TMI Tax Updates - e-Newsletter
January 12, 2015

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. No question of limitation arise when application filed after a long time for persuasion of sanctioned refund claim

   By: Bimal jain

2. SERIOUS FRAUD INVESTIGATION OFFICE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government Approves Twelve (12) Proposals of Foreign Direct Investment (FDI) Amounting to Approximately ₹ 1827.24 Crore

Circulars / Instructions / Orders

VAT - Delhi

1. 21/2014-15 - dated 8-1-2015

Filing of reconciliation return for the year 2013-14.

Highlights / Catch Notes

Income Tax

• High Court: Suspicion Alone Insufficient for Penalty u/s 271D; Thorough Investigation Required for Cash Loan Violations.

  Case-Laws - HC : Penalty under Section 271D - violation of Section 269-SS - surrender of income - Receipt of Loan in cash - There is suspicion but this alone without further verification and investigation cannot justify the finding that the respondent-assessee had taken loan/deposit in cash. - HC
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• Loans to Shareholders Aren't Deemed Dividends if Exchanged for Benefits to Company Under Income Tax Act.

  Case-Laws - HC : Deemed dividend - If such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act - HC
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• High Court Allows Deduction u/s 80IA(4) for Container Freight Station; Revenue's Argument Rejected.

  Case-Laws - HC : Deduction u/s 80IA(4) - revenue contended that assessee had not developed the infrastructure facilities as it was only a custodian for the movement and handling of all containerized import/export consignment in Container Freight Station - Contentions rejected - deduction allowed - HC
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• Interest Deduction u/s 36(1)(iii) Applies to Business Borrowing, Regardless of Asset Type Acquired.

  Case-Laws - HC : Disallowance of Interest u/s 36(1)(iii) - Section 36(1)(ii) of the Act makes no distinction between money borrowed to acquire a capital asset or a revenue asset and that all that the section requires is that that the assessee must borrow capital and the purpose of borrowing must be for business - HC
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• CIT's Objection Overruled: Section 288(2) Not Relevant for Registration u/s 12A.

  Case-Laws - HC : Registration u/s 12A - according to the CIT the auditor does not conform to the definition of accountant in terms of explanation below section 288(2) - The said Seciton has nothing to do in case of grant of registration u/s. 12A - HC
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• Court Rules Taxpayer's Expense Claims Valid Despite Lack of Prior Records Due to 1998 Flood, Citing Adequate Evidence.

  Case-Laws - HC : Disallowance of various expenses - increase in expenses despite decrease in turnover compared to previous year - it is an admitted position that the details of the accounts provided by the assessee were duly audited. Thus, merely because the assessee could not produce the accounts of the immediately preceding year, which was destroyed in 1998 flood, it cannot be said that the assessee offered no explanation or no evidence in support of his case. - HC
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• Dispute Over Section 40(b) Disallowance: AO Wrongly Denies Partner Salary as Business Income Despite No Other Income Source.

  Case-Laws - HC : Disallowance u/s 40(b) - salary paid to partners - AO did not accept the amount surrendered during the survey as income from business - when the business activity of the assessee has been accepted and no other source of income is found, then there was no justification for disallowing the salary paid to Partners - HC
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• Court Upholds Interest Levy on Petitioner, Denies Waiver Under Income Tax Act Sections 234A and 234B.

  Case-Laws - HC : Waiver of interest u/s.234A and u/s.234B - The conduct of the petitioner in the instant case does not call for any lenient view in the matter of levy of interest. - HC
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• Court Rules Loan Waiver Not Deemed Income as It's Not a Trade Receipt u/s 41(1) Income Tax Act.

  Case-Laws - HC : Deemed income u/s 41 - waiver of loan - respondent did not enter the loan amount in the profit and loss account, before, or after it was written-off - it was not a trade receipt - not taxable u/s 41(1) - HC
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Customs

• Royalty and service fees included in equipment import value under Customs Valuation Rules 9(1)(c) and 9(1)(e).

  Case-Laws - AT : Royalty paid for the Process Know-how and the various fees paid for basic engineering services and supervisory services are includible in the assessable value of the equipment imported under Rule 9(1)(c) and 9(1)(e) of CVR, 1988 as these payments are integrally connected with the supply of the equipment and formed part of a package deal - AT
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Central Excise

• Goods Destroyed in Transit: No Duty Remission u/r 21 for Exported Goods Cleared from Factory.

  Case-Laws - AT : Remission of duty - Goods destroyed in transit - when the goods after clearance from the factory for exports are lost in transit, the remission of duty under Rule 21 would not be admissible - AT
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• Refund Approved After Cenvat Credit Reversal for Stock Transfer Between Abu Road and Satnoor Units.

  Case-Laws - AT : Refund claim - Unjust enrichment - stock transfer to another unit - the Abu Road unit which had taken the Cenvat credit of the duty paid by Satnoor unit had reversed the Cenvat credit equal to the refund amount. - Refund allowed - AT
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• Appellant Denied CENVAT Credit Due to Bogus Transactions with M/s Sidh Balak Enterprises; No Goods Received.

  Case-Laws - AT : Denial of CENVAT Credit - transactions of the appellant company with M/s Sidh Balak Enterprises are bogus and as such no goods had been received by them and hence the Cenvat credit has been rightly denied. - AT
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VAT

• Court Rules Perfumes Classified Under Entry C-II-86 for VAT and Sales Tax; Includes Aromatic Chemicals as Per Entry C-I-19.

  Case-Laws - HC : Interpretation of term “and their compounds” - Additive flavour compounds only and synthetic essential oils, fragrances, etc. – the perfumery compounds are compounds of aromatic chemicals within the meaning of entry C-I-19 and in view thereof, the perfume is covered under C-II-86 - HC
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Case Laws:

• Income Tax

• 2015 (1) TMI 420
  Penalty under Section 271D - violation of Section 269-SS - surrender of income - Receipt of Loan in cash - held that:- Revenue has relied on the statement of Yogesh Gupta recorded on 31st May, 2006. In the said statement Yogesh Gupta had disclosed and surrendered an amount of 13.05 crores as additional income in the financial year 2005-06. This included 2 crores in his own hand and 9.05 crores as income of Real Tech Projects Pvt. Ltd. 2 crores was disclosed as undeclared income of Home Developers Pvt. Ltd. In the said statement in question Nos.11 and 12 Yogesh Gupta was asked to explain document A-12. Yogesh Gupta had stated that these were unaccounted ‘transactions’ in cash. No question was put to state or furnish the details of the writer or recipient i.e. the details of the companies, which had received the said amounts. He was also not asked to specify or state whether the amount received was on account of advances for flats or loan. Revenue was fully satisfied by the surrender made and closed their investigation. Thus, in the present case, there is doubt, but it is not established that the respondent- assessee had taken loan/deposit in cash. There is suspicion but this alone without further verification and investigation cannot justify the finding that the respondent-assessee had taken loan/deposit in cash. The findings recorded by the tribunal are not perverse. - Decided against Revenue.

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• 2015 (1) TMI 403
  Deemed dividend - Trade advances - Receipt of advances from sister concern - Whether any payment by a company by way of advance or loan to a shareholder or to any concern made under Section 2(22) (e) of the Income Tax Act, 1961, to the extent to which the company possessed the accumulated profits includes a trade advance and constitutes deemed dividend - Held that:- purpose of the insertion of sub-clause (e) of Section 2(22) of the Act was to bring within the tax net accumulated profits which are distributed by closely held companies to his shareholders in the form of loans to avoid payment of dividend distribution tax under Section 115-O of the Act. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding payment of tax by having these companies pay or distribute money in the form of advance or loan. Loan or advance given to the shareholders or to a concern, under normal circumstances would not qualify as dividend. If such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Instead of distributing accumulated profits as dividend, companies distribute them as loan or advances to shareholders or to concern in which such shareholders have substantial interest or make any payment on behalf of or for the individual benefit of such shareholder, in such an event, by the deeming provisions, such payment by the company is treated as dividend. It is so made by legal fiction created under Section 2(22)(e) of the Act. Even if the accumulated profit which ought to have been paid to the shareholders as the dividend paid to a sister concern for the purpose of acquisition of capital assets or as a consideration for the goods received which is required for carrying on the business, it would not fall within the definition of Section 2(22)e of the Act as the object was not to pay the said amount to the shareholders after avoiding payment of dividend distribution tax under Section 115-O of the Act. In that view of the matter, it is not possible to accept the interpretation sought to be placed by the revenue. Having regard to the plain words used in clause (e) 'to any concern', when the amount is paid or when any payment is made to a concern, the tax is levied on the concern and not on the shareholders. As far as this question is concerned, this Court following the judgment of the Bombay High Court in the case of Commissioner of Income Tax vs Universal Medicare (P) Limited reported in [2010 (3) TMI 323 - BOMBAY HIGH COURT] has categorically held that when any payment is made by a company to any concern, which falls under clause (e), the tax is leviable on the shareholder only and not on the concern - Therefore, the finding recorded by the Tribunal that, these advances made by the BDPL to the sister concern as well as to its shareholder do not constitute deemed dividend under Section 2(22)(e) of the Act, is legal and valid and do not call for any interference. - Decided in favour of assesse.

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• 2015 (1) TMI 402
  Disallowance of depreciation on goodwill - whether the respondent-assessee was entitled to depreciation on intangible assets - Held that:- specified intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” specified in Section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that Section - Following decision of reva T and D India Ltd. vs. Deputy Commissioner of Income Tax [2012 (4) TMI 79 - DELHI HIGH COURT] - Decided against Revenue.

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• 2015 (1) TMI 401
  Deduction u/s 80IA(4) - revenue contended that assessee had not developed the infrastructure facilities as it was only a custodian for the movement and handling of all containerized import/export consignment in Container Freight Station - Held that:- As has been observed by the Tribunal, in the decision of the Delhi High Court in the case of Container Corporation of India Ltd., Vs. ACIT reported in [2012 (5) TMI 260 - DELHI HIGH COURT], container freight station is held to be falling within the customs area attached to the port. As the work relating to customs is performed at these inland container depots/container freight stations, it would fall under the provision of Section 80IA(4)(i) Explanation (d) of the Income Tax Act. The plea of Mr.T.Ravikumar, learned standing counsel appearing for the Revenue that any other public facility on similar nature has been omitted with effect from 1.4.2002 will not make the case any different in view of the decision of the Delhi High Court (supra), which holds that CSF is part of an inland port and there is no specific exclusion of CSF in clause (d) of Explanation to Section 80IA(4)(i). Therefore, on fact when it has been found by the Tribunal that CSF is an infrastructure facility, we find no good reason to differ on fact. Whether the requirement of Section 80IA(4)(i) has been satisfied - Held that:- Tribunal has considered the proposal approved by the Government of India, Ministry of Commerce and Industry dated 27.5.2003, which has been extracted in paragraph 6 of the Tribunal and the public notice dated 10.11.2013 issued by the Commissioner of Customs (Port), Kolkatta permitting the CSF to operate. Once the public notice was issued and is valid as on date, it is deemed to be approval granted by the competent authority of the Central Government or an undertaking or a body of the Central Government. This principle has been enunciated by the Supreme Court in the case of Union of India v. Sampat Raj Dugar, [1992 (1) TMI 103 - SUPREME COURT OF INDIA], wherein it has been held that once a license is issued, it is valid until cancelled. Therefore these two documents satisfy the requirement of Section 80IA(4) of the Income Tax Act. There is no manner of confusion as the facts culled out by the Tribunal clearly show that the respondent/assessee has complied with the requirements of Section 80IA(4)(i). Whether in the absence of specific agreement with the Central/State Government, local authority or Statutory Body, the assessee is entitled to claim the benefit of section 80IA(4)(i) - Held that:- proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances there is no need to insist for the specific execution of agreements.- Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Thus, we are of the considered view that the assessee has complied with all the provisions of section 80IA(4)(i) and is eligible to claim deduction under the said section. The impugned order is set aside. - Decided against Revenue.

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• 2015 (1) TMI 400
  Disallowance of Interest u/s 36(1)(iii) - Capital expenditure or Revenue Expenditure - Held that:- Section 36(1)(ii) of the Act makes no distinction between money borrowed to acquire a capital asset or a revenue asset and that all that the section requires is that that the assessee must borrow capital and the purpose of borrowing must be for business which is carried on by the assessee in the year of account. - amount was revenue expenditure allowable u/s. 36(1)(iii) of the IT Act 1961 and further in allowing the claim of the assessee for the deduction of the said amount u/s 36(1)(iii) of the Act, when the interest attributable till the asset is put to use for the first time is required to be included in the actual cost as per Section 43 of the Act. - Following decision of Commissioner of Income Tax vs. Core Health Care Ltd. reported in [2008 (2) TMI 8 - SUPREME COURT OF INDIA] - Decided against Revenue.

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• 2015 (1) TMI 399
  Investment allowance - assets in question had been purchased during the immediately preceding year i.e. 1981-82 but investment allowance had been claimed in A.Y 1982-83 on the ground that these had been put to use during the latter assessment year. - Held that:- keeping in mind the permissible change of financial year, the assessee was permitted to change the financial year from 01.09.1980 and all crucial dates namely change of burner and installation of same was done in 1981 and production had started on 01.03.1981. - assessee had full intention of starting the regular commercial production but could not do so on account of non availability of natural gas as it was supplied to it only from 17.09.1981. In the meantime, the assessee had imported oil burner from Germany and it was with the aid of this equipment that it was able to enter into the realm of commercial production with effect from 01.03.1981. - provisions of section 32A which reads as follows gives an option to the assessee to make the claim either in the year in which the machinery is purchased and installed or in the year in which the machinery is first put to use and that being the immediate succeeding assessment year. Date on which the commercial production started was 01.03.1981 the assessment year considered by the assessee was rightly 1982- 83. In fact it goes without saying that even in the statement of facts, it is a matter of factual assertion that the IAC (Asstt.) has noted that the assessee had not claimed any Investment Allowance on the assets for the year 1981-82. - Court in complete agreement with the reasonings adopted by the Tribunal and the findings of fact arrived at and do not see any reason for interference - Decided against Revenue.

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• 2015 (1) TMI 398
  Compounding of offence under section 279(2) - Delay in making deposit of TDS - TDS amount along with interest already deposited by assessee - Request for compounding allowed in 1999 however a revision done in the year 2000 where this request was declined - Held that:- application of the assessee for compounding under Section 279(2) of the Act was accepted by the CCIT on 29.11.1999 whereby compounding was accepted on payment of compounding fee of 2192/-. However, the same was subsequently reviewed on 16.3.2000. It was not disputed by learned counsel for the respondents that the amount of 4870/- alongwith interest of 426/- under Section 201(1A) of the Act has already been deposited. Ordinarily, the power to compound vests with the authorities under the Act. It will not serve any useful purpose in referring back the matter to the competent authority particularly keeping in view the fact that the very insignificant amount of 4870/- is involved which also stood paid and even interest under Section 201(1A)of the Act was paid by the assessee. Accordingly, letter dated 14.3.2000 withdrawing the compounding is hereby quashed. As a necessary corollary, the Annexure P.6 whereby the CCIT had agreed for compounding of the offence on payment of compounding fee of 2192/- shall stand revived. - petitioners submitted that though the CCIT had determined the compounding fee at 2192/-, however, the assessee shall deposit an additional amount of 5000/- to show his bonafides - Decided in favour of petitioner.

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• 2015 (1) TMI 397
  Rejection of application for Registration u/s 12A - non-compliance of requirement of filing the audited accounts - Scope of Accountant for the purpose of Audit - Held that:- tribunal allowing the appeal of the assessee has observed that, assessee has got the accounts audited, but according to the CIT the auditor does not conform to the definition of accountant in terms of explanation below section 288(2). Section 288 permits an ssessee to be represented before the appellate tribunal or any income-tax representative as that term is defined in sub-section (2). The said Seciton has nothing to do in case of grant of registration u/s. 12A. In view of the above, we hold that the order of the CIT in refusing registration on the above ground is not in order. Considering the provisions of Sections 288 and 12A of the Act as well as the documents placed on record, we are of the opinion that the Tribunal is justified in coming to the conclusion that the view taken by the CIT is erroneous. The assessee has got the accounts audited and it is for the CIT to satisfy himself about the object of the Trust that he calls for such documents pursuant to the application. We are in complete agreement with the reasonings adopted and finding of facts arrived at by the Tribunal. - order of the Commissioner rejecting the application for registration u/s 12A of the Act on the ground of noncompliance of requirement of filing the audited accounts was bad and thereby was justified in directing the CIT to grant registration, if other conditions are fulfilled - Decided against Revenue.

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• 2015 (1) TMI 396
  Disallowance of various expenses - increase in expenses despite decrease in turnover compared to previous year - Audited books of accounts - Held that:- While taking into account the increase in expenditure with regard to the aforesaid items, the concerned AO, CIT(A) as well as the Tribunal seems to have lost sight of the fact that there was reduction in certain expenses also, viz. Commission and brokerage charges, power and fuel expenses and payment to the employees. Further, it is an admitted position that the details of the accounts provided by the assessee were duly audited. Thus, merely because the assessee could not produce the accounts of the immediately preceding year, which was destroyed in 1998 flood, it cannot be said that the assessee offered no explanation or no evidence in support of his case. On the contrary, the assessee has given the fullest details available with him in respect of profit and loss account for the year under consideration. We are, therefore, of the opinion that the AO was not justified in making the addition of 5,33,633/- and the CIT(A) as well as the Tribunal erred in confirming the same. - Decided in favour of the assesse.

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• 2015 (1) TMI 395
  Deduction u/s 80IA - Whether on the facts and in the circumstances of the case the Tribunal was right in allowing the deduction especially when the assessee has not filed audit report in Form 10CCB along with the return nor before the date of completion of the assessment - Held that:- filing of the audit report along with the return, as contemplated under section 32AB(5) of the Act, is only directory and not mandatory. Hence, finding no substantial question of law arising for consideration - Following decision of Commissioner of Income Tax v. AKS Alloys (P) Ltd. [2011 (12) TMI 39 - MADRAS HIGH COURT] - Decided against Revenue.

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• 2015 (1) TMI 394
  Deduction u/s 80HHC - Deduction u/s 80IA - Whether, the Appellate Tribunal is right in law on facts in holding that while computing deduction u/s. 80IA exchange rate difference and duty draw back should be treated to be 'derived' from the industrial undertaking - Held that:- Duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of deduction u/s 80-I/80I-A/80I-B of the Act - So far as question regarding foreign exchange difference is concerned, the same is squarely governed by the decision of this Court in the case of Commissioner of Income-Tax vs. Priyanka Gems reported in [2014 (3) TMI 938 - GUJARAT HIGH COURT] wherein this Court has answered the question in favour of the assessee and held that that the foreign exchange gain arising out of the fluctuation in the rate of foreign exchange cannot be divested from the export business of the assessee and once export is made, due to variety of reasons, the remission of the export sale consideration may not be made immediately and that all foreign currencies received by the assessee need not be converted into Indian Rupees on the last date of the accounting period. - Tribunal is justified in holding that while computing deduction u/s. 80IA exchange rate difference should be treated to be 'derived' from industrial undertaking whereas the Tribunal has committed an error in holding that duty draw back should be treated as 'derived' from industrial undertaking - Decided partly in favour of Revenue.

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• 2015 (1) TMI 393
  Waiver of penalty u/s 273B - Penalty u/s 271D - Breach of Section 269SS - assessee had accepted cash deposits of 5,21,000/- from five parties otherwise than by account payee cheques or account payee bank drafts - Held that:- Tribunal has rightly held that assessee was under the bona fide believe that the transaction was not covered by Section 269SS of the Income Tax Act. Further, the Tribunal has rightly held that the lower authorities have not given any finding that these deposits represented unaccounted income of the assessee in any manner. - Tribunal has not committed any error in allowing the appeal of the assessee. We are in complete agreement with the view taken by the Tribunal - Following decision of COMMISSIONER OF INCOME-TAX AHMEDABAD IV Versus MAA KHODIYAR CONSTRUCTION [2014 (7) TMI 137 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2015 (1) TMI 392
  Disallowance u/s 40(b) - salary paid to partners - AO did not accept the amount surrendered during the survey as income from business - addition of "excess stock" - Held that:- It appears from the Assessment Order that there is nothing to conclusively establish that the amount offered for taxation in the return of income and credited in the books of account is not the business income of the assessee. The A.O who recorded the statement of the assessee u/s. 131 did not question the source of income of assessee in respect of the disclosed income. Therefore, the stock, cash, etc. found during the course of survey indicate that the income disclosed is in respect of the business carried on by the assessee. No evidence has been brought on record by the A.O to establish that the assessee was doing any other activity other than the business in gold ornaments, etc. for which the amount was disclosed. It is, therefore, clear that the amount disclosed is nothing but, the business income of the assessee. - Now, when the business activity of the assessee has been accepted and no other source of income is found, then there was no justification for disallowing the salary paid to Partners at 4.50 Lacs. Therefore, the disallowance of 4.50 Lacs granted by the A.O and confirmed by the Tribunal is erroneous and deserves to be quashed and set aside. - Following decision of Md. Serajuddin & Bros. v. Commissioner of Income tax [2012 (8) TMI 104 - CALCUTTA HIGH COURT] - Decided in favour of assesse.

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• 2015 (1) TMI 391
  Waiver of interest u/s.234A and u/s.234B - interest on addition to the disclosed income - Held that:- In regard to reduction of interest u/s.234B, there is no provision for such reduction as the levy is compensatory. Waiver of interest u/s.234B is governed by clause (b) and (c) of paragraph (2) of above said Board's order u/s.119(2)(a) of the I.T. Act. The income assessed in the assessee's case does not come under any of the class or classes of income specified in the aforesaid clauses. When the additions, to the income disclosed by the petitioners in its returns, have been sustained to a particular extent by the appellate forum under the Act, then the finality of the assessment indicates that the amount sustained against the petitioner is the income on which he ought to have been paid tax at the very outset. The levy of interest is compensatory in nature and it is meant to compensate the department for the delay in getting the tax that was due to it. The conduct of the petitioner in the instant case does not call for any lenient view in the matter of levy of interest. - No reason to interfere with order passed - Decided against assesse.

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• 2015 (1) TMI 390
  Deemed income u/s 41 - waiver of loan - Swedish Company waived the loan stating to be as part of discharge of obligations under the Scheme of amalgamation - Held that:- The agency, which advanced the loan, has written-off the same. The fact that the writing-off the loan was as part of the obligation under the Scheme framed under B.I.F.R, would certainly become important, for keeping the entire amount outside the purview of the trade activity. The waiver of loan has only resulted in cessation of the liability on the part of the respondent to repay it. The entire controversy is as to whether such a cessation has the effect of transforming the loan amount, into income. It is too primary to refer to Section 14 of the Act to identify the sources or categories of income. However, the necessity is felt only as a step in the elimination process. The amount received as a loan for revival of a sick company does not fall into any of the categories of income under Section 14 of the Act. It safely becomes part of the capital. The Act does not provide for levy of tax on capital. A loan advanced to a Company as part of a scheme framed by B.I.F.R for its revival, can, by no stretch of imagination, be treated as its trade receipt. It has already been mentioned that, at the most, it can be treated as part of the capital. The writing-off such loan would, if at all, result in the fluctuation of the value of the capital assets. Though in a remote sense, the situation can be compared to the one of the increase in the market value of a land owned by a company/assesee. - if loan was taken by an assessee, not being for trading purpose and it is written-off, to certain extent, it would result in fluctuation in the asset value, and the amount cannot be treated as an item of income. The judgment of the Supreme Court in T.V.Sundaram Iyengars case [1996 (9) TMI 1 - SUPREME Court] was in relation to deposits received by the assessee in the course of its trade. - The facts of the present case are totally different. Firstly, the respondent did not enter the loan amount in the profit and loss account, before, or after it was written-off. Secondly, it was not a trade receipt. - waiver of loan is not taxable - Decided against Revenue.

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• 2015 (1) TMI 389
  Disllowance of gold purchase - undisclosed income - Held that:- From a perusal of the order of the Tribunal, it transpires that the appellant had claimed that he had purchased gold worth 2,57,000/- from one M/s. Nayan Jewellers, which was forming part of 8,81,000/-, which was seized by the Custom Authorities on 22.01.2000. From the order of the CIT(A) as well as the assessment order framed by the concerned AO it clearly transpires that despite the fact that ample opportunities being given to the assessee, he could neither offer any satisfactory explanation in that regard nor could he rebut the same. Therefore, the concerned AO, after giving detailed reasons, made addition of 2,57,000/- which in turn is confirmed by the CIT(A). The Tribunal, while passing the impugned order, has also considered the assessment order framed by the concerned AO as well as the reasoning given by the learned CIT(A) and has sustained the same. We are, therefore, of the opinion that there being concurrent finding of facts and proper evaluation of facts and law - Decided against assesse. Whether on the facts and in the circumstances of the case the Tribunal has substantially erred in confirming the disallowance of loss of 91,260/- without any discussion or independent reasoning by simultaneously granting relief for allowability of expenditure of 75,197/- which is already allowed by the CIT(Appeals) - Held that:- it is an admitted position that, though, the expenses of auction, i.e. towards advertisement etc., were initially borne by the Revenue, later on, same was reimbursed by the assessee. We are, therefore, of the opinion that the Tribunal committed no error in deciding question No.2. - Decided in favour of assesse.

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• Customs

• 2015 (1) TMI 406
  Valuation - Inclusion of Process Licence Agreement; Basic Engineering Services; and supervisory services in the assessable value of the capital goods imported by the appellant - Demand of differential duty - Rule 9(1) (c) and 9 (1) (e) of the Customs Valuation Rules, 1988 (CVR in short) read with Section 14 of the Customs Act, 1962 - Held that:- We have perused all the agreements entered into by the importer appellant with the foreign supplier. It will be useful and relevant to note some of the terms and conditions of these agreements to understand the nature of the transaction. It is also relevant to note that all the agreements were entered into on the same day - A combined reading of these agreements make it very clear that all these agreements are interlinked and inter-dependent and have direct nexus with each other. It is only in pursuance of these agreements, the supply of the equipment have been made by Davy/HYL and the services provided by these agreements are necessary and essential for the installation, operation, maintenance and use of the equipment by the appellant. Thus these four agreements constitute a package and cannot be separated from one another and the consideration paid under these different agreements, forms an integral part of the supply of equipment agreement. It is in the light of the factual matrix discussed above, the question whether the royalty payments made in respect of technical know-how and the various fees paid for engineering services and supervisory services are includible in the value of the equipment supplied under Rule 9 (1) (c) and 9(1) (e) of CVR, 1988 has to be examined. Royalty paid for the Process Know-how and the various fees paid for basic engineering services and supervisory services are includible in the assessable value of the equipment imported under Rule 9(1)(c) and 9(1)(e) of CVR, 1988 as these payments are integrally connected with the supply of the equipment and formed part of a package deal. Therefore, we do not find infirmity in the order passed by the lower authorities in this regard. - The obligations under these agreements remain intact and we do not understand how the appellant can take this plea. For determination of assessable value, not only the amounts paid but required to be paid under the contracts entered with the supplier have to be taken into account. In the absence of any conclusive evidence to show that the payments so far made is towards the final settlement of all the obligations, the appellant's plea in this regard cannot be entertained. CA certificate is not the authority for determination of liabilities and future obligations arising out of contract. In the absence of any satisfactory evidence duly certified by the foreign equipment supplier, the plea of the appellant in this regard cannot be entertained and therefore, the lower authorities have rightly rejected this contention and we do not find any infirmity or illegality in such a decision. - Decided against Assesse.

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• 2015 (1) TMI 405
  Export of red sanders - goods were not covered by the valid CITES permit as per the format - shipping bill invoice showed M/s. Ocean Trading Company, Hong Kong as the buyers name and not to M/s. Koyei as mentioned in the Public Notice. The Bill of Lading shows the destination as Hong Kong, who is an intermediary - Confiscation of goods - Imposition of redemption fine and penalty - Held that:- The Director General of Foreign Trade issued licences in respect of export of Red sanders wood in log form. In this context, we find that the licences would indicate that M/s. Andhra Pradesh Forest Development Corporation Ltd., is authorized to export Red sanders to M/s. M/s.Kyoei Trading Company, Japan and M/s. Radeep Services, Singapore and the destination of export as all permissible destinations. The licences were issued subject to fulfillment of all the conditions specified in Public Notice and subject to necessary clearance under CITES. Public Notice categorically imposed the condition that the export shall be made only to M/s.Kyoei Trading Company, Japan and M/s.Radeep Services, Singapore. It is also stated that no resale of the goods permitted to nobody in any circumstances. Public Notice categorically mentioned that there must not be any intermediary and middle man. On plain reading of the Public Notice, it is clearly apparent that goods will be exported directly to both the companies and no intermediary or middle men would be allowed to enter into the transaction. We have noticed that there is no mention of name of M/s. Ocean Trading Company in the purchase order and the agreement between the parties. The word intermediary means an agent. The licences allowed to export to permissible destinations. So, the licences were issued to export Red sanders to both the companies in their permissible destination. There is restriction that the goods cannot be exported to the agent. In view of that, we do not find any force in the submission of the Ld. Advocate. It is seen that the name of M/s. Ocean Trading Company was mentioned at the time of the export of the goods in the invoices and shipping bills. This practice was followed by the APFDC in the past exports and such irregularity cannot be accepted lightly. They have not placed any material to substantiate their contention. It is clearly established that the appellants exported the goods in violation of the condition of the Public Notice as well as licences and therefore, confiscation of goods under Section 113(d) & (l) of the Customs Act, 1962. The DIU officers detected the violation of the Public Notice and the licences. The Hon’ble High Court had directed to process adjudication proceedings and the Hon’ble Court also directed to furnish bank guarantee in respect of redemption fine and penalty - We agree with the findings of the adjudicating authority that the Vice Chairman and the Managing Director of the appellants are responsible for such irregularity and the CITES inspection report was given by the CITES authority only after 31.07.2007, which was not provided along with the Shipping Bill, which is also a clear violation against the Public Notice and the condition of licences. They cannot absolve their responsibility and liability for violation of conditions of Public Notice and Licences. Therefore, penalty on the Chairman and the Managing Director of APFDC and Shri P.V Shashidhar, Managing Director, M/s. Andhra Fogaku Pvt. Ltd. are warranted. - Decided against the assesse.

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• 2015 (1) TMI 404
  Import of copper concentrate from Chile and Indonesia - Benefit under Notification No.101/2007-Cus. dated 11.9.2007 and Notification No. 46/2011-Cus. dated 1.6.2011 - allegation that certificates of origin presented by the respondents are not in conformity with Notification - Held that:- On perusal of the adjudication order, it is seen that the provisional assessments were resorted to in respect of valuation and quantity as the Buyer's assay certificate, Final assay certificate, statement of facts given by the master of the vessel, Final Invoice etc. were not available. There is no whisper in the adjudication order that either any proceeding was initiated as per the said Rules, 2007 in respect of verification of the Certificate of Origin or provisional assessment was resorted to for want of Certificate of Origin. Adjudicating authority had not disputed that the respondents had imported the goods from Chile or Indonesia origin, which is substantiated by various documents insofar as invoice, assay certificate and manufacture etc. There is no material available that the provisional assessment under Section 18 of the said Act was resorted for want of Country of Origin certificate. The commissioner (Appeals) had categorically observed that the Country of Origin certificate has been produced at the time of provisional assessment and therefore it was not mentioned as a required document in respect of finalization of the provisional assessment. These facts were not disputed by the Revenue in the grounds of appeals. On a query from the Bench as to how the refund has arisen in some cases, the learned counsel clarified that the refunds arose in cases of excess payment made on account of higher quantity and higher value, which has no relation to the dispute before us. - Decided against Revenue.

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• Service Tax

• 2015 (1) TMI 419
  Imposition of penalty - Construction of residential complex service - Held that:- Appellants have deposited the entire amount of tax payable but the Commissioner in the impugned order has rejected the appeal on the ground that the appellants did not deposit the 50% penalty which was required to be deposited by them. The appellants were also required to deposit service tax also but the same has been deposited subsequent to the order passed by the Commissioner. Since the service tax itself was not payable where flats were sold to individual buyers in a residential complex under an agreement during the relevant period, we consider that the amount deposited by the appellants prima facie is sufficient for hearing the appeal. Therefore the impugned order is set aside and the matter is remanded to the learned Commissioner (A) with a request to decide the appeal without insisting on any further deposit to be made and treating the deposit of service tax made by the appellants as sufficient - Decided in favour of assessee.

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• 2015 (1) TMI 418
  Waiver of pre deposit - Undue harship - Held that:- The applicant also submits that financial difficulty would be caused to the applicant if pre-deposit is insisted upon. The law does not provide for the return of the pre-deposit with interest. Therefore, the loss of interest on this account is a financial loss which cannot be recovered by the applicant even if they succeed finally in the matter. On the other hand, if Revenue succeeds they would be entitled to recover the entire amount together with interest thereon. Therefore, the balance of convenience is always in favour of the Revenue. In such a situation inspite of a strong prima facie case in favour of the applicant and if they are directed to pre-deposit any part of the demand it would cause undue hardship to them. - stay granted - Matter remanded back - Decided in favour of assesse.

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• 2015 (1) TMI 417
  Imposition of penalty - franchisee service - Held that:- Having regard to the fact that appellant is a proprietary concern, he is functioning in a small town Pandalam, Pathanamthitta District, Kerala and as soon as the liability was brought to his notice, he paid the tax with interest even before issue of show-cause notice and took registration, we consider that this is a fit case for waiver of penalty by invoking provisions of Section 80 of Finance Act, 1994. As regards the service tax, the liability has been accepted and interest has also been paid. Since only penalty is involved and we have already taken a view that this is a fit case for invoking Section 80 of Finance Act, 1994 - Decided in favour of assessee.

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• 2015 (1) TMI 416
  Condonation of delay - Insufficient explanation for delay of 30 days - Held that:- delay was caused because of severe health problem, the mother of the authorized representative was facing and it was also submitted that mother expired on 7.5.2013. We find that the Commissioner (A) could have condoned this delay. Having regard to such tragic circumstances, we consider it appropriate that the Commissioner (A) should be directed to hear the appeal after condoning the delay in accordance with law. Accordingly, the impugned order is set aside and the matter is remanded to the Commissioner (A) to decide the appeal treating the delay as condoned on merits. - Delay Condoned.

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• 2015 (1) TMI 415
  Business Auxiliary Service - business of maintenance and repair of retreading tyres - Held that:- appellants are engaged in the business of maintenance and repair of retreading tyres. The appellants paid service tax under the category of Business Auxiliary Service only on labour charges after deducting 70% towards material cost on the gross retreading charges. - As Tribunal in assessee's own previous case remanded matter back therefore, following that decision - Matter remanded back - Decided in favour of assessee.

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• 2015 (1) TMI 414
  Waiver of pre dpeosit - maintenance, management and repair service - Held that:- As the issue appears to be covered by the earlier order of this Tribunal in [2014 (11) TMI 311 - CESTAT MUMBAI] where in the appellant's own case, this Tribunal was pleased to hold that Service Tax is not leviable in similar facts and circumstances. In this view of the matter, we grant waiver from pre-deposit of the amount of tax and penalty and stay recovery thereof during pendency of the appeal - Stay granted.

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• Central Excise

• 2015 (1) TMI 411
  Remission of duty - Goods destroyed in transit - Removal was made for export - truck met with an accident in which due to fire, not only the truck but the goods loaded in the truck were totally destroyed - Held that:- The remission of duty has been claimed under Rule 21 of the Central Excise Rules, 2002. - remission of duty in respect of the goods lost or destroyed due to natural causes or by unavoidable accident is permissible only when this loss or destruction has taken place ‘at any time before removal’. Thus the point of time when the loss or destruction should take place is the time before the time of removal. In my view the words ‘at any time before removal’ cannot be read as ‘at any place before the place of removal’; they have to be read as ‘at any time before the ‘time of removal’. In terms of the provision of Section 4 (3) (cc) of the Central Excise Act, 1944, the ‘time of removal’ even in respect of the goods sold from the depot or from consignment agent’s premises or from any other place, is the time when the goods are cleared from the factory. Therefore, in respect of the goods cleared for export, even if the ‘place of removal’ is the port from where the goods are exported, the ‘time of removal’ would be the time when the goods have been cleared from the factory and, therefore, if the goods are lost during transit, for the purpose of Rule 21, the ‘time of removal’ would have to be treated as the time at which the goods were cleared from the factory. - when the goods after clearance from the factory for exports are lost in transit, the remission of duty under Rule 21 would not be admissible - Decided against assesse.

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• 2015 (1) TMI 410
  CENVAT Credit - Bogus invoices - Receipt of material from such Company which has no office or storage premises and whose registration certificate has been cancelled - Held that:- all the six invoices issued by M/s. Pawan Steels to M/s. I. J. Steels , the particulars of the invoices issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels and also the invoices issued by the manufacturers / importers under which M/s. S. K. Garg & Sons had received the materials. It is seen that out of the six invoices issued by M/s. Pawan Steels , only in case of invoice no. 150 dated 15.09.2005, there is no gap between the manufacturer's invoice and invoice issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels. In all other five invoices, there is big gap of more than 20 days between the invoices issued by the manufacturer/importer to M/s. S. K. Garg & Sons and the date of invoice issued by M/s. S. K. Garg & Sons to M/s. Pawan Steels . This big gap between the date on which M/s. S.K. Garg & Sons are supposed to have received the materials from manufacturers/importers, and the date on which they have shown the sales of that material to M/s. Pawan Steels cast very serious doubt about the transactions of M/s. S.K. Garg & sons with M/s. Pawan Steels , as when M/s. S. K. Garg & sons had no godown as no office, they could not have stored the materials received from the manufacturers / importers for 2 to 3 weeks. Therefore, even though no inquiry has been made with M/s. S.K.Garg & Sons, on the basis of the details available in the invoices issued by M/s. Pawan Steels , the transactions of M/s. Pawan Steels with M/s. I.J. Tools and Castings became highly doubtful, the at least, 15 out of 6 invoices. Except for invoice no. 150 dated 15.09.2005 issued by M/s. Pawan Steels , the genuiness of all other 5 invoices is highly doubtful and as such, the impugned order denying the cenvat credit in respect of those invoices has to be upheld. In view of this, the cenvat credit demand of Rs . 1 ,80,204 /- along with interest is upheld. As regards penalty under Section 11 AC on M/s. I.J. Tools , since the entire disputed amount of cenvat credit had been paid during investigation and much before the adjudication since the order-in-original passed by the Dy. Commissioner , no option to pay lower penalty in terms of the provisions of Section 11 AC has been given, in view of the judgement of the Hon'ble Delhi High Court in the case of K.P. Pouches reported in [2008 (1) TMI 296 - HIGH COURT OF DELHI], the benefit of lower penalty cannot be denied to M/s. I.J. Steels and accordingly, the penalty under Section 11 AC on them is reduced to 25% of the cenvat credit demand. - Decided partly in favour of assesse. Penalty on issuer of bogus invoices is upheld.

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• 2015 (1) TMI 409
  Denial of refund claim - Unjust enrichment - Finalization of provisional assessment - stock transfer to another unit - Held that:- When the clearances were not on sale but were purely on stock transfer basis, there is no question of the Satnoor unit having recovered the incidence of duty from the Abu Road unit and, as such, the bar of unjust enrichment would not apply. There is no undue benefit to the appellant company for the reason that as soon as Satnoor unit filed these refund claim, the Abu Road unit which had taken the Cenvat credit of the duty paid by Satnoor unit had reversed the Cenvat credit equal to the refund amount. It is neither the Department’s claim nor any evidence to produce to show that during the period of dispute, the price charged by the Abu Road unit for the final product - ABS Polymer was higher. - In this case, there is no unjust enrichment in the sense that the incidence of duty whose refund has been claimed had been passed on by the appellant unit to Abu Road unit. - Refund allowed - Decided in favour of assesse.

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• 2015 (1) TMI 408
  Extension of stay order - Power of Tribunal - Speaking Order - Held that:- It is observed from the case records that the stay was granted to the appellant on 3/11/2008. After granting of stay to the appellant this appeal has never been listed for final hearing. The appeal could not be listed for final hearing by the Registry due to heavy work load as the appeals filed for the earlier period are being listed. Hon’ble Gujarat High Court [2014 (7) TMI 738 - GUJARAT HIGH COURT] have held that extension can be allowed by the Bench looking to the facts and circumstances of this case, there is no fault of the appellant in seeking extension of the stay already granted. The request made by the appellant is genuine and extension of stay is granted for a further period of 180 days. - Stay extended.

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• 2015 (1) TMI 407
  Denial of CENVAT Credit - bogus invoice - large time gap between issue of invoices and supply of goods - This held to be bogus transaction - Held that:- Cenvat credit, in question, has been taken by the appellant on the basis of seven invoices issued by M/s Sidh Balak Enterprises, Mandi Gobindgarh to the appellant during November 2004 and December 2004. All these invoices mention name of the manufacturer from whom the goods supplied to the appellant had been procured as ‘M/s JAS Casting Pvt. Ltd.’ and also details of the invoices issued by M/s JAS Casting to M/s Sidh Balak Enterprises. From the details of the invoices issued by M/s JAS Casting, Rajpura to M/s Sidh Balak Enterprises it is clear in each case there is big time gap of more than two weeks between the date on which the invoices had been issued by M/s JAS Casting to M/s Sidh Balak Enterprises and the date on which the invoices had been issued by M/s Sidh Balak to the appellant. When the appellant had no office or godown, it is difficult to believe as to how and where the goods had been stored. In view of this, the burden of proof that the goods had actually been received by the appellant company would shift to them. The appellant company in this regard has not produced any evidence. In view of this, I hold that the transactions of the appellant company with M/s Sidh Balak Enterprises are bogus and as such no goods had been received by them and hence the Cenvat credit has been rightly denied. Therefore, in view of this, there is no infirmity in the impugned order - Decided against the assessee.

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• CST, VAT & Sales Tax

• 2015 (1) TMI 413
  Interpretation of term “and their compounds” - Additive flavour compounds only and synthetic essential oils, fragrances, etc. – Held that:- Assessee rightly submitted that a composite expression must be construed as a whole and in the words of Bennion, it is incorrect to assume that the whole is necessarily the sum of its parts, because a certain meaning can be collected by taking each word in turn and then combining their several meanings - aromatic chemicals and their compounds are not intended to be treated separately from natural and synthetic essential oils - the use of the conjunction “and” with the word “and their compounds” is intended to apply to the compounds of natural synthetic oil and also compounds of aromatic chemicals and natural and synthetic oils - wherever it was intended that the product or derivative chemicals were to be grouped to create a distinct category, specific language has been used. Although in the case of Raw materials it is seen that the expression “and their compounds is applicable only to the natural and synthetic essential oils but not applicable to fragrance and flavour chemicals or industrial flavours and fragrance in concentrated form - a perusal of the definition of Aromatic Chemicals, Essential Oil and Essential Oil, Synthetic reveals that they can be combined with each other - Essential Oil Synthetic is shown as a composition of natural essential oils and aromatic chemicals etc. - The Tribunal was justified in negating the revenue's interpretation of the word “and their compounds” in schedule entry C-I-19 covers only the compounds of natural and synthetic oil and essential oils, to the exclusion of aromatic chemicals – thus, the perfumery compounds are compounds of aromatic chemicals within the meaning of entry C-I-19 and in view thereof, the perfume is covered under C-II-86 – Decided against petitioner revenue.

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• 2015 (1) TMI 412
  Locus Standi of Petitioner to invoke writ jurisdiction - TDS Deduction by revenue u/s 4(3) of the Tripura Value Added Tax Act, 2004 read with rule 7(1) of the Tripura Value Added Tax Rules, 2005 – Whether without authority from respondent No. 4 the petitioner has got any locus standi - Held that:- The petitioner is neither the contractor nor the person to whom the payment would be made by the dealer on account of the works contract - the dispute is fundamentally confined to performance of the private contract (as distinct from the works contract) as entered into by the petitioner and respondent No. 4 - it is surfaced that the petitioner is not an assessee nor the tax at source is directly deducted by the dealer from the petitioner but by the contractor only by dint of the terms of the turnkey agreements nor that the petitioner by any means comes within the meaning of the dealer or conversely whether any person having been affected by the provisions of the private contract, provisions of which have been agreed to by the petitioner, can approach this court for challenging the constitutionality of the rule. The petitioner as such has no statutory liability to pay tax at source or nor can he be assessed in terms of rule 7(8) of the Tripura Value Added Tax Rules, 2005, which provides all such deductions and deposits into the Government Treasury shall be deemed to be provisional payment of tax and shall be adjusted at the time of assessment under sections 29/30/31 of the Act as the case may be, but by virtue of the turnkey agreements as entered into between respondent No. 4 and the petitioner, the petitioner has been required to pay the amount of such tax to respondent No. 4 and this clause has no relation with the taxing authority nor the petitioner has been directed to deposit tax neither were they subjected to the procedure of determination of tax or assessment - Neither the dealer, the Union of India (not made party in the proceeding) nor respondent No. 4 has canvassed any grievance in this regard - there is no question of public injury that any member of the public may having interest come forward for a judicial redress of the injury on challenging the constitutional or legal validity of any piece of legislation. The petitioner has got no locus standi to invoke the jurisdiction under article 226 of the Constitution of India for calling the validity of rule 7(1) of the Tripura Value Added Tax Rules, 2005 or for praying other consequential reliefs - from the work-orders as awarded by respondent No. 4 it is apparent that the petitioner agreed to pay the category of the tax which includes the works contract tax/VAT - a person who has consented expressly or impliedly to a thing cannot be said to be "aggrieved" by it - If the petitioner is aggrieved by any action of respondent No. 4, the remedy is definitely not under article 226 of the Constitution of India inasmuch as there is an arbitration clause in each of the work orders as emanated from the agreements – thus, the petitioner lacks the locus standi, as the petitioner has got no legal grievance, to set in the writ proceeding and this writ petition does not deserve any further consideration – Decided against petitioner.

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