPREME Court) appears to be a lame excuse in order to avoid the tax liability and depriving the Revenue its due share in the taxable income earned by the assessee/Trust Despite past orders of several authorities that the income earned by the assessee/Trust is liable for tax at the hands of the Revenue, even in the assessment year 198384 return of income came to be filed by the assessee/Trust without paying self assessed tax but by making note in the statement of computation of income that the income is exempt under Section 11 of the I.T.Act, 1961. The assessee/Trust had given complete go bye to earlier decisions of the learned ITAT and other authorities in its own case which were available to the assessee/Trust from the assessment year 1962-63 onwards. The petitioner cannot interpret the finding of Apex Court erroneously and say it bonafidely believed that its income is exempted. As such, by no stretch of imagination it can be said that the assessee/Trust was acting bonafidely having belief that it is earning an exempt income, and therefore, the assessee/Trust is not liable either to pay advance tax or the self assessment tax.The history of this assessee/Trust with repeated noncompliance despite orders of the learned ITAT must weigh negatively on the assessee bonafides. The length of period during which the assessee/Trust was denied benefit of exemption does not allow us to hold that the assessee/Trust had reasonable belief to consider its income entitled for exemption, resulting in consequential actions of filing “NIL” estimate of advance tax and nonpayment of the self assessment tax. ITAT was justified in allowing the appeals of the Revenue and confirming penalty levied on the assessee/Trust under Section 273(2)(a) and under Section 140A(3) of the I.T.Act, 1961. - Decided against assessee.
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2017 (8) TMI 295
Nature of income - income from house property or business income - nature of activity - Held that:- The Commissioner (Appeals) and the Tribunal after going through the object of the company as detailed in the memorandum of association and also considering activities, the nature of the transaction, has held the income to be a business income. It is also held that the assets also include various amenities such as electricity, cooling towers, elevators, car parking for the lessees/visitors and the said services and amenities provided by the Assessee are inseparable and are provided along with the building. Both the authorities have concurrently correctly observed that the basic intention of the Assessee was commercial exploitation of its properties by developing them as shopping malls/business centers and therefore, income derived there from is assessable as business income. The main object of the company, the nature of the business activities of the Assessee Company as well as the terms of the agreement has been considered. The various services provided by the Assessee company during the course of operation and running of said commercial complex are also considered. Thus plausible conclusion arrived at. - Decided against revenue.
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2017 (8) TMI 294
TDS U/S 194J - payment for providing SMS services as well as technical support services - non deduction of tds - nature of services - Held that:- As observed by the Tribunal that M/s. Valuefirst Messaging Pvt. Ltd. is merely assisting the assessee in sending SMS messages to its customers. The preamble of the agreement between the assessee and M/s. Valuefirst Messaging Pvt. Ltd. itself describes that M/s. Valuefirst Messaging Pvt. Ltd. is a company engaged in providing mobile messaging solutions to carry data over mobile network using its mobility platform. There is no technical or professional services, which can be said to have been offered by M/s. Valuefirst Messaging Pvt. Ltd. The judgment in a case of Director of Income Tax (International Taxation) V/s. A.P. Moller Maersk A/S reported in (2017 (2) TMI 993 - SUPREME COURT) and another judgment of the Apex Court in a case of Commissioner of Income Tax Vs. Kotak Securities Ltd. (2016 (3) TMI 1026 - SUPREME COURT) has considered that such a service and charges paid, as not fees for technical services and no liability of direct tax of such liability arises. - Decided in favour of assessee.
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2017 (8) TMI 293
Deduction under section 80IB(9) - eligible undertaking - effect of the Explanation contained in sub section (9) of section 80IB - Held that:- Both sides agreed that the applicability of the explanation below sub-section (9) of section 80IB of the Act is not involved in the tax appeals pending before the Tribunal. However, both sides also agreed that the implication of the clause (iv) of sub-section (9) is one of the important issues involved in large number of such appeals. We have, therefore, proceeded on such basis. In that context, if we peruse the interim order of the Supreme Court, it provides that since the Supreme Court is entertaining the matter, the High Court wherever such appeals are pending, would not finalize the same till the matter is dealt with by the Supreme Court. The intention of the Supreme Court is thus, amply clear and it precludes any High Court from deciding the issues which are presented in the appeal against the judgement of the High Court in case of Niko Resources Ltd. (2015 (3) TMI 986 - GUJARAT HIGH COURT). Such issue could be one of implication of the Explanation to subsection (9) of section 80IB or of the interpretation of clause (iv) thereof. In either case, it would not be open for the High Court to proceed further and finalize the issue till the Supreme Court decides the appeal. Effectively therefore, the Supreme Court not only stayed the operation of the judgement of the High Court but has stayed judgement itself. We are conscious that the order of the Supreme Court does not take within its fold any pending appeal before the Tribunal. Strictly speaking therefore counsel for the petitioner may be correct in contending that there is no stay against the Tribunal proceeding further in such tax appeals. However, in the present case, it is not the question of the legality of power on part of the Tribunal, but propriety in proceeding or not proceeding with the appeals. When admittedly one of the issues involved in such tax appeals is of the effect of clause (iv) of newly substituted subsection (9) of section 80IB of the Act and consequently, the ratio laid down by the High Court in case of Niko Resources Ltd. (supra), the Tribunal cannot be faulted for deciding not to proceed further with the bunch of appeals till the Supreme Court finally cleared the issues. We see no impropriety or legal error in the Tribunal choosing this option.
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2017 (8) TMI 292
Reopening of assessment - reliance on subsequent decision of Supreme Court - deemed dividend addition under Section 2(22)(e) - notice issued beyond a period of four years - Held that:- Notice for reopening of the assessment having been issued beyond a period of four years from the end of relevant assessment year, the failure on part of the assessee to disclose truly and fully all material facts becomes relevant. As noted, in this context, the Revenue’s stand is that the assessee did not disclose its share holding pattern only upon which it could have been ascertained whether Section 2(22)(e) of the Act had applicability or not. The onus is on the part of the assessee to disclose primary facts. What would be the effect of these primary facts is for the Assessing Officer to judge. The assessee having made disclosures about the borrowings from J.P. Infrastructure and also having filed necessary details thereof along with the audited return, did not thereafter have the onus of further disclosing its share holding pattern to enable the Assessing Officer to examine the applicability of Section 2(22)(e) of the Act. If the Assessing Officer desired to scrutinize this aspect of the matter it was always open for him to call upon the assessee to provide for such details as and when necessary. Revenue heavily relies on the judgement of the Supreme Court in case of Gopal and Sons (2017 (1) TMI 331 - SUPREME COURT) which was delivered long after the assessee filed its return; the original assessment was completed and the Assessing Officer issued the notice for reopening of assessment by recording reasons. Neither the Assessing Officer nor the assessee therefore had the benefit of the judgement of the Supreme Court to guide in the context of either making necessary disclosures, in assessing the assessee’s income or to reopen the assessment. Our High Court in case of Austin Engineering Co. Ltd. (2008 (6) TMI 193 - GUJARAT HIGH COURT) had held that notice for reassessment beyond a period of four years based on subsequent decision of Supreme Court was not valid.In the result, only on this ground, the impugned notice is set aside. - Decided in favour of assessee.
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2017 (8) TMI 291
Transfer pricing - Validity of assessment order issued u/s 143(3) without complying the requirement of Section 144C(1) - Held that:- The procedure laid down under Section 144C of the Act is of great importance. When an Assessing Officer proposes to make variations to the returned income declared by an eligible assessee he has to first pass a draft order, provide a copy thereof to the assessee and only thereupon the assessee could exercise his valuable right to raise objections before the DRP on any of the proposed variations. In addition to giving such opportunity to an assessee, decision of the DRP is made binding on the Assessing Officer. It is therefore not possible to uphold the Revenue’s contention that such requirement is merely procedural. The requirement is mandatory and gives substantive rights to the assessee to object to any additions before they are made and such objections have to be considered not by the Assessing Officer but by the DRP. Reference by the Revenue to the circulars dated 03.06.2010 and 19.11.2013 in this regard would be of no avail. First of these circulars was an explanatory circular issued by the Finance Ministry in which it was provided that these amendments (which included Section 144C of the Act) are made applicable with effect from 01.10.2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. In the latter clarificatory circular dated 19.11.2013, it was provided that in the earlier circular there was an inadvertent error and Section 144C would apply to any order which is being passed after 01.10.2009 irrespective of the concerned assessment year. The latter circular was thus merely in the nature of a clarificatory circular and clarified which all along was the correct position in law. The earlier circular dated 03.06.2010 did not lay down the correct criteria in this regard. The assessee cannot be made to suffer on account of any inadvertent error which runs contrary to the statutory provisions - Decided against revenue.
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2017 (8) TMI 290
Shared Services Cost - allowable business expenses - reimbursement of expenses to its Holding Company - whether expenses made do not appear to be reasonable and are on the higher side? - TDS liability - Held that:- The Tribunal has considered that the present year was the first year of its operation, and therefore, during the year under consideration, the revenue was not very large, whereas it had to incur large cost to establish itself in the market. The assessee has incurred expenditure so that people can know it in the market and its services and get business which could earn its revenue. The said finding of fact appears to be plausible one. Even on reimbursement to the Holding Company of estimated cost of expenses, it could not have been subjected to tax as income as considered by this court of in M/s. C.U. Inspections (I) Pvt. Ltd. [2015 (8) TMI 1398 - BOMBAY HIGH COURT]. The Tribunal has given opportunity to the assessee as well as the Assessing Officer to verify the deduction of tax at source and if the Assessing Officer finds that tax has already been deducted at source in respect of expenditure which requires deduction of tax at source by the Holding Company, then no disallowance can be made with reference to such expenditure in hands of the assessee for reimbursement to the Holding Company. It is for the Assessing Officer to verify the same.
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2017 (8) TMI 289
Taxability in India - Entitlement to the benefits of the Agreement between the Government of Mauritius and the Government of the Republic of India - avoidance of double taxation and prevention of fiscal evasion (the ‘India Mauritius tax treaty') - taxes on income and capital gains - Held that:- In the present case, the Respondent has placed reliance on the Double Taxation Avoidance Agreement between India and Mauritius. It is clear from the said Agreement that the capital gains from alienation of the shares situated in India could only be taxed in Mauritius and not in India. The Apex Court in a case of Azadi Bachao Andolan & Anr.(2003 (10) TMI 5 - SUPREME Courta) has clearly observed that the terms and provisions of the Agreement i.e. DTAA shall operate even if they are inconsistent with the provisions of the Income Tax Act. The Petitioner could have relied on Section 9(1)(i) and Explanation 5 if the present case would have not been covered by the DTAA. Though the question of limitation/delay/laches would not be inconsequential we refrain from going into said aspect as we have decided this Petition on merits itself. On perusal of the Judgment of the AAR, it transpires that the AAR has considered all the relevant aspects of the matter and has arrived at the just conclusion. The Treaty has also been rightly considered.
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2017 (8) TMI 288
Imposition of penalty u/s 271D and 271E - acceptance and repayment of loans in cash - reasonable cause for entering into the transactions - Held that:- From the regularity of the transaction in case of each of the depositors, it was apparent that receipt and repayment were in the nature of inter se transactions. After examining the matter, it was concluded by the CIT(A) that the remand proceedings found the creditors to be genuine agriculturists and their cash transactions also to be genuine, in as much as there was confirmation of the money having been deposited and returned. It was categorically recorded that the impugned transactions could not be said to have been aimed at attempting to evade tax thereby causing loss to the revenue. Thus, the imposition of penalty under Sections 271D and 271E of the Act was not held to be justified. As recorded by the Tribunal that there was reasonable cause for entering into the above said transactions. The creditors from whom the cash was received and repaid were held to be genuine and confirmation to that act was obtained from the said persons and the transactions were not made for attempting to evade tax. - Decided in favour of assessee.
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2017 (8) TMI 287
Addition on account of net profit rate @ 6% - Held that:- This Court vide order (2016 (7) TMI 1092 - PUNJAB & HARYANA HIGH COURT) allowed the appeal and set aside the order, Annexure A-3. Further the matter had been remitted to the Tribunal for a fresh decision on merits after scrutiny of all material placed before it by the assessee in accordance with law. It had also been noticed therein that such observation would not preclude the Revenue from moving any application for revival of the present appeal since the liberty for the same was granted by this Court while permitting the appeal to be withdrawn. Thus after hearing learned counsel for the parties, the appeal is allowed and the order passed by the Tribunal is set aside. The matter is remanded to the Tribunal to adjudicate the issue on merits after affording an opportunity of hearing to the parties in accordance with law.
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2017 (8) TMI 286
Condonation of delay - reasons for delay of 1050 days in filing the appeal before ITAT - Held that:- Law of limitation has been enacted which is based on public policy so as to prescribe time limit for availing legal remedy for redressal of the injury caused. The purpose behind enacting law of limitation is not to destroy the rights of the parties but to see that the uncertainty should not prevail for unlimited period. Under Section 5 of the 1963 Act, the courts are empowered to condone the delay where a party approaching the court belatedly shows sufficient cause for not availing the remedy within the prescribed period. The meaning to be assigned to the expression “sufficient cause” occurring in Section 5 of the 1963 Act should be such so as to do substantial justice between the parties. The existence of sufficient cause depends upon facts of each case and no hard and fast rule can be applied in deciding such cases. The reasons given by the assessee regarding matrimonial dispute of his daughter and huge loss in his business were not found to be satisfactory. The explanation tendered by the assessee does not satisfy the test of sufficient cause as required under Section 5 of the 1963 Act. Consequently, no substantial question of law arises and the appeal stands dismissed.
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2017 (8) TMI 285
Exemption u/s 54B denied - capital gain from sale of agriculture land - investment in the new land made in the name of wife of the assessee - Held that:- Section 54B of the Act nowhere suggests that the legislature intended to advance the benefit of the said section to an assessee who purchases agricultural land even in the name of a third person. The term “assessee” is qualified by the expression “purchased any other land for being used for agricultural purposes”, which necessarily means that the new asset has to be in the name of the assessee himself. In the present case, the assessee alongwith his brother sold agricultural land in Village Ratoli, Yamuna Nagar for ₹ 72,00,000/- on 09.10.2006. Out of his half share, he purchased another agricultural land for ₹ 35,51,000/- in the name of his wife on 15.5.2007. As the value of the said land was more than that of the land sold, he did not disclose any long term capital gain and claimed exemption under Section 54B of the Act. Since the issue has already been concluded against the assessee by this Court in Jai Naryan’s case (2007 (8) TMI 295 - PUNJAB AND HARYANA HIGH COURT) and the Tribunal has also followed the said judgment, learned counsel for the appellant has not been able to controvert the applicability of the said decision or to show any error in the findings recorded by the Tribunal except to rely upon pronouncement of the High Courts referred to in the earlier part of this judgment. - Decided against assessee.
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2017 (8) TMI 284
Levy of penalty u/s 221 - reasonable cause for non compliance - not deducting tax at source within the prescribed time - Held that:- Held that:- Section 221 of the Act deals with penalty payable when tax in default. According to the said provision, when an assessee is in default or is deemed to be in default in making payment of tax, he shall in addition to the amount of the arrears and the amount of interest payable under Section 220(2) be liable, by way of penalty for such an amount as the Assessing Officer may direct and where there is continuing default such further amount or amounts as the Assessing Officer may direct from time to time but the total amount of penalty shall not exceed the amount of tax in arrears. As concluded by the CIT(A) that there was just, sufficient and reasonable cause before the assessee in not making compliance to the provisions of the TDS as the issue of deduction of tax involved complexity and uncertainty. The CIT(A) also referred to the judgment in Eli Lilly and Co. (India) Private Limited’s case (2009 (3) TMI 33 - SUPREME COURT ) wherein it was held that the liability to penalty under Section 271C can be fastened only on the person who does not have good and sufficient reason for not deducting tax at source. The burden, of course will be on that person to prove such good and sufficient reason. In the present case, the assessee had shown good and sufficient reasons for not deducting tax at source within the prescribed time. Thus, the CIT(A) rightly allowed the appeal filed by the assessee - Decided in favour of assessee.
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2017 (8) TMI 283
Nature or receipt - subsidy received from the ASIDE Scheme from Government of India - revenue or capital - best judgement assessment u/s 144 - Held that:- In the present case, the assessee could not appear before the Assessing Officer and furnish details of the books of account. The assessee had furnished plausible explanation for its non-appearance before the Assessing Officer as is discernible from the perusal of para 3 of the order of CIT(A). Further, on the issues raised by the assessee before the CIT(A) and the Tribunal, the findings are required to be recorded by examining the books of account in detail. Therefore, in the facts and circumstances of the case in hand, it would be appropriate to remand the matter back to the Assessing Officer to decide it afresh after affording an opportunity to produce the books of account who shall thereupon after examining them record his findings afresh thereon.
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2017 (8) TMI 282
TPA - application of TNMM as well as CUP as most appropriate method in respect of two transactions of import of goods and sale of finished products to the A.E. - Held that:- When the transactions are multiple and inter-related then if a particular transaction out of the composite transactions cannot be tested under CUP then it is not proper to apply separate methods for determining the ALP for each of the transaction, particularly, when the international transactions are closely linked and inter-depending having direct bearing on the price of each other. Therefore, we are of the considered opinion that in the given facts and circumstances of the case, the TNMM method would be the most appropriate method for determining the ALP of the international transactions entered into by the assessee. Hence, we do not find any error or illegality in the impugned order of the Ld. CIT(A) qua this issue. We, therefore, uphold the order of the Ld. CIT(A) on this issue. Exclusion of depreciation while computing the margins of the assessee as well as comparable companies to benchmark the international transactions - Held that:- Comparing only the depreciation cost of assessee and comparables will not serve the purpose as it will not gives the true and correct picture of the affairs. Hence, when high depreciation provided by assessee only on account of the new plant and machinery which is the state of art technology then the effect of reduction if any, in the cost of wages and salary has to be taken into consideration while comparing the depreciation cost of the comparable companies. Accordingly, on principle, we are of the view that if the assessee has brought on record a substantial difference in the cost of depreciation, then the depreciation has to be excluded to avoid the material difference. However, while undertaking this exercise of comparing the depreciation cost with the comparables, the other element and corresponding cost like wages and salary are also required to be taken into account. Accordingly, we set aside this issue to the record of the A.O./TPO for examining the same afresh Disallowance regarding testing fee by treating the same as capital in nature and further as FTS and by invoking the provisions of section 40(a)(ia) - Held that:- The testing of the product at the facility of the A.E. does not amount of rendering any technical services by the A.E. to the assessee but simply it is an activity of quality test of the product which is carried out outside India. In the absence of any material to show that assessee is using any technical knowledge or services rendered by the A.E. in the manufacturing process of its goods it cannot be treated as any technical services rendered by the A.E. Therefore, we do not find any material or facts either discovered by the A.O. or otherwise available on record to show that assessee has paid the testing fee for acquiring any technical knowledge or receiving any technical services from the A.E. Thus, the payments of testing fee to the A.E. is not fee for technical services. Since A.E. of the assessee is not giving any permanent establishment in India, therefore, the said receipt/income in the hands of the A.E. is not taxable in India and consequently, the assessee was under obligation to deduct TDS at source. As regards nature of expenditure being revenue or capital, we find that by incurring testing expenditure the assessee has not acquired any technology, advantage or enduring benefit but it is simply a quality test of its product. Therefore, it is part of the cost of the product and incurred only on the finished products of the assessee which has no connection with the manufacturing facility or plant of the assessee. Even otherwise, by incurring this expenditure, no new asset has come into existence and therefore, this expenditure cannot be categorised or classified as in capital field. Accordingly, we do not find any error or illegality in the order of the Ld. CIT(A) qua this issue. Disallowance made on account of computer software expenses treating as capital in nature - Held that:- Undisputedly, the assessee has incurred total expenditure of ₹ 6,27,988 under the head “Software Expenses”. The A.O. has made the addition of ₹ 4,39,592 on the ground that it is of capital in nature. At the outset, we note that the Ld. CIT(A) has decided this issue by following the decision of the Special Bench of the Tribunal in the case of Amway India Enterprise (2008 (2) TMI 454 - ITAT DELHI-C) as upheld by the Hon’ble Delhi High Court reported in (2011 (11) TMI 4 - DELHI HIGH COURT). Therefore, when the software package are only for smooth functioning of the business and has not brought into existence any new asset, then, having regard to the facts and circumstances of the case, we do not find any error or illegality in the order of the Ld. CIT(A). Appeal of the Revenue is partly allowed.
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2017 (8) TMI 281
Transfer pricing adjustment - Addition in relation to the international transaction of ‘Software development services.’ - Comparability - Held that:- it is abundantly patent that the segmental results taken by the TPO of this company have been influenced by the mergers and acquisitions taking place during the year, thereby making such financial results as incomparable - the same is directed to be excluded from the final list of comparables. Transfer pricing adjustment in relation to intra-group services - Held that:- Fortifying the incurring of actual expenses which are not duplicate in nature, the ld. AR contended that the additional evidence will prove the factum of having availed such services. In view of the fact that such additional evidence could not be considered by the TPO/Assessing Officer, we consider it expedient to set aside the impugned order on this score and remit the matter to the file of Assessing Officer/TPO for re-deciding it, after considering the additional evidence filed by the assessee. Depreciation on Computer peripherals at 15% instead of 60% claimed by the assessee - Held that:- The items of computer peripherals, which work in tandem with computers, can be rightly classified as computer for the purpose of granting depreciation at the enhanced rate. The items taken note of by the Assessing Officer for not granting higher rate of depreciation are Printers, Scanners and NT servers. These items too do not have any stand alone application de hors computers. Going by the ratio decidendi in in CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] we hold that these items are also eligible for depreciation @ 60%. Addition towards Licence expenses - Held that:- Since the intellectual property rights relating to ENTERPRISE suite vest in Aircom, UK, the assessee entered into contract with Aircom, UK to sell this Product directly in the domestic market. As a quid pro quo, the assessee agreed to share a percentage of sale price to Aircom, UK. Clause (1) of the Agreement provides that: “ITP charges to be paid by the subsidiary to the parent company @ 45% of the total sale value of software and support and maintenance charge.” Pursuant to this Agreement, the assessee raised invoices on certain customers in India including Idea Cellular Ltd. for upgradation of Aircom Tools. Copies of some of the invoices placed. The invoice value has been shown as its income and the amount paid to its AE has been shown as Licence fee in its Annual accounts. We are at loss to appreciate as to how the assessee can be said to have created an ‘Intangible asset’ by paying the Licence fee to its AE in respect of sales made. Such payment @ 45% of the invoice value was the obligation of the assessee ab initio without which it could not have procured the licnence of ENTERPRISE suite for sale in India. This amount can be loosely characterized as cost of goods transferred to the customers in India, which has necessarily to be allowed as a revenue expenditure. We, therefore, overturn the impugned order on this score and direct the deletion of addition
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2017 (8) TMI 280
Grant of approval u/s 10(23C)(vi) - solely for education purposes or not - CIT observed that various clauses in the trust deed are not as per the provisions of section 10(23C)(vi) - CIT further observed that, founder trustees are taking undue benefits by drawing a huge remuneration - Held that:- In compliance, the assessee-trust had amended its trust deed dated July 26, 2015 removing all the objects other than objects relating to education. What therefore, has to be examined is whether the amended objects clause satisfy the requirement of law or not. Further, where the assessee-trust is already in existence, at the time of seeking the approval, the Revenue can examine whether its activities are being carried out for education purposes or not. In this regard, the learned authorised representative has submitted that the assessee-trust is involved in educational activities and is running Jyoti Vidyapeeth Mahila Vishwavidyalya having more than 2200 students. However, there is a finding given by the learned Principal Chief Commissioner of Income-tax in this regard. The matter relating to powers entrusted to the trustees and its relevance at the time of grant of approval has been discussed in the Central Board of Direct Taxes circular which should be taken into consideration. Regarding the matter relating to payment of remuneration, there are counter-claims without any basis to support the contentions of either of the parties. In the light of the above, as there is not enough material available on record to adjudicate on the matter and the fact that the guidelines laid down by the hon'ble Supreme Court in the case of American Hotel and Lodging Association [2008 (5) TMI 17 - SUPREME COURT OF INDIA] and the Central Board of Direct Taxes while granting the approval not been considered, we hereby set aside the matter to the file of the learned Principal Chief Commissioner of Income- tax to examine the same afresh - Assessee appeal allowed for statistical purposes.
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2017 (8) TMI 279
Assessment u/s 153C barred by limitation - time limit provided under section 153B - Held that:- It is noted that the search and seizure operation under section 132 were carried out on September 17, 2008 and on the basis of which notices under section 153C of the Act was issued and the seized documents were handed over to the Assessing Officer of these assessees on April 1, 2011. Thus in terms of second proviso to section 153B the time limit for passing order under section 153C would be as under : (i) Twenty-one months from the end of the financial year in which the last of the authorisation for search under section 132 or the requisition under section 132A was executed (ii) Nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person Therefore, the order under section 153C should have been passed by December 31, 2012. Admittedly in all these cases, the orders under section 153C were passed after December 31, 2012. Therefore, considering all these facts and circumstances of the case, we hold that the order passed under section 153C were barred by limitation and it cannot be sustained - Decided in favour of assessee.
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2017 (8) TMI 278
TDS u/s 192 - short deduction of tds - assessee in default - Violation of the mandate of the Explanation to section 191 - Held that:- Before treating the deductor to be an assessee in default under section 201(1) of the Act, it is the bounden duty of the ITO (TDS) to ascertain and ensure that the assessee has also not paid due tax, for which, the assessee has to provide the requisite details to the ITO (TDS). At the time of issuance of notice dated 02.03.2015, under sections 201/201(1A) of the Act to the University, the ITO (TDS) was in possession of the requisite details of the recipients of the income. As such, the legislative mandate of the Explanation to section 191 of the Act, as explained by their Lordships in “M/s Jagran Prakashan Ltd.” (2012 (5) TMI 488 - ALLAHABAD HIGH COURT) was violated by the ITO (TDS), by not requisitioning, before issuing the show cause notice to the University, information from the recipients of the income, as to whether or not the taxes had been paid by them, nor seeking such information from the concerned Income Tax Authorities. As observed, this is a foundational jurisdictional defect going to the root of the matter. Violation of the mandate of the Explanation to section 191 is prejudicial to the invocation of the jurisdiction of the ITO (TDS) u/s 201/201(1A) of the Act. In absence of such compliance, the invocation of the jurisdiction is null and void ab initio. Such invocation of jurisdiction is, 10 accordingly, cancelled, respectfully following “M/s Jagran Prakashan Ltd.” (supra) and “The Branch Manager, Allahabad Bank” (2016 (3) TMI 1240 - ITAT DELHI). - Decided in favour of assessee.
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2017 (8) TMI 277
Addition u/s 40A(3) - various cash payment not exceeding ₹ 20000 - whether they are independent payments supported by vouchers and cannot be aggregated - Held that:- The aggregate of payments in a day would apply from the assessment year 2009-10 only, and not applicable for the impugned assessment year. Since each of the payment is less than ₹ 20,000, even if it is paid to the same person in a day, the same cannot be disallowed as the provisions of section 40A(3) of the Income-tax Act as applicable are not attracted. Accordingly, the disallowances made by Assessing Officer, as confirmed by the Commissioner of Income-tax (Appeals), stands deleted. The ground is allowed. Addition under section 40(a)(ia) - whether TDS has been deducted and paid? - Held that:- The provisions of section 40(a)(ia) cannot be invoked on this fact. In case the assessee has paid the TDS on behalf of the contractors and written off the amount to an extent of ₹ 50,620, the same cannot be allowed as business expenditure under section 37(1) of the Income-tax Act. The provisions of section 195A of the Income-tax Act and the provisions of section 201 and 201(1A) of the Income-tax Act may apply but not the provisions of section 40(a)(ia) of the Income-tax Act. In these circumstances, the Assessing Officer is directed to examine the issue afresh and examine whether the provisions of section 37 would apply. The ground is considered allowed for statistical purposes. Addition under section 40(a)(ia) as reported in the tax audit on considering the fact that TDS has been paid - Held that:- The disallowance is not warranted. The assessee has not violated the provisions of section 40(a)(ia) of the Income-tax Act as the TDS has been deducted and paid to the Government. Moreover the amount is also not outstanding at the end of the year. In view of that, we direct the Assessing Officer to delete the amount and the ground is accordingly allowed. Rent paid for the managing director's residence - disallowance under section 40A - Held that:- Disallowance cannot be either deleted or sustained in the absence of complete details. It is a fact that the respective recipients have declared the income. It is also the fact that the director has not shown its value in the computation of income nor the company included in Form No. 16 given to the director. In these circumstances, we are of the opinion that the same is required to be re- examined (1) with reference to the agreement or resolution for providing the rent free accommodation to the director. (2) Whether the same accommodation was provided in the earlier years and later years (3) Whether the rent paid is reasonable or not and (4) Whether the value of perquisites in the hands of the director required to be brought to tax separately, keeping in mind that computations provided by the assessee in the paper book. In order to examine these issues, we hereby set aside the entire issue to the file of the Assessing Officer to be re-examined and determined. Disallowing the proportionate interest - Held that:- The impugned assessment year in this case is the assessment year 2006-07. Consequently the proviso inserted in section 36(1)(iii) of the Income-tax Act read with section 43(1) Explanation 8, the Assessing Officer's action is to be upheld, subject to restricting the interest to the borrowed amount of ₹ 69,30,328. Needless to say that the above interest disallowed with form part of the actual cost, as and when the said assets are put to use. With these observations and directions, the grounds are considered party allowed. The Assessing Officer is directed to rework the interest disallow able on the loans availed of for capital work-in-progress.
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2017 (8) TMI 276
Addition of bogus purchases - ingenuity of expenditure - Held that:- Under the Income Tax Act only the real income can be taxed by the Revenue. Even if the transaction is not verifiable, the only taxable is the taxable income component, not the entire transaction. The assessee is engaged in the business of trading of Chemicals after considering the rival contention of both the parties, we are of the opinion that in order to fulfill the gap of revenue leakage, the disallowance of reasonable percentage of such impugned purchase would meet the end of justice. Though the case was examined by ld. CIT(A) on the similar line and the ld. CIT(A) sustained the 30% of impugned purchases as per our view the 30% of the impugned purchases is at higher side. Considering the submission of both the parties, the addition is restricted to 12% of total impugned purchases (disputed purchases). The Hon’ble Bombay High Court in CIT vs. Hariram Bhambhani [2015 (2) TMI 907 - BOMBAY HIGH COURT] held that Revenue is not entitled to bring the entire sales consideration to tax but only the profit attributable to the total unrecorded consideration alone can be subject to tax. In view of the above discussion, we restrict the disallowance to 12% of the total impugned/bogus purchases. - Decided partly in favour of assessee.
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2017 (8) TMI 275
Penalty u/s 140A(3) - non-payment of self-assessment tax - Held that:- As decided in assessee own case the assessee was facing financial constrain and acute liquidity crunch and there was a “good and sufficient cause” for the assessee for non payment of tax which was incorrectly rejected by the AO while wrongly imposing penalty u/s 140A(3) of the Act. We are unable to see any infirmity, perversity or any other valid reason to interfere with the impugned order of the CIT(A) which deleted the penalty and thus, we uphold the same. In the case of the assessee for we delete the penalty levied by the ld CIT(A) and accordingly the appeal of the assessee is allowed. Consequently, the appeal of the revenue is against the order of the ld CIT(A) in restricting the penalty to ₹ 18 lakhs is also dismissed.
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2017 (8) TMI 274
Penalty under section 271(1)(c) - disallowance of liasoning commission - satisfaction regarding concealment of income - Held that:- As during the course of assessment proceedings, the assessee submitted complete details of sub-agents rendering services for the assessee in the State of Haryana. Their statements were recorded in which they have confirmed having received the payment after deduction of TDS and service tax. The assessee, thus, has disclosed all the material facts to the Revenue authorities. In the assessment year 2005-06, in the original scrutiny proceedings, the Assessing Officer allowed a similar claim of the assessee on the same set of facts. Therefore, there is no finding by the authorities below that any details or explanations given by the assessee in his return are found to be incorrect or erroneous or false. A mere making of claim which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding income of the assessee. Merely because the commission expenses have been disallowed in the assessment year under appeal and confirmed by the appellate authority, by itself is no ground to levy the penalty under section 271(1)(c) of the Act against the assessee. - Decided in favour of assessee.
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2017 (8) TMI 273
Disallowance of 25% of expenditure - documentary evidence - reimbursement of expenditure incurred through employees - Held that:- As in assessee’s own case for Assessment Year 2004-05, 2005-06, 2006- 07, 2007-08 2008-09 & 2009-10 reimbursement of expenses to the employees by employer on the basis of self-declaration for small amounts, for which it is difficult and sometimes cumbersome to obtain supporting by employees, is common prevalent practice and it is not an disallowable expenditure. Therefore, also we reject the contention of revenue that balance 25% expenditure is without any basis and evidence. He also held that the payment is business expenditure as it is paid by way of salary or remuneration to the employees. Similarly he set aside the disallowance for the purpose of verification of the assessing Officer in case if the total amount of expenditure on subsistence allowances not related to the previous year and then to make disallowance of the expenditure to that extent, if it is related to the earlier years. DR could not point out any quantification made by the Ld. AO about the amount expenditure related to previous year and earlier years. Therefore when the assessment order does not mention about the vouchers and declaration which are pertaining to earlier years, then in that case that verification needs to be done by the A.O. only, hence there is no infirmity in the order of Ld. CIT(A) in directing ld. AO to verify the claim of the assessee form that aspect and quantify the disallowance, if any. In view of this, we confirm the order of the first appellate authority deleting the disallowance of subsistence allowance expenses Claim of the assessee u/s 10A - unobserved depreciation whether can be reduced from the income from other sources - Held that:- Hon’ble Karnataka High Court judgment in case of Yokogawa India Ltd. [2011 (8) TMI 845 - Karnataka High Court] clearly makes point that how the set off of unabsorbed depreciation has to be taken into account. As the income of the Section 10A unit has to be excluded at source itself before arriving at the gross total income, the loss of the non-section 10A unit cannot be set off against the income of the Section 10A unit under Section 72. The loss incurred by the assessee under the head “Profits and gains of business or profession” has to be set off against the profits and gains, if any, of any business or profession carried on by such assessee. Therefore, as the profits and gains under Section 10A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current year’s depreciation under Section 32(2) is to be set off. As deduction under Section 10A has to be excluded from the total income of the assessee the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise. Appeal of the assessee is allowed.
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2017 (8) TMI 272
Acceptance of Income as reflected in form 26-AS (TDS statement) - assessee submitted that, it is merely a detail of TDS credit in the account of the assessee and any wrong information fed in the TDS return could distort the data. - Held that:- It is observed that assessee had filed a lot of details before the authorities which deserves to be verified in detail. However neither Ld. CIT(A) had called for remand report, nor did Ld. AO conduct any enquiry to verify the correct income of assessee. Under such circumstances it is difficult to accept the income as reflected in form 26 A-S. We are therefore inclined to set aside the issue back to the files of Ld. AO to verify all the details and to ascertain the right income of the assessee. It cannot be ignored that mistakes could creep into form 26 A-S, which needs to be corrected in the event of proper documentation and proof being submitted by the assessees. We accordingly direct Ld. AO to give ample opportunity to assessee to file all necessary relevant documents to establish his claim and Ld. AO may take necessary steps as per law. Appeal filed by the assessee stands allowed for statistical purposes.
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2017 (8) TMI 271
Addition u/s 40A(2) - addition treating commission payment as unreasonable and excessive - Held that:- Commission was not outside the scope of the transaction agreement as well as the documents produced before the lower authorities. Section 40A (2) (b) set out the circumstances in which certain expenses or payments are not deductable. In the present case there were no circumstances for invoking the same. Though Shri Manish Patodia is brother of the assessee, he has actually worked for the assessee. Therefore, the CIT(A) as well as the Assessing Officer was not justified for invoking provisions of Section 40A (2) (b). The incentive of ₹ 5,27,602/- to Shri Manish Patodia was paid on the basis fixed percentage of the total turnover of sulpher at 0.2% on total turnover of sulpher of ₹ 26,38,01,114/-. This commission was paid as services, both administrative and managerial rendered by Mr. Manish Patodia for their sales. Merely because the commission was paid to Shri Manish Patodia was computed on turnover basis as fixed percentage thereof and the commission paid to others were on the basis of quantity sold cannot be the basis to hold that the payment as excessive and unreasonable. Merely because a person is not an employee but rendered the professional services cannot be the basis to hold that the payment made to such person is excessive and unreasonable. The 0.2 % commission for the turnover of ₹ 26,38,01,114/- cannot be held as excessive or unreasonable payment - Decided in favour of assessee Addition of notional interest income observing that appellant has charged lesser rate of interest - accrual of income - Held that:- The borrowed funds were mainly availed during the previous assessment years and brought forward to the year under assessment. During the year under consideration loans were given to Smt. Jaya Patodia and Mr. Manish Patodia (HUF) from the funds available in personal capacity and not out of the funds borrowed which is evident from the personal statement of affairs. When the assessee has both interest free funds and interest bearing funds, the presumption is that interest free funds are utilized for interest free loans. Hence, there is no justification for making the proportionate disallowance. The Assessing Officer failed to establish the nexus between the interest bearing borrowed funds and their utilization for loan given at a lesser rate of interest. The addition was made purely on notional interest income which neither was charged nor the same accrued to the assessee.- Decided in favour of assessee Allowable business expenditure - expenses incurred under the head vehicle repair and maintain, telephone expenses and business promotion - Held that:- The expenses incurred by the assessee are properly justified by the Assessee through vouchers. Neither the assessee was confronted nor any show cause notice was issued to the assessee before making the addition of ₹ 56,052/- for disallowance on ad-hoc basis being 20% expenses incurred under the head vehicle repair and maintainance, telephone expenses and business promotion while holding the same as personal in nature by the Ld. A.O. The Assessing Officer has not pointed out any specific expenses which as per him are personal expenses. The expenses were fully vouched and duly recorded in the regular books of accounts maintained by the assessee separately for his proprietary concern namely M/s Atul International. The books of accounts were duly audited u/s 44AB of the Act and nothing adverse was reported by the tax auditor regarding personal use of the business assets. All expenses were supported by the bills and vouchers. The same were before the Assessing Officer. The disallowance on Ad-hoc basis cannot be sustained - Decided in favour of assessee
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2017 (8) TMI 270
GP rate addition - Held that:- The basis of the addition is the average of the G.P. rate taken by the ld. AO from the submission of the ld. AR which was apparently not verified by him from the records and from the copies of the audited balances sheet which were duly accepted by the department in the earlier years, furnished by the appellant. It is seem that the G.P. rate for the earlier two years i.e A.Y. 2006-07 and 2007-08 was 1.51 % and 3.30% respectively and the average of the two comes to 2.40% as against re G.P. rate in the year under consideration at 4.1% with increased turnover by more than double. Thus, it is clear that the addition was made by the Id. AO on the basis of wrong figure inadvertently provided by the Id. AR during the assessment proceeding. In fact the G.P. rate is much better in the year consideration as compared to earlier years and hence no addition is called for. Therefore, the addition made by the ld. AO is directed to be deleted. - Decided in favour of assessee. Addition of renovation expenses - Held that:- Keeping in view the fact that the turnover has doubled during the year and the appellant has opened one more outlet for which a copy of the lease deed was also filed, I am of the considered opinion that some expenses must have been incurred for the renovation and upkeep of the business purpose, hence it will be appropriate to allow the expenses incurred by cheque and the disallowance of the balance amount is confirmed resulting into partial relief to the appellant. Addition on account of unsecured loans - occurrence of fire - Held that:- Once the tax auditor has audited the books of accounts of assessee much before the fire accident and has mentioned the figure of unsecured loan of ₹ 43,88,880/- from Rakesh Gupta, the contention of the assessee that the assessee received only ₹ 5 lacs from Rakesh Gupta cannot be accepted on the pretext that the reconciliation of the difference could not be made due to dislocation and overlapping of records in the fire accident. The assessee has also placed debtors and creditors list but the same are not found certified by any auditor. Moreover, the PAN mentioned at the confirmation filed before the CIT(A) was found wrong and the assessee at any stage has failed to produce Shri Rakesh Gupta to verify the true state of affairs. The assessee has placed tax audit report in the paper book before us, but on perusal of this audit report, we find that relevant annexures to the items mentioned under Sl. No. 24(a) of the audit report, i.e., “Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year”, have not been filed in the paper book, to verify the alleged reconciliation given by assessee. - Decided against assessee.
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2017 (8) TMI 269
Unexplained source of cash deposit - addition u/s 68 - Held that:- The assessee has claimed that the advances received have been repaid back in the months of October and November 2010 as the transaction did not go through. On a consideration of the facts, it is of the view that relevant facts have not been thrashed out by the tax authorities. Evidently there was a specific piece of land belonging to the assessee and there was an Agreement to Sell entered into by the assessee with Sh.Suresh Chand Yadav. If his signature is found therein and the entering into of the transaction is supported by an affidavit of the Sh.Suresh Chand Yadav, then there was no reason for the Revenue not to address the availability of funds in the hands of the Sh.Suresh Chand Yadav from his father’s agricultural activity. How the assessee can be held responsible for the financial affairs and the explanation offered by Sh.Suresh Chand Yadav is not brought out in the orders. As per the facts on record, the ownership of a specific land/plot in the hands of the assessee is not doubted. The other party signatory of the Agreement to Sell Sh.Suresh Chand Yadav is identified who explains the source but does not appear on the only one opportunity provided to him. The parties are not related the amounts are stated to be repaid back on specific dates prior to the filing of the return itself. The return as per record was filed on 20.03.2012 and the amounts are claimed to be repaid by cheques on specific dates in October and November in 2010. Accordingly, find that subject to verification that the amounts have been repaid on specific dates back to Sh. Suresh Chand Yadav the addition per se cannot be sustained. Appeal of the assessee is allowed for statistical purposes.
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Customs
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2017 (8) TMI 257
Seizure of goods - Smuggling - the Criminal Revision Case filed by the respondent was only with regard to the direction issued by the trial Court to return the seized materials and not against the order of acquittal - Held that: - the petitioner, through his counsel, sent a notice dated 27.03.2002 demanding the payment of sale proceeds along with interest. This was received by the office of the respondent on 01.04.2002 as evidenced by the office seal affixed in the representation. This was followed by reminder dated 24.08.2004 sent by the registered post, which has been received by the office of the respondent on 26.08.2004 as seen from the postal acknowledgment. Since no action has been taken, the petitioner has filed this writ petition in the year 2004 - the petitioner is directed to submit a fresh representation along with copies of the earlier representations and a copy of this order to the respondents within a period of three weeks from the date of receipt of a copy of this order - petition allowed by way of remand.
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2017 (8) TMI 256
Broker arranging mortgage - whether transaction was actual sale or was only a mortgage? - Held that: - All the evidences, which have not been retracted or disproved by the appellant, only serve to establish the intricate web of transactions woven to facilitate the sale and purchase of vehicle even though the same continued to be registered in the name of the importer. Evidently, all these has been done to get around the condition of no sale of the imported vehicle for a period of two years after import. However, the agreement dated 1.11.2003 entered into between Shri Saleem Mohammed and Shri Namit Malhotra together with the fact that Namit Malhotra as a co-applicant along with Shri Saleem Mohammed for applying a loan in the ICICI Bank establishes that the vehicle has been sold to Namit Malhotra as well as the fact that the vehicle has been delivered to Namit Malhotra thereby completing the sale. The appellant used the mortgage to camouflage the transaction of sale. Penalty u/s 112 (a) of Customs Act - Held that: - Shri Haren Choksey had actively aided and abetted the importer in the effort to dispose of the vehicle to Namit Malhotra within two years of its importation into India in violation of the provisions of EXIM Policy, had arranged for the sale/purchase of the said vehicle and has made himself liable for penal action and therefore ordering penalty under section 112(a) of the CA, 1962 - However, the penalty of ₹ 8 lakhs imposed by the adjudicating authority is on the higher side - penalty of ₹ 2,00,000/- would be more commensurate with the acts and omissions of the appellant Shri Haren Choksey. Appeal allowed - decided partly in favor of appellant.
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2017 (8) TMI 255
Confiscation - penalty - export of restricted item - Red Sanders - Smuggling - principles of Natural Justice - Held that: - the investigating agency attempted to interrogate the appellants, but failed to do so as they did not turn up in response to the summons. But it is not clear that when the appellants appeared in personal hearing, why the investigating officers were not given an opportunity to interrogate them. In my considered view, the investigating agency should be given an opportunity to interrogate the appellants as they had not appeared during investigation and thereafter, the Adjudicating Authority would proceed to decide the matter after considering the right of the cross examination as claimed by the appellants - appeal allowed by way of remand.
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Corporate Laws
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2017 (8) TMI 253
Outstanding dues - winding up petition - Held that:- The respondent had neglected to pay to the petitioner due to its relations becoming sour after October 2013 when the petitioner decided not to transact any further business with it. The respondent then blocked the balance payment. Despite the petitioner being shown, in its sundry creditors list till the year ending on 2014, the respondent suddenly showed the petitioner as a sundry debtor for the alleged losses it suffered on account of the conduct of the petitioner is nothing but a plot to avoid due payments to the petitioner which it neglected to pay despite promises made. The respondent failed to prove that its debt is a disputed debt. Its neglect to pay the balance amount without any cogent or sufficient ground rather reveal its inability to pay, hence there is no reason as to why the company petition be not admitted against the respondent. In view of the above, this petition is admitted. Citation be published in the “Statesman” (English edition) and “Jansatta” (Hindi edition) in accordance with Company (Court) Rules, 1959. However, publication of the citation and appointment of the provisional liquidator is deferred and one opportunity is given to the respondent company to pay the amount found already due and payable to the petitioner with interest at the rate of 8% per annum with effect from 25.02.2015 when the statutory notice was served on the respondent company. The amount be paid within one month failing which the petitioner shall be entitled to publish the citation and apply for appointment of the Provisional Liquidator.
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2017 (8) TMI 252
Outstanding dues - winding up - Held that:- The facts reveal the respondent is raising this frivolous issue after a period of 2 years of supply of material only to wriggle out of its liability to pay the balance due to the petitioner and hence has neglected to pay without any cogent, substantial or genuine cause. It is no defence to say that the respondent has ability to pay but has choosen not to pay or that it had a lesser liability to pay. In view of the above, this petition is admitted. Citation be published in the "Statesman" (English edition) and "Jansatta" (Hindi edition) in accordance with Company (Court) Rules, 1959. However, publication of the citation and appointment of the provisional liquidator is deferred and one opportunity is given to the respondent company to pay the amount found already due and payable to the petitioner with interest at the rate of 8% per annum with effect from 14.08.2016 when the statutory notice was served on the respondent company. The amount be paid within one month failing which the petitioner shall be entitled to publish the citation and apply for appointment of the Provisional Liquidator.
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2017 (8) TMI 251
Winding up the Company voluntarily - Held that:- Upon perusal of the Books of Accounts nothing objectionable has been noticed. No public interest elements have been involved. The Income Tax Department was also requested by the liquidator regarding their appointment as liquidator of the Company vide letter dated 3.3.2016. No reply has been received from the Income Tax Department. The liquidator and Directors of the Company, however, have filed affidavits duly notarized on 16.8.2016 and 19.8.2016 declaring that there are no dues to the Government department or other authorities against the Company and no prosecution is pending. They also have agreed to indemnify in case any dues are found in future against the Company. The Registrar of Companies have also issued a letter of no objection against such winding up. It transpires that all necessary formalities have been completed and it is found that there is no objection to winding up the Company voluntarily and therefore, it is hereby directed that the Company shall stand dissolved from the date of this order. The voluntary liquidator shall preserve the books of accounts of the Company for the period of 5 years from today. He shall also ensure that the Official Liquidator is paid cost of ₹ 5,000/.
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Service Tax
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2017 (8) TMI 268
CENVAT credit - input services - Air Travel Agent Service - Business Auxiliary Service - Business Support Service - Chartered Accountants Service - Convention Service - Event Management Service - Held that: - the aforesaid services has been held to be Input Services by the judgments of this Tribunal referred to against each of the said services - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 267
Business Auxiliary Service - Reverse Charge Mechanism - Market promotion in India - Export of Services or not? - Held that: - the issue has already been covered by the decision of Microsoft Corporation (I) (P) Ltd. Vs. Commr. of S.T., New Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)], where Business Auxiliary services provided by the assessee to their members located outside India by marketing their product in India was held to be export of services inasmuch as the service was held to be provided to the foreign located person who was also paying to the assessee on such services in convertible foreign exchange - no Service Tax can be demanded from the respondent under reverse charge mechanism - appeal dismissed - decided against Revenue.
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Central Excise
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2017 (8) TMI 266
Classification of goods - various parts of the Railway Engines - classified under chapter 84-85 or under chapter 86? - benefit of N/N. 62/95 - Held that: - the issue of classification and benefit of exemption Notification No.62/95 was traveled up to the Hon’ble Apex Court in respondent’s own case for the earlier period and the Hon’ble Apex Court on the basis of the statement made before the Hon’ble Apex Court by the Ld. ASG disposed of the matter holding that exemption to the parts manufactured by the respondent has already being granted and nothing survives - appeal dismissed - decided against Revenue.
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2017 (8) TMI 265
CENVAT credit - CHA service - denial on the ground that the services were rendered beyond the place of removal - Held that: - the Tribunal in the case of Commr. of C.Ex., Raipur v. Bhilai Engineering Corporation Ltd. [2015 (12) TMI 1268 - CESTAT NEW DELHI] dismissed the appeal on the identical issue, and held that these services were utilised for purpose of export of final products and exporters could not do business without them and hence service tax paid on these services availed till goods reached port was admissible and that the input service cannot be given restrictive meaning in view of means and includes used in definition in Rule 2(l) of CCR, 2004 - appeal dismissed - decided against Revenue.
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2017 (8) TMI 264
Refund of Education Cess and Higher Education Cess - amount paid by mistake - rejection on the ground of time bar and unjust enrichment - Held that: - similar issue decided in the case of M/s Orangajuli Tea Garden, M/s Nonai Para Garden Versus Commr. of Central Excise & S. Tax, Guwhati [2017 (5) TMI 455 - CESTAT KOLKATA], where following the decision of the Hon’ble Gujarat High Court in the case of Joshi Technologies International v. Union of India [2016 (6) TMI 773 - GUJARAT HIGH COURT], it was held that Crude Oil Cess is not in the nature of excise duty and consequently, the Education Cess and Secondary and Higher Secondary Education Cess computed thereon, also does not bear the character of a duty of excise, but is merely an amount paid under a mistake of law - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 263
CENVAT credit - M.S. Channels, SS Plates, Double Twin Rider Ring, Piston Rod Packing, Nickel Plate, Bar, Carbon Brick, Welding Electrodes and various other items used for repairs/maintenance of the capital goods - Held that: - there is no hesitation to observe that credit on M.S. Bar, H.R. Coils, Sheets, Plates, Angles, Channels etc. used for fabrication of capital goods as well as for repairing and maintenance of the capital goods, since supported by the evidence of Chartered Engineers’ Certificate are eligible to CENVAT credit - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the CENVAT Credit - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 262
CENVAT credit - M.S. Channels, M.S. Angles, M.S. Bar, H. R. Coils, Plates, M. S. beam, Steel Tub, P. F. Beam, ERW Pipe, Welding Electrodes etc., used for fabrication of capital goods - Held that: - there is no hesitation to observe that credit on M.S. Angles, Channels, Beams etc. used in the fabrication of capital goods as well as structure for capital goods, and being supported by the evidence of Chartered Engineers’ Certificate are eligible to CENVAT credit - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the CENVAT Credit - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 261
CENVAT credit - capital goods - M.S. Beams, Channels, Hot Rolled Sheet, used in the fabrication of capital goods in their factory premises - Held that: - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the CENVAT Credit - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 260
CENVAT credit - capital goods - M.S. Channels, M.S. Angles, M.S. Sheets, Plates, TMT Bars, SS Bars etc. used in the fabrication of machineries and structures - Held that: - credit on M.S. Angles, Channels, Beams etc. used in the fabrication of capital goods as well as structure used as support for capital goods, supported by the evidence of Chartered Engineers’ Certificate, are eligible to CENVAT credit - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the CENVAT Credit - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 259
CENVAT credit - input - M.S. Angles, Channels, Beams, TMT Bars, CTD Bars H. R. Sheets used for fabrication of machinery and also Repairing and Maintenance Service - Held that: - reliance was placed in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat credit - credit on M.S. Angles, Channels, Beams, TMT Bars, CTD Bars H. R. Sheets etc. used for fabrication of capital goods as well as for repairing and maintenance of the capital goods, since supported by the evidence of Chartered Engineers Certificate are eligible to CENVAT credit - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 258
CENVAT credit - capital goods - M.S. Channels, M.S. Angles, M.S. Sheets, Plates, Beams, CTD Bars etc. used in the supporting structure of the capital goods - Held that: - credit on M.S. Angles, Channels, Beams etc. used in the fabrication of capital goods as well as structure used as support for capital goods, supported by the evidence of Chartered Engineers’ Certificate, are eligible to CENVAT credit - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the CENVAT Credit - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (8) TMI 254
Search/survey - Revenue is of the view that the AO ought to have gathered / further material in support which was gathered by the Income Tax Officers, and merely because of the said communique from the Income Tax Department, the addition could not have been sustained - whether there is any reciprocal arrangement of exchanging such information of the search / survey conducted by the other Tax Departments or other Departments? - Held that: - It is directed that not only information would be passed on, but the Officer concerned having information in his possession, is duty bound to transmit even the incriminating material collected during the course of search / survey so that other Tax Department, without wasting further time, acts on such incriminating material rather than calling again and again from the official concerned under whose possession the said incriminating material is lying seized. The purpose would be served of constituting REIC by the Union Government when such information is transmitted by all the Agencies in their possession. Accordingly, it is directed that no sooner a search / survey is conducted wherever necessary, let the Agency who has conducted the search / survey pass on not only the information of search / survey being conducted of the person searched, but also the incriminating material / information gathered will also be transferred / transmitted in a confidential seal cover for use to the Chief / Head of the other Departments after putting a seal & signature by the Officer from whose possession these documents are being sent. Let a direction be given that such information lying in possession be forwarded/transmitted within a period not later than 3 months and in case information is not passed than the said officer would be held personally liable of the consequences which may follow. The power of prosecution plays a deterrent effect not only on the tax payer who has evaded the tax but it goes a long way and would be deterrent on the society / other tax payers at large. It is true that it should be sparingly used and not in a routine manner wherever evasion takes plays but at-least in cases where it is noticed that there is huge evasion of taxes over the years, that such power should certainly be used by the authorities respectively. Therefore, direction is given that as and when needed though sparingly such power of prosecuting the person / tax evader should be used. Therefore, this need to be taken care of henceforth by all the authorities concerned. Petition allowed - decided in favor of Revenue.
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