TMI Tax Updates - e-Newsletter
September 21, 2015

Case Laws in this Newsletter:

Income Tax Customs PMLA Service Tax Central Excise Indian Laws

Highlights / Catch Notes

• Income Tax:

  Claim of sales tax on the excise duty component of the goods purchased - appellant-assessee had directly deposited the excise duty payable on the goods and had claimed and received the deductions under the said head - claim of deduction in the revised return allowed - SC
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• Income Tax:

  Accrual of interest on refundable share application money - selection of assessment year - interest income has accrued only in the Assessment Year 1993-1994 and was taxable in that year only and not in the Assessment Year 1992-1993 - SC
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• Income Tax:

  Rental income - earlier assessee was showing the income as house property income - this year the income was shown as business income - claim of deduction of amount paid to tenant for vacating the property allowed - HC
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• Income Tax:

  Income as profits in lieu of salary - this was a case where there was no commencement of the employment and that the offer by ACEE to the Assessee was withdrawn even prior to the commencement of such employment. The amount received by the Assessee was a capital receipt and could not be taxed under the head 'profits in lieu of salary' - HC
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• Income Tax:

  Entitlement to depreciation claimed in respect of Unit-II - Non-undertaking any manufacturing activity during the AY in question - it is not the Revenue's case that the building and plant and machinery were not for the purpose of business of the Assessee - depreciation allowed - HC
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• Income Tax:

  Excessive expenditure u/s 40A(2)(b) - the net profit amounted to only 0.13% of a massive turnover of about ₹ 103 crores. On such a premise, the conclusion that the expenses incurred were excessive or unreasonable could not have been arrived at. - HC
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• Income Tax:

  Time limit for passing of the draft order by AO - TPA - the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. - AT
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• Income Tax:

  Entitlement to exemption u/s 11 and 12 and section 10(23C)(iiiab) - engagement in manufacturing activity - profits from manufacturing activity has been applied in the proceedings for larger object of charitable nature of education and medical relief - exemption cannot be denied - AT
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• Income Tax:

  Indo-UK DTAA - neither under Article 5(2)(k) nor under Article 5(4) read with 5(5), the assessee has a PE in India and, therefore, the distribution fee received by the assessee can not be held to be taxable in India. - AT
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• Income Tax:

  Adhoc disallowance of 20% of total expenditure incurred on repairs and maintenance and treating the same as capital expenditure mechanically and perfunctorily - No disallowance to be made - AT
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• Income Tax:

  Deemed dividend u/s 2(22)(e) - If a person is a registered shareholder but not the beneficial then the provision of Section 2(22)(e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder then also the first limb of provisions of Section 2(22)(e) will not apply - AT
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• Customs:

  Whether penalty can be imposed upon the importer for some misdeeds of the employee of their clearing agent during customs clearance of their imported goods - No penalty - AT
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• Service Tax:

  Work Contract Service - Construction Services - there was no evidence available to hold that whether the educational institutions to whom the petitioner provided construction services, are profit oriented or whether they are established solely for educational purpose without any profit, etc. - matter remanded back - HC
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• Service Tax:

  Penalty u/s 76 & 78 - Entire amount due paid before issuance of SCN - case was also covered by Section 73(3) of the Finance Act 1994 and there was no need to issue show cause notice in this case. Appellant is also eligible for the benefit of Section 80 of the Finance Act 1994 - AT
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• Service Tax:

  CENVAT Credit - Whole proceedings are vitiated for want of proper show-cause notice - show-cause notice is vague as it does not give the break up of the amount under each head of input service proposed to be disallowed - AT
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• Central Excise:

  Credit taken on denatured spirit - CENVAT Credit which was already accumulated in favour of the assessee at the time when the Rules,2002 were brought into force. - CENVAT Credit which was already earned by the assessee, could not have been taken away if the rigors of Rule 6 would be having only prospective effect - SC
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• Central Excise:

  Classification of the product manufactured - Calcined China Clay - merely because the product of assessee, i.e., China Clay is calcined, it would not put it out of Chapter Heading 25.05 - SC
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• Central Excise:

  Refund of the differential amount - Trade discount - The trade discount was given to a wholesaler and not in the course of any retail sale - The hurdle in the context of refund, namely, identification of the end customer from whom the component of excise duty does not arise in this case - refund allowed - HC
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• Central Excise:

  Denial of SSI Exemption - Exemption not taken for some unit, therefore exemption denied for other units as well - aggregate value of all excisable goods cleared from one or more factories by the same manufacturer is to be considered - AT
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• Central Excise:

  CENVAT Credit - Capital goods - final product has become not liable to duty - t at the time of procurement of capital goods, the appellant has taken CENVAT Credit correctly - demand set aside - AT
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Articles

• INCOME FROM SALE OF SEEDS AMOUNTS TO AGRICULTURAL INCOME

News

• Finance Minister During his Address at Singapore Summit Highlights the Reforms Undertaken by the Present Government in Various Sectors;

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• Repayment of Outstanding Balance of 9.85% Government Stock, 2015 at par on October 16, 2015

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Case Laws:

• Income Tax

• 2015 (9) TMI 864
  Claim of sales tax on the excise duty component of the goods purchased - appellant-assessee had directly deposited the excise duty payable on the goods and had claimed and received the deductions under the said head - claim of deduction in the revised return - HC decided case against assessee - Held that:- High Court had exceeded its jurisdiction in recording a finding with regard to the authenticity of the Agreement dated 18.12.1991. If the Agreement dated 18.12.1991 is to be treated as a part of the record of the assessment proceedings, undoubtedly, a liability had been cast upon the assessee insofar as the sales tax payable on the excise duty component is concerned. It is not in dispute that the mercantile system of accounting was in vogue in the assessee company. In the revised return filed by the assessee deduction of the amounts claimed by M/S. Mc Dowell & Co. Ltd. on sales tax was reflected. That the original return filed by the assessee did not reflect the aforesaid figures is not difficult to understand. At the time when the said return was filed (29.09.1982) the liability of M/S. Mc Dowell & Co. Ltd., disclaimed by the said Company, was yet to be determined. After the said claim of M/S. Mc Dowell & Co. Ltd. was negatived by the Andhra Pradesh High Court (06.12.1982) and during the pendency of the appeals before this Court M/S. Mc Dowell & Co. Ltd. had issued a letter dated 07.05.1983 to the assessee intimating that in the event the decision of the Supreme Court is adverse to M/S. Mc Dowell & Co. Ltd. the sales tax element will be collected by Mc Dowell from the assessee. It is thereafter that the revised return was filed on 27.08.1984. The liability of M/S. Mc Dowell & Co. Ltd. attained finality with the decision of the Constitution Bench M/s Mc Dowell and Company Limited Vs. Commercial Tax Officer [1985 (4) TMI 64 - SUPREME Court] . We are of view that the assessee is entitled to the benefit of deduction of the sales tax payable on the excise duty component in the assessment years in question. We, therefore, set aside the order of the High Court and restore the order of the Appellate Commissioner and the learned Tribunal deciding the said issue in favour of the assessee

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• 2015 (9) TMI 863
  Income u/s 5(2) - Income deemed to accrue or arisen in India u/s 9 - Part of business done in India - whether assessee purchases the goods for the purpose of exports, hence not liable to tax - Held that:- Assessee is not carrying any business in India. They have established a liaison office. The activities of the assessee in assisting the Indian manufacturer to manufacture the goods according to their specification is to see that the said goods manufactured has an international market, therefore, it could be exported. In the process, the assessee is not earning any income in India. If at all he is earning income outside India under a contract which is entered outside India, no part of their income could be taxed in India either under Section 5 or Section 9 of the Act. - HC decision upheld [2013 (8) TMI 194 - KARNATAKA HIGH COURT] - SC dismissed the revenue appeal.

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• 2015 (9) TMI 862
  Interest on refund and interest on interest - HC [2007 (7) TMI 221 - GUJARAT HIGH COURT] directed compensation by way of interest at the rate of 9% per annum on the amount for period from July 1, 1987 to November 13, 1990 refunded as well as to make payment of running interest at the rate of 9% per annum on the interest accrued on the aforesaid amounts to the assessee/respondent - Held that:- Since the High Court has primarily relied upon Sandvick Asia case (2006 (1) TMI 55 - SUPREME Court) and directed the Revenue to pay interest on the amounts refunded as provided for under the provisions of Section 244(1A), in light of the decision by this Court in Gujarat Fluoro case (2013 (10) TMI 117 - SUPREME COURT ) wherein held it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest, in our considered opinion, the impugned judgment and order requires to be set aside and the matter be remanded back to the High Court for re- consideration of the stand of the assessee as well as the Revenue once over again. - Decided in favour of revenue for statistical purposes.

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• 2015 (9) TMI 861
  Taxability of interest income - interest accrued on the allotment of the shares - selection of assessment year - Held that:- As the amount of interest earned on the application money to the extent to which it is not required for being paid to the applicants to whom moneys have become refundable by reason of delay in making the refund will belong to the company, only when the trust terminates and it is only at that point of time, it can be stated that amount has accrued to the company as its income. It is not in dispute that in the year 1993-1994, the assessee had shown the income on account of interest received in the income tax returns and paid the tax thereupon. We, thus, do not find any error in the order passed by the High Court holding that the interest income has accrued only in the Assessment Year 1993-1994 and was taxable in that year only and not in the Assessment Year 1992-1993. - Decided in favour of assessee.

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• 2015 (9) TMI 860
  Fixing the value of PUC - SCN issued stating that discounted value of apparent consideration would be ₹ 69,00,000/- (Rs. 80,00,000/- minus ₹ 11,00,000/- being the amount it was undervalued by pre-emptive Purchase order of immovable property of Respondents) was passed under section 269UD(I) for a net consideration of ₹ 69 lakh on 23.02.1995 as property value was undervalued by more than 15% - Held that:- We find from the judgment of the High Court [2005 (11) TMI 51 - BOMBAY High Court ] while quashing the aforesaid action of the Revenue, that the High Court has come to a categorical finding that there were lots of dissimilarities between Sale Instance Property (SIP) and Property Under Consideration (PUC). These are stated in detail in the judgment and on that basis finding of fact has been arrived at. After taking note of those dissimilarities the High Court relied upon the judgment of this Court in CB Gautam vs. Union of India reported [1992 (11) TMI 1 - SUPREME Court ] and held that the instance to the property that was taken could not be the basis of fixing the value of PUC and consequently for taking action under Section 269 UD(I) of the Income Tax Act. Since these are findings of fact arrived at by the High Court which are based on the material on record, we do not find any reason to interfere with that decision.

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• 2015 (9) TMI 859
  Income from inland transportation of cargo within India - HC decided issue in favour of assessee [2015 (8) TMI 1018 - BOMBAY HIGH COURT] as relying on DIT v. Balaji Shipping UK Ltd. [2012 (8) TMI 681 - BOMBAY HIGH COURT] wherein held that income from utilizing slot hire facilities as availing of in these cases would fall within Article 9(1) for slot hires have a closer nexus, connection and relationship to the actual operation of ships - Revenue has challenged Balaji Shipping U.K. Ltd. case in this court [2013 (10) TMI 1349 - SUPREME COURT] in which leave has been granted Held that:- Since the High Court has based its decision on Balaji Shipping U.K. Ltd., the distinction drawn by the learned senior counsel for the assessee,that the relevant article in the Belgium Treaty, which is under consideration in the present special leave petitions, is a little distinct from the Indo-U.K. Treaty which was under consideration in Balaji Shipping U.K. Ltd. can only be examined at the time of hearing of the matters.Leave granted.

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• 2015 (9) TMI 858
  Computation of deduction under Section 80HHC - Whether entire amount received on sale of the Duty Entitlement Pass Book (DEPB) represents profit on transfer of DEPB for the purpose of the computation of deduction u/s 80HHC – Held that:- As decided in Topman Exports vs. Commissioner of Income-Tax [2012 (2) TMI 100 - SUPREME COURT OF INDIA] DEPB has direct nexus with the cost of imports for manufacturing an export product, any amount realized by the assessees over and above the DEPB on transfer of the DEPB would represent profit on the transfer of DEPB and while the face value of the DEPB will fall under clause (iiib) of Section 28, difference between the sale value and the face value of the DEPB will fall under clause (iiid) of Section 28 . Issue decided in favor of assessee. The impugned judgment and order passed by the High Court [2011 (11) TMI 640 - GUJARAT HIGH COURT] is set aside and the Assessing Officer is directed to compute the deduction under Section 80HHC of the Income Tax Act, 1961, in the light of the observations made by this Court in Topman Exports (supra). - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 857
  Grant of a certificate under Section 10(23-C) (VI) rejected - the appellants are not using the entire income for the educational purposes for which purpose the trust is established as concluded by HC - Held that:- We are informed by the learned counsel for the appellants that the appellants have amended the objects of the Society w.e.f. 31.03.2008. If that is so, in our opinion, the appellants shall now make an appropriate application before the authorities for grant of certificate under Section 10(23-C) (VI) of the Act for the assessment years 2002-03 to 2007-08 along with the amended objects of the Society. In view of this subsequent development and keeping in view the peculiar facts and circumstances of the case, we set aside the order passed by the High Court and the authorities concerned. We now permit the appellants to file fresh application within a months' time from today. If such application is filed within the time granted the authority will consider the same in accordance with law, keeping in view the amended objects of the Society w.e.f. 31.03. - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 856
  Assessment of trust - Charge of tax where share of beneficiaries unknown - Held that:- Having regard to the amendment in Section 164(1) of the Income-Tax Act, 1961 by Finance (No. 2) Act, 1980 which has done away with the deeming provision whereby a trust under Section 164(1) of the 1961 Act could be assessed as though it was association of persons, the view taken by the High Court in the impugned order [2004 (9) TMI 92 - DELHI High Court] cannot be said to suffer from any legal flaw. The view that has been taken in the impugned order is in line with the decisions of High Courts of Calcutta, Gujarat and Madras in "Commissioner of Income Tax vs. Shri Krishna Bandar Trust" (1992 (3) TMI 23 - CALCUTTA High Court), Commissioner of Income Tax vs. Deepak Family Trust No. 1 and others (1993 (12) TMI 20 - GUJARAT High Court) and Commissioner of Income Tax vs. Venu Suresh Sanjay Trust and others (1995 (12) TMI 18 - MADRAS High Court) respectively.

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• 2015 (9) TMI 855
  Allowability of commission expense paid to sister concern for its licence for importing furnace oil - Held that:- As correctly held by HC [2013 (10) TMI 839 - GUJARAT HIGH COURT] Sister concern since had a licence for importing the furnace oil, the assessee diverted its contractual obligation for averting the payment of damages, nothing comes on the record to explain as to how the sum termed as "commission" for performing the contract obligation was needed to be paid to the sister concern – In the present case, appellant has failed to show as to how this amount of commission is compensatory in nature, which would entitle the appellant to avail the benefit of decision of Prakash Cotton Mills v. CIT [1993 (4) TMI 3 - SUPREME Court] – Decided against the Assessee. Allowance of expenditure for sending mangoes to one Narayan V. Thosar through Air Wings – Held that:- In the present case, no ground comes forth, nor there is any rationale for such huge business promotion expenditure incurred for supplying mangoes to a particular person, this authority will not come to the rescue of the assessee – Decided against the Assessee.

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• 2015 (9) TMI 854
  Unexplained investment under section 69 - sale of the shares - penny stock - ITAT deleted the addition - order of high court was confirmed by HC [2011 (9) TMI 919 - BOMBAY HIGH COURT] - SC dismissed the appeal of the revenue.

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• 2015 (9) TMI 853
  Receipts on sale of electricity energy to A.P. TRANSCO - accrual of income - ITAT deleted the addition confirmed by HC [2013 (7) TMI 914 - ANDHRA PRADESH HIGH COURT] by holding tat, "Amount payable by the A.P. TRANSCO to the respondent - assessee is in dispute and such dispute is yet to be resolved by arbitration. Merely because the assessee has raised a bill for recovery of certain amount, it does not partake the character of 'income'. If the amount is disputed and the same is pending adjudication in arbitration, there is no crystallization and quantification of the amount due and payable by the debtor. Unless the debtor accepts the amount due and paid, the question of accrual of income even in mercantile system of accounting does not and cannot arise" - SC dismissed the appeal of the revenue.

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• 2015 (9) TMI 852
  Assessment of the rental income - claim of deduction of amount paid to tenant for vacating the property - earlier assessee was showing the income as house property income - res-judicata - this year the income was shown as business income - whether under the head 'business' or under the head 'house property' - Held that:- Though as noted, in earlier assessment years the appellant had shown rental income as "income from house property", however, in this assessment year it has claimed rental income as business income, in view of the object as set out in clause 4 of the memorandum. Though before the Tribunal the Memorandum was relied on to put forward the case that the income was part of the business and payment of compensation was to earn higher income, it was not at all considered. Since in this assessment year the appellant had claimed rental income as business income, and as previously there was no adjudication or decision considering the Memorandum, and as being the owner of the premises, payment of compensation - the expenditure - was wholly and exclusively for commercial expediency. it earning and was revenue in nature. Since compensation was paid by the appellant, the landlord of the premises, to obtain possession from the lessee/tenant so as to earn a higher rental income, it had arisen out of business necessity and commercial expediency. Since there was no question of acquiring a property it cannot be said that the payment made was for having a benefit of enduring nature. Rather the compensation was paid to the existing tenants to have their portions vacated to have new tenants with higher rent and thus to have a higher rental income which was a business activity permitted by the Memorandum.Assessing Officer has to assess the income of an assessee after considering whether the figure in the return is taxable or not and then to determine the tax in accordance with law. In determining the same, a decision has to be reached on the issue raised. Unless a decision is reached, it cannot be said that the issue was adjudicated or decided. Keeping these principles of law as formulated by the Courts in mind, the finding by the Assessing Officer and Tribunal that declaring the rental income under the head "income from house property" precludes the appellant from calming deduction cannot be accepted as Memorandum permitted it to carry on business of letting out properties and indisputably it was carrying on business in letting out properties and in carrying on such trading activity had paid compensation. The observation of the Tribunal that the appellant had all along, including in this assessment year, had shown the income under "Income from house property" cannot be a ground for denial of the deduction as in the earlier assessment years never an occasion arose for adjudication or decision on the said issue Hence, as the appellant, being the owner of the property, was carrying on business and had paid compensation for deriving higher rent which was in tune with the Memorandum – a fact which was not at all considered by the Assessing Officer and the Tribunal, the question no.1 is answered in the negative, against the Revenue and in favour of the Appellant. The question no.2 is answered in the affirmative, against the Revenue and in favour of the Appellant.

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• 2015 (9) TMI 851
  Income as profits in lieu of salary - whether ITAT fall into error in holding that the sum recived was compensation in the hands of the Assessee and could not be treated as income as profits in lieu of salary and allowing the credit of TDS? - Held that:- The Court is unable to accept the interpretation sought to be placed on the plain language of Section 17 (3) (iii) of the Act by the Revenue. The words "from any person" occurring therein have to be read together with the following words in sub-clause (A): "before his joining any employment with that person". Section 17 (3) (iii) (B) also pre-supposes the existence of the relationship of employer and employee between the person who makes the payment of the amount and the Assessee. It envisages the amount being received by the Assessee "after cessation of his employment". Therefore, the words in Section 17 (3) (iii) cannot be read disjunctively to overlook the essential facet of the provision, viz., the existence of ‘employment’ i.e. a relationship of employer and employee between the person who makes the payment of the amount and the Assessee. The Court accordingly concurs with the concurrent view of the CIT (A) and the ITAT that this was a case where there was no commencement of the employment and that the offer by ACEE to the Assessee was withdrawn even prior to the commencement of such employment. The amount received by the Assessee was a capital receipt and could not be taxed under the head 'profits in lieu of salary'. Other plea of the Revenue that the said amount should be taxed under some other head of income, including 'income from other sources', is also unsustainable. The decision of this Court in Rani Shankar Mishra (2008 (12) TMI 14 - DELHI HIGH COURT) held in similar circumstances that where an amount was received by a prospective employee ‘as compensation for denial of employment,’ such amount was not in the nature of profits in lieu of salary. It was a capital receipt that could not be taxed as income under any other head. - Decided in favour of the Assessee Also the order of the CIT (A), as concurred with by the ITAT, that the Assessee is entitled to the refund of the TDS paid on ₹ 1,95,00,000/- and that the refund of TDS may be adjusted against tax demand if any arising on appeal effect being given to the said order of the CIT (A) is upheld. - Decided in favour of the Assessee

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• 2015 (9) TMI 850
  Entitlement to depreciation claimed in respect of Unit-II - AO held that the Assessee failed to prove that it had undertaken any manufacturing activity during the AY in question - CIT(A) allowed claim - Held that:- On facts, it is not in dispute that the building was constructed in the previous year 1988-89. Further, the plant and machinery was installed in the factory in the previous year ending 31st March 1990. The Court in of the view that the installation of the plant and machinery in the building would amount to use of the building so as to justify the claim for depreciation on the building. Further, the plant and machinery installed in the building during AY 1989-90 was ready for use for the purpose of business of the Assessee. The electricity connection was given on 6th February 1990. Another important fact was that the Assessee was already conducting its business and this was Unit II which was by way of expansion of an existing business. It is not the Revenue's case that the building and plant and machinery were not for the purpose of business of the Assessee. Therefore, it is concluded that the building and machinery in Unit II were used for the purpose of the business of the Assessee during the AY in question. - Decided in favour of assessee.

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• 2015 (9) TMI 849
  Penalty u/s 271(1)(c) - ITAT deleted penalty - Held that:- It is evident that the factum of deletion of addition in respect of non-deduction of tax by the assessee was not controverted by the revenue. The Tribunal has further found that the penalty had been levied on the amount which was reflected in the original return as income. That it was an undisputed fact that the assessee had declared this income in his original return of income, although it was a belated return. From the findings recorded by the Tribunal, it is evident that the Tribunal has found as a matter of fact that there was no concealment of particulars of income on the part of the respondent assessee and in fact, the Assessing Officer had proceeded on the basis of the return filed by the assessee and particulars furnished therein. Under the circumstances, in the absence of any concealment of the particulars of income or furnishing of inaccurate particulars of income on the part of the assessee, no infirmity can be found in the impugned order passed by the Tribunal in confirming the order passed by the Commissioner (Appeals) in deleting the penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.

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• 2015 (9) TMI 848
  Disallowance made on account of business promotion expenses u/s 37(1) - ITAT deleted the addition - Held that:- The Tribunal has recorded a factual finding that most of the items were found from the books of accounts not to be personal expenditure, but to be business promotion expenses. Therefore, the first question of law raised by the Revenue does not arise for consideration in the light of the factual finding that the expenses were found to be business promotion expenses. - Decided against revenue. Diversion of profits - raw material supplied to sister concern were at a lower rate when compared to others - ITAT deleted the addition - Whether the finding of the Tribunal that the disallowance made under Section 40A(2)(b) is not attracted especially when the assessee had supplied its entire product to its sister concerns at exorbitant price thus bring down the profit of the assessee company? - Held that:- In this case, the Tribunal found that the only reason as to why the Assessing Officer came to a conclusion about the excessive or unreasonable nature of the expenditure was on the basis that the net profit amounted to only 0.13% of a massive turnover of about ₹ 103 crores. On such a premise, the conclusion that the expenses incurred were excessive or unreasonable could not have been arrived at. This is why, the Tribunal pointed out there are no materials to come to the conclusion that any particular item of expenditure was expensive or unreasonable. - No substantial questions of law raised - Decided against revenue.

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• 2015 (9) TMI 847
  Refusal to extend the date prescribed for filing Income Tax Return of entities whose accounts are required to be audited - Held that:- The petitioners do not disclose any cause of action in their favour. Rather, in para 6 of the petition, it is pleaded that the petition is in the nature of public interest. However, the petition is not drafted as a Public Interest Litigation (PIL) and does not comply with the rules for filing a petition in public interest. The counsel for the petitioners seeks to withdraw the petition with liberty to file a PIL.Dismissed as withdrawn with liberty as aforesaid

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• 2015 (9) TMI 846
  Validity of assessment order - Time limit for passing of the draft order by AO - TPA - challenge to the final assessment order passed by the AO on the ground that the draft order passed by the AO and also the order passed by the Transfer Pricing Officer (TPO) were barred by limitation - DR made contentions that the time limit is to be reckoned from the date on which the information is received by the Principal Commissioner or Commissioner and not the Director of Income-tax, as has been the case under consideration Held that:- The term 'draft order' has been recognized as and is actually different in ambit from the term 'assessment order'. With the insertion of section 144C, which led to the birth of the draft order, the legislature did not substitute the term 'order of assessment' with the term 'draft order' in section 153. If the intention of the legislature had been to substitute the hitherto time limit for passing of the assessment order as the time limit for the passing of draft order henceforth, on shifting the time limit for passing of the final assessment order to section 144C(4) or (13), then it would have made necessary changes in section 153 by substituting the term 'draft order' with the term 'order of assessment'. We are unable to read the term 'draft order' interchangeably with the term 'assessment order' in the context of section 153 or practically for any other purpose. It is a settled legal position that where no time limit is prescribed for passing an order, then such order should be passed within a reasonable time. The time limit for completion of assessment, or in other words, passing of the final assessment order pursuant to the order of the TPO, is contained in section 144C(4) and (13); the time limit given u/s 153 has no relation whatsoever with the passing of the draft order, which should be passed within a reasonable time; and the time limit given in section 153 is relevant for determining the time available with the TPO for passing order u/s 92CA(3). Turning to the facts of the instant case, we find that the AO passed the final assessment order on 29.1.2015, which is well within a period of one month from the end of the month in which direction was received from the DRP on 24.12.2014. As such, we hold that the final assessment order passed by the AO is within the time prescribed u/s 144C(13). Further since the draft order has also been passed within a reasonable time, the same is also not barred by limitation. The contention of the ld. AR that the draft order passed in this case was barred by limitation, is therefore, found to be without any substance and hence repelled. Time limit for passing of order by the TPO - Held that:- Having held that the time limit given in sub-section (3A) of section 92CA is mandatory for the passing of the order by the TPO, let us find out the time available with the TPO for the passing of his order. It has been noticed above that the time limit as per section 153(1) read with the third proviso and clause (viii) of the Explanation to the section, comes at 7th June, 2014. Period of 60 days prior to such time limit coming as per section 153, available with the TPO for passing his order, comes to an end on 8th April, 2014. As against this, the order was actually passed by the TPO on 31st May, 2014. Thus, the order passed by the TPO is patently time barred. Consequences of valid draft order and TPO's time barred order - Held that:- When an order is passed without jurisdiction or beyond the permissible time, it is considered as null and void. The effect of passing a null and void order is that it is considered as non est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored for all practical purposes. The Hon'ble Madras High Court in Vijay Television (P.) Ltd. v. DRP [2014 (6) TMI 540 - MADRAS HIGH COURT] considered a case in which the assessment order was directly passed without routing through draft order or DRP. The Hon'ble Court held it to be a non-curable defect and resultantly the assessment was quashed. It was held that when there is an omission on the part of the AO to follow the mandatory procedure prescribed under the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. Extantly, we are confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold accordingly and direct the deletion of addition on account of transfer pricing adjustment made in the final assessment order. - Decided in favour of assessee.

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• 2015 (9) TMI 845
  Entitlement to exemption u/s 11 and 12 and section 10(23C)(iiiab) - engagement in manufacturing activity - CIT(A)-I held that the A.O. has erred in applying first proviso to section 2(15) to the case of the appellant trust and taxing the exempt income under section 10(23C)(iiiab). - Held that:- Once the activities of the Assessee are educational and medical in nature, the considerations of element of business activity and profit motives embedded therein etc. are rendered wholly irrelevant under S. 2(15) of the Act. The Assessee trust has been granted registration u/s 12A of the Act by the revenue on the basis of the object clauses. The activities carried out by the Assessee are not found by the Revenue to be ultra vires the objects. It is true that merely because the CIT has granted registration u/s 12A will not by itself preclude the AO from examining compliance u/s 11 of the Act. However, in the present case, no cogent case of non compliance has been made out. Merely because some manufacturing activities in the nature of alleged business activities are involved, this will not change the character of activity. The Assessee has demonstrated as to how these allied manufacturing activity has assisted its key objects in the area of education and medical reliefs. The receipts from manufacturing activities have been admittedly applied towards the objects of the trust. Therefore, in our considered view, manufacturing activity allied to education and medial reliefs etc. resulting in profits is no handicap for holding the activities to be charitable in nature under section 2(15) of the Act irrespective of fact that it may involve carrying on of commercial activities provided income from such activities are utilized towards charitable purposes. This view is also fortified by the CBDT Circular no. 11/2008 dated 19/12/2008. The very definition of ‘charitable purpose’ under S. 2(15) is inclusive in nature and not mutually exclusive. The Assessee is entitled to relief in any of the sub clause dehors the relief for other activity available under other sub clause. The stand of the Assessee that the receipts from manufacturing activity has been applied for furtherance of the principle objects also remains uncontroverted. As a logical corollary, the activities in question are not for the purposes of profit as contemplated in S. 10(23C) (iiiab) & (iiiac) of the Act. The case laws relied upon the Revenue are distinguishable on facts since the profits from manufacturing activity has been applied in the proceedings for larger object of charitable nature of education and medical relief. In the absence any other plea to vacate the order of CIT(A) granting relief on this issue, We find no reason to interfere with the order of the learned CIT(A). - Decided against revenue.

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• 2015 (9) TMI 844
  Dependent agency Permanent Establishment (PE) in India under Article 5(4) and 5(5) and Service PE under Article 5(2)(k) of Indo-UK DTAA - DRP taxing the ‘Distribution’ revenues on gross basis u/s 44D - whether if the assessee does constitute a PE in India then no further profits can be said/sought to be attributable to the PE as the transaction with the assessee have been found to be at arm’s length by the Transfer Pricing Officer (TPO), in subsequent years? - Held that:- The assessee is a tax resident of United Kingdom and has worldwide business of providing news and financial information distributed through Reuters Global Network. In India, it has entered into distribution agreement with RIPL for distribution of news and information service compiled by the ‘Reuters’ from the materials collected either by the ‘Reuters’ itself or from its subscribers in the territory of India and also supply of news and information by the distributor. From the plain reading of the relevant terms of the agreement, it is quite apparent that nowhere it has been specified or there is any mandate that RIPL is habitually exercising its authority to negotiate and to conclude the contracts on behalf of the assessee in the territory of India which binding or can bind the assessee. It envisages simply delivering of Reuter services for a price which can be further distributed by the RIPL for earning of its own revenue. There is no clause that RIPL will act as an agent on behalf of assessee qua the distribution to subscribers. In fact, the RIPL is having independent contract with the subscribers, which is evident from the contract agreement between RIPL and Third party subscribers in India The character of an agent under Article 5(4) which can be said to be dependent is that the commercial activities of the agent for the enterprise are subject to instructions or comprehensive control and it does not bear the entrepreneur risk. The main thrust of an agent being a PE under Indo-UK treaty is that whether the agent has an authority to conclude contracts in the name of the enterprise i.e. the agent has sufficient authority to bind enterprise’s participation in the business activities and the agent’s activities involved the enterprise to a particular extent in the business activities. Thus, the qualified character of the agency is authorization to act on behalf of somebody else so much as to conclude the contracts. Here in this case, there is no such terms which is borne out from the distribution agreement that RIPL is only acting on behalf of ‘Reuters’ or is in kind of dependent agent. It is completely an independent entity and the relationship between the assessee and RIPL is on principal-to-principal basis. As stated above, activities of RIPL cannot be said to be devoted wholly or almost wholly on behalf of the assessee as it has entering into contracts with the subscribers in India on independent basis and on principal-to-principal for earning and generating its revenues. In fact revenue from third party subscribes are far excess than transaction with the assessee. It is not the case here that it has completely or wholly doing activity for ‘Reuters’ and earning income wholly from ‘Reuters’ only. Thus, the conditions laid down in Article 5(5) also does not fulfill. As per terms of clause 3 of the agreement, the assessee is merely delivering Reuters services to the distributors. The Bureau Chief has nothing to do for providing of Reuters services to the distributor i.e. RIPL. The Bureau Chief is only acting as a Chief reporter and Text Correspondent in India in the field of collection and dissemination of news. Thus, it cannot be held that the News Bureau Chief constitute a service PE in India for the assessee to the Article 5(2)(k) as he has not furnished any services in India on which the assessee has earned the distribution fee. In view of our findings given above, we hold that neither under Article 5(2)(k) nor under Article 5(4) read with 5(5), the assessee has a PE in India and, therefore, the distribution fee received by the assessee can not be held to be taxable in India. - Decided in favour of assessee. Levy of interest u/s 234B - Held that:- It has been admitted by both the parties that same is covered by the decision of Hon’ble Bombay High Court in the case of NGC Network [2009 (1) TMI 174 - BOMBAY HIGH COURT]

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• 2015 (9) TMI 843
  Transfer pricing adjustment - international transaction relating to reimbursement of interest and other finance cost - whether whatever is reimbursed by the assessee to MRK goes to the Deutsche Bank account and the MRK is not the beneficiary of any income in any form? - Held that:- As decided in assessee's earlier AY we find merit in the assessee's contention that the MKR is not just a material seller to the assessee. Therefore, in principle, we cannot appreciate the approach of the TPO in accepting (i) the "international 15 transactions" involving the payment of cost for import of the raw materials and (ii) rejecting the reimbursement of the finance cost, interest cost etc amounting to ₹ 17.81 cr and (iii) not charging of the "corporate guarantee commission" on the MKR. The TPO must determine ALP of the purchase price of the raw material as a whole after considering all the relevant segments of the price ie purchase cost, administrative cost and the finance cost and interest cost, guarantee commission etc. In the remand proceedings, after considering all these segments of the pricing, if TPO finds that the unit price of the raw material is at ALP, in that case, there is no need for any TP additions. - Decided in favour of assessee for statistical purposes. Adhoc disallowance of 20% of total expenditure incurred on repairs and maintenance and treating the same as capital expenditure - Held that:- While deciding the appeal for AY 06-07 the Tribunal had decided the identical issue stating that CIT (A) surprisingly on the basis of some test check of vouchers affirmed the order of AO by differing from the findings in earlier two years. We are not fully convinced with the test conducted by the CIT (A) as he himself recorded that assessee out of the expenditure claim with reference to M/ s Sunny Constructions/ S.R. Containers treated part of the expenditure as capital and part has been claimed as revenue expenditure. It indicates that assessee has consciously segregated the capital expenditure and revenue expenditure for which no fault can be found. Moreover, AO also recorded that all the necessary details and vouchers have been placed before the authorities. Therefore, we are convinced that AO very mechanically and perfunctorily disallowed 20% on adhoc basis without establishing any expenditure as capital expenditure. There cannot be any adhoc disallowance out of the revenue expenditure as was done by AO. Therefore, we reverse the order of the CIT (A) and direct AO to allow the claim as such. In case any depreciation was allowed on the disallowed amount, AO is directed to withdraw the same. - Decided in favour of assessee.

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• 2015 (9) TMI 842
  Disallowance for deduction u/s. 80IB(10) - claim denied by the A.O for the reason that the plot size of the land on which the project was undertaken was less than 1 acre. - Held that:- Hon’ble Bombay High Court in the case of CIT vs. Vandana Properties reported in (2012 (4) TMI 54 - BOMBAY HIGH COURT) had an occasion to decide on the issue of deduction u/s. 80IB(10) wherein it has held that the expression “housing project” is neither defined under section 2 of the Act nor under Section 80IB(10) of the Act and therefore the expression “housing Project” in Section 80IB(10) would have to be construed as commonly understood “Housing Project” in common parlance and it would mean constructing a building or group of buildings consisting of several residential units. Assessee cannot be denied deduction u/s. 80IB(10) on the ground that the area of project is less than 1 acre and more so when Revenue has not disputed about the fulfillment of other conditions stipulated u/s. 80IB(10) by the Assessee. As far as denial of deduction on the ground of flat size being in excess of 1500 sq. ft. is concerned, we find that the Assessee had sold 4 flats namely C-401, 402, 403 and 404 to 4 different purchasers vide separate sale deeds which have also been confirmed by the respective purchasers and at the time of its sale each flat was less than 1500 sq. ft. It is also a fact that the inspection was carried out by the DVO subsequent and much after the date when Assessee had handed over the possession to respective owners of the flat. The respective owners have also confirmed by carrying out the modification in those flats and combining those 4 flats into 2 flats. In such a situation the act of the purchasers of flats of converting the 2 flats in to 1 flat resulting into the area of are combined flat being excess of 1500 sq. ft. cannot be said to be done by Assessee and therefore it cannot be said that Assessee has sold flat whose area was in excess of 1500 sq. ft. In view of the aforesaid facts, we are of the view that the Assessee is eligible for deduction u/s. 80IB(10) and therefore set aside the order of A.O on this ground. - Decided in favour of assessee. Disallowance u/s. 40(a)(ia) - late deduction tax at source from payments - Held that:- With respect to the payment made to Anar Builders Pvt. Ltd., we find that though Assessee had submitted that the payee has already included the payment received from the Assessee as its income and paid tax on it but we find that there is no finding to that effect either by the A.O or ld. CIT(A). In such a situation, we are of the view that the issue needs to be re-examined and re-decided at the end of A.O. in accordance with law. With respect to the submission of the Assessee in connection with the payments made to Dayal Krupa and Viral Transport, we are of the view that in the absence of categorical finding of A.O or ld. CIT(A) and in the light of the factual submission made by the Assessee the issue needs re-verification. We therefore restore the issue to the file of A.O for verification and thereafter decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 841
  Rejection of books of accounts - as per AO the assessee had failed to maintain quality-wise data of diamond manufactured and to furnish the relevant production record - CIT(A) reversed AO order - Held that:- There is no dispute that assessee’s books of account pertaining to its diamond stock are being maintained on “carat basis”. This method is consistently followed in preceding and succeeding assessment years. The case file contains details of quality-wise closing stock as on 31st March, 2007, audit report as well as sample copy of stock register for March 2007 relating to the relevant previous year. The Revenue fails to controvert correctness thereof except making oral submissions. The above stated consistency of past practice in maintaining books and stock caratwise is not rebutted. There is no other material quoted so as to reject assessee’s books of account. We uphold the CIT(A)’s order in these facts and hold that the same does not call for any interference. - Decided against revenue. Addition made after estimation of gross profit - Held that:- It is admitted that assessee’s gross profit from assessment year 2004-05 to the impugned assessment year 2007-08 reads 9.67%, 5.04%, 6% and 3.96%; respectively. The assessee attributed this fall to increase in turn over along with decline in export and local rates @ ₹ 1,251/- and ₹ 3,406/- respectively. The Assessing Officer neither disputes this rate fluctuation specifically nor does he draw any comparable instance to re-estimate the impugned gross profit. Be that as it may, the fact also remains that the very basis of this estimation is rejection of assessee’s books of account which already stands decided against the Revenue. It also fails to quote any evidence much less is specific one citing appropriate comparable instances in the course of hearing. We uphold the lower appellate findings accordingly.- Decided against revenue. Fall in diamond yield by 1.28% resulting in addition to income - CIT(A) deleted addition - Held that:- once the assessee’s book result already stands accepted in preceding paragraph, this issue is rendered academic. We further notice that the very yield in assessment year 2005-06 was 26.93% much less than 30.35% in assessment year 2004-05. This year comprises of yield rate @ 27.63% ie. much more than that in assessment year 2005-06. The Assessing Officer does not seem to have made addition on account of yield fluctuation attributable to peculiarities of the assessee’s business. Nor is any specific material pin pointing defecting the yield rate in question is being cited. We accordingly hold that the CIT(A) has rightly reversed the Assessing Officer’s findings under challenged. - Decided against revenue.

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• 2015 (9) TMI 840
  Addition made on account of interest on Post Dated Cheques (PDCs) - Held that:- As decided in the case of ACIT Vs M/s IAG Promoters and Developers Pvt. Ltd. [2014 (12) TMI 216 - ITAT DELHI] CIT(A) was rightly of the view that there is no evidence which proves that interest is paid from the date of sale to date of encashment of postdated cheques - where ever the date of PDCs are extended interest is paid @ 15% per annum in cash out of books of accounts which are evident from seized material - therefore, interest on PDCs to the extent of extension period appears to quite reasonable and logical - The ground raised by the Revenue is misconceived because CIT(A) has not deleted the addition but has only directed to recalculate the interest - after examining the loose papers seized at the time of search at the assessee’s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs – CIT(A) rightly directed the AO to re-compute the interest on PDCs at the time of extension of the PDCs - if it is not possible to work out the extension of PDCs in each case, then the AO is directed to recomputed interest on PDCs after six months from the date of issue of the PDCs – the order of the CIT(A) is upheld – Decided against revenue. Disallowance on account of additional payments for the purchase of land - Held that:- As decided in the case of M/s Westland Developers Pvt. Ltd. Vs ACIT [2014 (12) TMI 254 - ITAT DELHI ]Section 40A(4) starts with the non-obstante clause setting out that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provisions of the Act relating to the computation of income under the head ‘profits and gains of business or profession’ – if a transaction is embodied in a document, the liability to tax depends upon the meaning and content of the language used i.e. the Court has to look to the terms of the contract between the parties as to what is the true nature and effect of the terms embodied in an agreement between the parties - the assessee claimed relying upon the agreement entered that the assessee had acquired various lands through farmers/villagers and after acquiring the same handed over to the developer for development of an integrated township project and in terms of the collaboration agreement the assessee received a consolidated fee - relying upon Commissioner Of Income-Tax Versus Industrial Engineering Projects Pvt. Limited [1992 (7) TMI 38 - DELHI High Court] – section 40A(3) of the Act has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed and the assessee has successfully demonstrated that the payment were reimbursement made by CWPPL – Decided in favour of assessee. Addition u/s 2(22) - Held that:- The Revenue wants the deeming provision to be extended which is illogical and attempt is to create a real legal fiction, which is not created by the Legislature. - the definition of shareholder is not enlarged by any fiction - The assessee who was recipient of the amount was not the shareholder in the payer company and therefore, provisions of Section 2(22)(e) of the Act were not applicable. - Even the money which was paid was not in the nature of loan or advance simplicitor, but the amounts were advanced for business transaction. The expression "shareholder being a person who is the beneficial owner of shares" referred to in the first limb of Section 2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial then the provision of Section 2(22)(e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder then also the first limb of provisions of Section 2(22)(e) will not apply. See CIT Vs Ankitech Pvt. Ltd. [2011 (5) TMI 325 - DELHI HIGH COURT] - Decided in favour of assessee.

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• Customs

• 2015 (9) TMI 872
  Exemption under Notification No. 133/87 - Penalty u/s 112(a) - Held that:- during the pendency of proceedings before the Commissioner, the appellant had approached the authorities under Kar Vivad Samadhan Scheme and volunteered to pay the duty at 30% on the premise that the goods were classifiable under Heading 8905.20 and the Customs Notification No. 196/89 shall be applicable and, therefore, the appellant showed readiness for payment of duty at 30%. No doubt, its application under Kar Vivad Samadhan Scheme was rejected. However, this benefit has been extended by the Tribunal. Once this relief is given by the Tribunal, we are of the view, that no further relief is required to be given to the appellant in the facts of the present case. - Decided against assessee.

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• 2015 (9) TMI 871
  Writ jurisdiction where alternate remedy is available - Valuation of goods - Provisional release of goods - Execution of bond for re-determined value of the imported goods - Held that:- On a bare perusal of Section 128 of Customs Act it is manifestly clear that an appeal lies in respect of any “decision or order passed under the Customs Act”. In my view the impugned order falls within the description of “order or decision” with respect to provisional clearance. Further, the impugned order dated 06.04.2015 has been passed by the Assistant Commissioner, Customs Preventive (Alpha Group) which is lower in rank than a Principal Commissioner of Customs or Commissioner of Customs. No exceptional or extraordinary circumstances have also been brought on record before this Court to permit it to invoke its extraordinary jurisdiction under Article 226 of the Constitution of India. Therefore, this Court is of the opinion that in terms of Section 128 of the Customs Act, 1962 the appeal against the impugned order dated 06.04.2015 shall lie to the Commissioner of Appeals within sixty days from the date of its communication to him. - petitioner has approached this Court under the mistaken view that remedy of appeal is not available under the Customs Act, 1962, this Court is of the opinion that the petitioner may prefer an appeal before the concerned appropriate authority within four weeks - Decided against appellant.

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• 2015 (9) TMI 870
  Detention of goods - Levy of anti dumping duty - import of 3 MTS of L-ASCORBATE 2-PHOSPATE - 35 PCT AND 2 MTS MONO POTASSIUM PHOSPATE - Wrong classification of goods - Held that:- The issue relating to classification of items viz, whether the goods would attract Anti Dumping Duty or not, can be looked into by the authority concerned by adopting proper adjudication process followed by a speaking order, which is yet to be made. Hence, such exercise shall be completed by the respondents within a period of four weeks from the date of receipt of a copy of this order. In the meanwhile, for the purpose of release of goods i.e., L-ASCORBATE 2-PHOSPATE - 35 PCT, 50% of the Anti Dumping Duty as determined shall be paid by the petitioner and for the balance amount, a bond as directed by the authority concerned is directed to be executed by the petitioner. On such compliance, the goods shall be released forthwith. As far as the other item viz., MONO POTASSIUM PHOSPATE, it is mutually agreed by both the counsel on record that there is no dispute. Hence, the respondents are directed to release the said goods forthwith. - Decided in favour of assessee.

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• 2015 (9) TMI 869
  Overvaluation of goods - confiscation of the goods - Denial of request of cross examination - Held that:- statement against the assessees cannot be used without giving them opportunity of cross-examination of the deponent. In our considered view, the appellant should be given opportunity of cross-examination of the exporters and Panchas and documents should be provided in the interest of justice, otherwise, the adjudicating authority should give reasons thereof. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

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• 2015 (9) TMI 868
  Imposition of godown charges - re-export of goods - Held that:- The present appeal has been filed by the appellant where the case pertains to import of goods through baggage. As per preamble to the OIA dated 26.8.2013, passed by First Appellate Authority, appeal against such orders lies to the Under Secretary, Govt. of India, Ministry of Finance, Dept. of Revenue, New Delhi as per Section 129A(1) of the Customs Act 1962. This Bench, therefore, has no jurisdiction to entertain the present appeal. The same is, therefore, disposed of as non-maintainable - Decided against assessee.

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• 2015 (9) TMI 867
  Whether penalty can be imposed upon the importer for some misdeeds of the employee of their clearing agent during customs clearance of their imported goods - Held that:- Respectfully following the ratio laid down by this Bench [2014 (4) TMI 381 - CESTAT AHMEDABAD], I hold that the present appeal filed by the Revenue is required to be rejected. - Decided against Revenue.

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• PMLA

• 2015 (9) TMI 865
  Commission of offence under Prevention of Money Laundering Act - Attachment of property - Held that:- In terms of Section 8 of the PMLA, the Adjudicating Authority independently considers the issue of such attachment and if it has reason to believe that the person is in possession of proceeds of crime, he shall issue show cause notice to such person. The accused is entitled to explain the sources of income, earning or assets, out of which or by means of which he has acquired the property, lead evidence and furnish any other information in his possession to justify the legitimate means of acquiring the properties in dispute. It is only after taking all the submissions of the accused and documents brought on record to establish the sources of his property so attached that the adjudicating authority takes a final decision on the same. - Any person aggrieved by an order made by the Adjudicating Authority under Section 8 of PMLA can avail the remedy of appeal under Section 26 of PMLA to the Appellate Tribunal, whereby again the accused person is given an ample amount of opportunity of being heard, before any orders are passed. It is only when a person is aggrieved by the decision or order of the Appellate Tribunal that he may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him. The remedy of appeal under Section 42 of PMLA is in the nature of second appeal. Petitioners have received show cause notice under Section 8 of the PMLA in O.C. No. 501/2015 and the provisional attachment order dated 21.05.2015 under Section 5 of the PMLA issued by the respondent No.2. The action of coming to this Court is premature and therefore, this Court is of the view that since the petitioners have effective and efficacious remedy under PMLA, necessitating institution of the petition by invoking extraordinary jurisdiction of this Court is not appropriate at this stage. If this Court were to enter into the merits of this case at this stage, it would amount to scuttling the statutorily engrafted mechanism i.e. PMLA. - Decided against the appellant.

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• Service Tax

• 2015 (9) TMI 890
  Waiver of pre deposit - Best Judgment assessment - Section 72 - Failure by the Appellant to furnish complete particulars despite repeated opportunities - Held that:- Returns in Form ST-3 filed online by the Appellant was rejected by the computer on the ground of some error and was not re-filed till after a Show Cause Notice was issued to the Appellant on 18th October, 2012 - Court finds that the Appellate has raised serious objections against the order of the CC on merits. In particular, the Appellant is aggrieved by the manner in which inferences were drawn by the CC with respect to the details furnished by it. The Court is of the view that contention of the Assessee that it did furnish the full particulars requires a detailed examination on merits. - pre deposit of ₹ 78 lakhs as ordered by the CESTAT is harsh and in the interests of justice a sum of ₹ 25 lakhs should instead be directed to be paid by the Appellant as pre-deposit - Partial stay granted.

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• 2015 (9) TMI 889
  Maintainability of appeal - Held that:- Whether the export of services provided by the Respondent constituted a ‘service’ and was exigible to service tax under Section 73(1) read with Section 66 and 68 of the Finance Act, 1994 read with Rules 6 of the Service Tax Rules 1994 - Held that:- Section 83 of the Finance Act 1994, makes the provisions of Sections 35 G and 35 L of the CE Act ipso facto applicable in relation to service tax. Section 35 G concerns appeals to the High Court from orders of the CESTAT whereas Section 35 L deals with appeals to the Supreme Court from orders of the CESTAT. Section 35 L (b) provides that appeals from orders of CESTAT would lie directly to the Supreme Court where it involves the “the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.” In Ernst & Young this [2014 (2) TMI 1133 - DELHI HIGH COURT] Court held that any question having relation to a rate of duty would include a determination as levy of tax on a particular service. It was held that “The words 'rate of tax' in relation to rate of tax would include the question whether or not the activity is exigible to tax under a particular or specific provision.” Accordingly, it was held that an appeal under Section 35-G of the CE Act against the order of the CESTAT on the question of exigibility of a service to tax was not maintainable before this Court. - Decided aagainst Revenue.

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• 2015 (9) TMI 888
  Maintainability of appeal - Held that:- Whether the export of services provided by the Respondent constituted a ‘service’ and was exigible to service tax under Section 73(1) read with Section 66 and 68 of the Finance Act, 1994 read with Rules 6 of the Service Tax Rules 1994 - Held that:- Section 83 of the Finance Act 1994, makes the provisions of Sections 35 G and 35 L of the CE Act ipso facto applicable in relation to service tax. Section 35 G concerns appeals to the High Court from orders of the CESTAT whereas Section 35 L deals with appeals to the Supreme Court from orders of the CESTAT. Section 35 L (b) provides that appeals from orders of CESTAT would lie directly to the Supreme Court where it involves the “the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.” In Ernst & Young this [2014 (2) TMI 1133 - DELHI HIGH COURT] Court held that any question having relation to a rate of duty would include a determination as levy of tax on a particular service. It was held that “The words 'rate of tax' in relation to rate of tax would include the question whether or not the activity is exigible to tax under a particular or specific provision.” Accordingly, it was held that an appeal under Section 35-G of the CE Act against the order of the CESTAT on the question of exigibility of a service to tax was not maintainable before this Court. - Decided aagainst Revenue.

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• 2015 (9) TMI 887
  Condonation of delay - Whether the Tribunal is right in rejecting the condonation of delay applications filed by the appellant for condoning the delay of 311 days in filing the appeals - Held that:- We are not happy with the reasoning given by the Tribunal for dismissing the applications filed by the appellant for condonation of delay of 311 days stating that the appellant having appeared in the personal hearing before the adjudicating authority, did not follow up the case. It is seen from the records that personal hearing in these matters took place on 13-10-2011 and the Order-in-Original is said to have been passed on 10-5-2012, namely, after a lapse of seven months. Before the Adjudicating Authority, there is methodology prescribed for prior intimation regarding the passing of the order or its despatch. Only when such order is received by the person concerned, he will be in the know of things. It is, therefore, necessary for a party to explain the delay from the date of actual service either on the person concerned or his authorized representative and such delay has to be properly explained when an appeal is filed after the statutory period prescribed. There is no necessity to go into the issue as to whether the party should pursue the matter before the adjudicating authority as to when he is going to pass the order. In our considered opinion, all that the Tribunal needs to decide is whether the delay of 311 days from the date of service of the order on the alleged authorized representative has been properly explained - Matter remanded back - Decided in favour of assessee.

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• 2015 (9) TMI 886
  Manpower Recruitment & Supply Agency - Exemption under notification No. 45/2010 dated 20/07/2010 - Cleaning agency - Held that:- The services rendered by appellant to Maharashtra State Electricity Distribution Company is exempted retrospectively by notification No. 45/2010 dt. 20/07/2010. It is undisputed that services of "Manpower Recruitment & Supply Agency" are rendered to MSEDL, by the appellant. In view of retrospective amendment as also relying on ratio of the decision of Tribunal in the case of Sri Ganesh Enterprises (2014 (2) TMI 436 - CESTAT BANGALORE) we set aside that portion of the impugned order and allow the appeal. As regards the services of "Cleaning Agency" we find that issue needs reconsideration as the entire findings are only in respect of Manpower Recruitment & Supply Service. Holding that appeal to this portion of the impugned order needs re-consideration by the adjudicating authority, who will reconsider the issue and quantify the Service Tax Liability on this point, and as also the question of penalty. Adjudicating authority should follow principles of natural justice while coming to a conclusion. - Decided in favour of assessee.

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• 2015 (9) TMI 885
  Business Auxiliary service - services provided by the automobile dealers for facilitating the customers for taking banking loans from the Banks/Non-banking Financial Institution - Held that:- It is observed from CBEC Circular No. 87/05/2006-S.T., dated 06-11-2006 that the issue of livability of services provided by automobile dealers to the Banking/Non-banking Finance Institutions and quantum of consideration of the services provided was disputable and there was confusion about taxability of the service and its valuation. Once, there was a dispute in the taxability and valuation of the services, then, it cannot be held that there was any malafied intention on the part of the appellant to evade payment of tax. Accordingly, extended period of limitation cannot be applied in the present proceedings and no penalties under Sections 76, 77 and 78 of the Finance Act 1994 are imposable and are accordingly set aside. However the demand within the period limitations is required to be confirmed against the appellant along with interest. The benefit of cum-duty price is also required to be extended period to the appellant, in view of the order passed by this Bench in the case of M/s. Viraj Travel Agency Vs. CST, Ahmedabad [2013 (2) TMI 509 - CESTAT Ahmedabad]. For quantification of the demand, the matter is remanded back to the Adjudicating Authority after allowing the benefit of cum-duty. - Decided in favour of assessee.

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• 2015 (9) TMI 884
  Penalty u/s 76 & 78 - Entire amount due paid before issuance of SCN - Held that:- except for the first periodical return the appellant was showing the correct service tax liability in the returns and that amount available in the cenvat credit account was debited by the appellant after the end of each month. Once the correct duty amount is shown in the returns there cannot be any intention of evade payment of service tax which is also paid by the appellant before the issue of show cause notice alongwith interest. In view of the above, there was reasonable cause for the appellant for not paying the entire service tax which was truly reflected in the periodical returns filed by the appellant - case was also covered by Section 73(3) of the Finance Act 1994 and there was no need to issue show cause notice in this case. Appellant is also eligible for the benefit of Section 80 of the Finance Act 1994. - Decided in favour of assessee.

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• 2015 (9) TMI 883
  Commercial Coaching or Training - Held that:- Demand of service tax was raised under the category of “Commercial Coaching or Training” service for the period 1.4.2003 - 31.3.2006. The show cause notice was issued on 19.9.2006 and the appellant had not seriously challenged the issue of limitation and exemption notification before the Adjudicating Authority, which can be raised before the Appellate Authority. In our considered view, as the issues were not raised before the Adjudicating Authority, the appellant should be given an opportunity to raise the issue before the Adjudicating authority in the interest of justice. - Matter remanded back - Decided in favour of assessee.

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• 2015 (9) TMI 882
  CENVAT Credit - Banking and Financial Services and Business Auxiliary Services - Held that:- Whole proceedings are vitiated for want of proper show-cause notice. I find that the show-cause notice is vague as it does not give the break up of the amount under each head of input service proposed to be disallowed. Further, although the show-cause notice refers to the audit report and the assessee's reply to it, nowhere in the show-cause notice, neither the allegation of the audit has been discussed nor the reply of the appellant thereto and as to why the amount under the particular head is proposed to be disallowed. Also, no reason as to why the said services, are not input service, flows from the show-cause notice. Hence, I hold that the show-cause notices are vague, thereby vitiating the impugned order. Thus the impugned order is set aside. - Decided in favour of assessee.

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• Central Excise

• 2015 (9) TMI 881
  Reversal of Credit under Rule 6 - credit taken on denatured spirit - CENVAT Credit which was already accumulated in favour of the assessee at the time when the Rules,2002 were brought into force. - Utilization of the major portion of the credit was denied to the assessee by the Adjudicating Authority invoking the provisions of Rule 6 of the Rules,2002 - Held that:- CENVAT Credit which was already earned by the assessee, could not have been taken away if the rigors of Rule 6 would be having only prospective effect. - no doubt that the view of the Tribunal is perfectly justified and does not call for any interference - Decided against Revenue.

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• 2015 (9) TMI 880
  Classification of the product manufactured - Calcined China Clay - Classification under Chapter sub-heading 3824.90 or under Chapter Heading 25.05 - Held that:- After mentioning the products, there is again an exclusion clause which excludes the products that have been roasted, calcined or obtained by mixing. Calcination was excluded there as well. However, when this Head Note is contrasted with Head Note 2 which was introduced in the year 1990, we find significant addition of words in the beginning of the said Note which are "except where the context otherwise requires". Therefore, the exclusion of calcination would not apply in respect of those products where the context otherwise includes calcination. Chapter Heading 25.05 which has already been reproduced above mentions under Entry 2505.10 "Kaolin and other kaolinic clays, whether or not calcined". It is not in dispute that the china clay otherwise is known as Kaolin as well and the process of Kaolin is same as that of china clay. Here the Kaolin is included under Entry 2505.10, i.e., under Chapter Heading 25.05, even when it is calcined. Therefore, it follows from the above that the context here requires such a product to remain included under Chapter 25.05 even when it is calcined. - merely because the product of assessee, i.e., China Clay is calcined, it would not put it out of Chapter Heading 25.05. - order of the CESTAT without any blemish and are of the opinion that there is no merit in the instant appeal - Decided against Revenue.

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• 2015 (9) TMI 879
  Exemption from levy of excise duty - additional excise duty - tea purchased from small growers whose holding is less than 10-hectre - notification(no: 13/2003) dated 1st March, 2003 - Held that:- Order is an appealable order. It is further stated that the order of the DC cannot be relied on in this Court as the order had no persuasive value in law. It is stated that the order of the AC is sound and proper - order of the AC 'for insisting land documents of the small grower' is sound and proper. When the basic proof of status of the small grower is not produced the petitioner would not be entitled to any exemption. However in the interests of justice we remand the matter to the AC for a fresh consideration by providing an opportunity to the petitioner to produce the land documents of the seller to substantiate that the seller is a small grower with a land holding less than 10-hectre. - Petition disposed of.

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• 2015 (9) TMI 878
  Challenge to the show cause notice - petitioner have shown the less production in ER-7 returns when the capacity of the kiln is to produce 72,000 metric tonnes - Held that:- From the perusal of the show cause notice, it appears that the authority have prima facie opined that the petitioner have shown the less production in ER-7 returns when the capacity of the kiln is to produce 72,000 metric tonnes. On the basis of such prima facie finding, a show cause notice is issued upon the petitioner as to why the Central Excise Duty amounting to Rs. Twenty five crores and odd have not recovered together with the penalty and the interest. - Since the authority have not decided the issue finally as the petitioner was invited to give defence to the allegations made in the show cause notice, this Court does not feel that any case within the parameters, as set forth in the noted report, has been made out. - Since the time to file reply to a show cause notice, has expired, as the petitioner decided to challenge the said show cause notice before this Court, this Court feels that the petitioner should be given another opportunity to file reply thereto. - Petition disposed of.

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• 2015 (9) TMI 877
  Refund of the differential amount - Trade discount - provisional assessment - Held that:- Order of provisional assessment was made on 13-2-1995 and Excise duty so determined was paid. At the stage of passing of final order of assessment, the appellant placed before the Deputy Commissioner, the particulars of the discounts given by it in the relevant forms. The Deputy Commissioner was satisfied about the permissibility of such discounts, having regard to the purport of the law, as it stood then. The order holding that the discounts are in accordance with law has become final. It is only at the stage of refund of the differential amount, that certain controversy has arisen. - The manufacturer was found to have collected the amount, representing the excise duty and when the question of refund on the basis of an order passed in the appeal arose, the plea as to unjust enrichment was taken into account. Once the manufacturer has collected the component of excise duty, refund on account of the adjudication at a subsequent stage was found to be linked with the feasibility of passing on the benefit to the end customer. Such a situation does not obtain in the instant case. The trade discount was given to a wholesaler and not in the course of any retail sale. Further, it was paid at the prescribed point of sale, namely, at the stage of removal of goods from the place of manufacture as well as the depot, in favour of the wholesaler. The order passed by the Deputy Commissioner on 30-12-2002 in this behalf, became final. The hurdle in the context of refund, namely, identification of the end customer from whom the component of excise duty does not arise in this case. The particulars furnished under Rules 173C and 173G contained the names of the persons who were extended the trade discounts. Since it was in the form of a credit note, it becomes clear that the corresponding burden did not pass on to the end customer. - Decided in favour of assessee.

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• 2015 (9) TMI 876
  Remission of duty - Place of removal - Held that:- The Appellant’s appeal regarding remission of duty on certain goods destroyed during the period from the place of removal to the place of export. Larger Bench in the case of the Appellant decided the issue in favour of the Appellant and accordingly Appeal No.E/371/2009 of the Appellant was allowed. Once remission of duty for the same goods is allowed, the case of confirming the demand on the same goods is not justified. - Decided in favour of assessee.

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• 2015 (9) TMI 875
  Denial of SSI Exemption - Exemption not taken for some unit, therefore exemption denied for other units as well - Held that:- Demand was confirmed only on the ground that they have been paying duty in two of their units at Jaipur and Vasai and accordingly they cannot avail SSI exemption for their Rohad unit. It appears that the Department proceeded on the basis of the condition that clearance of all the factories of the same manufacturer should be considered for exemption and as such option of duty payment also should be for all factories of the manufacturer. We find that if the SSI exemption is to be denied to the assessee then the combined turnover of all the units of the manufacturer are to be taken and based on the aggregate value of the clearance. The proceedings are not on these lines. In fact for the year 2003-2004, the value of clearance of Jaipur unit is stated to be ₹ 6,82,584/- and for Vasai unit ₹ 20,23,374/- the value of clearance of Rohad unit for the period December 2003 to January 2004 is shown as ₹ 22,16,180/-. We find that if a combined reading of all the conditions of para 2 of the Notification No. 8/2003-CE is to be taken then aggregate value of all excisable goods cleared from one or more factories by the same manufacturer is to be considered. - option of payment of duty is to be exercised for all factories of the same manufacturer. - Decided in favour of assessee.

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• 2015 (9) TMI 874
  Levy of penalty - Benefit of area based exemption under Notification No. 56/2002-CE dated 14.11.2002 - payment of Education Cess or Secondary & Higher Education Cess - Held that:- Issue of interpretation of the Notification is pending before the Supreme Court. On such circumstances the assessee cannot be found fault with if he has taken refund/credit of the Education Cess & S.H.E. Cess. The commissioner (Appeals) has set aside the penalty for the reason that there are conflicting judicial decisions on the issue and therefore no malafide, or intention to evade duty can be attributed. - No penalty - Decided against Revenue.

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• 2015 (9) TMI 873
  Capital goods - final product has become not liable to duty after availing the credit - Held that:- At the time of procurement of capital goods, the appellant was clearing their final product on payment of duty on the understanding that their final product is dutiable and activity undertaken by the appellant amounts to manufacture. Same understanding was of the department. The only problem arose after the decision of the Hon’ble Apex Court in the case of Aman Marble Industries (2003 (9) TMI 81 - SUPREME COURT OF INDIA) when Revenue has accepted the duty demand on the final product, the duty paid on final product shall amount to reversal of CENVAT Credit on capital goods. Moreover, when the final product has become not liable to duty in this circumstances whatever CENVAT Credit remain in their CENVAT Credit account shall not be any use of the appellant. Therefore, we hold that at the time of procurement of capital goods, the appellant has taken CENVAT Credit correctly. In these circumstances, impugned order is set aside - Decided in favour of assessee.

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• Indian Laws

• 2015 (9) TMI 866
  Appointment of the arbitrator - substitute arbitrator after termination of earlier arbitrator - Held that:- Clause 22.3 of the Supply Contract contemplates appointment of a sole arbitrator by the parties by mutual consent. In a situation where the original arbitrator i.e. Shri Justice S.K. Dubey had recused himself the substitute or new arbitrator is required to be appointed according to the rules that were applicable to the appointment of the original arbitrator. This is the mandate of Section 15(2) of the Act. It was, therefore, incumbent on the petitioner to give notice and explore the possibility of naming an arbitrator by mutual consent and only on failure thereof the present application under Section 11(6) of the Act could/should have been filed. The above recourse is required to be followed by virtue of the provisions of Section 15(2) of the Act and the decision of this Court in Yashwith Constructions (P) Ltd. [2006 (7) TMI 579 - SUPREME COURT]. Admittedly, the same had not been followed. In these circumstances, the Court will understand the present application/arbitration petition to be premature. It is accordingly not entertained leaving it open for the petitioner to act appropriately, if so advised, in terms of the present order and thereafter seek its remedies as provided by law.

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