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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter January 13, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Articles 1. Cost Auditing Standards [ Cost Audit Documentation (102)] – Part-II By: Rakesh Singh Summary: The Cost Auditing Standard on Cost Audit Documentation (102) provides guidance for auditors on maintaining comprehensive documentation during cost audits. It aims to ensure that audit records are sufficient to support the auditor's report and demonstrate compliance with auditing standards and legal requirements. Key requirements include recording audit procedures, evidence, and conclusions, ensuring documentation is understandable by an independent reviewer, and maintaining confidentiality and integrity of records. The standard also emphasizes timely documentation, retention policies, and the necessity for audit files to be organized and secure. Overall, it aims to enhance audit quality and accountability. 2. BASIC CONCEPTS OF GST (PART-1) By: Dr. Sanjiv Agarwal Summary: Goods and Services Tax (GST) is a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services at the national level, aiming to replace multiple indirect taxes with a single tax system. It is levied at each point of sale or service provision, allowing sellers and service providers to claim input tax credits. GST is designed to eliminate tax distortions and facilitate seamless credit across the supply chain, ultimately borne by the final consumer. It will subsume various central and state taxes, including excise duties, service tax, VAT, and others, while certain taxes like customs duties and taxes on petroleum products remain outside its scope. News 1. RBI Reference Rate for US $ Summary: The Reserve Bank of India set the reference rate for the US Dollar at Rs. 66.8905 on January 12, 2016, up from Rs. 66.7885 on January 11, 2016. The exchange rates for the Euro, British Pound, and Japanese Yen against the Rupee were also adjusted. On January 12, 2016, 1 Euro was Rs. 72.7434, 1 British Pound was Rs. 97.1518, and 100 Japanese Yen were Rs. 56.91. The SDR-Rupee rate is determined based on this reference rate. Notifications Law of Competition 1. ADVT. III/4/Exty./314 - dated 7-1-2016 - Competition Law Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2016 Summary: The Competition Commission of India issued amendments to the 2011 regulations concerning business transactions related to combinations under the Competition Act, 2002. Key changes include the removal of the term "verified" in certain sub-regulations, alterations in the language regarding the board of directors' role, and provisions for hearing parties before invalidating a notice. The amendments also redefine the treatment of certain share acquisitions as investments and adjust the criteria for acquisitions not exceeding specific thresholds. Additionally, new declaration formats for Forms I, II, and III have been introduced, requiring parties to confirm the accuracy and completeness of their submissions. Highlights / Catch Notes Income Tax No Penalty for Inaccurate Income Details Due to Clerical Error u/s 271(1)(c) of Income Tax Act. Case-Laws - AT : Penalty levied u/s 271(1)(c) - Even if it is considered for a moment to be a case of furnishing of inaccurate particulars of income, the same has been caused due to a clerical mistake committed by the clerk who fed the details into the computer - the case does not warrant levy of penalty u/s 271(1)(c) - AT Visit to Get Source Section 54F Relief Upheld: No Revision u/s 263 Needed; Decision Not Detrimental to Revenue Interests. Case-Laws - AT : Revision u/s 263 - AO on merits has allowed the case u/s 54F of the Act in accordance with law. This cannot be a case for revision u/s 263 - A decision of the AO could not be prejudicial to the interest of the revenue simply because it did not make detailed discussion - AT Visit to Get Source Transfer Pricing Officer Sets Arm's Length Price for Management Consultancy Fee at NIL, Excludes FX Loss as Service Charge. Case-Laws - AT : Transfer pricing adjustment - TPO take the amount of ALP at NIL - determination of Management Consultancy Fee - foreign exchange loss in financial transactions cannot be considered as ‘service charge’ for the intra group - AT Visit to Get Source Assessment Reopening Quashed: AO Failed to Verify Investigation Wing's Info Before Issuing Notice u/s 148. Case-Laws - AT : Reopening of assessment - it is evident that the AO did not corroborate or examine the information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. - Notice u/s 148 quashed - AT Visit to Get Source Interest Expense Disallowance Reviewed: 18% Rate on Unsecured Loan Reasonable Despite Section 40A(2)(b) Conditions. Case-Laws - AT : Disallowance on account of interest expenses u/s.40A(2)(b) - the unsecured loan was required to be paid on demand, but in the case of related parties there was no such condition. We are of the considered view that the interest @18% is reasonable - AT Visit to Get Source Customs High Court Denies Waiver of Pre-Deposit Due to Lack of Specific Pleadings and Prima Facie Case by Appellants. Case-Laws - HC : Waiver of pre-deposit - undue hardship - There is no specific pleading to the effect that the compliance of the pre-deposit condition would cause undue hardship to the appellants. - The appellants cannot even contend that they have a prima facie case. - No relief in stay - HC Visit to Get Source Imported Cars for Auto Expo Cannot Use ATA Carnet Value for Customs u/s 14 of the Customs Act. Case-Laws - AT : Valuation - request for provisional clearance of imported cars against an ATA Carnet for the purpose of exhibition at Auto Expo - Carnet value does not constitute assessable value under Section 14 of the Customs Act - AT Visit to Get Source Refund Claim Approved Due to Clerical Error in Interest Rate; Excess Payment Treated as Deposit, Avoiding Unjust Enrichment. Case-Laws - AT : Claim of refund of excess interest paid - The payment of excess interest was due to clerical error or due to mistake as to rate of interest applicable, the unjust enrichment is not attracted as the excess payment made is in the nature of deposit. - refund allowed - AT Visit to Get Source Shipping Agency Penalized for Issuing Second Bill of Lading; Minor Infraction Due to Good Faith Action. Case-Laws - AT : Levy of penalty on the Shipping Agency - issuing the second Bill of Lading after canceling the first - Seeking amendment in Import General Manifest (IGM) of the name of the consignee - as the shipping agent has acted bona fidely at the request of the shipper, it is the case of minor infraction of law. - AT Visit to Get Source Wealth-tax Aircraft Used in Business Exempt from Wealth Tax in Co-ownership Cases per Section 2(ea)(iv) of Wealth Tax Act. Case-Laws - AT : Inclusion of aircraft in the wealth tax assessment - co-ownership of the aircraft - value of aircraft, which is used in the assessee’s business, cannot be included in taxable wealth and the exception provided u/s.2(ea)(iv) of the Wealth Tax Act is attracted. - AT Visit to Get Source Service Tax Service Tax on Royalty Payments for Intellectual Property Services Overturned; Training and Demos Ruled Non-Taxable. Case-Laws - AT : Levy of service tax on the royalty under reverse charge mechanism - Intellectual Property Service - scope of the work "namely" - The appellant demonstrates and imparts training to the customers who use their software for their own use under specific lock code system. - Demand set aside since the activity was not taxable - AT Visit to Get Source Appellant's Penalty u/s 77(1)(c) Set Aside After Submitting Required Documents During Hearing. Case-Laws - AT : Levy of penalty u/s 77(1)(c) for failure to furnish the records before the Audit Party - The appellant have already deposited penalty of ₹ 10,000/- imposed on the director and not appealed further. It is an admitted fact that the documents required were ultimately filed at the time of personal hearing of the show cause notice - taking a liberal view, penalty set aside - AT Visit to Get Source Refund Granted for Service Tax on Technical Testing Services Under Reverse Charge Due to Overseas Performance, Despite Time Limitations. Case-Laws - AT : Refund claim - service tax was paid under reverse change mechanism - Technical Testing and Analysis Service - service was not partly performed in India - period of limitation - since service was taxable, refund allowed - AT Visit to Get Source Central Excise Concluding Manufacturer's Case Ends Penalties for Traders u/r 26; No Need for Further Actions. Case-Laws - AT : Levy of personal penalty on co-noticees - when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25% of the duty as penalty, there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods - AT Visit to Get Source Cenvat Credit Denied for Dussera Festival Expenses: Gifts and Mandap Setup Not Business-Related. Case-Laws - AT : Cenvat Credit - eligible input services - Other welfare service i.e. service tax paid on the services of purchase of gift and setting up of mandap in the factory premises for celebrating Dussera festival is not eligible to be held as credit as this seems to be not connected with the business of the appellant - AT Visit to Get Source Destructive Testing of Towers Integral to Production; No Additional Duty on Resulting Scrap, Duty Cleared. Case-Laws - AT : Removal of towers for testing - They are destroyed and turned into scrap. Appellant clears scrap on payment of duty. Thus, the process of destructive testing being integrally connected with the ultimate production of final product, it cannot be said that appellants have cleared any goods liable to duty - AT Visit to Get Source Case Laws: Income Tax 2016 (1) TMI 463 Penalty levied u/s. 271(1)(c) - Proceedings u/s. 153A/153C - Held that:- There were no incriminating material found. Particularly in the case of Shri Raghuveer Singh, as no search has occurred in his place, Explanation-5A cannot be invoked. In the case of Shri B. Ramdas Goud, even though search has occurred, nothing was found therefore, so Explanation-5A is not applicable. In both the cases, assessees’ explanation was that incomes were offered on estimation basis which were accepted by the AOs without any addition. Proceedings u/s. 153A/153C are separate proceedings and has no relevance to the earlier assessment proceedings. There is no variation between income returned and income assessed in these cases. Consequently, it cannot be held that there is any ‘concealed income’ or ‘furnishing of inaccurate particulars of income’ so as to attract proceedings u/s. 271(1)(c). In view of this, levy of penalty u/s. 271(1)(c) is not warranted and accordingly, the impugned orders of the AO are cancelled. - Decided in favour of assessee. 2016 (1) TMI 462 Levy of fees under section 234E - proceedings u/s 200A - Held that:- Section 200A nowhere authorizes the AO to levy fee under section 234E while processing the return under this section. Thus we allow the appeal of the assessee and delete the demand relating to Quarter-1. See case of Lions Club of North Surat Charitable Trust (2015 (9) TMI 1231 - ITAT AHMEDABAD ) - Decided in favour of assessee 2016 (1) TMI 461 Taxability of interest earned on funds as income from other sources - Whether the mode and manner of raising funds on which interest is earned, whether by way of loan or through share capital, is a material consideration in deciding the taxability of interest earned - ITAT concurred with the view of CIT(Appeals) that the interest income earned by the assessee in the pre-commencement period could not be stated to be ‘income from other sources’ - Held that:- In the present case, there is a finding of fact that the money placed in the fixed deposit was inextricably linked with the setting up of the power plant. Thus, the revenue generated on account of interest on the said fixed deposits would be in the nature of a capital receipt and not a revenue receipt. This case has been decided on the basis of this principle and not on the basis that the source of the funds was through raising of share capital and not through borrowings. For the foregoing reasons, we do not find that there is any substantial question of law which arises for our consideration and the very issues which are sought to be raised in the present case had been squarely covered by the decision of this Court in Indian Oil Panipat Power Consortium Limited (2009 (2) TMI 32 - DELHI HIGH COURT ). - Decided in favour of assessee 2016 (1) TMI 460 Revision u/s 263 - as per CIT(A) entire capital gain out of sale is required to be assessed in the hands of the assessee - incorrect assumption of facts by AO that five other claimed co-owners had legal rights in the property and these legal rights were transferred by the subject sale of flat, renders order of AO as erroneous - ITAT quashed CIT(A) revision orders - Held that:- All the co-owners have signed on the sale deed. All these co-owners had been showing rental income arising out of above flats in their respective returns of income and share in above property had been shown by the co-owners in respective returns of wealth. From this, it has been proved beyond doubt that the assessee is only 1/6th share holder in the sale consideration which has been property taxed in the hands of the assessee to that extent. It was found for a fact that in the hands of all other co-owners 1/6th of the profit from sale of this house have been accepted by the same A.O. and the ld. CIT has not revised their accepted assessment orders. It is also found that on the basis of very same facts the A.O. has taken possible which has to be accepted as correct and, therefore, we do not find any error in this finding of the A.O. We are not in agreement with the ld. CIT's finding that entire capital gain out of sale is required to be assessed in the hands of the assessee alone - Decided in favour of assessee 2016 (1) TMI 459 Bad debt disallowance while computing section 115JB book profits - CIT(A) deleted the addition - Held that:- It is to be seen that the lower appellate findings that assessee is already assessed under normal provision rather than MAT u/s. 115JB. The Revenue is unable to dispel this factual position in the course of hearing. We accordingly hold that the issue of bad debt in question vis-a-vis for computing book profits becomes mere academic in nature. - Decided against revenue Transfer pricing adjustment - Revenue seeks to rebut the narrated findings of fact the assessee has not tendered the impugned corporate guarantee in favour of its Singapore based associate enterprise (AE) - Held that:- Paper book contains assessee’s explanation in lower proceedings that it only intended to provide the impugned guarantee by pledging its shares for arranging a term loan of $ 239.82 millions from ICICI Bank Ltd. Page 225 is bank’s letter that acceptance of loan terms be not taken as a binding loan obligation. Then comes assessee’s AE’s request to RBI dated 15-01-2007 seeking approval of the MPSEZ’s shares pledging. The same stood declined on 21-02-2007 at page 229 of the paper book. There is no evidence to the contrary forthcoming from the case record. We conclude in these facts and circumstances that the CIT(A) has rightly held the assessee not to have furnished the impugned corporate guarantee in favour of its AE so as to be taken as an international transaction u/s. 92C of the Act. - Decided against revenue Section 14A disallowance restricted by CIT(A) - Held that:- There is no dispute that interest and administrative expenditure hereinabove form two components of the impugned disallowance. The assessee’s case claims availability of sufficient non-interest bearing funds much more than its tax free investment throughout. Its further case denies to have incurred any administrative expenditure as well. Its categorical case made out in lower proceedings is that its non-interest bearing funds in the nature of general reserves, debt redemption reserves and share premium amounts read 396.61 crores, 70 crores and 181.30 crores respectively. Its tax free investments are of 600.82 crores. These figures are as on the last day of the relevant account year 31- 03-2007. We observe in these facts and circumstances that a presumption can safely be drawn as per case law of CIT vs. Torrent Power Ltd [2014 (6) TMI 185 - GUJARAT HIGH COURT ] that the impugned tax free investments have been made out of such surplus funds not carrying any interest component. Hon’ble jurisdictional high court further concludes that a specific finding regarding involvement of actual administrative expenditure has also to be given while making such a disallowance. The above extracted portion of the relevant finding makes it clear that the same neither takes into account assessee’s non-interest bearing funds nor its plea of having incurred no administrative expenditure for making the impugned section 14A disallowance. The CIT(A) has indirectly been guided by rule 8D otherwise not applicable in the impugned assessment year. We hold in these facts and circumstances that the impugned section 14A r.w. Rule 8D disallowance in question is liable to be deleted in entirety. - Decided in favour of assessee Depreciation disallowance - CIT(A) allowed claim - Held that:- There is no dispute about the fact that the assessee has claimed deprecation in question on shares of the above stated assets. The Revenue fails in rebutting the crucial appellate finding that the same already forms part of the relevant bloc of assets since 1998 treated eligible for deprecation. We further find that a co-ordinate bench decision of the tribunal in Deepak Fertilizer case (2007 (9) TMI 290 - ITAT BOMBAY-G ) already allows identical depreciation claim on shares of the relevant assets. There is no distinction on facts or law pointed out in the courses of hearing. - Decided in favour of assessee Section 43B disallowance - Held that:- There is no dispute so far as factual position that the assessee has not paid the above stated sums on or before the due date of furnishing the return is concerned. We accordingly reject assessee’s contentions and confirm the impugned leave encashment disallowance.- Decided against assessee VAT component coupled with entry tax and custom duty sum disallowed u/s 43B - Held that:- The paper book contained assessee’s argument justifying its accounting treatment in not crediting the impugned heads in its profit and loss account by not taking damage as revenue receipt. It clarified in the lower appellate proceedings that neither it had passed the abovestated account through P & L account nor raised a deduction claim out of its taxable income. It further filed elaborate detailed involving custom procedure thereby praying for deleting the impugned disallowances. We deem it appropriate to refer to the above extracted lower appellate findings dealing with the leave encashment issue only and without even adverting to assessee’s detailed submission narrated hereinabove. The CIT(A) has simply brushed aside the same with sweeping observations qua applicability of section 43B. We are of the view in these peculiar facts and circumstances that larger interest of justice would be met in case this limited issue of VAT, entry tax and customs duty vis-à-vis application of 43B is restored back to the assessing authority for a fresh adjudication.- Decided in favour of assessee for statistical purposes. Disallowance of exemption claim u/s. 10AA - Held that:- The assessee’s only argument is that the impugned disallowance has to be confined to allocation of expenditure and not its profits derived from the eligible undertaking. It states to have been maintaining complete books allocating all specific expenses. The Revenue’s submissions strongly support the CIT(A)’s action under challenge. However, it failed to justify the impugned course of action in invoking the impugned disallowance vis-à-vis assessee’s eligible profit instead of specific expenditure allocated in books. We feel it more appropriate in these peculiar facts and circumstances that this issue also needs to be re-adjudicated at the level of Assessing Officer as per law after affording adequate opportunity to the assessee - Decided in favour of assessee for statistical purposes. 2016 (1) TMI 458 Reopening of assessment - assessee has wrongly claimed deduction u/s 80IC - Held that:- Assessee has furnished the consolidated tax audit report and financial statement and the notes claiming deduction under section 80IC of the Act. During the course of assessment proceeding and thereafter claim was allowed in other assessment years. Now, the Assessing Officer has taken a different stands for reopening the assessment without looking into the fact that in succeeding year the claim of deduction u/s 80IC of the Act was allowed and no interference was made by the AO by invoking the provisions of section 147 of the Act. In the light of these facts, we are of the considered view that reopening is bad in law as it amounts to change of opinion. Accordingly, we find ourselves in agreement with the order of the CIT(A). So far as the issue on merit is concerned, we find that assessee has categorically stated that entire investment in Sitarganj Unit in plant and machinery of 37,52,759/- was made during relevant assessment year as compared to NIL opening balance as on 01.04.2008 being new undertaking/enterprises. Therefore, we are of the view that the assessee is entitled for deduction u/s 80IC of the Act as the addition to the plant and machinery is required to a particular undertakings and not the assessee as whole. - Decided in favour of assessee. 2016 (1) TMI 457 Penalty levied u/s 271(1)(c) - concessional rate provided u/s 111A of the Act is not applicable to the STCG declared by the assessee - mistake in computation of tax on the STCG pointed - Held that:- The assessee has committed a bonafide mistake in computation of tax on the STCG. Further, there is no allegation that the assessee has concealed any particulars of income or furnished inaccurate particulars of income relating to STCG. The assessee has explained that the mistake was committed by the clerk who has fed the data into the computer for preparing the return of income. The assessee has voluntarily submitted the details of STCG to the AO by duly bifurcating the STCG into (a) the STCG which suffered Security Transaction Tax (STT) and (b) which did not suffer the STT. The details to submitted by the assessee proves the bonafides of the assessee and the same supports the explanation of the assessee. Further, the assessee has also written another letter duly accepting the mistake and has also requested the assessing officer to raise the tax demand. The foremost important point is that the income returned by the assessee has been accepted by the assessing officer as it is, without making any adjustment. Hence, in view of the judgments referred above, the mistake committed in computation of tax cannot be considered to be a case of concealment of particulars of income or furnishing of inaccurate particulars of income. Even if it is considered for a moment to be a case of furnishing of inaccurate particulars of income, the same has been caused due to a clerical mistake committed by the clerk who fed the details into the computer and hence the decision rendered by the Hon’ble Supreme court in the case of Price waterhouse coopers (P) Ltd (2012 (9) TMI 775 - SUPREME COURT ) supports the case of the assessee. Accordingly, we are of the view that the facts and circumstances of the case does not warrant levy of penalty u/s 271(1)(c) of the Act. Accordingly, we set aside the order of Ld CIT(A) and direct the AO to delete the impugned penalty. - Decided in favour of assessee. 2016 (1) TMI 456 Revision u/s 263 - Eligibility for the benefit u/s 54F need to be denied as per CIT(A) - Held that:- The transfer was completed in terms of section 2(47)(v) by giving possession of the property in terms of the sale agreement dated 13.6.2005 registration was delayed on bonafide reasons which was beyond the control of the assessee and sale deed was executed on 25.11.2005 was only a legal formality. The jurisdictional High Court in the case of CIT Vs. Anand Food Products (2013 (11) TMI 1444 - ANDHRA PRADESH HIGH COURT ) has observed that during the assessment proceedings the assessing officer had not only taken into account all the details but also disallowed some expenditure and made addition whenever same was required. A decision of the Assessing Officer could not be prejudicial to the interest of the revenue simply because it did not make detailed discussion and upheld the order passed by the Tribunal. Keeping in view of the above judicial precedent, we are of the opinion that the order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue and therefore the order passed by the Ld. CIT u/s 263 of the Act cannot survive. So far as merits of the case is concerned in respect of the claim u/s 54F of the Act, the Hon’ble Delhi High Court has considered this issue in the case of Balraj Vs. CIT (2001 (12) TMI 51 - DELHI High Court ) and observed that for claiming benefit u/s 54F of the Act, it is not necessary that the assessee should become a owner of property purchased by him by registration of documents. In the present case, there is a memorandum of family agreement dated 15.10.2006 between assessee and his father & mother. In accordance with the above agreement assessee is entitled for 1/3rd share of the property. Therefore, in our opinion the assessee is entitled for the claim u/s 54F of the Act. The decision of the Delhi High Court squarely applies to the facts of the above case and we hold that the Assessing Officer on merits has allowed the case u/s 54F of the Act in accordance with law. This cannot be a case for revision u/s 263 of the Act. - Decided in favour of assessee 2016 (1) TMI 455 Disallowance of expenditure recorded in the seized material - Applicability of provisions of sections 40A(3) and 40(a)(ia) invoked - Held that:- The undisputed facts are that the assessee has accepted that books found and seized during the course of search pertain to the assessee and that the receipts and payments mentioned therein are also relating to the business operations of the assessee. Whatever may be the reason for accepting the receipts mentioned in the books, the lone contention of the assessee before us is that the expenditure relating to the receipts should be allowed. We agree with the contention of the Ld. D.R. that the expenditure which has been incurred wholly and exclusively for the purpose of business alone can be allowed and it is not verifiable from the seized material that this expenditure is incurred wholly and exclusively for the purpose of business of the assessee. We also agree with the Ld. D.R. that most of the expenditure being incurred in cash and some of which may be for illegal purposes is also not allowable under sections 40A(3) and 40(a)(ia) of the I.T. Act. Therefore, the contention of the Ld. Counsel for the assessee that the entire payments mentioned in the seized material is to be allowed while treating the receipts as income of the assessee is not tenable. However, we also agree with the Ld. Counsel for the assessee that the entire receipts recorded in the registers can not be treated as the income of the assessee. The relatable business expenditure has to be allowed from the receipts to compute the undisclosed income of the assessee. Therefore, the only course open to the Revenue would be to reject the books of account maintained by the assessee and to estimate the business income of the assessee. As the facts relating to the computation of gross profit or net profit of the assessee for the earlier or subsequent assessment years or relating to other assessees in similar business are not before us, we are of the opinion that the issue needs re-look/reconsideration by the A.O. for estimation of the assessee’s income. Since payments mentioned in the seized material are not being considered as the expenditure of the assessee, the applicability or otherwise of the provisions of sections 40A(3) and 40(a)(ia) of the I.T. Act is also not relevant at this stage. - Decided in favour of assessee for statistical purposes. 2016 (1) TMI 454 Depreciation claim by trust - Held that:- All the material facts relevant thereto are similar to the case of AP Olympic Association, Hyderabad for AY. 2008-09 (2014 (2) TMI 988 - ITAT HYDERABAD), we respectfully follow the decision rendered by the Co-ordinate Bench of this Tribunal in the said case, and direct the Assessing Officer to allow the claim of assessee for depreciation in respect of the assets, the cost of which was claimed by the assessee as application of income. - Decided in favour of assessee. 2016 (1) TMI 453 Validity of revision u/s 263 - addition u/s 68 - Held that:- In view of the discussion and following the view taken in Subhlakshmi Vanijya Pvt. Ltd. [2015 (8) TMI 174 - ITAT KOLKATA ] we have drawn the following conclusions: - A. Contention of the assessee that since the AO of the assesseecompany was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable. B. Failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order, by holding that :- i) the enquiry conducted by the AO in such cases can’t be construed as a proper enquiry; ii) CIT u/s 263 can set aside the assessment order and direct the AO to conduct a thorough enquiry, notwithstanding the jurisdiction of the AO in making enquiries on the issues or matters as he considers fit in terms of section 142(1) and 143(2) of the Act, which is relevant only up to the completion of assessment ; iii) Inadequate inquiry conducted by the AO in the given circumstances is as good as no enquiry and as such, the CIT was empowered to revise the assessment order ; iv) The order of the CIT is not based on irrelevant considerations and further in the present circumstances, he was not obliged to positively indicate the deficiencies in the assessment order on merits on the question of issue of share capital at a huge premium ; and v) the AO in the given circumstances can’t be said to have taken a possible view as the revision is sought to be done on the premise that the AO did not make enquiry thereby rendering the assessment order erroneous and prejudicial to the interest of the revenue on that score itself. C. In the given facts and circumstances of all such cases, the notices u/s 263 were properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases. D. Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, which is not an order for the purposes of section 263. In all the cases, the orders have been passed within the time limit. E. The CIT having jurisdiction over the AO who passed order u/s 147 read with section 143(3), has the territorial jurisdiction to pass the order u/s 263 andnot other CIT. F. Addition in the hands of a company can be made u/s 68 in its first year of incorporation. G. After amalgamation, no order can be passed u/s 263 in the name of the amalgamating company. But, where the intention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid. H. Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day. I. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by the CIT. J. Refusal by the Revenue to accept the written submissions of the assessee sent after the conclusion of hearing cannot render the order void ab initio. At any rate, it is an irregularity. K. Search proceedings do not debar the CIT from revising order u/s 263 passed u/s 147 of the Act. - Decided against assessee 2016 (1) TMI 452 Disallowance of software expenses - revenue v/s capital expenditure - AO treated the same as capital expenditure and allowed depreciation to the income of the assessee whereas CIT(A) treated as revenue expenditure - Held that:- Commissioner of Income Tax (Appeals) observed that the Hon'ble Delhi High Court in the case of CIT Vs. G.E. Capital Services Ltd. [2007 (7) TMI 185 - DELHI HIGH COURT] has held that expenditure incurred by the company on computer software, which was not customized software and said software required frequent up-gradation and hence, it was held as revenue expenditure. The Commissioner of Income Tax (Appeals) also noted that the Hon'ble Madras High Court in the case of CIT vs. Southern Roadways Ltd. [2006 (10) TMI 82 - MADRAS HIGH COURT ] held that up-gradation of computers by changing certain parts thereby enhancing the configuration of the computers for improving their efficiency without making any structural alternations is not change of an enduring nature. He also observed that in assessee's own case, in assessment year 2007-08 has held that if the expenditure has been incurred by the assessee for up-gradation of the software, the expenditure has to be allowed as a revenue expenditure and if the expenditure has been incurred for the first time for acquiring this software, the expenditure is to be treated as capital expenditure, therefore, he deleted the disallowance made by the Assessing Officer. - Decided against revenue Addition on excess interest - CIT(A) deleted the addition - Held that:- No material was brought on record by the Departmental Representative to controvert the finding of the Commissioner of Income Tax (Appeals) that no non-business utilization of the loan fund or diversion was proved by the Assessing Officer and disallowance of interest made was without any basis. In absence of any material being brought on record, we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) which is after considering the entire facts of the case of the assessee. Hence, we confirm the order of the Commissioner of Income Tax (Appeals) - Decided against revenue 2016 (1) TMI 451 Transfer pricing adjustment - TPO take the amount of ALP at NIL - determination of Management Consultancy Fee - mark up computation - Held that:- What the TPO has missed is with reference the amounts other than foreign exchange loss. In the absence of any comparable figures and in the absence of any further enquiry and having the fact that services have been rendered to assessee as accepted by DRP also, TPO cannot take the amount of ALP at NIL, ignoring the payment by assessee of US$ 4,27,000. As per the agreement, all the costs incurred by the DQE Mauritius with 5% markup had to be charged to assessee. Therefore, as per the details furnished by assessee before the TPO, the actual management fee of US$ 4,27,000 with administration charges of US$ 14000 and markup of 5%, at the exchange value as on the date of 31-03-2008, can be considered as ‘service charges’ for the intra group services rendered. This can be taken as ALP. Therefore, modifying the order of TPO, we determine the Management Consultancy Fee as detailed above and AO is directed to modify the order accordingly. In arriving at the above, we have considered the OECD Transfer Pricing guidelines 2010, Chapter-VII pertaining to ‘special considerations for intra group services’. Considering the assessee’s agreement with DQE Mauritius which in turn has an agreement with DQ Entertainment Plc, and the reimbursement of cost from one company to another, we agree with the TPO’s observation that foreign exchange loss in financial transactions cannot be considered as ‘service charge’ for the intra group and therefore, we after considering the facts of the case, restrict the amount to the actual management fees charged by the DQE Mauritius along with other cost of administration and audit and mark up at 5%. 2016 (1) TMI 450 Reopening of assessment - information received from the investigation wing - accommodation entries - Held that:- AO proceeded to issue notices for reassessment on the basis of information received from the investigation wing of the Department about the existence of accommodation entries providers. It is a settled legal position that at the stage of issue of notice u/s 148, the merits of the matter are not relevant and the AO at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment. However, once that stage is crossed and the reassessment proceedings are set in motion, the material on the basis of which the requisite belief was formed by the AO has to be appraised and examined. It is seen that the reassessment proceedings were initiated entirely on the basis of specific information received from the investigation wing and it was during the course of inquires from the bank by the investigation wing that it was revealed that the assessee was a beneficiary of some accommodation entries. As per the reasons recorded, it is evident that the AO did not corroborate or examine the information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. In light of the aforesaid discussion, we are inclined to hold that in the instant case, the AO proceeded to initiate proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act only on the basis of information received from the investigation wing of the Department. There is no material on record to show that the AO had applied an independent mind in forming a belief which may result in the required reason to believe as per the provisions of Section 147 and 148 of the Act - Decided in favour of assessee 2016 (1) TMI 449 Disallowance on account of interest expenses u/s.40A(2)(b) - Held that:- In the case in hand, the assessee has paid the interest @18% to the related parties and 15% to unrelated parties. The contention of the assessee is that the interest paid at lesser rate was paid to the unrelated parties, in those cases, the unsecured loan was required to be paid on demand, but in the case of related parties there was no such condition. We are of the considered view that the interest @18% is reasonable, therefore we direct the AO to delete disallowance. - Decided in favour of assessee. Disallowance on account of business development expenses - Held that:- The ld.Sr.DR submitted that the ld.CIT(A) has followed the order passed in the AY 2006-07, therefore this ground of assessee's appeal deserves to be dismissed. 2016 (1) TMI 448 Long term capital gain in respect of leasehold rights - Held that:- The statutory definitions in other legislations explained that tenancy right includes lease right. Thus tenancy right is a wider and broader term capable of conceiving similar and such rights. Accordingly, we do not find any infirmity in the order of lower authorities for taxing the capital gains earned on transfer of leasehold rights. So far as expenses incurred on improvement is concerned, we direct the A.O. to consider the same as claimed by the assessee while computing capital gains u/s.45 of the Act. Penalty u/s.271(1)(c) - treatment to the leasehold rights as different from tenancy rights - Held that:- There was full disclosure and no suppression of fact. The bonafide explanations supported by judicial pronouncements were also furnished by the assessee for treating the leasehold rights as different from tenancy rights so as to exclude the same from the taxable capital gains. Accordingly, we are of the opinion that it is not a fit case for impose the penalty u/s 271(1)(c) of the Act. 2016 (1) TMI 447 Disallowance of D-mat charges - Held that:- gone through the orders of authorities below and found that the D-mat charges were paid by the assessee to various banks. The income arising from application of share in IPO was taxed by the A.O. as business income. However, making payment to the bank for D-mat charges does not amount to any illegal payment nor such payment is in contravention of any law. Accordingly, we do not find any merit in disallowance of D-mat charges in all the three years under consideration - Decided in favour of assessee Disallowance of new issue expenses - A.O.’s action by holding that expenditure was not allowable in view of Explanation to section 37(1) - Held that:- As during the year the assessee has not written off the amount payable to M/s Viraj Investments and further more M/s Viraj Investments has also wrote letter to the assessee asking repayment of dues payable by the assessee and failing which court action was threatened by them. Under these circumstances, mere on a plea that M/s Viraj Investment written off the amount in its books of account will not empower the A.O. to add the income in assessee’s hands unless it is proved that assessee is not going to pay the amount. In the interest of justice and fair play, we restore this issue to the file of the A.O. to verify the actual payment made by the assessee in the subsequent assessment years and if it is found that the amount was not actually been paid, the A.O. is at liberty to add the same in the income of the assessee. To the extent of interest expenditure, if claimed by assessee during the year under consideration with respect to this amount, same is liable to be added. - Decided against assessee Addition made on account of transfer of 50% of IPO shares to the financiers - CIT(a) deleted the addition - Held that:- confirmation letters have been filed by the financiers before the AO with regard to the price paid by them. After considering the statement recorded by the AO as well as confirmation filed by the financiers, the CIT(A) recorded a finding to the effect that the shares were transferred by the assessee to the financiers at an issue price in accordance with the arrangement entered into between the assessee and the financiers. As the statement recorded by the AO from the financiers corroborated the stand of the assessee that the assessee had transferred 50% of shares allotted in IPO to the financiers at issue price and not at the listed price, the additions so made by the AO was not warranted. The detailed finding recorded by CIT(A) at para 7.3 to 7.6 has not been controverted by ld. DR by brining any positive material on record. Accordingly, we do not find any reason to interfere in the order of the CIT(A) for deleting the addition made on account of transfer of 50% of IPO shares to the financiers. - Decided against revenue Penalty u/s 271(1)(c) - addition u/s 41(1) - Held that:- Addition was made by the AO merely on the plea that M/s Viraj Investments to whom assessee was to make payment has written off amount in its books of account. However, at the very same time, M/s Viraj Investments has written a letter to the assessee asking for the repayment and threatened to take legal course of action in case of non-repayment. In these circumstances, it cannot be taken that assessee has earned any income u/s.41(1). The CIT(A) has deleted the penalty by observing that assessee has not concealed any particulars of income, therefore, same cannot be termed as concealment of income within the meaning of Section 271(1)(c) of the Act. The CIT(A) also observed that issue is debatable, therefore, do not warrant any penalty. Reliance was placed on the decision of Hon’ble Supreme Court in the case of Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT]. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the penalty so imposed. Thus, the appeal of the revenue is dismissed. - Decided in favour of assessee. 2016 (1) TMI 446 Addition on account of non recognition of interest income on the funds deployed in optionally convertible debenture - Income Recognition - CIT(A) deleted the addition - Held that:- Acts on record show that M/s. Ordyn Technologies Pvt. ltd., went into heavy financial crisis by which it was not in a position to pay the principle amount of debentures least to talk about interest on the said debentures. The assessee purchased the OCDs heavily banking upon the future prospects of M/s. Ordyn Technologies Pvt. ltd. However, it turn out to be that all the Government orders successfully bided by M/s. Ordyn Technologies Pvt. ltd. have been cancelled and the said company ran into deep financial crisis . There is no evidence on record brought by the AO to suggest that the assessee has actually received any interest from M/s. Ordyn Technologies Pvt. ltd. There is also no evidence on record which could suggest that there is any possibility of getting interest on debentures from the said company. Assuming for a moment that the assessee has purchased debentures cum interest and therefore the assessee must account for the interest, but at the same time there being no possibility of receiving interest, the same is allowable as a write off in the books. Therefore, we do not find any logic in making the addition of interest accrued and then allowing the same as a deduction as a bad debt. Considering the facts of the case from all possible angle, we do not find any reason to interfere with the findings of the Ld. CIT(A). To this extent, findings of the Ld. CIT(A) are confirmed. However, we do not find any findings given by the Ld. CIT(A) in respect of money lended to Shri Satish Lade, there is not even a whisper of any finding by the Ld. CIT(A) in respect of interest income added by the AO in respect of the loan given to Shri Satish Lade. We, therefore only to this limited extent, restore the issue to the file of the Ld. CIT(A). The CIT(A) is directed to decide the taxability or other wise of the interest on loan given to Shri Satish Lade after giving reasonable and fair opportunity of being heard to the assessee. - Decided partly in favour of revenue for statistical purpose. 2016 (1) TMI 445 Disallowance u/s 36 (1)(iii) - Held that:- As the principal amount itself was in dispute which, according to the submission of the assessee was given to the above company for purchase of property and when agreement was not executed, the assessee made efforts for recovery of the amount in question and ultimately, after issuing a demand notice dated 30.03.2012 and notice dated 20.08.2011 (PB-208), the amount in question was returned to the assessee. Therefore, authorities below were not justified in making disallowance under section 36(1)(iii) of the Act. We, therefore, do not find any justification to sustain the addition. We, set aside the orders of authorities below and delete the addition - Decided in favour of assessee Disallowance of claim of set off of brought forward business loss - Held that:- It was duty of the Assessing Officer to apply the relevant provisions of law and grant relief to the assessee instead of rejecting the claim of assessee by not mentioning the speculative loss in particular column of the e-return for assessment year 2010-11. Considering the above discussion, we are of the view that authorities below were not justified in not allowing the claim of set off of brought forward speculative loss. The orders of authorities below are therefore, set aside and we direct the Assessing Officer to allow set off of brought forward speculative loss for assessment year 2010-11 in assessment year under appeal of the amount in question.- Decided in favour of assessee Disallowance under section 10B - Held that:- It is admitted fact that assessee claimed deduction under section 10B of the Income Tax Act in assessment year under appeal i.e. 2011-12. Same claim was made in preceding assessment years 2004-05 to 2010-11 and the claim of assessee has been allowed by Assessing Officer under section 143(3) of the Income Tax Act after scrutiny assessments. In assessment year 2010-11, it was allowed under section 143(1). In assessment year 2009-10, the Assessing Officer after passing the assessment order under appeal, re-opened under section 148, however by following the judgement of the Delhi High Court in the case of Lovlesh Jain (2011 (12) TMI 93 - DELHI HIGH COURT ), allowed the claim of assessee under section 10B of the Act wherein held that "When the assessee imported standard gold into India and then converted it into jewellery or ornaments and exported the ornaments, it amounts to exporting articles or things, conversion of standard assessee amounts to manufacture/production which qualifies for deduction under section 10A/10B of the Act". It, therefore, stands established that in preceding several assessment years, the Assessing Officer allowed exemption under section 10B of the Income Tax Act in favour of the assessee on the same facts and even later on in proceedings under section 148 of the Act, allowed similar claim under section 148/143(3) of the Act. Therefore, the revenue authorities should follow rule of consistency and should not have made disallowance under section 10B of the Income Tax Act in assessment year under appeal itself. - Decided in favour of assessee 2016 (1) TMI 444 Exemption u/s.11 and 12 - Revenue disputed only regarding deficit being based on figures after considering 15% of the gross income as exempt - Held that:- 15% of the gross income or receipts have to be first deducted before computing the surplus or deficit arising to the assessee for a year. See Addl. CIT v. ALN Rao Charitable Trust [1995 (10) TMI 2 - SUPREME Court ] Eligibility for carry forward of such deficit - rectification of mistake - Held that:- Allowing or not allowing carry forward deficit adjustment was not something which would fall within the parameters of a rectificatory proceedings u/s.154 of the Act. However in principle, the claim of the assessee that deficit from earlier years can be set-off against current year’s income for working out the utilisation. In view of this, we are of the view that assessee is eligible for claiming carry forward of the deficit, and CIT (A) was justified in directing so. Customs 2016 (1) TMI 428 Waiver of pre-deposit - undue hardship - validity of order of tribunal granting partial stay - Held that:- It is true that the Proviso to Section 129E of the Customs Act, 1962 empowers the Appellate Commissioner and the Tribunal to dispense with the whole or any part of the pre-deposit amount, if the Appellate Authority is of the opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship to such persons. But at the same time, while ordering a waiver of pre-deposit, the Appellate Authority is entitled to impose such conditions as it may deem fit to impose, so as to safeguard the interests of the Revenue. It is seen from the applications for waiver filed by the appellants that they are all stereotyped. The applications of all the seven appellants contain the very same submissions. There is no specific pleading to the effect that the compliance of the pre-deposit condition would cause undue hardship to the appellants. We agree that it is not necessary for the appellants before the Tribunal to repeat the very same language used in the Proviso to Section 129E parrotlike, for securing an order for waiver. But at the same time, undue hardship, being a question of fact and being a factor that would vary from case to case and from person to person, an obligation is primarily cast upon any person seeking waiver to specifically plead the circumstances, in which, he is placed. But unfortunately, none of the appellants fulfilled this most fundamental requirement, in their application for waiver. The appellants cannot even contend that they have a prima facie case. A careful look at the table extracted would show that the Tribunal decided the cases into two categories namely (i) those, in which, a duty was levied together with penalty and (ii) those where only a penalty was imposed. It is in cases where what was imposed was only penalty that the Tribunal has given some waiver. In cases where a duty is levied together with penalty, the Tribunal has rounded off the duty amount to the next higher or lower figure and directed the said amount to be deposited. Therefore, we see no reason to interfere with the order of the Tribunal - Accordingly, all the civil miscellaneous appeals are dismissed - Decided against the appellants. 2016 (1) TMI 427 Re-export of old moulds - moulds were imported earlier for the manufacture of tyres - Revenue's contention is that as per the provisions of Para 2.3 of the Hand Book of Procedure at the relevant time the appellant could not have sold mould without prior permission from DGFT. - Held that:- it is not in dispute that goods were sold and re-exported - relevant para of the Hand Book Procedure makes no distinction between sale within India and sale outside India and therefore there is violation of provisions of Import and Export Policy/Hand Book of Procedure. Confiscation of the goods therefore is upheld. - However, keeping in view the facts and circumstances of the case, redemption fine is reduced to 50,000/-. We do not find it to be fit case for imposing penalty. Penalty is therefore set aside. - Decided partly in favor of appellant. 2016 (1) TMI 426 Suspension of customs brokers licence - the suspension was ordered and confirmed on the ground that the appellant had violated the provisions of Regulation 11(a), 11(d), 11(j), 11(m) and 11(n) of CBLR, 2013. - Overvaluation to avail of undue benefits of Duty Draw Back and Focus Product Schemes - export of floor coverings - Investigation further revealed that several exporters were non-existent and the Import Export (IE) codes were obtained using identity of persons who were not actually exporters. Held that:- the appellant was not engaged by any of the exporters to deal with the export of the impugned goods and therefore the question of violation of any of the above-quoted provisions of CHALR by the appellant simply does not arise. Thus, the ground on which the suspension of licence was confirmed is totally unsustainable. While the appellant has denied receipt of any payments in respect of the clearances of the impugned goods, we find that some of the exporters of the impugned goods had dealings with the appellant inasmuch as certain ledger accounts of the appellant show debit and credit entries in the name of some such exporters but that by itself would not make the appellant guilty of violation of CBLR, 2013, when it has already held above that in the present case CBLR, 2013 could not have been violated by the appellant when it was not the customs broker in relation to the impugned goods. - Decided in favor of appellant. 2016 (1) TMI 425 Valuation - request for provisional clearance of imported cars against an ATA Carnet for the purpose of exhibition at Auto Expo - The adjudicating authority ordered the assessable value to be taken as Carnet price + Insurance + Freight + Landing Charges. Before the Commissioner (Appeals) the appellant also pleaded that since their case is under investigation by SVB Mumbai in respect of other cars imported, the lower authority ought to have permitted provisional clearance after acceptance of 1% Revenue deposit. Held that:- In this particular case when import of identical cars have been made at lower values which are comparable to the value declared at the time of filing Bill of Entry for sale of the cars imported under Carnet, there is no justification to take the higher value mentioned in the Carnet. The appellant gave specific Bills of Entry Nos. 543752, 541155, 510318 under which contemporaneous imports were made assessed to duty on provisional basis as the valuation of the cars was being examined by Special Valuation Branch (SVB), Mumbai, the lower authorities ignored this aspect and did not allow the provisional assessment on similar basis in the case of the cars imported under Carnet. In any case it is shown by the Ld. Advocate that the SVB Order did not establish that the value between appellant and their Principal had influenced the price and had consequently accepted the declared prices. Therefore, we find no reason to differentiate between the cars imported under Carnet and the cars imported otherwise. In the present case even though buyer and seller are related it is established by the SVB order that the price has not influenced the relationship. Therefore, the transaction value cannot be rejected. Revenue rejected the transaction value on the basis that the value declared in the Carnet is much higher. We find that Rule 8(2)(iii) of the Valuation Rules which provides for residual method of determining the value clearly states that no value shall be determined on the basis of the price of the goods on the domestic market of the country of exportation. Carnet value does not constitute assessable value under Section 14 of the Customs Act. - Appeal allowed - Decided in favor of appellants. 2016 (1) TMI 420 Claim of refund of excess interest paid on demand of duty due to shortfall in export obligation - unjust enrichment - Held that:- the appellant had filed C.A. certificate before the lower authority to the effect that the amount of excess paid interest have not been passed on and the same stands recoverable in the Books of Account of the appellant. Further, the appellant have produced a copy of Balance sheet along with certificate of C.A. certifying the amount has been shown as recoverable on the Asset side under the head ‘Deposit and Others’ and as such the only thing, being audited in Balance sheet, for which the lower authority did not accept the claim is erroneous, as unjust enrichment is not attracted. The payment of excess interest was due to clerical error or due to mistake as to rate of interest applicable, the unjust enrichment is not attracted as the excess payment made is in the nature of deposit. - refund allowed - Decided in favor of assessee. 2016 (1) TMI 419 Levy of penalty on the Shipping Agency - issuing the second Bill of Lading after canceling the first - Seeking amendment in Import General Manifest (IGM) of the name of the consignee - Circular No. 44/2005-Cus., dated 24-11-2005 - Held that:- the only violation in the facts and circumstances is that shipping line in good faith and at the request of the shipper, have erred in canceling the original Bill of Lading and have issued a fresh Bill of Lading in favour of M/s. R.A. Apparels. The holder of the Bill of Lading, i.e., shipper was always entitled to make endorsement on the document of title in favour of the new purchaser during transit of the goods. Thus, shipping line including the present appellant (its agent) have erred in issuing the second Bill of Lading after canceling the first, once the goods are in transit. In this view of the mater, I uphold the confiscation. However, as the shipping agent has acted bona fidely at the request of the shipper, it is the case of minor infraction of law. - . Accordingly, I reduce the redemption fine to 2 lakhs and penalty imposed under Section 112(a) is reduced to 25,000/- (Rupees twenty-five thousand only). - Decided partly in favor of appellant. Corporate Laws 2016 (1) TMI 421 Oppression and mismanagement - CLB accepted the case of Respondent Nos. 1 and 2 of oppression and mismanagement, and dissolved the Board of Directors of Appellant no.2 and reconstituted the same - Held that:- . As rightly held by CLB, it is inconceivable that Appellant No.1, who is an industrialist and who has been running the Company having net worth of crores of rupees (with financial assistance worth about 124 crores from banks), was not aware of the consequences of the documents or that he signed the documents under a belief that they would not be used for any purpose other than for arranging the additional finance of 10 crores. There was adequate material before CLB to come to this finding and no question of law arises for the consideration of this Court in connection therewith. There is no substance in the Appellants' contention that this was a matter for the Civil Court to decide by reason of being a complicated question of fact needing extensive evidence. In the facts of the case, it was obviously for the Appellants to discharge the onus to show that the documents were signed under misrepresentation or were otherwise not binding. They could very well have led evidence in this behalf . There is nothing on record to show that they offered to lead any evidence on the subject besides what was produced before CLB or were denied any opportunity to lead further evidence. Parties take various positions in their pleadings. What is considered at the hearing by any Court or tribunal is the submissions advanced before it at the hearing. Without advancing submissions on a particular issue, and that too on an issue of fact, a party cannot fault an order of the Court or the tribunal relying on its case on the issue pleaded in its pleadings. That would clearly spring a surprise on the opponent and compromise the integrity of the trial. Besides, the parties have clearly acted on the resolutions passed at the EOGM; the Appellant in Company Appeal (Lodging) No. 46 of 2013 was a nominee director of promoters represented by Appellant No.1 in the main appeal and has himself signed the share certificates issued to Respondent Nos. 1 to 3 in pursuance of decision take at the EOGM of 5 March 2010. It was the case of Respondent Nos. 1 to 3 before CLB that he was part of the management under Appellant No.1; that many general meetings were called by the Company likewise with a short notice; and that he had notice of the Board meeting as well as EOGM of 5 March 2010. Had the submissions concerning want of notice been placed before CLB, all these relevant matters would have been considered by it. It is too late in the day to now agitate these issues. In that view of the matter, it is not necessary for me to consider the case law cited by learned Counsel on merits of the submissions on consequences of want of notice. The impugned order does not, in the premises, suffer from any error of law in this behalf. There is no substance, thus, in any of the submissions advanced by the Appellants. All three Company Appeals are accordingly dismissed. Service Tax 2016 (1) TMI 442 Levy of service tax on the royalty under reverse charge mechanism - Intellectual Property Service - scope of the work "namely" - The appellant demonstrates and imparts training to the customers who use their software for their own use under specific lock code system. The master key of the locking code system is entirely in the possession of M/s.Fluent Inc.; they are the owners of the said mater key. - Held that:- the appellant are a wholly owned subsidiary of Fluent Inc. USA. It can hardly be expected that a company will transfer its intellectual property right to its wholly owned subsidiary. Specific clauses of the Agreement clearly show that the appellant cannot disclose transfer or otherwise make available any software products or copies thereof to others. The appellant is only authorised to retain the trade mark of Fluent Inc which are provided by the latter. Fluent Inc. products sold by the appellant can bear the markings of Fluent Inc. The appellant is merely distributing, marketing and supporting set of computer programme known as FI software. There is absolutely no indication of any transfer of intellectual property right on a plain reading of the Agreement. Neither do we find any hidden or deeper meaning in the Agreement which would indicate transfer of intellectual property right. Demand of service tax is set aside - Decided in favor assessee. 2016 (1) TMI 441 Supply of Tangible goods service - receipt of facility charges - control over the tanks - appellant has installed storage tanks/Evaporator at the customer's premises for supply of gases and have collected facility charges from the customers during the period 1.6.2009 to 1.8.2009. - Held that:- appellant has not made out a case for full waiver of Pre-deposit. - pre-deposit of 20% of the demand of service tax would be sufficient for compliance of Section 35F of Central Excise Act, 1944 - stay granted partly. 2016 (1) TMI 440 Levy of penalty u/s 77(1)(c) for failure to furnish the records before the Audit Party - appellant urges that the letter dated 6/2/12 is vague as it does not state which particular document is required - Held that:- although there was some confusion as the document desired was "financial statement/documents", not specifying the particular document, the same led to confusion with the appellant in making timely compliance - there is some element of negligence on the part of the appellant also. - the bone of contention, that is applicability of notification number 12/2003 has been decided in favour of the appellant by the Commissioner (Appeals). The appellant have already deposited penalty of 10,000/- imposed on the director and not appealed further. It is an admitted fact that the documents required were ultimately filed at the time of personal hearing of the show cause notice - taking a liberal view, penalty set aside. - Decided in favor of appellant. 2016 (1) TMI 439 Refund claim - service tax was paid under reverse change mechanism - Technical Testing and Analysis Service - service was not partly performed in India - period of limitation - Held that:- the proviso to Rule 3(1)(ii) of Taxation of Services Rules, 2006 will be applicable in a case the service is partly performed in India. In the present case, there is no dispute that the service was provided outside of India and therefore, they are not covered under the said proviso. - Adjudicating authority directed to allow the refund to the Appellant in accordance with law. - Decided in favor of assessee. Central Excise 2016 (1) TMI 438 Levy of personal penalty on co-noticees for abetting clandestine removal - revenue contended that adjudicating authority erred in not imposing penalties. - allegation of clandestine removal agianst the main noticee was confirmed - Held that:- when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25% of the duty as penalty, there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods, transporters who had transported the goods cleared by manufacturer/assessee, the Directors/employees of the manufacturer/assessee company. impugned order is correct and legal and does not require any interference, in the cases of individual respondents. - Decision in the case of Abir Steel Rolling Mills [2013 (7) TMI 405 - CESTAT NEW DELHI] followed - Decided against the revenue. 2016 (1) TMI 437 Cenvat Credit - eligible input services - service tax paid on (a) Agency Charges (b) Tour Operator Service (c) Other Welfare Expenses (d) Catering services (On the amount collected by the appellant from their employees) - Held that:- services rendered by the cargo handling services and the service tax paid thereof is eligible to be availed as CENVAT credit and the same view has been expressed by various decisions of the Tribunal. Accordingly, in the case in hand I hold that CENVAT credit availed on agency services is eligible to be availed as CENVAT credit. Tour operator services are for transportation of employees and credit of tax paid is eligible as input service. Other welfare service i.e. service tax paid on the services of purchase of gift and setting up of mandap in the factory premises for celebrating Dussera festival is not eligible to be held as credit as this seems to be not connected with the business of the appellant, hence the CENVAT credit on this services is upheld as incorrectly availed and needs to be reversed by the appellant. - regarding catering services, the service tax paid on the employees' contribution cannot be availed as CENVAT credit. Decided partly in favor of assessee. 2016 (1) TMI 436 100% EOU - Misuse of the scheme - failure to fulfill the export obligations - appellant contended that the only ground on which the demand against the appellant have been confirmed is that of cancellation of LOP and their status as 100% EOU by the Development Commissioner - There has been no discussion of exports made by the appellant and proper quantification of duty on such raw materials which were actually put into the intended use in a EOU. - Held that:- It is seen that the Original Authority did not examine and give his finding that how the present demand of duty is over and above the already confirmed demands and whether there is overlapping of the quantification. It is apparent that there is overlapping demands as seen from the reason given by the Assistant Commissioner in his letter dated 22/05/2007. The earlier 4 show cause notices having been issued on different grounds is no reason for confirming the demanded amount again in the present proceedings. Even if they are on different grounds no discussion on such distinction has been made. As accepted by the learned AR the demands ave clearly overlapping. It is also clear that all the demands are linked to violation of the conditions of the notifications which granted excise/customs duty exemptions for the inputs used by the appellant as they are 100% EOU and certain export performance of appellants. Further, we also find that there is no discussion or finding on the appellants claim regarding substantial exports carried out by them during the impugned period. Considering the above position, we find it will be legal and proper to set aside the impugned order and to remand the matter to the Original Authority to examine and give his clear findings on the above issues. - Matter remanded back. 2016 (1) TMI 435 Duty demand - Removal of towers for testing - whether the appellant's are liable to pay duty on the tower manufactured, and send for destructive testing - Held that:- Unless the towers undergo destructive testing they are not saleable to the buyer/Rajasthan Rajya Vidyut Prasaran Nigam Ltd. Thus if not saleable, it only means that the process of manufacture is incomplete and the duty of excise is not leviable on them. Merely because the appellants received the cost for manufacture along with testing charges it cannot be said that the towers are liable to excise duty. As per the contract the manufacturing process is not complete when the goods were removed for testing. After testing the goods no longer exist. They are destroyed and turned into scrap. Appellant clears scrap on payment of duty. Thus, the process of destructive testing being integrally connected with the ultimate production of final product, it cannot be said that appellants have cleared any goods liable to duty. - Impugned order is not sustainable - Decided in favour of assessee. 2016 (1) TMI 434 Determination of duty on the basis of Annual Production Capacity under Section 3A - fixation of the capacity of the Furnace - appellant contended that the capacity has been determined incorrectly and also on the grounds that with omission of the section 3A of the Central Excise Act, without any saving clause, the proceedings initiated under the said section cannot continue and would lapse. - Held that:- In the instant case the SCN has been issued prior to 1.3.2001, the capacity has not been finalized till date. The last adjudication order has been issued on 9.12.2005, which is much after the omission of Section 3A. It is seen that the facts of this case are identical to the facts in the case of M/s Alwar Processors Pvt. Ltd. [2014 (12) TMI 156 - CESTAT NEW DELHI] No strong arguments or facts have been presented to differ from the case. Respectfully agreeing with decision of the co-ordinate Bench in the case of M/s Alwar Processors Pvt, Ltd, being identical matter, we allow the appeal. The proceedings initiated in the letter of Commissioner dated 14.11.1998 for fixation of capacity different from the declaration originally filed by appellants would lapse, since the same has not been finalized before omission of Section 3A. - Decided in favor of assessee. 2016 (1) TMI 433 Demand of interest and penalty - Clandestine removal of goods - Revenue neutrality - Held that:- Appellants removed the semi-finished goods continuously for about three years without payment of duty and the input was cleared as such without reversal of credit in violation of the Central Excise Rule 2002 and the Cenvat Credit Rules 2004. There is no dispute that the appellant was liable to pay duty and reverse credit at the time of clearance of semi-finished goods and therefore, the demand of interest is justified. The demand of interest cannot be waived on the ground of the Revenue neutrality. - It is revealed from the Adjudication order that the appellant submitted the statement showing month-wise details of payment of duty from Cenvat account and PLA in respect of both the units during the material period. It is also recorded that the sister unit had paid more duty from the PLA than the Cenvat account. The appellant claimed that there is no suppression of the fact with intent to evade any payment of duty as it is a case of Revenue neutrality. The Adjudicating Authority observed that there is some merits in the argument of the appellant. Hence, the imposition of penalty under Section 11AC is not warranted - demand of duty alongwith the interest is upheld and the penalty is reduced - Decided partly in favour of assessee. 2016 (1) TMI 432 Denial of SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 - Use of other's band name - interest under Section 11 A (1) and 11 AB of the CEA, 1944 and imposed penalty under Rule 25 of CER, 02 - Held that:- Since the Apex Court has settled the issue of using the brand name and trade name in the appellant’s own case, by respectfully following the Apex Court’s decision [2015 (6) TMI 226 - SUPREME COURT], we hold that the appellants are using their own brand name and are eligible for SSI exemption under Notification No. 8/03-CE dated 01.03.2003. Hence, penalties involved in all the appeals are not sustainable. Accordingly, all the impugned orders are set aside - Decided in favour of assessee. 2016 (1) TMI 431 Availment of CENVAT Credit - Capital goods - delay in filing the declaration - Held that:- As interpreting sub-rule 13 of Rule 57T, they concluded that so long as receipt and duty paid nature of the goods is not challenged, the delay in filing the declaration can be condoned. Respectfully following the aforesaid judgement in cases where sole grounds of denial of credit is delay, the delay is condoned. The appeal for such cases is allowed by condoning the delay. In cases where apart from delay, there are other issues raised in the Order-in-Original, but it has not been dealt with in the Order-in-Appeal, the Order-in-Appeal is set aside and the matter is remanded to the jurisdictional Commissioner (Appeals). - Decided in favour of assessee. 2016 (1) TMI 430 Availment of CENVAT Credit - Non maintenance of separate accounts - Held that:- Appellant had availed Cenvat credit of service tax paid on common input services. We find from the records that the appellant had manufactured and cleared newsprint paper and Kraft paper. Appellant claimed exemption from payment of duty in respect of newsprint paper and discharged appropriate duty liability on the Kraft paper - worksheet attached to the show cause notice that 87% of the final products manufactured by the appellant are cleared availing exemption from payment of duty. It is the case of the appellant that they had initially reversed the Cenvat credit proportionate to the exempted goods cleared but subsequently reversed the entire Cenvat credit availed on common input services. In support of such a claim, our attention was drawn to the relevant documents. On perusal of such documents, we find it so. - As per the provisions of the Cenvat credit rules, more specifically Rule 6, we find that if a manufacturer proportionately reverses the Cenvat credit attributable to the clearances of exempted goods, it is considered as compliance of the provisions and need not be burdened with the demand of an amount equivalent to 5% or 10% of the value of exempted goods. In the case in hand, as the appellant has already reversed the entire Cenvat credit of service tax paid on the common input services, we find that further demanding any amount from him is not in consonance with the law. - Impugned order is set aside - Decided in favour of assessee. 2016 (1) TMI 429 Rejection of request for inclusion of premises situated at Plot No 3210 and 3201/A into the existing Central Excise registration of the appellant - Held that:- There is a subsequent development in this matter, in so far after filing of this appeal, the appellant obtained a separate registration certificate in respect of the same premises for manufacturing of the goods. The Adjudicating Authority observed that the said premise is used for storing of the goods. But, the fresh registration certificate was issued to the appellant by the Dept. for manufacture of goods. At this stage, the Learned Advocate on behalf of the appellant submits that liberty may be granted to file application for merger of both the registration certificates and to issue a single registration certificate. In our considered view, the appellant has right to file application for single registration certificate. As there is change of circumstances, we direct that the Adjudicating authority should examine the application if filed, after giving a fresh look without considering the findings in the present impugned order. - Appeal disposed of. CST, VAT & Sales Tax 2016 (1) TMI 424 Challenge to the notice threatening to lock Tax Identification Number (TIN) of the petitioner under Rule 51 of the Punjab VAT Rules, 2005 - trading and milling of paddy - Held that:- Perusing the present petition and without expressing any opinion on the merits of the case, we dispose of the present petition by directing respondent No.4 to take a decision on the reply dated 11.12.2015 (Annexure P-2) and Form VAT-29 and indemnity bond (Annexure P-3 Colly), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of certified copy of the order before proceeding further against the petitioner, if required, in the matter. 2016 (1) TMI 423 Refund claim - Finalization of provisional assessment - Held that:- Refund has already been made to the petitioner(s). Further, it is the admitted position that the order dated 11.5.2015 passed by the assessing authority is appealable. It is directed that in case an appeal is filed by the petitioner(s) within a period of 30 days from the date of receipt of a certified copy of this order, the same shall be decided by the appellate authority on merits, in accordance with law and shall not be rejected on the ground of limitation - Regarding interest, liberty is granted to the petitioner(s) to move a representation and in case any representation is filed within a period of four weeks from the date of receipt of the certified copy of the order, the same shall be decided by the concerned authority within six weeks thereafter. It is further directed that in case it is found that the petitioner(s) is/are entitled to the amount of interest, the same be paid to them within next two weeks. - Petition disposed of. 2016 (1) TMI 422 Revisional proceedings - Bar of limitation - Quashing of SCN - Held that:- we do not find any justifiable reason to interfere with the notices under challenge. However, we clarify that the proper course of action for the noticee is to file detailed and comprehensive objection/reply and to raise all the pleas as have been raised in the writ petitions. In case any objection/reply is filed by the petitioner(s) within a period of two weeks from the date of receipt of the certified copy of the order, the revisional authority shall decide the same within a period of six weeks from the date of receipt of the objection/reply in accordance with law after affording an opportunity of hearing to the petitioner(s) and by passing a speaking order before proceeding further in the matter. - Petition disposed of. Wealth tax 2016 (1) TMI 443 Inclusion of aircraft in the wealth tax assessment - co-ownership of the aircraft - exception u/s.2(ea)(iv) of the Wealth Tax Act - Held that:- value of aircraft, which is used in the assessee’s business, cannot be included in taxable wealth and the exception provided u/s.2(ea)(iv) of the Wealth Tax Act is attracted. Merely because the Revenue has not accepted the decision of the Tribunal and an appeal has been filed before the Hon’ble Bombay High Court, the same in our opinion, cannot be a valid reason to take a different view other than the view taken by the Tribunal until and unless such view is reversed by a Higher Court. - Decided against the revenue.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter January 13, 2016

Articles

1. Cost Auditing Standards [ Cost Audit Documentation (102)] – Part-II

2. BASIC CONCEPTS OF GST (PART-1)

News

1. RBI Reference Rate for US $

Notifications

1. ADVT. III/4/Exty./314 - dated 7-1-2016 - Competition Law

Highlights / Catch Notes

Income Tax

No Penalty for Inaccurate Income Details Due to Clerical Error u/s 271(1)(c) of Income Tax Act.

Section 54F Relief Upheld: No Revision u/s 263 Needed; Decision Not Detrimental to Revenue Interests.

Transfer Pricing Officer Sets Arm's Length Price for Management Consultancy Fee at NIL, Excludes FX Loss as Service Charge.

Assessment Reopening Quashed: AO Failed to Verify Investigation Wing's Info Before Issuing Notice u/s 148.

Interest Expense Disallowance Reviewed: 18% Rate on Unsecured Loan Reasonable Despite Section 40A(2)(b) Conditions.

Customs

High Court Denies Waiver of Pre-Deposit Due to Lack of Specific Pleadings and Prima Facie Case by Appellants.

Imported Cars for Auto Expo Cannot Use ATA Carnet Value for Customs u/s 14 of the Customs Act.

Refund Claim Approved Due to Clerical Error in Interest Rate; Excess Payment Treated as Deposit, Avoiding Unjust Enrichment.

Shipping Agency Penalized for Issuing Second Bill of Lading; Minor Infraction Due to Good Faith Action.

Wealth-tax

Aircraft Used in Business Exempt from Wealth Tax in Co-ownership Cases per Section 2(ea)(iv) of Wealth Tax Act.

Service Tax

Service Tax on Royalty Payments for Intellectual Property Services Overturned; Training and Demos Ruled Non-Taxable.

Appellant's Penalty u/s 77(1)(c) Set Aside After Submitting Required Documents During Hearing.

Refund Granted for Service Tax on Technical Testing Services Under Reverse Charge Due to Overseas Performance, Despite Time Limitations.

Central Excise

Concluding Manufacturer's Case Ends Penalties for Traders u/r 26; No Need for Further Actions.

Cenvat Credit Denied for Dussera Festival Expenses: Gifts and Mandap Setup Not Business-Related.

Destructive Testing of Towers Integral to Production; No Additional Duty on Resulting Scrap, Duty Cleared.

Case Laws:

Income Tax

Customs

Corporate Laws

Service Tax

Central Excise

CST, VAT & Sales Tax

Wealth tax

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TMI Tax Updates - e-Newsletter
January 13, 2016