TMI Tax Updates - e-Newsletter
September 22, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Withdrawal of exemption granted u/s 10(23C)(iv) - DGIT(E) erroneously drew a distinction between corpus and non-corpus donations made by it to HNF - Hamdard’s is not carrying on a business of the nature envisaged in condition (c) of the order of exemption/seventh proviso to Section 10(23C) - Hamdard’s dominant purpose is charitable in nature, and it is not guided by the motive of profit-making - Exemption cannot be denied - HC
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Income Tax:
Addition to the closing stock - consequent to search action, the assessee wanted to change the method of stock valuation for the first time, which is nothing but an after-thought so as to reduce the income which cannot be permitted at this point of time - AT
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Income Tax:
Addition on account of excess salary paid by the employer in the earlier years but recovered during the present year - The fact that the assessee, on her own, refunded the amount of excess salary received due to wrong pay fixation, was a gracious gesture, which is hallmark of academic fraternity anyway, on her part - No addition - AT
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Income Tax:
Interest u/s 234C - Date of presentation of cheque - Cheques issued have not been dishonored - nterest u/s 234C of the Act should be computed from the date of presentation of the cheque of tax payment. - AT
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Income Tax:
Charitable activity - The planned development of cities and towns is an object of general public utility, and that is an object consistently followed by the assessee in all its activities - , the benefit of Section 11 read with Section 2 (15) cannot be declined - AT
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Income Tax:
Reopening of assessment - Nomenclature of a transaction is immaterial while deciding the true nature of the transaction. Thus no hesitation to hold that the expenditure incurred by the assessee company in acquiring exclusive vendor status in terms of the agreement entered into by it is nothing but capital expenditure - AT
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Income Tax:
Addition for 'income from house property' - there is no evidence which can substantiate that the assessee actually earned rental income from the said property during the previous year - addition made by the AO on the basis of surmises and conjectures cannot be held as sustainable - AT
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Income Tax:
Invoking Section 41(1) - entries in the books of account of the assessee would amount to an acknowledgment of the liability within the meaning of section 18 of the Limitation Act, 1963, and extend the period of limitation for the discharge of the liability as debt - not a case of cessation of liability - AT
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Income Tax:
Expenditure incurred on improvement/additions to leasehold property - The expenditure incurred by the assessee on construction of storage structure etc. has to be allowed as revenue expenditure - AT
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Customs:
Import of Comoros Cloves - origin was not certified by the exporter from the exporting country - the benefit of exemption cannot be denied only for the procedural discrepancies - AT
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Service Tax:
Appellant is entitled to take Cenvat credit on outward transportation service as the transportation charges have formed part of the assessable value and goods are to be delivered at the place of the buyers. - AT
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Service Tax:
Steamer agent services - port service - unless the appellant was actually rendering steamer agent service, there was no question of levying Service Tax under this heading. - AT
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Service Tax:
Denial of refund claim - Notification No.41/07-ST - services used for export purposes - Refund was denied to the Appellant mainly on various procedural grounds - refund allowed - AT
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Service Tax:
Pre-deposit of the penalty amount would be required only when the order of the penalty alone is under challenge. But when there is composite order namely assessment order of the tax component along with interest and also penalty as in the present case, direction for pre-deposit of any portion of the penalty amount would result in injustice as well as hardship. - HC
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Central Excise:
100% EOU - Clandestine removal of goods - DTA clearances -Once there is an absolute prohibition against the sale of goods manufactured by the appellant in the DTA, the question of making any classification or distinction of the goods or purchases in the DTA, does not arise - HC
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Central Excise:
Denial of refund claim - amount paid in excess of duty at the above effective rate - Refund allowed by way of reversal in CENVAT Credit account - Government cannot retain the amount paid without any authority of law. - HC
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Central Excise:
Classification of goods - ceramic tile - smaller pieces ( cubes of various sizes and shapes) manufactured and affixed to a sheet (craft paper) - No material found from Revenue to show as to whether the goods of respondent were technically tested by any recognized laboratory or national institute to hold that the goods were ceramic - No demand - AT
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Central Excise:
Duty evasion - Clandestine removal of goods - There is absolutely no justification for adopting power consumption norm of M/s.SSSRM to the unit of the respondent as while the rolling mills of M/s.SSSRM is automatic rolling mills, the respondent's rolling mill is manual - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (9) TMI 945
TDS liability - payments made by the assessee for the purpose of display of advertisement of the assessee’s clients - whether the ld. CIT(A) was correct in holding that the provisions of section 194C would apply and not the provisions of section 194J? - CIT(A) deleted the interest levied u/s.201(1A) - Held that:- Considering all the facts in totality, we find that the assessee has entered into a contract with other parties for display of advertisement of its client and the transaction is purely in the nature of contract for the work of advertising as defined in clause VA of Explanation to section 194C of the Act. We decline to interfere with the findings of the ld. CIT(A) and the appeals filed by the Revenue are accordingly dismissed. Whether the consultancy charges paid by the assessee are in the nature of salaries u/s.192 of the Act or in the nature of fees or professional service attracting the provisions of section 194J ? - Held that:- The appointment letter clearly shows that the persons have been appointed as a consultant. Though there is a restrictive clause that during the pendency of agreement with the assessee, the consultants will not take up any other assignment of temporary or permanent nature with any other person. However in our considered opinion, such restrictive covenants are provided in contract to safeguard the interest of the company and to make it sure that the consultants do not give services to the rivals in the same line of business. Merely because of this restrictive covenant, no employer-employee relationship could be established. Further, it is an undisputed fact that the consultants have charged service tax to the assessee and the service tax so collected have been paid to the government. By any stretch of imagination no employee would charge service tax to its employer. Therefore, we do not find any merit in the views taken by the Revenue authorities. The assessee has correctly deducted the tax. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O. to accept the assessee’s contention. - Decided in favour of assessee.
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2015 (9) TMI 916
Review petition - Held that:- In view of the orders passed by this Court in THE COMMISIONER OF INCOME TAX, NEW DELHI Versus PADMINI TECHNOLOGIES LTD. [2012 (1) TMI 185 - SUPREME COURT] we are informed by the learned Additional Solicitor General appearing for the petitioner-herein that the petitioner have already filed a review petition before the High Court. If that is so, it would be unnecessary to keep this matter pending in this Court. This special leave petition is, therefore, disposed of. We, however, request the High Court to consider the review petition, said to have been filed by the petitioner, on its merits and in accordance with law without reference to the period of limitation.
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2015 (9) TMI 915
Withdrawal of exemption granted under Section 10(23C)(iv) w.e.f. AY 2004-05 - status of Hamdard Laboratories questioned - whether the nature of objects/activities of HNF, as well as the third set of trusts (i.e. Jamia Hamdard University, HES, AIUTC, BEB) has a bearing on the classification of Hamdard’s objects? - Held that:- Hamdard had been carrying out its since charitable activities through HNF since the latter was set up, and HNF enjoyed the benefit of exemption under Section 11 of the Act since its inception on 12.05.1964. HNF’s charitable status was further approved by the CIT(A) in its order dated 31.01.2012. However, the DGIT(E) has drawn a distinction between corpus and non-corpus donations of Hamdard to HNF, the non-corpus fund – which is the source of HNF’s charity – comprises of a small proportion of Hamdard’s total donation to HNF. The DGIT(E) held that the predominant portion of donation is applied towards building HNF’s corpus as opposed to being applied for charitable purposes and the extent of actual charity carried out by HNF is not significant. However, in this Court’s opinion, Hamdard rightly contends that the DGIT(E) erroneously drew a distinction between corpus and non-corpus donations made by it to HNF. The resolutions of Hamdard placed on record clearly mandate that the interest income generated from corpus donations was to be utilized for charitable purposes. Revenue argument that Hamdard had been enjoying enormous profit margins year after year, generating considerable surplus and consequently, its activities cannot be considered as those of a charitable organisation runs afoul a plethora of Supreme Court decisions, the most recent being Queen’s Educational Society (2015 (3) TMI 619 - SUPREME COURT ), where, following the law laid down in Surat Art Silk [1979 (11) TMI 1 - SUPREME Court], Aditanar Educational Society [1997 (2) TMI 3 - SUPREME Court], and American Hotel and Lodging [2008 (5) TMI 17 - SUPREME COURT OF INDIA], the Court held that merely because an educational institution is generating surplus does not imply that it ceases to enjoy the benefit of exemption under Section 10(23C)(iii-ad) of the Act. This Court finds that the DGIT(E) misconstrued the nature of Hamdard’s activities, inasmuch as it held them to be in the nature of business. This Court has already held above that Hamdard’s objects are charitable in nature, and its activities relating to manufacture and sale of unani medicines and other allied businesses are only meant to act as a source of funds for its charitable activities. It is undisputedly a case of a business held in trust, and Hamdard has been consistently applying the proceeds of its activities for charitable purposes. Whether Hamdard accumulated and applied its income towards its objects? - Held that:- Hamdard continues to apply its income from its ‘business’ activities for charitable purposes in accordance with its Trust Deed. It is baffling that the DGIT(E), on one hand, justified the ruling in Hakim Abdul Hamid (supra) on the ground that the reserve fund was to be utilized for Hamdard’s business whereas on the other hand, withdrew the exemption under Section 10(23C)(iv) of the Act for the reason that Hamdard was applying and accumulating its income for business purposes. The DGIT(E) fell into error in reasoning that in light of the deletion of clauses in the Trust Deed – which obligated Hamdard to utilize the Reserve Fund for business purposes – this Court’s decision in Hakim Abdul Hamid (1972 (2) TMI 14 - DELHI High Court) does not hold any relevance. This Court also notes that the Revenue granted exemption to Hamdard under Section 10(23C)(iv) of the Act vide its order dated 28.12.2007, with complete knowledge of Hamdard’s activities. It is obvious that Hamdard would be required to invest funds in such activities in order to sustain its charitable purpose. In such circumstances, it is incomphrenesible that the DGIT(E) would construe Hamdard’s application or accumulation of funds towards its activities, which constitute a part of its objects, as a violation of any of the statutory conditions imposed under Section 10 or Section 11 or those imposed by the order dated 28.12.2007. Hamdard has rightly placed reliance on this Court’s decision in DIT v. Eternal Science of Man’s Society, (2006 (3) TMI 114 - DELHI High Court) where the Court allowed acquisition of moveable and immoveable property if it achieved the objects of a charitable trust. Therefore, this Court holds that Hamdard did not fail to apply or accumulate its income/surplus towards its objects. Whether Hamdard accumulated its income in excess of five years? - Held that:- DGIT(E) has misintepreted the provision concerning accumulation of income, third proviso to Section 10(23C) (a), which forms condition (a) in the order granting exemption under Section 10(23C)(iv) dated 28.12.2007. That provision mandates that income accumulated in excess of 15% of the total income should be utilized within five years of the period of accumulation. It does not bar all forms of accumulation. The DGIT(E) has nowhere concluded that Hamdard accumulated in excess of 15% of the income, much less concluding that any amount in excess of 15% accumulated by Hamdard was not utilised within a period of five years of its accumulation. Further, Revenue’s contention that Hamdard had admitted a certain amount to be deemed income within the meaning of Section 11(3) of the Act does not conclusively determine the issue. It is settled that estoppel does not apply under the Act and the assessee can resile from an incorrect position it had adopted earlier (see CIT v. Bharat General Reinsurance, [1970 (12) TMI 5 - DELHI High Court ]). Did Hamdard invest its funds in violation of condition (b) stipulated in the order dated 21.08.2013? - Held that:- A perusal of the order dated 22.02.2012 indicates that the Revenue had alleged violation of third proviso to Section 10(23C) of the Act. However, there was no finding on the same. Further, the written submissions filed by Hamdard, including the submissions dated 21.05.2013 relied upon by the Revenue, also do not deal with such allegation. Given these facts, this Court does not have any basis to accept the Revenue’s contention that this issue was the subject matter of hearing before the DGIT(E). Therefore, the Revenue’s submission that Hamdard was aware of allegations of violation of this condition does not have any merit. In such circumstances, Revenue cannot rely upon this purported non-compliance for withdrawal of exemption under Section 10(23C)(iv). Did Hamdard violate condition (c) of the order of exemption - Held that:- Hamdard’s failure to maintain separate books of accounts is not fatal to its case, since such an obligation would have existed only in the event of applicability of condition (c). This Court’s ruling in PHD Chamber of Commerce & Industry (2012 (11) TMI 429 - DELHI HIGH COURT ) also supports this conclusion. In that case, the Court held that the services performed by a trade, professional or similar association, such as a chamber of commerce and industry, could not be held to be in pursuit of a business or trade with a profit motive and would not qualify as a business activity. Thus, Section 11(4A) of the Act would be inapplicable to such associations and they are not required to maintain separate books of accounts to avail exemption from tax. This Court, upon an examination of Hamdard’s objects, has already concluded that it is not carrying on a business of the nature envisaged in condition (c) of the order of exemption/seventh proviso to Section 10(23C). Consequently, it is not required to maintain separate books of accounts. Did Hamdard cease to be a charitable institution with effect from 01.04.2009? - Held that:- arguendo if Hamdard’s objects were to be construed to be falling within the residual category of ‘charitable purpose’ with the result of attracting the applicability of the first proviso, it would not cease to be a charitable organisation with effect from 01.04.2009. The interpretation of first proviso put forward by the DGIT(E) would exclude all entities advancing an object of general public utility from the definition of ‘charitable purpose’ if such entities carry on any activity of trade, commerce or business, irrespective of the nature of application of surplus generated from such activity. This unduly broad interpretation has been rejected by this Court in Institute of Chartered Accountants of India (2013 (7) TMI 205 - DELHI HIGH COURT ), where the Court held that while determining whether an assessee is carrying on business, the dominant purpose test laid down in Surat Art Silk [1979 (11) TMI 1 - SUPREME Court], albeit in a different context, would continue to apply. This Court has already held above that Hamdard’s dominant purpose is charitable in nature, and it is not guided by the motive of profit-making. Therefore, the first proviso to Section 2(15) does not alter the charitable status of the organisation - Decided in favour of assessee. Reopening of assessment - Held that:- In the order dated 25.05.2012, besides a general reference to Hamdard’s alleged failure to disclose all material facts, there is no reference to the particular facts which have not been disclosed. In such circumstances, this Court holds that the pre-condition for reopening of assessment after the expiry of four years has not been met in this case. Also the reasons for reopening of assessment stated in the orders dated 16.04.2012 and 25.05.2012 are identical to those contained in the order dated 28.07.2013. Therefore, in light of this Court’s order the basis for re-opening of assessment proceedings for AY 2005-06 does not survive. Consequently, the notice of reopening dated 27.03.2012 and orders dated 16.04.2012 and 25.05.2012 passed by the ADIT(E) are hereby quashed.- Decided in favour of assessee. The orders dated 10.07.2013 passed by the CIT(A) for AYs 2006-07 to 2009-10 denying exemption to Hamdard under Section 11 of the Act are quashed - Decided in favour of assessee.
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2015 (9) TMI 914
Stay orders - Pre-Assessment Order of Attachment - Held that:- Writ appeal is allowed modifying the order of the learned Judge to the effect that the respondent will have a limited protection against coercive action, only till the disposal of the stay petition by the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal shall dispose of the stay petition in the appeal filed by the respondent within two weeks
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2015 (9) TMI 913
Entitlement for deduction of provision made of Non Performing Assets considered irrecoverable - Held that:- Issue covered against the assessee by the judgment of the Supreme Court in SOUTHERN TECHNOLOGIES LIMITED v. JOINT COMMISSIONER OF INCOME TAX (2010 (1) TMI 5 - SUPREME COURT OF INDIA) as held keeping in mind an important role assigned to banks in our market economy, we are of the view that the restriction, if any placed on NBFC by not giving them the benefit of deduction, satisfies the principle of "reasonable justification" Applicability of Section 234D - Tribunal confirming the order of the CIT (A) after holding that Section 234D introduced with effect from 01.06.2003 by Finance Act, 2003 cannot apply to the assessment year under consideration - Held that:- Despite recording the fact that section, 234D introduced with effect from 1.6.2003 by Finance Act, 2003, cannot have retrospective effect, the Tribunal has confirmed the order of the Commissioner of Income Tax (Appeals) in this regard. But, unfortunately, the appellant herein did not take up the matter before the Tribunal as against the order of the Commissioner of Income Tax (Appeals). Therefore, we cannot allow the appellant to raise this question. There is also one more reason for us not to take up that issue. After all, the Tribunal has remitted the matter back. Therefore, if permissible in law, it is open to the appellant to take advantage of the finding of the Tribunal. Depreciation claim - whether benefit of higher rate of depreciation under the third proviso to section 34(1) is available even to motor cars, by virtue of explanation (a) under section 32(1)- assessee is a NBFC engaged in the purchase and leasing of commercial vehicles - ITAT remanded to reexamine the case - Held that:- As seen from para 21 of the decision ICDS LIMITED v. COMMISSIONER OF INCOME TAX (2013 (1) TMI 344 - SUPREME COURT) SC drew a distinction between a simple lease of vehicles and a hire purchase agreement entered into by such Finance Companies with prospective buyers. The nature of the agreement that the appellant generally enters into with its customers, is not borne out by records. Therefore, the remand order for examining this question, which is essentially, a question of fact, cannot be interfered with. If, after going through the agreements that the appellant has entered into with its customers, the assessing officer considers that the case of the appellant is similar to the decision of the Supreme Court in ICDS, he would certainly grant the benefit to the appellant. But, if it is not so, the appellant may not be entitled
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2015 (9) TMI 912
Additions made on account of bogus purchases - ITAT confirming the order passed by CIT(A) restricting the additions - Held that:- Perused the orders passed by the CIT (Appeals) as the the ITAT and the ratio laid down by the division bench of this Court in case of Vijay Proteins Ltd. V. Commissioner of Income-tax (2015 (1) TMI 828 - GUJARAT HIGH COURT) to held that the assessee would be liable to pay the income tax only to the ratio of 20% of the amount of purchase value and not on the entire so called bogus purchase and considering the above, we are of the opinion that the present appeal is meritless and accordingly is dismissed. - Decided against revenue.
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2015 (9) TMI 911
Additions made on account of bogus purchases - ITAT confirming the order passed by CIT(A) restricting the additions - Held that:- Perused the orders passed by the CIT (Appeals) as the the ITAT and the ratio laid down by the division bench of this Court in case of Vijay Proteins Ltd. V. Commissioner of Income-tax (2015 (1) TMI 828 - GUJARAT HIGH COURT) to held that the assessee would be liable to pay the income tax only to the ratio of 25% of the amount of purchase value and not on the entire so called bogus purchase and considering the above, we are of the opinion that the present appeal is meritless and accordingly is dismissed. - Decided against revenue.
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2015 (9) TMI 910
Sale of scrap - CIT(A) valuing the scrap at estimated market rate and confirming the addition of notional imaginary income - Held that:- With regard to valuation made by the chartered engineer,we are of the opinion that the FAA had correctly held that the certificate of the engineer was of no help as it was prepared after a long time of generation of scrap - FAA had correctly held that the certificate of the engineer was of no help as it was prepared after a long time of generation of scrap.We find that the FAA has considered all the relevant factors before deciding the issue and has rightly held that the sale of scrap shown by the assessee was on the lower side.Comparative analysis of the income generated and scrap sold and the figures of scrap lost/abandoned also prove that the stand of the FAA with regard to lesser generation of scrap during the year under appeal was justified.However,we are inclined to accept the alternate argument of the assessee. After considering the peculiar facts and circumstances of the case,we are of the opinion that to meet the end of justice the estimated addition should be restricted to ₹ 50,00,000/in place of ₹ 83,15,244/. - Decided partly in favour of assessee.
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2015 (9) TMI 909
Entitlement for exemption u/s 11 - whether the terms and clauses of the trust deed which were the basis of grant of registration u/s 12A of the Act have been altered after grant of such registration, the very foundation of registration having been removed by voluntary act of the assessee? - Held that:- Non-intimation of the amendments in the Trust Deed to the Department cannot ipso-facto lead to cancellation of registration because the statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribe that the cancellation of registration cannot be effectuated unless a case is made out that the new objects do not fit-in with the existing objects (i.e. new objects are ‘non-charitable’ in nature) or that the activities are in-genuine There is no change in the tone and tenor of the objects pursued by the assessee in a real sense. In fact, analysis of the changes in the Trust deed, do not reflect that the objects of the assessee Trust has undergone changes but the amendments are merely enabling clauses which provide only ‘means’ or ‘power’ to achieve objects in the Trust Deed. In our considered opinion, having regard to the aforesaid fact situation, it would be inappropriate to construe the amendments of 1957 and 1979 as insertions of any new objects of the assessee Trust, rather the amendments only seek to provide enabling powers to the Trust to accomplish its original objects which are in the fields of educational purpose, medical purpose, relief of poverty and objects of general public utility not involving carrying on any activity for profit. In fact, Hon’ble Bombay High Court in the case of Deccan Gymkhana vs. CIT,(2002 (8) TMI 23 - BOMBAY High Court ) as well as Commissioner of Income-Tax, New Delhi Versus Federation of Indian Chambers of Commerce And Industry [1981 (4) TMI 9 - SUPREME Court] has laid down that a distinction has to be made between the ‘purpose’ of a Trust and the ‘powers’ conferred upon the Trustees as being incidental to accomplish the purpose of the Trust. In our considered opinion, the amendments in 1975 &1979, which have been noticed above only seek to enable the Trustees to carry out activities for accomplishing the purpose of the Trust which we have found earlier to be for a ‘charitable purpose’ as per original Trust deed. Therefore, factually speaking, even if one has to consider the amendments of 1975 & 1979 made in the Trust Deed, in our view it does not signify that the registration granted to the assessee on 27/11/1973 under section 12A of the Act is rendered nugatory. - Decided in favour of assessee.
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2015 (9) TMI 908
Revision u/s 263 - determination of the income of the assessee by the A.O. from Sai Royal Residency (“SRR”) Project - as per CIT(A) A.O. failed to take into consideration the value of un-sold plots as well as to make disallowance under section 40A(3) and also allowed deduction on account of land development expenditure without verifying any documentary evidence - Held that:- The profit as indicated in the said working amounting to ₹ 3,98,88,000 was adopted by the A.O. as net profit of the Sai Royal Residency project rejecting the stand of the assessee that further expenditure on account of litigation, bank interest etc., was incurred by it. In the working of partners account, the said profit was stated to be taken as per P & L account, but no such P & L account giving the details of working of the said profit was either found during the course of survey or was brought on record by the A.O. even during the course of assessment proceedings. There is thus nothing available on record to show that the estimation of income of the assessee from Sai Royal Residency project as finally done by the A.O. was without taking into consideration the value of the unsold plots. Moreover, the figure of profit appearing in the relevant working of partners accounts was a net profit for the year under consideration available for distribution to the partners as indicated in the relevant impounded documents and the same ought to have arrived at after taking into consideration all the relevant facts and figures including the value of un-sold plots. It therefore cannot be said that the income of the assessee from Sai Royal Residency project as finally estimated by the A.O. did not take into consideration the value of un-sold plots as alleged by the Ld. CIT. Expenditure on account of land development allegedly allowed by the A.O.- Held that:- As already observed that the income of the assessee from the Sai Royal Residency project was estimated by the A.O. on the basis of the working of partners capital account found recorded in the relevant impounded documents and the working made by the A.O. taking gross profit at ₹ 5,33,38,000 and presuming the balance amount of ₹ 1,34,50,000 being difference between the gross profit and net profit as expenditure incurred towards land development was just to support the said estimation. The said balance amount treated as land development expenditure thus was never claimed by the assessee and it therefore cannot be said that there was an error in the order of the A.O. in allowing the same. A.O. allowing the land development expenditure and land cost paid in cash without considering the applicability of the provisions of section 40A(3) - Held that:- As observed the income of the assessee from Sai Royal Residency project in the present case was determined by the A.O. on estimated basis, we are of the view that no separate disallowance under section 40A(3) was called for and there was no error in the order of the A.O. in not making such disallowance separately as alleged by the Ld. CIT. We therefore agree with the contention of the Ld. Counsel for the assessee that the manner and method in which the income of the assessee from Sai Royal Residency project was determined by the A.O. on estimated basis was not appreciated by the Ld. CIT in proper perspective while pointing out error nos. 1 to 3, which were actually not there. Taking the sale consideration of land at Aushapur at ₹ 1.25 crores instead of ₹ 3.75 crores for the purpose of computing the profit - Held that:- As it is observed that this issue was duly examined by the A.O. during the course of assessment proceedings and identified the probable events that took place in connection with the relevant transactions and found that the 5.00 acre of land at Aushapur was sold by the assessee to M/s. ETA Star Property Developers Ltd., for an apparent consideration of ₹ 1.25 crores and although the amount of ₹ 3.75 crores was paid by ETA Star Property Developers Ltd. to M/s. Poornodaya Industries Limited, what the assessee actually received was only ₹ 1.1 crore while the balance amount was lying in the three bank accounts of M/s. Poornodaya Industries and its associates which were under attachment of the Court. Accordingly, the sale consideration of the property was taken by the A.O. at ₹ 1.25 crores and after reducing the cost of acquisition of the land amounting to ₹ 45,37,500, the balance amount of ₹ 79,62,500 was brought to tax by him in the hands of the assessee. The sale consideration of ₹ 1.25 crores thus was adopted by the A.O. by applying his mind to all the relevant facts of the case including especially the fact that the consideration as stated in the relevant agreement was ₹ 1.25 crores out of which the assessee had actually received only ₹ 1.10 crores. As rightly contended by the Ld. Counsel for the assessee, a possible view in the matter thus was taken by the A.O. after taking into consideration all the relevant facts of the case while adopting the sale consideration of ₹ 1.25 crores and it is not permissible to the Ld. CIT to substitute his own view in place of the possible view taken by the A.O. under section 263. - Revision orders set aside - Decided in favour of assessee.
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2015 (9) TMI 907
Addition to the closing stock adopting cost of goods at the year end instead of adopting cost or realizable value followed by the assessee - Held that:- The assessee has valued the unsold stock by discounting purchase price at fixed percentage considering the age of the stock. However, this method of reduction is not following year by year. As seen from the above table, in the assessment year 2009-10, the assessee adopted the reduction of value of purchase price at 25%, when the stock is one year old. However, for the assessment year 2008-09, it was 50%, for the assessment year 2007-08 again 25% and for the assessment year 2006-07, the same was 50%. There is no explanation for such kind of arbitrary reduction of either 25% or 50%. There is no consistency in the method followed by the assessee for valuing the closing stock. The closing stock is to be valued at market price or cost whichever is less and that should be consistent from year to year. The assessee is not disputed that it has been followed the same method. However, consequent to search action, the assessee wanted to change the method of stock valuation for the first time, which is nothing but an after-thought so as to reduce the income which cannot be permitted at this point of time. - Decided against assessee. Disallowance of lease commitment charges - Held that:- tThough the assessee pleaded that the expenses were incurred for the purpose of business, absolutely nothing on record to indicate that the assessee did acquire any business advantage out of such expenditure. We do not find any expenses allowable under sec.37(1) of the Act and the assessee failed to explain that how it gained some business advantage by incurring that expenditure. Therefore, we are not inclined to uphold the argument of the ld. AR and we agree with the finding of the CIT(Appeals).- Decided against assessee. Regarding donations the assessee along with other partners paid ₹ 30 lakhs to two temples, viz., Mutharaman Temple, Palai and U & U Kattalai, Palai. The share of the assessee’s donation out of these, is ₹ 40,024/- and it cannot be allowed, as the same is added and the CIT(Appeals) has confirmed the same. Since, the assessee has not paid lease commitment charges, we reject this ground.- Decided against assessee. Addition towards stock discrepancy - Held that:- The physical stock of goods lying in Vannarapettai shop and also town shop was taken with the active participation of their staff under their own supervision and valuation thereof has also been checked, the same is found to be correct. Hence, subject to any duplicate entries or change in the dates as stated above, he accepted the value of excess stock found during the course of search to be out of their unrecorded income and agreed to pay the income-tax due on such income for the year. During the course of investigation vide letter dated 10.8.2009 submitted to the ADIT (Investigation) by Sri Shiva Kumar, no specific arguments relating to the figures of stock were raised except pointing out that the physical stock at Tirunelveli was mentioned in the tabulation reflecting the physical stock for the group as a whole. The said mistake was rectified by the AO while passing the order. The AO after considering the entire facts of the case, added ₹ 9,43,980/- as discrepancy found in the stock for this assessment year at Chennai Branch and determined at ₹ 1,11,827/- at Tirunelveli Branch and the same was brought to tax as unrecorded sales. No infirmity in the orders of the lower authorities - Decided against assessee. Allowing the claim of repairs on hired building - revenue expenditure or capital expenditure - Held that:- n order to find out the nature of expenditure, it is necessary to find out the nature of construction put up, the purpose of construction/renovation and the use to which the construction put up and also if it is a case of repair, replacement, addition or improvement has to be gone into. It is only on the aforesaid material, keeping in mind the principles enunciated in the judgments by the Supreme Court and keeping in mind section 37 and section 32 of the Act, that one has to determine whether the expenditure is revenue expenditure or capital expenditure. What would apply to civil work equally applies to electrical work or interior decoration. The assessee had not stated the nature of civil works constructed, the nature of interior decoration made to the leasehold premises and also the nature of electrical work undertaken. In the absence of that material and without proper application of mind, the assessing authority proceeded on the footing that the expenditure constituted capital expenditure. We remit the issue in dispute to AO to consider whether the expenditure is revenue or capital in nature and decide afresh - Decided in favour of assessee for statsitical purposes. Addition on account of expenditure by way of sundry supply to staff found to have been vouched by self-made vouchers - assessment u/s 153A - Held that:- While making the above additions, the AO has not established that there is incriminating material discovered during the course of search. Being so, in our opinion, when the original assessment has been completed u/s.143(3), the addition can be made on the basis of incriminating material found during the course of search. Admittedly, in this case, there is no mention of any incriminating material discovered during the course of search warranting addition, placing reliance on the order of the Special Bench in the case of Cargo Global Logistics Ltd. vs. DCIT (2012 (7) TMI 222 - ITAT MUMBAI(SB)), we are inclined to uphold the argument of the ld. AR. - Decided in favour of assessee. Unexplained expenditure u/s.69C - Held that:- This is a search assessment. The AO made an estimation of drawings. Without any incriminating material found during the search, the AO cannot make addition on account of poor cash drawings of the assessee. In such circumstances, it is not possible to sustain the addition made by the AO and confirmed by the CIT(Appeals). - Decided in favour of assessee.
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2015 (9) TMI 906
Revision u/s 263 - A.O. has not examined whether the depreciation is admissible under section 32(iia) as additional depreciation can be claimed only on assets installed during the relevant previous year - Held that:- If the assessee has not used the new assets for more than 180 days, the assessee is only eligible to claim additional depreciation at 50%. The statute provides 50% for the year under consideration in which it is put to use. The statute does not provide anything to claim additional depreciation in the subsequent year. Therefore, the Assessing Officer, without applying his mind, simply accepted the explanation given in the Note by the assessee and allowed the claim of the assessee. Therefore, the order passed by the Assessing Officer is erroneous and prejudicial to the interests of Revenue. In our opinion, the ld. CIT has rightly invoked section 263 of the Act. Therefore, we confirm the order of the ld. CIT on this issue. - Decided against assessee. Set off of brought forward capital loss and benefit under section 112 - A.O. has not examined whether the units sold by the assessee would fall within the definition given in Explanation to section 115AB and whether the proviso to section 112 would apply to the assessee as the said proviso would appear to apply only to those shares, bonds or units which are eligible for indexation benefit under second proviso to section 48 read with third proviso thereof - Held that:- In the assessment order, the Assessing Officer has not examined the issue at all and simply allowed the claim of the assessee. The order passed by the ld. CIT is valid in view of the inadequate enquiry by the Assessing Officer since the Assessing Officer has not examined the applicability of proviso to section 112 of the Act and also not examined whether the Sundaram Bond Saver is a unit as per section 10(23D) of the Act. Therefore, we are of the opinion that the Assessing Officer has failed to discharge his duty to examine the issue. Accordingly, the ld. CIT has rightly invoked section 263 of the Act on this issue.- Decided against assessee. Non consideration of disallowance of expenditure relating to exempt income as provided in section 14A - Held that:- The Assessing Officer has not examined the issue at all and simply allowed the claim of the assessee. Therefore, we are of the opinion that the ld. CIT has rightly invoked section 14A of the Act - Decided against assessee. Eligibility for set off of brought forward capital loss nor benefit under section 112 - Held that:- Carried forward capital loss relates to long term capital loss, which cannot be set off against the short term capital gain in the financial year. In view of the above, we direct the Assessing Officer to examine the details of set off of brought forward capital loss keeping in view of the provisions of section 74(1)(b) of the Act and decide the issue de novo. In so far as benefit under section 112, we find that before the Assessing Officer, the assessee has not filed the above certificate and copies of registration with SEBI. Accordingly, it is fresh evidence, which was produced before the ld. CIT(A), which is the basis for his conclusion. In our opinion, it is appropriate to remit the issue to the file of the Assessing Officer for fresh consideration. Since the set off of brought forward capital loss and benefit under section 112 of the Act are interlinked, we set aside the order passed by the ld. CIT(A) on these issues and, in view of the above findings, the Assessing Officer is directed to decide the issues de novo in accordance law after giving opportunity to the assessee - Decided in favour of revenue for statistical purposes. Disallowance u/s 14A - CIT(A) restricted the disallowance to 2% - Held that:- We find that the assessment year under consideration is 2004-05 and therefore, the provisions of Rule 8D r.w.s. 14A has no application since the said provisions of Rule 8D has been notified with effect from 24.03.2008 and applicable with effect from the assessment year 2008-09. Therefore, the ld. CIT(A) has rightly followed the decision of the Tribunal and restricted the disallowance to 2% of the exempt income. In view of the above, we find no infirmity in the order passed by the ld. CIT(A) - Decided against revenue.
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2015 (9) TMI 905
Addition on account of excess salary paid by the employer in the earlier years but recovered during the present year - Held that:- The employer was well within his powers to make recovery for excess payments made earlier. The excess payment made to the assessee was already detected. The amount which constituted “salary due from an employer” was only the amount net of recovery, which the employer was legally empowered to make, in respect of excess payments made on account of wrong pay fixation. The fact that the assessee, on her own, refunded the amount of excess salary received due to wrong pay fixation, was a gracious gesture, which is hallmark of academic fraternity anyway, on her part. Nothing, however, really turned on that. Whether she was to return the money or not, what was due to her as salary was salary accrued that year as reduced by the recoveries sanctioned by the law laid down by Hon’ble Supreme Court in the case of Chandi Prasad Uniyal & Ors. vs. State of Uttarakhand [2012 (8) TMI 928 - SUPREME COURT]. Since she was gracious enough to refund the excess salaries received in earlier years, the periodic payments made to her remained the same as normally due. The effect, however, remains the same. The salary due to the assessee this year was only ₹ 2,43,689. However, since she had refunded ₹ 2,13,132 by cheque immediately upon coming to know about excess salary payments to her, she was paid the amount of ₹ 4,56,821/- which would have been due to her but for this recovery. Whether she refunds the excess salary received in earlier years and gets full salary for this year, or whether she gets net of recovery salary this year, the amount due to her from employer, which can only be net of recoveries held permissible by Hon’ble Supreme Court, remains the same. Viewed thus, the impugned addition is not sustainable in law. We, therefore, direct the Assessing Officer to delete the impugned addition
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2015 (9) TMI 904
Interest u/s 234C - Date of presentation of cheque - whether the interest charged u/s 234C is to be computed from the date of presentation/ tendering of cheque of tax payment into bank or from the date of clearance from the Bank Account of the assessee? - Held that:- Cheques issued have not been dishonored and so respectfully following the judgment of CIT Vs. REPCO Home Finance Ltd (2014 (11) TMI 487 - MADRAS HIGH COURT ) and DIT( Exemption) v. Raunaq Education Foundation [2013 (1) TMI 239 - SUPREME COURT ] , we hold that interest u/s 234C of the Act should be computed from the date of presentation of the cheque of tax payment. We direct the Assessing Officer to compute the interest u/s 234C of the Act, accordingly - Decided in favour of assessee.
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2015 (9) TMI 903
Addition u/s. 68 - CIT(A) deleted addition - Held that:- All the transactions have been carried out through account payee cheque and confirmations, share application forms, written acknowledgement of these parties have been filed. The AO rejected the said explanation merely on the ground that the summons issued by him was not responded to. Since the concerned parties were assessed to tax and their return acknowledgements were submitted, the facts could have been verified from their assessment records. The appellant has furnished sufficient documents to prove the identity of the parties and therefore in view of the decision of Supreme Court in the case of Lovely Exports [2008 (1) TMI 575 - SUPREME COURT OF INDIA] no additions in the company have been made as regards share application money. - Decided in favour of assessee. Reopening of assessment - Held that:- As find from the records that earlier scrutiny assessment u/s. 143(3) was completed vide order dated 28.2.2005 and (ii) four years have elapsed on date of instant reopening (23.3.2009) and (iii) in reasons recorded allegation was made for income escaping assessment of ₹ 24.50 lacs as mentioned of the impugned order also whereas income escaping assessment was found to be ₹ 16 lacs in the very same order. On these reasons merely based on investigation wing information without surveillance of substantiation and without any statement being mentioned therein and without nature of transaction being narrated therein and without tangible material, and further without application of mind on amount of income escaping assessment, shows that the reopening is bad in law and needs to be quashed. In the background of the aforesaid discussions, we are of the considered view that only effective ground in this appeal is reassessment proceedings u/s. 148 of the I.T. Act, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. See Signature Hotels P. Ltd. vs. Income Tax Officer [2011 (7) TMI 361 - Delhi High Court] - Decided in favour of assessee.
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2015 (9) TMI 902
Charitable activity to qualify for exemption under section 11 - CIT(A) upholding the addition made by the AO, by treating the surplus as profit at par with a normal builder - whether 'profit earning' was never the motive of the assessee trust? - retrospectivity of amendment - Held that:- On the admitted facts of this case, so far period prior to 1st April 2009 is concerned and for the reasons set out above, the benefit of Section 11 read with Section 2(15) could not have been declined at all. The law is well settled by a five judge bench of Hon'ble Supreme Court, in the case of Vatika Township Pvt Ltd. (2014 (9) TMI 576 - SUPREME COURT), that, following the maxim lex prospicit non respici, the law, particularly with respect to a requirement which is more onerous on the assessee, cannot be treated as retrospective in effect unless it is specifically legislated to be so. In our considered view, therefore, this amendment cannot be treated as clarificatory or retrospective in effect. In view of these discussions, even post insertion of proviso to Section 2(15) but before 1st April 2016, when business activities are carried by the assessee trust "in the course of actual carrying out of such advancement of any other object of general public utility", the benefit of Section 11 read with Section 2 (15) cannot be declined. Nothing, therefore, turns on the assessee carrying out, even if that be actually so, activities in the nature of trade, commerce or business etc as long as these activities are carried out in the course of actual carrying out of advancement of any other object of general public utility. The planned development of cities and towns is an object of general public utility, and that is an object consistently followed by the assessee in all its activities. For this short reason alone, the stand of the authorities below must be held to be unsustainable in law. A lot of emphasis has been made by the learned Departmental Representative on the fact that nothing, or very little, has been done by the trusts for the poor people but what this argument overlooks is that the assessee trust is not granted registration under section 2 (15) for implementing poverty alleviation programs or doing other acts of charity but it is granted registration because what it is pursuing, by following the State Government policies for planned development of city, is advancement of an object of general public utility. Pursuing an object of general public utility does not necessarily involve more noticeable direct acts of charity driven by compassion and benevolence. There is so much to be done by the Government agencies, as these assessee trusts are perceived to be, that no matter what these agencies do, there is still lot left to be done. Just because these agencies could have done more, such expectations, no matter how legitimate, do not obliterate the work done by these agencies and the role played by these agencies for public good in furtherance of advancement of objects of general public utility. The inclusion for provision for unforeseen charges, in our understanding, is a fair and conservative approach to ensure that the costs incurred by the assessee trust are recovered from the end buyers of the residential units or land. The element of charity is not in giving away the residential units at subsidized or low prices but in pursing the object of advancement of object of general public utility in planned development of the are in accordance with the policies of the State Government. For the reasons set out above, we are of the considered view that the authorities below were not justified in declining the benefit of section 11 read with section 2(15) to the assessee, and in holding that the assessee trust was not covered by advancement of any object of general public utility. We, therefore, direct the Assessing Officer to delete the disallowance of exemption - Decided in favour of assessee.
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2015 (9) TMI 901
Validity of assessment under Section 158BD - Determination of total undisclosed income - Held that:- The satisfaction note was recorded by the Assessing Officer of the appellant instead of Assessing Officer of searched person. Therefore, it has to be inferred that no satisfaction note was recorded, as per the law laid down by in the case of Manish Maheshwari Vs. CIT, [2007 (2) TMI 148 - SUPREME COURT OF INDIA]. Furthermore, the assessment in the case of searched person i.e. Mr. Manoj Kumar Aggarwal, completed on 29th August, 2002 and the notice under Section 158BD in this case was issued on 15th April, 2004 that is nearly after lapse of two years and two months. The Hon’ble Apex Court in the case of CIT Vs. Calcutta Knitwears, [2014 (4) TMI 33 - SUPREME COURT] held that the recording of satisfaction on the issue of notice under Section 158BD should be done (a) at the time or along with the initiation of proceedings against the searched person under Section 158BC of the Act, (b) along with the assessment proceeding under Section 158BC of the Act, and (c) immediately after assessment proceedings are completed under Section 158BC of the Act of the searched person. The period of limitation prescribed under Section 158BC cannot be extended by issuing the belated notice under Section 158BD. The Hon’ble Jurisdictional High Court in the case of CIT Vs. Bharat Bhushan, [2015 (1) TMI 705 - DELHI HIGH COURT] held that having regard to the intent of the Hon’ble Supreme Court in Calcutta Knitwears, [2014 (4) TMI 33 - SUPREME COURT], the completion of assessment under Section 158BD of the Act nearly after one year, cannot be considered contemporaneous to the assessment proceedings of searched persons. Therefore, the Hon’ble High Court held that the delay in completion of assessment under Section 158BD vitiates the very proceedings itself. Applying the same ratio in this case, the assessment proceedings cannot be sustained in the eyes of law on this score alone - Decided in favour of assessee.
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2015 (9) TMI 900
Reopening of assessment - payment made to M/s Mahindra & Mahindra for the purpose of obtaining exclusive vendor status - Held that:- From the explanation furnished during the course of original assessments, it is clear that the assessee company was harping on that it is nothing but volume discount by the appellant to the M/s Mahindra and Mahindra. There is no evidence on record to indicate that the agreement entered into by the assessee company with M/s Mahindra & Mahindra, dated 11th January, 1998 was filed before the Assessing Officer. Therefore, the Assessing Officer had no opportunity to peruse and draw any kind of inference about the nature of agreement or the right acquired pursuant to that agreement. Hence, it cannot be said that the Assessing Officer at the time of framing the original assessment formed any opinion on this issue. Therefore, the contentions raised by the appellant that the reassessment proceedings were initiated based on the mere change of opinion, is devoid of merit. The case-laws relied upon by the appellant do not come to the rescue of the appellant as the ratio laid down on those cases are that the reassessment proceedings are invalid in law, when prompted by a change of opinion. Accordingly, we hold that the reassessment proceedings initiated by the Assessing Officer are valid in law. - Decided against assessee. Disallowance on the ground that the expenditure incurred to obtain exclusive vendor status was in the nature of capital expenditure - Held that:- In this case also the assessee company acquired a right to carry on its business unfettered by any competition from outsiders within India. It was a protection acquired by the company for its business as a whole. As a result of this, the capital value of the business goes to appreciate and make it more profit yielding. Therefore, the expenditure incurred in acquiring this right is nothing but a capital expenditure which cannot be allowed as a deduction under Section 37(1) of the Act. The fact that the appellant company paid consideration by way of reduction from the invoice value does not make any difference because what has to be looked to is the character of the payment. A capital expenditure may as well be spread over for a number of years and had retained his character as a capital expenditure. We place reliance on the decision of CIT Vs. Piggot Champman & Co., (1949 (2) TMI 8 - CALCUTTA HIGH COURT) and further the fact that in the books of account this item was treated as a volume trade discount cannot determine the true nature of the transaction. Nomenclature of a transaction is immaterial while deciding the true nature of the transaction. Thus no hesitation to hold that the expenditure incurred by the assessee company in acquiring exclusive vendor status in terms of the agreement entered into by it is nothing but capital expenditure and hence this ground of appeal is also dismissed.- Decided against assessee. Disallowance without appreciating the fact that during the year the total expenditure incurred and claimed on account of trade/volume discount was only ₹ 9,23,23,607/- - Held that:- As held that the entire expenditure is capital in nature and mere fact that the capital expenditure is spread over period of time, does not make any difference. Therefore, the argument that the expenditure incurred during the year under consideration was only ₹ 9,23,23,607/-, does not hold any water.- Decided against assessee.
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2015 (9) TMI 899
Reopening of assessment - assessee has not complied with the provisions of section 54B of the Act for claiming deduction - whether reasons to believe do not survive? - CIT(A) deleted the disallowance - Held that:- When the assessee is showing income from business and profession in the return of income either negative or positive, then obviously, the assessee falls within the ambit of non-corporate tax payers which includes partners of the firm and hence, date of filing of return applicable for the assessee would be 31.10.06. We may further point out that when admittedly and undisputedly, the assessee deposited impugned amount of ₹ 32 lakh in the capital gains account scheme on 28.10.06 before the due date of filing of return i.e. 31.10.06, then assessee is eligible for deduction u/s 54B of the Act in this regard. We, therefore, are of the opinion that the view taken by the CIT(A) is sustainable and as per provisions of the Act and we are unable to see any infirmity, perversity or any other valid reason to interfere with the same. Accordingly, sole ground of the revenue being devoid of merits is dismissed. - Decided in favour of assessee. Declining the claim u/ s 54F - Held that:- We are inclined to hold that the issue raised by the assessee is squarely covered in favour of the assessee by the judgment of Hon’ble Madras High Court in the case of Dr. P.K. Vasnathi Rangarajan vs CIT (2012 (7) TMI 563 - MADRAS HIGH COURT) and the assessee cannot be denied exemption u/s 54F of the Act merely because he was the holder of 50% of the share jointly with Smt. Saroj Aggarwal of the property situated at Siddarth Extension Residential Scheme and the AO was not justified in denying claim of the assessee u/s 54 of the Act and the first appellate authority was incorrect in upholding the action of the AO on this issue. Finally in view of our foregoing discussion, we dismiss the action of the AO as well as impugned order pertaining to the claim of deduction u/s 54F of the Act and the AO is directed to allow the same to the assessee. - Decided in favour of assessee. Addition for 'income from house property' - Held that:- From careful reading of the impugned assessment order and order of the CIT(A), we are unable to see any fact or evidence which can substantiate that the assessee actually earned rental income from the said property during the previous year, even we are unable to see any name or entity to whom the said property was rented by the assessee. In this situation, addition made by the AO on the basis of surmises and conjectures cannot be held as sustainable and the view taken by the CIT(A) is mechanical and we decline to accept the same. Accordingly, addition made by the AO is directed to be deleted - Decided in favour of assessee.
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2015 (9) TMI 898
Capitalization of license fee and royalty expenditure - CIT(A) deleted the addition - Held that:- The ratio laid down in case of G4S Securities India Pvt. Ltd. [2011 (7) TMI 65 - DELHI HIGH COURT] is clearly applicable in the present case wherein held the expenditure incurred by the assessee as royalty is revenue expenditure and is therefore, relatable under Section 37 (1) of the Act. In the case of Empire Jute Co. Ltd. v. CIT, (1980 (5) TMI 1 - SUPREME Court) observed that there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the cost of enduring benefit may break down. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The license fee and the royalty fee to the Government of India is on a year to year basis and this fact was never disputed by the Revenue at any point of time and thus the same has to be held as revenue in nature keeping in mind the decisions of the Supreme Court as well as the Delhi High Court. - Decided against revenue. Non deduction of TDS - royalty paid to the Government of India - CIT(A) deleted the disallowance - Held that:- As per Section 196 of the Act, no deduction of tax shall be made by any person from any sums payable to government. In this regard the AO has overlooked the provisions of Section 196 of the Act and CIT(A) has rightly allowed the deduction to the assessee in this regard.- Decided against revenue. Invoking Section 41 (1) - AR submitted that he was was contractually liable to pay consultancy fee AMSIPL for various services as received by it from AMSIPL the amount was contractually and legally payable in full to AMSIPL by the assessee and hence Section 41 (1) could not be invoked - Held that:- since profits were not generated the company could not pay to the creditor and creditor could also not enforce the payment of date till profits and generated. However, the agreement does not prescribe any time limit beyond which the appellant will be free from discharge the liability to the said party and, therefore, it is not correct to assume that such liability has seized to exist. Such liability remained unpaid does not amply that it has seized to exist in view of Limitation Act 1963. The aforesaid liability exist in the books of accounts of both the debtor and the creditor. The Hon’ble Supreme Court in case of Mahabir Cold Storage Vs. CIT [1990 (12) TMI 3 - SUPREME Court ] held that the entries in the books of account of the assessee would amount to an acknowledgment of the liability within the meaning of section 18 of the Limitation Act, 1963, and extend the period of limitation for the discharge of the liability as debt. Thus, the CIT(A) has rightly deleted this addition.- Decided against revenue. Capitalization of brand development expenditure - Held that:- Even that the assessee made for classified part of advertisement as Brand Development Expenses the real nature is no more than a normal advertisement expenses as it includes expenses on hoardings, pamphlets, advertisement behind buses expenses relating to promotional events etc. The Hon’ble Delhi High Court in the case of CIT Vs. Casio India Ltd [2011 (5) TMI 511 - Delhi High Court] and CIT Vs. CITI FINANCIAL CONSUMER FIN. LTD. [2011 (3) TMI 622 - Delhi High Court ] hold that the expenditure on publicity and advertisement is to be treated as Revenue in nature allowable fully in the year in which it was incurred. - Decided against revenue.
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2015 (9) TMI 897
Computation of deduction under Section 10A/ 10B - CIT(A) reducing from the profits of the business eligible for deduction under Section 10A/ 10B an amount on account of recoveries of under- utilised dedicated human resources - Held that:- Tribunal while adjudicating the issue in the AY.2002-03 decided the matter as undisputedly, the expenses incurred by the assessee on account of export of computer software are much higher than the amount of ₹ 81.91 crores received by the assessee from these two parties. Therefore,the amount received by the assessee is nothing but reimbursement of expenses.By reimburse -ment of expenses, the expenses of the assessee had been reduced and the profit has been increased. Therefore, the assessee is entitled for deduction u/s 10A because these receipts are directly linked with the business of the assessee. Various decisions relied upon by the assessee before the CIT(A), which have been discussed by the CIT(A) in his order and also reproduced somewhere above in this order, clearly indicates that the reimbursement of expenses are nothing but directly linked with the business of the assessee. - Decided in favour of the assessee. Reducing from the profits of the business eligible for deduction under Section 10A/10B an amount in respect of recovery of Global Recruitment Cell(GRC)cost - Held that:- Identical issue is decided in favour of the assessee by the order of the Tribunal for the AY.2002- 03 - Decided in favour of the assessee. Applicability of provisions of section 10A(7) - Held that:- It was agreed by the Representatives of both the sides that the tribunal had decided the issue in favour of the assessee,while adjudicating the appeal filed by the assessee for the AY.02-03 as held that the CIT(A) has also found that the assessee’s main business is export and depreciation etc. has been claimed very less and it is considered that the profit can be more than in comparing with the average profits of other industries.In view of the above facts and circumstances of the case, we hold that the provisions of sec.10A(7) are not applicable on the facts of the present case. Accordingly, this ground of the assessee is also allowed. Not considering the claim that the interest income derived from the industrial undertaking - not allowing deduction u/s 10A/10B of the Act in respect of the said interest income - Held that:- his issue is also covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for the AYrs. 99-2000 and 2000-01 wherein it has been held to have a direct nexus with the business and development of export of software. Respectfully following the decisions of the coordinate bench, these grounds of the assessee are allowed. Foreign exchange loss on sales/debtors, balance in EFFC account and its treatment while computing deduction u/s. 10A - Held that:- During the assessment proceedings the AO found that the assessee had computed business profit for the year under appeal after debiting exchange loss of about ₹ 6.51 crores in the P&L account and after reducing the export turnover amount by ₹ 6,51,30,323/-. In the earlier year the AO had not accepted the similar position when there was gain because of exchange rate.The assessee, before the FAA stated that the issue for the earlier years was pending for adjudication, that the AO should be directed to modify the order after the issue was adjudicated by higher authorities. The FAA was of the opinion that the assessee should not have any grievance,that the AO had accepted the figure shown in the return by the assessee itself, that it was open to the AO to take a consistent view on the issue as and when the issue was decide by higher appellate authorities. Therefore,we allow the last ground of appeal for statistical purposes. Disallowance of deduction under section 10A/10B on the gross receipts netted off in the respective accounts - Held that:- There is no basis for Assessing Officer’s exclusion of the above receipts from computation of business profit as the assessee has not claimed the expenditure in its P & L Account and these amounts are netted off in the respective expenditure accounts and only the net expenditure related to the assessee’s business were claimed in the P & L Account. In view of this we are of the opinion that the order of the CIT(A), who analysed the factual matrix of the assessee’s claims and arrived at the correct conclusion, does not require any modification. Similar issue in earlier years was also held in favour of the assessee, as submitted, and the department has not challenged the findings of the ITAT even though that order was taken up in appeal on another issue, which also was dismissed - Decided in favour of assessee. Deduction on delayed payment of employer and employee's contribution to P. F - Held that:- FAA found that the assessee had made payments within the grace period.In our opinion,there is no legal infirmity in the order of the FAA.Therefore, confirming his order,we decide ground no.2 against the AO. - Decided in favour of assessee. Disallowance u/s 14A - Held that:- We find that the assessee earned dividend income of ₹ 13,870/-,that the FAA made a disallowance of ₹ 54.49 lakhs,that the AY.under appeal is prior to AY.2008-09.In pursuance of the judgment of Hon’ble Bombay High Court,we hold that provisions of Rule 8D of the Income tax Rules,1962 are applicable from AY.2008-09 only.Therefore,in our opinion the calculation made by the AO adopting the formula suggested by Rule 8D cannot be endorsed.Respectfully,following the judgment of the Hon’ble Delhi High Court delivered in the case of Joint Investment Pvt. Ltd. (2015 (3) TMI 155 - DELHI HIGH COURT ) we hold that the disallowance should not exceed exempt income.- Decided in favour of assessee.
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2015 (9) TMI 896
Advances made to the sister concern - Disallowance of interest regarding non charging of interest on the loans advanced to sister concern - Held that:- As far as business expediency is concerned, we find that the assessee has not proved as to how its business was benefited directly or indirectly by advancing interest free loans to sister concerns and other related parties.In our opinion,the onus of proving justification was on the assessee and it did not discharge the same.Saving the reputation of sister concern cannot be termed business expendiency. We are of the opinion that every business entity has unrestricted right to manage its own affairs in the manner it deems fit. But, it cannot claim expenditure that are not incurred wholly and exclusively for carrying out its business of profession. If the assessee had not made a claim of interest expenditure in the P &L account on the borrowings that were advanced as interest free loans to the related persons and WCPL,there would not have been any problem. State should not be made party to those items of expenditure that are unrelated with business of an assessee.In the case before us,the assessee has done the same thing.It wants to shift the burden of its generosity in form of claiming an untenable claim.In our opinion there was no commercial expediency in the transactions entered in to by the assessee i.e. non charging of interest from WCPL,PBIPL and others was necessitated by any business consideration. The assessee had failed to establish existence of commercial expediency. The FAA has given a categorical finding of fact that there was no direct nexus between the borrowings of the funds and diversion thereof for non-business purposes. He had dealt with each and every of the four parties to whom loans were advanced and had given a categorical finding of fact that the transactions in question were not guided by commercial expediency.In our opinion,his order does not suffer from any legal or factual infirmity as far as first direction of the Tribunal in concerned. Considering the second direction of the Tribunal availability of funds has been discussed by the FAA. In our opinion,availability of funds from partners’ account has be seen in light of the principle laid down by the Hon’ble Apex Court in the case of Reliance Utility (supra). For the limited purpose of calculation,we are remitting back the matter to the file of the AO. He would consider the argument taken by the assessee before us about availability of funds in partners’ account before making proportionate disallowance,in any. - Decided partly in favour of assessee.
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2015 (9) TMI 895
Validity of reopening of assessment - non-supply of verbatim copy of reasons recorded for reopening the assessment - Held that:- .The Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO and Others [2002 (11) TMI 7 - SUPREME Court] held that when a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the notice is to file the return and, if he so desires, to seek reasons for issuing the notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In view of the concession of the assessee, we remit back the issue to the Assessing Officer with direction to give verbatim copy of reasons recorded to the assessee and thereafter, to adjudicate the objections, if any, raised by the assessee against such reasons recorded for reopening the assessment. Thereafter, the Assessing Officer shall adjudicate the issue raised on merits after providing reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (9) TMI 894
Expenditure incurred on improvement/additions to leasehold property - treated as capital or revenue expenditure - Held that:- In the present case the assessee has incurred expenditure on construction of sheds etc. on leasehold land for advancement of its business. The lease period in the present case is 3 years which is further extendable for the period of 3 years. Thus, the total period of lease is 6 years only. The assessee has not received any advantage of enduring nature, no new asset has come into existence for the assessee. The Hon'ble Gujarat High Court in the case of DCIT Vs. Sun Pharmaceuticals Ind. Ltd.(2009 (3) TMI 587 - Gujarat High Court) while dealing with similar controversy held that lease rental paid on 99 years lease is allowable as Revenue expenditure. In the said case, the assessee had made payment of lease charges to GIDC and claimed the same as revenue expenditure. The Assessing Officer disallowed the same on the ground that the assessee had acquired a benefit of enduring nature in the form of use of land for a period of 99 years, the land has been transferred through a registered deed involving transfer of immovable property, thus, the assessee has acquired fixed asset. CIT(Appeals) upheld the order of Assessing Officer. The Tribunal reversed the findings of the CIT(Appeals). In appeal by the Department, the Hon'ble High Court upheld that the findings of the Tribunal, that the land in question was not acquired by the assessee. That merely because the deed was registered the transaction in question would not assume a different character. The lease rent was very nominal. By obtaining the land on lease the capital structure of the assessee did not undergo any change. The assessee only acquired a facility to carry on business profitably by paying nominal lease rent. Thus, from the analysis of the above judgment of the Hon'ble Gujarat High Court it can be safely concluded that the Special Bench decision in the case of JCIT Vs. Mukund Ltd. (2007 (2) TMI 358 - ITAT MUMBAI) cannot be applied in the facts of the present case. The expenditure incurred by the assessee on construction of storage structure etc. has to be allowed as revenue expenditure. - Decided in favour of assessee.
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2015 (9) TMI 893
Disallowance on account of depreciation on plant & machinery purchased from the sister concerns - CIT(A) allowed claim - applicability of Explanation 3 to section 43(1) of the Act on the given set of facts - Held that:- The phraseology of the Explanation is plain and simple. It is the “main purpose” and not secondary purpose or some incidental benefits arising from such transaction which can trigger Explanation 3 to S. 43(1). Once the overwhelming commercial advantage from the transaction is displayed, which is done in the instant case, the other considerations fade into insignificance. Thus, while the assessee has clearly demonstrated its bona-fide, the Revenue could not contradict any averment of the assessee.There is no material in possession of the Assessing Officer to enable him to displace the cost of acquisition declared by the Assessee. Further, the WDV of assets in the case of M/s KEL was ₹ 47,58,848/-, which was taken at NIL by Assessing Officer. There is no rationale for such action. The Assessee on the other hand has supported the valuation of the assets by the Valuation Report of the Registered Valuer and in absence of onus being discharged by the Assessing Officer, the applicability of Explanation 3 to section 43(1) of the Act by the Assessing Officer is not justifiable in the facts of the case. The assessee is entitled to claim of depreciation on the acquisition of assets and technical know-how, we uphold the order of the CIT(A). - Decided in favour of assessee. disallowance of expenses concerning tool room acquired made to its sister concern - Held that:- Considering Revenue submission that it is not clear as to why the expenses were not claimed in the original return and claimed only by way of revised return and whether these debit notes were available before the Assessing Officer for necessary enquiry or not and assessee submission that the debit notes are dated 30th September, 2005 i.e. after the finalization of account pertaining to the relevant assessment year and therefore the claim has been made by way of filing the revised return to take cognizance of the legitimate expenses incurred by M/s KEL on behalf of the assessee we remit the issue back to the file of the Assessing Officer to decide the claim of assessee after affording proper opportunity of hearing to the assessee. Decided in favour of assessee for statistical purposes.
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2015 (9) TMI 892
Deduction u/s. 80IB for Goa Unit in respect of sale of scrap - Held that:- Madras High Court judgment in the case of M/s Fenner India Ltd (1998 (4) TMI 67 - MADRAS High Court ) for the proposition that the profit on sale of scrap material since had a direct link or nexus with the industrial undertaking and therefore, it is eligible for deduction u/s 80IB, Considering the similarity in language used in sections 80HH and 80IB of the Act, we are of the considered opinion that the assessee should succeed in this regard also - Decided in favour of assessee. Depreciation on intangible assets denied - Held that:- The assessee in the period relevant to assessment year 2004-05 had capitalized the amount of 285 million Japanese Yen and had claimed depreciation thereon year after year. This fact is evident from the balance sheet filed by the assessee for the financial year ending on 31-03-2004, 31-03-2005 and 31-03-2006. Once, it has become the part of block of asset on which the depreciation has been allowed for the three assessment years, the depreciation cannot be denied in the subsequent assessment years on the written down value. The asset cannot be taken out of block of assets. Similar view has been taken by the Tribunal in the case of Kodak Polychrome Graphics (I) (P) Ltd. Vs. ACIT (2013 (9) TMI 481 - ITAT MUMBAI ). - Decided in favour of assessee.
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Customs
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2015 (9) TMI 928
Import of Comoros Cloves - discrepancy in Certificate of Origin - Eligibility to avail benefit of Notification No. 96/2008 - origin was not certified by the exporter from the exporting country - Held that:- Authorities have been given instructions, which when read holistically, would mean that minor discrepancies would not ipso facto invalidate the certificate of origin if the same in fact corresponds to the product imported. It can be seen that the certificate of origin needs to issued by the government authorities designated by the government of exporting beneficiary country. In the case in hand, as already held by us the certificate of origin has been insured by "African Commodities House Ltd."seems to us to be an authority approved by the union of Comoros. This our view is fortified from the fact that identical goods imported at other various ICDs were certified by the same issuing authority and was accepted by the revenue authorities and not disputed the issuing authorities credentials. - goods which are imported by the appellants are eligible for benefit of Notification NO. 96/2008 as amended by the said benefit is being denied only for the procedural discrepancies. We find strong force in the contentions raised by the learner consultant that the ratio of the judgment of Hon'ble Supreme Court in the case of Bharat Diagnostic Centre (2014 (10) TMI 440 - SUPREME COURT) will apply in this case. - Decided in favour of assessee.
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2015 (9) TMI 924
Maintainability of appeal - benefit of Notification No.21 of 2002 - What will be the rate of duty that is payable by the first respondent, but for the notification in question. - Held that:- Court is fortified by a decision of the Gujarat High Court in Commissioner of Central Excise v. JBF Industries Ltd., [2010 (12) TMI 437 - GUJARAT HIGH COURT], - Following this decision; appeal is not maintainable and accordingly, the same is dismissed giving liberty to the appellant to pursue the matter before the appropriate forum - Decided against Revenue.
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2015 (9) TMI 923
Waiver of pre deposit - Tribunal restored the appeal of the co-applicants but refused in case of the petitioner - earlier the appeals were dismissed for non-compliance of order of pre deposit - Held that:- On a perusal of the common order dated 07.07.2010 made by the Tribunal on the stay applications made by the petitioner and other co-appellants, including M/s Bhairavi Exim Pvt. Ltd., it is clear that the Tribunal had directed the appellant - M/s Bhairavi Exim Pvt. Ltd. to deposit 50% of the duty within a period of eight weeks. Insofar as the penalties imposed on the other appellants, including the petitioner are concerned, the condition of pre-deposit of penalties had been dispensed with. It appears that the appeals preferred by all the appellants had been dismissed for non-compliance of the stay order in view of the fact that M/s Bhairavi Exim Pvt. Ltd. had not made the pre-deposit of 50% of the duty. However, in case of other co-appellants who had earlier approached the Tribunal, the Tribunal by an order dated 14.02.2011, had restored their appeals by observing that the stay petitions of the applicants had been unconditionally allowed. The petitioner herein is similarly situated to the said applicants in the stay applications and therefore, was entitled to similar treatment on the ground of parity. The Tribunal was, therefore, not justified in rejecting the application for restoration made by the petitioner by holding that the stay granted in favour of the petitioner was conditional upon M/s Bhairavi Exim Pvt. Ltd. making the predeposit. - subsequent order of the Tribunal taking a view different from the view adopted in the previous order of the Tribunal, whereby the petitioner is not granted parity of treatment with other appellants, cannot be sustained. - Decided in favour of appellant.
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2015 (9) TMI 922
Denial of refund claim - Liability to pay Cess on the export of processed marine products - Held that:- neither any adverse order has been passed nor any proceeding is pending against the petitioner and the representation of the petitioner alone is pending for consideration with the 3rd respondent - Court directs the 3rd respondent to consider the representation of the petitioner dated 16.08.2004 with regard to levy of Cess in the light of the judgements of the Division Benches of this court referred [2015 (3) TMI 1036 - MADRAS HIGH COURT] and dispose of the same on merits and in accordance with law after affording due opportunity to the petitioner including personal hearing. The said exercise shall be completed within a period of six weeks from the date of receipt of a copy of this order. The petitioner company is directed to place all their submissions including copies of the orders passed by the Division Benches of this court which shall be taken into consideration by the 3rd respondent while passing the orders on the representation of the petitioner - Petition disposed of.
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2015 (9) TMI 921
Waive of pre deposit - penalty for abetment - attempt to export of MOP (Muriate of Potash) - Held that:- It is difficult to ascertain whether the applicants are involved in the offence or otherwise which rests on scrutiny/appreciation of evidences. However, the offer made by each of the applicants i.e. ₹ 25,000/- seems to be reasonable. Consequently, each of the applicants is directed to deposit ₹ 25,000 within eight weeks from today and report compliance. On deposit of the said amount, balance dues adjudged against each of the Applicants would stand waived and its recovery stayed during the pendency of the appeals. - Partial stay granted.
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2015 (9) TMI 920
Waiver of pre deposit - Penalty u/s 114A - exemption from payment of duty in terms of Notification No.48/1999-CUS dated 29.4.1999 - diversion of imported goods to DTA - export obligation - Held that:- Applicant had not fulfilled the export obligation as required therefore, we are of the view that the applicant could not able to make out a prima facie case for total waiver of pre-deposit of dues adjudged in both the cases. - Partial stay granted.
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2015 (9) TMI 919
Condonation of delay - Non-production of Export Obligation Discharge Certificates rom DGFT for showing the utilization of the materials imported under the DEEC Scheme and used for the export purposes - Held that:- By appreciating above conduct of the appellant and by appreciating the fact that there could be some bona fide belief on the part of the assessee that inasmuch as EODCs stand issued and stand filed with the Revenue and that being the only dispute, no further action is required to be taken by them, we are of the view that the late filing of the appeal is not with any mala fide or does not reflect any intentional lapse on the part of the assessee. We accordingly condone the delay subject to the appellant depositing a cost of ₹ 10,000 - Delay condoned conditionally.
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Service Tax
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2015 (9) TMI 944
Disallowance of CENVAT Credit - Rent a cab service, Outdoor catering service, services by Air Travel agency, services by CHA in respect of exports, cleaning and Repair/maintenance service of Guest House, Gymnasium and sports club/sports ground etc - Penalty under Section 11AC(1)(a) of the Central Excise Act read with Rule 15(2) of the Cenvat Credit Rules - Held that:- Documents produced by the appellant, as regards the ‘canteen expenses', which is only the labour component for manpower engaged for running the canteen, I hold that no proportionate disallowance is called for as there is no element of outdoor catering nor there is any element of recovery of Service Tax from the employees - As regards the ‘gardening expenses', the credit on the same is fully allowable as the same is required for maintaining the goods atmosphere in the manufacturing area and also a condition precedent laid down by the State Pollution Control Board, without which the appellant cannot resort to manufacturing activity. As regards the ‘cleaning expenses', the same have been incurred in the maintenance of residential colony, which forms part of the factory premises, I take notice of the fact that the colony is part of the factory premises as per the approved map by the Central Excise authorities. Further, there is no Municipality in the area where the factory and colony is located for providing the services of township maintenance. The colony is a small industrial township, created by the appellant for running its factory and as an industrial township; the same is required to be maintained by the Industry itself (Article 243 of the Constitution of India). As such the disallowance of cleaning expenses is set aside. There is no allegation in the show-cause notice to disallow any proportionate amount towards the amount recovered in part from the employees and as such the said disallowance is held to be unsustainable and the same is set aside. - Decided partly in favour of assessee.
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2015 (9) TMI 943
Cargo handling service - for railing and transport of Maganese Ore the service involved wagon loading, truck loading, transport including stacking and de-stacking/rehandling of manganese ore. - penalties under Section 76, 77 and 78 - Held that:- transport activity (excluding stacking) formed a very small part of the entire service rendered, inasmuch as while hiring of truck including stacking was @ of ₹ 1,15000 / PMT, transport excluding stacking was only ₹ 10,000 / PMT, wagon loading was @ ₹ 1,25,000/- PMT and truck loading @ 25,000/- / PMT and stacking/re-handling was also @ 10,000 / PMT. As the goods were loaded on to the trucks and wagons they acquired the status of cargo. Therefore the activity performed by the appellant clearly fell under the category of cargo handling service as defined in Section 65(23) ibid. This conclusion is in harmony with the ratio of the judgement in the case of Coal Carriers Vs. CCE - [2011 (2) TMI 1140 - ORISSA HIGH COURT]. - The service was rendered to a public sector unit which had taken up the matter with CBEC contending that it was not taxable. It is thus evident that it is not a case where the appellant-assessees could/would have intended to suppress the fact of rendition of the impugned service. The appellants also supplied the information within about 3 weeks of the date on which they were summoned to appear before the Central Excise officer. The Commissioner (Appeals) has taken due note of some of the judgements like in the case of Singh Brothers - [2009 (1) TMI 147 - CESTAT NEW DELHI]. - appellants are not guilty of supression and do not deserve to be penalised - Decided against assessee.
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2015 (9) TMI 942
Denial of CENVAT Credit - outdoor catering, rent-a-cab services, auction, club and association, outward transportation service - Held that:- I have seen the certificate issued by the Chartered Accountant certifying that no amount towards providing outdoor catering services has been recovered by the appellant from their employees. In these circumstances, I hold that the appellants are entitled to take Cenvat credit on outdoor catering services up to the period 31-3-2011. Rent-a-cab service for transportation of the passengers from residence to factory or vice versa is an integral part of the manufacturing activity of the appellant and therefore, I hold that appellant is entitled to take Cenvat credit on these services. Sale of Waste and scrap which is arising out of manufacturing of the final product is a part of the business of manufacturing of cement by the appellant. Therefore, I hold that on auction services, the appellant is entitled to take Cenvat credit. Further, I find that the charges have been paid for availment of club and association services for the officials visiting outside the city and same has been paid in the case of business of appellant. Therefore, I hold that on this auction and club and association services, the appellant is entitled to take Cenvat credit. Purchase order shows that goods are to be delivered at the place of buyer on FOR basis and in the invoice, the transportation cost has formed part of the assessable value as the goods are to be delivered at the buyers place. Therefore, the appellant has satisfied the condition of the C.B.E.&C. Circular No. 97/08/07, dated 23-8-2007 which has been supported by the decision of this Tribunal in the case of Lumax Automotive Systems Ltd. (2013 (1) TMI 471 - CESTAT New Delhi). Therefore, I hold that appellant is entitled to take Cenvat credit on outward transportation service as the transportation charges have formed part of the assessable value and goods are to be delivered at the place of the buyers. - Decided partly in favour of assessee.
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2015 (9) TMI 941
Demand of service tax - steamer agent services - Port services - Held that:- Board has issued a circular on 26-2-2010 vide DOF No. 334/1/2010/TRU wherein it was clarified that the definition of “Other Port Services” are being amended to provide that all services provided within the port would fall under port service and authorization from port authority could not be a pre-condition for taxing the services. In the absence of any evidence to show that appellant had been authorized to provide the port service and in terms of the authorization, activities were undertaken by the appellant, and also in view of the specific provision in the definition relating to authorization, we consider that the impugned order taking a view that levy is sustainable cannot be upheld. We also find that the appellants’ operation in Bhavnagar which is limited to hiring a barge to the customer cannot be levied to tax under Port Service. Therefore, demand for Service Tax under the category of Port Service also cannot be sustained. Appellant merely identified and arranged services of licenses steamer agents Custom house agents, etc., for ship owners based in the United States from 29-3-2006 and were remitting the Service Tax treating the service rendered by them as business auxiliary service. This is because the foreign ship owners were reimbursing the expenses incurred by the appellants for identification and arranging the services and were also giving commission to the appellants on which the appellants paid Service Tax under the category of business auxiliary service. We agree with the submission that unless the appellant was actually rendering steamer agent service, there was no question of levying Service Tax under this heading. - impugned orders cannot be sustained - Decided in favour of assessee.
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2015 (9) TMI 940
Denial of refund claim - Notification No.41/07-ST - services used for export purposes - Terminal Handling Service - GTA services (export) and C&F agency services - held that:- Refund was denied to the Appellant mainly on various procedural grounds as stated hereinabove. Be that as it may, as regards refund for THC on the grounds such as invoice being raised by shipping line instead of port operator and the service provider being registered under a different service category or no proof regarding authorization from port authorities, I find that such issues stand concluded in favour of the appellant vide Board Circular dt.12.3.09 as well as various case laws as referred to and relied upon by the Appellant, especially in the case of Riddhi Siddhi GlucoBiols Ltd. [2011 (8) TMI 187 - CESTAT, AHMEDABAD] and Fibre Bond Industries (2014 (3) TMI 372 - CESTAT MUMBAI). As such, denial of refund claim on THC services does not appear to be correct and is allowed. As regards CHA/C&F service, sufficient co-relation was demonstrated during the course of hearing, that the export consignment, as per Shipping Bill and the service provided in this regard are verifiable and co-relatable on the face of document in form of Shipping Bill number, Invoice Number, Container Number etc. and as such, the ground on which such refund is denied, does not appear to be proper. As regards Shipping Bill showing name of different CHA as compared to the actual service provider, it is a practice in vogue to seek services by way of outsourcing by certain shipping lines/CHAs/freight forwarders to arrange for export of consignments for the exporters. In fact, similar situation was examined in the case of ADF Foods (supra) and refund was granted. As such, refund in respect of CHA and C&F agent service also is held allowable to the Appellant. In terms of Board Circular No.112/6/2009-ST dt.12.3.09, procedural infractions in respect of export documents are required to be ignored while granting refund. Once it is not in dispute that Services are specified for refund purpose, on the date of claim, and since Service Tax was actually paid on specified service pertaining to export activity, in terms of the broad scheme of refund under Notification No.41/07-ST (as amended), read with clarifications, refund must be paid to the exporter. - impugned order is quashed and set aside - Decided in favour of assessee.
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2015 (9) TMI 939
Denial of refund claim - accumulated CENVAT credit - Notification No.5/2006-CE dated 14.3.2006 - Various input services - Nexus with output service - Held that:- in respect of services reliance of the appellants on the decisions of the Tribunal mentioned against each service is applicable and appropriate. Moreover, the submissions regarding the nature of service received and its use also shows that stand taken by the Revenue that there is no nexus between input service and output service is not correct. - appellant is eligible for the refund and there is nexus between input services and output service - Decided in favour of assessee.
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2015 (9) TMI 938
Condonation of delay - Disallowance of Cenvat credit - Penalty u/s 11AC - Held that:- Limitation expired on 29-6-2010. Therefore, the appeal filed by the appellant is delayed by a period of six months. The Tribunal has powers under Section 35B of the Central Excise Act, 1944 to condone the delay “if it is satisfied that there was sufficient cause for not presenting it within that period”. The cause shown by the appellant for moving an application belatedly was that the order dated 29-1-2010 passed by the adjudicating authority was not communicated to the authorized person. This aspect has not been dealt with by the Tribunal while passing the order under challenge.- delay condonation application should have been allowed, considering the facts and circumstances of the case, including the fact that the appellant is public sector undertaking of the Central Government. Consequently all the substantial questions of law are decided in favour of the present appellant-Bharat Sanchar Nigam Limited. - matter restored before the Tribunal - Decided in favour of assessee.
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2015 (9) TMI 937
Maintainability of appeal - alternate remedy - Demand of service tax - It is also brought to the notice of this Court that similar assessees had already approached this Court at different points of time raising similar contention and that the said parties have been relegated to pursue the remedy before the competent authorities under the Statute. The learned counsel for the petitioner points out that the said parties had approached this Court at the stage of notice and not after passing the orders. This does not make any difference in so far as the petitioner is having an effective alternate remedy under Section 85 of the Finance Act, as made clear in the opening paragraph of the impugned order itself. That apart, the merit of the case has to be considered with reference to the facts and figures and this Court does not find it necessary to act as a 'fact finding agency'; more so when, the petitioner is having other appropriate Forum to establish the same in accordance with law. In the said circumstances, the petitioner is relegated to pursue the matter by way of appeal, if so advised. - Decided against assessee.
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2015 (9) TMI 936
Waiver of pre deposit - Held that:- no material has been produced about the financial crunch or undue hardship, but considering the fact, that the appellant is a Government Company, we direct the appellant to deposit 50% of the service tax amount in question along with proportionate interest within four weeks from today; failing which the appeal shall dismissed for failure of pre-deposit. If compliance of the order passed by this Court is made, the recovery of the penalty is stayed Partial stay granted.
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2015 (9) TMI 935
Waiver of pre deposit - Imposition of interest and penalty - Held that:- when the appeal is admitted for hearing and the order of the assessment is under scrutiny, unless the order of assessment reaches its finality, the question of initiation of penalty proceedings does not and cannot arise - in view of insertion of the word ‘or’ the Tribunal cannot ask for the pre-deposit of the penalty also. According to us, the pre-deposit of the penalty amount would be required only when the order of the penalty alone is under challenge. But when there is composite order namely assessment order of the tax component along with interest and also penalty as in the present case, direction for pre-deposit of any portion of the penalty amount would result in injustice as well as hardship. Under these circumstances, we are of the view that the direction for pre-deposit of the penalty component of the order has to be deleted and the same is accordingly deleted and the rest of the order would remain. - Decided in favour of assessee.
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2015 (9) TMI 933
Duty liability - Violation of principle of natural justice - Held that:- Petitioner submitted that in view of the order passed by the Division Bench in [2013 (10) TMI 1164 - JHARKHAND HIGH COURT ] absolving the liability of the Damodar Valley Corporation, the liberty be given to the petitioner to file an appeal before the Appellate Authority/Commissioner (Appeal), Central Excise and Service Tax. - Petitioner disposed of.
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Central Excise
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2015 (9) TMI 934
Waiver of pre deposit - restriction on utilisation of Cenvat credit due to delay in payment of duty - violation of provisions of Rule 8(A) of Central Excise Rules, 2002 - Imposition of penalty - Difference of opinion - Majority order - Held that:- Language of Rule 8 (3A), it is clear that it is non-obstinate provision which operates notwithstanding anything contained in sub-Rule (1) and sub-Rule (4) of Rule 3 of Cenvat Credit Rules, 2004 and, hence, the provisions of Rule 8 (3A) of Central Excise Rules, 2002 would have over-writing effect over the provisions of Cenvat Credit Rules, 2004. In this judgment, it was further observed that the intention of sub-Rule (3A) of Rule 8 is to punish an assessee defaulting in discharge of monthly duty liability beyond the period of 30 days from the due date by denying the utilisation of Cenvat credit and making him pay the duty consignmentwise, as in most of such cases, while the defaulting assessee has not paid duty on the goods cleared during a particular month, on the basis of the invoices issued by him his customers would have taken the Cenvat credit resulting in double loss to the Government. - appellant would be required to pay duty of ₹ 16.70 lakhs through cash and on payment of this amount through cash, they can re-credit the amount of ₹ 16.70 lakhs debited earlier in their Cenvat credit account for payment of duty. While the appellant company, in the ER-1 returns filed by them, had reported the payment of self assessed duty, 18 cheques for payment of duty amounting to ₹ 34,37,391/- presented by the appellant company to the bank were not honoured due to insufficient balance in his account and in respect of 13 cheques for payment of duty amounting to ₹ 26,26,500/- whose particulars were mentioned in the returns, had never been presented to the bank. The act of dishonouring of 18 cheques of an amount of ₹ 34,37,391/- and not presenting the cheques for an amount of ₹ 26,26,500/- was never reported by the appellant company to the Department and, as such, this fact, has prima facie, been concealed. This conduct of the appellant, prima facie, would amount to clearance of goods without any intention to pay the duty and, as such, in such a situation, the judgment of Hon’ble Gujarat High Court in the case of CCE & Customs vs. Saurashtra Cement Ltd. (supra) would not be applicable. - Such conduct of an assessee, in my prima facie view, would attract for penalty under Rule 25 (1) (d) - stay granted partly.
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2015 (9) TMI 932
Denial of MODVAT Credit - Whether items namely Synthetic Filter Cloth and Asbestos Mill Board said to be not directly used in the manufacture of Aluminium and Products thereof or are used as part of plant and machinery for production of Aluminium and Products thereof, can be considered as "inputs" eligible for MODVAT credits under Rule 57A of the Central Excise Rules, 1944 - Held that:- In order to construe the provisions relating to MODVET Credit, in Saraswati Sugar Mills Vs. Commissioner of Central Excise, Delhi [2011 (8) TMI 4 - SUPREME COURT OF INDIA], the Court considered the question, whether iron and steel structures manufactured and used captively in factory for installation of sugar manufacturing plant by Assessee can be classified as ''capital goods' under Rule 57Q of Rules, 1944. The Court held that provisions of Statute must be construed strictly and the Court neither should stretch the words nor add nor subtract words in order to bring in or include something therein. - both the items were part and parcel of machines, plants, equipments etc., used for producing and processing of goods, hence, were excluded specifically under Rule 57A, Explanation which excludes "machines, machinery, plant, equipment, apparatus, toots or appliances used for producing or processing of any goods or for bringing about any change in any substance in or in relation to the manufacture of the final products". - Assessee was not entitled to claim MODVET Credit on 'Synthetic Filter Cloth' and 'Asbestos Mill Board' treating the same to be "inputs" under Rule 57A of Rules, 1944. The Tribunal taking otherwise view has clearly erred in law. - Decided in favour of Revenue.
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2015 (9) TMI 931
100% EOU - Clandestine removal of goods - DTA clearances - Held that:- Where it becomes necessary to shift the imported goods from one customs godown to another, it can be done only on the strength of a specific order passed by the competent authority in this behalf. In case, the appellant had permission from any superior authority for removal of the goods from a godown, without payment of customs duty, the same ought to have been presented before the incharge officer of the godown. It is only when such incharge officer is satisfied about the genuinity of the order, that he can be expected to release the goods without payment of the customs duty. The record discloses that the appellant did not produce the so-called order of the Development Commissioner, at any point of time nor it was shown to the incharge officer of the godown. The respondent as well as the Tribunal recorded specific findings to this effect. - Once there is an absolute prohibition against the sale of goods manufactured by the appellant in the DTA, the question of making any classification or distinction of the goods or purchases in the DTA, does not arise. - Decided against assessee.
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2015 (9) TMI 930
Denial of refund claim - amount paid in excess of duty at the above effective rate - Refund allowed by way of reversal in CENVAT Credit account - Held that:- The Revisional Authority referred to such sum being lying with the Government as a deposit. The judgments of Punjab & Haryana High Court were referred and the opinion was that the Government cannot retain the amount paid without any authority of law. The direction to allow the amount to be re-credited in the Cenvat credit account of the concerned manufacturer does not require any interference by us because even if the impugned order of the Appellate Authority and the Order-in-Original was modified by the Joint Secretary (Revisional Authority), what is the material to note is that relief has not been granted in its entirety to the first respondent. The first respondent may have come in the form of an applicant who has exported goods, either procured from other manufacturer or manufactured by it. Looked at from any angle, we do not find that any observation at all has made which can be construed as a positive direction or as a command as is now being understood. - on some apprehension and which does not have any basis in the present case, we cannot reverse the order or clarify anything in relation thereto particularly when that it is in favour of the authority - Petition disposed of.
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2015 (9) TMI 929
Refund of amount paid as pre-deposit as a per-condition to admit appeal - unjust enrichment - Levy of duty on free market sugar - Exemption under Notification No. 130/83-C.E. and 131/83-C.E., dated 27-4-1983 - Held that:- Pre-deposit amount remitted by the respondent, as a condition precedent for filing the further appeal before CEGAT need not be refunded, necessary submission in that behalf ought to have been made before CEGAT itself. When the application is filed under Section 11B of the Act, the Assistant Collector appears to have thought that he is not bound by the order passed by the CEGAT at all and virtually treated the adjudication that has taken thus far, as irrelevant. It is curious to note that the amount involved in this case is one, of pre-deposit and not the one recovered or collected from a manufacturer as excise duty. Another factor is that CEGAT has referred to a trade notification, which added strength and kept the entire issue beyond pale of doubt. Benefit that has accrued to the respondent on the basis of long drawn adjudication was denied to him - Though the Collector of Customs & Central Excise (Appeals), Hyderabad, upheld such an act, the CEGAT, Bangalore, has taken the correct view and we do not find any substance in the questions that are framed in this CERC. - Decided against Revenue.
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2015 (9) TMI 927
Classification of goods - ceramic tile - smaller pieces ( cubes of various sizes and shapes) manufactured and affixed to a sheet (craft paper) - switching over to Chapter 68 from Chapter 69 - assessee earlier classified the goods under Tariff 6905.10 - after the decision of the Tribunal in the cases of Shon Ceramics Pvt. Ltd. Vs. Collector of Central Excise - [1990 (11) TMI 219 - CEGAT, NEW DELHI] and Collector of Central Excise Vs. Shon Ceramics Pvt. Ltd. - [1996 (3) TMI 222 - CEGAT, NEW DELHI] and Notification No.8/2002 dated 1.3.2002, it changed its classification to Tariff Heading 6807.10. Held that:- No material found from Revenue to show as to whether the goods of respondent were technically tested by any recognized laboratory or national institute to hold that the goods were ceramic. Accordingly, it is safe to relyon the finding of the Tribunal made in the aforesaid decision for application thereof to the case of the assessee since its goods are similar to that of M/s. Shon Ceramics not opposed by Revenue. Tribunal having examined very carefully the composition of the cubes which are ultimately pasted on kraft paper to give raise to the goods in question, both the decisions of the Tribunal when appealed by Revenue before the Apex Court, those were dismissed as reported in [1997 (9) TMI 608 - SUPREME COURT] finding no discrepancy in the ratio laid down by the Tribunal. - Revenue's appeal fails on merit. - Decided against Revenue.
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2015 (9) TMI 926
Duty evasion - Clandestine removal of goods - estimation of turnover - comparison of power consumption - third party evidence - Held that:- On the basis of records recovered from a third party, the allegation of duty evasion cannot be made against an assessee unless cross examination of the persons from whom possession the records had been recovered, has been allowed, which has not been done in this case. Moreover, just because, M/s.NIPL had filed application before the settlement commission and had admitted certain quantum of duty evasion, it cannot be treated as an admission of receipt of unaccounted MS ingots by the respondent, and in this regard, we are supported by the decision of the larger bench of the Tribunal in the case of Bosch Chassis Systems India Ltd. Vs. CCE, Delhi-III-[2008 (9) TMI 106 - CESTAT NEW DELHI]. There is absolutely no justification for adopting power consumption norm of M/s.SSSRM to the unit of the respondent as while the rolling mills of M/s.SSSRM is automatic rolling mills, the respondent's rolling mill is manual. Moreover, no experiment has been conducted by the department to ascertain as to whether the roiling mills of the respondent is comparable with the rolling mills of M/s.SSSRM in terms of technology and production. Besides this, we also find that that National Institute of Secondary Steel Technology, established by the Ministry of Steel, Govt. of India conducted a study and submitted a technical report on performance, and energy consumption of re-rolling mills, where electricity consumption was arrived at 215 units per MT and Government of Rajasthan in the notification issued under compounded levy scheme for charging sales tax from rolling mills has mentioned power consumption of the medium size rolling mill as 225 units per MT. In view of this, there is absolutely no justification for adopting power consumption norm of 102.09 units per MT of M/s.SSSRM in respect of the respondent. Rule 173E provided for determination of normal production by a manufacturing unit and that could be adopted as basis for allegation of duty evasion, in case his actual production drastically varied from the normal production. But in this case, no experiment has been conducted by the department, in respect of the respondent's unit to determine their actual power consumption, Before adopting power consumption ratio of M/s.SSSRM and applying it to the respondent's unit absolutely no study has been conducted to establish as to whether the rolling mill of the respondent is comparable with the rolling mill of M/s.SSSRM. - Decided against Revenue.
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2015 (9) TMI 925
Reversal of Cenvat Credit - Final product become exempt subsequently - inputs lying in stock when the Retail Computer System became exempted by Notfn No.23/2004 dt. 9.7.2004 - Held that:- During the relevant period there is no specific provision in CCR for recovery of cenvat credit on the inputs lying in stock when the final product became exempted fully. Only from 1.3.2007 a specific sub-rule (3) of Rule 11 of CCR was inserted making specific provision where a manufacture is required to pay amount equal to the cenvat credit taken on inputs lying in stock if the final product became fully exempted. The Revenue relied on Tribunal's decisions in the case of Albert David Ltd. Vs CCE (2002 (11) TMI 144 - CEGAT, COURT NO. III, NEW DELHI) and Explicit Trading & Marketing (P) Ltd. Vs Commissioner (2009 (3) TMI 978 - SUPREME COURT). Both the decisions were upheld by Supreme Court [2003 (3) TMI 709 - SUPREME COURT]. I am fully aware of the fact that this Tribunal Bench also upheld the reversal of credit in the case of CCE Vs M/s.Annapoorna Re-rolling Mills (P) Ltd. (2011 (8) TMI 1093 - CESTAT CHENNAI) - The ratio of the High Court of Madras order [2014 (12) TMI 905 - MADRAS HIGH COURT] is squarely applicable to the present case as the appellant availed the credit on inputs when the final product was dutiable and there was no one to one correlation and the final product was exempted vide Notfn 23/2004-CE dt. 9.7.2004 and the sub-rule (3) of Rule 11 of CCR came into effect from 1.3.2007 onwards and cannot be applied retrospectively. - impugned order confirming the demand on credit already taken on inputs lying in stock when the finished goods i.e. computers became exempted on 9.7.2004 is liable to be set aside - Decided in favour of assessee.
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Indian Laws
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2015 (9) TMI 918
Maintenance of seniority - writ petitioner challenges the judgment of the Central Administrative Tribunal (‘‘CAT’’) dated 14-8-2012 - The petitioners contend that there is no legal basis for the repatriation order, and that it is contrary to the DoPT OM of 3-4-1986. Moreover, the repatriation order violated both the July 2011 CAT order as well as the order of the Delhi High Court in that the CBEC did not consult the DoPT. Finally, the petitioner submits that the repatriation order was premature in that the issue was pending before the DoPT and the CBEC pursuant to the orders of the CAT and the Delhi High Court. The petitioner ever had made a representation on 8-2-2012 to the CBEC that the repatriation order be withdrawn, on this basis. Held that:- save and except the plea of seniority, which affected the aggrieved employees of the Ernakulam Commissionerate (an issue which was to be finally settled by the DoPT), there was no question of any cloud on the CBEC’s authority to frame policies. There is also no dispute that in terms of the 2009 circular, the petitioner was transferred to Delhi; the circular issued in 2011 clarified that she would not secure any seniority. Given these circumstances, the findings of the CAT cannot be sustained. There cannot be any quarrel with the general proposition that in matters of transfer, judicial intervention is ordinarily not called for. At the same time, the Courts have underlined that wherever existing rules or regulations having statutory force are involved, the right of the employee to be considered in the context of those rules has to prevail. In the present case, the 2009 circular as well as the subsequent 2011 circular, in between which the petitioner was transferred to Delhi, did not disqualify her from seeking an ICT. A subsequent circular dated 15-2-2012, almost three years after her joining of service, barring gazetted Group-B officers from seeking such ICT, could not, therefore, be a valid reason to repatriate her, in effect, a denial of a right that vested in her in 2009. - Decided in favor of appellant.
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2015 (9) TMI 917
Prayer for discharge from the complaint case filed by SEBI - collective investment schemes (CSI) - company failed to make any application with SEBI for registration of the collective investment schemes operated by it as per the Regulations - The petitioner while praying for discharge submitted that she was the director of the company from 1.1.1998 to 25.7.1998 which period was much before the alleged violations. - Held that:- From the perusal of Form 32 (P2 to the petition), it would appear that the same was filed with the Registrar of Companies much later than the filing of the complaint. It is a matter of common knowledge that such form could be filed by ROC even after sufficient lapse of time after paying nominal fee or fine. In such circumstances, the petitioner was on the board of the company as a director and whether she participated in the day to day functioning of the company remains a disputed question of fact which could only be thrashed out or settled in a full fledged trial. The petitioner would get the opportunity at the trial for proving that she was not at all concerned with the affairs of the company, much less, day to day affairs of the company and whatever violation of the Act is alleged was not in her knowledge. - Petition dismissed.
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