TMI Tax Updates - e-Newsletter
January 12, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Computer is an integral part of CCTV camera - CCTV cameras are eligible for depreciation at the rate of 60% as prescribed for Computers

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• If the allottee approaches for restoring the allotment, restoration charges / penalties are levied - such charges not liable to service tax

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• Deputation of employees - reimbursements of salaries paid to their employees deputed to do the work of the sister concern - No Service Tax

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Articles

1. MAINTAINABILITY OF CRIMINAL PROCEEDINGS FOR DISHONOR OF POST DATED CHEQUE ISSUED

   By: DR.MARIAPPAN GOVINDARAJAN

2. Chapter XVI – Audit

   By: Pradeep Jain

3. Deemed dividend – case of HUF , Karta , members and some related issues discussed in view of recent judgment of the Supreme Court. Suggestion to omit deeming provision in view of changed in circumstances..

   By: DEVKUMAR KOTHARI

News

1. Hopeful of resolving issues to roll out GST from Apr 1: FM

2. GST to be simple, less burdensome for industry

3. On demonetization, Finance Minister Shri Arun Jaitley says that difficult decisions initially pass through difficult phases as historic decisions have temporary pain attached to them. Stressing the implementation of GST, FM says that most of the issues have been resolved; few critical issues are left which will be resolved in the next few weeks

4. Macro and Micro Drivers of Business Potential of IFSCs in India (Dr. Urjit R. Patel, Governor – January 11, 2017 – at Gandhinagar, Gujarat)

5. Committee on Digital Payments - Medium Term Recommendations to Strengthen Digital Payments Ecosystem

6. RBI Reference Rate for US $

Circulars / Instructions / Orders

DGFT

1. 54/(2015-2020) - dated 11-1-2017

Amendment in Chapter 2 of the Handbook of Procedure (2015-20)

Highlights / Catch Notes

Income Tax

• TDS Deduction on Non-Resident Payments Complies with Section 115A(1)(b) and DTAA Rates, No Residency Dispute.

  Case-Laws - AT : TDS on Payments made to non-residents towards various services - there is no dispute to the residential status of payees, assessees have rightly deducted TDS as per rates provided in section 115A(1)(b) of the Act as well as per rates provided in DTAA with respect to countries to which the payees belong to. - AT
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• Court Rules 12% Annual Interest on Unlikely Interest-Free Loan to Appellant Company under Tax Dispute.

  Case-Laws - AT : Interest income - it is strange to believe that any non-related party will given loan of ₹ 50 lakh without taking any interest from the appellant company - Hence CIT(A) rightly estimated interest @1% per month (i.e. 12% per year simple interest rate) - AT
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• CCTV Cameras Qualify for 60% Depreciation Rate by Including Computer as Key Component in System Evaluation.

  Case-Laws - AT : Rate of depreciation on CCTV cameras - Computer is an integral part of CCTV camera and as such, is eligible for depreciation at the rate of 60% as prescribed for Computers - AT
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• Section 11 Exemption Covers Tour, Fashion Show, and Mr & Mrs University Expenses as Income Application for Society's Goals.

  Case-Laws - AT : Exemption u/s 11 - both the tour expenses and fashion show and Mr & Mrs University expenses incurred by the assessee society would have to be construed as application of income in pursuance of objects of the assessee society - AT
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• Assessee penalized u/s 271(a)(c) for failing to disclose interest income; explanation deemed not bona fide.

  Case-Laws - AT : Penalty u/s 271(a)(c) - The explanation filed by the assessee about not disclosing interest income in the return of income was not bona fide - levy of penalty confirmed - AT
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• Penalty u/s 271 Not Automatic for Disallowed Interest: No Inaccurate Income Reporting u/s 14A.

  Case-Laws - AT : Levy of penalty u/s 271 - disallowance u/s 14A - merely interest has been disallowed does not mean that the assessee has considered the income are filed the inaccurate particulars of income - AT
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• Commission Payments to Staff Exempt from TDS u/s 40(a)(ia), No Extra Tax Liability Imposed.

  Case-Laws - AT : Non-deduction of TDS while making payment on account of commission - assessee has rightly contended that the said commission was paid to his staff and, thus, it was not attracted Section 40(a)(ia) - no addition - AT
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• Court Approves Section 80IC Deduction for Manufacturing Processes of Luggage Carriers and Accessories.

  Case-Laws - HC : Deduction u/s 80IC - assembling Luggage carriers, Wheel Caps etc - the processes adopted by the Respondent Assessee to obtain front guard, luggage, carrier, rear gear etc. were manufacturing processes - Deduction allowed - HC
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• Foreign Exchange Forward Contract Losses Recognized as Legitimate Business Losses; Claims Permitted for Currency Hedging.

  Case-Laws - AT : Loss on Forward Contracts in foreign exchange - such transactions were carried out in the normal course of business to guard against the fluctuation in foreign exchange such transactions are in nature of hedging transactions, loss on which is genuinely business loss - claim of loss allowed - AT
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Customs

• Customs Tariff Dispute: Confiscation of Goods Highlights Potential for Multiple Interpretations; No Mis-declaration by Importer Found.

  Case-Laws - AT : Confiscation - classification of Desktop, 3D printer and certain other goods - In an issue of classification under the customs tariff, two different views are entirely possible. This cannot be taken to mean mis-declaration on the part of the importer - AT
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• Company and Directors Jointly Liable for Pre-Deposit; 7.5% Duty Drawback Element Satisfies Legal Requirement.

  Case-Laws - HC : Pre-deposit - a company and its directors are held jointly and severally liable - if one set of pre-deposit amount to the extent of 7½ % of the duty drawback element is made, it would be considered sufficient compliance with the mandate of law - HC
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Service Tax

• Restoration Charges for Allotment Defaults Classified as Penalty, Not Subject to Service Tax.

  Case-Laws - AT : If the allottee approaches for restoring the allotment, restoration charges are levied - such charges are in the nature of a penalty imposed on the allottee to cover damages caused by his default in payment - such charges cannot be considered as a service charge liable for levy of service tax - AT
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• Real Estate Service Providers Must Pay Service Tax on Services and Transfer Charges Under Real Estate Agent Services Category.

  Case-Laws - AT : A person who is engaged in rendering any service in relation to sale of real estate is liable to pay service tax under the Real Estate Agent Services - the transfer charges would be liable for payment of service tax under the above category. - AT
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• Composite Works Contracts Tax Liability Effective from June 1, 2007; Calculate Using Applicable Rates if Conditions Met.

  Case-Laws - AT : The liability of composite works contract stand upheld w.e.f. 01/06/2007. The tax liability has to be arrived at applying the rate applicable, including the composition rate, if all the conditions thereof are fulfilled by the assessee - AT
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• Salaries for Employees on Deputation to Sister Concerns Not Taxable as Support Services Income.

  Case-Laws - AT : Deputation of employees - reimbursements of salaries and wages paid to their employees deputed to do the work of the sister concern - Not taxable under the category of Support Services of Business or Commerce - AT
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Central Excise

• Omission of correct info isn't fact suppression unless deliberate to evade duty; errors aren't willful misstatements.

  Case-Laws - AT : Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. An incorrect statement or wrong method of computation cannot be equated with willful misstatement - AT
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• Cenvat Credit Approved for Appellant's Use of Postage and Courier Services for Business Communications.

  Case-Laws - AT : Postage and courier services have been utilized by the appellant for sending letters, parcels and other business communication. Cenvat credit on such services stands allowed - AT
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• Char/Dolochar not subject to excise duty; ineligible for exemption under Central Excise Act, Section 5A.

  Case-Laws - AT : If no duty of excise is leviable on Char/Dolochar, these cannot be exempted under section 5A of the Central Excise Act, 1944 as only those goods can be exempted which are chargeable to duty of excise - the items Char/Dolchar are not manufactured or excisable goods - AT
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• Sub-contractors, not appellant, liable for duties on storage system installation under relevant manufacturing rules.

  Case-Laws - AT : Manufacture - sub-contract - erection and installation of storage system - said activity carried out by sub contractor therefore appellant cannot be treated as manufacturer of storage system accordingly, duty should have been demanded if at all applicable, it is from the sub contractors - AT
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• Cenvat Credit Rules, 2004: No Requirement for Assessee to Reverse Cenvat Credit After Receiving Refund Order.

  Case-Laws - AT : There is no provisions in the Cenvat Credit Rules, 2004 which requires the appellant-assessee to reverse the Cenvat credit against the receipt of refund order. - AT
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• Transportation Costs Deductible from Assessable Value in Excise Duty Valuation, Even if Charged via Debit Note.

  Case-Laws - AT : Valuation - Merely because the transportation was recovered by way of debit note, the same should not be disallowed as deduction for the purpose of charging the duty from the assessable value - transportation not chargeable to duty - AT
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• Refund Claim for Reverse Osmosis Plant Exemption Approved Under Relevant Notification for Industrial Water Treatment Facility.

  Case-Laws - AT : Refund claim - RO Plant - the plant itself is a water treatment plant for supply of treated water for the industrial use - the Reverse Osmosis Plant received by the appellant is clearly covered by the exemption notification - AT
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• Cenvat Credit Granted for Railway Track Used in Manufacturing Process Under Central Excise Regulations.

  Case-Laws - AT : Cenvat Credit - railway track was handling system for raw material and processed material. Their use inside plant formed process of manufacturing and the assessee was entitled to take credit for duty paid by them - AT
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VAT

• High Court Upholds Constitutional Validity of Luxury Tax Amendment, Classifying Accommodations Over Rs. 1000 as 'Luxury' Under Article 226.

  Case-Laws - HC : Constitutional validity - amendment in Luxury tax - The classification of such accommodation and amenities as 'luxury', if it costs Rupees one thousand or more per day, is, therefore, made by the legislature for constitutionally sound principles and cannot, therefore, be obtruded by this Court in exercise of its powers under Article 226 of the Constitution of India - HC
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• Illicit Goods Transport with Fake Consignors: Validity of Seizure and Cash Security Demand Upheld u/s 48 U.P. VAT Act.

  Case-Laws - HC : Evasion of tax - goods transported illegally - consignors and consignees are non-existent - seizure - Whether under the facts and circumstances of the case, seizure of goods and demand of cash security for its release u/s 48 of the U.P. VAT Act, 2008 is valid? - Attempt to evade duty proved - Action taken by the revenue sustained - HC
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Case Laws:

• Income Tax

• 2017 (1) TMI 635
  Payments made to non-residents towards various services - tax deducted at source at the rates provided u/s 115A or as per the rates provided u/s 90(2) r.w.s. Double Taxation Avoidance Agreement (DTAA) with respective countries of the non-residents - payments have been made to non-residents persons having no permanent establishment in India - assessee contended that tax has been rightly deducted at source at the rates provided u/s 115A of the Act or as per the rates with reference to DTAA r.w.s. 90C(2) of the Act, whereas Revenue created demand against the assessee by observing that as the deductees do not hold PAN provisions of section 206AA of the Act comes into effect as per which tax was required to be deducted @ 20% Held that:- In case where payments have been made to the deductees on the strength of the beneficial provisions of section 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, then provisions of section 206AA cannot be invoked by the Assessing Officer insisting to deduct tax @ 20% for non-availability of PAN. Portions of demand sustained for want of verification of agreement relating to industrial policy as well as in case of some payment for verifying the treaty rates - Held that:- We observe that during the course of hearing ld. AR has affirmed that such type of payments by assessee are being regularly made to the deductees which have been dealt by ld. CIT(A) in appeal before the Tribunal. Ld. AR has also submitted that all the payments have been made through banking channels and automatic route of RBI with due certification of the nature of payment, details of payees, rates of taxes deducted at source. We are, therefore, of the view that as assessee is making such payments consistently to the payees for various types of services relating to produce registration, marketing and professional royalty and other technical services, and looking to the fact that there is no dispute to the residential status of payees, assessees have rightly deducted TDS as per rates provided in section 115A(1)(b) of the Act as well as per rates provided in DTAA with respect to countries to which the payees belong to.

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• 2017 (1) TMI 634
  Accrual of income - Selection of year of assessment - tds liability - Cash system of accounting - Held that:- As the petitioners prays to withdraw the special leave petitions and states that the petitioner had paid some tax in the subsequent years which now should become refundable and he would be moving an appropriate application for refund thereof. If permissible in law, the petitioner can do so. Insofar as this Court is concerned, nothing is observed on the merits of the aforesaid submissions. As prayed for, the special leave petitions are dismissed as withdrawn. [ See HC ref 2016 (8) TMI 329 - DELHI HIGH COURT

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• 2017 (1) TMI 633
  Penalty under section 271(a)(c) - addition under the head under-reported interest income - non filing ROI on due date - Held that:- We find that the assessee had not filed his return of income on due date, that he himself was filing the return, that while preparing the return he had included the income under the head house property and income from other sources. House property income was computed in negative.Clearly,the assessee was aware of the procedure of filing the return and method of computing the income. It is to be remembered that assessee had earned interest income of 1.92 lakhs during the year under consideration. It is not a small amount that could be ignored by a person while filing the return. It is not the case that return was filed in the first month of the subsequent financial year and that assessee had not received the statement of interest income from the bank. Return of income is not a simple piece of paper. The assessees are supposed to not only disclose their income but also has to verify that entries made in it are correct The explanation filed by the assessee about not disclosing interest income in the return of income was not bona fide.So,confirming the order of the FAA,we decide the effective ground of appeal against the assessee.

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• 2017 (1) TMI 632
  Levy of penalty u/s 271 - disallowance of the interest paid on borrowed funds - Held that:- In the present case, the assessee filed the required evidence before the AO in original assessment proceedings wherein the interest amount to the extent of 57,90,492/- was adjusted to the returned loss in the original assessment and thereafter, while giving effect to order of Tribunal, the AO made the disallowance of the interest paid on borrowed funds. Therefore, it is a clear the AO identified the amount of 57,90,492/- as interest paid and on such amount the AO disallowed 1,18,096/-which is a corresponding interest under section 14A treating the same as expenditure incurred on earning dividend of 42,020/-. CIT(A) did not consider the same as it clearly appearing in the original assessment order. Therefore, both the authorities did not consider the material evidence available on record in right perspective. We find that merely interest has been disallowed does not mean that the assessee has considered the income are filed the inaccurate particulars of income. Also there is no finding that any details furnished by the assessee in its return were found to be incorrect or false. Thus, the order of penalty is liable to be quashed. - Decided in favour of assessee

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• 2017 (1) TMI 631
  Capital gain computation - consideration received - pro-rata transfer of land - Transfer exigible to tax by reference to Section 2(47)(v) read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Held that:- We find no infirmity in the order of the learned CIT (Appeals) in directing the Assessing Officer to recompute the short term capital gain on the amount actual received by the assessee. We find that the aforestated directions have been given by the CIT (Appeals) following the judgment of the Hon'ble Punjab & Haryana High Court on the identical issue in case of Shri C.S. Atwal [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT ] This fact is not denied even by the Revenue. Since the issue has been decided by the higher authority and the learned CIT (Appeals) has passed the order following the decision of the Hon'ble Jurisdictional High Court, we find no reason to interfere in the same. In view of the same, all the grounds raised by the Revenue are dismissed.

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• 2017 (1) TMI 630
  Disallowance u/s 40A(2)(b) - assessee has paid interest to specified persons at the rate of 18% on the loan received from them - AO has disallowed interest payment over and above 12% per annum - Held that:- As decided in assessee's own case for the Asstt.Year 2005-06 to 2010-11 once there was categorical findings by the Tribunal that 18% per annum interest was reasonable and there was nothing contrary thereto such findings the CIT(A) ought to have followed the same. In view of the above discussion and bearing in mind entirety of the case, we are of the considered view that the impugned disallowance u/s 40A(2)(b) in respect of interest paid in excess to 12% per annum deserves to be deleted. We, therefore, direct the Assessing Officer to delete the impugned disallowance. - Decided in favour of assessee

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• 2017 (1) TMI 629
  Non-deduction of TDS while making payment on account of commission - as per assessee the said commission was paid to his staff and, thus, it was not attracted Section 40(a)(ia) - Held that:- As during the hearing in remand report, the assessee produced all books of accounts, documents, salary register before the AO in response to the remand report sent by the CIT(A). Accordingly the AO sent the notice u/s.131 of the Act, to the said 5 staff of the assessee by post to their residential address for their personal appearance with documents. Four of the staff out of five staffs appeared before the AO along with their voter ID and bank accounts and they all admitted that they received salary very nominal amount and they received commission on their sale as their designation is ‘Sales Representatives’. On considering and being satisfied of their identity with the documentary evidence such as books of accounts, vouchers, bank accounts, voter ID etc. and on considering the oral submissions and acceptance of sale for the staff of the assessee, the AO has rightly observed that commission was paid to the staff of the assessee. Ld. AR also submitted that the remand report prepared by the AO after giving further opportunity of being heard to the assessee and after verification of all returns and witnesses and there is no infirmity in the remand report, therefore, ld. CIT(A) must accept it. The remand report was prepared by the AO after thoroughly verification of books of accounts, documents as well as personal appearances of the staff of the assessee in respect of notice u/s.131 of the I.T.Act. But the ld. CIT(A) disbelieved in the remand report of the AO and passed the erroneous order - Decided in favour of assessee

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• 2017 (1) TMI 628
  Validity of notice u/s 147 - not giving cognizance to the valuation reports of DVOs as no proceedings was pending for A/Y-1995-96 - Held that:- Aforesaid question has already been considered by this Court in M/s Tikaula Sugar Mills Limited Vs. C.I.T., Muzaffar Nagar [2012 (10) TMI 619 - ALLAHABAD HIGH COURT ] the reference to DVO under Section 142-A is not to make a fishing and roving enquiry into the expenditure in constructions. The AO is not authorised to call for the report of DVO unless he forms an opinion that he cannot rely on the assessee's accounts and rejects the accounts books. The incomplete report of the DVO on the basis of which the assessment was reopened and for which the reasons were recorded on could not be accepted as the material on the basis of which the AO could have formed belief that the assessee-company had not truly disclosed the expenditure of earthwork. The DVO had only raised doubts on the methodology adopted by the assessee for valuation. The AO acted casually in discharging his functions. - Decided in favour of assessee

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• 2017 (1) TMI 627
  Deduction u/s 80IC - ITAT considering assessee's business activity as manufacturing instead of assembling Luggage carriers, Wheel Caps etc.- Held that:- We find that both the CIT(A) as well as the Tribunal on application of the principle laid down by this and the Apex Court in Union of India and Others vs. J.G. Glass Industries Ltd. & Others [1997 (12) TMI 110 - SUPREME COURT OF INDIA]concluded that the processes adopted by the Respondent Assessee to obtain front guard, luggage, carrier, rear gear etc. were manufacturing processes. This concurrent finding of fact is not shown to be perverse. - Decided in favour of assessee

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• 2017 (1) TMI 626
  Disallowance made on agricultural income - Tribunal deleting the disallowance on the ground that the same was exempted under Section 10(1) - Held that:- From the materials on record, it could be seen that, it is not the case of the Assessing Officer, at the first instance that the assessee has not produced any details of the expenditure incurred in raising flowers and petals in pots. Assessment order does not disclose that because of the fact that the assessee did not prove expenditure, income from flowers and petals was added. He has only stated that without performing basic operations, income generated cannot be termed as agricultural income. Even during the appeal, the Revenue has not raised such issue. Such contentions are made for the first time, before this Court. The assessment order has to fall or succeed on the contents of the order. A fact which was never raised in the assessment proceedings cannot be introduced for the first time, in an appeal under Section 260A, for an answer. Needless to state that questions of law arise on the facts considered by the authorities with reference to the provisions and for the above reasons, we are of the view that the Revenue cannot raise the said issue at this stage. In the light of the concurrent findings of the appellate authority and the appellate Tribunal and also in the light of the above decisions, this Court is not inclined to interfere with the impugned order of the appellate Tribunal. The substantial questions of law are answered against the Revenue

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• 2017 (1) TMI 625
  Levying the penalty u/s. 271(1)(c) - adjustment to the Book Profit as well as to the normal computation of the total income - Additions have been confirmed and accepted by the assessee - Held that:- The issue of disallowance has already reached finality in the hands of the assessee for both the assessment years against the assessee. It is a settled principle of law that where there are two opinions on allowability of expenditure , it makes it debatable and on such disallowance penalty u/s 271(1) (c) cannot be levied. The present disallowance of advance depreciation is ultimately settled by the Hon’ble Supreme Court of India and that too in favor of the assessee, therefore even if the assessee has accepted the addition in its hands, it cannot be said that assessee has furnished inaccurate particulars of income. Hence on this disallowance penalty u/s 271(1) ( c) cannot be levied. See CIT V Reliance Petro products Limited [2010 (3) TMI 80 - SUPREME COURT ] Whether the assessee files an appeal or did not contest the addition or disallowance at higher forums , it does not have any bearing on the statutory provisions of section 271(1) ( c) of the I.T. Act, 1961In view of this, we do not incline to uphold the order of the AO on levy of penalty under section 271(1) ( c) of the I.T. Act, on advance against depreciation disallowed while computing the Book Profit under section 115JB of the I.T. Act as well as under the normal computation of total income. In view of this, we do not find any infirmity in the order of the Ld. CIT(A) in cancelling the penalty levied by the AO. - Decided in favour of assessee Disallowances of Income Tax recovery and Transmission charges - Held that:- Both these issues were amply disclosed in Note No. 14(d) and 17 of the Audited Accounts of the assesee. These Notes also shows that the same have been based on the order of the CERC and the claim has been disputed by the payer. In view of this, the income have not been shown by the assessee for tax purposes. Subsequently, on the submission of the assessee, sum have been added to the income of the assessee for the assessment year 2007-08. On that basis, the addition was made in assessment year 2005-06. In the present case, the accrual of the income itself is in doubt when the payee has provided the same, but the payer has not admitted the liability. Further, the Assessee itself has brought on record before the AO that as the same amounts have been received in assessment year 2007-08, it can be added in the income of the current year and may be excluded from assessment year 2007-08. The full facts of particular dispute and uncertainty arising on account of receipt of the income were disclosed and reason why assessee did not offer it for taxation was also available before ld AO. Therefore, it cannot be said that assessee has furnished inaccurate particulars thereof. No penalty under section 271(1)(c) on both these disallowances. - Decided in favour of assessee

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• 2017 (1) TMI 624
  Validity of assessment - non-service of notice u/s. 143(2) within the prescribed time - Held that:- AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law and hence, cancel the same by accepting the appeal filed by the Assessee. - Decided in favour of assessee

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• 2017 (1) TMI 623
  Validity of assessment u/s 153A - addition to income - Held that:- The additions made by the AO are beyond the scope of section 153C of the Income Tax Act, 1961, because no incriminating material or evidence had been found during the course of search so as to doubt the transactions. It was noted that in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee, leave alone the question of any incriminating material for the year under appeal. The action of the AO is based upon conjectures and surmises and hence, the additions made is not sustainable in the eyes of law, because this issue in dispute is now no more res-integra, in view of the decision dated 28.8.2015 of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs. Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) - Decided in favour of assessee

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• 2017 (1) TMI 622
  Treatment to loss - CIT-A justified in treating the loss as business loss as against the speculation loss treated by the ld AO - Held that:- Respectfully following the judicial precedents relied upon hereinabove, Wanchoo Committee report of December 1971 and our findings given hereinabove , we hold that the amendment brought in by the Finance Act 2014 should be construed as curative in nature and hence to be given retrospective applicability. It is not in dispute that the principal business of the assessee in the instant case is trading in shares. If the amendment supra is given retrospective effect, then the same would automatically fall under the exception provided in the Explanation to Section 73 of the Act and accordingly the loss incurred on delivery based share transactions should not be construed as speculation loss. In view of this, we are not inclined to get into the other arguments advanced by the ld AR and ld DR on the merits of the case. Hence, ground raised by the revenue in this regard is dismissed. Disallowance made u/s 43B - Held that:- The issue involved only requires factual verification from the bank statement and the loan account of the assessee as to whether out of total settlement of dues made by the assessee, whether the interest component had been duly paid or not. Based on this factual verification, the ld AO is directed to decide the issue in accordance with law. Disallowance of interest - Held that:- It is not in dispute that the entire details of amount of interest free funds paid to three companies were duly filed before the ld AO by the assessee. The ld CITA had given a categorical finding that no part of the borrowed funds were utilized for advancing interest free funds by the assessee. This fact has not been controverted by the revenue before us. Hence the primary test for disallowance of interest that borrowed funds have been diverted for non business purposes fails.It is well settled that when there are mixed funds (i.e both borrowed as well as own funds) and when the own funds are several times more than the borrowed funds and interest free advances, then it should be presumed that the interest free funds were advanced by the assessee from its own funds. Reliance in this regard placed by the ld AR on the decision of in the case of CIT vs Britannia Industries Ltd reported in (2005 (6) TMI 19 - CALCUTTA High Court ) is very well founded and is directly on the point. Thus we hold that there is no justifiable reason to interfere with the order of the ld CITA in this regard. Disallowance of depreciation related to transferred assets - Addition on account of business profit - Held that:- There was no surplus that was derived in any manner whatsoever by the assessee warranting chargeability to tax. In any case, we are in complete agreement with the arguments of the ld AR that the transfer of assets by holding to subsidiary company would fall under the exemption clause provided in section 47(iv) of the Act and hence the same, in any event, would not be regarded as ‘transfer’ within the meaning of section 2(47) of the Act. We find from the facts narrated above, the assessee had only added the fixed assets pertaining to Ahimsaa Channel during the year under appeal including the capitalization of preoperative and preliminary expense relating to the channel and transferred the same at book values / cost to its subsidiary company. There is no profit element derived from it. Hence we hold that there is no case for making any addition towards excess depreciation or profit derived from excess of assets over liabilities. We find that the ld CIT-A had rightly granted relief by duly appreciating the facts of the case.

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• 2017 (1) TMI 621
  Disallowance of expenses pertaining to guest house maintenance and repair maintenance - it relates to cash payment which the assessee did not provide vouchers/bills - Held that:- It is evident that the disallowance made is completely ad-hoc without specific finding as to how the expenditure incurred is not for business purpose. It is not the case of the AO that the expenditure claimed is not genuine. Since all bills/vouchers and ledger accounts were before the AO, it would have been appropriate that specific vouchers etc. were identified before the disallowance was made. The assessee had incurred the expenditure on a lease property used as holiday home for the employees of the company. The expenses incurred in cash or through DD are towards electricity, water, house tax charges etc. and are for business purposes. Similar is the nature of expenses claimed under repairs and maintenance. Therefore CIT(A) has rightly held that there is no justification for making an ad-hoc disallowance when all bills/vouchers etc. were produced before the AO - Decided in favour of assessee Addition on account of repair and maintenance - Held that:- CIT(A) has perused the bills/vouchers produced before the AO and noted that expenditure incurred is purely on repair and maintenance of the roof and outer areas and cannot be treated as capital expenditure providing benefit of enduring nature or leading to creation of capital asset. Therefore, Ld. CIT(A) has rightly held that the disallowance of the impugned expenditure by treating the same as capital in nature was not in order and was therefore rightly deleted which does not need any interference on our part Addition on account of repair and maintenance - Held that:- CIT(A) has observed that the expenditure has been incurred on painting, polishing, repair of false ceiling, water proofing treatment, tile work, dismantling of roof and other miscellaneous repairs. On careful examination of the bills/vouchers, it was noted that sum is incurred for dismantling and grading of roof. It appears that entire roof has been recast. Further note that Ld. CIT(A) has treated a sum as revenue in nature and therefore the disallowance made by the AO was rightly directed to be deleted which does not need any interference on our part.

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• 2017 (1) TMI 620
  Addition u/s. 68 - inguenity of loan - information from the Investigation Wing that the assessee has received accommodation entries - Held that:- There was only one loan taken by assessee from Moderate Credit Crop Ltd. by cheque no. 743431 25 lacs each. The loan was repaid by cheque no. 230415 dated 28.04.2007 of 45 lacs and cheque no. 530345 dated 03.05.2007 of 5 lacs. Thus the loan was repaid 3 years before the date of statement taken by Investigation Wing of the Department from the CA Sh. Aseem Kumar Gupta in 2010. Therefore, the department should not take a wrong view of genuine loan taken by the party from another company M/s. Moderate Credit Corp. Ltd. and treat as bogus accommodation entry. Therefore the addition made cash introduction to the bank account of M/s. Moderate Credit Corp. Ltd. before issuing cheque or no such other transaction however happened with that company. Hence, the genuine transaction made by the assessee company cannot be treated as a sham transaction. It of the opinion that this is a genuine loan transaction which has been repaid by the AO 50 lacs which was rightly been deleted by the Ld. CIT(A) which does not need any interference on my part, hence, uphold the order of the Ld. CIT(A) on this issue. Also find that Ld. CIT(A) further observed in his impugned order that the loan is taken from non-related parties/company M/s. Moderate Credit Corp. Ltd. He further observed that it is strange to believe that any non-related party will given loan of 50 lakh without taking any interest from the appellant company. The loan period 7 months in this FY approximately. Hence he rightly estimated interest @1% per month (i.e. 12% per year simple interest rate) for the above 7 months on principal amount of 50 lacs which in this FY 2005-. CIT(A) had rightly add this 3,50,000/- as estimated interest paid by assessee company which was not shown in books of a/cs, and hence reduced the returned loss by this amount. Therefore, the observation of the Ld. CIT(A) that the net assessed loss after giving effect to this order will be Rs. (-) 15,15,832 + 3,50,000 = 11,65,832/-) is quite genuine and therefore, the addition made of 3,50,000/- by the Ld. CIT(A) is reasonable, hence, I upheld the same.

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• 2017 (1) TMI 619
  Eligibility to exemption u/s. 11 & 12 - charitable institution - whether assessee’s activity falls under the category of ‘advancement of any other object of General Public Utility’? - First Proviso to Section 2(15) challenged as arbitrary and unreasonable and has no rational nexus with the object sought to be achieved and is thus violative of Article 14 of the Constitution of India - Held that:- Recently the Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT(E)(2015 (1) TMI 928 - DELHI HIGH COURT ) has upheld the constitution validity of the proviso of section 2(15) which was under challenge being discriminatory in view of the Article 14 (Equality before law) of the Constitution of India but the Hon'ble High Court has read down the strict and literal Interpretation of the Proviso of section 2(15) and has held that mere receipt of fee or charge cannot be said that the assessee involved in any trade, commerce or business and has accordingly allowed the relief to the ITPO. Also further find that after considering all the facts and circumstances of the case and following the order of Ld. CIT(A) for AY 2010- 11 & 2011-12, Ld. CIT(A) has rightly held that the assessee is a charitable institution and accordingly, the AO was directed to allow the exemption u/s. 11 & 12 of the I.T. Act to the assessee alongwith consequential benefits - Decided in favour of assessee

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• 2017 (1) TMI 618
  Rate of depreciation on CCTV cameras - Held that:- CCTV cameras cannot function without computer, as to see the footage captured by CCTV camera you need a device in the shape of computer and thus, Computer is an integral part of CCTV camera and as such, is eligible for depreciation at the rate of 60% as prescribed for Computers under the Income Tax Act and accordingly, allow the depreciation @ 60% on the issue in dispute. See Commissioner of Income Tax Versus Citicorp Maruti Finance Ltd. [2010 (11) TMI 802 - Delhi High Court ] Disallowance of advertisement expenses - Held that:- The said expenditure was genuine one as the same was paid to Lion Club for advertisement in District Directory for good and effective medium for company's products and services, as is evident from the receipt filed at pages 165 of the paper book and delete the addition in dispute by relying on the judgment of Hon'ble High Court of Delhi in the case of CIT vs. Salora International Limited reported in [2008 (8) TMI 138 - DELHI HIGH COURT ] wherein it has been held that expenses incurred for advertisement and sales promotion and brand building are allowable expenses. Disallowance expenditure(i.e. 10% of the telephone expense and vehicle running and maintenance expenses and 40% of the festival expenses) - Held that:- The disallowance made by AO are without any basis and purely adhoc disallowances made for personal use or vouchers in the hands of the company which is not permissible in the eyes of law. Also note that the disallowance (40% of the festival expenses) has been incurred exclusively for the business purpose and all the payments had been through bank with proper supporting vouchers, hence, both the additions in dispute are deleted. See Sayaji Iron 20,000/- was paid for brand promotion and effective marketing of company's products and services, as is evident from the receipt filed at page 166 of the paper book. Hence, the addition in dispute is deleted. Also find that even otherwise the assessee is eligible for deduction under section 80G of the I.T. Act, 1961. See CIT vs. Salora International Limited [2008 (8) TMI 138 - DELHI HIGH COURT ] wherein, it has been held that the expenses incurred for advertisement and sales promotion and brand building are allowable expenses.

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• 2017 (1) TMI 617
  Unexplained cash deposit in bank account - admission of additional evidence under Rule 46A of the Income Tax Rules, 1962 - Assessee has not filed all the additional evidences i.e. 7 sale deeds of land from which the assesseee has received 52,07,500/- before this Bench - Held that:- The action of the Ld. CIT(A) in admitting these additional evidences is contrary to the conditions as laid down under Rule 46A of the Income Tax Rules, 1962. Assessee has not established before us that the AO has refused to admit the additional evidence which ought to be admitted by the AO. Assessee has also not established that assesee is prevented by sufficient cause for producing the additional evidence before the AO. After going through the assessment records, we have also seen that AO has given opportunity to the assessee for producing the evidence supporting the claim of the assessee, but the assessee has failed to avail the same and the AO has competed the assessment as per law. Keeping in view of the facts and circumstances as explained above, we are of the considered view that the additional evidences filed before the Ld. CIT(A) needs to be thoroughly examined at the level of the AO. Therefore, we set aside the issues in dispute to the file of the AO for fresh consideration, after thoroughly examining the additional evidences filed by the assessee before the Ld. CIT(A). As a result, the appeal filed by the Revenue stands allowed for statistical purposes.

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• 2017 (1) TMI 616
  Exemption u/s 11 - Treatment to tour expenses and fashion show expenses - assessee is a charitable society registered u/s 12A - Held that:- We find that there is no material brought on record by the ld AO to suggest discrimination of the students who get selected to participate in the tour. In view of these findings, we have no hesitation in holding that the incurrence of tour expenses would definitely form part of the application of income of the assessee society and is part and parcel of the activity of imparting education. It is not in dispute that the vocational training department of the assessee society conducts annual fashion shows and Mr & Mrs University competition. We hold that these shows admittedly provides a platform for the students to display their talents and also to exhibit what they had learnt in the classroom. This also creates lot of employment opportunities for the students. We hold that these events help in students shedding their inhibitions and come out of stage fear which in turn enables the students to meet the society at large with greater confidence. This is similar to institutes like National Institute of Fashion Technology set up by Government of India who are also holding fashion shows for similar purposes, as rightly pointed out by the ld CITA. We hold that this also forms an integral part of education, learning and training of students. We find that the ld AO treated these expenditures to be in the nature of advertisement for the institution, which in turn would again have to be construed as application of income in pursuance of the objects of the assessee society. Hence in any case, this would only fall under the ambit of application of income. Thus we hold that both the tour expenses and fashion show and Mr & Mrs University expenses incurred by the assessee society would have to be construed as application of income in pursuance of objects of the assessee society. - Decided in favour of assessee.

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• 2017 (1) TMI 615
  Loss on Forward Contracts in foreign exchange - assessee does not deal in foreign exchange and is a diamond merchant - Held that:- The appellant has cancelled some of its foreign exchange forward contracts before the due date, but such transactions has resulted in net profit. For the sake of discussion, even if such transactions are held to be speculative in nature simply because the appellant has cancelled these transactions before the maturity date, still it does not have any adverse effect on revenue because net result of such transactions is profit and not the loss. Therefore, after considering the totality and circumstances of the instant case as well as the principle laid down by the Hon’ble ITAT in appellant’s own case in A.Y.2009-10, it is noted that the net loss of the appellant is in respect of the transactions of only those forward contracts which was incurred on settlement on or after due date of the contracts. Since such transactions were carried out in the normal course of business to guard against the fluctuation in foreign exchange such transactions are in nature of hedging transactions, loss on which is genuinely business loss, hence the AO is directed to allow the same.

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• 2017 (1) TMI 614
  Addition made on account of claim of reduction in value of investment as business loss which was stock-in-trade - Held that:- We find from the above facts that the assessee held these securities as current investments as stock-in-trade and, therefore, provisions made for depreciation in the value of securities as allowable as deduction and this supports by the following facts:- i) Securities are purchased and sold in the course of carrying on business of the assessee. Securities are held for trading as is evident from the sale made in the subsequent year as explained. ii) The treatment of securities is same in the subsequent years. The appellants have prepared the accounts on an accrual basis of accounting complying with the prescribed accounting standards as certified by the auditors. iii) As per the RBI prudential norms read with AS 13, current investments are stated at carrying value as at the year and at lower of the cost and market value. iv) Such valuation of closing stock of securities is as per section 145 and 145A of the Act. In view of the above facts and circumstances, we are of the view that the allowability of deduction u/s 37(1) of the Act and deduction for the provisions for depreciation the assessee is entitled to. Thus we confirm the order of the CIT (A) deleting the addition made by the AO and dismiss the appeal of the Revenue - Decided in favour of assessee Disallowance of expenses relatable to exempt income by invoking the provisions of Section 14A of the Act read with Rule 8D - Held that:- We find that assessee has not claimed any exempt income and hence this issue is covered in favour of assessee by the decision of Hon’ble Delhi High Court in the case of Cheminvest ltd. (2015 (9) TMI 238 - DELHI HIGH COURT), wherein it is held that if there is no exempted income claimed by the assessee, no disallowance can be made by invoking the provisions of Section 14A read with Rule 8D of the Rules. - Decided in favour of assessee Disallowance of tds credit - Held that:- The assessee fairly stated that he is ready to produce evidences before AO and AO may be directed to verify the same and allow credit for TDS. We find no reason not to direct the AO accordingly. Hence, we direct the AO to verify the evidences regarding credit for TDS and accordingly allow the same. Charge interest u/s 234C on returned income as against interest charged on the assessed income - Held that:- We find that the provisions of Section 234C of the Act is very clear on this issue that interest u/s 234C of the Act is to be charged on returned income only. We direct the AO accordingly.

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• Customs

• 2017 (1) TMI 588
  Imposition of penalty u/s 114(i), 114(iii) and 117 on CHA - mis-declaration of goods - overvaluation of goods to claim higher drawback - the appellant failed to verify the antecedents of the exporter, his identity and address, as was expected of CHA - Held that: - the department has not brought any other evidence to prove that the appellant or his representative indulged in any activity to actively pursue the improper exportation. It stands admitted by Shri Vermani in his statements as well as in the present appeal, that there were lapses in complying with the norms regarding verification of the identity and antecedents of the exporters. However, we are of the view that such lapses are liable to be proceeded with by the Customs Department in terms of the Customs Broker Licensing Regulation, 2012. The conditions precedent for imposing penalty under Section 114 is absent in the facts of the present case. Section 117 provides for imposition of penalty not elsewhere specified for contravention of any of the provisions of this Act. We are of the view that the conduct of the appellant can be covered by the above section. Accordingly, we uphold the penalty imposed under Section 117 of the Customs Act. Appeal disposed off - decided partly in favor of appellant.

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• 2017 (1) TMI 587
  Imposition of penalty u/s 114 of the Customs Act, 1962 - improper exportation of goods - GR declaration form - Held that: - Regulation 4 of the Foreign Exchange (Export of Goods and Services) Regulation, 2000 lists out various exemptions from furnishing GR declarations. One of the exemptions is given under 4(g), which covers goods imported free of cost on re-export basis. From a perusal of the relevant contracts, it is seen that the goods imported and subsequently re-exported would satisfy the above condition for waiver of GR declaration given in Regulation 4 (g). Consequently, there is no requirement of filing GR-declaration in respect of the present exports - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 586
  Revocation of CHA licence - mis-declaration of goods - Did the CESTAT fall into error in upholding the revocation of the appellant’s CHA license in the circumstances of the case? - Held that: - the Enquiry Officer appears to have completely overlooked all the aspects and returned the finding that such inquiries have not been made nor has any material been disclosed. Even if the respondents were able to establish that there was omission or failure on the part of the appellant to comply with due diligence requirement, for some reason at least in the circumstances of this case, the revocation of the licence which has almost a permanent effect, was not warranted at all - the inquiry in this case was completed fairly beyond the period of 9 months stipulated by the CHA Regulations of 2004 - time limitation not applicable. Appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 585
  Revocation of CHA licence - smuggling and concealment - undeclared cigarettes of “Dunhill” and “Mond brands”. Scotch whisky was also found along with tyres - Held that: - even though the enquiry authority has taken the view that the respondent has contravened various provisions of the Custom Broker Regulations, the adjudicating authority has given detailed reasons for taking a different view and holding that no such contraventions can be attributed to the respondent. Having gone through the records of this case, we find no reasons to take a different view. Hence, the impugned order does not merit any interference and is upheld - appeal dismissed - decided against Revenue.

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• 2017 (1) TMI 584
  Confiscation - redemption fine and penalty - classification of imported goods - Desktop, 3D printer and certain other goods - Custom authorities are of the view that the goods are classifiable under a heading which is different from that declared by the appellant in the Bills of Entry - Held that: - Nothing have been brought under on record to indicate that a classification was indicated by the appellant in the Bill of Entry with a view to mis-declare the nature of the goods so as to evade payment of customs duty. In the circumstances of the case, it appears to us that the change in classification was a result of different interpretation by the customs authorities - In an issue of classification under the customs tariff, two different views are entirely possible. This cannot be taken to mean mis-declaration on the part of the importer - confiscation not justified - fine and penalties set aside - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 583
  Pre-deposit - is separate pre-deposit amount in respect of the petitioners and its directors justified? - Held that: - if a company and its directors are held jointly and severally liable, one set of pre-deposit is sufficient for hearing of the appeal. - if one set of pre-deposit amount to the extent of 7½ % of the duty drawback element is made, it would be considered sufficient compliance with the mandate of law. The Appellate Commissioner shall decide the appeals before him in accordance with law subject to such deposit - petition disposed off - decided in favor of petitioner.

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• 2017 (1) TMI 582
  Revocation of CHA licence - opportunity of being heard - Held that: - the show-cause notice was issued on 16.04.2015; the enquiry officer’s report was made on 30.06.2015; the Disciplinary Authority’s order was made on 06.10.2015 and the impugned order of the CESTAT is of 28.04.2016 - the technical breaches alleged against the respondent, even if held well founded, are of no such magnitude as to deprive it of the CHA licence, altogether - matter on remand - petition dismissed.

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• Corporate Laws

• 2017 (1) TMI 577
  Secured creditor entitlement to interest after the date of the winding up of the Company - whether Rules 154 and 179 of the Companies (Court) Rules, 1959 are applicable to debts due to a secured creditor by a Company in liquidation, which secured creditor stands outside the winding up and opts to realise his security for recovery of the decretal amounts? - Held that:- Admittedly the Court Receiver/Official Liquidator has an approximate amount of Rupees Thirty Eight Crores Thirty Six Lakhs as on 15th November, 2016 lying with him after making all the payments as required under Section 529A of the Act. No part of this amount can be paid to the unsecured creditors of the Company so long as the full decretal amount remains outstanding and payable to the secured creditors. However, as informed that since some of the claims filed before the Official Liquidator by some of claimants claiming to be 'workmen' of the Company in liquidation, were rejected by the Official Liquidator and the adjudication upheld by this Court and by the Appeal Court, the claimants have filed SLPs impugning the said orders. Though notice has been issued in the said SLPs by the Hon'ble Supreme Court, till date no ad-interim/interim order are passed in the said SLPs. The entire balance surplus amount lying with the Court Receiver/Official Liquidator with the interest earned or accrued thereon, is ordered to be paid to ICICI Bank Ltd. and Metropolitan Infrahousing as prayed by them in their respective Notices of Motion, subject to them giving an undertaking to the Official Liquidator that they shall bring back the said amounts or part thereof if any amounts are directed to be paid.

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• 2017 (1) TMI 576
  Condonation of delay - reasons for delay - Held that:- A perusal of the complaint and the application seeking condonation of delay reveals that efforts were made to trace the respondents and to inspect the records which were all frustrated and finally reverting back to the IFCIL, the petitioner collected the documents and filed the complaint. Thus the date of knowledge of offence to the petitioner can be attributed only when complete facts with incriminating documents were disclosed by IFCIL after appointment of the inquiry officer. Hence it cannot be held that there was a delay of one year and nine months in filing of the complaint from the date of knowledge of the offence. Considering the fact that the date of knowledge of the offence to the petitioner which falls in the category of a ‘person aggrieved by the offence’ could be attributed only on 25th August, 2004, when complete records were given by IFCIL and the complaint was filed on 30th September, 2004. Thus there was no delay in filing of the complaint. Hence there was no need for seeking condonation of delay in filing the complaint.

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• Service Tax

• 2017 (1) TMI 613
  100% EOU - refund claim - Consultant Engineer Service - Information Technology Software Services - Rule 5 of Cenvat Credit Rules, 2004 read with N/N. 5/2006-C.E. (N.T.), dated 14-3-2006 - denial on the ground that the invoice is issued to the unregistered premises of the appellant - Held that: - As per Rule 4A of Service Tax Rules, 1994, there is no requirement that the premises of the service recipient has to be registered. Therefore, the denial of refund on this ground is unjustified - appellant entitled for refund for this part - appeal allowed - decided partly in favor of appellant.

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• 2017 (1) TMI 612
  Maintainability of appeal - condonation of delay - a delay of 48 days after the expiry of due date for filing the appeal - Held that: - as per Section 128, the appeal before the Commissioner (A) has to be filed within 60 days from the date of communication of the order. Sub-section(1) of Section 35 ibid makes the position crystal clear that the appellate authority has no power to allow the appeal to be presented beyond the period of 30 days - the legislature intended the appellate authority to entertain the appeal by condoning the delay only upto 30 days after the expiry of 60 days which is the normal period of preferring appeal. Appeal dismissed - delay not condoned - decided against appellant.

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• 2017 (1) TMI 611
  N/N. 20/2009-ST dated 07.07.2009 - tour operator service - rent-a-cab service - time limitation - Held that: - the exemption for tour operator service as contained in N/N.20/2009-ST made available retrospectively w.e.f. 01.04.2000 is not available for examination by the lower authorities. The applicability of the said exemption to the appellants required re-verification of basic documents, more specifically the registration status of the vehicles operated by the appellants. In case the said exemption is found to be available to them, then the question of eligibility of small scale exemption for the other taxable service namely, “rent-a-cab service” also requires to be examined. The question of time bar also has to be examined in view of the submissions made by the ld. Counsel - appeal allowed by way of remand.

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• 2017 (1) TMI 610
  Business Auxiliary Services - loan fee for arranging loans - brokerage for enabling distribution of IPO - reimbursable expenses - Held that: - as regards loan fee, examining the scope of service rendered by the appellant, we find this category has no connection to such services. There is neither an advisory role nor auxiliary financial service with reference to investment etc. We further note that the impugned order mentioned about “other financial services” which were added under the category of BOFS only w.e.f. 18.04.2006. Even such “other financial services” appear to have no application to the present case. Regarding the brokerage fee, we find the same cannot be covered under Business Auxiliary Service during the relevant time. The services “Registrar to an issue” and “share transfer agent” more appropriately deal with the services rendered by the appellant. These taxable services were introduced only w.e.f. 01.05.2006 whereas, the demand in the present case is for the period prior to that date - since the tax liability under BAS itself is found to be not tenable, the inclusion of reimbursable expenditure for such tax does not arise. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 609
  Development of immovable property - administrative charges - restoration charges - transfer charges - Revenue has taken the view that these charges have been recovered in connection with the sale of real estate and hence, are liable to service tax under the category of Real Estate Agent Services defined under Section 65 (88) of the Finance Act, 1994, which has been introduced w.e.f. 16/10/1998 - demand of tax, with interest and penalties. Held that: - The administration charge has been recovered by the appellant from all original allottees of flats to cover expenses in connection with registration etc. It is fairly obvious that such charges are not covered within the definition of Real Estate Agent, in as much as it has been collected by the appellant directly from the allottees. In such a transaction there are only two parties - the buyer and seller (appellant) of the flat. Since no service has been rendered, the demand for service tax is not sustainable. Restoration charges - Held that: - such amounts have been recovered when an allottee defaults in his payment schedule and for that reason allotment is cancelled. In such cases, if the allottee approaches for restoring the allotment, restoration charges are levied - such charges are in the nature of a penalty imposed on the allottee to cover damages caused by his default in payment - such charges cannot be considered as a service charge liable for levy of service tax. Transfer charges - Held that: - A person who is engaged in rendering any service in relation to sale of real estate is liable to pay service tax under the Real Estate Agent Services - the transfer charges would be liable for payment of service tax under the above category. Matter remanded to the Adjudicating Authority to re-compute the demand within the normal period of limitation - penalties set aside - appeal allowed by way of remand.

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• 2017 (1) TMI 608
  Works contract service - commercial and industrial construction service and erection, commissioning or installation service - period prior to 01/06/2007 - Held that: - the Hon’ble Supreme Court decision in Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] is applicable. As such, there can be no service tax liability on the appellant/assessee for the period prior to 01/06/2007 - service tax demand confirmed for the period prior to 01/06/2007 cannot be sustained. Period post 01/06/2007 - Held that: - after the decision of the Hon’ble Supreme Court in Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT], the legal position is that there could be no service tax levy on the composite works contract prior to 01/06/2007. Such finality has been pronounced by the Hon’ble Supreme Court only in 20/08/2015. Accordingly, the liability of composite works contract stand upheld w.e.f. 01/06/2007. The tax liability has to be arrived at applying the rate applicable, including the composition rate, if all the conditions thereof are fulfilled by the appellant/assessee. The appeal filed by the appellant/assessee is allowed to the extent of non-leviability of service tax prior to 01/06/2007 and restricting the demand for normal period post 01/06/2007 - penalties set aside - appeal dismissed - decided against Revenue.

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• 2017 (1) TMI 607
  Deputation of employees - reimbursements of salaries and wages paid to their employees deputed to do the work of the sister concern - whether the service falls under the category of Support Services of Business or Commerce and is taxable or not? - Held that: - There is nothing on record to state that the appellant had received any further amount for deputing the employees to sister-concern - similar issue was decided by the Tribunal in the case of Arvind Mills Ltd v. Commissioner of Service Tax, Ahmedabad [2013 (10) TMI 821 - CESTAT AHMEDABAD] holding that the reimbursements of salaries and wages received for the deputation of employees will not be taxable - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (1) TMI 606
  Valuation - reversal of credit u/r 6(3) (b) of the CENVAT Credit Rules 2002 - extended period of limitation - suppression of facts - Held that: - Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. An incorrect statement or wrong method of computation cannot be equated with willful misstatement - The appellant has submitted details of work order as well as filed the ER-1 returns to the department. It is for the department to conduct scrutiny and call for information from appellant, if not found in order - the department has not been able to establish suppression of facts or willful misstatement with intend to evade payment of duty on the part of the appellant - Invoking extended period is not acceptable in the situation presented by the instant case - demand time barred - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 605
  CENVAT credit - LC charges and banking charges - Telephone & Fax services - Postage and courier services - Insurance services - denial on the ground that these services are not covered within the definition of input service - Held that: - the issue with reference of LC charges and banking charges have been held in favor of the appellant following the decision of the Coordinate Bench in the case of Lupin Ltd. Vs. CCE & ST (LTU) [2014 (1) TMI 55 - CESTAT MUMBAI], I allow Cenvat credit of LC charges and banking charges. Telephone and Fax services have been utilized by the appellant at the offices of the company. Telephone also have been provided to some of their employees for activities connected with business. The issue regarding the Cenvat credit of such services stand decided in favour of the appellant in the decision relied upon by the appellant in the case of Semco Electric Pvt. Ltd. Vs. CCE, Pune-I [2011 (10) TMI 142 - CESTAT, MUMBAI] - credit allowed. Postage and courier services have been utilized by the appellant for sending letters, parcels and other business communication. Cenvat credit on such services stands allowed in the case CCE Vs. Apar Industries [2010 (8) TMI 407 - CESTAT, AHMEDABAD] - credit allowed. Insurance services have been utilized by the appellant towards insurance of employees as well as fire and marine insurance, the issue of Cenvat credit on such services is also no more res integra and settled in favour of the appellants by the Tribunal in the case of CCE, Bangalore-II Vs. J.K. Fabrics [2015 (10) TMI 232 - CESTAT BANGALORE] - credit allowed. Appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 604
  Captive consumption - Dolochar - production of electricity - benefit of N/N. 67/95 CE 06.03.1995 - Held that: - the subject matter is covered by Tribunals decision in the case of HEG Ltd. [2011 (11) TMI 553 - CESTAT NEW DELHI], where it was held that if no duty of excise is leviable on Char/Dolochar, these cannot be exempted under section 5A of the Central Excise Act, 1944 as only those goods can be exempted which are chargeable to duty of excise - the items Char/Dolchar are not manufactured or excisable goods - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 603
  Recovery of credit along with penalty - demand on the ground that the value of the inputs has been written off - whether the Appellant is eligible to CENVAT Credit of 1,56,325/- on the inputs, the value of which was shown to have been written off in their books of account as other income? - Held that: - I do not find any basis for denying the CENVAT Credit once the quantity of inputs received in the factory against those invoices and had been used in or in relation to the manufacture of final product cleared on payment of duty - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 602
  Manufacture - sub-contract - erection and installation of storage system - Held that: - The appellant cleared the angles channels on payment of duty as applicable to site of the customers thereafter with the help of the said angle, channel alongwith bought out items fabrication/ erection/ installation job was done by the sub contractor namely (a) M/s. S.M. Errection Service (b) M/s. Saibaba Erection Service.(c) M/s. Ali Bin Mohgammed Magrabi - If at all, the activity at site is amount to manufacture and if it is liable for duty, it should have been demanded from the manufacturer of storage system, the said activity carried out by sub contractor therefore appellant cannot be treated as manufacturer of storage system accordingly, duty should have been demanded if at all applicable, it is from the sub contractors - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 601
  Job-work - N/N. 214/86-CE - excise duty not discharged on supply of inputs - time limitation - Held that: - it is apparent from the records that show-cause notice for the period 20/07/2000 to 18/08/2000 was issued on 06/05/2002, i.e. much after one year of the transaction of the goods. As per the above correspondence, since there is no suppression of facts on the part of the appellant, the extended period of demand was wrongly invoked. Therefore, the demand is not sustainable on the ground of limitation itself - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 600
  Whether the appellant is required to pay interest and also needs to be penalized for non-reversal of Cenvat credit lying in balance? - reversal of credit against refund order. Held that: - There is no provisions in the Cenvat Credit Rules, 2004 which requires the appellant-assessee to reverse the Cenvat credit against the receipt of refund order. There is also no provision which mandates for demand of interest for late deposit of the refund cheque given to an assessee. In the absence of any such provision, demand of interest from the appellant for the period from the date of issue of cheque till the date of deposit for non-reversal of Cenvat credit seems inconsistent with law - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 599
  Benefit of exemption N/N. 3/2004-CE dated 8.1.2004 - denial on the ground that the project for which pipes were supplied has not fulfilled all the conditions inasmuch as there is no water supply plant and no storage facility of the water - Held that: - the water supply plant not only include the plant of demineralization or purification of the water but water supply plant also if any plant which is built for water supply, it is covered by the term ‘water supply plant”. There is no dispute that the pumping station is a plant which is used for supply of water. Therefore, the water supply plant i.e. pumping plat very much exists in the project. As regards the issue that whether there is storage facility or otherwise, we find that the water after supply from pumping station from the source point it is supplied to the discharge chamber and thereafter it is released for irrigation purpose in the field. It is our considered view that the discharge chamber is nothing but storage facility. Both the conditions of existence of water supply plant and storage facility are fulfilled - appellants are entitled for the exemption notification No. 3/2004-CE - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 598
  Intermediate product, consumed captively - duty based on cost construction method - time limitation - Held that: - It is obvious that when the goods are cleared captively, the valuation of goods is governed by Rule 8 of Central Excise Valuation Rules, 2000 which is based on the cost construction method, if at all there is any variation in the cost, the department was free to issue show cause notice within the normal period of 1 year - In the present case, the demand pertains to the period September 2002 to March 2003 and the show cause notice was issued on 4.10.2004 i.e. much after 1 year. In these facts, no suppression of fact can be alleged against the respondent - demand not maintainable on the ground of time bar - appeal allowed - decide in favor of assessee.

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• 2017 (1) TMI 597
  SSI exemption - denial of benefit of N/N. 8/2003-CE dated 1.3.2003 - value of clearances exceeding threshold limit - Held that: - there is no dispute that the threshold limit of the aggregate value of Rupees three hundred lakhs was exceeded due to addition of traded goods. If the value of the traded goods is excluded than the aggregate value will remain below the threshold limit of Rupees three hundred lakhs. The Notification No. 8/2003-CE for the purpose of SSI exemption is available only for manufactured goods and not for trading goods - the exemption Notification No.8/2003 was wrongly denied by adding the value of the traded goods - appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 596
  Valuation - the differential excise duty was demanded on the amount of transportation only on the ground that the same was not mentioned in the invoice whereas the transportation was recovered through debit notes - whether transportation charges incurred towards the supply of their excisable goods to be included in assessable value? Held that: - though as per the procedure, the amount of transportation should be shown in the invoice however the objective of showing in the invoices to identify the amount of transportation for allowing the deduction thereof. Therefore whether it is shown on the invoice or if it is recovered by way of debit notes, in our view both are one and the same - Merely because the transportation was recovered by way of debit note, the same should not be disallowed as deduction for the purpose of charging the duty from the assessable value - transportation not chargeable to duty - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 595
  Clandestine removal - shortage of stock of yarn in the factory - Held that: - the lack of authentication of opening stock in the computation of stock of yarn was described as a glaring defect in arriving at the conclusion that grey fabric had been clandestinely removed. Likewise, the input-output ratio of yarn to fabric is also asserted to be an unsubstantiated assumption. Nowhere in the records do I find any evidence to support these assumptions. Further, it was pointed out that there was an absolute absence of motive for clandestine clearance because M/s Golden Silk Mills having registered under CENVAT Credit Rules, 2002 though the manufacture of grey fabric is exempt for excise duty owing to the special measure of the option to manufacturers to pay duty on clearance of grey fabric if CENVAT credit on yarn was intended to be availed, it is contended that it would be foolish of them to contemplate clandestine removal of grey fabric which is liable to duty of 10% when duty on yarn was 24%. Appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 594
  Refund claim - Reverse Osmosis Plant - rejection on the ground that the goods supplied by the supplier and received by the appellant is not entitled for the benefit of notification - Held that: - On going through N/N.3/2004, we find that the goods is specified in the notification are very broad and wide which in our view, even plant is also covered. The whole objective of the notification is that all the goods which are required for setting up of water supply plant are exempted. In the present case there is no dispute that the plant itself is a water treatment plant for supply of treated water for the industrial use. As per the description of the goods given in the notification read with explanation, we have no doubt that the Reverse Osmosis Plant received by the appellant is clearly covered by the exemption notification. Therefore it was not liable for any payment of duty, hence the duty paid on the same by the supplier is refundable. Appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 593
  Restoration of credit - The refund claim was rejected as the credit was not within the entitlement of the appellant for having been availed long after the receipt of the inputs within the factory of appellant - Held that: - The Rules do not prescribe any outer limit for availment but they do insist upon taking of credit on inputs only after receipt in factory, i.e. it cannot be availed on the strength of a paper trail but on physical arrival at the factory. As long as that condition has been fulfilled, there can be no cavil on availment. ‘Capital goods’ must similarly be received and the full credit was not to be availed in the first year; to the extent that appellant has not availed of the credit in the first year, there can be no cavil again on lumpsum availment beyond the first year. Reliance placed in the case of COROMANDEL FERTILIZERS LTD. Versus COMMR. OF C. EX. (A), VISAKHAPATNAM-IV [2008 (8) TMI 333 - CESTAT, BANGALORE], where it was held that there was sufficient reasons for the appellants for not taking credit during the relevant period in view of the Uncertainty in the matter. When the law is settled on the issue, there is no justification to deny the credit on the ground that it is availed after a long time. Appeal is allowed by restoring of credit - decided in favor of appellant.

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• 2017 (1) TMI 592
  MODVAT credit - ingot mould car bogie assembly - Held that: - I find that these items are used in the factory for transportation of raw materials in semi-furnished form, final products, etc. in the plant without which there cannot be any movement of the material from one division to another Reliance placed in the decision of the case of Jayaswal Neco Ltd. Vs. Commr. of Central Excise, Raipur [2015 (4) TMI 569 - SUPREME COURT], where it was held that railway track was handling system for raw material and processed material. Their use inside plant formed process of manufacturing and the assessee was entitled to take credit for duty paid by them. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 591
  CENVAT credit - input services - transportation of the finished goods from the factory gate upto the port of export - clearing and forwarding - CHA services - Denial on the ground that these are past manufacturing activities and the services have no nexus, either directly or indirectly, with the manufacturing activities and the services cannot be held as input services. Held that: - I find that in the case of CCEx. Vs. Inductotherm India Pvt. Ltd. [2014 (3) TMI 921 - GUJARAT HIGH COURT], the Hon ble Gujarat High Court held that though there is no express inclusion of such service in the definition of input service in Rule 2 (l) of Central Credit Rules, 2004, it can be included therein holding that in case of export of final products, the place of removal would be the port of shipment of the final product and not factory gate and therefore, the manufacturer would be entitled to cenvat credit towards cargo handling as input service under Central Credit Rules, 2004 - the appellant is entitled to avail the cenvat credit on the input service in respect of the services used in relation to clearance of the final product upto the port of shipment. Appeal allowed - credit allowed - decided in favor of appellant.

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• 2017 (1) TMI 590
  100% EOU - clandestine removal - whether the consignee 100%EOU, M/s Ganesh Overseas had received the quantity of goods mentioned in the respective AR-3A Nos. viz. 166, 169, 170 & 171 at their end, thereby, the procedure laid down under Rule 20 of Central Excise Rules 2002 read with relevant Notification had been complied with by them? Held that: - the goods were rewarehoused as is evident from the records maintained in the Range office - appeal rejected - decided against Revenue.

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• 2017 (1) TMI 589
  Rebate claim - Rule 18 of Central Excise Rules, 2002 - export of goods - Held that: - rule 5 of CENVAT Credit Rules, 2002 applies to inputs used in final products cleared for export and that rule 18 of Central Excise Rules, 2002 accords rebate of duties paid on goods that are exported. The rebate under this rule is allowable as long as goods are excisable or duty has been paid on materials used in processing of such goods. We find no reason to surmise that these rules distinguish between exempted goods and dutiable goods. They refer to final products and to excisable goods respectively. It is the stated doctrine in tax administration that domestic taxes are not exported with goods. Legislation carves out special provisions in taxing statutes for ensuring that such anathema is eliminated. The failure on the part of the lower authorities to perceive the intent of provision of rule 18 of Central Excise Rules, 2002, by digressing to the issue of payment of duty without the legal compulsion to do, appears to have blindsided them into suspicion of the motives for payment of such duty to the exclusion of the larger issue, viz, burdening the export value with domestic taxes. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (1) TMI 581
  Jurisdiction - the appellants have challenged the amendments made to the Act not on the ground that they are violative of the fundamental rights or other provisions of the Constitution, but singularly on the ground that those amendments have been made in excess of the powers available to the State Legislature under Entry 62 List II of VII Schedule of the Constitution of India - generic interpretation of the term 'Luxury' - whether the amendments made to the Act have been enacted by the legislature within its competence and therefore, is intra vires of the Constitution of India? Held that: - Legislation stems from the experience of the evils and should not, therefore, be impeded by the particular beliefs or opinion that certain classes of people would hold. The wisdom of legislature has to be respected as being for the good of the citizenry at large and not to the sentiments of a few. The power given under the Constitution to legislate is large and wide and must be construed as such - The duty of the court is only to interpret the provisions of the Constitution in a liberal spirit and to achieve the purposes and ideals set out in the Statute. As changes come in political and social life, the legislature is competent to adopt and evolve the Statutes in such a manner so as to answer such changes. Even though the powers granted do not change, the manner of its exercise would always depend upon the evolving socio- economic and political scenario but emotions, sentiments, unfounded suspicions, wild apprehensions and imaginary threats would obtain no place while assessing the validity of such legislation. We have no doubt that the legislature has taken into consideration various criterion like the experience over the time, the mischief that is sought to be redressed, the requirements that are sought to be achieved and the purpose for which a tax is imposed. The classification of such accommodation and amenities as 'luxury', if it costs Rupees one thousand or more per day, is, therefore, made by the legislature for constitutionally sound principles and cannot, therefore, be obtruded by this Court in exercise of its powers under Article 226 of the Constitution of India. The legislature must surely be given the credit of being aware of the developments on the subject from time to time and be credited with the capacity to control and exercise the purposes and requirements for which the power was committed to it under the Constitution. This is what is recognised as the doctrine of 'generic interpretation' meaning the entitlement to execute the power, with respect to new developments of the same subject that arise from time to time, under the control of the Authority to which the power is vested. The impugned amendments to the Act have been enacted by the legislature within its competence and therefore, is intra vires of the Constitution of India - appeal dismissed - decided against appellant.

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• 2017 (1) TMI 580
  Validity of reassessment order - the first respondent, being the assessing authority, instead of undertaking the re-assessment, by verifying the C Form as well as purchases as to whether the value of C Form declaration issued to the appellants/seller correctly tallied with that of the counterfoil available with the purchasers, who has paid tax, has simply proceed to pass the present impugned order dated 30.11.2009. Held that: - re-assessment has not been done by the first respondent before passing the impugned orders in accordance with the directions issued by the appellate authority. This position cannot be controverted by the learned Additional Government Pleader appearing for the respondents also. Therefore, this Court is of the view that the impugned orders shall not stand in the legal scrutiny as if an authority is directed to do a particular thing in a particular manner, the same has to be done only in that manner not otherwise - though a categorical direction was given by the appellate authority, the same has not been followed by the Assessing Authority and, therefore, the impugned orders followed by the non- consideration on the part of the first respondent would not stand in the legal scrutiny and, therefore, this Court has no hesitation to quash the said impugned orders, the same are quashed - petition allowed by way of remand.

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• 2017 (1) TMI 579
  Revision of order of assessment - denial on the ground that only an appeal would lie against the said order - Held that: - A bare reading of the proviso to Section 8(4) and Rules 12(7) would show that the Assessing Officer i.e., the first respondent has jurisdiction to accept C Forms, even after expiry of the prescribed period of time for submission of C Forms, which is three months, after the end of the period to which the declaration or the certificate relates. This power the first respondent is to exercise, if he is satisfied that the person concerned, i.e., the assessee, was prevented by sufficient cause from furnishing such declaration or Certificate within the time frame stipulated for the said purpose - the first respondent appears to be under a misapprehension that he has no such power - the first respondent will reconsider the request of the petitioner firm afresh, and pass an order, therafter, with respect to the request made upon due opportunity being given in that behalf - petition dismissed - matter on remand.

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• 2017 (1) TMI 578
  Evasion of tax - goods transported under the cover of TDF - consignors and consignees are non-existent - seizure - Whether under the facts and circumstances of the case, seizure of goods and demand of cash security for its release under Section 48 of the U.P. VAT Act, 2008 is valid? - Held that: - the goods in question originated for transportation from Ghaziabad, were being carried by the respondent in a fraudulent manner under the cover of bogus invoices with fictitious TIN numbers printed thereon. Respondents downloaded TDF-1 by submitting false information, suppressing material information, identity and particulars of real owners of the goods, so as to give it colour of transportation of the goods from outside the State of Uttar Pradesh to outside the State of Uttar Pradesh under Section 52 of the Act, with intent to evade tax under the Act - seizure of the goods under Section 48 of the Act and demand of cash security by the Mobil Squad Authority for release of the goods, does not suffer from any illegality. Whether Delhi - U.P. Border area of District Ghaziabad is "no-man's land"? - Held that: - the circular dated 31.01.1987 is non-existent. That apart, it has no relevance in view of the facts found and the constitutional provisions mentioned above. Delhi - U.P. Border area of District Ghaziabad is not "no man's land" rather it is part of District Ghaziabad (U.P.). Whether transporters are strangers to the transaction of sale and purchase and totally ignorant about the consignors and consignees? - Held that: - it cannot be said that transporters are strangers to the transaction of purchases and sales and totally ignorant about the consignors and consignees. In cases like the present case where transactions have been fictitiously carried on in false names and addresses, bogus invoices with fictitious TIN numbers printed therein and TDF-1 is downloaded on the basis of false particulars and forged papers by a transporter then he makes himself party to the episode of fictitious transaction with sole purpose of evasion of tax by undisclosed non-bonafide dealers. By seizure of goods in such cases transporter is not affected if he is really a transporter - Therefore, instead of being torch bearer of dishonest persons, he should allow the real consignors or consignees to come forward and assign reasons for concealing their real identity. The action of the departmental authorities in such cases to unearth evasion of tax is one of their fundamental duties under the Act. Whether fraudulent transportation of goods and colourable devices used to give impression of transportation of goods from outside the State of U.P. to outside the State of U.P. shall fall under Section 52 or would be a case falling under Section 48 of the U.P. VAT Act, 2008? - Held that: - No doubt, when a person transports goods from outside the State of U.P. to outside the State of U.P. in terms of Section 52 of the Act and Rule 58 of the Rules, the authorities under the Act have no power to seize the goods and demand security for release thereof but where, as in the present case, the transaction is sham, not genuine and make-believe and originated from a place within the State of U.P. or intended to be sold within the State of U.P. with intent to evade tax then it would be a case falling under Section 48 of the Act. Provisions of Sections 48 & 52 of the Act, have to be considered in a manner so as to hold that it serves to seek a reasonable result. Protection of Section 52 of the Act cannot be extended for evasion of tax under the Act, to perpetuate fraud or to do something indirectly which cannot be done directly. Revision allowed - decided in favor of applicants.

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• Indian Laws

• 2017 (1) TMI 575
  Infringement of trademark/copyright - whether the averments made in the plaint indicate that the present suit is a quia timet action and is based on the plaintiff’s apprehension of infringement of trademark/copyright within the territorial limits of this Court? - Held that:- The cause of action in the present case – even as described by the plaintiff in paragraph no. 26 of its plaint – is not of any apprehended injury by future action but essentially stems from the use of the trademark/label “Smart Choice” by the defendant in praesanti. It is alleged that defendant no.1 is using the trademark in Andhra Pradesh, which was discovered by the plaintiff in 2013; and this is the cause of action for the plaint as pleaded by the plaintiff. A mere bald statement at the end of the plaint which has no foundation in the entire plaint cannot be accepted as indicating the cause of action; the averments made in the plaint must, ex-facie, disclose the cause of action. Thus, the contention that part of cause of action has arisen within the territories of this Court since the plaintiff has made a bald statement that it apprehends that defendant would launch its product in Delhi, cannot be accepted.

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