TMI Tax Updates - e-Newsletter
January 15, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Activities of street light maintenance cannot be equated with maintenance of road, bridge, tunnel etc. - Exemption not available - AAR

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Articles

• Money Makes the Mare Go - दाम सँवारे सारे काम
• BASIC CONCEPTS OF GST (PART-2)
• Secretarial Standard-1 A Bird's View

News

• RBI Reference Rate for US $

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• Government Approves Five (5) Proposals of Foreign Direct Investment (FDI) Amounting to ₹ 6050.10 Crore Approximately

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• FM: Indian economy is on path of recovery despite uncertainty and volatility in global economic situation; Government continues to adhere to the path of fiscal consolidation;

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• Finance Minister Shri Arun Jaitley: India has emerged among the few large economies in the world with a promising economic outlook; Economic growth is moving in the right direction and its pace is expected to gather momentum in the coming quarters, once the impact of the on-going economic and structural reforms takes the firm root

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Notifications

Customs

• 11/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Additional Director General(Adjudication), Directorate of Revenue Intelligence, Delhi

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• 10/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Principal Commissioner/Commissioner of Customs (Import), Raigad, Maharashtra

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• 09/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Principal Commissioner/ Commissioner of Customs, Raigad, Maharashtra

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• 08/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, New Delhi

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• 07/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, New Delhi

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• 06/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai

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• 05/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai

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• 04/2016 - dated 12-1-2016 - Cus (NT)
  Appoints the Commissioner of Customs, Bengaluru

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Income Tax

• 2/2016 - dated 13-1-2016 - IT
  DTAA - Amending the Agreement Republic of India and the Government of the Republic of Belarus

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• 1/2016 - dated 12-1-2016 - IT
  Corrigendum - Notification No. 93/2015 dated 16/12/2015

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Circulars / Instructions / Orders

FEMA

• 39 - dated 14-1-2016
  Export of Goods and Services – Project Exports

Highlights / Catch Notes

Income Tax

• Service of an independent contractor - whether would be taxable as salary contrary to the contract of service - Whether it is professional or skilled work; nature of establishment and the right to reject, are also required to be scanned before arriving at the conclusion of the employer-employee relations - HC
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• Allowability of exemption u/s 10(1) - For earning agricultural income, it is not necessary that the assessee must own the land and it is enough if it is established that the agricultural organizations have been actually carried on by the assessee - AT
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• Income from house property - Rental income inclusive of service tax - whether should be deducted from the gross rental receipts? - Held Yes - AT
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• What we are doing for next generation, what the next generation will learn and inherit from present cacophony of things, will they ever be able to argue a case on merit without money pocketed? Are we not answerable to our conscience, CBDT, ITD, MoF are not only to be blamed but we are also part of that?
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Customs

• Refund - export of Bauxite - the shipping bill was assessed finally on the basis of information declared by the appellants themselves and since the assessments had become final, appellant’s claim for refund on the basis of quantity of goods as per DMT is not sustainable - AT
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• Levy of penalty on courier agency on the ground that they have failed to exercise due diligence in performing their work as an authorized courier and thus, their inaction/negligence has led to this attempt of smuggling of costly goods in the guise of low value spare parts. - penalty confirmed, though reduced - AT
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• Conversion of free shipping bills to drawback shipping bills - Neither the appellant have approached the Commissioner for establishment of identity of goods or for relaxation of conditions prescribed under Re-export of Imported Goods (Drawback of Customs Duty) Rules, 1995, nor the adjudicating authorities have examined that aspect - matter remanded back - AT
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Service Tax

• Activities of street light maintenance cannot be equated with maintenance of road, bridge, tunnel etc. - Exemption not available - AAR
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• Advance Rulings - Classification of service - Activities of street light maintenance - Scope of Mega Exemption - As a matter of fact, the word ‘road’ is clear and it can not be substituted by the term street light support structure. - AAR
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Central Excise

• Classification of chemically coated micronized minerals and Red-oxide power - by virtue of chapter note, the micronized minerals are chemically coated products which has undergone the process beyond the process mentioned in Section note 2 or chapter 25 of CETA. Therefore, the goods are rightly excluded from Chapter 25. - AT
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• Levy of penalty on dealers who issues Bogus Invoices - Cenvat Credit - Bogus credit - levy of penalty confirmed, though reduced - AT
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• Area based exemption - substantial expansion by way of installed capacity by not less than 25% - Notification No. 50/2003-CE dated 10/6/03 - it was contended that production capacity of the both the units are to be counted as one - benefit of exemption allowed - AT
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• Cenvat Credit - export of goods - place of removal - it is the undisputed policy of the Government not to burden the export goods with domestic taxes as has been noted in various decisions of the Tribunal - Having decided that the place of removal is the Port, we hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges - AT
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• Manufacturer - Sub-contractor / job worker - who is liable to pay duty - appellant is not a manufacturer of the goods, in question. M/s. VEE is the manufacturer of said goods only, therefore, duty cannot be demanded from the appellant - AT
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• Cenvat Credit in respect of power plant - on these capital goods, the appellant has taken cenvat credit only on 28.11.2011. At the time of availment of cenvat credit, the provisions of Rule 2A (1A) were in force and there is no bar for availment of cenvat credit at that point of time. - Credit allowed - AT
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Case Laws:

• Income Tax

• 2016 (1) TMI 542
  Disallowance tax deductible expenses - Held that:- Disallowance of the expenses to the extent of ₹ 3.44 lakhs by the AO cannot be sustained in law particularly when audited accounts, containing two separate P&L accounts for the two distinct lines of activity, were not rejected. The disallowance could not have been made on the basis of surmises and conjectures. There was no material before the AO to come to the conclusion that the expenses were either excessive or unreasonable. The impugned order of the ITAT on this issue is unsustainable in law. In that view of the matter, the Court sets aside the assessment order of the AO as well as the impugned order of the ITAT on the above aspect. The order of the CIT (A) is restored. The question framed is answered in the affirmative i.e. in favour of the Assessee and against the Revenue.

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• 2016 (1) TMI 541
  Service of an independent contractor - whether would be taxable as salary contrary to the contract of service dated 9th February, 2004 and 14th November, 2005? - Held that:- In case, it is 'contract for service', the income of the doctors would fall under the head 'income from business or profession' whereas under 'contract of service, it would partake the character of salary which is dependent upon master-servant relationship. It is always a vexed question to determine whether employer-employee relationship exists between the parties or not. There is no strait jacket formula prescribed under any statute or by any pronouncement on the basis of which it could be said that in a given eventuality, it would be characterized as employer-employee relationship. Such relationship depends upon several factors taken together. Even the Apex Court in Workmen of Nilgiri Coop. Market Society Limited v. State of Tamil Nadu and others, (2004 (2) TMI 688 - SUPREME COURT) observed that the question whether the relationship between the parties is one of the employer and employee is a pure question of fact. The control test and the organization test are not the only factors whereas several other factors viz. who is the appointing authority; who is pay master; who can dismiss; how long alternative service lasts; the extent of control and supervision; the nature of the job e.g. Whether it is professional or skilled work; nature of establishment and the right to reject, are also required to be scanned before arriving at the conclusion of the employer-employee relations - matter is remanded to the Tribunal to decide the same afresh keeping in view the principles

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• 2016 (1) TMI 540
  Disallowance under section 14A r.w.r. 8D - Held that:- There has been no disallowance under section 14A which essentially proceeds on the accepted position that there has been no use of borrowed funds in this case. So far as fresh investments made in the present year are concerned, it is not in dispute that the sale proceeds of the mutual fund investments during the year has been used in making the investments. The disallowance even under rule 8D must therefore remain restricted to the amount worked out under rule 8D(2)(iii), 0.5% of the average value of investments appearing in the balance sheet as on 31.3.2007 and 31.3.2008, which works out to ₹ 26,951 as no part of the interest can be disallowed by invoking section 14A. We, therefore, restrict the disallowance to ₹ 26,951 and delete the remaining disallowance. Disallowance in respect of motor car expenses and depreciation - Held that:- This issue is now covered, in the case of assessee’s group Aflon Alplast Pvt Ltd for the same assessment year and in respect of similarly worded orders of the authorities below, in favour of the assessee Disallowance under section 40A(2)(b) - interest payment to the specified persons @ 24% pa, is excessive and unreasonable - Held that:- This issue is now covered, in the case of assessee’s group Aflon Alplast Pvt Ltd for the same assessment year and in respect of similarly worded orders of the authorities below, in favour of the assessee

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• 2016 (1) TMI 539
  Allowability of exemption u/s 10(1) - Held that:- We are of the opinion that the CIT (A) has rightly adjudicated the issue in favour of the assessee following the binding judgment of the Hon'ble jurisdictional High Court in assessee's own case recording finding of the fact that the assessee in fact carried on agricultural operations and that the orders passed to that effect in assessment years 1990-91 to 1992-93 have been accepted by the Revenue. For earning agricultural income, it is not necessary that the assessee must own the land and it is enough if it is established that the agricultural organizations have been actually carried on by the assessee. In view of the finding of the fact recorded - Decided in favour of assessee. Disallowance u/s 14A r.w. Rule 8D of the Act instead of disallowing adhoc amount applying flat rate of 2% of the exempt income - Held that:- Assessee submitted that the law on this issue has under gone number of changes so for as the applicability of the provisions of section 14A read with Rule 8D is concerned. There is a need for examining the various aspects of the issue such as own funds v/s borrowed funds; dividend yielding investment v/s other strategic investments, the dividend income which is chargeable to tax otherwise etc. Therefore, he pleaded for remanding this issue also to the file of the AO for adjudication. We accordingly find merit in the said Ld Counsel's argument and direct the AO to examine and decide the issues raised after granting a reasonable opportunity of being heard to the assessee.

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• 2016 (1) TMI 538
  Treatment of loss arisen on account of foreign exchange derivative contracts - Held that:- Assessing Officer has to consider the foreign exchange derivative in proportion to export turnover as regular business transaction of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the Assessing Officer is directed to compute accordingly. Further, the Assessing Officer has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from these foreign exchange forward contract. With this observation, we remand this issue to the file of the Assessing Officer for fresh consideration. This issue was considered by the Mumbai Tribunal while delivering the decision in the case of Araska Diamond P. Ltd, [2014 (10) TMI 776 - ITAT MUMBAI ] wherein the Tribunal came to the conclusion that the transactions, which were prematurely cancelled, cannot be considered as business transaction and it is to be considered as speculative transaction. - Decided in favour of revenue for statistical purposes.

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• 2016 (1) TMI 537
  Disallowance of expenditure on account of not carrying any business activity - Held that:- We find from the details of the expenses filed in paper book and in the order of the Commissioner of Income Tax (Appeals) that those expenses were bare minimum required for the purpose of securing interest of the company for defending legal cases in connection with the liabilities, protection of assets and pursuing legal cases with the Government Departments. We find that the learned Commissioner of Income Tax (Appeals) has considered all the facts and circumstances of the case and upheld the disallowance of ₹ 4,07,050/-. In our opinion, the learned Commissioner of Income Tax (Appeals) has passed a reasoned and justified order and we do not find any reason for interfering into the findings of the Commissioner of Income Tax (Appeals). - Decided against revenue

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• 2016 (1) TMI 536
  Addition undisclosed receipts - CIT(A) deleted the addition - Held that:- The amounts in question have already been shown and included in the gross receipts of the assessee in the earlier assessment year and in the absence of any thing contrary being brought to our notice by the learned DR , We are of the view that the addition made by the AO was rightly deleted by CIT(A). - Decided in favour of assessee Disallowance u/s 40(a)(ia) - CIT(A) deleted the addition - Held that:- We have perused the relevant part of the remand report of the AO as extracted in the order of CIT(A) and find that no specific objections was pointed out before CIT(A) by the AO in the remand report except contending that no evidence of payment of TDS was filed by the assessee. In fact the specific contention of the assessee was that TDS was not applicable on a sum of ₹ 55,000/- as it was office maintenance charges not in the nature of rent covered u/s 1941 of the Act. The AO has not raised any objections on this contention in the remand report. Consequently ground no.2 raised by the revenue is dismissed. - Decided in favour of assessee Disallowance of non- essential expenses made on the grounds of failure to produce any evidence - CIT(A) deleted the addition - Held that:- The basis on which AO made the impugned disallowance cannot be sustained and was rightly deleted by CIT(A). The law is well settled that it is for the assessee to decide what expenses are necessary for the purpose of business. AO cannot sit in judgments on what these expenses are essential or not essential for the purpose of business. - Decided in favour of assessee

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• 2016 (1) TMI 535
  Depreciation on machinery purchased from group of companies - CIT(A) allowed the claim - Held that:- Parties from whom machines have been purchased are registered under VAT, purchase bills have been issued, entry is available in Gate Pass Register. The reason for absence of lorry number was that the machine(s) purchased from Prakash Finstock Pvt. Ltd. was at Ex- Mill delivery and, therefore, the transportation charges were not required to be paid by the assessee and in the case of Ashutosh Fibre Pvt. Ltd., this supplier being local party, hand cart was used for bringing the separate parts of the machine to the destination which were later on assembled at the assessee’s premises. Due to this reason there was no transport receipt for machine purchased from Ashutosh Fibre Pvt. Ltd. Therefore, the assessee was having sufficient reason for not having lorry receipt for the machines purchased from Prakash Finstock Pvt. Ltd. and Ashutosh Fibre Pvt. Ltd. Apart from this, nothing contrary has been brought on record by the Assessing Officer to controvert the submissions of the ld. AR in regard to the details submitted in the form of bills, Gate Pass entry, inward entry of machinery, copy of bills of machinery of original purchaser etc. In these circumstances and on the basis of our observations above, we are of the opinion that as the assessee has furnished sufficient documents and evidences to prove the genuineness of purchase of machineries from group companies and therefore, we do not find any reason to interfere with the finding of ld. CIT(A) - Decided in favour of assessee Addition under section 41(1) on account of cessation of liability - CIT(A) deleted the addition - Held that:- The liability of sundry creditors has not ceased to exist rather there were regular transactions with these parties in the latter years as well. Not a single instance has been brought to prove that sundry creditors have denied their claims nor the assessee has written off the liability in its books of account in the year under plea, and therefore, respectfully following the judgment of Hon’ble Apex Court in case of CIT vs. Sugauli Sugar Works (P) Ltd. (1999 (2) TMI 5 - SUPREME Court) and CIT vs. Bhogilal Ramjibhai Atara (2014 (2) TMI 794 - GUJARAT HIGH COURT ) and in light of our discussions made above, we find no reason to interfere with the order of CIT(A) - Decided in favour of assessee

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• 2016 (1) TMI 534
  Computation of rental income - Assessing Officer treated the amount of rent as ‘income from other sources’ - Held that:- The assessee has in fact credited rental income of ₹ 1.62 crores to its profit & loss account. A copy of the Addendum dated 25.08.2006 to the Lease agreement has been placed at page 28 of the paper book, as per which, “the Lessor agrees to give an additional rent free period of one month from the rent commencement date towards delays in handover of the premises. Lessee hereby agree to adjust ₹ 22,18,200/- out of the rent payable to the Lessor”. This addendum to the agreement amply proves that the assessee allowed rent free period of one month to the lessee because there was some delay in handing over of the premises. Once no rent is received as the same stood waived because of late handing over of the possession, there cannot be any question of charging such amount as ‘Income from other sources’. We, therefore, overturn the impugned order on this score and order for deletion of this addition. - Decided in favour of assessee Disallowance on account of interest on O.D. account - Held that:- The assessee claimed deduction of interest on over draft account stated to have been utilized for purchase of the furniture and fixtures and repairs and maintenance of the building which was let out on rent. The Learned AR submitted that the AO did not allow a reasonable opportunity to adduce necessary evidence and requested that one more opportunity be given to the assessee for filing necessary evidence in this regard. It is noticed that it is a case of payment of interest to bank and hence the genuineness of payment of such interest cannot be denied. The only thing which remains is to link such interest with the purpose of loan. Agreeing with the contention, we set aside the impugned order on this score and send the matter to the Assessing Officer for examining this issue afresh in the light of the evidence which the assessee proposes to adduce in support of the claim of deduction of interest.- Decided in favour of assessee for statistical purposes. Disallowance on account of interest on bank loan - Held that:- Here again, the assessee could not file evidence of spending the loan amount for acquiring building etc. with the help of loan on which interest was paid and the learned AR seeks one more opportunity for adducing such evidence. Following the view taken hereinabove, we set aside the impugned order and send the matter to the Assessing Officer for deciding this issue afresh in the light of the evidence to be filed by the assessee.- Decided in favour of assessee for statistical purposes. Disallowance on account of Professional charges - Held that:- It can be seen from the Profit & loss account that there is a debit of ₹ 54,827/- towards Professional charges. The learned AR contended that the Assessing Officer did not allow adequate opportunity to present evidence in support of the payment of such Professional charges. Setting aside the impugned order on this score, we remit the issue to the Assessing Officer with a direction to allow adequate opportunity to the assessee for producing necessary evidence in support of this payment and then decide as per law.- Decided in favour of assessee for statistical purposes. Disallowance on account of Processing of loan fees by treating it as capital expenditure - Held that:- No substance in the view canvassed by the authorities below that the processing of loan fees is a capital expenditure. The fact that such processing fee has been paid by the assessee has not been denied by the AO. The dispute is only whether it is a capital or a revenue expenditure. We do not find any qualitative difference between interest and processing fee on loan. In our considered opinion, such processing fee cannot be capitalized and is deductible in the same manner in which the interest is deductible. We, therefore, set aside the impugned order on this issue also and send the matter to the file of the AO to consider the deductibility of such amount on the same line as that of the interest.- Decided in favour of assessee for statistical purposes. Income from house property - Rental income inclusive of service tax - whether should be deducted from the gross rental receipts? - Held that:- The assessee categorically claimed before the authorities that gross rent of ₹ 2.66 crore includes service tax of ₹ 0.14 crore and only the net amount should be charged to tax. The amount of service tax is undoubtedly a part of assessee’s receipt and is chargeable to tax in the same way as receipt. However, the payment of service tax is deductible in the computation of income. The authorities below have considered only the receipt aspect of the rent at ₹ 2.66 crore inclusive of service tax but have not allowed any deduction for service tax claimed to have been paid by the assessee before the due date. Under such circumstances, we hold that the gross rental income is chargeable at ₹ 2.66 crore but the assessee is also eligible for deduction of ₹ 0.14 crore towards payment of service tax.- Decided in favour of assessee Disallowance on account of brokerage charges - Held that:- As AR argued that such brokerage charges were paid to commission agents for procuring tenants of the building and this brokerage was paid at the rate of 40 days’ rental value. He submitted that the assessee could not file evidence for the payment of such brokerage because of inadequate opportunity provided by the Assessing Officer. In our considered opinion, the ends of justice would meet adequately if the impugned order on this issue is set aside and matter is sent back to the Assessing Officer for a fresh determination - Decided in favour of assessee for statistical purposes.

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• 2016 (1) TMI 533
  Trading additions - addition by not accepting the trading results and applying gross profit rate of 20% as against 13.90% declared by the assessee - Held that:- As the facts and circumstances of the current year are admittedly similar to those of the preceding year, except for an additional item of trading, being Almirahs, in respect of which again the average GP rate comes to 25.29%, we are inclined to go with the results of the preceding year. In our considered opinion, the AO was more than reasonable in applying the GP rate of 20% as against the last year’s GP rate of 22.94%. We, therefore, uphold the view taken by the ld. CIT(A) in upholding the addition of ₹ 31.12 lakhs. - Decided against assessee Addition of commission to its directors and sister concern covered u/s 40A(2)(b) - Held that:- It is noticed that the assessee paid salary/commission to its directors in the preceding year as well and such payment of commission at ₹ 7.87 lakhs stood allowed as deduction. The mere fact that no new parties were introduced by these directors etc. of the company, cannot be a reason for making disallowance of commission if the continuation of business is due to the services rendered by the commission agents/directors. The terms of Agreement, referred to in the assessment order, provide that they had undertaken the entire responsibility of the realization of sale proceeds. In such circumstances, the factum of having rendered services for earning commission cannot be denied. Reasonableness of the amount of commission - In this regard, we find that as against turnover of ₹ 3.02 crores in the preceding year, the assessee paid commission of ₹ 7.87 lakhs. This gives percentage of 2.60%. In this year, the assessee has paid commission of ₹ 14.14 lakhs against total turnover of ₹ 5.10 crores. This gives rate of commission at 2.77%. Considering the fact that the payees are related to the assessee and there is no other evidence of commission payable at arm’s length rate, we are of the considered opinion that it would be just and fair if the deduction for commission is allowed at the same rate on which it was paid and allowed in the preceding year. This would result into disallowance of excess commission to the tune of ₹ 86,700/-. We reduce the addition to this level.

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• 2016 (1) TMI 532
  Disallowance u/s 14A - Held that:- The Hon’ble Delhi High Court in CIT vs. Holcim India P. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT) has held that in the absence of any exempt income, there can be no disallowance u/s 14A. Recently, the Hon’ble jurisdictional High Court in Joint Investment Pvt. Ltd. Vs. CIT (2015 (3) TMI 155 - DELHI HIGH COURT ) has held that disallowance u/s 14A cannot exceed the exempt income. In view of the fact that the assessee did not admittedly earn any exempt income during the year, there can be no question of making any disallowance u/s 14A of the Act in terms of the aforestated precedents from the Hon’ble jurisdictional High Court. We, therefore, order for the deletion of the entire addition. - Decided in favour of assessee. Addition on account of lower scrap sale can be made as a percentage of turnover - Held that:- Scrap is ordinarily considered with reference to production. It is further pertinent to note that percentage of scrap to production may not remain consistent over the years. The generation of scrap depends on various factors, such as, quality of raw material, age of machine, quality of work force, etc. If good raw material is used, naturally, it will lead to lower scrap and vice versa. The relevant factors discussed above ultimately find their reflection on the gross profit rate. If the gross profit rate of the assessee is better than that of the preceding year, but, the generation of scrap is less, there cannot be any separate addition for lower generation of scrap because this would show the higher economies availed by the assessee due to better performance or good quality of raw material etc. Adverting to the facts of the instant case, we find that the assessee declared GP rate of 9.77% in the year under consideration as against the last year’s GP rate of 8.61%. These gross profit rates are available in the written submissions filed before the CIT(A), a copy of which is available on page 19 of second paper book. When the gross profit rate itself has registered an increase of over 1% in the current year, we fail to appreciate as to how any addition on account of lower scrap sale can be made as a percentage of turnover.- Decided in favour of assessee. Disallowance of interest in respect of balance payable to M/s Tobu India Ltd. - addition on u/s 40A(2)(b) - Held that:- On a specific query to point out the balance of M/s Tobu India Ltd., in the assessee’s account for the preceding year as reflected in the balance sheet, the ld. AR invited our attention towards annual accounts, a copy of which is available on pages 1-39 of the paper book. Details of Schedule of Loans and advances to Balance sheet is available on page 14 of the paper book and the name of M/s Tobu India Ltd., appears on page 15, which is part of Schedule 10. It can be observed that the closing balance of the sister concern in the Annual accounts for the year under consideration is ₹ 21,84,964/-, but, there is no corresponding figure of closing balance of this sister concern in the immediately preceding year, as such figure has been shown as Nil. As such, the entire basis on which the addition has been deleted by the ld. CIT(A), ceases to exist. We cannot countenance the impugned order on this line of reasoning which has not been shown to exist. Under such circumstances, we set aside the impugned order on this score and remit the matter to the file of CIT(A) for deciding this issue afresh, as per law, after taking note of the correct facts.

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• 2016 (1) TMI 531
  Addition on account of 'Sundry creditors’ - CIT(A) deleted the addition - Held that:- The three persons who were examined by the AO duly admitted that they had sold their jewellery to the assessee. The AO has doubted the genuineness of transactions with them by holding that they were persons of no means. When we peruse the details of amounts appearing against these persons, it is found that the same ranged between ₹ 1 lac to ₹ 2 lac. The fact that confirmation from all the creditors were filed along with the affidavit filed by the assessee’s husband averring their production before the AO who refused to examine and other attending circumstances go to prove the genuineness of the transactions of purchase of gold jewellery by the assessee from them. Immediate payment could not be made to these persons because the receipt from M/s Nikki Jewellers House, the sole buyer of the assessee, was held up. Considering the entirety of the facts under consideration, we are of the considered opinion that the ld. CIT(A) was justified in deleting this addition. - Decided in favour of assessee. Addition on account of unsecured loans - CIT(A) deleted the addition - Held that:- There cannot be any addition under section 68 in respect of brought forward balances. Section 68 contemplates the addition in respect of amounts received during the year which are not properly explained by the assessee to the satisfaction of the AO. Here is a case in which the assessee contended before the AO that a sum of ₹ 11.14 lac represented brought forward balances, but, the AO did not find any closing balances of unsecured loans in the return for the immediately preceding year. The ld. AR did not readily have the balance sheet of the preceding year to amplify his contention about such brought forward balances. In our considered opinion, this fact is of utmost importance which requires examination at the AO’s end. We, therefore, set aside the impugned order and send the matter back to the file of AO for deciding this issue afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. In case it is found that unsecured loans amounting to ₹ 11,14,926/- were brought forward balances from the last year, then, no addition should be made for this amount in the current year. In the otherwise situation, the AO is free to examine the genuineness of these credits as per law. While examining this issue of the opening balances, the AO will also examine the assessee’s contention about the sale of jewellery by Smt. Amarjeet Kaur during the year for a sum of ₹ 3.04 lac. - Decided in favour of assessee for statistical purposes. Addition on account of excessive salary paid to employees and on account of salary payable - Held that:- We observe that the assessee paid a salary of ₹ 7.56 lac to its employees and ₹ 2 lac to outside ‘karigars.’ The assessee furnished person-wise details to whom salary payments were made and also payment to ‘karigars.’ The assessee expressed inability to produce these persons because the business itself was closed down on 27.7.2009 and, thereafter, it was difficult to locate them. In our considered opinion, the amount of salary paid to the assessee’s employees and charges to outside ‘karigars’ is reasonable in the facts and circumstances of the instant case as the further corroboration by producing them for personal examination was not possible due to the closure of business. As such, the ad hoc disallowance of ₹ 3 lac made by the AO is held to be rightly deleted. As regards the remaining amount of ₹ 63,000/-, we find that this was a provision created by the assessee towards salary for March, 2008 which was paid in April, 2008, which does not require disallowance. - Decided in favour of assessee.

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• 2016 (1) TMI 530
  Levy the fees as per provision of Section 234E while processing the statement u/s 200A - Held that:- The adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. Assessing Officer cannot levy the fees as per provision of Section 234E of the Act while processing the statement u/s 200A before the amendment made by the Finance Act, 2015 - Decided in favour of assessee

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• 2016 (1) TMI 529
  Addition on account of difference between income admitted during the course of survey U/s 133A and return income - CIT(A) deleted the addition - Held that:- The statement recorded U/s 133A as held by the various courts including Hon'ble Supreme Court that statement recorded has no evidentiary value and also rebuttable. The assessee admitted ₹ 4 crores during the survey estimated regular income but books had not been completed as date of survey was 11/3/2010. The statutory deduction such as depreciation, interest on loan, salary to the Director and other statutory liability could not ascertain at the time of survey, which has been explained by the ld AR. The ld DR has not controverted the finding given by the ld CIT(A), therefore, we uphold the order of the ld CIT(A). - Decided against revenue

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• 2016 (1) TMI 528
  Penalty u/s 271(1)(c) - concealment on account of investment - Held that:- It is an undisputed fact that the evidence in the form of sale deed was found during the course of survey showing the assessee paid sale consideration of ₹ 4.00 lacs for purchase of plot which was not found recorded in the books of account and source of investment has not been explained by the assessee which was admitted by the assessee during the course of survey but the same has not been disclosed in the return. The concealment on account of investment has been established by the AO. The assessee also partly admitted that Coordinate Bench has not accepted the theory of set off of this addition against trading addition in quantum proceedings. Similarly, the cash deposit in the bank account is also proved by the AO as concealment of income of the assessee. The explanation filed by the assessee is not bonafide and this case is covered u/s 271(1)(c) of the Act. Thus in view of the above judgement of Hon'ble Supreme Court CIT vs. Mac Data (P) Ltd. (2013 (11) TMI 14 - SUPREME COURT ) wherein held AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the Assessing Officer is not required to record his satisfaction in a particular manner or reduce it into writing we confirm the order of the ld. CIT(A). Therefore, the appeal of the assessee is dismissed. - Decided against assessee

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• 2016 (1) TMI 527
  Addition as undisclosed income - revenue not accepting the fact that the said amount was gifted to the assessee by her father - Held that:- The appellant has submitted a confirmation dated 17/11/2011 from Shri P.M. Lodha where he had confirmed that he had gifted a sum of ₹ 3.90 lacs in cash to her daughter Smt. Neelmani Jain (Appellant), wife of Shri B.K. Jain on 10th of July, 2008. Further in the said letter, it is stated that the amount has been gifted as his natural love and affection to her. This amount was withdrawn by him (Donor) from his savings bank account No. 001201009312 with ICICI Bank, Subhash Nagar, CScheme, Jaipur. So in the light of this, it is clear that the observation of the ld CIT(A) is not correct that the money was withdrawn and kept by the donor for 15 days and then gifted to the appellant. The correct factual position as appearing from the record is that the amount was withdrawn on 10th July, 2008 and on the same date, the money was gifted to the appellant and thereafter the appellant after spending a part of amount, deposited remaining amount of ₹ 3,59,031/- in her and her son’s bank accounts. As regards, non appearance of the donor Shri P.M. Lodha before the Assessing Officer, it was submitted that the donor Shri P.M. Lodha is over 85 years of age and because of his age he could not appear before the Assessing Officer. However, he has submitted his statement dated 17/11/2011 as well as produced a copy of his bank statement, which proves beyond doubt that he has gifted an amount of ₹ 3.90 lacs to his daughter. Further on query from the Bench that if the donor Shri P.M. Lodha can go to the bank to withdraw the amount, what stops him from making an appearance before the Assessing Officer. The ld AR has submitted that the donor Shri P.M. Lodha had not gone to the bank as well and the money was withdrawn through self cheque and he has sent one of his family’s member to withdraw the amount. So given the above factual position (substantiated by appellant through appropriate documents), the identity, creditworthiness as well as genuineness of the gift transaction has been proved and in the light of above, the addition made by the Assessing Officer and confirmed by the ld CIT(A) U/s 68 of the Act is deleted. - Decided in favour of assessee.

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• 2016 (1) TMI 526
  Non deducting tax at source on uniform reimbursements to its employees - Salary u/s. 17(1)(IV) liable for TDS deduction - whether uniform allowance to be exempt u/s. 10(14)(I) r.w.r. 2BB? - Held that:- The assessee's arguments are not liable to be accepted. It transpires from the stated circular no. 23/2010 issued on 29th March, 2010 prescribing uniform of its employees that what is prescribed is only dress of its employees i.e. shirts, trousowers, ties, belts for gents and salwar kameez etc for lady employees without any particular shade or texture thereof. We are of the view that the same is only a general instruction much less than the dictionary meaning of "uniform" as quoted by the lower authorities. This general prescription does not even satisfy the meaning of the word "uniform" in common parlance i.e. of that same kind or type. We further notice that the Assessing Officer in his order quotes similar plea rejected in preceding assessment year as well which stood upheld up to lower appellate stage. The assessee's arguments do not dispel the same. We hold accordingly that its arguments herein above have to be rejected on merits as well consistency. We affirm the lower appellate order in all for cases. - Decided against assessee.

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• Customs

• 2016 (1) TMI 515
  Writ petition - Demand of 100% Bank Guarantee towards the customs duty of 16% leviable in the normal course of import - import of unbranded gold jewellery. - clearance of the goods by accepting the Special Additional Customs Duty of 1% as per the Malasiya-India Comprehensive Economic Co-operation Agreement. - The learned Additional Solicitor General appearing for the respondents, who filed the counter affidavit, submitted that the writ petition is premature in nature i.e., without approaching the authorities, the petitioner has filed this writ petition. Held that:- The learned Additional Solicitor General in reply submitted that those representations, if submitted, would be considered followed by necessary orders. The said submission made by the learned Additional Solicitor General is recorded. The counsel for the petitioner also submitted that the petitioner will appear before the respondents with materials. The petitioner is directed to approach the authorities for the purpose of clearance of goods by proper representation within a week from the date of receipt of a copy of this order and the respondents are directed to hear the petitioner and pass necessary orders within a period of two weeks thereafter. - writ petition is disposed of

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• 2016 (1) TMI 514
  Refund - export of Bauxite - duty was paid on the basis of Wet Metric Tons (WMT for short), whereas the appellants contention is that it should have been paid on the basis of Dry Metric Tons (DMT) in accordance with the Sales- Purchase Contract with the buyers of the goods. - Held that:- the shipping bill was assessed finally on the basis of information declared by the appellants themselves and since the assessments had become final, appellant’s claim for refund on the basis of quantity of goods as per DMT is not sustainable in view of the various decisions of the Hon'ble Supreme Court. In the instant case, the assessment was final and it was not challenged. We also find force in the contentions of the learned Authorised Representative that they had not raised this issue either in the documents such as shipping bill, invoices etc., nor had they brought it to the notice of the Customs Officers or claimed provisional assessment or paid duty under protest. - Refund not allowed - Decided against the assessee.

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• 2016 (1) TMI 513
  Rectification of Mistake - appellant submitted that before the Tribunal they had requested for setting aside the order against the applicant. However, even though this Tribunal noted these submissions, in the findings it has been recorded that the importers (transferees of licence) very well knew that the original licence issued was a licence with actual user condition and the same is not transferable and this observation is erroneous as far as the applicant is concerned. Accordingly, he prays for recalling of the order as far as the applicant is concerned as it is an error apparent on the face of the record. Held that:- We do not think it appropriate to interfere and rectify the said order under the garb of this present application and it would amount to reviewing the order on merits. In our considered opinion, as far as the applicant is concerned there is an error apparent on the fact of the record to impose penalty on the applicant to the tune of ₹ 1 lakh when the penalty of ₹ 1,10,000/- has already been imposed the Proprietorship concern i.e. M/s. Shravan Enterprises. We set aside the penalty of ₹ 1 lakh imposed on him by the impugned order. Further, the order dated 07.05.2012 is modified to the extent that penalty imposed on the applicant is set aside. Rest of the order dated 07.05.2012 would remain intact. - Decided partly in favor of applicant.

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• 2016 (1) TMI 512
  Levy of penalty on courier agency on the ground that they have failed to exercise due diligence in performing their work as an authorized courier and thus, their inaction/negligence has led to this attempt of smuggling of costly goods in the guise of low value spare parts. - Held that:- the appellants are a Courier Company and in ordinary course of business they do not come to know about the factual desertion of the goods or actual value of the same. They are only aware of the details as disclosed by the clients. As argued by the learned AR, it is seen that no allegation in respect of failure to follow regulation 13(a) have been made in the notice and therefore, he cannot place any reliance on any fact relating to failure to observe the said regulations. Furthermore, it is seen that no specific case of non-compliance, which was known to the appellant, was pointed out either in the notice or in the impugned order and therefore no allegation made for failure to observe the obligation under regulation 13(b) can be made. - However, regulation 13(c) provides for a very wide scope. The appellants were required to exercise due diligence. The fact that the weight of consignment was 22 kg and the freight was ₹ 25,000/- but the declared value was less than ₹ 3000/- should have raised suspicion. Therefore, it is felt that it was possible for the appellant to exercise due diligence in respect of the consignment. Considering that the appellants are in the courier business such consignments are indeed the outliners and needed closer scrutiny. However, considering the facts of the case, it is felt that the penalty imposed of ₹ 1 lakh is excessive and penalty under Section is revised to ₹ 10,000/- only - Decided partly in favor of appellant.

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• 2016 (1) TMI 511
  Conversion of free shipping bills to drawback shipping bills - The appellants claimed that the goods exported under these two free shipping bills were the same goods which were imported by them vide BE dated 20.8.2009. The Assistant Commissioner rejected the request, both under Section 149 of the Customs Act, 1962 and under Section 154 of the Customs Act, 1962. - Circular 4/2004 and 36/2010 - Held that:- Revenue has power to convert the free shipping bill to drawback shipping bill, subject to the necessary safeguards under section 74, under Section 149 of the Customs Act. It is seen from the Order-in-Original and the impugned order that there has been no attempt to establish the identity of goods. Neither the appellant have approached the Commissioner for establishment of identity of goods or for relaxation of conditions prescribed under Re-export of Imported Goods (Drawback of Customs Duty) Rules, 1995, nor the adjudicating authorities have examined that aspect. The appeal is partially allowed in so far as it is clarified that Revenue has the power for conversion of free shipping bill to drawback shipping bill subject to the establishment of identity. The conditions laid down in the various circulars cited above regarding time limits etc. are waived. The order is set aside and the matter is remanded to the original adjudicating authority for examination on above lines. - Decided partly in favor of appellant.

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• 2016 (1) TMI 510
  Levy of penalty - Redemption of confiscated currency - Trying to export Indian currency and foreign currency at the Airport - The appellant claimed that the said currency belong to one Shri Sabir and was to be handed over to one Shri Hazi Shaikh at Dubai. The said statement was later retracted and the appellant claimed that the money belonged to him. - Held that:- Larger Bench has given full discretion to the proper officer to allow in respect of redemption fine and imposition of penalty. Each case is to be decided on its merit and therefore, two citations, one given by Revenue and another by appellant are of no avail as the facts are substantial different. In the instant case, it is noticed that the appellant has changed its stand regarding ownership of currency repeatedly. In his last statement dated 31.1.2005, he has not claimed ownership of the currency. It is seen from the impugned order that the appellant is a repeated offender and two cases have already been booked against the him, which are mentioned in para 114 of the impugned order. Further, it is noticed that the appellant had not challenged the confiscation per se. Further it is seen from the adjudication order that the proceedings in respect of Shri Sabir, who had apparently given this cash to the appellant and Shri Hazi Shaikh, who was supposed to receive the money in Dubai are still in abeyance. Considering the decision of the Larger Bench of the Tribunal and the facts that the appellant is a repeated offender and also the fact that the proceedings against Shri Sabir and Hazi Shaikh are in abeyance, it would be improper to allow redemption of seized currency. - levy of penalty also confirmed - Decided against the appellant.

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• Corporate Laws

• 2016 (1) TMI 506
  Auction and the buy out - Validity of MOU - validity of board meetings and the resolutions passed therein - suppression of facts - discard of valuation report and the reliance upon the same by Muthu Group is an act of oppression - Held that:- The appeal filed by Lesaffre is maintainable. The petition filed by Nafan was rightly not dismissed by the Board on the ground of suppression of facts. The declaration given by the Board that MOU is valid, effective, and enforceable document and its terms are binding, cannot be sustained as it is beyond the jurisdiction of the Board, and needs to be agitated in the suit, which is pending. Prima facie, no unquestionable intention can be culled out from the MOU. The Board meetings held on 29 January 2009, 23 May 2009, and 25 May 2009 and the resolutions passed therein, are invalid, illegal, and oppressive, so also the issuance of duplicate share certificates. The Board has rightly discarded the valuation report and the reliance upon the same by Muthu Group is an act of oppression. The comments made by the Board on the valuation report, were justified. The direction of the Board to Muthu Group to rectify register of SAF Yeast by restoring the shareholding of Nafan and Lesaffre is valid and proper. The direction given by the Board to Nafan and Lesaffre to transfer their shareholding to Muthu Group is not sustainable and has to be set aside. Nafan is entitled to a buyout as prayed for in its petition. However, it will be in the interest of SAF yeast that the litigation ends and if Muthu group agrees to withdraw the suit and undertake not file further proceedings based on the MOU then the dispute can be put an end to by holding a forward competitive bid. If Muthu Group is not agreeable then buyout in favour of Nafan will follow. For overseeing the two options, as suggested by the Board, Justice J.N.Patel is appointed as an Administrator. M/S Ernst and Young is appointed as Chartered Accountants to carry out the valuation. A regards the modalities for holding the auction and the buy out, the modalities suggested by Nafan are proper and can be adopted. A. The declaration by the Board that the MOU dated 23 January 2009 is valid, effective and enforceable document and the terms thereof are binding upon the Petitioner and Lesaffre Group, is quashed and set aside in light of what is observed above. B. The declaration by the Board that the Valuation Report prepared by Sharp and Tannan is biased, partial and in contravention of the statutory guidelines and rules to carry out the valuation of shares of a going concern and the direction to set it aside, is confirmed. C. i) The declaration by the Board that the Board Meeting held on 29 January 2009 is invalid and illegal, is confirmed. ii) The declaration that the Resolutions passed in the Board Meeting held on 29 January 2009 are not oppressive, is quashed and set aside. iii) It is declared that the Resolutions passed in the Board Meeting held on 29 January 2009, are oppressive. D. i) The declaration by the Board that the Board Meetings held on 23 May 2009 and 25 May 2009 are non-est, illegal and void, is confirmed. ii) The direction by the Board that the Resolutions passed in both these meetings are set aside being illegal and oppressive to the Nafan and Lasaffre, is confirmed. E. The directions by the Board setting aside the transfer of shares in favour of the A.M.Muthiah and canceling the duplicate shares issued in favour of the A.M.Muthiah, are confirmed. F. The direction by the Board that the shareholding of Nafan and Lasaffre stands restored, is confirmed. G. The direction by the Board to Muthu Group to rectify the Register of Members of the SAF Yeast as per law, is confirmed H. The direction by the Board to Nafan and Lasaffre to transfer the 80,722 shares held by them to the Muthu Group proportionately to their respective shareholdings, is quashed and set aside. I. If within six weeks from today Muthu group withdraws the civil suit and associated proceedings filed by them and files an undertaking on affidavit in the registry of this court that they will not take any proceedings on the basis of the MOU in question, then Part-I of this order will come in operation. If the above mentioned steps are not taken by Muthu Group within the stipulated period as above, Part-II of the order will come into effect forthwith and prayer clause (a) sought for by Nafan in its company petition will stand granted on the terms mentioned in Part II. PART - I a. The Board of Directors, including the powers of the Managing Director, is immediately and completely suspended. b. Mr. Justice J.N. Patel, Retired Chief Justice of Calcutta High Court is appointed as an Administrator on the same emoluments and immunity, as directed by the Board with the powers of the Chairman of the Company's Board of Directors, and the Managing Director, to supervise the functioning of the Company on an interim basis until the process of sale/purchase is complete; upon appointment of the Administrator, Respondent Nos.26 in the petition (Muthu Group) shall forthwith deposit with the Administrator signed, duly filled in but undated share transfer forms along with the original share certificates in regard to all the shares held by them in the Company. c. Until the process of sale/purchase is complete, the powers of the Board of Directors shall be vested in an equal number of Directors/alternate directors nominated by Nafan and the Muthu Group (as one group) with the Administrator holding the casting vote, the Directors/alternate Directors nominated by Nafan and the Muthu group shall be entitled to attend meetings of the Board and/or general meeting of the Company; all such meetings, whether meeting of the Board or General Meetings, if any, shall be convened and presided over by the Administrator alone. d. Until the process of sale/purchase is complete, the SAF Yeast and the Administrator shall not (except in the ordinary course of business), (a) sell or otherwise dispose of or encumber the Company's assets, (b) incur liabilities, (c) distribute funds from the Company, (d) enter into any contracts to be performed for a period longer than six months for or on behalf of the Company, (e) change the nature of the business of the Company, (f) alter or increase the share capital or issue further shares of the Company, or (g) enter into any related party transactions for or on behalf of the Company. e. The Administrator shall be entitled to appoint ,at an appropriate monthly compensation to be paid by the Company as the administrator deems fit, an independent, suitably qualified person conversant with the yeast industry to assist him in the functioning of the Company. f. Nafan shall be provided complete and unimpeded access within seven days from the date of the order to the statutory and other records books and all the relevant documents as indicated in the Schedule to Note on Modalities given by Nafan, and shall be allowed full and unimpeded access to the Company's industrial plants. g. Access shall also be made available to any such Chartered Accountant nominated in writing by Nafan and the said access shall be provided continuously on a day-today basis for a period of forty five days from today. h. After the said forty five days of Nafan being given continuous access as provided above, a continuing competitive bid auction shall take place within fifteen days and the bidding shall be only between Nafan and the Respondent Nos.2 to 6Muthu Group as one. The party bidding the highest cash amount for 100% of the shares under the auction shall be entitled to buy 100% of the shares of the Company with the successful bidder getting credit for its own shares (either 51% for Nafan or 49% for the Muthu Group-Respondent Nos.2 to 6); the process of auction shall be conducted under the supervision of the Administrator. i. The successful bidder will deposit in Court by Bankers cheque (Demand Draft) the amount payable, along with all applicable taxes, within fifteen business days after being declared by the Court as the successful bidder. j. On such payment, the shares will be transferred to the buyer, the Register of Members of the Company shall be updated accordingly, the Administrator will be replaced by the board of directors appointed by the successful bidder, and payment will be released by the Court to the seller. k. If the successful bidder does not deposit in Court the amount payable within fifteen business days after being designated as the successful bidder, the other party will be entitled to buy the shares of the defaulting party for a price equal to the higher of either Euros 28 Million (i.e. ₹ 196,83,79,380/at the current rate of exchange), or the amount of the next highest bid (with the unsuccessful bidder getting credit for its own shares - either 51% for Nafan or 49% for the Muthu Group Respondent Nos.2 to 6) less a twenty-five per cent reduction, by depositing the amount payable in Court within fifteen business days after default. l. Upon the completion of the exercise of transfer of shares and its consequent registration in the Register of Members of the Company, the functioning of the Administrator appointed shall stand terminated automatically and at this time, the process of sale/purchase will be deemed complete. m. The currency for any payments made hereunder shall be Indian rupee. n. The Nafan as well as the Muthu Group Respondent Nos.2 to 6 shall fully cooperate in the completion of all formalities, including signing and execution of share transfer forms, compliance with any and all necessary requirements under the Company law to effect the transfer of their shares in favour of the successful bidder under the auction. PART - II a. M/s.Ernst and Young, Chartered Accountants are appointed to value the 49% shares of the Company held by Respondent Nos.2 to 6 Muthu group including, if required, a forensic audit/ due diligence of the records, books and accounts of the Company within three months from today. b. For the purpose of (a) above, the Chartered Accountant so appointed shall convene a preliminary meeting with Nafan and the Muthu group-Respondent Nos.2 to 6 to decide the valuation methods and both parties shall be entitled to make recommendations/suggestions in writing to the Chartered Accountant in that regard. c. The appointed Chartered Accountant shall determine the fair market value of the Muthu group Respondent Nos.2 to 6's 49% shareholding interest, as on today, using such generally accepted valuation methodologies for valuing a going concern as the Chartered Accountant deems fit and proper in the facts and circumstances of the present case, after hearing the parties. d. Nafan shall be provided complete and unimpeded access within seven days from the date of the order to the statutory and other records books and accounts of Saf Yeast, and such other relevant documents as indicated in the Schedule to Note on Modalities given by Nafan and shall be allowed full and unimpeded access to the industrial plants. e. The Board of Directors, including the powers of the Managing Director, is immediately and completely suspended. f. Mr.Justice J.N. Patel, Retired Chief Justice of Calcutta High Court is appointed as an Administrator on the same emoluments sand immunity as directed by the Board, with the powers of the Chairman of the Company's Board of Directors, and the Managing Director, to supervise the functioning of the Company on an interim basis until the process of sale/purchase is complete; upon appointment of the Administrator, Respondent Nos.26 in the petition (Muthu Group) shall forthwith deposit with the Administrator signed, duly filled in but undated share transfer forms along with the original share certificates in regard to all the shares held by them in the Company. g. Until the process of sale/purchase is complete, the powers of the Board of Directors shall be vested in an equal number of Directors/alternate directors nominated by Nafan and the Muthu Group (as one group) with the Administrator holding the casting vote, the Directors/alternate Directors nominated by Nafan and the Muthu group shall be entitled to attend meetings of the Board and/or general meeting of the SAF Yeast; all such meetings, whether meeting of the Board or General Meetings, if any, shall be convened and presided over by the Administrator alone. h. Until the process of sale/purchase is complete, the SAF Yeast and the Administrator shall not (except in the ordinary course of business), (a) sell or otherwise dispose of or encumber the Company's assets, (b) incur liabilities, (c) distribute funds from the Company, (d) enter into any contracts to be performed for a period longer than six months for or on behalf of the Company, (e) change the nature of the business of the Company, (f) alter or increase the share capital or issue further shares of the Company, or (g) enter into any related party transactions for or on behalf of the Company. i. The Administrator shall be entitled to appoint (at an appropriate monthly compensation to be paid by the Company as the administrator deems fit) an independent, suitably qualified person conversant with the yeast industry to assist him or her in the functioning of the Company. j. Upon the completion of the exercise of valuation, the valuation report, including the Chartered Accountant's opinion of the fair market value of the Respondents' shareholding interest, shall be delivered to the Court, Nafan and Muthu group, and within a period of thirty days after receipt, Nafan shall deposit by Bankers cheque (Demand Draft) payment as per the valuation of the Chartered Accountant which will then be transferred by the Court to the Respondent Nos.2 to 6 in the appropriate amounts based on their shareholding interest. k. Against payment by the Administrator to the Respondent Nos.2 to 6: (a) Respondent Nos.2 to 6-Muthu group's 49% shareholding shall be transferred in favour of Nafan and the Muthu group-Respondent Nos.2 to 6 shall fully cooperate in the transfer of the said shares, including signing and executing share transfer forms, complying with any and all necessary requirements under the Company law; (b) appropriate entry shall be made in the Register of Members of the Company; (c) the mandate of the Administrator shall stand automatically terminated after he hands over the original share certificates and duly executed and signed share transfer forms (given pursuant to above clause to Nafan, and (d) the process of sale/purchase will be deemed complete. L. The currency for any payments made hereunder shall be Indian Rupee.

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• 2016 (1) TMI 505
  Sanction of Amalgamation and Arrangement - Scheme of Amalgamation and Arrangement is hereby sanctioned with the direction to follow all the procedural formalities.

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• Service Tax

• 2016 (1) TMI 546
  Cenvat credit - input services - installation and erection, maintenance or any other services rendered at Windmills - located away from the factory premises and the electricity generated out of such Windmills is consumed at the factory premises after such power is put through the common grid. - Held that:- Hon ble Bombay High Court in the case of Endurance Technologies Pvt. Ltd. [2015 (6) TMI 82 - BOMBAY HIGH COURT] held that Cenvat credit is eligible on maintenance or repair services of Windmills, located away from the factory. It is well settled that the decision of Hon ble High Court is binding on the Tribunal. It was pointed out at the time of hearing that the definition of input service credit was subsequently amended in 2011. We find that the present appeals are involving for the period 2006-2007 - Credit allowed - Decided in favor of assessee.

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• 2016 (1) TMI 545
  Export of services - non-receipt of convertible foreign exchange - commission agent services rendered to persons situated abroad - period 01/07/2003 to 19/11/2003 - Business Auxiliary Service - Held that:- the issue is no more res integra as there is no dispute as to the fact that the appellant had undertaken the activities as mentioned herein above for a client situated abroad. The range of services which are rendered by the appellant would fall under the category of “Business Auxiliary Services”, under clause (vii) of provisions of Section 65(19) of the Finance Act, 1994. Yet again, we find that the claim of the appellant that these services are to be considered as export of services is now decided by the Tribunal in various decisions, as correctly pointed out by the learned counsel for the appellant. A majority view was held in favour of the assesse in a similar situation in a case of Microsoft Corporation (India) Pvt. Ltd. vs. Commissioner of Service Tax, New Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] wherein it was held that service rendered for any entity situated abroad in India would be services rendered to that person and can be termed as export of services. The facts of the case in hand are very similar to the two case laws as cited hereinabove. Accordingly, we hold that, on the point of export of service itself, the impugned order is liable to be set aside - Decided in favor of assessee.

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• 2016 (1) TMI 544
  Restoration of appeal - This miscellaneous application is filed seeking recall of the order dt. 18/12/15; seeking condonation of delay that occurred in filing the COD application and pleading reasons for having filed a defective appeal. It is pleaded that there was mere 7 days delay in filing the appeal but a COD application was not filed in advance. The Defect Memo issued by Registry was noticed by some lower official who did not care to inform the concerned officer and thus there occurred a delay in rectifying the appeal. Condonation of delay is also sought on the ground that the appellant is a local authority - The Chittoor Municipality. Held that:- In the peculiar circumstances, we recall the order dt. 18/02/2015 and restore the appeal. - Delay is condoned on condition that the appellant remits costs of ₹ 2,500/-

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• 2016 (1) TMI 543
  Advance Rulings - Classification of service - Activities of street light maintenance - Scope of Mega Exemption Notification No. 25/2012-Service Tax - Ex-parte decision - Non-appearance of the applicant - it was noted that application seems to have been forwarded through a counsel and even the counsel has not bothered to come before us excepting on one occasion that is 5th August, 2015. - Held that:- One look at the services proposed to be provided as they appear from the application would go to show that this paragraph 13(a) would be wholly irrelevant as the service is not being provided for the maintenance of road, bridge, tunnel etc. It is tried to point out by way of written submissions that the word ‘road’ is a wider term and include street light supporting structure. We do not think so. As a matter of fact, the word ‘road’ is clear and it can not be substituted by the term street light support structure. The reliance on para 13(a) by the applicant is, therefore, of no consequence. The learned representative of the Department has also correctly argued that there would be no question of applicability of Paragraph 13(a) of the aforementioned Notification. In view of the specific language of the said Paragraph 13(a), we accept the arguments and hold that there will be no question of applicability of para 13(a) of the Notification. - No exemption is available to assessee - Decided against the assessee.

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• Central Excise

• 2016 (1) TMI 525
  Classification of chemically coated micronized minerals and Red-oxide power - Revenue classified the chemically coated micronized minerals under Chapter sub-heading 3824.90 and Red-oxide power under Chapter Sub-heading 2821.10 of CETA, 1985 - Assessee classified the same under Chapter 25.05 of CETA - Held that:- Chapter note specifically covers products which are in the primary form which are crushed, ground, powdered, levigated, sifted, screened, or concentrated by flotation, magnetic separation or other mechanical or physical processes (except crystallisation) and the chapter note specifically excludes products which are roasted, calcined, obtained by mixing or subjected to processing beyond that mentioned in each heading or sub-heading. It is evident from the above that the products which are covered under Chapter 25 are the only products which has not undergone any further processing beyond washing, grounded, powdered and concentrated. In the present case, the product micronized minerals which has undergone the process beyond the processes mentioned in Chapter note 2 of Chapter 25. Therefore, by virtue of chapter note, the micronized minerals are chemically coated products which has undergone the process beyond the process mentioned in Section note 2 or chapter 25 of CETA. Therefore, the goods are rightly excluded from Chapter 25. As regards classification of red oxide the appellant classified it under Chapter 25.05 and the department re-classified it under chapter 2821.10. The red oxide which is otherwise known as iron oxide and earth colour are specifically classifiable under Chapter 2821.10 as iron oxide and red oxide. Therefore, we do not find any merit in the appellant’s claim of classification under general category under Chapter 25. The appellant's only contention is that the products does not amount to manufacture is not justified as the process involved and also marketed clearly confirms that they are rightly classifiable under 2821.10. Demand of duty confirmed - Confiscation, fine and penalties are set aside. - Decided partly in favor of assessee.

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• 2016 (1) TMI 524
  Levy of penalty on dealers who issues Bogus Invoices - Cenvat Credit - Bogus credit - It is alleged that the appellant-assessee availed ineligible and irregular credit of duty paid on MS scrap as if it was supplied by M/s.Victoria Steel Enterprises Ltd. based on the documents prepared indicating bogus transaction particulars, without actual/physical movement of the M.S. Squares said to have been used in the manufacture of TMT bars thereby contravened the provisions of Rule 4 (1) of Cenvat Credit Rules, 2004. - Held that:- appellant’s intention of violation of CER is established beyond doubt and they are liable for penalty both under Rule 15 (1) and Rule 26. So appellant’s contention that penalty is imposable only under Rule 15 and not under Rule 26 (2) is not sustainable and not acceptable. In this regard, Rule 26 of CER provides penalty for certain offences. Considering the peculiar facts of the instant case, where this entire circular paper transaction was created by the appellant and also considering the fact that there is apparently no revenue loss to the Department, the quantum of penalty imposed by L.A is on the higher side in respect of appellants, at Sl.No.1,2,4 & 5 of the Cause Title. Therefore, considering overall circumstances of the case, we reduce the penalty imposed under Rule 26 (2) (i) (ii) on the appellants. - Decided partly in favorof appellant dealers. Demand of cenvat credit - adjudicating authority dropped the demand of cenvat credit - Held that:- Though the appellants have created the documents by way of issuing documents and subsequently taking the credit without receipt of the goods, the appellants at the first instance have paid the duty by debiting the cenvat account which was again taken back by above paper transaction. Therefore, we do not find any infirmity in the order of adjudicating authority in so far as regularizing the credit and dropping of recovery of credit. Accordingly, the Revenue's appeal is rejected.

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• 2016 (1) TMI 523
  Determination of annual capacity of production (ACP) - type of furnace - ‘batch type’ or ‘pusher type’ - manufacturing of Hot re-rolled products of non-alloy steel viz., M.S. Flats, angles, bars and rods. - The assessee though initially filed declaration under the statute describing the furnace as ‘pusher type’, based on which monthly duty liability was fixed at ₹ 78,625/-, subsequently realizing the mistake that the furnace is ‘batch type’ and not ‘pusher type’, filed revised declaration along with Chartered Engineer’s Certificate for redetermination of duty liability. - Held that:- From the material on record, it could be seen that the above report of the NISST was given to the assessee in advance and after affording personal hearing and as the assessee has not lead any rebuttal evidence in the form of any Chartered Engineer’s Certificate, the authority below has categorically recorded finding on technical aspect that the subject furnace of the assessee is ‘pusher type’ and rejected the claim of the assessee. Based on certificate of NISST and the material on record, the contention of the learned counsel for the assessee that the mill is low speed mill and the authorities treating it as high speed mill, fixed higher annual production capacity and demanded higher duty, cannot be countenanced and the judgments cited in this regard are not applicable to the facts of the case. - Decided against the assessee.

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• 2016 (1) TMI 522
  Restoration of appeal - Tribunal dismissed the appeal for want of prosecution - Held that: Central Excise Act, 1944, does not give any power to the Tribunal to dismiss the appeal for default or for want of prosecution in case the appellant is not present when the appeal is taken for hearing. In the light of this clear pronouncement of law we cannot sustain the impugned order. The initial dismissal itself being contrary to law, the refusal to restore the appeal for adjudication on merits cannot be sustained. Once we also find that there was a justification for the petitioner’s non-appearance before the Tribunal on the two dates mentioned above viz. in 2008 and 2009 as the company was in winding up, then, in the peculiar facts of this case, we refrain from imposing any further conditions or costs.

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• 2016 (1) TMI 521
  Area based exemption - substantial expansion by way of installed capacity by not less than 25% - Notification No. 50/2003-CE dated 10/6/03 - it was contended that production capacity of the both the units are to be counted as one - Held that:- prior to substantial expansion the Paper Board unit was having installed capacity of 15 TPD and Spiral Paper Tube unit was having installed capacity of 5 TPD, therefore, there was a total production capacity of the factory was 20 TPD. After expansion in Paper Board unit, the total installed capacity has been increased to 30 TPD which is more than 25% of the installed capacity prior to substantial expansion. On this ground itself, the Revenue has no case. Further, in the case of Tirupati LPG Industries Ltd. vs. CCE, Meerut I [2015 (10) TMI 622 - CESTAT NEW DELHI], the assessee was having two separate units in their factory one for manufacturing of LPG cylinder and another for conductors unit and this Tribunal has considered the substantial expansion of both the units separately, therefore, following the precedent decision of this Tribunal and observation made by the learned Commissioner (Appeals) in the impugned order, we do not find any infirmity in the impugned order. - Decided against the Revenue.

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• 2016 (1) TMI 520
  Cenvat Credit - Extended period of limitation - Bonafide belief - Credit on TMT bars, MS Flats, MS Angles, MS channel, MS beam, sheets, MS. Round, MS Steel, MS Pipes, etc., during the period from July, 2007 to June, 2009 - manufacture of Cement and Cement Clinker liable to Central Excise Duty - Held that:- We tend to agree the appellants’ plea that they have entertained a bonafide belief regarding the eligibility of MS Angles, etc for CENVAT Credit during the impugned period. This is supported by the adjudicating authorities finding in one of the appellants’ other unit in Andhra Pradesh. The credit on similar iron and steel items were allowed by the department in that unit. We were informed that no appeal has been filed against the said order. There is no ground for invoking extended period for demand in the present case and as such the demand is barred by limitation. The impugned order is set aside on the issue of time bar and the appeal is allowed on this ground. - Decided in favor of assessee.

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• 2016 (1) TMI 519
  Cenvat Credit - service tax paid on outward transportation of finished goods, up to the port, which are meant for export - place of removal - The CHA charges and wharfing charges rendered by the service providers outside the factory, after the clearance of goods from the factory, was also sought to be considered as ineligible input services” as these services can neither be considered as used in or in relation to manufacture of cars. Held that:- it is the undisputed policy of the Government not to burden the export goods with domestic taxes as has been noted in various decisions of the Tribunal. The reasons are obvious. Generally it is not intended to make domestically produced goods, when exported to the foreign market, to become uncompetitive, by means of increase in cost. No country wants to export the domestic taxes meant to be levied on domestic consumption of goods and services. Countries either exempt such taxes in respect of goods to be exported including taxes relating to inputs used in the export goods, or there are alternative schemes for providing rebate, drawback of duties suffered by export goods. India is no exception as we also have similar schemes. There are also schemes making available duty-free goods and services for export production. In the event of the benefit of cenvat credit being denied, it would contribute to inescapable rise in costs, making exports uncompetitive in the global market. In view of the settled legal position and in view of the above case laws and the Circular, we are of the view that Port is to be construed as the “place of removal” for the purpose of exports. As regards customs house agent service and wharfage charges, we are of the view that the same are eligible for cenvat credit in view of the nexus in existence between the goods manufactured and the services under dispute which are essential for export, the same is qualified for credit. Having decided that the place of removal is the Port, we hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. - Credit allowed. - Decided in favor of assessee.

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• 2016 (1) TMI 518
  Cenvat Credit of input service on installation and erection of wind mills which are located far away from factory - Held that:- there is no dispute that the electricity generated by the wind mill was used in the manufacture of the excisable goods, which was cleared on the payment of duty. - Credit allowed.

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• 2016 (1) TMI 517
  Manufacturer - Sub-contractor / job worker - who is liable to pay duty - appellant submits that the appellant had sub-contracted certain work to M/s. VEE under an agreement and as per the terms of the agreement, M/s. VEE is the fabricator of those piping and are liable to pay duty thereof being a job worker/manufacturer of such said goods, therefore, the appellant is not liable to pay duty. - Held that:- As M/s. VEE has executed the work of fabrication of piping being a job worker and payment was being made on running bill basis and not on labour contract basis. Therefore, relying on the decision of AFL Pvt. Ltd. v. CCE, Mumbai-II [2013 (12) TMI 87 - CESTAT MUMBAI], we hold that the appellant is not a manufacturer of the goods, in question. M/s. VEE is the manufacturer of said goods only, therefore, duty cannot be demanded from the appellant. - Demand set aside - Decided in favor of assessee.

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• 2016 (1) TMI 516
  Cenvat Credit in respect of power plant - it was revealed that the appellant has availed cenvat credit on imported capital goods namely, boiler parts, condenser, H P Heater, ESP, Steam Turbine and generator on the strength of Bills of Entry - goods used outside the factory of manufacture of final product for generation of electricity for captive use within the factory prior to 31.3.2011 - Held that:- The thrust of the learned AR is on the definition of capital goods as per Rule 2A of Cenvat Credit Rules, 2004 which has been expended with effect from 01.04.2011 and there is no specific provision provided to take the benefit expansion of said definition retrospectively. In fact, prior to 01.04.2011, there are various judicial pronouncements on the said issue. Further, we also find that Hon’ble Supreme Court has time and again has held that if the goods procured outside the factory for generation of power for captive consumption, it is to be seen that the inputs has been used in the factory, therefore, the appellant is entitled to take cenvat credit. We also note that on these capital goods, the appellant has taken cenvat credit only on 28.11.2011. At the time of availment of cenvat credit, the provisions of Rule 2A (1A) were in force and there is no bar for availment of cenvat credit at that point of time. - Credit allowed - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2016 (1) TMI 509
  Rectification of error apparent on the face of the orders of revised assessment - Tamil Nadu Value Added Tax Act, 2006 (TNVAT) - scope and jurisdiction of the first respondent, while exercising powers u/s 84 - Held that:- the power of the first respondent under Section 84 of the TNVAT Act, 2006 is neither limited nor circumscribed as understood by the first respondent in the impugned orders. As pointed out by the Honourable Division Bench, an order passed contrary to the provisions of the statute or the judgments of the High Court or the Supreme Court, which are covered on the issue and binding on the Authorities, when not considered or when the factual aspect has not been correctly stated, a mistake would occur on the face of the record. It has to be undoubtedly held that the impugned orders do not address the real issue and that the finding rendered by the first respondent in the penultimate paragraph of the impugned orders is not legally tenable. One more error, which is apparent on the face of the orders passed by the first respondent, is that there is no endeavour made by the third respondent to examine as to whether the error sought to be pointed out by the petitioner was an error apparent on the face of the records. However, being guided by the principle that only the arithmetical and clerical errors could be corrected, the first respondent rejected the petitions under Section 84 of the TNVAT Act, 2006. Hence, the impugned orders call for interference on this technical ground. The writ petitions are allowed, the impugned orders are set aside and the matters are remitted back to the first respondent for fresh consideration - matter remanded back - Decided in favor of assessee.

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• 2016 (1) TMI 508
  Eligibility to pay VAT on works contract at compounded rates - Kerala Value Added Tax Act (KVAT) - As per the provisions of Section 8(a)(i) of the KVAT Act, as it stood on 1.4.2005, any works contractor who was not an importer or a dealer effecting first taxable sale in the State could, at his option, instead of paying tax in accordance with the provisions of the said section, pay tax at 2% of the whole contract amount. - Effect of subsequent amendment - Held that:- The amendment to Section 8(a)(i) having come into force in the middle of the assessment year, and it being almost impossible on account of the statutory provisions of Section 7(5) of the CST Act, to get a cancellation of the certificate of registration issued to them under the CST Act in 2005-06 itself, it would be unfair on the part of the respondents to insist on the higher rate of compounded tax under Section 8(a)(ii) of the KVAT Act being paid by the petitioners on the works contracts executed by them. The orders of penalty imposed on the petitioners on this ground also cannot be legally sustained. - Demand of differential tax and penalty set aside - Decided in favor of assessee. Regarding the petitioners could have applied for a surrender of their certificate of registration under the CST Act during the assessment year 2005-06 itself, for reasons best known to them, did not choose to apply for a cancellation of the CST registration before the commencement of the assessment year 2006- 07 - Held that:- petitioners had ample time during the assessment year 2005-06 itself to ensure that they were duly qualified for exercising their option under Section 8(a)(i) for the assessment year 2006-07. The petitioners having not chosen to do so, and having opted for payment of tax at the lower rate of compounded tax under Section 8 (a)(i), when they were not entitled for the same, the orders impugned in these writ petitions, where the Assessing officers find that the petitioners are not entitled to the rate of tax under Section 8(a)(i) of the KVAT Act, cannot be said to be illegal - Decided against the assessee.

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• 2016 (1) TMI 507
  Interstate sale and stock transfer - Assistant commissioner (CT), Kerala revealed that the petitioner had not declared the transaction details in Form 8F in respect of a large number of consignments at the border check posts at Kerala which leads to a suspicion on the stock transfers effected from Chennai to Kerala. Therefore, the 5th respondent proposed to revoke exemption allowed on the entire stock transfer of ₹ 91,02,94,770/- and levy tax at 5% treating them as outright interstate sales. - TNVAT - Held that:- The issue of stock transfer and sufferance of taxes are to be proved by documents only. Hence, to give quietus to the issue, this court is of the view that yet another opportunity shall be provided to the petitioner. Hence, the impugned order dated 28.05.2015 is set aside and the matter is remitted back to the 4th respondent for passing orders afresh. The petitioner is permitted to produce all the stock transfer related documents, check post partaiculars and the details of payments made in respect of the assessments completed by the Kerala authorities, along with tax payment certificates related to the year 2012-13 - Matter remanded back.

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