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TMI Tax Updates - e-Newsletter
January 19, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Protective assessment - Double addition - the fact that a protective assessment has been completed against the assessee’s wife does not ipso facto mean that assessment of such items of assets at the hands of the assessee is unsustainable. - HC
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Treatment to issuance of CCDs as a loan - TPA - issuance of CCDs was denominated in Indian Rupees and not foreign currency. Therefore, TPO has erred in considering LIBOR as benchmark rate which is in complete contradiction to the principles on the issue. - AT
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Adjustment arrived by TPO in respect of notional interest - buyback of shares - assessee had given justification of the buy-back price by pointing-up the NAV of the investee company on the date of buy-back, which was much lower than buyback price - CIT(A) has made no mistake in deleting the addition - AT
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Penalty u/s 271(l)(c) - it is a case where the hypothesis of there being a concealment of income and there not being concealment of income are equal - no penalty - AT
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Exemption U/s 11 and 12 - non charitable activities - receipt of rent - the dominant motive in this case is not earning profit but to do charity in the form of public service by providing accommodation to the common man at affordable rates - benefit of exemption allowed - AT
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Eligibility to claim of deduction u/s 5F - even though the property was registered in the name of assessee’s wife and daughter in law the deduction as claimed by the assessee u/s 54F is to be allowed. - AT
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Validity of reopening of assessment - The allegation is of bogus loss from brokers by client code modification being booked in the accounts - such loss was not placed before the AO for consideration - reopening sustained - HC
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TDS u/s 194I - Passenger Service Fees (PSF) - PSF paid by the asssessee to the airport operators was not covered under the definition of rent given in the Explanation (i) to Section 194-I - HC
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Estimation of profit @ 8% on the alleged bogus purchases - the assessee has failed to prove beyond doubt that the purchases made from the concerned parties are genuine, there is no other option but to estimate the profit element embedded in the bogus purchases - AT
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Revision u/s 263 - nature of modification and improvement expenditure leasehold Workshop - the observation of the CIT that said expenditure is capital in nature (not Revenue in nature) and eligible for Depreciation is correct - AT
Central Excise
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Valuation - the goods were partly sold at factory gate and duty was paid. Remaining goods were transferred to the Depot. Therefore, Rule 7 of Central Excise (Valuation) Rules, 2000, is not applicable in the instant case - AT
Case Laws:
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Income Tax
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2017 (1) TMI 903
Penalty u/s. 271(1)(c) - Assessee had sold depreciable assets and had claimed STCG - Held that:- penalty u/s. 271(1)(c) cannot be levied automatically if the issue is only about had under which the particular income should be assessed. In the case under consideration, the assessee had filed all the necessary details about the share transaction, that the AO and the assessee had difference of opinion about the treatment to be given to the said transaction. All the details of the transactions were available to the AO. Therefore, it could not be held that assessee had filed inaccurate particulars of income had concealed the particulars of income. - Decided in favour of assessee
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2017 (1) TMI 902
Subsidy received from Government of India under Technology Upgradation Fund Scheme (TUF Scheme) disallowed - Held that:- Subsidy received was capital in nature. See Sahney Steel and Press Works Ltd. vs CIT (1997 (9) TMI 3 - SUPREME Court), CIT vs P.J. Chemicals (1994 (9) TMI 1 - SUPREME Court) - Decided in favor of assessee.
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2017 (1) TMI 901
Eligibility to claim of deduction u/s 5F - treatment to one unit - Held that:- The pent house purchased by the assessee in the form of duplex flat is a single residential house/single owned by the assessee at the time of transfer of original asset and the claim of the assessee under section 54F is allowable. Property not registered in the name of assessee himself - new asset was purchased in joint name of assessee's wife and daughter in law - Held that:- Asset need not be registered in the assessee’s name but should belong to the assessee. In the case on hand it is not disputed that the entire sale consideration has been passed through cheques which were given by the assessee. We also notice that the Revenue is assessing the rental income from the very same property in the hands of the assessee. In such circumstances, it cannot be denied that the assessee is not the real owner of the property. Therefore in view of various judicial pronouncements relied on by the assessee referred to in para 7 above we hold that even though the property was registered in the name of assessee’s wife and daughter in law the deduction as claimed by the assessee under section 54F is to be allowed. - Decided in favour of assessee
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2017 (1) TMI 900
Validity of reopening of assessment - reasons to believe - The allegation is of bogus loss from brokers by client code modification being booked in the accounts. - Held that:- The insistence on behalf of the petitioner that the Assessing Officer did not have any material to invoke Section 148, gave reasons for such invocation, and has proceeded to reassess without disposing of the objection raised in respect of such invocation and, therefore, all steps of the Assessing Officer ought to be set aside, is without any basis, in the facts of the present case. AO had received credible information as to income escaping assessment for the relevant assessment year. He had applied his mind to it and had informed the petitioner of his intention to invoke Section 148. He had given his reasons for doing so. AO had reasons to believe that, there was under assessment and that he has reasons to believe that, such under assessment had resulted from non disclosure of materials facts. Both of these two essential conditions are present in this case. The allegation is of bogus loss from brokers by client code modification being booked in the accounts. The reasons supplied by the Assessing Officer as noted above, allows one to infer that, the Assessing Officer had addressed its mind to such issue. The petitioner has not demonstrated any material to substantiate that, such loss was placed before the Assessing Officer for consideration and that, the Assessing Officer had taken a view after production of the material facts by the assessee, before it. - Decided against assessee
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2017 (1) TMI 899
TDS u/s 194I - Passenger Service Fees (PSF) paid by the asssessee to the airport operators - whether payment was not covered under the definition of rent given in the Explanation (i) to Section 194-I - Held that:- As the substance of the PSF is not for use of land or building but for providing security services and facilities to the embarking passengers the decision of the Apex Court in Singapore Airlines (2015 (8) TMI 185 - SUPREME COURT ) would cover the issue in favour of the respondent-assessee.Tribunal was justified in upholding the order of the Commissioner of Income Tax (Appeals) (CIT(A)) and holding that the PSF paid by the asssessee to the airport operators was not covered under the definition of rent given in the Explanation (i) to Section 194-I. Appeal admitted on second question: Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding the order of the CIT(A) and holding that the amount retained by a bank/credit card agency out of the sale consideration of the tickets booked through credit cards is not covered under the definition of “commission or brokerage” given in the Explanation (i) to Section 194H of the Act and the assessee was not liable to deduct tax at source under Section 194H in respect of this amount?”
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2017 (1) TMI 898
Estimation of profit @ 8% on the alleged bogus purchases - Held that:- As in absence of any evidence to prove the fact that the assessee had actually taken delivery of goods, assessee’s claim that purchases were genuine cannot be accepted. Therefore, the assessee’s claim that the entire addition should have been deleted is not acceptable. At the same time, it is a fact on record, that the A.O. has not disputed the sales effected by the assessee. Hence, the assessee might have purchased the goods from some other source. Taking this into consideration and also the fact that the assessee has failed to prove beyond doubt that the purchases made from the concerned parties are genuine, there is no other option but to estimate the profit element embedded in the bogus purchases. Moreover, we have also noted that the assessee himself before the A.O. as well as ld. CIT(A) had taken an alternate contention to estimate the profit at 8%. Therefore, on an overall consideration of facts and materials on record, we are of the considered view that the ld. CIT(A) was justified in estimating the profit at 8% of the bogus purchases
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2017 (1) TMI 897
Disallowance of interest paid on money borrowed at higher rate of interest - Held that:- From the record we found that assessee was having sufficient interest free funds in the nature of shares capital, reserve and surplus and advances for sale of flats. Substantial portion of the advances and deposits were given purely for business purpose for having property on development on which no interest can be charged. From the record, we also found that following advances and deposit were given purely for business of property development and thus no interest can be charged on the same. We also found that the Assessing Officer has wrongly in calculating average rate of interest on the balance amount outstanding as at 31.03.2010 instead of taking average balance during the year. This would have clearly shown that the average rate of interest on loan taken is same as that of average rate of interest on loan given. We attach herewith a statement showing average rate of interest on of loan taken and given. As per this statement the average rate of interest on loan taken is 11.28% and average rate of interest on loan given is 11.20%. Thus advances were given out of owned funds and for business purposes, therefore, no disallowance can be made in respect of advances given for the purpose of business. - Decided in favour of assessee
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2017 (1) TMI 896
Revision u/s 263 - unsigned notice by the designated authority - notice was issued by DCIT - non reasons for treating the order of AO as erroneous and prejudicial to the interest of the revenue - Held that:- From the facts of the case in hand, we find that notice u/s 263 of the Act was not signed by the Commissioner of Income Tax as required under the provisions of law. In the similar facts and circumstances in the case of Bardhman Co-operative Milk Producers’ Union Limited vs CIT [2014 (5) TMI 1132 - ITAT KOLKATA] for A.Y.2003-04 and 2004-05 have decided the issue in favour of the assessee. We further find that there was no reason mentioned in the notice issued u/s 263 of the Act for treating the order of AO as erroneous and prejudicial to the interest of the revenue. In this case, we find that it is a mandatory requirement for the Ld.CIT to incorporate the reasons for treating the order of AO as erroneous and prejudicial to the interest of the revenue. In holding so, we rely upon the decision of the Hon’ble Madhya Pradesh High Court in the case of CIT vs Sattandas Mohandas Sidhi [1997 (6) TMI 13 - MADHYA PRADESH High Court] as held the notice should contain reasons as to how the order is prejudicial to the Revenue - Decided in favour of assessee
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2017 (1) TMI 895
Validity of reopening of assessment - notice u/s 143(2) not served within the stipulated time prescribed - calculation of time limit - Held that:- The decision of Krishna Mohan Banik Versus Income Tax Officer [1997 (9) TMI 72 - GAUHATI High Court] clearly supports the plea of the Assessee that the notice u/s.143(2) of the Act ought to have been served on the Assessee in the present case on or before 31.5.2008 as per the law as it prevailed when the Assessee filed return of income on 15.5.2007, whereas it was served only on 5.9.2008. Hence, the entire reassessment proceedings ought to be held as invalid and the order of reassessment is hereby annulled. In view of the aforesaid conclusion, the determination of total income in the reassessment order will have no effect. In the result, the appeal of the Assessee is allowed on the issue of order of assessment being held to be invalid for want of service of notice u/s.143(2) of the Act within the time required by law. - Decided in favour of assessee
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2017 (1) TMI 894
Revision u/s 263 - nature of modification and improvement expenditure leasehold Workshop - CIT observed that in view of the Explanation 1 to Section 32(1) inserted with effect from 01/04/1988, the assessee-firm's claim of allowance of said sum under revenue expenditure is not correct and the expenditure is however eligible for depreciation in accordance with the Explanation 1 to Section 32(1) - Held that:- The assessee has taken on lease the semifinished building with other structure and the assessee had made the modification and improvement to the semi-finished structure to suit the requirement of work shop (refer page 21 of paper book). Hence the assessee has only modified and improved the leased property to suit the requirement of its business. Hence, the explanation “1A” to section 32 will apply to the assessee’s case and the findings of ld. CIT is proper. Accordingly, we are inclined to uphold the order of CIT passed u/s 263 of the Act. - Decided against assessee
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2017 (1) TMI 893
Treatment to issuance of CCDs as a loan - TPA - considering LIBOR as benchmark rate - Held that:- There is no dispute with reference to the fact that the CCDs were issued in Indian Rupees. Accordingly we have to hold that TPO has wrongly treated the issuance of CCDs as a loan, by treating it as an external commercial borrowing, ignoring the fact that loan is a debt, whereas CCD is hybrid instrument in nature basically categorised as equity in nature Further, the policy of Govt. of India and also RBI effective from 01- 04-2010 also indicate that issuance of CCD is part of FDI being quasi-equity in nature and considering the same as a loan would be completely against regulations laid by DIPB, RBI and FEMA. It is to be reiterated that issuance of CCDs was denominated in Indian Rupees and not foreign currency. Therefore, TPO has erred in considering LIBOR as benchmark rate which is in complete contradiction to the principles on the issue. Thus we agree with the assessee’s contentions that the CCDs cannot be categorised as a loan and LIBOR plus two hundred basis points benchmark cannot be accepted on the facts of the case. Adopting the benchmark rate in Indian context, assessee has justified the ALP not only on the basis of SBI PLR, which was at 12.26% for the year under consideration, but also from the data from NSDL website in which average coupon rate ranged from 0.50% to 16.50% with an arithmetic mean of 12.50%. These rates were already before the TPO. Therefore, we are of the opinion that there is no need to restore the matter to the file of the AO for re-examination, when assessee has justified the issuance of CCDs at 12%. In view of that we are of the opinion that the rate at which the CCDs were given are within the range, therefore, no further addition can be considered under the TP provisions. - Decided in favour of assessee
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2017 (1) TMI 892
TDS u/s 194C - Non deducting tax on the payments made on account of reimbursement of shipping expenses to M/s Dolphin Maritime Agency Pvt Ltd. - Held that:- CIT(A) has considered Board’s circular No.715 dated 08-08-1995 which is on the issue of deduction of tax at source on the payments made for reimbursement of shipping charges. It is noted that the Ld. CIT(A) has merely sent the issue back to the file of the AO to verify the facts with the direction that disallowance shall be deleted only if the amount paid by the assessee represents the amount of reimbursement. During the course of hearing before us, nothing has been pointed out by Ld. DR in the directions and findings of Ld. CIT(A) which is incorrect on facts or on law. Under these circumstances, in absence of anything incorrect or wrong having been pointed out in the findings of Ld.CIT(A), we find that no interference is called for in the order of the Ld.CIT(A) and, therefore, the same is upheld. - Decide against revenue
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2017 (1) TMI 891
Adjustment arrived by TPO in respect of notional interest - buyback of shares - Held that:- The investment by the assessee in the equity shares of the subsidiary was undertaken in the past @ US $20.35 per share and during the year under consideration the subsidiary has undertaken buy-back at the same rate i.e. uS $20.35 per shares. The nature of the said transaction has been disbelieved by the Transfer Pricing Officer, who has recharacterized it as provision of loan/fund by the assessee to its subsidiary on interest-free basis in the garb of investment in equity of the subsidiary. It is a trite law that the transfer pricing proceedings do not envisage empowering of the Transfer Pricing Officer to re-characterize the transactions on the basis of his own whims and fancies. In the present case, the CIT(A) has correctly brought out that the transactions of investment and buy-back of shares has been spread over more than one year and that there was no material to suggest that the stated transactions were unreal. Even with regard to the value at which the buy-back of shares has been undertaken by the investee subsidiary company, the CIT(A) noted that the valuation of shares has not been disputed by the Transfer Pricing Officer during the proceedings before him. In fact, the CIT(A) has categorically observed that the Transfer Pricing Officer in his order has observed the per share price of the shares as reflected in the Balance Sheet of the assessee for the various years. On this point, we also note that before the Transfer Pricing Officer, assessee had given justification of the buy-back price by pointing-up the NAV of the investee company on the date of buy-back, which was much lower than buyback price. We find nothing adverse on such assertions of the assessee. Therefore, under these circumstances, in our view, the CIT(A) has made no mistake in deleting the addition. Whether the Transfer Pricing Officer is competent to re-characterize a tested transaction - Held that:- The ratio of the reasoning approved by the Hon'ble Bombay High Court in the case of Besix Kier Dabhol SA (2012 (10) TMI 817 - BOMBAY HIGH COURT ) clearly militates against the action of the Transfer Pricing Officer in re-characterizing the transaction of investment in the equity shares of the subsidiary as a loan transaction in the instant case. There was no provision under the Act by which equity could be re-characterized into debt and vice-versa. Also noted that at the relevant point of time there were no rules with regard to thin capitalization so as to consider the debt as equity and that such a proposal was only part of Direct Taxes Code Bill of 2010 as a part of General Anti Avoidance Rules (GAAR) and that in the absence of any such statutory provision the stand of the Revenue could not be upheld. - Decided against revenue
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2017 (1) TMI 890
Penalty u/s 271(1)(c) - additions made with the aid of section 68 - Held that:- The assessee failed to substantiate the alleged loans given by five entities. According to the assessee, representatives of all the concern came to Income-tax department in the quantum proceedings but after examination of one, rest of them ran away. It shows that transaction was not genuine. Facts in the case of National Textiles (2000 (10) TMI 19 - GUJARAT High Court) relied upon by the ld.counsel for the assessee are quite distinguishable. Therefore, considering well reasoned finding of the ld.CIT(A), I find no reasons to interfere in the order of ld. CIT(A), the same is confirmed and the appeal of the assessee is dismissed. - Decided in favour of revenue
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2017 (1) TMI 889
Admission of additional evidence - Held that:- The Incometax Act, by a statutory mandate, gives the right to an assessee to submit additional evidence and obliges the appellate authority to decide whether the additional evidence is admissible for consideration in terms of Rule 46A of the Income-tax Rules, which has not been done in this case resulting in a statutory mistake in the order which needs to be corrected. Be that as it may, looking at the fact that the assessee is a student and indulged in share trading activities which are claimed to be resulted into losses, no comments on merits of the facts of the case can be commented from the Bench at this level. However, looking at the facts and circumstances of the case, it is directed that the additional evidence stands admitted. The appeal is thus remitted back to the ld. CIT(A) to consider the additional evidences filed by the assessee and decide the appeal after affording the assessee adequate opportunity of being heard.
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2017 (1) TMI 888
Penalty under section 271(l)(c) - claim of deduction u/s 80IB disallowed - proof of concealment of income - Held that:- Nothing has been brought before us to show whether any of the expenses were found to be bogus or false. The claim of the assessee made u/s 80-IB was reduced only because of re-allocation of expenses done by the AO. The exercise of reallocation was done by the AO on the basis of his information and understanding disregarding the claim of the assessee, which was based upon a certificate in form 10CCB issued by a professional expert. Nothing has been brought on record by the AO to show if the certificate was based upon any erroneous premises or wrong facts supplied by the assessee. During the course of penalty proceedings, the assessee furnished detailed explanation in this regard and again took help of his argument that the claim u/s 80IB was made relying upon the certificate wherein bifurcation of expenses was made by a professional expert. The AO did not examine the concerned Chartered Accountant during the course of penalty proceedings before rejecting the explanation of the assessee. Nothing was brought on record by the AO to negate the assertion of the assessee that the claim u/s 80-IB was based upon his bona fide belief for making apportionment of expenses in the manner as was done by the assessee. Even otherwise, the re-allocation exercise done by the AO would also involve some kind of guess work which cannot be said to be purely scientific or devoid of any flaws. If the allocation done by the assessee was not precise and correct as per facts of the case, then, it can also not be said that the re-allocation exercise done by the AO was free from any doubts or ifs and buts. Thus, it is a case where the hypothesis of there being a concealment of income and there not being concealment of income are equal. Under these circumstances, in our considered opinion, it cannot be said that there was any kind of concealment or furnishing of inaccurate particulars of income by the assessee. - Decided in favour of assessee
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2017 (1) TMI 887
Exemption U/s 11 and 12 - non charitable activities - receipt of rent as hit by the amended provisions of Section 13(8) r.w. 1st and 2nd proviso of Section 2(15) - Held that:- As decided in assessee’s own case for the A.Y. 2010-11 as held by the Apex Court in the case of Surat Arts Silk (1979 (11) TMI 1 - SUPREME Court) what is important in the case of trust or institution is the primary or dominant purpose. If the dominant purpose is charitable, another object which by itself may not be charitable, would not prevent the trust or institution from being a valid charity. It is noted in this case that the charges for the room are very nominal. This also indicates that there is no profit motive involved in this case. Thus it is apparent that the dominant motive in this case is not earning profit but to do charity in the form of public service by providing accommodation to the common man at affordable rates. The activities of the assessee, therefore, cannot be characterized as business activities. Hence, proviso to section 2(15) is not attracted in this case and, therefore, the disallowance of exemption u/s 11 & 12 is unjustified. The AO is, accordingly, directed to assess the society as per the provisions of section 11 & 12, and grant the requisite exemption. - Decided in favour of assessee.
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2017 (1) TMI 886
Undisclosed income addition u/s.69 - Held that:- We find that a unsigned paper was seized from the residential premises of one of the group members of the builders,that the group had made a disclosure of ₹ 22.50 crores,that there are two statements of same member of the group,that in one of the statements he had stated that in all the cases cash was not received,that the assessee had denied payment of cash for purchase of the shop, that he was not allowed to cross examine the builder.In our opinion,Rule 46A is not applicable to the facts of the case.The assessee had not filed additional evidences before the FAA,so,there was no justification for invoking the provisions of Rule 46A of the Rules. We find that in the case of Synthetic Hydro Carbon (2012 (9) TMI 1086 - ITAT MUMBAI),the Tribunal has dealt with the same issue.In that matter also a shop was purchased from the same vendor and on the basis of the seized paper the AO had made an addition to the income of the assessee wherein held that no material brought on record by the AO to substantiate his claim that assessee has actually paid ₹ 52,26,000/- over and above the cheque amount for the purchase of Shop No. 119 at Little World. The entire assessment has been made only on the basis of surmise, assumptions and conjectures. In our humble opinion, such additions cannot be sustained - Decided in favour of assessee
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2017 (1) TMI 885
Scope of rectification of mistake - whether AO empowered to reduce the deduction claimed by the assessee u/s 80-IC @ 30% accepted u/s 143 invoking the provisions contained u/s 154 - Held that:- Undisputedly, the AO has passed order dated 29.03.2012 u/s 154 summarily without perusing and discussing the record to find out if the assessee is actually entitled for deduction u/s 80-IC @ 100% as claimed or 30% as held by the AO. It is settled principle of law that when there exists a debatable issue that two views are possible, it is not open to the authority u/s 154 of the Act to revise the opinion by invoking the provisions contained u/s 154 of the Act and only mistake apparent on record can be rectified. In the instant case, this is not a mistake apparent on record rather the issue was debatable and required to be decided on merit. So, we are of the considered view that the impugned issue decided by the AO u/s 154 is not rectification rather it amounts to reframing of the assessment without giving any reason. However, the revenue is at liberty to reopen the assessment in accordance with law. Even otherwise, the assessee has already been granted 100% deduction u/s 80-IC for AY 2010-11 vide order dated 15.07.2014 passed by CIT (A) which is not stated to have been challenged by the revenue. So, when the assessee has already been allowed 100% deduction u/s 80-IC till 10th year of its operation, the disallowance u/s 80-IC for the intervening year AY 2006-07 does not fit into the scheme of rule of consistency which the revenue is required to follow. - Decided in favour of assessee
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2017 (1) TMI 884
Nature of expenditure - revenue or capital - Held that:- We find that the assessee has carried repair to the existing factory building at Vapi and to strengthen the beam of the existing building. The assessee also carried out repair of boundary walls of factory at Nasik. Once this is repair, the expenditure is Revenue in nature, hence, we agree with the findings of CIT (A) and confirmed the same. Disallowance of expenses relatable to exempt income by the AO by invoking the provisions of Section 14A read with Rule 8D - Held that:- We noticed that the assessee has interest free fund in the balance sheet amounting to ₹ 43.57 crores and investment is amounting to ₹ 25.39 crores. There is presumption that the assessee might have made investment out of its own interest free funds available with him, in case AO is unable to prove nexus. This view of ours is supported by the decision of Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ). Respectfully following the Hon’ble High Court, we confirmed the decision of CIT (A) and this issue of Revenue’s appeal is dismissed. Addition made being work-in-progress - Held that:- AO has made adhoc disallowance of 1% on raw material and CIT (A) deleted the same as there is no evidence. We find no infirmity in the order of CIT (A) and hence deletion is confirmed Addition of foreign travel expenses - Held that:- The argument of the assessee that such foreign travel is to source new suppliers is not maintainable as the majority of purchases shown by the assessee is from Germany, China, UAE, South Korea and the foreign travel expenditures to such places have already been considered and allowed. As the assessee failed to file corroborative evidence to justify that such foreign travel is wholly and exclusively for the purpose of business, the AO disallowed the expenses of ₹ 7,34,610/- with regard to visit of Arbind M. Kapoor to Zurich and Kualalumpur and the visit of Adidtya Kapoor to Zurich and Hongkong. The CIT (A) also confirmed the disallowance of Foreign Travel Expenses exactly on identical reasons. Before us also, assessee could not controvert the finding of CIT(A) or the AO, hence we confirm the disallowance and dismiss this issue of assessee’s appeal.
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2017 (1) TMI 883
Eligiblity to claim the benefit of deduction u/s 80HHC on the amount of sales-tax refund received - Held that:- As stated that the assessee is a trader and not a manufacturer. Therefore, provisions of Explanation (baa) to section 80HHC are not applicable upon the assessee as were applied by the AO. Further, it is also noticed by us that sales-tax refund received by the assessee was nothing but reduction of cost of purchase. In substance, it does not make a difference in whatever manner the accounting has been done by the assessee. The sales-tax refund received by the assessee clearly goes to reduce the cost of purchases of the assessee. Under these circumstances, we find that the findings of Ld. CIT(A) are well reasoned and he has not erred in treating sales tax refund as eligible component for deduction under section 80HHC. See Topman Exports vs CIT (2012 (2) TMI 100 - SUPREME COURT OF INDIA). No contrary view was brought before us by the Ld. DR. Therefore, no justification to make interference in the well reasoned findings of the Ld. CIT(A). Therefore, his order is confirmed. - Decided in favour of assessee
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2017 (1) TMI 882
Validity of the search u/s 132 - Block assessment u/s 158BD - addition on gold ornaments - Held that:- The assessing officer has not considered the case in its entirety, i.e. The gifts received other than the details given by the assessee because the assessee was asked to give the details of persons those who have gifted five or more sovereigns of gold, a reasonable estimation of 1500 grams of gold cannot be ruled out. Therefore, we allow the claim of the assessee to this extent. The difference is to be treated as assessee's undisclosed income. Undisclosed source of income - Held that:- The conclusions of the Tribunal sustaining the finding of the Assessing Officer that the assessee could not explain the source of ₹ 3,00,000/- is entirely based on the factual materials which were available before him. Therefore, the Tribunal was fully justified in treating ₹ 3,00,000/- as the undisclosed income of the assessee. Addition on purchase of Maruti Zen Car - Held that:- Additions were made by the assessing officer only after applying his mind. The mere fact that it has been reproduced verbatim of the previous assessment order does not mean that the assessing officer had not applied his mind. It is the duty of the assessee to explain the source of the money that came into his account. The only explanation of assessee's daughter that the demand drafts were purchased in the name of her father because it was easy to get the car on priority basis if it was booked in her father's name, of course, is an explanation to be accepted provided the source of the money was properly explained with such precision. It has not been done so. In the facts and circumstances of the case, we are of the view that this addition made by the assessing officer is to be confirmed. Protective assessment - Double addition - as contended by the assessee that many of the items of income which were assessed in the hands of the assessee were already assessed in the hands of his wife - Held that:- It is well settled that where there is a doubt as to the assessment of a person amongst two, parallel proceedings can be taken against both and alternative assessment may also be completed. Therefore, the fact that a protective assessment has been completed against the assessee’s wife does not ipso facto mean that assessment of such items of assets at the hands of the assessee is unsustainable. On the other hand, if the assessment at the hands of the assessee is sustained, the assessment of the very same assets at the hands of the assessee’s wife, would have to necessarily fail. In such circumstances, we reject the contention now raised before us by the learned Senior Counsel for the assessee. Addition from profit from land deal at Palakkad by Sree Sankaracharya University and certain items of properties purchased by the Sree Sankaracharya University at Attukal in Thiruvananthapuram district - Held that:- These two additions were deleted by the Tribunal on the basis that the conclusions of the Assessing Officer were purely based on surmises and without any evidence. While the bonafides of the aforesaid transactions entered into by the assessee, during his tenure of the Vice Chancellor of the University are open to doubt, there is no evidence whatsoever to conclude for the Assessing Officer or the Tribunal or this court to arrive at a conclusion that the differential amounts mentioned above have actually reached the hands of the assessee to be treated as his undisclosed income to be taxed at his hands. In this case, although there are communications which are sufficient to suspect the bonafides of the deals that cannot take the place of all principles to saddle the assessee with the tax liability which requires proof of undisclosed income at the hands of the assessee. Thus the finding of the Tribunal deleting the additions made in respect of Palakkad and Attukal properties are well found both factually and legally.
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2017 (1) TMI 881
Stay of demand - Non-disposal of appeal - appeal non attributable to the assessee - extension of stay for a further period of 180 days or till the disposal of appeal - stay has exceeded 365 days.Held that:- Wherever the appeal could not be decided by the Tribunal due to pressure of pendency of cases and the delay in disposal of the appeal is not attributable to the assessee in any manner, the interim protection can continue beyond 365 days in deserving cases.
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2017 (1) TMI 880
Non registering the Certificate of Sale - public auction - Attachment orders - recovery proceedings - original owner has been prohibited and restrained from transferring or charging the property in question for the alleged dues with interest under section 220(2) - Held that:- When the petitioner is a bonafide purchaser of the property in question, which has been purchased by him in a public auction held and conducted pursuant to the order passed by the Debt Recovery Tribunal and when the order of attachment has been passed subsequently, appropriate authority is required to be directed to register the Certificate of Sale in favour of the petitioner. Therefore, there is no justification in not registering the Certificate of Sale issued by the Debt Recovery Tribunal and informing the petitioner to obtain No Objection Certificate from the Income Tax Department on the ground that pursuant to the communication / order dated 18/11/2011 issued by the Income Tax Department, the property in question is under attachment. As held by the Division Bench of this court in the case of Asset Reconstruction Company (India) Ltd. (2011 (9) TMI 1087 - GUJARAT HIGH COURT ) and even not disputed by the learned counsel appearing on behalf of the Income Tax Department, for the dues of the Income Tax Department, Income Tax Department cannot claim priority and/or cannot claim first charge over the dues of the secured creditor. There is no justification in refusing to register the Certificate of Sale with respect to property in question which the petitioner has purchased on payment of full sale consideration in an auction held and conducted by the on payment of full sale consideration pursuant to the for the dues of the Bank and pursuant to the order passed by the Debt Recovery Tribunal.
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2017 (1) TMI 879
Disallowance of expenses on incentives paid to the loaders at Port premises - allowable business expenditure - Held that:- Without going into the merits of the matter, solely because the Assessee claims to have been in possession of additional vouchers which would prove the expenditure in question, we are of the opinion that it would be appropriate and in the interest justice to give an opportunity to the Assessee to produce such vouchers before the Assessing Officer and dispose of the appeal.
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Customs
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2017 (1) TMI 869
Imposition of penalty on officers who are inspector and superintendent and importer - absolute confiscation of Lead Scrap, prohibited and restricted item - it is alleged that officers failed to perform their duties and importer imported prohibited item - Held that: - the Original Authority has held that there is no evidence on record to justifying penalty under Section 112 and that the Officers have neither connived nor indulged in the fraudulent act and that the charges, made out against them, are not explicit and the only ground made out is that they ought to have examined the containers fully and discovered discrepancies - He further held that since the SCN proposed imposition of penalty under Section 112 of Customs Act, 1962 against the two Officers, the provisions of Section 117 of Customs Act, 1962 were not invokable - penalty on officers set aside. The penal provisions, u/s 117 of Customs Act, 1962, is residuary in nature and can be invoked only in the situation when no express penalty is provided, elsewhere in the Customs Act Penalty on importer is held to be justified. Appeal dismissed - decided partly in favor of revenue.
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Corporate Laws
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2017 (1) TMI 866
Scheme of Amalgamation - Held that:- Considering the approval accorded by the equity shareholders and creditors of the Transferee Company to the proposed scheme and the affidavit filed by the Regional Director, Northern Region having not raised any objection to the proposed scheme, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, subject to sanction of the proposed scheme from the Court of competent jurisdiction in respect of the Transferor Companies, sanction is hereby granted to the proposed scheme. The Transferee Company will comply with the statutory requirements in accordance with law. The sanction to the proposed scheme will be effective from the appointed date of the proposed scheme, i.e. 1st April, 2015.
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2017 (1) TMI 865
Scheme of amalgamation - Held that:- The proposed scheme filed along with the company petitions as also the affidavits placed on record. As find that the Scheme as proposed is not prejudicial to the interest of any person or entity, which has a stake/interest in the petitioner companies. The said scheme, as framed, is not violative of any statutory provisions. The scheme as formulated is fair, just, sound and is not contrary to any public policy or public interest. No proceedings appear to be pending under the provisions of Sections 231 to 237 of the Companies Act, 1956. All the statutory provisions appear to have been complied with. Consequently, there shall be an order approving the scheme of amalgamation of Lancor Guduvanchery Developments Limited (1st transferor company), Lancor Sriperumbudur Developments Limited (2nd transferor company) and Lancor Holdings Limited (transferee company), with effect from 01.04.2015, as per the procedure laid down under Sections 391 to 394 of the Companies Act. Taking note of the report of the Chartered Accountant as enclosed by the Official Liquidator, in terms of the order passed by this Court, both the transferor companies shall stand dissolved, albeit, without winding up. It is made clear, that this order will not be construed as an order granting exemption from payment of stamp duty or, taxes or, any other charges, if any, payable, as per the relevant provisions of law or, from any applicable permissions that may have to be obtained or, even compliances that may have to be made, as per the mandate of law.
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Service Tax
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2017 (1) TMI 878
Reverse Charge Mechanism - Business Exhibition Service - the services were provided outside India and the recipient is located in India - Held that: - in terms of Taxation of Service (Provided from Outside India and Received in India) Rules, 2006, the appellant is not liable to pay tax under the reverse charge mechanism in respect of the Business Exhibition Service - in an identical set of facts, this Tribunal in the case of Positive Packaging Industries Ltd. [2013 (4) TMI 727 - CESTAT MUMBAI] has held that no service tax is payable by the receiver of the service - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 877
Reversal of CENVAT credit - Rule 6(3)(c) of Cenvat Credit Rules, 2004 - the appellant was providing taxable as well as exempted service to their customers but not maintained the separate records for exempted service - Held that: - The learned Counsel states that sub-rule 6(3) (c) relates to only input duty credit and restriction placed therein is not applicable to the capital goods credit and credit in respect of specified services, which are covered under sub-rule 6(4) and Rule 6(5) respectively - the Ministry of Finance (Board’s) Circular No. 137/203/07-CX-4 dated 01.10.2007, is relied upon, which was not dealt by the adjudicating Commissioner. The Commissioner has not dealt with a circular whether the circular is applicable in the instant case or not, we deem fit to set aside the impugned order and remand the matter back to the Commissioner (Appeals) - appeal allowed by way of remand.
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2017 (1) TMI 876
Short payment of tax - Section 68 of the Act read with Rule 6 of the Rules - suppression of facts - demand of tax, with penalty - invocation of extended period of limitation - Held that: - the Commissioner (Appeals) has examined the issue in detail along with the evidence and the same appears reasonable in the peculiar facts and circumstances of the case specially when either in SCN or in OIO, the adjudicating authority, has proceeded to segregate the portion of the work executed in the contract while confirming the demand nor he took pain to observe the nature of work while determining tax liability. In absence of any specific findings by the department, we are of the view that the service tax paid by the appellant on the basis of receipts under the contract is appropriate - demand set aside - appeal allowed - decided in favor of assessee.
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Central Excise
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2017 (1) TMI 875
Unjust enrichment - rejection of refund claim - refund claims arising out of consequences of finalization of provisional assessments - Held that: - once the order for finalization of assessment is issued and it is accepted by the Department, then department cannot question the quantum of refund arising out of it after filing of the refund claim - the issue of unjust enrichment has been properly examined at the original and appellate stage and therefore, department's contention in the grounds of appeal in respect of unjust enrichment is not tenable in Law - appeal dismissed - refund allowed - decided in favor of respondent-assessee.
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2017 (1) TMI 874
Valuation - sale of goods partly at factory gate and partly through consignment agents by stock transferring the goods on payment of duty - whether valuation to be done by adopting Rule 7 of Central Excise (Valuation) Rules, 2000? - Held that: - the ratio laid down by the Tribunal in the case of Bharat Petroleum Corporation Ltd. Versus Commissioner of Central Pxcise, [2009 (9) TMI 845 - CESTAT CHENNAI] is squarely applicable in the instant case as facts and circumstances are identical. Accordingly, when the goods are not sold at the factory gate but removed exclusively to a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold, the rule 7 is applicable. It is evident that the goods were partly sold at factory gate and duty was paid. Remaining goods were transferred to the Depot. Therefore, Rule 7 of Central Excise (Valuation) Rules, 2000, is not applicable in the instant case - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 873
Restoration of appeal - natural justice - non-communication of notice to petitioner - Held that: - Only on the ground that the Commissioner (Appeals), Central Excise & Service Tax, Ranchi has decided the appeal, preferred by the respondent-Department, without giving any opportunity of being heard to the petitioner, we hereby quash and set aside the order being OrderInAppeal No. 09/RAN/201617 dated 15th June, 2016 passed by the Commissioner (Appeals), Central Excise & Service Tax, Ranchi. The said appeal is restored to its original file with the same number and will be heard afresh by the Commissioner (Appeals), Central Excise & Service Tax, Ranchi - petition allowed - decided in favor of petitioner.
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2017 (1) TMI 872
Power of Commissioner to condone delay - Section 35(1) of the Central Excise Act, 1944 - condonation of delay - petitioner-assessee has submitted that since the original order was communicated to the petitioner-Company on 17.12.2015, but was served only on the security personnel and not on the authorized officer on the Company, the same was not delivered properly in the office and escaped the notice of the Company and the appeal could not be filed in time - Held that: - this Court is of the opinion that the reasons assigned by the petitioner-assessee appear to be of sufficient and the delay deserved to be condoned by the Commissioner of Appeals. However, in view of the statutory limit on his powers, this Court exercising its extraordinary jurisdiction is of the opinion that the said delay deserves to be condoned. It is hereby condoned - appeal restored to the file of the respondent- Commissioner of Appeals. Moreover this Court is of the opinion that discretion ought to have been given to the Appellate Authorities under the Act to condone such delays, if caused by sufficient reason. Be that as it may. Delay condoned - petition allowed - decided in favor of petitioner.
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2017 (1) TMI 871
Restoration of appeals - delay of 776 days in rectifying objections - Held that: - the Registry dismissed this appeal for want of compliance with procedural formalities after giving an opportunity to the Revenue to so comply with the same. Thus, after lodging this appeal on 2nd April, 2014, no steps were taken even after sufficient time was granted and additionally to the Revenue - Now, waking up after more than two and half years after such a dismissal and seeking restoration of the appeal would not be fair and proper. It is clear that there is no cause shown, much less some change in the panel of advocates. No details are provided and a vague statement is made in paragraph 5 of the affidavit-in-support. The delay of 776 days remains unexplained. The cause shown is not bona fide and reasonable. The appeal is, therefore, dismissed for want of prosecution.
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2017 (1) TMI 870
Return of defective goods - goods not found suitable for remaking was removed as scrap and duty paid on the same - differential duty with interest was paid on being pointed out - whether the SCN issued is hit by the provisions of Section 11A(2)of Central Excise Act, 1944? Held that: - there is no case of any deliberate suppression, fraud etc. in the facts and circumstances of this case. Further, the extended period of limitation is not invokable - the SCN is hit by the provisions of this section 11A Sub-section 2 of Central Excise Act, 1944 which provides that wherein assessee on his own ascertainment, or on being pointed out by the Central Excise Officer, deposits the differential duty or duty short paid under intimation to the authority, then no show cause was required to be issued and the matter should stand closed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (1) TMI 868
Works contract - Deduction of tax by Chennai Metro Rail Limited (CMRL) - short deduction - Held that: - the petitioner has rightly contended that liability under Section 13 of the Act would fall on CMRL and not on the petitioner. Therefore, consequences, if any, that flow from shortfall in the collection of withholding tax can only be visited upon, if at all, on CMRL - assessments to be redone after giving due opportunity to the petitioner - petition allowed - matter on remand.
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2017 (1) TMI 867
Punishment of stoppage of increment - it was alleged on petitioner that while he was serving as DCTO at Kottakuppam check-post has accepted the transit passes surrendered by the persons in-charge of vehicles related to movement of oil to Puducherry State without actual movement of vehicle with goods and the said act has been done with the connivance of dealers and thereby caused revenue loss to the Government - there was a collusion between the findings of Enquiry Officer and Disciplinary Authority/respondent. Held that: - though the Disciplinary Authority has recorded the finding that the officials have colluded with the tax evaders, the details of the tax evaders and the action taken against him have not been disclosed. In the considered opinion of the Court, the findings recorded by the Disciplinary Authority in the impugned orders are based upon no evidence and as such, the impugned orders warrants interference. In Lav Nigam v. Chairman & MD, ITI Ltd. and another [2006 (4) TMI 538 - SUPREME COURT], it has been held that in case the Disciplinary Authority differs with the view taken by the Inquiry Officer, he is bound to give a notice setting out his tentative conclusions to the delinquent and only after hearing the delinquent, the Disciplinary Authority shall arrive at a final finding of guilt and thereafter, the employee/delinquent would again have to be served with a notice relating to the punishment proposed - Admittedly, the said procedure has been given a complete go-by by the respondent/Disciplinary Authority. Petition allowed - decided in favor of petitioner.
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Indian Laws
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2017 (1) TMI 864
Acquittal of the charge - NDPS Act - Held that:- The prosecution has failed to establish its case beyond reasonable doubt and the benefit of doubt given by the learned Trial Court to the respondent cannot be faulted. The Trial Court has noted number of vital infirmities, inconsistencies and discrepancies in the statements of the prosecution witnesses which make it unsafe to base conviction on the unsubstantiated and uncorroborated testimony of PW-21 (Anshul Dwivedi). It is well settled law that the Appellate Court must bear in mind that in case of acquittal, there is double presumption in favour of the accused. Firstly, the presumption of innocence is available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent Court of law. Secondly, the accused having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the Trial Court. If two reasonable conclusions are possible on the basis of the evidence on record, the Appellate Court should not disturb the finding of acquittal, recorded by the Trial Court. Considering the facts and circumstances of the case, find no substance in the appeal preferred by the appellant – NCB; it lacks merits and is dismissed. Pending application also stands disposed of.
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2017 (1) TMI 863
Regular bail in FIR registered under Section 22 of the Narcotic Drugs and Psychotropic Substances Act, 1985 - Held that:- This Court is not at this stage inclined to record a finding with regard to the competency of the officer who carried out the search upon the petitioner. However, considering the period of incarceration and the fact that the petitioner was allowed statutory bail in the instant FIR, without adverting to the merits of the instant case, this petition is allowed. The petitioner be admitted to bail during the pendency of the trial, on his furnishing bail bonds/surety bonds, to the satisfaction of the trial Court.
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