Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 18, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Income from house property - unsold inventory of built- up residential houses/flats - the properties held as stock in trade will be taxable under the notional annual letting value method prescribed u/s 23(1)(a) - HC
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TDS liability - There was and still is no obligation on the part of the appellant’s said branch to deduct tax while making interest remittance to its head office or any other foreign branch. The permanent establishment and the head office have to be taken as separate entities for all purposes. - AT
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The free sample of medicine is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors but for promotion of its products. - expenses allowed - AT
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Penalty u/s 271D and 271E - the transaction between son and father and wife and husband, for giving a support and help, in law, is not a loan or deposit in stricter sense of section 269SS of the Act and it is only a financial support - no penalty - AT
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Taxability of supply of software - the receipts from supply of software are not taxable in the hands of Intec–Ireland as Royalty under new Ireland tax treaty. Intec-Ireland does not have PE in India and accordingly amounts received by Intec-Ireland towards supply of software are not liable to tax in India. - AT
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Nature of income - salary income or busniss income - the assessee has only Business Income and not Salary Income, hence, the professional contracts carried on by assessee are treated as ‘contract for service’ and not ‘contract of service‘ - AT
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Disallowing the claim of bad debts written off in respect of debts pertaining to Jute division - the assets of jute division representing sundry debtors had been merged with the sundry debtors of tea division of the assessee company - assessee is entitled for deduction u/s 36(1)(vii) - AT
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The surrendered value of keyman insurance policy received during the previous year had also to be considered as part of the composite income on which Rule 8 has to be applied - AT
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When it stands established that the visits of the actors, celebrities and VIPs to the matches staged by the assessee was a part of the business strategy of the assessee to generate more revenues, therefore, what quality of security cover was required to be provided to the aforesaid persons remained within the exclusive realm of the wisdom of the assessee and the A.O could not guide him as to the nature of the security cover - AT
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Receipt on account of electricity duty exemption as capital receipt. Hence, the same cannot be brought to tax in the hands of assessee company under the normal computational provisions as well as while determining the books profits u/s 115JB - AT
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TDS liability on education cess and higher education cess - assessee’s claim of deduction on account of education cess (EC) & secondary and higher education cess (SHEC) on income tax & dividend distribution tax as eligible revenue expense u/s 37- AT
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Addition on account of prior period expenditure - deducting prior period income From prior period expenditure is against well settled principles of law. - AT
Customs
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Sub: Clearance of Baggage at Unaccompanied Baggage Centre, (Speedy CFS), J.N.Custom House, Nhava Sheva-reg. - Trade Notice
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Refund of SAD - filing the refund application filed after one year from the date of import as prescribed under the said Notification is barred by limitation - AT
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Focus Product Scheme (FPS) - exports of industrial valves - it would be difficult to accept that the intention of the Central Government was to not grant export incentives to industrial valves and restrict the same only to valves used in bicycles for a short intervening period. - HC
Central Excise
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Area based exemption - appellant is not entitled to claim the CENVAT Credit on the basic excise duty paid on the raw materials for payment of NCCD and the cesses. - HC
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Benefit of N/N. 108/1995-CE dated 28.08.1995 - The department allowed clearance of the goods without any murmur on the validity of the certificate. The department cannot later turn around to deny exemption by interpreting Explanation 2 to the effect that the exemption is not available if the goods are withdrawn from project site. - AT
Case Laws:
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GST
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2018 (1) TMI 815
Improper implementation of Integrated Goods and Services Tax Act (IGST) and the Central Goods and Services Tax Act (CGST) - increasing the flying squad in State Level, District Level, Zonal Level to monitor the movement of goods and E-Way Bills - Held that: - Government has issued Notification No. 27/2017-Central Tax, New Delhi, dated 30. 08. 2017 - the counter-affidavit of the second respondent has answered the prayer Nos. (a) to (d) and in the light of the stand taken by the petitioner, this Court directed him to submit his response to the Notification, dated 30. 08. 2006 - Writ Petition is closed
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Income Tax
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2018 (1) TMI 814
Validity of assessment - Assessments for Assessment Year 2008-09 pending on the date of the search - Held that:- SLP dismissed. HC order confirmed .[2017 (7) TMI 746 - DELHI HIGH COURT]
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2018 (1) TMI 813
Interest charged under Sections 234A, 234B and 234C - whether the petitioner should be compelled to pay a portion of the demand in terms of CBDT Circular for being entitled to an interim protection till the disposal of the appeal pending before the third respondent? - Held that:- The interest charged under Sections 234A, 234B and 234C of the Act has remained the same, i.e. both in the order of assessment dated 30.03.2015 and the impugned order dated 17.10.2017. Therefore, this aspect has to be looked into and this can be canvassed by the assessee before the third respondent in the pending appeal. Even with regard to the demand of interest, the petitioner has complied with the condition and 20% of the amount has already been collected by the department. Thus, I find that the interest of revenue has been sufficiently safeguarded and the petitioner should be permitted to pursue their appeal without the second respondent insisting upon any further payment pursuant to the impugned order dated 17.10.2017. While permitting the petitioner to canvass the correctness of the impugned order before the third respondent in the pending appeal, there will be a direction to the respondents 2 and 3 not to insist upon any further payment of tax or interest as per the impugned order dated 17.10.2017 till the appeal filed by the petitioner is heard and disposed of by the third respondent on merits and in accordance with law, after affording an opportunity of personal hearing to the authorized representative of the petitioner.
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2018 (1) TMI 812
Waiver of interest levied under Sections 234B and 234C - Held that:- In the case of DIT (International Taxation) NGC Network Asia (2009 (1) TMI 174 - BOMBAY HIGH COURT) with the view taken by the Uttaranchal HighCourt in the case of CIT Anr. vs. Sedco Forex International Drilling Co. Ltd. Ots (2003 (10) TMI 40 - UTTARANCHAL High Court ) and held that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee/assessee. Thus the assessee therein was not liable for payment of interest under Section 234B of the Act. - Decided in favour of assessee
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2018 (1) TMI 811
Penalty under Section 271(1)(c) - assessee has not voluntarily withdrawn the benefit claimed u/s 54F but has revised the computation only after he has been cornered in the scrutiny proceedings and that too after one and a half year of the scrutiny proceedings - Held that:- Penalty u/s 271(1)(c) may be imposed either if the assessee had concealed the particulars of his income or it had furnished inaccurate particulars of it's income. In case the assessing officer alleged 'concealment' of such particulars it would have to be alleged and established as a fact that the assessee did something so as to hide or not disclose such particulars. Similarly, in case the assessing officer alleged furnishing of inaccurate particulars of income he would have to establish which particulars of income furnished was/were inaccurate as may have had a material bearing on determination/assessment of the true income of the assessee. Therefore, we are unable to accept the argument advanced by learned counsel for the assessee that the two charges that may invite a penalty under Section 271(1)(c) of the Act can never co-exist. It is too broad a proposition to merit acceptance or rejection in the facts of the present case. No independent reasoning has been recorded by the assessing authority to conclude that the assessee had furnished inaccurate particulars of his income. At the same time, finding as to concealment of particulars of income was duly supported with reasoning (as extracted above). Tribunal has erred in setting aside the entire penalty order. It should have examined the other grounds of appeal raised by the assessee including the ground that mere rejection of a claim or withdrawal of a claim did not amount to evidence or proof of concealment. We find that the Tribunal has not adjudicated the challenge raised by the assessee to the imposition of penalty for concealment, on merits. Assessing officer having imposed penalty for concealment of particulars of income upon reasoning given by him, the said order could not have been set aside in entirety merely because the assessing officer, in the later part of the penalty order also mentioned that the assessee had furnished inaccurate particulars of his income. The appeal is allowed. However, in view of the fact that the Tribunal has not recorded any finding on the grounds of appeal raised by the assessee whether as a fact the assessee had concealed particulars of his income, the matter is remitted to the Tribunal to decide the appeal afresh on that issue. It is requested to the Tribunal to proceed to hear and decide that issue in accordance with law, within a period of six months from the date of production of a certified copy of this order.
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2018 (1) TMI 810
Reopening of assessment - recording the reasons for initiating the reassessment proceedings - legality of notice - sufficiency and adequacy of the reasons - Held that:- A perusal of the reasons recorded by the AO for issuing notice u/s 148 reveals that the re-assessment proceedings has been initiated against the assessee on the basis of the material impounded during the survey of M/s Akash Amar Agrotech Pvt. Ltd. and post survey investigation. As during the relevant A.Y. the assessee has shown agriculture income of ₹ 15,24,600/- in lieu of sale of agriculture land which has been claimed as exempt from tax. As main business activity of the appellant assessee as per its own record is purchase and sale for the purpose of development and subsequent sale, which forms the source of its revenue. The factum of the appellant assessee entering into development agreement for the purpose of development and sale of the land has also come on record. Thus where the return filed by the assessee was not subjected to scrutiny assessment, the belief formed by the AO after due examination of the material on record that the income of the assessee chargeable to tax during the relevant assessment year has escaped assessment cannot be said to be arbitrary or irrational or there exists no rational and intelligible nexus between the reasons and the belief. It is true that the reasons recorded or the material available on record must have nexus to the subjective opinion formed by the AO regarding the escapement of the income but then, while recording the reasons for belief formed, the AO is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the AO had cause or justification to know or suppose that income had escaped assessment [see Rajesh Jhaveri Stock Brockers Pvt. Limited’s case (2007 (5) TMI 197 - SUPREME Court )]. It is also well settled the sufficiency and adequacy of the reasons which have led to formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. - Decided against assessee.
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2018 (1) TMI 809
Assessment u/s 153C - limitation for assessment on search and seizure - fresh assessment ordered u/s 263 to be completed within the time provided under Section 153B - Held that:- On the question of limitation, Section 263 confers power on the Commissioner to revise orders, which are found to be prejudicial to the revenue. When such an order is made within the time provided for making such order, it cannot be said that the limitation under Section 153B has to be resorted to, which would be impossible of compliance. If no further extension is provided, either under Section 153B or under Section 263, for making a fresh assessment on the assessment being remanded to the AO, it has to be taken that there is no limitation provided. There is no limitation provided to carry out the assessment. The fresh assessment cannot be said to be possible only within the limitation provided under Section 153B, since the power to revise extends to two years while that under Section 153B is far lesser. The legislature cannot be said to have conferred a power redundant, ineffective and unworkable. In the present case, suffice it to notice that the Commissioner had passed the order cancelling the assessment and directing a fresh assessment on 12.03.2010, within the two year period provided under Section 263 of the Act. The fresh assessment was passed on 30.12.2010, a little more than nine months from the order of revision. Considering the fact that there was requirement for a fresh notice and a hearing, in making that fresh assessment and that too of seven years, we are of the opinion that the fresh assessment made under Section 153C is within a reasonable time. - Decided against assessee.
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2018 (1) TMI 808
Disallowance of service tax expenditure on freight for transportation of goods - the assessee is not beneficiary of such transport payment in any manner - Held that:- Contention raised by the appellant is required to be accepted inasmuch as the cement industry when transportation is made by the manufacturer and transporter has done service on behalf of appellant assessee. In that view of the matter, he has to realize all expenses of the transporters including tax paid by the transporter. In that view of the matter, issue No.1 is required to be answered in favour of assessee Rejection of entire books of account by invocation of the provisions of section 145(3) - Held that:- In view of observations made by AO that there are serious discrepancies in the stock register, the view taken by the AO as well as CIT (A) is required to be accepted. However, it will be open for the appellant assessee to rely upon the decision of this Court in the case of books of accounts where this Court has taken a view of average GP or NP on the basis of last five years. - Decided against assessee.
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2018 (1) TMI 807
Denial of registration u/s 12AA - Held that:- We remit matter back to the authority to consider the law on subject and will reconsider independently, in view of observation made by us, will independently consider the law declared by the Supreme Court and also while remitting matter back, we restrained from passing order of registration, keeping the power of authority intact their independent power to grant registration. We are remitting back the matter to the authority.
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2018 (1) TMI 806
Grant of stay pending the final hearing of an appeal - applicant has been directed to deposit a sum of ₹ 18 crores in three installments Held that:- On instructions learned Senior Counsel appearing for the petitioner states that the petitioner is not in a position to deposit any amount as of today. Hence, no case is made out for grant of ad-interim relief. Place this petition for admission after all office objections are removed.
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2018 (1) TMI 805
Income from house property - unsold inventory of built- up residential houses/flats were subject to the provisions of Section 22 read with Section 23 - notional annual letting value was taxable in the hands of the Assessee under the heads“Income from House Property” - as per assessee in view of the amendment to Section 23 of the Act with effect from 1st April 2002 in the assessee’s case, the annual letting value of the properties held as stock in trade was to be considered as “Nil” - Held that:- There is no dispute that the effect of the amendment, inserting Section 23(1)(c), would not be to change the incidence of taxability of the properties held as stock in trade. Therefore, this Court’s finding that such properties were to be assessed as income from house property and not income from “business or profession”, in its judgement dated 31.10.2012, would be good law, even in view of the insertion of Section 23(1)(c). As in the assessee’s case, the properties held as stock in trade will be taxable under the notional annual letting value method prescribed u/s 23(1)(a), since in view of the decision in Vivek Jain (2011 (1) TMI 897 - Andhra Pradesh High Court), the assessee cannot claim the benefit of Section 23(1)(c) having never actually let out the properties held as stock in trade. Thus sub- section (5) would be squarely applicable, but for the fact that sub- section (5) has been inserted w.e.f. 1 April 2018. Moreover, sub-section (5) does not use language which would indicate that it has been inserted as a clarification (which would make clear that it was always the legal position) or by way of abundant caution. The amendment therefore clearly applies prospectively and since a separate sub-section was inserted in Section 23, it is clear that the legislative intent is that the peculiar situation in sub-section (5) was not already covered by sub-section (3). That being the case, for the relevant assessment years, the properties held as stock in trade would be taxable on the basis of notional annual letting value under Section 23. - Decided against assessee.
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2018 (1) TMI 804
Validity of proceedings under section 153A - no incriminating material found from the premises of the assessee - Held that:- No addition could have been made in the instant assessment year in absence of any incriminating material found from the premises of the assessee. See Principal CIT, Central-2, New Delhi Vs. Subhash Khattar [2017 (7) TMI 1091 - DELHI HIGH COURT] - Decided in favour of assessee.
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2018 (1) TMI 803
Addition u/s 68 on account of low yield percentage and impractical rate of burning loss - Held that:- As explained by the assessee that yield depends on various factors and it cannot be constant. The assessee has maintained quantitative records of raw material consumed and finished product produced. The books of account were subject to tax audit which was produced before the Assessing Officer. The assessee has explained the reasons for variation in percentage of burning loss and consumption pattern. The observation o f the CIT(A) that there is no finding by the Assessing Officer that the accounts were not correct and complete or income could not be deduced from the accounts maintained by the assessee was not controverted by DR. No reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of revenue is dismissed. Addition on account of commission paid on purchase - Held that:- The copies of bills which were furnished before the CIT(A), were not furnished before the Assessing Officer to take a view that the commission payment was actually paid to them. As regards to the findings of the Assessing Officer that most of the parties were relatives to the assessee, CIT(A) was of the view that AO has not properly enquired into the matter to prove that commission payment made to the parties, ultimately flown to the assessee. Looking into the facts and circumstances of the case, we set aside the order of the CIT(A) and restore the matter back to the file of the Assessing Officer to re-adjudicate the payment of commission after conducting a thorough enquiry into the matter. Disallowance u/s. 40A(3) - Held that:- We find that the freight payment is an advance which is subsequently reimbursed to the assessee company. Hence, the provisions of section 40A(3) are not applicable in this case. Hence, we confirm the order of the CIT(A) and dismiss this ground of appeal of the revenue. Addition on account of under valuation of closing stock - Held that:- In the instant case, the appellant has valued the inventory at cost being lower than the net realizable value. It is equally settled that the A.O does not have the power to recompute the cost using any other method in disregard to the method adopted by the appellant which is not only recognised but also consistently followed by the appellant. It is not the case of the A.O that the appellant has undervalued the cost to reduce the value of closing stock. As the valuation has been made as per the prescribed norms, there is no merit in the addition made by the AO. Hence, the additions are deleted.
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2018 (1) TMI 802
Addition on account of profit on sale/redemption of investments - Held that:- As in assessee's own case [2017 (9) TMI 172 - DELHI HIGH COURT] in this case too assessee had taken identical plea regarding profit on sale of investment being exempt as the same is not covered by section 44 of the Income Tax Act. Further it is observed from the assessment order that assessee has been consistently crediting the profit on sale of investment to general reserve and the change in its treatment was made only due to the change being mandated by IRDA Regulation in 2002. It is observed that Hon’ble High Court in assessee’s own case for assessment year 2005-06 has observed this change of accounting pattern for non life insurance companies were required to credit income from sale of investments directly to P&L account which was made applicable only from assessment year 2011-12. Hon’ble High Court has also observed that prior to 01/04/11 there was no such provision which would require revenue to disallow the claim of assessee in respect of sale of investment. - Decided in favour of assessee Denial of exemption under section 10 (38) - Held that:- In the assessment order it is observed that assessee had raised an alternative plea in respect of profit on sale of investments being exempt under section 10 (38) of the Act. In our considered opinion this ground now becomes in fructuous in view of Ground No. 1 which has been decided in favour of assessee. Disallowance of depreciation - Held that:- As we compare the factual position prevalent during assessment year 2000-01 and 2001-02 based on which the Tribunal confirmed the disallowance of depreciation, we observe that it was so decided because assessee failed to furnish relevant information before the Assessing Officer along with Audit Report. Facts of the present assessment year are different as Ld.AR sufficiently demonstrated that the details were very much available before Ld.AO and Assessing Officer has not taken any steps to verify the same.We therefore are inclined to set aside this issue to Ld. AO for proper verification of the details filed by assessee
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2018 (1) TMI 801
TDS on payment made to bank towards bank charges and bank guarantee commission - Held that:- All the decisions reliance has been placed on Notification No. S03069 (E) NO. 56/2012 (F.NO. 27-section 197A of the Income Tax Act dated 31/12/12 which has held the circular to be clarificatory in nature and therefore though issued w.e.f. 01/01/13, applies retrospectively and hence no deduction of tax is required on payment of bank guarantee commission and bank charges to the banks. SEE Kotak Securities Limited Versus Deputy Commissioner of Income-tax, TDS Circle 2(1), Mumbai [ 2012 (2) TMI 77 - ITAT MUMBAI ] - Decided in favour of assessee
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2018 (1) TMI 800
Seeking recall of the ex-parte order u/s 254(2) restoring the appeal for disposal on merits - Held that:- Respectfully following the same, we hold that the present application is barred by limitation. In the result, Miscellaneous Application is dismissed. See Srinivas Sashidhar Chaganty, Hyderabad Versus ITO [2016 (8) TMI 458 - ITAT HYDERABAD]
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2018 (1) TMI 799
Non deduction of TDS - disallowance of interest paid to the head office(HO)/ overseas branches on deposits placed with the assessee u/s. 40(a)(i) - Held that:- As decided in case of ABN Amro Bank NV [2010 (12) TMI 340 - CALCUTTA HIGH COURT] the appellant is a foreign company incorporated in Netherlands and having its principal branch office in India. The head office of the appellant is not liable to pay any tax under the Act - Therefore, there was and still is no obligation on the part of the appellant’s said branch to deduct tax while making interest remittance to its head office or any other foreign branch. The permanent establishment and the head office have to be taken as separate entities for all purposes. But in the making of payment of interest no tax has to be deducted under section 195(1) - If no tax is deductible under section 195(1) section 40(a)(i) of the Act will not come in the way of the appellant claiming such deduction as from its income - Decided in favour of assessee. Applying an ad hoc rate of 20% for agency fee and interest income of the overseas branches for the External Commercial Borrowings(ECB) - Held that:- It is a fact that loan was granted by the AE. s and all the gains and risks of the transaction was with them only. The assessee was compensated by the AE. s for the job done by it. As far as interest income is concerned, it is clear that there was no contract /agreement between the assessee and the AE. s to share the interest amount. The assessee is objecting to the adjustment made under the head interest income. It has no objection with regard to the other portion of the adjustment. So, we direct the TPO/AO that only 20% of the agency fee should be attributed to the assessee and the interest attributed to its income should be deleted. See M/s Credit Lyonnais Versus ADIT(International Taxation) [2014 (7) TMI 1 - ITAT MUMBAI]. - Decided partly in favour of assessee Derivative transactions and their ALP - TPA - Held that:- The assessee had adopted the GTPP to determine ALP of the IT's thus no defect in its approach. Method applied by the TPO and the details of controlled transactions, relied upon by him, were not available in the public domain. The assessee did not have any opportunity to examine the comparability of FAR of the transactions selected by the TPO. Thus use of untested comparables to determine the ALP is against the basic spirit of the TP provisions and the Rule 10 of the Rules The TPO had also violated the principles of natural Justice by not confronting the assessee with the comparables used against it. He proposed an addition of ₹ 51. 12 crores to the income of the assessee without affording an opportunity to it, so that it could become aware of the basis for the adjustment. Only on this count the adjustment could be validly deleted. INPV calculation can be different for different banks because of their functioning. So, in our opinion it would be inappropriate to apply for a uniform multiplier effect on the value of sales credit/INPV of derivative transactions. INPV fixed by Indian branch of another foreign bank in India should not have been compared with the assessee case, because the above said branch of the foreign bank itself was dealing with its another AE. In short, we hold that the methodology adopted by the TPO, for determining the ALP of INPV of the derivative transactions, was incorrect from the very beginning and was fundamentally wrong. FAA had rightly held that the TPO was not justified in considering JP Morgan Chase Bank and Bank of America, NA having similar arrangements with their AEs as appropriate comparables for the aforesaid transaction.We are also agreeable to the argument submitted by the assessee that the PSM can never be applied for benchmarking marketing support service functions. As per Rule 10B(d), PSM is applicable “mainly in IT. s involving transfer of unique intangibles or in multiple IT. s which are so inter-related that they cannot be evaluated separately for the purpose of determining the ALP of any one transaction. - Decided in favour of assessee
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2018 (1) TMI 798
TDS u/ 194C - person responsible for paying or crediting any sum to the person carrying on the business of playing, hiring or leasing goods carriages - Held that:- Payee is having a) PAN: ABOPN 0110 H (copy of the Acknowledgement of the Return of Income enclosed). In view of this, no tax is required to be deducted at source u/s.194C(6), b) As regards Section 194C(7), it is slated that the same is required to be furnished in such form and within such time as may be prescribed. However, no reference has been made in the Act as to which form or which time it refers to. c) Without prejudice to the above, it is submitted that this is purely procedural, which should not be a cause for disallowance. Therefore, we remand this matter back to the file of the AO who will verify the details whether parties in question have deposited the Tax or not. Appeal of the assessee is allowed for statistical purpose.
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2018 (1) TMI 797
Revision u/s 263 - Allowability of expenditure for the purpose of marketing of its products and dissemination of knowledge etc. - allowable busniss expenditure - Held that:- CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of ‘Indian Medical Council Regulation, 2002’ and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. The free sample of medicine is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic areas, etc. Every day there are new developments taking place around the world in the area of medicine and therapeutic, hence in order to provide correct diagnosis and treatment of the patients, it is imperative that the doctors should keep themselves updated with the latest developments in the medicine and the main object of such conferences and seminars is to update the doctors of the latest developments, which is beneficial to the doctors in treating the patients as well as the pharmaceutical companies. - Decided in favour of assessee.
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2018 (1) TMI 796
Penalty u/s 271D and 271E - money has been given by the assessee to his son/wife - Held that:- Assessee had accepted the loan in cash of ₹ 4,00,000/- from Shri Mithun Banik Mazumder, (son of the assessee) and repaid ₹ 1,50,000/-. Assessee repaid loan to his another son Sri Indranil Banik Mazumder at ₹ 2,25,098/- and also repaid loan to his wife Smt. Sandhya banik Mazumder at ₹ 54,928/. All these transactions are between husband and wife, and between father and son, being close relative of one family. We also note that assessee is a salaried employee and not a businessman. Therefore, based on the facts narrated above, these transactions do not fall within the ambit of sections 269SS and 269T of the Act. To support the family members, the money has been given by the assessee to his son/wife. This is simply a transfer of money from one family member to another family member to support day to day expenses, educational expenses and other family expenses. We are of the view that the transaction between son and father and wife and husband, for giving a support and help, in law, is not a loan or deposit in stricter sense of section 269SS of the Act and it is only a financial support, therefore, penalty imposed by the Assessing Officer and confirmed by the ld CIT(A) needs to be deleted under section 269SS and 269T - Decided in favour of assessee.
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2018 (1) TMI 795
TPA - comparable selection criteria - methodical search process followed by the assessee for identifying the comparables - Held that:- Assessee is into call centre services thus companies functionally dissimlar with that of assessee need to be deselected from final list. Thus five comparables are excluded from the final list of valid comparables, the margin shown by the assessee would be within the safe limits of plus/minus 5%. Therefore, we are not commenting upon the other comparables, though the arguments advanced by the AR about the remaining comparables are found to be factually correct. In short, we hold that the assessee had proved that the list of comparables approved by the DRP(12 comparables)contain 8 comparables which should have been excluded. We hold that AMFL, Maple, GTL, TTL. DFL, STSL, AKSPL and ALT are not valid comparables for the purpose of determining the ALP of the IT's entered in to by the assessee for the year under consideration. Remanding the matter to the departmental authorities - Held that:- We are not inclined to allow premium on carelessness and callousness of the TPO and allow him a second chance to amend his errors. An erring officer does not deserve a new innings to continue unnecessary litigation. TP proceedings, like any other proceedings under the Act, have to be completed in a proper manner and the record should prove that, while making TP adjustment, the TPO had applied his mind to the facts and circumstances of the case. Posts of TPO. s were specifically created to determine the ALP of the IT. s. Considering the seriousness of the job the AO. s are not allowed to decide the value of IT. s. The scheme of the Act casts an added responsibility on the TPO. s to pass a reasoned, valid and proper order. In the case before us, we find that the TPO had committed several mistakes in the search proceedings and sending notices. So, we are of the opinion that it is not a fit case to be remanded. Profits eligible for deduction u/s. 10A - entitled to incremental deduction under section 10A - Held that:- We find that the assessee had filed a specific objection about not allowing incremental deduction, that the DRP did not decide the issue. Therefore, we are of the opinion that the matter should be restored back to the file of AO who would decide the Ground after affording reasonable opportunity to the assessee and after considering the judgment of Gem Plus Jewellery India Ltd. (2010 (6) TMI 65 - BOMBAY HIGH COURT) Disallowance u/s 14A - Held that:- We find that the AO had invoked the provisions of section 14A r. w. r. 8D of the Rules to make the disallowance. As provisions of Rule 8 were not applicable for the year under consideration. We direct the AO restrict the disallowance to 1% of the exempt income. Third grounds is partly allowed.
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2018 (1) TMI 794
Entitled to the benefit of exemption u/s 54 - restriction of deduction to ‘one independent residential unit’ at the time of reinvestment - whether different flats allotted to the assessee are meant for residential use of the assessee and if such test is fulfilled? - Held that:- CIT(A) was of the opinion that the 8 flats allotted to the assessee are meant for utilisation of the joint family comprising of 3 sons and 4 daughters. Nothing was placed on record by the Ld DR to contradict the findings of the Ld. CIT(A). Since the finding of the Ld. CIT(A) was not contradicted by placing any material on record, we are unable to appreciate the contention of the Revenue. See CIT Versus Syed Ali Adil [2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee.
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2018 (1) TMI 793
Taxability of supply of software - Supply of off the shelf software treated ‘Royalty’- receipts from supply of software - amount receivable treated as grant of ‘copyright’ - existence of PE - DTAA - Held that:- The definition of Royalty under the Indo-Ireland Tax Treaty is pari-materia as that under Indo-US Tax Treaty and the Coordinate Bench of the Tribunal had already decided the issue of taxability of supply of software under the same agreement in favour of the Intec- Ireland with reference to the Indo-US Tax treaty for the Assessment Year 2002-03, wherein it has been held that receipts from supply of software are not taxable in the hands of Intec-Ireland as Royalty. Therefore, since both the treaties are pari-materia with each other, we hold that the receipts from supply of software are not taxable in the hands of Intec–Ireland as Royalty under new Ireland tax treaty. Intec-Ireland does not have PE in India and accordingly amounts received by Intec-Ireland towards supply of software are not liable to tax in India. Therefore, we hold that payment received by the assessee was not in the nature of Royalty and cannot be therefore brought to tax. - Decided in favour of assessee.
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2018 (1) TMI 792
Penalty u/s 271(1)(c) - ALV of the Flat Nos. 502 and 203 at Kent Estate - Held that:- The claim of the assessee that it was using the Flats No. 203 and 502 for its business purposes had not been disproved, therefore, no penalty under Sec. 271(1)(c) on the said count could have been validly imposed in its hands on the said count. We thus in the backdrop of our aforesaid observations delete the penalty imposed by the A.O and sustained by the CIT(A). - Decided in favour of assessee. Penalty imposed u/s 271(1)(c) in the hands of the assessee as regards the suppressed contract receipts - Held that:- now when the assessee in the backdrop of the aforesaid facts was in actual receipt of an amount of ₹ 2,50,000/- from its aforesaid client, viz. M/s Siddhivinayak Construction Co., and had also claimed the credit as regards the TDS corresponding to the said amount only, therefore, the bonafides of the assessee as regards not accounting for the contract receipts of ₹ 4 lac stands duly established. We thus are of the considered view that as the bonafides of the explanation of the assessee as regards not accounting for the amount of ₹ 4 lac stands proved, therefore, saddling the assessee with penalty under Sec. 271(1)(c) as regards the said amount would not be justified. We thus for the aforesaid reasons vacate the penalty imposed by the A.O under Sc. 271(1)(c) in the hands of the assessee as regards the suppressed contract receipts of ₹ 4 lac. The Ground of appeal is allowed in favour of assessee.
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2018 (1) TMI 791
Nature of income - salary income or busniss income - technical skill for rendering the independent contract and professional services - proof of employer employee or master servant relationship - Held that:- The assessee is a retired Electrical Technician from the Defense Department, Govt. of India, & currently is working as a contractor of electrical maintenance on board of different companies vessels. He has more than 30 years experience as electric maintenance engineer with Indian navy and private vessels on high seas. We further find that the entire agreements executed between the contracting company and the assessee, it is clearly evident that the nature of work executed by the assessee for the Marine Companies is in the nature of a contract. There is no employer employee or master servant relationship. There is also no permanent contract. It ranges from 6 weeks to 8 weeks only. In the agreement the companies mentioned the work executed by the assessee will be on contractual basis and at the time of making payment to the assessee, the company will deduct Tax at source. We also note that vide letter dated 19.11.2007 issued by Chief Legal Officer & Company Secretary, M/s Seamec Limited which was addressed to the ITO/AO, Ward-1, Rohtak of the assessee for furnishing information called u/s. 133(6) of the I.T. Act, 1961, has clearly mentioned that the work was in the nature of the contractor. The payments made by the said companies are for Technical Services rendered by the assessee. It is therefore, held that that the assessee has only Business Income and not Salary Income, hence, the professional contracts carried on by assessee are treated as ‘contract for service’ and not ‘contract of service‘, therefore, accordingly appropriate expenditure are allowed and as a result, the grounds taken by the assessee stand allowed.
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2018 (1) TMI 790
Addition made towards prior period expenditure towards interest paid to supplier - allowable busniss expenditure - claim of the assessee that the liability to pay the interest itself accrued only pursuant to the bill dated 3.11.1992 raised by the said supplier and the same was duly paid by the assessee before the end of the previous year ending 31.3.1993 - Held that:- We are informed that the tax rates for domestic companies for both Asst Years 1992-93 and 1993-94 were one and the same ie 45% tax plus surcharge of 15%. Hence there is no loss that could be attributed to the exchequer because of this claim of expenditure by the assessee as the business expediency of the said expenditure and its genuineness had not been doubted by the revenue at any point of time. It is not in dispute that the said payment of interest on delayed payment to supplier is a legitimate business expenditure. See CIT vs Jagatjit Industries Ltd reported in (2010 (9) TMI 58 - DELHI HIGH COURT). In view of these facts, we have no hesitation in directing the ld AO to delete the disallowance made on account of prior period expenses - Decided in favour of assessee Disallowance of interest paid on borrowed funds - assessee had diverted the borrowed funds for non-business purposes - Held that:- We find from the perusal of the balance sheet of the assessee company which is part of the paper book filed before us, that the assessee company is having sufficient own funds in the form of share capital and reserves and surplus to the tune of ₹ 9,02,06,003/- which is higher than the loans taken by the assesse company. Hence the presumption could be drawn in favour of the assessee that the interest free funds were given out of the own funds available with the assessee company. See CIT vs Britannia Industries Ltd [2005 (6) TMI 19 - CALCUTTA High Court]. - Decided in favour of assessee. Disallowing the claim of bad debts written off in respect of debts pertaining to Jute division - Held that:- out of the total debtors of the assessee company in the sum of ₹ 5,92,08,719/- as on 31.3.1993, a sum of ₹ 2,92,65,884/- represents old balances, out of which debts representing ₹ 16,43,829/- had been written off in the books of accounts as bad debt. Hence it clearly proves that the same represents trade debts of the assessee. Since the debt is reflected under sundry debtors, it goes without saying that the income was offered in the earlier years and unrealized portion of the debt is reflected under the head ‘Sundry Debtors’ in the balance sheet. The above note also impliedly proves that the assets of jute division representing sundry debtors had been merged with the sundry debtors of tea division of the assessee company. In view of these facts, we hold that the assessee company had indeed complied with the requirements of section 36(2) of the Act in the instant case and is accordingly entitled for deduction u/s 36(1)(vii) of the Act - Decided in favour of assessee Disallowance towards provision for leave encashment - Held that:- We find that the provisions of section 43B(f) of the Act was introduced in the statute by the Finance Act 2001 with effect from 1.4.2002 (i.e from Asst Year 2002-03 onwards) wherein the claim of deduction towards leave encashment could be allowed only on payment basis. This provision cannot be made applicable for Asst Year 2001-02 which is the year under consideration. Hence the basis of disallowance by applying provisions of section 43B of the Act is incorrect in the instant case. There is no dispute that the assessee had made provision based on rational workings towards provision for leave encashment . Hence the assessee would be entitled for deduction on provision basis by placing reliance on the decision in the case of Bharat Earth Movers Ltd.(2000 (8) TMI 4 - SUPREME Court). - Decided in favour of assessee Disallowing the set off of business loss of packaging division of the assessee with the business income - Held that:- We hold that once the separate profit and loss account of packaging division was filed by the assessee, the same ought to have been examined by the revenue which has not been done in the instant case. Hence in the interest of justice and fairplay, we deem it fit and appropriate to remand this issue to the file of the ld AO with a direction to examine the profit and loss account of packaging division of the assessee company and decide the allowability of loss of packaging division afresh, in accordance with law. The aspect of double addition would have to be addressed by the ld AO while disposing of this set aside assessment. Accordingly, the Ground No. 2 raised by the assessee for Asst Year 2001-02 is allowed for statistical purposes. Non treating the receipt of other income as composite income of the assessee - Held that:- AO ought not to have treated the aforesaid receipts as other income and hence not part of composite income of the assessee merely based on admission of the assessee. Getting into the merits of each item of receipt, we find that the receipt towards sale of tea waste, rent realized and tea claim realized, would be eligible to be forming part of composite income of the assessee based on the decision of this tribunal dated 11.9.2015 supra and by the decision of ld CITA in assessee’s own case for the Asst Year 2009-10. As far as other items of receipts are concerned, no details were furnished by the assessee and no business nexus of those receipts with the tea business were proved by the assessee. Hence we hold that the same would have to be treated separately as income from other sources. For the sake of clarity, we would like to state the incomes forming part of composite income would be sale of tea waste, rent realized and tea claim realized. The other receipts i.e sale of assets and sundry receipts would have to be treated as income from other sources. - Decided partly in favour of assessee
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2018 (1) TMI 789
Determining the price of shares of First Advantage Pvt. Ltd. - TPA - valuation of the shares sold - ALP determination - Held that:- In the case under appeal, estimate made by the assesse for determining PGR and the valuation of the shares is better and more convincing than the estimation made by the departmental authorities. The Hon’ble Bombay High Court in the case of Titan Time Products Limited (2015 (1) TMI 105 - BOMBAY HIGH COURT), has held that valuation reports of experts should not be rejected by the departmental authorities unless the assumption considered in the report are proved to grossly erroneous or another expert-opinion is obtained contradicting the earlier report. In the present matter the DRP has not given any cogent or valid reason for rejecting the four reports submitted by the assessee. We find that during the year under consideration there was buy back of shares of FAPL from FADV, Singapore, that the shares of FAPL were sold by the Singapore entity at the same rate at which they were sold by the assessee to the Singapore AE, that the TPO had examined the buyback agreement of the shares(i. e. sale of shares by Singapore entity to FAPL)and held that the transaction was at Arm’s length. If the subsequent transaction was found to be at fair market value then what was the justification for not treating the first transaction at arm’s length, is not coming out of the order of the TPO/DRP. It is one of the recognised principle of valuation that a high PGR would require a proportionate higher cost of equity. If the said theory is applied to the facts of the case under consideration, the cost of equity will have to be taken at minimum of 17.57% (for 7% PGR). Therefore, we agree with the argument advanced by the assessee that if cost of equity was taken at 17.57%, then the value of a share of FAPL would be lower than value determined by the independent valuer. In short the transaction i. e. valuation of shares of FAPL, was at Arm’s length. - Decided in favour of assessee
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2018 (1) TMI 788
Rejection of claim for deduction under section 80IA - Held that:- This issue in question is squarely covered by the judgment of the Hon’ble Jurisdictional High Court in assessee’s own case for the assessment year 2008-09 (2017 (11) TMI 1227 - KERALA HIGH COURT). Since the facts in the current assessment year are identical to the facts considered by the Hon’ble High Court, respectfully following the judgment of the Hon’ble High Court, we allow ground no. 1 raised in assessee’s appeal Disallowance of expenditure relating to cost of cattle keepers - Held that:- Allowing the employees to rear their cattle in assessee’s estate in order to attract them to work in its estate, is purely a labour welfare measure and the same is in tune with the accepted plantation practice. On a perusal of the resolution of the Plantation Labour Committee, it is very discernable that the scheme of cattle grazing in various estates is an accepted norm in the plantation industry and it is nothing but a labour welfare measure in order to attract labourers which is otherwise scarce. Since the expenditure incurred on cattle keepers is purely a labour welfare measure which is approved by the Plantation Labour Committee, we are of the view that the expenditure incurred is directly relatable to the tea business of the assessee. Therefore, the same shall be treated as expenditure under Rule 8 of the I.T. Rules. Disallowance of the claim under section 10(30) - subsidy received from Tea Board of India taxed 100% under the IT Act - Held that:- If the provisions of sec. 10(30) of the I.T. Act is not applicable, since the subsidy is given for replantation, replacement planting and rejunevation planting of the tea bushes, it can only be termed as a capital receipt and not as a revenue receipt. For the aforesaid reasons, we confirm the order of the CIT(A) and reject the ground No. 1 raised by the Revenue. Disallowance of expenditure incurred in relation to exempt income u/s 14A read with Rule 8D - Held that:- We find merits in the contention of the assessee for the reason that the assessee has demonstrated with evidences that no part of interest bearing funds has been used to make investment in shares which yield exempt income. The A.O. has not brought on record any reasons for disallowing expenditure incurred by the assessee on term loan and working capital u/s 14A by invoking Rule 8D(2)(ii). On the other hand, the assessee has categorically proved that its interest expenditure is not relatable to exempt income. Therefore, we are of the view that the A.O. was incorrect in disallowing interest u/s 14A by invoking Rule 8D(2)(ii) of the Income-tax Rules, 1962. The CIT(A), after considering the relevant submission, has rightly deleted the additions made by the A.O. towards disallowance of interest. Insofar as the disallowance of administrative and general expenses under Rule 8D(2)(iii) we are of the view that the disallowance worked out by the A.O. under Rule 8D(2)(iii) is less than the exempt income earned by the assessee for the relevant period and hence we are of the view that the A.O. was right in disallowing expenditure at the rate of 0.5% of the average value of investment. In any case, if the disallowance worked out by the A.O. is in excess of exempt income earned by the assessee, such disallowance should be restricted to exempt income earned for the relevant financial year. The CIT(A) without appreciating the fact has simply deleted the addition made by the A.O. towards disallowance of expenditure under Rule 8D(2)(iii) of the Income-tax Rules, 1962. Therefore, we reverse the finding of the CIT(A) and uphold the additions made by the A.O. towards disallowance of expenditure at the rate of 0.5% of average value of investment under Rule 8D(2)(iii) subject to our observations that such disallowance shall not exceed exempt income earned by the assessee for the relevant financial years. Profit on sale of green leaves - whether is not taxable under the Income Tax Act, 1961 and is taxable only under Kerala Agricultural Income Tax Act - Held that:- Following the above order of the ITAT in assessee’s own case for the assessment year 2009-10 [2017 (11) TMI 1227 - KERALA HIGH COURT] the CIT(A) had deleted the addition. Therefore, we see no reason to interfere with the order of the CIT(A) and we confirm the same Taxation of income from sale of import license - Held that:- The import licenses were obtained by the assessee company on account of a scheme for promoting tea exports. The income from sale of import licenses received on account of export of tea, is an integral part of the plantation operations of the company. The assessee company undertakes exports taking into consideration the import license benefits. Therefore the import license benefits are clearly part of the tea income. The assessee company has not claimed the income as exempt income (agricultural income), but as a part of the combined operation and hence the CIT(A) was correct in treating the said income as tea income as per Rule 8. Taxability of miscellaneous income - Held that:- CIT(A), after considering each of the incomes received by the assessee had held that these are incidental and directly connected with the operation of tea business and the same is to be treated as income under Rule 8 of the I.T. Rules. The finding of the CIT(A) which are from pgs. 51 to 54 for the assessment year 2010-11 are very categoric and no interference is called for and we confirm the same. TDS u/s 195 - Disallowance of foreign agents commission and reimbursement of expenses for non deduction of tax at source - Held that:- A perusal of the expenditure incurred by the assessee, we notice that these are payments made as reimbursement of expenditure incurred by the foreign agents plus their commission. The foreign agent commission and reimbursement of expenditure are not taxable in India and hence, the provisions of section 195 of the I.T. Act have no application Taxability of income from electricity operations - Held that:- We have held that electricity distribution is a separate undertaking and therefore the claim of the assessee u/s. 80IA is to be allowed. This finding is based on the judgment of the Hon’ble Jurisdictional High Court (supra). Thus Ground no. 7 raised by the Revenue has been rendered infructuous and same is dismissed as infructuous.
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2018 (1) TMI 787
Disallowance u/s. 14A read with Rule 8D - Held that:- Disallowance u/s 14A be restricted to the exempt income earned by the assessee Disallowing being 10% of repairing expenses on estimate basis - Held that:- AO disallowed 10% of the repairs and maintenance claimed by the assessee as deduction in computing the total income on the ground that the assessee could not produce the related bills and vouchers. The CIT(A) confirmed the order of the AO. Before me the prayer of the ld. Counsel for the assessee was that the disallowance is excessive and should commensurate with the quantum of total expenditure and the scale of business of the assessee. There has been no basis for the disallowance by the AO or CIT(A). Disallowance of 5% of the repair expenses would be just and fair. Accordingly ground no.4 is partly allowed. Receipt of surrender value of Keyman Insurance Policy as Central Income when the premium when paid was allowed as deduction from the composite income of the assessee at the time of payment - Held that:- The only business of the assessee is growing and manufacturing of tea. The surrender value of keyman insurance policy is admittedly connected with the business of growing and manufacture by the assessee and therefore it has to be considered as part of the composite income on which Rule 8 should be applied. In this regard it is also noticed by me that the insurance premium was paid when the policy was in force was allowed as deduction while computing the composite income. Therefore the nexus with the business of the assessee has been accepted by the revenue in the past. Therefore the surrendered value of keyman insurance policy received during the previous year had also to be considered as part of the composite income on which Rule 8 has to be applied
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2018 (1) TMI 786
Deduction of franchise consideration – Capital or revenue expenditure - Held that:- As no enduring benefit by making the payment of the Franchise fee got vested with the assessee, therefore, the said judicial pronouncements being distinguishable on facts would not assist the case of the revenue. We thus in the backdrop of our aforesaid observations and finding ourselves to be in agreement with the view taken by the coordinate benches of the Tribunal, therefore, are of the considered view that the payment of the Franchise fee for IPL Season-1 of ₹ 30,03,60,000/- by the assessee can safely be held to be in the nature of a revenue expenditure, which was rightly claimed by the assessee as such while computing its income for the year under consideration. We thus set aside the order of the CIT(A) and direct the A.O to delete the addition of ₹ 30,03,60,000/-. We may herein observe that as we have held that the Franchise fee of ₹ 30,03,60,000/- paid by the assessee to BCCI is a revenue expenditure, therefore, the contentions of the assessee as regards quantification of the W.D.V for computing the depreciation in respect of the franchise rights is rendered as redundant and is not being adjudicated by us. The Ground of appeal No. 2 to 4 are allowed in terms of our aforesaid observations. Expenditure under the head “Franchise fee” - Held that:- We find that in the present case before us, as the liability as regards the Franchise fee as per Clause 7.1 (a) was to arise and assume the character of an expenditure on the date of the first match of the league in the year in which the league deposit was paid, therefore, as observed by us hereinabove, now when no match of IPL Season-2 was played till 31.03.2009, thus no expenditure in respect of the Franchise fee accrued at all during the year under consideration. We thus in the backdrop of our aforesaid observations, finding ourselves to be in agreement with the view taken by the lower authorities that the amount of ₹ 7,50,90,000/- cannot be held as a revenue expenditure in the hands of the assessee during the year under consideration, therefore, uphold the order of the CIT(A) to the said extent and dismiss the Ground of appeal no. 5 raised by the assessee before us. Disallowance of an amount forming part paid by the assessee to Cricket Association of Bengal for use of Eden Garden - Held that:- The payment of ₹ 75 lac was made by the assessee to Kolkata Police Welfare fund, not by its choice, but as per the directions of CAB who was responsible to arrange for security in the stadium at the time of staging of the matches by the assessee. We thus not being persuaded to be in agreement with the observations of the lower authorities as regards the allowability of the claim of the amount of ₹ 75,00,000/- (forming part of total expenditure of ₹ 3,50,00,000/-) paid by the assessee as per the directions of CAB to Kolkata Police Welfare Fund, therefore, set aside the order of the CIT(A) to the said extent and delete the addition/disallowance of ₹ 75,00,000/- sustained by him. The Ground of appeal No. 6 is allowed. Disallowance of the expenditure which was claimed by the assessee to have been paid to Mr. John Buchanan for providing coaching services to the team for IPL Season-1 - Held that:- The revenue had neither placed on record any irrefutable documentary evidence which could persuade us to conclude that no coaching services were provided by Mr. John Buchanan to the assesse’s cricket team for IPL Season-1, nor the material placed on record by the ld. A.R before us to fortify his aforesaid claim had been rebutted or disproved by the ld. D.R. We thus being of the view that the claim of the assessee as regards the expenditure of ₹ 1,28,34,490/- in respect of the coaching fees paid to Mr. John Buchanan for IPL Season-1 is found to be in order, therefore, set aside the order of the CIT(A) to the extent the latter had sustained the addition/disallowance of ₹ 1,28,34,490/- made by the A.O. The Ground of appeal of no. 7 and 8 raised by the assessee are allowed. Disallowance being expenditure incurred in connection with airfare expenses, travelling expense ad vehicle hire charges - Held that:- Keeping in view the fact that as observed by the CIT(A) that the assessee had failed to place before him any evidence e.g air tickets, details of vehicles, name of service providers, details of persons utilizing these services and their nexus with business etc, therefore, as per him the possibility of the expenditure partly having been incurred for non business purposes could not be ruled out, and the fact that the assessee too had submitted before us that sufficient opportunity was not allowed to it at the time when such adhoc disallowance of expenses was made, therefore, in all fairness restore the matter to the file of the A.O for making necessary verifications on the basis of documentary evidence as regards the entitlement of the assessee towards the claim of the aforesaid expenses. We herein direct that the A.O shall in the backdrop of our aforesaid observations make necessary verifications as regards the aforesaid claim of expense of the assessee booked under the said respective heads, viz. airfare expenses, travelling expenses and vehicle hiring charges. Disallowance of security charges expenses - Held that:- We are unable to comprehend the observation of the CIT(A) who had concluded that now when the police was taking care of the security arrangements in the stadium, therefore, it was the responsibility of the State of government to have provided the necessary security arrangements to the aforesaid persons. We are unable to persuade ourselves to subscribe to the aforesaid observations of the CIT(A). We are of the considered view that now when it stands established that the visits of the actors, celebrities and VIPs to the matches staged by the assessee was a part of the business strategy of the assessee to generate more revenues, therefore, what quality of security cover was required to be provided to the aforesaid persons remained within the exclusive realm of the wisdom of the assessee and the A.O could not guide him as to the nature of the security cover that should have been provided. We thus being of the considered view that the claim of the assessee of ₹ 1,08,700/-incurred for security for VIPs and celebrities who attended the matches at Eden Garden was well in order, therefore, set aside the order of the CIT(A) sustaining the aforesaid disallowance. Disallowance of expense - Held that:- As the expenditure under consideration was incurred by the assessee to meet the aforesaid liability of the business which had accrued during the year, therefore, the amount of ₹ 8,85,600/- was rightly claimed as an expenditure while computing the income of the assessee for the year under consideration. We thus set aside the order of the CIT(A and delete the addition/disallowance of ₹ 8,85,600/-. Addition in connection with website design charges - Held that:- As averred by the ld. A.R, the CIT(A) in the assesse’s own case for the subsequent years, viz. AY 2010-11 to AY 2012-13 had held the web designing charges as a revenue expenditure. We are of the considered that as claimed by the ld. A.R before us that the website design charges had been held by the CIT(A) in the subsequent years, viz. AY 2010-11 to AY 2012-13 as a revenue expenditure in the assesse’s own case, therefore, in all fairness restore the matter to the file of the A.O to make necessary verifications as regards the factual position and readjudicate the entitlement of the assessee as regards the web designing charges, keeping in view the aforesaid judicial pronouncements
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2018 (1) TMI 785
Applicability of section 80A(6) - benefit under Section 80-IA entitlement - Held that:- As noted the authorities below have not examined the matter after taking into consideration the provisions of section 80A(6) of the Act wherein the market value of the electricity sold and purchased are to be determined separately and has been made subject to statutory and regulatory restrictions. Further, the earlier decisions of the Coordinate Benches are distinguishable as the provisions of section 80A(6) were not considered in those decisions. Thus in the interest of justice and fair play, following our decision in case of Chambal Fertilizers (2016 (10) TMI 1115 - ITAT JAIPUR) and given the provisions of section 80A(6) which overrides section 80IA(8) and are clearly applicable in the instant case and have not been considered by the authorities below, we deem it appropriate to set aside the matter back to the file of the Assessing officer to examine the same afresh taking into consideration the above discussions. TDS liability on education cess and higher education cess - Held that:- Hon’ble Supreme Court in case of SRD Nutrients Private limited (2017 (11) TMI 655 - SUPREME COURT OF INDIA) where education cess and higher education cess have been held to partake the character of excise duty, the legal proposition so laid down by the Hon’ble Supreme court will apply with equal force in the context of income tax, and following our decision in case of Chambal Fertilizers (supra) wherein we have held that across all tax legislation – direct taxes as well as indirect taxes on goods and services, the nature and character of education cess and higher education cess is clearly tax and nothing else, we are of the considered view that the assessee’s claim of deduction on account of education cess (EC) & secondary and higher education cess (SHEC) on income tax & dividend distribution tax amounting to ₹ 1,42,79,859/-, as eligible revenue expense u/s 37 of the Act is not permissible in view of the provisions of section 40(a)(ii) of the Act. MAT computation - exclusion of profit on sale of investments and profit on sale of fixed assets while computing book profit u/s 115JB - Held that:- This issue has since been covered against the assessee by the decision of Coordinate Bench [2015 (3) TMI 759 - ITAT JAIPUR] in the assessee’s own case for AY 2008-09. Respectfully following the same, we hereby confirm the order of the ld CIT(A) and dismiss the ground of appeal taken by the assessee. Disallowance of electricity duty exemption - capital receipt or revenue receipt - not including the same while determining the books profits u/s 115JB - Held that:- The object and purpose test has been held to be determinative of the character of receipt in the hands of the assessee company and our own decision in case of Hindustan Zinc (2018 (1) TMI 758 - ITAT JAIPUR) wherein we have examined the Rajasthan Investment Promotion policy 2003 in context of electricity duty exemption, we affirm the action of the ld CIT(A) and hold the receipt on account of electricity duty exemption as capital receipt. Hence, the same cannot be brought to tax in the hands of assessee company under the normal computational provisions as well as while determining the books profits under section 115JB of the Act. - Decided against revenue
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2018 (1) TMI 784
Entitlement for deduction u/s 80P - whether the respondent assessee before us is whether primary agricultural society or a primary co-operative agricultural rural development bank? - Held that:- Undisputedly, it is a co-operative bank. But it is not a primary agricultural credit society. The area of operation of the respondent– assessee is not confined to a Taluk and therefore it is not a primary cooperative agricultural and rural development bank. Therefore, provisions of sub-section (4) of section 80P are squarely applicable and the ratio of the decision of the Hon’ble Kerala High Court in the case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. (2016 (5) TMI 1164 - KERALA HIGH COURT ) is squarely applicable. We hold that the respondent-assessee was not entitled for deduction u/s 80P - Decided against assessee.
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2018 (1) TMI 783
Deduction u/s 54B eligibility - Held that:- Agricultural record produced before us does show at least with respect to Fasil year 1416, 1417 and 1418 the details of agricultural produce. This it is apparent that land sold by the assessee shown in the sale deed was an agricultural land and further in view of the evidences produced by the assessee of agricultural produce for the relevant period which is not controverted by revenue then, assessee is eligible for deduction u/s 54B as the capital asset being land which was used for the agricultural purposes for specified number of years - Decided in favour of assessee Deduction u./s 54F as sum paid by the appellant for purchase of new residence - Held that:- The assessee has deposited a sum of ₹ 6.50 lacs on 05.07.2011, however due to clerical error the appellant has shown this figure at ₹ 704772/-. Further, the assessee could not point out the exact payment about this whether related to the acquisition of house. Therefore, we do not find any infirmity in the order of the lower authorities. Hence, the claim of the assessee u/s 54F to the extent of ₹ 650000/- has rightly been rejected. Assessee stated as has deposited a sum of ₹ 20.50 lacs in capital gain account scheme however AO has granted deduction of only ₹ 329100/- - Held that:- Allahabad High Court in case of Ranjit Narang Vs. CIT [2009 (7) TMI 118 - ALLAHABAD HIGH COURT] wherein, it has been held that if the amount deposited is not utilized for the purposes of acquisition in the house property then such shortfall shall be chargeable to tax in the year in which the period of three years from the date of the transfer of the original asset expires. Therefore, the assessee must be granted deduction of deposit subject to time limit and unutilized amount shall be charged to tax in different year as provided under the proviso to section 54F(4) - AO is not correct in charging the sum of unutilized amount in Assessment Year 2012-13 but it is chargeable to tax in later assessment year. Therefore, the AO is directed to grant deduction to the assessee and take remedial action in specified year if the same is not offered in income by the assessee. This ground with respect to ₹ 20.50 lacs is allowed and ₹ 6.50 lacs is dismissed. - Decided partly in favour of assessee.
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2018 (1) TMI 782
Disallowance made under section 14A r/w rule 8D - Held that:- The assessee’s submissions before the Departmental Authorities was restricted to the additional disallowance proposed and made by the Assessing Officer under section 14A r/w rule 8D. The issue as raised by the assessee before us to the effect that the suo–motu disallowance made by the assessee even has to be deleted is a completely new issue raised for the first time before us. Therefore, for the purpose of giving a fair opportunity to the Department to have its say on assessee’s aforesaid claim, we restore the matter back to the file of the Assessing Officer for adjudication. Disallowance of interest expenditure under section 36(1)(iii) / section 57(iii) - Commissioner (Appeals) disallowed 6% out of interest expenditure incurred by the assessee only on the reasoning that while the assessee has paid interest @ 18% on the borrowed fund it has received interest @ 12% on interest bearing advances made to the joint venture - Held that:- The rate of interest at which the assessee has borrowed funds cannot be made applicable to the interest bearing advances made to the joint venture as the joint venture is constituted by the partners and the assessee apart from receiving the interest income has also a share in the distribution of the income of the joint venture. Moreover, the interest bearing advance to joint venture being made only for the purpose of business no disallowance out of interest expenditure can be made. Grounds raised by the assessee on this issue in both the appeals are allowed.
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2018 (1) TMI 781
Method of working out of profits eligible for deduction u/s 80IVA(4)(iv) - Allocation of indirect expenditure to the unit of power generation for the purpose of computing deduction u/s 80IA(4)(iv) - Held that:- As decided in the case of Tide Water Oil Co.(India) Ltd. [2011 (11) TMI 451 - CALCUTTA HIGH COURT] expenses which are directly related to units should be allocated to that particular unit.In the present case, the AO has applied the turnover key for allocation of common expenditure. We do not find any fallacy in application of turnover key for apportionment of common expenditure as turnover key is held to be good key for allocation of common expenditure. Hence, the ground of appeal is dismissed. Addition on account of prior period expenditure - CIT(A) has deducted prior period income From prior period expenditure - Held that:- the approach of the CIT(A) is against the basic Principles governing allowbility of prior period expenditure. It is trite law that expenditure which is crystallized during the previous years relevent to assessment year under consideration should be allowed as deduction, different principle govern taxing prior income. Therefore, deducting prior period income From prior period expenditure is against well settled principles of law. Therefore, we remand this issue back to the file of the AO with a direction that after examining evidence filed before the CIT(A) to allow prior period expenditure, if liability of expenditure had occurred/crystallised during the previous year relevant to year under consideration and also to tax prior period income. Keeping in view the salutary principle of law income of the year alone should be taxed.
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2018 (1) TMI 780
Deduction u/s.80IA(4)(iii) rejected - profits and gains arising from Industrial Park - Held that:- The requirement of granting deduction u/s.80IA(4)(iii) of the Act is approved in the assessee’s own case. Therefore, following the rule of consistency, we allow the grounds raised by the assessee on this issue in both the A.Yrs. 2011-12 and 2012-13. See M/s Kolte Patil Developers Ltd Versus Dy. Commissioner of Income Tax [2015 (3) TMI 363 - ITAT PUNE]
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2018 (1) TMI 779
Treatment of loss as a speculative loss and had not allowed set off of the aforesaid loss against the other income - Held that:- Set off claimed by the assessee cannot be denied by relying on the Explanation to section 73 of the Act and the decision of the Hon’ble Delhi High Court in the case of DLF Commercial Developers Ltd. (2013 (7) TMI 334 - DELHI HIGH COURT). The set off claimed by the assessee is therefore directed to be allowed. The appeal of the Assessee is accordingly allowed.
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2018 (1) TMI 778
Re-opening of assessment - reasons to believe - notice u/s 154 issued requiring the assessee to explain reasons for non deduction of tds - re-opening on the basis of audit objection - deduct tax either u/s 194C or u/s 194I - Held that:- Rectification of mistake apparent from the record cannot be equated with the power of reopening under section 147 and 148 which is conferred on the Assessing Officer to reopen the cases under assessments when the conditions mentioned in the said sections are satisfied. The object and purpose of the two provisions is separate and the preconditions and requirements are different. The words "reasons to believe" when income chargeable to tax has escaped assessment has a different connotation and requirements and cannot be equated with the power under section 154 to rectify the mistakes apparent from the record. From the above facts, it is clear that the assessee duly disclosed all material facts before the A.O. during the assessment proceedings by furnishing all the details, producing books of accounts and the A.O. duly examined those details and books of accounts and had the TDS provision been applicable on such payments, he would not have disallowed a sum of ₹ 3,00,000/- out of machinery rent paid by the appellant. It is pertinent to mention here that no new material has come on record which goes to show that these payments are to be disallowed u/s 40(a). Also the contract under reference was machinery hire contract and not a contract for carrying out any work within the meaning of limb (a) of section 194C of the Act The issue regarding machinery rent has already been considered vide para no.2 of the original assessment order made "u/s 143(3) in which an addition of ₹ 3,00,000/- has already been made, secondly, the appellant explained the same during the course of proceedings u/s 154. On these facts of the assessee's case, it cannot be held that the A.O. can entertain the "reason to believe" for income chargeable to tax escaping assessment. A.O. rejected all the object ions raised by the assessee against initiation of re-assessment proceedings on the ground that the Assessing Officer has not examined the above expenses with regard to provision of tax deduction at source i.e. disallowance U/s 40(a)(ia) of the Income Tax Act, 1961. Hence, there is no change of opinion. Change of opinion comes to the rescue of the assessee only when Assessing Officer has taken one of the permissible views at the time of original proceeding. A wrong application of law can not be held as a permissible view and that can always be changed for appreciating law and in support of his findings. - Decided against revenue
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2018 (1) TMI 758
Disallowance of staff welfare expenses u/s 40A(9) - Held that:- It is not disputed by revenue that the expenditure on staff welfare has been allowed by AO himself in various earlier years while re-varying also in set aside fresh proceedings. From the record it emerges that no specific item of expenditure is pointed out to be not covered by sec. 40A(9), no such indication is given by auditors and ld. CIT(A)’s finding on facts and law have not been dislodged by revenue. Adverting to the plea of set aside as raised by revenue, it can be acceded as no lawful justification exists to support it. In pat so many years even after re-verification AO himself has allowed such expenditure. - Decided in favour of assessee. Disallowance made on account of publicity and public relation expenses - Held that:- As it is not disputed that it was incurred for sending Gujarat Earthquake relief in the form of a truckload of food items consequent to chittorgarh district Collectors Clarion Call. The amount being for social good and for discharge of corporate social responsibility is allowable as business expenditure u/s 37(1). Depreciation claimed in respect of intangible assets in the form of right in relation to power from APGPCL - Held that:- We hold that to ascribe 2/3rd value of the APGPCL investment to intangible commercial rights of cost effective power supply rights an 1/3rd value to the tangible rights a share holder will be a reasonable estimate ascribable to these constituents. The AO will accordingly word out the eligible depreciation on intangible rights u/s 32(I)(ii) on 2/3rd value of APGPCL investment and 1/3rd to share holder rights and work out the block of asset of intangible rights for depreciation and 1/3rd to value of APGPCL shares. The allowances, claim of LTCG on sale of shares whenever sold will be worked out accordingly. Depreciation in respect of assets retired from active used - Held that:- As decided in assessee's own case the expression "used for the purposes of the business" as found in section 32 when used with respect to discarded machinery would mean that the user in the business was not in the relevant financial year/ previous year but in the earlier financial years. The discarded machinery would not be actually used in the relevant previous year as long as it was used for the purposes of business in the earlier years. The Tribunal was correct in directing the assessing officer to recomputed depreciation after reducing the scrap value of the assets which had been discarded and written off in the books of account for the year under consideration from the written down value of the block of assets. Actual user of the machinery was not required with respect to discarded machinery ad the condition for eligibility for depreciation that the machinery being used for the purpose of the business would mean that the discarded machinery was used for the purpose of the business in the earlier years for which depreciation had been allowed. Addition on a/c of enabling assets written off - Held that:- This claim allowed as relying on assesse's own case. Addition made on account of Mine Development Expenses - Held that:- Assessee has been canvassing its claim for allow ability of expenditure by repeatedly emphasizing that undisputedly its mining activity had commenced prior to 1/4/1970, consequently this expenditure is legally not covered by sec. 35E but u/s 37(I). Ld. Counsels raises deep concern on the fact that despite such observations which are in conformity with the facts on record, the claim is being set aside unnecessarily which is not in conformity with judicial discipline and causing the assessee deemed harassment as proposition which requires due considerations. We find substance in the contentions of ld. Counsel for the assessee about judicial discipline. However, the issue of applicability of sec. 35E or 37(I) in earlier years has been restored back. Addition on a/c of undervaluation of closing stock of ore - Held that:- Taking a consistent view, this issue is also restored to the file of the assessing officer for decision afresh for valuing the stock Claim u/s 80IA - Held that:- Taking a consistent view, we restore this issue to the file of the Assessing Officer for re- computing the reduction of deduction u/s 80IA. The Assessing Officer would restrict the apportionment to the extent of Director’s fee, charity and donations. The Ground is partly allowed as discussed hereinabove for statistical purpose. Donation given to Nandi Foundation as an expenditure u/s 37(1) OR 80G - Held that:- We do not see any merit into the contention of the ld. Counsel for the assessee that the donation of Nandi foundation for providing mid- day-meal under the Government of Rajasthan Scheme, is allowable as business expenditure. Section 37(1) operates in a different field. In our view there has to be direct nexus between the amounts spent and the business of the assessee. In the present case, there is no evidence suggesting that the expenditure is laid out or expended wholly and exclusively for the purpose of business of the assessee. Therefore, this ground of the Revenue’s appeal is allowed. The finding of the Ld. CIT(A) on this issue is set aside and that the Assessing Officer is restored. Addition on a/c of waiver of electricity duty - Held that:- Essentially such waiver of electricity duty is related to setting up and expansion of industry hence capital in nature as per notification issued by the State Government. Under these undisputed facts, we do not see any reason to disturb the finding of the Ld. CIT (A), same is hereby affirmed. This ground of the revenue’s appeal is dismissed. Disallowance as exchange rate difference on loan - Held that:- We find merit into the contention of the Ld. Counsel for the assessee that after capitalization, the ECB had changed its nature and assumed character of circulating capital. Such treatment is in consonance with the accepting accounting principles and accounting standards. As such loss on account of exchange difference is a revenue charge and is allowable deduction under section 37(1) of the Act. In view of these un rebutted facts in our considered view, the ratio of the judgment of the Hon’ble Apex Court rendered in the case of CIT vs. Woodward Governor (2009 (4) TMI 4 - SUPREME COURT ) is squarely applicable on the present case.
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Customs
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2018 (1) TMI 777
Focus Product Scheme (FPS) - exports of industrial valves - case of Revenue is that such benefit is not available for export of industrial valves and is restricted only to bicycle parts - products as specified at serial no. 269, in Appendix 37D of the Handbook of Procedures - According to the respondents, industrial valves were not covered under serial no. 269 of Appendix 37D of Table 1. Held that: - admittedly, export of goods covered under ITC (HS) Code 8481 is eligible for benefits under the MEIS. In the past, respondents had readily accepted that the industrial valves were covered under the products specified against serial no. 269 of Appendix 37D and were eligible for benefits under the FPS. Such benefits are also available under MEIS, which came into effect from 01.04.2015 and has effectively replaced the FPS - In this view, it would be difficult to accept that the intention of the Central Government was to not grant export incentives to industrial valves and restrict the same only to valves used in bicycles for a short intervening period. It is clarified that industrial valves falls squarely within the goods covered under serial no. 269 of Appendix 37D - The impugned notice cannot be sustained - petition allowed.
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2018 (1) TMI 776
Release of goods - Prohibited goods - wrong shipment of 78 cartons - permission to re-export cargo - Held that: - Admittedly, it is a case of mis-declaration. Therefore, the petitioner cannot escape by merely stating that, they are concerned about remaining cargo and sofar as 78 cartons, containing adult toys are concerned, they do not want clearance. The question of clearance of the remaining cargo can happen, only if the petitioner seek for re-export of the 78 cartons, which according to them has been wrongly shipped - petition disposed off.
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2018 (1) TMI 775
Cancellation of DEPB Scrips - denial of benefit on the ground that it was subsequently found that the said Exim International had obtained DEPB scrips fraudulently on the basis of fake documents - Held that: - There is no allegation that the appellants have colluded in any manner with Exim International in the fraud committed by the latter for obtaining the DEPB scrips. The appellants have purchased the scrips in a bonafide manner and with bonafide belief that they were genuine and valid - similar issue decided in the case of CC, Amritsar Vs. Vallabh Design Products [2007 (4) TMI 274 - PUNJAB & HARYANA HIGH COURT], where it was held that in the case of DEPB scrips obtained by fraud and forgery and where the transferee of these scrips are not a party to the fraud and were obtained on payment of full price from the open market on bonafide belief, the transferee is not liable to duty, penalty and interest - appeal allowed - decided in favor of appellant.
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2018 (1) TMI 774
Refund of SAD - N/N. 102/2007-CUS dated 14.09.2007 - rejection on the ground of time limitation - whether the refund claim of ₹ 19,55,354/- filed under the exemption N/N. 102/2007-Cus dated 14.09.2017 filed on 06.01.2016 for imports made in January 2014 is barred by limitation? - Held that: - The Hon’ble Bombay High Court in the case of M/s. CMS Info Systems Limited Versus The Union of India & Others [2017 (1) TMI 786 - BOMBAY HIGH COURT] has held that the period of one year has been prescribed under said N/N. 102/2007-Cus. as a condition precedent required to be fulfilled for availing exemption. Therefore, filing the refund application filed after one year from the date of import as prescribed under the said Notification is barred by limitation - appeal dismissed - decided against appellant.
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2018 (1) TMI 763
Refund of excess duty paid - denial on the ground of unjust enrichment and non compliance of provisions of Sec. 27(ii) of the CA, 1962 - Held that: - The Adjudicating Authority in the OIO has accepted the fact that the a refund claim is filed by the appellant is correct in so far as the quantum is concerned as it is arising out of finalization of the Bills of Entry - on plain reading of the CA certificate which is reproduced in the Adjudication order it is noticed that the said CA specifically records that based on the examination of the books of accounts of the respondent they have come to a conclusion that the amount of refund claim of ₹ 3,69,633/- in the case in hand has been shown as amount receivables - the First Appellate Authority was correct in setting aside the OIO. Appeal dismissed - decided against Revenue.
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Corporate Laws
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2018 (1) TMI 773
Winding up proceedings - bonafide dispute - Held that:- From perusal of the above communication that firstly it is in reply to the communication dated 01.04.2009 sent by the petitioner. In the letter dated 01.04.2009, the petitioner is again asking for balance 50 per cent dues plus additional amount for other services. Interest has also been sought for the delayed payment. The respondent has categorically denied that the said amount does not match their books of accounts. On a plain reading of the said communication it is manifest that they have disputed the said dues of the petitioner. The respondent has been able to raise a bona fide dispute about the liability of the respondent to pay the said amount. There is no merit in the present petition. Accordingly, the present petition is dismissed. It is however clarified that nothing said herein will in any manner tantamount to prejudice the case of the petitioner in case the petitioner chooses to start any alternate proceeding as per law.
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Insolvency & Bankruptcy
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2018 (1) TMI 816
Corporate Insolvency Resolution Process - Whether the respondent succeeded in proving existence of a genuine dispute as alleged in the reply? - Held that:- No proof produced in support of oral intimation of dispute to the petitioner prior to the date of receipt of the demand notice by the respondent. The demand notice was received by the respondent on 28.06.2017. In the absence of proof to prove that the respondent raised the dispute as highlighted in the reply prior to the receipt of the notice from the petitioner we find no merits in the contention of the respondent that there was a pre-existing dispute as alleged. Thus, the contention of the respondent that a dispute was in existence and therefore a petition of this nature is not maintainable is found devoid of any merit. This point is answered accordingly. The contentions of the respondent that there was pre-existing dispute regarding the services given by the petitioner to the respondent and that pendency of arbitration proceedings initiated at the instances of the respondent bar the instant petition is found devoid of any merit. Given the abovesaid discussion, we have no hesitation to hold that this petition deserves admission under section 9 of I&B Code. Accordingly, we admit this Petition u/s. 9 of the Code declaring a moratorium for the purposes referred to in section 14 of the Code
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Service Tax
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2018 (1) TMI 771
Construction project of Delhi Haat in INA and Pitampura - commercial nature of the construction undertaken by the respondent - whether classified under Commercial or Industrial Construction Service or otherwise? - Held that: - the constructions undertaken by the appellant are in pursuance of composite works contracts and were not liable to be taxed prior to 01.06.2007. The SCN was issued on 27.05.2011. On that date, both the tax entries, namely, Commercial or Industrial Construction Service and Works Contract Service, were available in the Finance Act, 1994. The SCN did mention this in the first para itself. However, the proposal for tax demand was specifically made under Commercial or Industrial Construction Service under Section 65 (105) (zzq) of the Finance Act, 1994. In such situation, it cannot be a case of simple mentioning of wrong provisions of law. Since the impugned order dealt with the tax liability for the whole period only under the Commercial or Commercial or Industrial Construction Service, the same is not sustainable - appeal dismissed - decided against Revenue.
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Central Excise
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2018 (1) TMI 770
Area based exemption - exemption in respect of NCCD, EC and SHEC - N/N. 50 of 2003 dated 10.06.2003 - CENVAT credit - penalty u/s 11AC - Held that: - There is no dispute that the appellant has availed the benefit of said Notification. It be noted that under the same, the Authority has granted exemption from the whole of the duties payable under the enactments mentioned therein. In other words, it is not a case of partial exemption. There is no dispute that the appellant proceeded to clear the final products without payment of NCCD, EC and SHEC - We have already noticed the terms of the exemption Notification, which is involved in this case, namely, Exemption Notification No. 50 of 2003. This Notification was issued invoking the power under Section 5A and sub-section 3 of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section 93 of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978). The Government granted area based exemption in respect of the goods specified in the first and the second schedule to the Central Excise Tariff Act, 1985, other than certain goods, which were mentioned, with which, we are not concerned. The exemption was from whole of the duty of excise or additional duty of excise, which were levied under the said Acts. The power to exempt payment of NCCD and the cesses in terms of the Act and the Rules are certainly available in relation to NCCD and the cesses, but they remain levies under the concerned Finance Acts. Since they are part of the basket of levies embraced under Rule 3(1) making up the aggregate of the CENVAT credit, subject to any restriction or limitation, which may be found elsewhere, there can be no doubt that the assessee can make use of the basic excise duty under the Act for payment of the NCCD or the cesses on the final product. A perusal of the provisions of Section 11AC as it stood would show that the fact of payment of the duty may not help the appellant to contend that it can extricate itself from the liability to pay penalty under Section 11AC, if the appellant is otherwise liable to pay penalty under the said provision. The appellant has not paid the penalty. Therefore, if the provision relating to Section 11AC is otherwise applicable, appellant cannot lay store by payments, which it had made, be it under protest or without protest. Therefore, we reject the contention and also the question of law raised in this regard. We reject the case of the appellant that the appellant is entitled to claim the CENVAT Credit on the basic excise duty paid on the raw materials for payment of NCCD and the cesses. The question of law is answered against the appellant in all these Appeals in this regard. The fact of payment of the duties in question in all the Appeals, be it under protest or otherwise, cannot, in the light of the extant provisions, extricate the appellant from liability to pay the penalty, if it is otherwise found to be liable and the question of law raised in this regard is answered against the appellant. As far as the question relating to whether the appellant was entitled to make use of the basic excise duty paid on raw material for the payment of NCCD and the cesses and therefore, penalty should not be imposed, the matter is remitted back to the Tribunal and to the said extent. Appeal allowed in part and part matter on remand.
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2018 (1) TMI 769
Requirement of Special Audit u/s 14AA of the CEA 1944 - transactional years 1999 to 2005 - Held that: - the Commissioner/Respondent No.1 was under a legal obligation not only to comply with the twin obligations specified in the order dated 6th December, 2016 (supra) but, also to apply his mind with regard to the requirement of Section 14AA of the 1944 Act on the basis of the materials made available by the petitioner/assessee which gave ample evidence of the fact that there were no reasons to believe that the credit availed of had exceeded the outer limit - stay granted Let the matter next appear under the same heading ‘Court Application’ at the top on 17th January, 2018.
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2018 (1) TMI 768
Maintainability of appeal - supply of the documents which sought to be relied - Held that: - the issue is covered by the decision of the Supreme Court in Kothari Filaments vs. Commissioner of Cus. (PORT), Kolkata [2008 (12) TMI 28 - SUPREME COURT], and it was binding upon the officer to follow the said decision, otherwise any damage to the petitioner will be recovered from erring officer for not following the judgments which are binding and it will be open for the court to pass an appropriate order for recovery of the amount from the officer - this exparte order is passed in view of the fact that inspite of representation made for supplying documents, the same has not been supplied. The officer will now act in accordance with law and will not proceed arbitrarily, without giving proper opportunity to the petitioner. Petition disposed off.
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2018 (1) TMI 767
Recovery of Excise duty - extended period of limitation - whether this Court should permit the petitioner to now challenge the Order-in-Original dated 10.01.2014 when the appeal filed against the said order stood dismissed though on a technical ground? - Held that: - it appears due to the impugned proceedings under the Central Excise Act, the petitioner is now faced with proceedings under the Income Tax Act and the Tamil Nadu Value Added Tax Act and the matters are pending at various stages - though the Order-in-Original was passed in the year 2014, the Central Excise Department has not been able to recover a portion of the amount pending disposal of the appeal and the Department have been drawn into the litigation ever since 2014 onwards - with a view to protect the interest of Revenue and also to give an opportunity to the assessee to remedy the breach, this Court is inclined to issue appropriate directions. While rejecting the challenge to the impugned order, direction is issued to the petitioner to pay a sum of ₹ 75 lakhs on or before 16.02.2018 - petition disposed off.
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2018 (1) TMI 766
Penalties - Clandestine manufacture and removal - “Gutka” with brand “Pan King” - it was alleged that two packing machines were found to be in working condition - Held that: - At the factory of M/s MRTPL, at the time of search, the packing machines were found sealed. But there was evidence of the activity of preparation of gutka mix as evidenced by the presence of workers actively engaged as well as the oven which was found in hot condition. Sufficient material has been brought on record by Revenue in their investigation, to establish the fact that S/Shri Chander Kumar Gupta and Himanshu Gupta have master-minded the evasion of excise duty by procuring packing machines illegally and installing the same at the premises at Libaspur and getting gutka manufactured and packed in the said premises - The entire activity has been carried-out and financed by S/Shri Chander Kumar Gupta and Himanshu Gupta. Consequently, their role in the evasion of excise duty stands fully established - penalties imposed on S/Shri Chander Kumar Gupta and Himanshu Gupta upheld. Cross-examination of witnesses - Held that: - the witnesses, whose cross-examination have been sought, have voluntarily given the statements. Since all the witnesses were under the control of the appellants, offering them for cross-examination will not serve any purpose since the witnesses can be easily manipulated to deny their earlier statements. Appeal dismissed - decided against appellant.
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2018 (1) TMI 765
Clandestine manufacture and removal - process of fabrics - corroborative evidences - Held that: - Revenue authorities have miserably failed in bringing on record the evidence as to whom the clandestine clearance were made in any form - In the absence of details of recipient of the goods or any evidence they had accepted and admitted the receipt of goods; also in absence of clandestine purchase of raw-materials, unexplained consumption of electricity, movement of goods through transporters and receipt of sale proceedings, the demand made against the appellant seems to be incorrect and unsustainable - appeal allowed - decided in favor of appellant.
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2018 (1) TMI 764
Benefit of N/N. 108/1995-CE dated 28.08.1995 - supplies to projects financed by the World Bank, Asian Development Bank or International Organization approved by the Government of India - denial of benefit on the ground that specified goods were cleared to the contractors of the project instead of the Project Authorities. Whether the denial of exemption on the ground that the impugned goods are supplied to the contractor of the project instead of the Project Authorities is correct or not? - Held that: - The Hon’ble High Court in the case of The Commissioner of Central Excise Versus M/s. Caterpillar India Pvt. Ltd. [2013 (7) TMI 244 - MADRAS HIGH COURT], held that the use of the phrase supply to the projects financed by United nations or International Organization and approved by the Government of India clearly shows that the condition for grant of exemption is supply of the goods towards the project. That since the conditions are satisfied, the benefit of exempton cannot be denied stating that the goods were supplied to the contractor - the denial of exemption benefit on the ground that the goods were cleared to contractors cannot sustain. Denial of exemption on the basis of Explanation 2 inserted in N/N. 108/1995-CE w.e.f. 01.03.2008 - Held that: - The appellant has complied with the condition of furnishing certificate of designated authorities. The department allowed clearance of the goods without any murmur on the validity of the certificate. The department cannot later turn around to deny exemption by interpreting Explanation 2 to the effect that the exemption is not available if the goods are withdrawn from project site. Denial of exemption is unjustified - appeal allowed.
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2018 (1) TMI 762
Demand of differential duty - Section 11D of CEA - Sale of imported and indigenous petroleum products – Allegation that duty reflected in the invoice in respect of imported products was higher than the CVD actually paid – Held that: - similar issue decided in the case of INDIAN OIL CORPORATION LTD. Versus COMMR. OF CUS., KANDLA [2008 (4) TMI 93 - CESTAT, AHMEDABAD], where it was held that there is system of adjustment of duty paid by oil pool account. Duty collected was not retained by the appellants but deposited with Central Govt, so allegation of excess collection of duty is not correct - the demand u/s 11D against the Appellant is not sustainable - appeal allowed.
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2018 (1) TMI 761
CENVAT credit - common input (furnace oil) used for manufacture of dutiable (aerated waters) as well as exempt goods (Maaza Mango) - non-maintenance of separate records - appellants contend that they have reversed proportionate credit and therefore may not be compelled to pay the 8%/10% of value of clearances - Held that: - In similar set of fact, the Tribunal in the case of CCE, Trichy vs Tamil Nadu News Print & Paper Ltd [2014 (8) TMI 248 - CESTAT CHENNAI] observed that when proportionate credit is reversed there is no requirement to pay 8%/10% of value of clearance - it needs to be verified whether the amount reversed would be the actual proportionate credit or not. For this limited purpose the matter requires to be remanded to the adjudicating authority. Penalty - Held that: - issue is an interpretational one and had travelled up to the Hon’ble Supreme Court. Further the period involves pre as well as post amendment - penalty imposed is unwarranted and requires to be set aside. Appeal allowed by way of remand.
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2018 (1) TMI 760
Liability of Service Tax - Renting of Immovable Property Services - benefit of N/N. 6/2005-ST dt.1.3.2005 - Held that: - the Renting of Immovable Property Services is not rendered by the firm and the same cannot be clubbed with the services rendered by the firm - demand set aside. Penalty - Held that: - it was an interpretational issue as to whether the renting services rendered by them in their individual capacity can be clubbed together with that of the services rendered by them as partners of the firm - the levy of penalty is unwarranted. Appellant has discharged the entire service tax liability in regard to Mandap Keeper Service and is not contesting this demand, penalty on this issue set aside. Appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (1) TMI 759
Direction to the respondent-authorities to take strict disciplinary/departmental action resulting into awarding major punishing against respondent No.6-Rajesh Verma, Excise and Taxation Officer-cum- Designated Officer, Jalandhar-I - it was alleged that Respondent No.6 acting with malafide intention and to cause wrongful loss to the petitioner started harassing him on the pretext that the tax leviable on the silicon is 13.75% and not as 5.5%. Held that: - learned State Counsel was directed to produce the inquiry report as well as other relevant record for perusal of the court. In compliance thereto, enquiry report dated 13.8.2017 and other relevant record was produced. A perusal of the said report shows that all the charges have been proved against respondent No.6 - the writ petition is disposed of as infructuous as after the charges have been proved against respondent No.6, further disciplinary action is being taken against him in accordance with the relevant rules.
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Indian Laws
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2018 (1) TMI 772
Recovery of Compensation fines - Sec.357(1)(b) of the Cr.P.C. - Issuance of non-bailable warrant - grievance of the petitioner is that the trial court had subsequently taken up steps for execution of the impugned sentence and had issued, not only distress warrant for recovery of the compensation amount but had also issued nonbailable warrant against the petitioner, even though the petitioner had suffered more than the required substantive sentence and default sentence, in terms of Ext.P-2 revisional order passed by this Court. Held that: - In case like the one involved in the instant case, where the accused has already suffered the default sentence for offence punishable under Sec.138 of the Negotiable Instruments Act and he has not paid the compensation amount payable in terms of Sec.357(3)of the Cr.P.C., then the same is recoverable as if it were a fine in terms of the deeming provision contained in Sec.431(1) of the Cr.P.C., by taking recourse to the procedure for recovery of fine contained in Sec. 421 (1). The matter in issue involved in this case is fully covered against the petitioner by virtue of the dictum laid down by the Apex Court in the decision in Kumaran v. State of Kerala, [2017 (5) TMI 372 - SUPREME COURT OF INDIA], where it has been held by their Lordships of the Supreme Court that in case the accused is convicted for offence under Sec.138 of the Negotiable Instruments Act and sentence of imprisonment with compensation is imposed and there is a default sentence clause for non-payment of compensation and even if the accused has undergone the default sentence, the compensation could still be recoverable in the manner provided in Sec.421(1) of the Cr.P.C., 1973 and that this would be without necessity for recording of any special reasons, as provided in Sec.386(1) of the old Code. Sec.421 deals with warrant for levy of fine. Time limitation - Held that: - In the instant case Ext.P-2 revisional order was passed on 26.10.2007. A perusal of Ext.P-7 proceedings sheet would disclose that distress warrant was issued by the trial court as early as on 13.2.2009. Therefore, the issuance of the distress warrant by the trial court for recovery of the due compensation amount payable by the accused, is legally correct and proper and the trial court has necessary jurisdiction in that regard going by the abovesaid legal position and the action for issuance of distress warrant has been taken within the permissible time limit envisaged in Sec.70 of the I.P.C. Petition disposed off.
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