TMI Tax Updates - e-Newsletter
September 27, 2016
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Change in method of valuation of stock - from “lowest price during the year” to the “weighted average cost” formula - So long as the change made by the assessee in his method of accounting is bona fide and amounts to a permanent arrangement to be followed, the Revenue has no cause to complain - HC
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Income Tax:
If the assessee makes investments or deposits in the scheduled bank and claims the deposits as accumulated for the purpose of section 11(1)(a) or 11(2), the investment or deposit cannot be disallowed only for the reason that application of money was not for the object of the society. - AT
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Income Tax:
Additional depreciation on windmil - A close reading of the provision brings out that there is no requirement that the windmill should be used in any manufacturing activity - the assessee clearly satisfied the conditions of section 31(1)(iia) and is entitled to the claim of additional depreciation in respect of wind mills. - AT
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Income Tax:
Unexplained cash credit - addition u/s 68 - The capacity as well as the genuineness aspect is completely unproved in the present case. - The firms being registered under VAT. Surprisingly, however, it is not known who the proprietors/partners of these firms are. - matter to be re-adjudicated - AT
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Income Tax:
It seems that assessee is indulged into mal practices of fabricating books of accounts and depicting unrealistic financial data with a view to cheat the public and, therefore, deserves no mercy. - AT
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Income Tax:
Grant of registration U/s 12AA - there is no pension scheme flouted by any of the statutory bodies for the benefit of the lawyers’ community. In our view, the useful and public purpose would be served if the registration is granted to the assessee as sought by it. - AT
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Income Tax:
Disallowance of gifts given to Doctors - business expenditure - it was necessary on the part of the assessee to provide complete details containing names, addresses of the doctors who have accepted these gifts so that it could have facilitated the Revenue to recover the due taxes from them - AT
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Income Tax:
Scope of Section 43B - there is no difference between employees and employer contribution to PF and if such contribution is made on or before the due date of furnishing return of income u/s 139(1) - AT
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Service Tax:
Since the services of renovation and modernization were provided by the service provider in the form of works contract which is excluded from the definition of input service, Cenvat credit was rightly denied. - AT
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Service Tax:
The action of the appellant of suo motu omitting the portion of the refund claim not eligible for refund has only facilitated the department and does not vitiate the original refund claim - refund claim of for the remaining amount, on the basis of revised claim, is not time barred - AT
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Central Excise:
Demand of differential duty - misdeclaration of MRP on gas stoves - The MRP of the product on cartons was enough and does not require presence of gas stove in the carton. Gas stove in the carton is sufficient for the customer to know the MRP. - AT
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Central Excise:
Imposition of penalty - inadmissible availment/utilization of Cenvat credit in the name of Baddi unit - In the instant case, the ‘surrender’ is not voluntary and levy of penalty is justified - AT
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Central Excise:
Appellant have, suo motu, reversed the Cenvat credit under dispute along with the interest prior to the enquiry initiated against them by the Revenue and issuing the show cause notice. - No penalty - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (9) TMI 1047
Change in method of valuation of stock - from “lowest price during the year” to the “weighted average cost” formula - Held that:- So long as the change made by the assessee in his method of accounting is bona fide and amounts to a permanent arrangement to be followed, the Revenue has no cause to complain. The conclusion drawn by the Tribunal that the change in the method of valuation adopted by the assessee, namely, from “lowest price during the year” to the “weighted average cost” formula was not justified, is without any merit. - Decided against the Revenue. Allowance u/s 35B - Held that:- Packing expenses of goods exported did not qualify for an allowance under Section 35B(1)(b) of the Acy. See COMMISSIONER OF INCOME-TAX Versus ZENITH STEEL PIPES AND INDUSTRIES LTD. [2009 (1) TMI 242 - BOMBAY HIGH COURT] - Decided against the assessee.
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2016 (9) TMI 1046
Independent accumulation of income u/s. 11(2), besides accumulation of profit u/s. 11(1)(a) - Held that:- It has been brought to our notice from the details of application of funds in both the assessment years with the submission that application of fund is already more than 85%, therefore the issue of accumulation of fund u/s. 11(2) becomes academic and does not require any adjudication, as the CIT(Appeals) has already allowed the accumulation of fund as per the provisions of section 11(1)(a) of the Act. Therefore, we do not find it necessary to give a specific finding on a issue, whether accumulation of fund is further permissible after allowing accumulation of fund u/s. 11(1)(a) of the Act. Accordingly, this issue is disposed of for both the assessment years. Investment or deposit disallowed - Held that:- The mode of investment is given in sub-section (5) of section 11 for accumulating the fund. Investment or deposits of money can be made as per sub-section (5) of section 11 of the Act and clause (iii) says that for the purpose of sub-section (2), deposits can be made in any account of the Scheduled Bank or co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); meaning thereby, if the assessee makes investments or deposits in the scheduled bank and claims the deposits as accumulated for the purpose of section 11(1)(a) or 11(2), the investment or deposit cannot be disallowed only for the reason that application of money was not for the object of the society. We accordingly do not find any merit in the disallowance and direct the AO to treat the deposits in the scheduled bank as part of accumulation of fund as no disallowance can be made. Non-application of accumulation of fund within a specified period - Held that:- CIT(Appeals) has categorically observed that the accumulated fund was not applied for the objects of the society and if not applied, it is to be liable to be taxed in the previous year immediately following the previous year in which it was derived where it could not be applied to the specified purposes and the CIT(Appeals) has given directions that the said amount will be taxable in A.Y. 2009-10 and not in the current year. The CIT(Appeals) has taken into account the provisions of the Act and having noted that the accumulated fund was not applied for the specified purposes, he directed that this amount be taxed in the A.Y. 2009-10. Since we do not find any infirmity in the order of CIT(Appeals), we confirm the same.
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2016 (9) TMI 1045
Revision u/s 263 - allowability of additional depreciation on windmill - Held that:- The grounds mentioned by learned CIT in show-cause notice are different and the order passed by learned CIT u/s. 263 is based on another ground and therefore the assessee could not get opportunity to explain the point recorded at the time of passing the final order. Therefore we hold that the order passed by learned CIT u/s. 263 is bad in law and not sustainable in law. Therefore the same is quashed. Even, otherwise on the merits of the case, the ld. CIT(A) has held that this “windmill” was not used in any manufacturing activity. Therefore as per CIT this does not qualify for additional depreciation. From the afore mentioned reading we find that the only requirement of section is that the assessee should be engaged in the business of manufacture or production of any article or thing. This condition is clearly satisfied by the assessee who is engaged in the manufacture of pigments, HDPE etc. A close reading of the provision brings out that there is no requirement that the windmill should be used in any manufacturing activity. However, a windmill which generates power is itself engaged in the manufacturing of production of an article or thing. We found support from the judgement in the case of Associated Bearing Co. Ltd. vs. Commissioner of Income-tax (2005 (10) TMI 75 - BOMBAY High Court ) and Commissioner of Income Tax vs. Atlas Export Enterprise (2015 (3) TMI 846 - MADRAS HIGH COURT ). Therefore, while relying upon the judgement, we hold that the assessee clearly satisfied the conditions of section 31(1)(iia) and is entitled to the claim of additional depreciation in respect of wind mills. - Decided in favour of assessee
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2016 (9) TMI 1044
Unexplained cash credit - addition u/s 68 - Held that:- . The assessee was found to have made purchases on credit during the relevant previous year (f.y. 2005-06), which were unpaid by the year-end. Significant proportion of the same remaining unpaid even by 31.3.2008, i.e., two years hence, seriously impaired the genuineness of the credit/s. Neither the material adduced in support, nor the enquiries conducted or the incidents found, which are neither denied nor rebutted, further confirm and validate the inference of the same being bogus or mere accommodation entries. The law does not draw any distinction between one credit and another – on which basis principally relief stood allowed by the first appellate authority, so that any credit which is not satisfactorily explained could be deemed as income u/s. 68, which is essentially a rule of evidence, the basis of which is that an amount could be subject to tax on the ground that the assessee is a beneficiary of the said sum, so that it is for it to explain its’ nature and source. The question is of real versus apparent, which in view of sec. 68 casts the burden of proof on the assessee to prove that the apparent is real In the instant case, there is nothing to show the conduct of business by the ‘trade creditors’, with even their addresses remaining elusive, so that their being considered as regular traders, much less being in a position to extend credit, remains completely unproved. The credit was for an indefinite period, extraordinary by any count, well beyond the capacity of even a regular trader. The capacity as well as the genuineness aspect is completely unproved in the present case. The identity, which thus becomes of little consequence, could though be said to be satisfactorily explained in-as-much as the repayment is through account payee cheque and the firms being registered under VAT. Surprisingly, however, it is not known who the proprietors/partners of these firms are. Even so, the subsequent payments by cheque, however, could not be dismissed lightly, as it is prima facie indicative of an existing liability. Whether the bank account in which the cheques are banked are the regular accounts of the parties, etc., duly disclosed and forming part of the regular accounts, etc. are aspect that would require to be looked into. An accommodation entry, on the other hand, would normally be accompanied by withdrawal of cash, which is then recycled by the name lender to the payer. The matter requires factual determination, and for which the same is therefore, without any fetters, restored back to the file of the assessing authority. We decide accordingly. - Decided in favour of revenue for statistical purposes.
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2016 (9) TMI 1043
Validity of the initiation of the proceedings under Section 158BD - Held that:- Taking recourse with the block assessment u/s 158BD/158BG of the Act the preceding conditions are that firstly satisfaction must be recorded by the Assessing Officer of the searched person that any undisclosed income belongs to any person other than the person who has been searched u/s 132 of the Act and secondly documents or assets or books of accounts seized in relation to such other persons have been handed over to the Assessing Officer having jurisdiction over such other person. Examining the facts of the case in light of above discussion, we find that there is no dispute to this fact that no such satisfaction note was provided to the assessee which has been specifically mentioned by the Assessing Officer in his assessment order and also Revenue has not placed on record the copy of satisfaction note, if any, made. In all, the juncture at which proceedings u/s 158BD of the Act commenced for block assessment of a person other than the searched person, Assessing Officer completely failed to satisfy the provisions of section 158BD of the Act. We are, therefore, of the view that the impugned assessment order for the block period passed under section 143(3),r.w.s. 254 r.w.s. 158BD of the Act needs to be quashed in the given facts and circumstances of the case wherein no satisfaction has been recorded as per the provisions of section 158BD of the Act before framing the block assessment. We quash the block assessment order.- Decided in favour of assessee Addition u/s 68 - Held that:- Assessee has miserably failed to explain the cash credits appearing in the audited financial statements attached with the original return of income. The later submissions made by assessee that the previous audit report was fictitious (even when signed by independent audit) and the revised balance sheet audited by another auditor is correct, is not convincing. It seems that assessee is indulged into mal practices of fabricating books of accounts and depicting unrealistic financial data with a view to cheat the public and, therefore, deserves no mercy. We find no reason to interfere with the order of ld. CIT(A). The appeal of the assessee is dismissed on this issue. Unaccounted investment in shares - Held that:- Addition has been made in the block assessment of the assessee as well as on protective basis in the case of Renco Gears Ltd. Further Assessee has failed to substantiate with any material evidence which could prove that investment did not flow through the funds of assessee. From going through the facts discussed by ld. CIT(A) in his order, we find that investment in shares of Renco Gears Ltd. have been duly owned by the investor and the source of investment was from FCNR account with Dena Bank, Ambawadi, Ahmedabad and the impugned amount was given towards share application money through banking channel but later on these shares have been transferred to Jashwant Shan and Mrudula Shah. Surprisingly these two persons have denied the ownership of the shares. In such situation complete transaction looks doubtful. From going through the facts we are of the view that addition was rightly made for unaccounted investment - Decided in favour of revenue Investment in machinery - Held that:- Assessing Officer has completely ignored the facts so much so that all necessary details including purchase bills containing invoice no., date and amount, details of payment, which were made in the Financial Year 1993-94 itself and the sale consideration was received against the sale of these machines only. Therefore, when the source of investment in machines is proved, there cannot be any question mark on the sale consideration received against sale of machinery. Ld. CIT(A) has rightly deleted the addition - Decided in favour of assessee
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2016 (9) TMI 1042
Grant of registration U/s 12AA - denial of registration by holding that the objects of the society are not charitable in nature as they are for the benefit of particular group of persons and not for the benefit of public at large - the objects of the society are loud and are meant to help the retired advocates and also to the family of the deceased advocates - Held that:- We have gone through the records, the Advocates Act, 1961 and also appreciated the role of lawyer in the society. It is an admitted position in law that the advocates are officers of the court and even the public prosecutor or the advocates representing the government and its various departments are required to be registered under the Advocates Act, 1961. In our view, for the orderly behavior of the society and for the purposes of adjudication of disputes, the lawyers play an important role and the institution of the advocates cannot be dispensed with as they are helping the poor litigant to seek justice and get justice from the court of law. In our view, the advocates are discharging the public duties but incidentally they are also being paid for rendering those services either by the government or by the legal aid or by the litigant. This Court cannot be oblivious to the facts that there is no pension scheme flouted by any of the statutory bodies for the benefit of the lawyers’ community. In our view, the useful and public purpose would be served if the registration is granted to the assessee as sought by it. In our view, there is direct nexus between the duty discharged by the advocates and the public purposes and public utility. In view thereof, the assessee society is required to be granted registration. - Decided in favour of assessee
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2016 (9) TMI 1041
Disallowance of expenditure considering it as non-business expenditure being gifts given to Doctors - Held that:- We observe that assessee has duly accepted to have given the gifts on various items including mobile phone, jewellery, dinner set etc. to various doctors or maintaining cordial business relationship. We further observe that ld. CIT(A) has rightly observed that all these doctors are earning professional income in the course of providing professional services and they have received these gifts. We agree with this view that looking to the materiality of the amount which is ₹ 5,97,314/- it was necessary on the part of the assessee to provide complete details containing names, addresses of the doctors who have accepted these gifts so that it could have facilitated the Revenue to recover the due taxes from them. We find that assessee is unable to provide these details. Therefore, in the given facts and circumstances, we are of the view that ld. CIT(A) has rightly sustained the addition. We uphold the same and dismiss the ground of assessee. TDS u/s 194J - payments made to doctors as allowable without deducting TDS - disallowance u/s 40(a)(ia) - Held that:- Respectfully following the judgment of Hon. Delhi High Court in the case of CIT vs. Ansal Landmark Township (P) Ltd. (2015 (9) TMI 79 - DELHI HIGH COURT) and Rajeev Kumar Agarwal vs. Addl. CIT (2014 (6) TMI 79 - ITAT AGRA) wherein it was held that the second proviso to section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 01.04.2005, we restore this issue to the file of Assessing Officer with the direction that assessee shall provide before him all the details with regard to the recipients of the income of having received ₹ 53,41,049/- and taxes paid by them. We further direct the Assessing Officer to carryout necessary verification in respect of the payments and taxes of such income and also filing of income-tax return by the recipients. Needless to mention that adequate opportunity will be provided to the assessee for filing necessary details to show that the said recipients have reflected the receipts in their books of account and offered the same to tax in the period under consideration. In case the Assessing Officer finds that the recipients have duly paid the taxes on the income, the addition made by the Assessing Officer shall stand deleted. This ground of assessee is allowed for statistical purposes.
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2016 (9) TMI 1040
Additions towards belated payment of employees’ contributions to PF - whether the assessee would be entitled to claim deduction for the employees’ contribution made to PF after the due date prescribed under the PF Act, but before the due date prescribed for filing of income tax return in the light of the provisions contained in section 36(1)(va) of the Act and section 43B(b) of the Act? - Held that:- Under the said Act, the employer shall contribute both employees and employer share along with administrative charges before the due date specified under the PF Act. The Act prescribed only one due date for depositing the contribution i.e. 15th of subsequent month with the grace period of 5 days which indicates that there is no difference between employee and employer contribution. If the legislature intends to differentiate employees and employer contribution, then there would have been two due dates like in the case of Income Tax Act. Therefore, from the above, it is clear that the Provident Fund Act does not differentiate employees and employer contribution and contribution means both employees and employer contribution under the PF scheme. Section 43B of the Act provides for certain deductions to be allowed only on actual payment basis. Sub clause (b) of section 43B of the Act covers any sum payable by the assessee as an employer by way of contribution to any Provident fund or superannuation fund or gratuity fund or any other fund for the welfare of the employees. The proviso to section provides that any sum paid by the assessee on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made under the provisions of section 43B of the Act. A careful consideration of section 43B of the Act, it is clear that an extension is granted to the assessee to make the payment of PF contributions or any other fund till the due date of furnishing return of income u/s 139(1) of the Act. Therefore, in our opinion, there is no difference between employees and employer contribution to PF and if such contribution is made on or before the due date of furnishing return of income u/s 139(1) of the Act, then deduction is to be allowed under the provisions of section 43B of the Act. Considering the facts and circumstances of this case and also following the judicial precedents as discussed above, we are of the view that there is no distinction between employees’ and employer contribution to PF, and if the total contribution is deposited on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made towards employees’ contribution to provident fund. The CIT(A) after considering the relevant details rightly deleted the additions made by the A.O. We do not see any reasons to interfere with the order of the CIT(A). Hence, we inclined to uphold the CIT(A) order and dismiss the appeal filed by the revenue. - Decided in favour of assessee
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2016 (9) TMI 1039
Recovery proceedings - valid debtor - Held that:- M/s. N.K.Industries Ltd. waived its rights under agreement dated 02.09.2011 and subsequent agreement dated 05.01.2013 and also waived execution of the sale deed. In turn, M/s. Banpal Oil Chem Pvt. Ltd agreed to return consideration of ₹ 10.75 crores already paid by M/s. N.K.Industries Ltd. and M/s. N.K.Industries Ltd. withdrew the suit for specific performance from the civil court. We notice that in the earlier portion of this agreement there is a wrong reference to the terms of the agreement dated 09.04.2015. This, however, would not be of any consequence since the latest agreement dated 23.07.2015 is clear in all material terms and essentially brings about an end to the relationship between M/s. N.K.Industries Ltd. and M/s. Banpal Oil Chem Pvt. Ltd. That being the position, the Tax Recovery Officer was not correct in contending that M/s. N.K.Industries Ltd. owed any amount to M/s. Banpal Oil Chem Pvt. Ltd which can be recovered directly for the tax dues of M/s. Banpal Oil Chem Pvt. Ltd. The impugned order dated 10.06.2016 is, therefore, set aside. We make it clear that if the department has any recovery to be made either against M/s. Banpal Oil Chem Pvt. Ltd or M/s. N.K.Industries Ltd., it is always open for them to proceed in accordance with law.
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2016 (9) TMI 1038
Reopening of assessment - deduction under Section 80IB - Held that:- The claim of deduction under Section 80IB of the Act was examined by the Assessing Officer. The matter was verified from the records and only thereafter the claim was accepted as it is. It may be that in the process, the Assessing Officer committed an error in allowing deduction with respect to several amounts which may not be eligible for such deduction. The erroneous decision of the Assessing Officer is widely different from nonconsideration of an issue at the time of assessment. It therefore cannot be stated that this issue was not scrutinized by the Assessing Officer during the original assessment. Disallowance of interest expenditure - objection of audit party - Held that:- On the vital issue of disallowance of interest expenditure, the Assessing Officer was not convinced about the audit objection. She gave her brief but precise reasons for her stand. In the case of Indian and Eastern Newspaper Society V/s Commissioner of Income-Tax, New Delhi [1979 (8) TMI 1 - SUPREME Court] held that the opinion of the audit party on a point of law cannot be regarded as information enabling the income tax officer to initiate reassessment proceedings. In the same judgment, however, it was clarified that the audit party does not possess the power to pronounce on the law, it nevertheless may draw the attention of ITO to it. In case of Commissioner of Income-Tax V/s P.V.S.Beedies Pvt.Ltd.,[1997 (10) TMI 5 - SUPREME Court] it was found that the audit party had merely pointed out the fact which was overlooked by the income tax officer in the assessment. It was observed that there is no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening the case on the basis of factual error pointed out by the audit party is permissible under the law. The present case falls in the former category where the audit party not only brought a certain issue to the notice of the Assessing Officer but compelled her to issue notice of reopening despite her clear opinion that the issue was not valid and that there has been no escapement of income on the grounds so urged by the audit party. - Decided in favour of assessee.
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2016 (9) TMI 1037
Reopening of assessment - netting of interest for deduction under section 80P(2)(d) - Held that:- The petitioner had filed full details of such interest income along with the return itself along with the interest expenses. If the Assessing Officer was of the view that the same was not in order, he could have disallowed part of the claim. At any rate, this cannot be a ground for reopening the assessment beyond a period of four years since it cannot be stated that the petitioner had not disclosed true and full facts. Escapement of income as per the provisions of section 50C - Held that:- The contention of the petitioner that the Assessing Officer was aware about such difference in two valuations based on the letter dated 28.11.2007 cannot be accepted. The said letter was written not by the Assessing Officer but by the investigation wing of the department which was till then, on prima facie information available, was inquiring further in this respect. It was in this background the Assistant Director of Incometax (Inv), Surat, conveyed to the petitioner that the value of the property mentioned in the sale deed is lower than the value adopted by the stamp valuation authority. The petitioner was therefore, asked to explain whether capital gain was computed on the basis of section 50C of the Act. If yes, the petitioner would submit evidence, if no, the petitioner to show cause why adverse inference should not be drawn. This letter was received by the petitioner on 4.12.2007. On 6.12.2007, it appears that the purchaser of the land had in respect to a similar letter from investigation wing contended that the Government approved valuer had assessed rate of land at ₹ 275/per square meter at which the land was sold. It was further pointed out that stamp valuation authority had earlier adopted market value of ₹ 1.42 crores but after objection reduced it to ₹ 71.07 lacs which would show that no proper parameters had been adopted. As noted, the petitioner had also replied separately to the said authority under letter dated 2.1.2008. The stand of the petitioner in such reply was rather vague and general. The petitioner did not deny the higher valuation adopted by the stamp duty authority or application of section 50C of the Act but merely generally and vaguely opposed any proposal for action. . In reply to this, the petitioner again made similar averments without drawing any further light on why the petitioner had not disclosed such development or offered capital gain on the basis of such higher computation. In our opinion, the petitioner thus failed to discharge duty of true and full disclosure. On the first ground, therefore, the notice for reopening is valid.
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2016 (9) TMI 1036
Entitlement to claim of deduction under Section 80HHC - Mandates filing of an audit report - Held that:- Tribunal simply observes that an audit report specifies the amount of rebate allowable at ₹ 6,00,410/- on the basis of the amount received in the country in convertible foreign exchange, but the Tribunal is also silent about any audit report in reference to ₹ 1,07,33,971/- and simply observes that the said claim of ₹ 1,07,33,971/- was claimed as per computation of total income while filing the return of income and merely because the claim was made in the computation of total income, in our view such a finding is wholly perverse and not sustainable. We disapprove the manner in which the claim has been allowed by the Tribunal on the basis of computation of total income alone and in not even uttering a word about the audit report to claim deduction for an amount of ₹ 1,07,33,971/-. Merely because claim is allowable as per computation of income, is no reason to allow when sub-clause (4) of Section 80HHC mandates filing of an audit report in support for claiming deduction. Accordingly, the Tribunal erred in allowing deduction under Section 80HHC - Decided against assessee
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2016 (9) TMI 1035
Differential value of stock - value as submitted before the banking authorities for procurement of credit facility visavis stock disclosed in the books of accounts - Held that:- Having considered the decision in case of Nangalia Impex (2014 (11) TMI 1092 - GUJARAT HIGH COURT), this Court is of the opinion that the stock register which was maintained by the assessee; entries of which have been reflected in the Books of Account and the said aspect has been accepted by the authorities below and therefore, the view taken by the tribunal is just and proper in deleting the addition made on account of differential value of stock as submitted before the banking authorities for procurement of credit facility visavis stock disclosed in the books of accounts. - Decided against revenue
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2016 (9) TMI 1034
Penalty u/s 271(1)(c) - fictitious book entry & cash payments of labour expenses - difference in turnover - Held that:- We find that the additions i.e. fictitious book entry & cash payments of labour expenses respectively as disallowed by A.O. on assumption basis and the same was restricted by CIT(A) to the extent of 25%. Against the order of the CIT(A), when revenue carried the matter in appeal before the ITAT in the assessee’s own case, ITAT has observed that the CIT(A) has examined each and every aspect of the claim of the expenses raised by the assessee. No specific defect has been pointed out in the order of the CIT(A) and hence found no infirmity therein and accordingly confirmed the order of the CIT(A). In view of the above, we find that the disallowance sustained for the assessment years 2005-06 as well as 2006-07 is only on assumption basis, therefore, no penalty can be levied. Therefore, we find no infirmity in the order passed by the Ld. CIT(A). In so far as difference of turnover is concerned, during the course of the assessment proceedings, the A.O. has asked the assessee to reconcile the difference of ₹ 2,91,964/- being the difference between the net project turnover which is of ₹ 4,00,00,304/- and the turnover reflected in the books of accounts of ₹ 3,97,08,340/-. The assessee was not able to substantiate the difference and paid taxes accordingly. In our opinion, the difference in turnover is neither amounting to concealment nor filing of inaccurate particulars. On this count, no penalty can be levied. This ground of appeal raised by the revenue is dismissed. - Decided in favour of assessee
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2016 (9) TMI 1033
TDS u/s 194C - non deduction of tds on payments in respect of lorry freight - Held that:- Assessing Officer should be furnished with Permanent Account Number of lorry owners, which is mandatory requirement for not deducting of TDS and further the ld. Commissioner of Income Tax (Appeals) order does not refer the said provision, considering the apparent facts, provisions of law, we are of the opinion that the ld. Assessing Officer has to examine the nature of expenditure and provisions under 194C(6) of the Act and collect information of lorry owners and pass the order on merits after providing adequate opportunity of being heard to the assessee. The ground of the assessee is allowed for statistical purpose. Disallowance u/s 40A(3) - Held that:- The payments to the small farmers by cash other than account payee cheques was never doubted by the Revenue. The assessee is following prevailing business practice from earlier years. Further, provisions of Sec. 40A(3) of the Act must not be read in isolation or exclusion of Rule 6DD of Income Tax Rules, 1962. The section must be read alongwith Rule and on reading together, it is very clear that provisions are not intended to restrict the business activities. The ld. Assessing Officer cannot restrict the Business of the assessee on application of the Rule 6DD, further the provisions of Sec. 40A(3) of the Act empowers the ld. Assessing Officer to disallow deduction claimed as expenditure were payments are not by account payee cheque/draft. The ld. Assessing Officer should analysis the payments either by Crossed Cheque or Bank Draft and ascertain whether the payments are genuine considering business expediency, genuineness and bonafide peculiar transactions of the business. The assessee makes cash payments in the circumstances as per the intention of the farmers/supplier who transact on cash basis and no credit facility is available in the villages. So, considering the apparent facts and nature of business of the assessee and purchase of country coal from small farmers who are illiterate and does not have permanent place of Business and also vendors deliver country coal at the working site of assessee. We support our opinion with the decision of Anupam Tele Services vs. ITO (2014 (2) TMI 30 - GUJARAT HIGH COURT ) and set aside the order of the Commissioner of Income Tax (Appeals) and delete the addition made by the ld. Assessing Officer on this ground. - Decided in favour of assessee Disallowance of salary - Held that:- The ld. Commissioner of Income Tax (Appeals) considering the volume of business and CFA activities has granted partial relief to the assessee but sustained ₹ 1,68,000/- as excess salary paid. We on perusal of material found that neither the ld. Assessing Officer nor ld. Commissioner of Income Tax (Appeals) has brought on record any cogent material or evidence or comparables in respect of same line of business in support of the Revenue. So, considering the inflation rate, commercial expediency and employees working conditions we are of the opinion that the order of Commissioner of Income Tax (Appeals) cannot be sustained on the ground and we direct the ld. Assessing Officer to delete the addition of ₹ 1,68,000/- - Decided in favour of assessee
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2016 (9) TMI 1032
TDS u/s 195 - Disallowance u/s 40(a)(i) - Held that:- The assessee has acted under bonafide belief that no tax has to be deducted at source on these payments. Apart from the bonafide belief the Hon’ble ITAT has further held that as per para 4(b) of Article 12 of Indo-US DTAA fees for included services means “If such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the developments and transfer of a technical plan or technical design”. Since in the present case the training was given to pilots and other staff as per the requirement of the DGCA Rules therefore, training was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term “service make available.” Ld. CIT(A) has rightly held that the disallowance u/s 40(a)(i) is not justify as per the facts of the present case and the same was rightly deleted. Considering the totality of the facts and circumstances of the present case, we are of the view that the learned CIT (A) has passed a reasonable and judicious order. Therefore, we find no reason to deviate from or interfere with the findings of the learned CIT (A). Accordingly, we uphold his order. These grounds of appeal of the revenue stand rejected. TDS deductable for reimbursement of expenses - Held that:- We have noticed that in the assessment order it has been categorically mentioned that mobilization of expenses of ₹ 43,90,000/- were paid to Canada Inc. for acquiring the aircrafts on lease. Mobilisation expenses pertain to expenses incurred on bringing the aircraft from the Country of Lessor to India and hence they are in the nature of expenditure incurred for acquiring the aircrafts as they are covered in the specific lease agreements with the Lessors. We have also perused the orders of CIT(A) where in para number 3.1 of the CIT(A). There is reference of order for previous year wherein it has been categorically mentioned that the TDS was not deductable for reimbursement of expenses by the assessee accompanied for transporting/mobilizing the helicopters in India and in the absence of any embedded income in the reimbursement of these expenses, the question of deducting TDS does not arise. Considering it we are of the view that the learned CIT (A) has passed a well reasoned and judicious order. Therefore, we find no reason to deviate from or interfere with the findings of the learned CIT (A). Accordingly, we uphold his order. This grounds of appeal of the revenue stand rejected.
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2016 (9) TMI 1031
Application of the trust for registration u/s.12A rejected - obligation on the trustees on applying income / funds of the applicant trust solely for charitable purposes - Held that:- On appraisal of the all mentioned objects we found nowhere commercial in nature. So far as the clause 9 of the Act is concerned it speaks about the discretion of the trustees only to select any object of the trust. The trustees have no discretion to apply the income outside the object which is not within the scope of trust. No doubt this clause speaks about the discretion to use their discretion in connection with the object of the trust. It is to be seen whether in view of the above said objects the application moved by the trust is liable to be rejected or not. This controversy can be looked into at the time of assessment. It is liable to be considered whether the assessee is entitled for the exemption u/s.12A of the Act or not. In brief the allowability of the deduction u/s.11 and 12 of the Act is to be looked into by the Assessing Officer while completing the assessment in the hand of the assessee at the relevant time. The said violation of the trust if any on account of provision u/s.13(1)(b) of the Act are not required to be considered by the authority while granting registration u/s.12A of the Act. In view of the said circumstances we are of the view that the rejection of the application of the assessee is wrong and against the law and facts, therefore, the order passed by the authority in question is ordered to be set aside. We direct the concerned authority to re-examine the matter afresh and to decide the same in view of the observation made above by giving an opportunity of being heard to the assessee in accordance with law. - Decided in favour of assessee
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2016 (9) TMI 1030
Disallowance of “Speculative Loss” - Held that:- CIT(A) has rightly held that the payment made by the assessee for breach of contract after the expiry date is a normal loss incidental to the business of the assessee and not a speculation loss within the meaning of section 43(5) of the Income Tax Act, 1961. Hence, we uphold the well reasoned order passed by the Ld. CIT(A) on the issue in dispute and accordingly, dismiss the Appeal filed by the Revenue.
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2016 (9) TMI 1029
Applicability of section 11(1A) - investments in new capital asset - investments out of advance of sale receipts being eligible for deduction u/s 11(1A) - Held that:- The provisions of Section 11(1A) are clearly applicable in facts and circumstances as neither the assessee has been held to be noncharitable entity nor the new assets have been held to be purchased for purposes other than charitable nor it has been held that the new assets are not qualified for such deduction. It reveals that the assessee society has sold two properties on 31.3.2010 but claiming to have received advance against these sales, the assessee has claimed to have made investments in new capital asset in form of FDs and New Building at Shalimar Garden-II, Village Pasonda to be used for running school and has claimed deduction u/s. 11(1A) out of capital gains arising on sale of assets. The case of assessee is covered squarely by the decision of Mumbai ITAT decisions in the case of Shri Ramnagar Trust vs. Third ITO (1985 (2) TMI 75 - ITAT BOMBAY-E ) and ITAT as regards investments out of advance of sale receipts being eligible for deduction u/s 11(1A). Also find that Ld. CIT(A) has rightly held that when the advance was given for new capital asset and FDs were purchased, the assessee had not received commensurate advance out of sale consideration. It is noted that when assessee paid advance of ₹ 21 Lacs for purchase of new asset, it had received only ₹ 6 lacs towards sale consideration. Similarly, when FDs were purchased for ₹ 30 Lac, it had received another sum of only ₹ 20 Lacs advance out of sale consideration. Thus only ₹ 26 Lacs could be said to have been invested out of advance received out of sale consideration. As per provisions of Section 11(1A)(a), the capital gain deemed to applied for charitable purposes would be the sum invested (Rs. 26 lacs in this case). The cost of asset sold (which is ₹ 551000/- in this case). Hence, the allowable deduction is only ₹ 20,49,000/- which the Ld. CIT(A) has rightly deleted and addition of ₹ 13,26,400/- was rightly sustained as per provisions of Section 11(1A)(a)
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Corporate Laws
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2016 (9) TMI 1050
Sanction of the scheme of amalgamation - Held that:- The scope of the Company Court sitting over an application for sanctioning of amalgamation on an application under Sections 391 and 304 of the Act of 1956 is supervisory in nature and limited to ensure that in the process there is no violation of any statutory rule or prejudice to public interest. From the affidavit submitted by the Regional Director and the report of the Official Liquidator, on notice being sent to them on second motion under Sections 391 and 394 of the Act of 1956, it is quite apparent that no ground for denying the scheme of amalgamation is made out in the present case. The issue of Income Tax Clearance, to my mind, is a matter which does not directly flow from the language of Section 391 of the Act of 1956. Income Tax liability is a matter distinct from manner of carrying out of business. Income tax liability would hold as per law both for the period prior to the sanction of the scheme and thereafter. Even otherwise under the circular dated 15-1-2014, non response to the Regional Director's letter is required to be considered as a presumption that the Income Tax Department has no objection to the action of the merger/ demerger as the case may be under Sections 391-394 of the act of 1956. Having examined the scheme of amalgamation, this court find nothing prejudicial to the interest of creditors, members of both transferor companies and the transferee company or to public interest. All required procedures had been followed.
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2016 (9) TMI 1049
Bidding procedures - extension of time to deposit the balance 75 % of the bid amount within 60 days from the date of acceptance of the bid - auction sales - Held that:- It is true that once the appellant has voluntarily participated in the auction as per the terms & conditions knowing it fully well certainly he could not make any claim or raise grievance at the same time it also depicts from perusal of clause-12(iii) of the terms and conditions of auction that the Ld. Company Judge reserves its discretion to extend facility of payment of the remainder amount in monthly installments if considers proper in the given facts and circumstances. Keeping in view the surrounding circumstances and the fact that if the property is now put to re- auction as pleaded by the respondents it may take another six months and with a man of ordinary prudence the price which has been fetched in the present auction there is no possibility to fetch this price within a span of six months at the same time the official liquidator has informed to this Court that the total expenditure incurred from the office of official liquidator in preparation of the valuation report and the publication of the auction notice of the subject property in question including other ancillary charges is approx. ₹ 12 Lakhs and taking the matter in totality & the fact in particular that the appellant is ready & willing to deposit the remainder of 75% along with interest @ 24% within the time which this Court may consider appropriate, in our considered view the appellant deserves indulgence to deposit the remainder of 75% of the auction sale with interest @ 24% within a period of seven days invoking clause 12(iii) of the terms and conditions of the auction notice. Accordingly, in the light of what has been observed above while setting aside the order of the Ld. Company Judge impugned dt.13-5-2016, we grant opportunity to the present appellant to deposit the balance ₹ 53,62,500 (75% remainder) + ₹ 3,93,250 (interest @ 24% for the period from 16-5-2016 to 4-9-2016)= total ₹ 57,55,750 positively within seven days from today with no further extension and we make it clear that if the appellant makes the compliance as per the terms indicated the respondent may complete the process in terms of the tender notice dt.13-2-2016 and if the appellant fails to carry out the arrangement (supra) within the stipulated period, the respondents will be at liberty to proceed further in reference to the subject property in question including re-auction, if so advised
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Service Tax
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2016 (9) TMI 1060
Refund claim - THC, MT TSC, Documentation Charges, Handling Charges - whether to be covered under port service as the service provider are registered under different category of services and proof of deposition of tax under port service not produced - Held that:- in the case of Adani Enterprises [2014 (11) TMI 973 - GUJARAT HIGH COURT], the Hon’ble Gujarat High Court have held that different services provided within the port shall merit consideration for refund in terms of Notification 41/2007-ST dated 6.10.2007. We find that the CBEC vide Circular dated 26.02.2010 has clarified that irrespective of the classification of service provided by the service provider, if the services are related to port service, the same shall be considered for benefit of refund in terms of the Notification dated 06.10.2007. Refund claim - service tax paid on freight for transportation of goods from ICD to Port of export - Held that:- we find that such service specifically covered under serial No. 6 in the schedule appended to the Notification dated 06.10.2007. We also find that the Commissioner (Appeals) has not recorded any specific findings in disallowing the cenvat benefit on this account. Therefore, the refund is allowed. - Decided in favour of appellant
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2016 (9) TMI 1059
Cenvat credit - various services of repairs, renovation and modernization of the premises - service provider has categorized the services under work contract service and discharged the service tax liability - Held that:- the service provider provided the services under the head of work contract service and discharged the service tax liability accordingly. Therefore, the service which is received by the appellant is of works contract service though it is for the purpose of renovation and modernization of the premises. The appellant is not entitled for Cenvat credit. There cannot be different yardstick for the purpose of classification of service at the service providers and classification of the same service in the recipient end. It is pertinent to note that if as per nature of service, Cenvat credit is decided then exclusion clause provided to ‘works contract service’ in the definition of input service will become redundant for the reason that in ‘works contract service’, the nature of service involved is like, renovation, repairs, construction, erection, installation and like. These individual service may be input service but if the same service is provided in the forum of ‘works contract service’, the same will fall under exclusion clause. In the present case, since the services of renovation and modernization were provided by the service provider in the form of works contract which is excluded from the definition of input service, Cenvat credit was rightly denied. - Decided against the appellant
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2016 (9) TMI 1058
Condonation of delay in filing appeal - appellants shifted from Bareilly to delhi so could not get to know about the OIO which was sent to their old address of Bareilly and served on the guard or the caretaker, who neither understood importance, nor intimated to the Members of the AOP - appellant has filed this appeal within 90 days from the date of knowledge - Held that:- it is found that there is no proper service of the impugned order on the appellant by the service made on the guard/caretaker, who is neither an employee or Member of the AOP, nor an authorized person. Accordingly, in terms of Section 37C of the Act, there is no proper service of the impugned order. We further hold that the appellants have filed appeal within time from the date of knowledge of the impugned order being 3-8-2015. - Delay condoned and appeal admitted
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2016 (9) TMI 1057
Refund claim - whether 7-11-2014, the date on which the original refund claim was filed, should be considered as the date of filing the refund claim, or the date of filing the revised application which is on 8-2-2015 should be the relevant date - Held that:- it is observed that the original refund claim was submitted within the time limit prescribed. The appellant filed a revised claim after a couple of months realising that there was some wrong calculation/error in the original refund claim, in the sense that items and serial numbers from 7 to 18 was not eligible for the refund. Therefore, they omitted the same and filed a revised claim for a lower amount. We find the action of the appellant bona fide. The said action of the appellant does not in any way negate the original refund claim which was filed within the time limit. If the appellant had not come forward and had suo motu omitted the said portion of the refund claim, which were not eligible for refund, the department would have rejected the said portion of the refund claim and would have sanctioned the refund for the balance portion of the refund claim. Therefore, the action of the appellant of suo motu omitting the portion of the refund claim not eligible for refund has only facilitated the department and does not vitiate the original refund claim. Hence, the decision of the lower authorities to hold that a portion of the refund claim amounting to ₹ 1,80,290/- is barred by limitation on the ground that the revised claim was filed after the prescribed time limit is unfair, unjust and not sustainable. It is observed that the original refund claim filed on 7-11-2014 included this amount also, and was filed within prescribed time limit. - Appeal allowed by way of remand
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Central Excise
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2016 (9) TMI 1056
Demand - differential duty - misdeclaration of MRP on gas stoves - stock of goods of the relevant period i.e. 1998-99 has been seized from anywhere showing MRP at higher level than that was declared by the noticee - evidence of sale of the excisable goods to consumers at prices higher than declared to the Department - statements of the authorized signatory Shri Sandeep Jain taken. It may mention that gas stoves fall under Chapter sub-heading 7221.10 of the Schedule to the CETA, 1985. The law requires that Maximum Retail Price has to be declared on the packages of subject goods and correct duty payment is to be accordingly made. But in the instant case, two sets of stamps were kept by the appellant. The plea taken by the appellant is indeed vague. The background of the matter is that the appellant has been charged for evasion of duty by violating law, that specifically relate to the payment of duty on the MRP value of the excisable goods which has been admittedly violated in the statements recorded under statutory provisions. In such background, the cartons and stamps found are critical piece of evidence for the detected evasion and that support charges against the appellant. The MRP of the product on cartons was enough and does not require presence of gas stove in the carton. Gas stove in the carton is sufficient for the customer to know the MRP. Therefore, we find no reason to interfere with the impugned order. The same is sustained. - Decided against the appellant
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2016 (9) TMI 1055
100% EOU - Excisability - cut flowers - demand - cut flowers cleared to DTA without informing to the department, without taking permission from the Development Commissioner and without discharging duty liabilities - Held that:- it is found that the issue and methodology of charging duty on articles allowed to be cleared inter alia from a EOU, into DTA is now been said to rest with effect from 18.05.2001 by way of amendment in Notification No. 126/94-Cus. However it is seen that the period of dispute in the present appeal is from 1997-98 to 2001-02 during which period the unit made DTA clearances of cut flowers and on which the order in original had inter alia confirmed demand, which on appeal was set aside by the Commissioner (Appeals). Therefore, prior to the amendment with effect from 18.05.2001 to Notification No. 126/94 dated 03.06.1994 there cannot be any duty charged for the said DTA clearances of cut flowers for the reason that flowers are not excisable under the Central Excise Tariff supported by various case laws. For the period of dispute, after 18.05.2001, in the present case on such clearances of cut flowers customs duty will be liable to be paid, equal in amount to that leviable on the inputs, if any, that have gone into the production or packaging of such flowers. The matter is therefore remanded to the original adjudicating authority to re-work the duty liability in case any inputs obtained by assessee as per the notification. - Appeal allowed by way of remand
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2016 (9) TMI 1054
Refund claim - out of the refund of approximately ₹ 91.99 lakhs,Commissioner (Appeals) allowed the refund claim of ₹ 75 lakhs - goods were assessed provisionally - duty paid under protest - unjust enrichment has not been properly satisfied by the appellant-assessee - Held that:- this has no merits inasmuch that there is no dispute that the clearances affected by the appellant-assessee had been under provisional assessment as per Rule 9B of the erstwhile Central Excise Rules, 1944. Under the said Rule, an assessee can seek provisional assessment and on finalization, either excess duty paid by him has to be refunded or short payment has to be paid by him to the Government. The factor of satisfying that unjust enrichment does not arise on the finalization of the provisional assessment was brought into Rule 9B in the year 1999. It is undisputed that the refund claims were filed by the appellant in 1991. The law is now settled that the provisions of Rule 9B before the amendment of bringing the question of unjust enrichment cannot be applied for rejecting the refund claims arising out of provisional assessment. On this ground, we hold that the Revenue's appeal is devoid of merits and is rejected. Reversal of Modvat credit - inputs used in manufacture as intermediate products were exempted from payment of duty - Held that:- the appellant-assessee had used this credit for discharging the duty liability on the intermediate products which were held subsequently as non-excisable/ non-dutiable but further consumed in manufacture of final product "chopped strand mat" which is excisable. Therefore, having paid the duty and provisional assessment being finalized in their favour, we hold that the impugned order to the extent challenged by the appellant-assessee is liable to be set aside. - Decided against the Revenue
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2016 (9) TMI 1053
Imposition of penalty - inadmissible availment/utilization of Cenvat credit in the name of Baddi unit - documents issued by the head office and Baddi branch as distributor of services - Baddi was a tax free zone and therefore, goods manufactured by the assessee in their Baddi unit were exempted from payment of duty - appellant paid inadmissible credit voluntarily - Held that:- the assessee had deposited the amount only when based on specific information , the Department caught them. Had there being voluntary payment on the appellant's part, without any action on the part of the Department, they might have deposited the said amount earlier. It may mention that the assessee had already accepted their guilt by depositing the excise duty. The case is not fit for reduction of penalty to any extent. In the instant case, the ‘surrender’ is not voluntary and levy of penalty is justified as per the ratio laid down by Hon’ble Supreme Court in the case of UOI vs. Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT]. - Decided against the appellant
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2016 (9) TMI 1052
Invokation of extended period of limitation - Imposition of penalty - Cenvat credit disallowed on goods, namely angles, plates, channels and joists - no documentary evidence that goods used as inputs or capital goods for manufacture of welding electrodes - period June, 2006 to March, 2007 - appellant is in appeal on the ground that in view of the finding of ld. Commissioner (Appeals) that there is no malafide and/or contumacious conduct on the part of the appellant, extended period of limitation is also not available to revenue as the whole demand relate to the period beyond one year from the date of show cause notice being 27.1.2009. Held that:- I am satisfied that the extended period of limitation is not invokable in the facts and circumstances of the case. Accordingly I hold that the Show Cause Notice is bad and the impugned order is set aside to the extent it have confirmed the disallowance of Cenvat credit for ₹ 2,30,256/-. - Decided in favour of appellant with consequential benefits
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2016 (9) TMI 1051
Invokation of extended period of limitation - Cenvat credit - appellant purchased input-Scrap i.e. SS Scraps from a first stage dealer namely, Khmeshwar Enterprises who was involved in passing fraudulent credit by trading in excisable goods namely Metal Scrap - seeking cross examination of witness of the Revenue - appellant contended that they are not aware, if Khameshwar Enterprises have supplied them some other scrap or non-duty paid scrap and passed on illegitimate credit - suo motu, reversal of duty with interest by the appellant. Held that:- it is found that the appellant has admittedly paid the duty on the inputs in question by cheque. Further, no case of collusion is made out against the appellant. I further take notice of the fact that the case of Revenue is based on the statements of the said Rakesh Agarwal of Khameshwar Enterprise & others, and Revenue have failed to offer its witness for cross-examination in spite of prayer having been made by the appellant. This has resulted into miscarriage of justice for not giving any reasonable opportunity of hearing. Further, in view of the findings of the Ld. Commissioner (Appeals), we find that the appellant seems to have received some scrap along with the duty paying document, also establishes the absence of collusion and or mala fide on the part of the appellant. I also take a notice of the fact that the appellant have, suo motu, reversed the Cenvat credit under dispute along with the interest prior to the enquiry initiated against them by the Revenue and issuing the show cause notice. Therefore, I hold that no case of contumacious conduct or fraud, is made out against the appellant. Hence, the penalty imposed under Rule 15 of CCR read with Section 11 AC of the Act is set aside. Also, the appellant will not be entitled to take re-credit of the amount reversed by them, suo motu. - Decided partly in favour of appellant
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Indian Laws
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2016 (9) TMI 1048
Exemption from taxation - use of property - control of the premises - titles to the property - Held that:- It is clear that the property which is constructed is in the ownership of the Government of India but land and the possession is with the Food Corporation of India and they are enjoying the property, no sovereign function is done on the land in question. The land which is allotted to the Food Corporation of India is on creation of the statutory authority and complete department has been handed over to the petitioner-Corporation. From the record, it seems that the Corporation is in complete control of the premises and are enjoying the fruits of the property. Taking into consideration the basic object of the tax statute, property is taxed on the enjoyment of the rights of the property and Food Corporation of India is enjoying the property. Merely because technically titles are not clear, the Food Corporation of India cannot be granted exemption of taxation.The contention raised by the petitioner is misconceived and is liable to be rejected.
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