TMI Tax Updates - e-Newsletter
January 20, 2017

Case Laws in this Newsletter:

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

TMI SMS

• AO failed make investigation & pinpoint the actual expenditure not incurred for the business - Expenditure through credit cards allowed

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• Raw grade palm oil would mean it is crude oil and merits classification under 15111000 and not under 15119090, as crude palm oil

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Articles

1. APPEAL BEFORE HIGH COURT UNDER INCOME TAX PROVISIONS

   By: DR.MARIAPPAN GOVINDARAJAN

2. 9th GST Council inks breakthrough on dual control over tax payers, rollout deferred to July 1, 2017

   By: Bimal jain

News

1. Union Minister of Statistics & Programme Implementation Sh. D.V. Sadananda Gowda says that Statistics plays important role in Good governance

2. Government Approves Six (6) Proposals of Foreign Direct Investment (FDI)

3. RBI Reference Rate for US $

4. Digital payment promotion gets a boost More than 3.81 lakh consumers and 21,000 merchants win prizes worth ₹ 60.90 crore at Digi-Dhan Melas

5. Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016

Notifications

Customs

1. 4/2017 - dated 19-1-2017 - ADD

Seeks to extend the levy of anti-dumping duty, imposed on Nylon Filament yarn originating in or exported from China PR, Chinese Taipei, Malaysia, Indonesia, Thailand and Korea R.P under notification No. 03/2012-Customs (ADD), dated the 13.01.2012, for a further period of one year from the end date of Anti-Dumping Duty imposed vide Notification No. 03/2012-Customs (ADD), dated 13.01.2012, i.e. upto and inclusive of the 12.01.2017

2. 3/2017 - dated 19-1-2017 - ADD

Seeks to extend the levy of anti-dumping duty, imposed on Saccharine originating in or exported from China PR under notification No. 07/2012-Customs (ADD), dated the 13.01.2012, for a further period of one year

3. 5/2017 - dated 19-1-2017 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 20th January, 2017

Income Tax

4. 1/2017 - dated 17-1-2017 - IT

Procedure for registration and submission of statement of financial transactions (SFT) as per section 285BA of Income-tax Act, 1961 read with Rule 114E of Income-tax Rules, 1962

Highlights / Catch Notes

Income Tax

• Foreign Travel Expenses Partially Disallowed for Directors; Commercial Purpose May Qualify for Tax Deduction.

  Case-Laws - AT : Disallowance of one-third of directors’ foreign travel and conveyance expenses - If the object of the undertaken tour is commercial in nature, the expenditure would qualify for deduction - AT
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• Film Production Payments Considered Contract Payments: TDS Applies u/s 194C, Not Section 194J of Income Tax Act.

  Case-Laws - AT : TDS u/s 194C OR 194J - Payments made to the production houses towards cost of production of film/advertisement were nothing but contract payments made by the assessee company in pursuance of the purchase orders - would fall u/s 194C - AT
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• Company's Payment to Director: Temporary Advances or Salary? AO's Decision Questioned Due to Ignoring Key Facts.

  Case-Laws - AT : Nature of amount paid by the company to its director - temporary advances or salary - AO has been overtly influenced by the explanation of the representative of the assessee without appreciating attendant facts, which clearly show that the impugned amount could not be construed as payment of salaries - AT
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• Hospital Payments to Doctors and Labs: Can Non-Claimed Expenses Be Disallowed u/s 40(a)(ia) and 194J?

  Case-Laws - AT : TDS u/s 194J - Disallowance u/s 40(a)(ia) - non deduction of tax at source on the payments made by the assessee hospital to the doctors and pathology laboratory in relation to inpatients - When an expenditure has not been claimed at all, how can the same be disallowed? - AT
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• Reversal of Excess Profits in Project Completion Method Violates Accounting Standard AS-7, Unauthorized by Management.

  Case-Laws - AT : Method of account - project completion method - Reversal of the excess profits recognised as income in the post period - this kind of rectification / reversal of entries constitutes the amendment to the account unauthorizedly done by the management and it is outside the Accounting Standard (AS)-7 - AT
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• Assessing Officer's Duty to Investigate Business Promotion Expenses via Credit Card Doubts Clarified.

  Case-Laws - AT : Disallowance of the business promotion expenditure through credit cards - If the AO had any doubt, it was his duty to make further investigation and pinpoint the actual expenditure not incurred for the business of the assessee - AT
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Customs

• Crude Palm Oil Classified Under Tariff Code 15111000 When Imported in Raw Form.

  Case-Laws - AT : Raw grade palm oil would mean it is crude oil and merits classification under 15111000 and not under 15119090, as crude palm oil which is imported and declared as such - AT
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Service Tax

• Recipient Cannot Change Service Classification u/r 6(5) of Cenvat Credit Rules; Misclassification by Provider Challenged.

  Case-Laws - AT : Credit availed on services specified u/r 6(5) of CCR on the ground the service provider has wrongly classified the services - the classification and categorization of service cannot be changed at the end of the recipient - AT
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Central Excise

• CENVAT Credit Allowed for Sales Commission as Part of Sales Promotion Linked to Manufacturing Activity.

  Case-Laws - AT : CENVAT credit - sales commission - there need not be manufacture unless there is sale of product. Hence, the commission paid on sales becomes part of sales promotion resulting in increased manufacturing activity - sale and manufacture are directly interrelated - credit allowed - AT
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• Cenvat Credit Allowed on CVD Paid via DEPB; No Suppression of Facts or Extended Limitation Validity.

  Case-Laws - AT : Whether Cenvat credit can be permitted, when CVD is paid using the DEPB? - it cannot be alleged that the appellant indulged in suppression of facts with deliberate intent to avail ineligible Cenvat credit - Demand invoking extended period of limitation not valid - AT
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• CENVAT Credit Eligibility Depends on Final Product's Dutiability When Capital Goods are Received, Not Later Exemptions.

  Case-Laws - AT : CENVAT credit on Capital goods - capital goods were used for the manufacture of excisable goods on which duty was paid - subsequently assessee opted for exemption - eligibility of Cenvat credit is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods. - AT
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VAT

• Court Rules Siding and Shunting Charges Excluded from Sale Price for Tax Calculations; Officer's Decision Upheld.

  Case-Laws - HC : Valuation - the siding and shunting charges would not form part of the sale price and thus the AO had rightly excluded the same from the computation of the sale price - HC
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Case Laws:

• Income Tax

• 2017 (1) TMI 957
  TPA - advertisement, marketing and sales promotion (AMP) expenses - (DRP) upholding the adjustments proposed by TPO holding that AMP spend of the Assessee answered the description of an international transaction as defined under Section 92B between the Assessee and its Associated Enterprise (AE) - Held that:- TAT has not rendered any categorical finding one way or the other on the central issue raised before it by the Assessee viz., there exists an international transaction between the Assessee and its AE involving AMP expenses? In the event that the ITAT decides the question regarding the existence of an international transaction between the Assessee and its AE in the negative, then obviously no other question will survive as far as the Assessee is concerned. In the event it is answered in the affirmative, then in the further appeal that may be filed by the Assessee before this Court, it will be open to the Assessee to urge, apart from the other grounds it may have, the question concerning the jurisdiction and power of the TPO to determine the existence of an international transaction even though it is not reported by the Assessee and the further question regarding the retrospective application of Section 92CA(2B) of the Act. In the event the ITAT finds the existence of an international transactions, it will proceed to decide the further question concerning the ALP of such transaction in accordance with law. If the materials available for the said decision are inadequate, it will be open to the ITAT to remand the question further to the TPO. Accordingly, the the impugned order passed by the ITAT for the AY 2006-07 is set aside and the said appeal is restored to the file of the ITAT to first decide the question regarding the existence of an international transaction involving AMP expenses between the Assessee and its AE.

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• 2017 (1) TMI 956
  Treatment to consultancy expenditure - capital expenditure or revenue expenditure - Held that:- The expenditure on development of new product in the line of business being carried out by the assessee is an expenditure related to such business and benefit to the assessee is in the revenue field, inasmuch as it seeks to improve the profitability of the assessee and the enduring benefit cannot be regarded to be in the capital field. The parity of reasoning laid down by the Hon’ble Apex Court in the case of Empire Jute Co Ltd (1980 (5) TMI 1 - SUPREME Court), as extracted above, clearly supports the stand of the assessee, inasmuch as the expenditure in question merely results in development of new products by the assessee in its existing line of business. Even otherwise, it is noteworthy that none of the expenditures in question are of capital nature and in fact, the expenditure which has been referred to by us in the earlier paragraph clearly are such expenditure, which are incurred in the course of carrying on of business. - Decided in favour of assessee Disallowance of one-third of directors’ foreign travel and conveyance expenses - Held that:- The details were furnished by the assessee company before the AO. In Seshasayee Brothers Ltd. vs. CIT (1960 (3) TMI 50 - MADRAS HIGH COURT) and Cooper Engineering Ltd. vs. CIT (1981 (3) TMI 49 - BOMBAY High Court) it has been held that where the details are not furnished by the assessee, the claim can be disallowed on the ground that the assessee had not established that the amount in question was expenditure laid out wholly and exclusively for the purposes of the business. If the object of the undertaken tour is commercial in nature, the expenditure would qualify for deduction. We find that the disallowance made by the AO of the directors’ expenses is bereft of sound reasoning. Therefore, the disallowance made by the AO is deleted.- Decided in favour of assessee

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• 2017 (1) TMI 955
  TDS u/s 194C OR 194J - short deduction of tds - Held that:- Where TDS has been deducted by the deductor in most bona file manner as applicable and no revenue leakage has been pointed out, then the deductor should not be penalized for any unintended short fall in deduction of TDS so long as the payees are income tax assessee and they have included the impugned payments as part of their income offered to tax. In the case before us, the admitted case of the assessee is that all the payees are properly identified and duly assessed with the income tax department. Ld. CIT(A) has already followed this view and accordingly directed the AO to verify these facts and exonerated the assessee from the liability of short fall under such cases. Under these circumstances we uphold the view taken by in this regard by Ld. CIT(A), and direct the AO to exercise his powers under the law to make requisite verification with the payees. If the payee is assessed with the tax department and has filed its income tax return, then liability on account of short deduction of TDS would not be recovered from the assessee. The assessee shall extend requisite cooperation to the AO by submitting complete particulars of the payees containing name, address, PAN No. and copies of invoices. - Decided in favour of assessee for statistical purposes. Payment for utilizing services of production houses - Held that:- Payments made to the production houses towards cost of production of film/advertisement were nothing but contract payments made by the assessee company in pursuance of the purchase orders, and therefore, these would fall within the purview of provisions of section 194C and not u/s 194J of the Act. Payment for AMC services - Held that:- These payments are within the purview of provisions of section 194C of the Act. We find that order of the Ld. CIT(A) is based upon proper reasoning and analysis of facts. Therefore we do not find any justification to interfere in the finding of Ld. CIT(A). Treating payments made towards car parking charges as rent under Section 194I instead of contract payment covered under Section 194C - Held that:- During the course of hearing before us, detailed arguments have been made by the Ld. Counsel. It has also been submitted that AO had not worked out the liability after verifying the facts from the payees. Under these circumstances, we send these issues back to the file of the AO to make direct verification with the payee with the same directions as were given while disposing Ground No 1 of the CO. If need arises, the assessee would be free to take all the legal and factual issues with regard to its liability to deduct tax u/s 194C and not u/s 194I.These grounds may be treated as allowed for statistical purposes.

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• 2017 (1) TMI 954
  Exemption under section 11 - shares held by assessee - rightful owner of shares - denial of claim for the alleged violation of section 13 (1) (d) (iia) - addition to the corpus donations - Held that:- We find that assessee has received shares of Delhi Guesthouse Pvt. Ltd., from the settler of the trust and could not be disposed off immediately due to the conflict that arose amongst the legal hairs of the settler in respect of the partition of the assets which included the impugned shares of Delhi Guesthouse Private Limited. The legal heirs approached Hon’ble Delhi High Court by way of a civil suit in which Hon’ble court had passed an order restraining the parties from de-alienating from any of the assets held by them. In our considered opinion, under such circumstances assessee could not be considered to be a legal owner of the shares during the period F.Y 2000-04 As the word used in the section 13(1)(d)(iii) is “held”, it implies ownership of the assessee to the exclusion of all others which is not the case here. In a considered view, the assessee was not physically in rightful possession of the shares so as to enable it to comply with the provisions of section 11 (5) of the Act. The assessee was not in a position to dispose of these shares due to lis pendence before Hon’ble Delhi High Court though the shares were bequeathed to assessee by way of a Will in the F. Y. 2004-05. - Decided against revenue Payment made for non charitable activities - Held that:- As for conversion of property from lease hold to free hold, the appellant trust being a shareholder, has contributed towards share of such charges. It is further noticed that Executor of estate Dr. Bhai Mohan Singh granted temporary loan of 3,33,57,000/- to the appellant trust, which was paid by the appellant trust towards conversion charges which cannot be said as payment has been made for non-charitable activities and for commercial consideration. - Decided in favour of assessee

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• 2017 (1) TMI 953
  Allowable business expenditure - Claim of expenditure for the purpose of business - Held that:- At the level of the Tribunal, we are unanimous for confirming disallowance roughly in between 5% to 10% of the total disallowances unless the assessee proved that expenditures were incurred exclusively for the purposes of business. Assessee has pointed out that out of office repair and business promotion, the ld. Assessing Officer has made double disallowance i.e., in the case of M/s Delhi Investigators as well as M/s DI Management International Services. Considering this aspect, concur with the ld. Revenue authorities in principle, but, direct the Assessing Officer to re-examine the details of these expenditure and exclude the item which has been disallowed twice. The disallowance to the extent of 10% or lower to that, excluding double on any of the items is being upheld and if there is any disallowance over and above 10% that would stand deleted. The ld. Assessing Officer may quantify the amounts after providing an opportunity of hearing to the assessee.

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• 2017 (1) TMI 952
  Salary earned in India - number of days of stay in India - India UK DTAA - work on deputation - Held that:- It is an admitted fact that the assessee is a non-resident. And the assessee has stayed more than 180 days outside India. It is also a fact that the assessee was employed in IBM India Pvt. Ltd., though, he was deputed to do company’s work at UK, but he remains the employee of IBM India Pvt. Ltd. Therefore, the law of India are applicable in assessee’s case. CIT(A) has observed that the assessee was paid at the home location of the company i.e., India and the assessee has not independently earned any income outside India. The assessee earned salary income in India from his employer for the services rendered at UK and therefore, the salary earned in India is taxable as per section 5(2) of the Income Tax Act. In view of the above and as per DTAA, the assessee can claim exemption if he is resident of India. Since the assessee being non-resident, the ld. CIT(A) has held that the assessee is not eligible to claim exemption under Article 16(1) of the DTAA and accordingly confirmed the disallowance made by the Assessing Officer. Before us, the ld. Counsel for the assessee sought for permission for filing of additional supporting evidence by stating that the foreign allowances were received by the assessee outside India. After considering the submissions of the assessee, we are of the opinion that the additional evidence filed before the Tribunal were not filed before the authorities below. Thus, we remit the matter back to the Assessing Officer to verify the evidences filed by the assessee and decide the issue afresh - Decided n favour of assessee for statistical purposes.

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• 2017 (1) TMI 951
  Benefit of deduction u/s 80P(2) to the assessee society - Held that:- The Hon’ble jurisdictional High Court in the case of The Chirakkal Service Cooperative Bank Ltd & others (2016 (4) TMI 826 - KERALA HIGH COURT ) has held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s 80P(2) - Decided in favour of assessee

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• 2017 (1) TMI 950
  Nature of amount paid by the company to the director - temporary advances or salary - AO observed that initially the payments were received as salary and later on surrendered or foregone - Held that:- If one has to look at the payments dehors the said explanation available to the Assessing Officer, no other feature is present which could justify the characterization of the said amount as salary. Firstly, the payments have been made on varying dates between 21/06/2010 to 21/03/2011. Secondly, even the amounts vary and the payments have not been subject to any tax deduction at source, which would normally the position if the payments were in the nature of salary. Thirdly, there is no material to suggest that any Board of Director’s resolution was available permitting the company to pay salary to the assessee -director. In fact, before the CIT(A) assessee referred to a resolution passed in the meeting of the Board of Directors of the company dated 25/04/2011, which approved the salary payment to the assessee-director for the financial year 2011-12, which corresponds to the next assessment year. In this manner, assessee sought to point out that so far as instant year is concerned, there is no resolution of the Board of directors of the company authorizing the payment of salary to the assessee-director Assessing Officer has been overtly influenced by the explanation of the representative of the assessee without appreciating attendant facts, which clearly show that the impugned amount could not be construed as payment of salaries by the company to the assessee-director. Therefore, the income tax authorities have erred in adding a sum to the income of the assessee as salary. - Decided in favour of assessee

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• 2017 (1) TMI 949
  Unverifiable sundry creditors - AO was of the view that since sundry creditors did not respond to his notices, therefore, these are not genuine and he made the addition - Held that:- No merit in ground of the Revenue’s appeal. The ld. first appellate authority has recorded a finding of fact that sundry creditors doubted by the AO are genuine. The assessee has produced evidence exhibiting repayment of alleged amounts to these concerns. The findings of the AO is not based on any concrete evidence. Therefore, the first ground of appeal is rejected.- Decided in favour of assessee Addition in respect of cash payments made to the parties splitting the amount to below 20,000/- - violation of provisions of section 40A(3) - Held that:- The disallowance u/s 40A(3) could be made if the assessee has made payment to a person in a day otherwise than account payee cheque or bank draft exceeding 20,000/-. The ld.CIT(A) has recorded a specific finding that no such payment was made by the assessee. As gone through the finding of the AO also which has been extracted above, but, there is no clear-cut finding discernible from the order of the AO. Therefore,no reason to interfere in the finding of the ld.CIT(A). - Decided in favour of assessee Addition on account of interest corresponding to the amounts outstanding against debtors - Held that:- No merit in this ground of appeal because there is no decision at the end of the AO to assume notional interest income and, thereafter, assume that interest expenses claimed by the assessee to be disallowed. He has not demonstrated any nexus as to how interest bearing funds were diverted for the non-business purposes. The ld.CIT(A) has rightly deleted the addition.- Decided in favour of assessee

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• 2017 (1) TMI 948
  Claim of deduction u/s 54 - assessee has invested the sale proceeds in a commercial property - Held that:- The building was constructed as a residential unit and even the report of the Inspector clarified that it was a “residential vacant floor”. The occupation certificate dated 19/09/2009, issued by the BMC also clarified that it was a residential building. Even the report of SE dated 24/12/2010 and internal note/report dated 05/01/2010 clarified that the first floor was occupied by the assessee and there was no office therein and these documents are prior to passing the assessment order, therefore, cannot be said to be created document. Even, on 13/01/2011, the assessee got a single water connection for the residential unit. The assessee also paid the property tax of 1 lakh to the BMC as a residential property and vide letter dated 11/04/2011, the assessee wrote a letter to the Assessor and Collector, BMC with a request to assess the property as a residential from wrongly assessed as commercial. In response to an RTI application dated 21/11/2011, the BMC furnished the inter note dated 11/01/2011 and 21/04/2011, wherein, it was mentioned that the plot was assessed as residential rateable value from 01/01/2008 and the building plan was sanctioned as “residential building” vide note dated 29/09/2009. Before the Ld. Commissioner of Income Tax (Appeal), the assessee also enclosed copy of receipt dated 27/04/2011 for transfer of residential gas Cylinder at the new address. All these documents were made part of the paper book before the First Appellate Authority and also before us. The small units were converted in a single unit (as mentioned earlier the total area of all units is 1935 Sq. Ft.), therefore, in our considered opinion, it is a single unit. It is not the case that all the six flats are having abnormally bigger areas and simply to get the benefit u/s 54 of the Act, a story was concocted by the assessee. The evidences filed by the assessee clearly indicates that small units on the same floor were converted into one habitable unit for a peaceful/comfortable living, thus, the assessee cannot be denied the benefit of exemption. - Decided in favour of assessee

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• 2017 (1) TMI 947
  Loss on exchange rate fluctuation - AO disallowing a loss resulting on account of fluctuation in foreign exchange rate on the closing date of the year under consideration, primarily on the ground that it was a contingent liability and notional in nature - Held that:- The aforesaid stand of the Assessing Officer is clearly in contrast to the decision of the Special Bench of the Tribunal in the case of Oil & Natural Gas Corporation Ltd. vs. DCIT (2002 (8) TMI 802 - ITAT DELHI). Moreover, the CIT(A) has also relied upon the judgment of the Hon’ble Supreme Court in the case Woodward Governor India Ltd.,(2007 (4) TMI 118 - DELHI HIGH COURT) to say that loss arising on reinstatement of foreign currency loss utilized for the purposes of business could not be construed as contingent or notional in nature. In the present case assessee is following mercantile system of accounting and under these situation, in our view, the CIT(A) made no mistake in treating such loss as revenue in nature. The other plea of the Assessing Officer that since loss related to raising of foreign currency loans for acquiring an asset, such loss on account of rate fluctuation should go to add to the cost of the asset in terms of section 43A of the Act is also not tenable. Quite clearly, section 43A of the Act deal with an asset acquired by the assessee “from a country outside India” and in the present case it has been found by the CIT(A) that the asset acquired by the assessee by utilizing the foreign currency loans was from within India. Therefore, the CIT(A) made no mistake in allowing the claim of the assessee - Decided in favour of assessee Determination of deduction under section 10A of the Act in relation to the STPI unit - Held that:- Having regard to the judgments of the Hon'ble Bombay High Court in the cases of Black And Veatch Consulting Pvt. Ltd. (2012 (4) TMI 450 - BOMBAY HIGH COURT ) and Techno Trap and Polymers Pvt. Ltd.(2015 (12) TMI 909 - BOMBAY HIGH COURT), we find no error on the part of the CIT(A) in directing the Assessing Officer to determine the deduction under section 10A of the Act before reducing the loss of the other unit. Thus, Revenue fails on this Ground also. - Decided in favour of assessee

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• 2017 (1) TMI 946
  Allowable business expenditure - whether the business of the assessee was set up during the year under consideration? - Held that:- Most of the employees had been already appointed in the preceding year. The sales order was received as early as in the beginning of the Financial Year i.e. 08.04.2009. Office premises were hired, computers, other assets and requisite infrastructure were put in place to enable the assessee to carry on its business and some purchases were also made. Expenses incurred by the assessee were of routine nature i.e. salary, audit fee, bank charges, rent, traveling expenses, installation expenses and various other routine administrative expenses. Further, share capital and unsecured loan were received aggregating to 3.32 crores. The surplus funds were kept in the bank. All the facts put together clearly indicate that the entire infrastructure was put into place to make the assessee ready to cater to its customers. On the top of it, it is also noted that similar expenses were claimed by the assessee in the immediately preceding year which have not been disallowed by the AO. However, no income was booked in the Profit & Loss A/c since execution of sales orders was not completed during the year. But, as discussed above, receipt of income would be essential to determine factum of commencement of income. As far as, ‘setting-up’ of business is concerned, it takes place as soon as an assessee becomes ready to cater to its customers. As discussed in detail above, the expenses shall be allowable from the stage of ‘setting up’ of the business in view of proviso to section 3 of the Act which says that in the case of a business or profession newly set up in a financial year, the previous year shall be the period beginning with the date of setting up of the business and ending with the said financial year. Thus, taking into account all the facts and circumstances of the case, it would not be difficult to reach to the conclusion that business of the assessee was ‘set up’ during the year as the facts strongly indicate that business was duly ‘set up’ during the year. Under these circumstances, it can be easily said that the assessee had ‘set up’ its business and therefore, expenses incurred during the year should be allowed as business expenses. As the expenses claimed in the profit and loss account are apparently revenue in nature, and nothing wrong had been pointed out by any of the lower authorities on merits of these expenses. Thus it is held that expenses claimed by the assessee in the return of income are allowable and therefore AO is directed to delete the disallowance.

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• 2017 (1) TMI 945
  Eligibility to exemption u/s 11 - charitable activity - objects to achieve - Held that:- The advancement of any object of benefit to the public or a section of the public as distinguished from individual and group of individuals would be a charitable purpose. An object of public utility need not be an object in which the whole of the public is interested. It is sufficient if well defined section of the public benefits by the objects which means that the expression "object of general public utility" is not restricted to objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. After considering the entire facts in totality, in the light of the decisions discussed hereinabove and also drawing support from the speech of the Hon'ble Finance Minister and subsequent clarifications issued by the CBDT within the frame work of the amended provisions of Sec. 2(15) of the Act, in our considered view, there was no material which may suggest that the appellant company was conducting its affairs solely on commercial lines with a motive to earn profit. There is also no material brought on record which could suggest that the appellant company deviated from its objects for which it has been constituted. In our humble opinion and understanding of law, the proviso to Sec. 2(15) of the Act is not applicable on the facts of the case. - Decided in favour of assessee

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• 2017 (1) TMI 944
  Validity of the AO’s assumption of jurisdiction under section 153A - Held that:- The said notice under section 153A of the Act dated 05.10.2009 issued to the assessee for A.Y. 2008-09, in order to enable the AO to assume valid jurisdiction for making the assessment thereunder, was not the notice that was required to be issued by the AO in the case on hand as it is clearly and undisputedly established that no search under section 132 of the Act was carried out at the assessee’s premises on 24.02.2009 as stated by the assessee. Since it is clearly evident that the notice required to be issued for the assessee was not the one issued under section 153A of the Act for A.Y. 2008-09, as was admittedly issued by the AO in the case on hand, the provisions of section 292BB of the Act would not, in our considered view, come to the rescue of Revenue. We accordingly reject this argument put forth by the learned D.R.

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• 2017 (1) TMI 943
  TDS u/s 194J - Disallowance under section 40(a)(ia) - non deduction of tax at source on the payments made by the assessee hospital to the doctors and pathology laboratory in relation to inpatients - Held that:- Admittedly, neither the AO nor the Ld. CIT(A) have added the amount collected by the hospital from the patients on behalf of the doctors as income of the hospital. What has been disallowed is the expenditure; that too on account of non deduction of TDS as per the provisions of section 194J of the Act. The disallowance has been made accordingly under section 40(a)(ia) of the Act. Admittedly, the assessee hospital has not debited the said expenditure to its P & L account. Once the amount paid has not been claimed as expenditure, there cannot be any question of disallowance of the same. When an expenditure has not been claimed at all, how can the same be disallowed. Without going into further aspects of the matter, the disallowance in this case under section 40(a)(ia) of the Act, is not attracted at all. The same is accordingly ordered to be deleted. - Decided in favour of assessee Addition of Bisi payment under section 69C - Held that:- This issue requires re-examination at the hands of the AO. If the assessee will be able to prove that the Bisi payments were out of the income declared during survey action then the same cannot be taxed twice. We therefore restore this issue to the file of the AO with a direction to decide the same afresh. Needless to say that the AO will give proper opportunity to the assessee to explain his case and then the AO will pass a speaking order in accordance with law on this issue. This appeal of the assessee is therefore treated as partly allowed for statistical purposes.

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• 2017 (1) TMI 942
  Method of account - project completion method - Addition of relatable to the reversal of the excess profits recognised as income in the post period - Mentioning that 16% is a higher side, the assessee proceeded to rectify the same by reducing 4% and offering in the return only 12% of profit. - Held that:- There is no dispute on the fact of completion of the assessments of the earlier years to which the said amount of 20,46,764/- belongs. In our view, this kind of rectification / reversal of entries constitutes the amendment to the account unauthorizedly done by the management and it is outside the Accounting Standard (AS)-7, relied upon by the assessee. In the scheme of percentage completion method adopted by the assessee and the adjustments of this in the earlier assessment years is not proper as the final assessments, if any, can be done in the year in which the project is conclusively completed ie AY 2005-06. We find no mistake in the order of the CIT on this issue. Therefore, in our opinion, the CIT (A)'s order on this issue is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by the assessee are dismissed. - Decided against assessee

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• 2017 (1) TMI 941
  Disallowance made u/s 14A read with Rule 8D - as the assessee made the investment in equity shares - Held that:- at the stage of enquiry u/s 14A, the Assessing Officer is free to independently consider the matter for admissibility of interest on borrowings and its extent. In the present appeal, we note that no exempt income was earned by the assessee from the strategic investment made in group companies, therefore, no disallowance was required to be made u/s 14A of the Act. The expression “does not form part of the total income” in section 14A of the Act, envisage that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the income. In other words, section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Since, no exempt income was earned by the assessee and since the genuineness of the expenditure, incurred by the assessee, was not in doubt, no disallowance could be made u/s 14A of the Act. - Decided in favour of assessee

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• 2017 (1) TMI 940
  Claim of benefit under section 80IB - whether the activity carried out of production of Manganese Dioxide falls in the definition of manufacturing activity or not? - whether the assessee had started manufacturing activity/production on or before 31.03.2004 to claim benefit under section 80IB? - Held that:- From the activity carried out by the assessee, it reveals that it coverts the raw Manganese Ores into powder by removing the silicon there from and hence an entirely new product comes into existence. Thus in the light of the decision of the Hon’ble Supreme Court in the case of “Lucky Minmat Pvt. Ltd.” (2000 (8) TMI 6 - SUPREME Court ) and also in the light of the Notification dated 09.05.12, the activity carried out by the assessee can be safely said to be manufacturing activity. The department has not come with a specific stand that on which date the assessee has actually commenced the production. The department has only found fault with the date mentioned in the certificate (form 10CCB) regarding which the assessee has successfully explained that it was due to an inadvertent mistake on the part of Chartered Accountant. The correct and rectified certificate has been produced. Even it is not the case of the Revenue that the activity has commenced months later or in any subsequent year. There is a difference of only one day. The assessee from the evidences on the file has showed that since the date of limitation for claiming deduction was approaching, the assessee somehow, has been able to commence its manufacturing activity prior to 01.04.04 even though under some odd circumstances. The assessee has produced the relevant evidences like purchase of raw material, sales, use of electricity through generator set etc. Under these circumstances it can be safely said that the assessee has proved that the manufacturing activity commenced prior to 01.04.04. - Decided in favour of assessee

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• 2017 (1) TMI 939
  Deduction u/s 10A before computing the brought forward business losses and unabsorbed depreciation - Held that:- Grounds of appeal raised in the present appeal are covered in his favour by the decision of jurisdictional High Court in CIT vs. Techno Tarp and Polymers Pvt. Ltd. [2015 (12) TMI 909 - BOMBAY HIGH COURT] the issue as raised stands concluded against the Revenue as Tribunal was right in holding that the brought forward unabsorbed depreciation and losses of the unit, the income of which is not eligible for deduction u/s.10B of the Act cannot be set off against the current profit of the eligible unit for computing the deduction u/s.10B of the Act - Decided in favour of assesee

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• 2017 (1) TMI 938
  Deduction u/s. 80IA on the addition made u/s. 14A r.w. Rule 8D - Held that:- It is an undisputed fact that the assessee is eligible to claim deduction u/s. 80IA of the Act. The effect of disallowance u/s. 14A r.w. Rule 8D is that there is increase in profits. The assessee is eligible to claim deduction on such increase in profits, as the said profits are arising from the business of assessee eligible to claim deduction u/s. 80IA of the Act. Similar view has been taken by the Tribunal in the case of ITO Vs. Kalbhor Gawade Builders (2013 (2) TMI 68 - ITAT PUNE ). Further, we find that disallowance u/s. 14A r.w. Rule 8D was made in the case of assessee on similar grounds in assessment year 2009-10. The assessee carried the issue in appeal before the Tribunal. The Co-ordinate Bench of the Tribunal decided the issue in favour of the assessee. As the issue raised by the Department in appeal has already been decided in favour of the assessee in the immediately preceding year and in the light of CBDT Circular dated 2nd November, 2016, the present appeal by the Department is liable to be dismissed.

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• 2017 (1) TMI 937
  Gain out of sale of agricultural lands - nature of land - transfer - Held that:- Assessing Officer has drawn adverse inference on account of lack of appreciation of the facts. The Assessing Officer has relied upon the description in the 7/12 extracts to hold that the land was not agricultural. He has also drawn adverse inference on account of the agreement of sale executed by the assessee and the period for which the land was held by the assessee. The learned CIT(Appeals) has elaborately considered all the aspects of the Assessing Officer's adverse inference. His elaborate findings are cogent and fully sustainable. The reliance upon various case laws including that from the jurisdictional High Court in the case of CIT Vs Smy Debbie Alemao in [2010 (9) TMI 560 - Bombay High Court ] fully support his findings. Accordingly do not find any infirmity in the same. Hence uphold the order of Learned CIT(Appeals). - Decided against revenue

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• 2017 (1) TMI 936
  Eligibility of the assessee to claim exemption under section 11 and 12 - non-registration under section 12AA - Held that:- As decided by this very Bench for A.Y. 10-11, 2011-12 & 2012-13 nothing has been brought on record to suggest that besides non-registration under section 12AA, the assessee has failed to fulfil any other conditions as envisaged u/s 11, 12 and 13 of the Act by virtue of which it shall be denied the exemption under section 11 & 12 of the Act. Revenue has not disputed any of the expenses as application of income for want of fulfilment of any of the conditions specified under section 11, 12 and 13 of the Act. Regarding applicability of section 13(8), we have already held above that in view of proviso to section 2(15) not applicable in the case of the assessee, provisions of section 13(8) would not be applicable. - Decided in favour of assessee.

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• 2017 (1) TMI 935
  Disallowance of exemption claimed by the assessee u/s 11(1)(d) - AO treating the receipts of voluntary contribution and corpus donation as taxable income there being violation of provision of section 13(3) - addition on advances - Held that:- In respect of advance of 22,16,000/-to M/s Rajkala Industries (P) Ltd., the assessee’s submission regarding advance of 20 lacs has already been accepted by the AO to the extent that 20,00,000 is the opening balance at the beginning of the year under consideration and it is only an amount of 2,16,000/- which pertains to the year under consideration. As far as 20 lacs is concerned, the same was subject matter before Coordinate Bench in A.Y. 2011-12 and it was held therein that there is no income generated on the said amount of 20 lacs in A.Y. 2011-12 and there is nothing which can be brought to tax in the hands of the trust in A.Y. 2011-12. Regarding balance amount of 2,16,000/- which pertains to the year under consideration, the same has already been offered to tax in the return of income for the year under consideration and there is nothing further which can be brought to tax in the hands of the assessee’s trust. Coming to the advance advanced to Smt. Madhu Adukia is concerned it is not in dispute that the class rooms were actually constructed in F.Y. 2012-13 out of the said advance, the class rooms were constructed on premises provided by Smt. Madhu Adukia without any charges to Gyan Sindhu Girls college and the advance has subsequently been refunded. The intent of such an advance is clearly for promoting and supporting the girls education and which has been demonstrated through building of class rooms. Merely because the money has been routed through Smt Madhu Adukia, it cannot be said that she has benefitted out of such advances in any manner. Further, there is no income which has been generated in the hands of the assessee’s trust out of such advances which can be brought to tax. AO is directed to allow the exemption u/s 11 to the assessee trust and the additions made by the AO are hereby deleted. - Decided in favour of assessee

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• 2017 (1) TMI 934
  Income from house property - determination of annual value of the income from house property - Held that:- We find that assessee was owner of two flats, that same were rented in the earlier years and it had offered the rental income in its returns,that before the AO/FAA it was claimed that during the year under consideration repair and renovation was carried out and the flats were not rented out, that it was also claimed that the flats were used for office premises,that in the subsequent years the AO had not made any addition under the head beings rental income. Once the assessee had produced the bills of repairs and renovation of the flats and the AO had treated the said expenditure as capital expenditure, there was no justification for making any addition under the head house property income. Both the authorities have not proved that the flats were rented out during the year under appeal. As per the settled principles of taxation if any sum has to be taxed the AO has to bring on record the necessary facts for taxing the same. AO had not discharged the onus in that regard. Therefore, reversing the order of the FAA,we decide the first ground of appeal in favour of the assessee. Addition under section 14 A read with Rule 8D - Held that:- We find that assessee had not incurred any expenditure nor had it claimed any expenditure with regard to the tax-free income during the year under consideration. Therefore,there was no justification of any kind to make any dis-allowance invoking the provisions of section 14 A of the Act. The basic precondition for making disallowance under the said section is earning of tax-free income and incurring of expenditure by the assessee.As both the preconditions are absent in the case under consideration therefore, in our opinion,the order of the FAA has to be reversed. - Decided in favour of the assessee. TD u/s 194C - disallowance on account of non-deduction of tax at source on advertisement expenses and business promotion expenses - Held that:- Matter should be restored back to the file of the AO. He is directed to afford a reasonable hearing to the assessee to prove its claim that tax was actually paid by the recipient. The assessee is directed to produce all the necessary evidence before the AO. Ground number three is decided in favour of the assessee,in part. Non-deduction of tax on payment of interest on car loan - Held that:- We find that legal payments were made during the year under consideration and the amounts in question pertain to earlier year. Prior period expenses, as per the taxation principles, can be allowed if they are crystallised during the subsequent year. The AO/FAA has not given any finding as to whether the assessee was following the same accounting policy in the earlier and subsequent years of claiming pre paid expenditure on account of crystallised expenditure in the later years.There is no doubt about the genuineness of the payment and therefore same has to be allowed in one of the years. Considering the peculiar facts and circumstances of the case and the fact that assessee had made the payment after the receipt of the bills in the subsequent year,we are of the opinion that ground number 5,filed by the assessee ,should be allowed. Disallowance of remuneration paid to the directors - Held that:- AO had disallowed the entire remuneration paid to the director, that the FAA restricted it to 50%, that the director had offered the remuneration income in her individual return of income, that the return of the director was accepted by the Department, that the AO had not made any enquiry about the assertion made before the assessee before him, that it was claimed that she was attending the day-to-day affairs of the company and had stood as guarantor to the banks, that in the subsequent year the AO had allowed the remuneration (Rs. 6 lakhs) paid to her. Considering these facts we are of the opinion that there was no justification for restricting the expenditure to 3 lakhs. Reversing the order of the FAA, we decide ground in favour of the assessee. Disallowance of the business promotion expenditure - AO had held that assessee had incurred an expenditure through credit cards, that he did not call for any details in that regard, that he had made an ad hoc disallowance at the rate of 20%, that the FAA had confirmed his order - Held that:- In our opinion in case of corporate assessees disallowance on account of personal element can be made only if the expenditure incurred was for the personal use of any of the directors/employee and that expenditure did not have any relation with the carrying out of the business. We don’t find that AO/FAA had carried out any such exercise. If the AO had any doubt, it was his duty to make further investigation and pinpoint the actual expenditure not incurred for the business of the assessee. We are of the opinion that making and upholding the disallowance was not justifiable. Reversing the order of the FAA, we decide ground in favour of the assessee.

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• 2017 (1) TMI 933
  Addition on account of deemed income - accrual of profit in lieu of expenditure incurred for development of plot - AO held that assessee had become the owner of the plot of land after handing over the possession of the quarters and station to the Police department that he made an addition to the income of the assessee - FAA reversed the order of the AO - Held that:- The order of the FAA does not suffer from any legal or factual infirmity,that he had given a finding of fact that assessee was the owner of the plot of land from the very beginning, that it had executed a lease for 99 years at the rent of 1 per year in favour of the Police department,that if the assessee was not the owner of the plot of land there was no need for the government to enter in to a lease. Reserving or de-reserving of the plot of land cannot decide the issue of ownership of the plot of land. By constructing the plot of land the assessee had improved upon the right in land. If any taxable income was to accrue or arise it would not be at this stage but at the stage of sale of the constructed portion on the balance plot i.e.60% of the plot. The AO was not justified in applying ready reckoner rate on the stamp duty valuation and that also for the year under consideration.As the order of the FAA needs no interference from our side, so, confirming the same we decide the first ground of appeal against revenue Addition on incurred expenditure toward building number two of the police station building under various heads - Held that:- AO had not doubted the genuineness of the expenditure.His only objection was that at the time of spot visit by the inspector it was found that the assessee was not carrying out any construction activities.In our opinion,in the case of a contractor or a developer time gap in starting a new project after completing the first project is not an abnormal practice. But he has to maintain the office and the staff for starting the second project. Expenditure incurred for the intervening period cannot be disallowed. The assessee had started the construction of Police station and quarters after the plot of land was de-reserved. The FAA had scrutinized all the expenses incurred by the assessee and had held that certain expenses were not allowable. Expenses incurred under the heads salary of staff or electricity bills cannot be disallowed, especially when incurring of expenses is not in doubt. - Decided against revenue

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• 2017 (1) TMI 932
  Unaccounted purchases - Held that:- Upon examination of the records the learned CIT(Appeals) has given a finding that the stock of red chillies lying with Best Cold Storage was out of the opening stock of the assessee and cannot be said to be an unaccounted purchase. Hence find that the above order of Learned CIT(Appeals) is cogent one and does not need any interference. - Decided in favour of the assessee Interest free advances to Hanuman Tractors - Held that:- There is no infirmity in the finding of learned CIT(Appeals). Learned CIT(Appeals) has given a finding that the advances were for business expediency as the parties were in the farm vehicle and supply business related to the assessee. The short term advance to them is compensated by business provided by them - Decided in favour of the assessee

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• 2017 (1) TMI 931
  Notice of Motion for recalling the order - condonation of delay of 110 days in taking out the application and for setting aside the order dated 19th November, 2015 passed by the Prothonotary and Senior Master under Rule 986 of the Bombay High Court (Original Side) Rules rejecting the Revenue's appeal - Held that:- The present Notice of Motion seeks a recall of the order dated 19th August, 2016 and does not make any prayer for recall of an earlier order dated 22nd April, 2016 of this Court or for setting aside the order of this Court passed on 19th November, 2015 by the Prothonotary and Senior Master rejecting the applicant's appeal for non removal of office objection. Thus considering this application would be an academic exercise as even if the prayer of recall of the order dated 19th August, 2016 is granted, yet the earlier orders of dismissal of the appeal would stand unaffected. In any case, even if for the purposes of this application, we ignore the fact that we had passed orders earlier, the present application would still be liable to be dismissed. This is for the reason that the genesis of the present Notice of Motion is the order dated 19th November, 2015 passed by the Prothonotary and Senior Master which has granted time to remove office objections on or before 17th December, 2015 failing which the petitioner appeal was to stand rejected for non removal of office objections. The applicant Revenue failed to remove office objection resulting in the appeal itself being rejected by the Prothonotary and Senior Master We see no reason to entertain the present Notice of Motion. In view of the repetitive applications filed by the Revenue it would appear to be a fit case to impose costs.

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• 2017 (1) TMI 930
  Reopening of assessment - change of opinion - Revenue's grievance is that there was no application of mind by AO to the assessee's claim for deduction u/s 80IB(8A) during the regular assessment proceedings for subject assessment years under Section 143(3) - Held that:- In all orders passed under Section 143(3) during the regular assessment proceedings for the subject assessment years, AO records the fact that the assessee's claim for deduction under Section 80IB(8A) were examined in detail and found to be in order. There can be no clear case of application of mind to the respondent assessee's claim for deduction under Section 80IB(8A) of the Act then this. Therefore, in the facts of this case, it is not to be presumed that the Assessing Officer had applied his mind to the respondent assessee's claim for deduction under Section 80IB(8A) of the Act when assessment orders were passed under Section 143(3) of the Act for the subject assessment years as it has in fact been considered therein. Thus, this is a clear case of change of opinion. Consequently, the reopening notices issued for the subject assessment years are without jurisdiction as they are founded upon a change of opinion. - Decided n favour of assessee

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• 2017 (1) TMI 904
  Reopening of assessment - basis for forming the belief is the report from the Principal Director of Income Tax and the application of mind to the report of the Assessing Officer along with the record available with him - Held that:- We note that the reasons in support of the impugned notice accept the fact that as a matter of regular business practice, a broker in the stock exchange makes modifications in the client code on sale and / or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching the orders. The reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. The material available is that there is a client code modification done by the Assessee's broker but there is no link from there to conclude that it was done to escape assessment of a part of its income. Prima facie, this appears to be a case of reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. In the above view, prima facie, we are of the view that the impugned notice is without jurisdiction as it lacks reason to believe that income chargeable to tax has escaped assessment. - Decided in favour of assessee

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• Customs

• 2017 (1) TMI 916
  Whether appellant is eligible for exemption under N/N.34/98-Cus. dated 13.6.1998 and N/N.56/98-Cus. dated 1.8.1998 from payment of special additional duty of customs (SAD) on the goods imported for resale as such? - the imported goods of the appellant are sold by them in Daman area; they had claimed the benefit of notifications from payment of SAD. Held that: - the appellant is a trader of the goods and has registered with the sales tax authority as a trader. The said sales tax registration was valid at the time of import of the goods. We notice from the records that the appellant had produced documentary evidence of invoices in respect of sale of the imported goods to various manufacturers; to some of them the appellant charged sales tax and to some of them they cleared the goods under form ST-XI. In our considered view, the first appellate authority has totally misdirected his findings without considering all these factual position - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 915
  Imposition of redemption fine and penalty - valuation of imported goods - secondhand 4 cylinders motor vehicles diesel engines - confiscation on the ground that all the goods are secondhand goods other than capital goods and are restricted for import and can be imported only in accordance with the public notice or the licence issued on this behalf - Held that: - valuation as adopted by the first appellate authority and the adjudicating authority cannot be faulted with - The confiscation of the secondhand diesel engines which are imported is also upheld as these diesel engines are secondhand in nature and should have been imported only with a specific licence which was not done so. Since the goods are liable for confiscation under Section 111(d) of the Customs Act, 1962, penalty has been correctly imposed under Section 112(a) of the Customs Act, 1962. However, the redemption fine imposed by the adjudicating authority is on the higher side. It has been a consistent view of the Tribunal that redemption fine should be 20% of the enhanced value of the goods. Accordingly, we hold that the goods are liable for confiscation and can be redeemed on payment of redemption fine which is equivalent to 20% of the enhanced value of the engines. Appeal disposed off - decided partly in favor of appellant, by reduction of quantum of redemption fine.

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• 2017 (1) TMI 914
  Benefit of concessional rate of duty under N/N.21/2002-Cus - spinnerets - denial on the ground that the said products are not equipment - Held that: - On plain reading of the equipment mentioned in list 45, we find that the said list talks about spinning equipment which are used for drawing of synthetic fibre and used in the fibre plant. The definition as can be seen from the Words & Phrases of Central Excise, Customs & Service Tax by S.B. Sarkar, is leaving no doubt in our mind that spinneret is used as an equipment which is a disk with fine holes through which molten polymer or a solution of the polymer is forced, to form the continuous filaments of a manmade fibre. In the case of Gwalior Sugar Co. Ltd. [1991 (12) TMI 144 - CEGAT, NEW DELHI], the Special Bench of the Tribunal held that filter bags used for filtering of cane juice in a filtration equipment in the process of manufacturing of sugar, is an equipment for which the benefit of N/N.217/86 can be extended. The appellant is eligible for the benefit of N/N. 21/2002-Cus - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 913
  Classification of imported crude palm oil - classifiable under Chapter Heading 1511100 or under 15119090 - the goods which are imported are classifiable under 1511 and the CRCL report clearly records that the sample is “raw grade palm oil” - Held that: - raw grade palm oil would mean it is crude oil and merits classification under 15111000 and not under 15119090, as crude palm oil which is imported and declared as such. The carotenoid value decreases when the samples are transported for the analysis purposes and there is a delay in testing of samples - there is a delay of 14, 18 and 38 days in testing the samples by the authorities concerned, which would definitely affect the carotenoid value in the sample. The appellant is eligible for the benefit of reduced rate of customs duty as per N/N. 21/2002-Cus. as the products imported by them are classifiable under chapter heading 15111000 - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (1) TMI 909
  Scheme of Amalgamation - Held that:- The requirement of convening the meeting of the equity shareholders of the Transferor Company/Applicant to consider and, if thought fit, approve with or without modification, the proposed scheme is dispensed with. Since there are no secured creditors of the Transferor Company/Applicant; therefore the question of dispensing with the requirement of convening a meeting of secured creditors thereof does not arise. The Transferor Company/Applicant has 01 unsecured creditor. The sole unsecured creditor has given its written consent/NOC to the proposed scheme. The said written consent/NOC has been placed on record. The same has been examined and found in order. In view of the foregoing, the requirement of convening the meeting of the unsecured creditor of the Transferor Company/Applicant to consider and, if thought fit, approve with or without modification, the proposed scheme is dispensed with.Further, a prayer has also been sought in the present application, seeking dispensation of the requirement of publishing the notices for meetings in newspapers.

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• 2017 (1) TMI 908
  Scheme of Amalgamation - convening of meetings - Held that:- The requirement of convening meetings of the equity and preference shareholders of the Transferor Company to consider and if thought fit, approve, with or without modification, the proposed scheme, is dispensed with. The Transferor Company has 02 unsecured creditors. 01 out of the two unsecured creditors has given its written consent/NOC to the proposed scheme. The second creditor is the Transferee Company. The said written consent/NOC has been placed on record and has been examined and found in order. In view thereof, the requirement of convening meeting of the unsecured creditors of the Transferor Company to consider and if thought fit, approve, with or without modification, the proposed scheme, is dispensed with. The Transferor Company does not have any secured creditors. Therefore, the question of convening the meeting of secured creditors of the Transferor Company does not arise.

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• 2017 (1) TMI 907
  Scheme of Amalgamation - Held that:- In view of the approval accorded by the shareholders and creditors of the Petitioners to the proposed scheme; the report filed by the Official Liquidator not raising any objection to the proposed scheme and the affidavit filed by the Regional Director, Northern Region, wherein all observations raised stand satisfied, there appears to be no impediment to the grant of sanction to the proposed scheme. Hence, sanction is hereby granted to the proposed scheme under sections 391 and 394 of the Companies Act, 1956. The petitioners will comply with the statutory requirements in accordance with law. A certified copy of this order, sanctioning the propsed scheme, be filed with the ROC, within thirty (30) days of its receipt. Resultantly, it is hereby directed that the Petitioners will comply with all the provisions of the proposed scheme and, in particular, those which are referred to hereinabove. It is also made clear, that the concerned Statutory Authority will be entitled to proceed against the Transferee Company qua any liability which it would have fastened onto the Transferor Companies for the relevant period, and that, which may arise on account of the proposed scheme being sanctioned.

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• 2017 (1) TMI 906
  Scheme of Amalgamation - Held that:- In view of the foregoing and upon considering the approval accorded by the members and creditors of the Petitioner/Amalgamating Company and the Amalgamated Company to the proposed scheme; the report filed by the Official Liquidator having not raised any objection to the proposed scheme; and in view of the circumstance that the objections raised by the Regional Director in its affidavit stand satisfied, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioner/Amalgamating Company will comply with all the statutory requirements, in accordance with law. Upon the sanction becoming effective from the appointed date of the proposed scheme i.e. 1st April, 2015, the Petitioner/Amalgamating Company shall stand dissolved without undergoing the process of winding up. A certified copy of the order, sanctioning the proposed scheme, be filed with the ROC, within thirty (30) days of its receipt.

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• 2017 (1) TMI 905
  Scheme of Arrangement and Amalgamation - Held that:- After perusing the entire material placed on record, sanction is hereby granted to the proposed scheme, subject to following conditions: i. That the necessary consent, approval and/or permission is obtained by the Demerged/Transferor Company from the RBI, in terms of Clause 35.1 (a) of the proposed scheme; ii. That the Petitioner/Transferee No.1 Company comply with the FDI norms with respect to the proposed integration of Transferee No.2 Company into the foreign Company, Dassault Systems; iii. That sanction is accorded by the Court of competent jurisdiction to the proposed scheme, in respect of the Demerged/Transferor Company and the Transferee No.2 Company.; and iv. That the Petitioner/Transferee No.1 Company comply with all the statutory requirements with respect to the relief sought in the present petition, in accordance with law. The sanction to the proposed scheme will be effective from the appointed date of the proposed scheme i.e. 31.03.2016.

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• Service Tax

• 2017 (1) TMI 929
  CENVAT credit - advertisement - tour operators service - denial on the ground that the sufficient documents have not been produced by the appellant - Held that: - both these services fall in the definition of input service. Therefore, I allow the CENVAT credit on these two services subject to production of documents before the original authority. Short payment of tax - Held that: - the appellant has tried to explain the reasons for short-payment vide his letter dated 22.9.2009 but the same has not been considered by both the authorities below. Therefore, this case needs to be remanded back to the original authority with a direction to pass de novo order after considering the explanation given by the appellant vide his letter dated 22.9.2009. Appeal allowed by way of remand.

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• 2017 (1) TMI 928
  Imposition of penalty - Mandap Keeper service - contest of penalties on the ground that the appellant have already discharged the service tax liability on being pointed out by the audit party - Held that: - once appellant has accepted the short payment of the duty as pointed out by the audit party and discharged the tax liability and interest thereof, he also having taken a ground they were in confusion how the discharged of service tax under this category due to various interpretation, a lenient view should have been taken - It was also pointed out by the appellant before the adjudicating authority due to misunderstanding and lack of guidance they did not obtain the certificate under Goods Transport Agency/Mandap Keeper Services they could not discharge the tax liability - the appellant has made out a case for setting aside the penalties imposed by the adjudicating authority under Section 77 and 78 of Finance Act, 1994, we set aside the penalty of 5000/- and 15,19,448/- imposed by the adjudicating authority on the appellant. As regards the penalty of 2000/- per return under Section 77 read with Rule 7C of Service tax Rules, we find that this penalty needs to be upheld. Appeal disposed off - decided partly in favor of appellant.

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• 2017 (1) TMI 927
  CENVAT credit availed on input services polishing, grinding of marble floor etc. - denial of benefit of exemption on the ground that when appellant have availed credit on input services, they are not entitled to get benefit of notification no. 1/2006 (abatement) - credit availed on services specified u/r 6(5) of CCR on the ground the service provider has wrongly classified the services - Held that: - the service tax for the input service has been discharged by the provider under the ‘cleaning service’ which is not the listed service - the recipient of service is taking credit on such tax paid to the Government and it is not open to the recipient to reclassify the service when the tax has been paid already under a particular category by the provider of service. Neither the appellant nor the officers in the jurisdiction of the appellant have legal sanction to revise classification of service received, even if the said classification is thought to be made incorrectly by the provider of service - the invoices issued by the provider of service indicate that service tax registration under ‘cleaning service’ though the description of service in the body of the invoice is indicated as ‘marble maintenance’ - the classification and categorization of service cannot be changed at the end of the recipient - appeal dismissed - decided against appellant.

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• 2017 (1) TMI 926
  Reverse charge - Natural justice - all the submissions required to made by the appellant before the adjudicating authority, are not done - Held that: - adjudicating authority, should be extended an opportunity to look into the merits of the detailed submissions of the appellant before appellate forum - appellant should be directed to appear before the adjudicating authority, for making the detailed submission as made before us so that the adjudicating authority can appreciate and pass an order on merits - appeal allowed by way of remand.

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• 2017 (1) TMI 925
  Imposition of penalty - Business Auxiliary Services - during the period July 2003 to September 2004 - the appellant had already taken the registration for payment of service tax with effect from 17.11.2004. The registration was taken before the investigation commenced by DGCEI. A part of service tax due was paid before commencing the investigation. However, rest of the dues were paid after commencing investigation along with interest due thereon under section 75 of the Finance Act, 1994 - Held that: - the appellant had reasonable cause for delay for compliance under Finance Act, 1994. Accordingly, I am of the view that this is a bona fide case for waiver of penalties under section 80 of the Act. However, since the demand for service tax and interest is not disputed, I uphold the same - penalty set aside - appeal allowed - decided in favor of assessee.

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• Central Excise

• 2017 (1) TMI 924
  CENVAT credit - input services - sales commission - denial on the ground that the activity of sales commission paid to the agents was no way related to the activity of manufacturing the final product in terms of Section 2(f) of the Central Excise Act - Held that: - the sales commission is directly attributable to sales of the products. Any activity which amounts to sale of the products is deemed to be sales promotion activity in the normal trade parlance. The commission is paid on sales of the products/services with an intention to boost the sale of the company. In view of the same, the sales commission has a direct nexus with the sales which in turn is related to the manufacture of the products. It is to be understood that there need not be manufacture unless there is sale of product. Hence, the commission paid on sales becomes part of sales promotion resulting in increased manufacturing activity - reliance placed on the decision of the the case of Ambika Overseas [2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT], where it was clearly held that the sale and manufacture are directly interrelated and the commission paid on sales needs to be taken as services related to sales promotion. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 923
  Whether in the facts and circumstances of the case, the Tribunal has committed substantial error or law in giving option to the respondent to deposit duty, interest and @25% of duty amount towards penalty, within 30 days from the receipt of the order of the Tribunal for availing benefit of reduced penalty under proviso to section 11AC of the Central Excise Act, 1944? Held that: - the question/s involved in the present appeal is/are squarely covered against the revenue in light of the decision of the Division Bench of this Court in the case of Commissioner of Central Excise & Customs, Surat-I Versus M/s. Kanishka Prints Pvt. Ltd. [2011 (4) TMI 1444 - GUJARAT HIGH COURT], where it was held that - appeal dismissed - decided against Revenue.

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• 2017 (1) TMI 922
  Clandestine manufacture and removal - MS Ingots - principles of natural justice - Held that: - I find that section 36(b)(2) provides the conditions in respect of computer printouts. But, the said procedure has not been followed by the Revenue while relying on the said computer printout. Therefore, the said print outs cannot be the piece of evidence to demand duty from the appellant - Therefore, as the computer print outs are not admissible evidence, in that circumstances it cannot be alleged that the quantity of MS ingots shown in the computer print outs have been used for manufacturing of finished goods and cleared clandestinely. Revenue has failed to prove the clandestine receipt of MS Ingots from Ramadevi and used thereof in manufactured clandestinely and to clear finished goods clandestinely without payment of duty with positive evidence. Therefore, charge of clandestine removal of goods is not sustainable against the appellant. Appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 921
  Whether Cenvat credit can be permitted, when CVD is paid using the DEPB? - Held that: - the issue was very much disputed by different benches of the Tribunal and held differently - the dispute has been going on for fairly a long time, which came to be decided against the assessee only by the decision of the larger bench, it is concluded that the issue was disputed. Under the circumstances, it cannot be alleged that the appellant indulged in suppression of facts with deliberate intent to avail ineligible Cenvat credit. Consequently, the Show Cause Notice dated 31.1.2008, which has been issued covering the period March, 2003 to December, 2005 is to be held as time barred. In this view of the matter, no part of the demand will survive. The other ground on which the demand has been upheld in the impugned order is that some of the credits have been available on the basis of DEPB scrips issued under the earlier Foreign Trade Policy (2002-2007). In the light of the circular issued by the Board, the Cenvat credit has been denied. This issue has since been settled in favor of the appellants by the Hon'ble High Court, Delhi. In the case of Commissioner of Delhi Vs. Havells India Ltd. [2015 (10) TMI 1553 - DELHI HIGH COURT], it was held that there was no condition in the said notifications that the debits made in the DEPB issued under a particular FTP alone would be eligible for CENVAT credit and that debits in a DEPB issued under a previous FTP would not be eligible for credit. Appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 920
  CENVAT credit - denial on the ground that the steel items in question have been used for fabrication/manufacture and erection of supporting structure for capital goods, which are ultimately fixed/embedded to the earth, and hence are not goods, as it becomes an immovable property - Held that: - reliance placed in thee case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI] where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 919
  Manufacture - import of various parts/ modules/ accessories of digital multi functional printers, copiers and photocopiers cum printers of different models - Some of these machines were also imported by M/s XIL in Semi Knocked Down (SKD) condition and incomplete machine also and were assembled - whether the assemble of these parts amount to manufacture? - appeal filed to Allahabad High Court and the matter was remanded back to Tribunal. Held that: - the order passed by the Hon’ble Allahabad High Court has been challenged by the department before the Hon’ble Supreme Court in Special Appeal No. 6895-97/2012 the same was tagged with another Civil Appeal No.19252/2011, of the assessee pertaining to Hyderabad Branch. Thus, on the issue, the matter is sub-judice before the Hon’ble Supreme Court. When it is so, then liberty is granted to the appellant to come again after having final verdict from Hon’ble Supreme Court, within the prescribe time, if advised so. Appeal disposed off - matter on remand.

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• 2017 (1) TMI 918
  CENVAT credit on Capital goods - denial on the ground that w.e.f. 02/01/2006, assessee were manufacturing exempted goods from the said capital goods - Held that: - the capital goods were capable of being used even before installing the entire range of capital goods. It is undisputed fact that the capital goods were received when the appellant was paying Central Excise duty on the clearances and that the capital goods were used for the manufacture of excisable goods on which duty was paid. The appellant opted to avail the benefit of said N/N. 50/2003-CE w.e.f. 02/01/2006. Before 02/01/2006, the said capital goods were used for manufacture of dutiable goods. The ratio of decision of Larger Bench of this Tribunal in the case of Spenta International Ltd. Versus Commissioner of Central Excise, Thane [2007 (8) TMI 25 - CESTAT, MUMBAI] is squarely applicable in the facts and circumstances of the present case where it was held that the eligibility of Cenvat credit is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods. In the present case the capital goods were received when the dutiable final products were being manufactured. Therefore, in the present case Cenvat credit was admissible to the appellants. Appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 917
  100% EOU - inclusion of SAD in assessable value - N/N. 23/03-CE dated 31/03/2003 - bonafide belief - wilful intent or not - Held that: - the appellant had not placed any material on record in support of their contention of bonafide belief and therefore, the submission of the Ld. Advocate cannot be accepted - the appellant is entitled to the option to pay penalty @ 25% of the duty, subject to the conditions as provided under Section 11AC of the Act. In the instant case, the Adjudicating Authority had not given such option to the appellant. Appeal disposed off - decided partly in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (1) TMI 912
  Works contract - Conditional stay on remittance of 20% of the balance tax and interest demanded for the year 2013-14 - a works contractor, conceded a total contract receipt of 9,03,36,825/- during the year 2013-14 and claimed exemption under Rule 10 for a turnover of 7,76,35,006/-. Almost 85% of contract receipt was claimed as deduction - books of accounts of dealer did not substantiate the claim of deduction - Held that: - The Appellate Authority, on a prima facie consideration, found that there was no substantiating documents to prove the deduction and the books of accounts did not reveal the entire deduction as claimed by the petitioner. The Appellate Authority had also only directed remittance of 20% of the balance tax and interest demanded; which this Court is not inclined to interfere with. However, the petitioner shall be granted four instalments to make the payment as directed in Exhibit P4, starting from 25.01.2017 and continued on 25th of February, March and April of 2017. Recovery proceedings shall be kept in abeyance on satisfaction of the above conditions - petition disposed off.

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• 2017 (1) TMI 911
  Grant of interim stay against the recovery of the amount of tax assessed by the respondents-authorities - the appellant had challenged the said assessment for recovery of the tax, interest and the penalty. The learned Single Judge dismissed the petitions on the ground of alternative remedy. However, in the writ appeals before the Division Bench of this Court, the Division Bench upheld the levy of tax as per its decision dated 06.02.2010. The matters were carried before the Apex Court and the Apex Court initially vide order dated 12.03.2010 granted interim order against the deposit of 50 crores and also observed that pending the petitions, the petitioner will now implement the impugned judgment for the future period till the matter is finally disposed of. But subsequently upon the application for modification preferred by the appellant, the Apex Court having taken note of the deposit of the amount of 50 crores, observed that let the Assessing Officer proceed with the assessment proceedings, but restrained recovery till further orders - appellant contended that in view of the aforesaid order of the Apex Court, no recovery whatsoever can be made by the State authorities even if the assessment is completed for the subsequent period may be after 2008 to 2010 and even from 2010 to 2016. Held that: - It is hardly required to be stated that in an intra- Court appeal, the judicial scrutiny would be available if the learned Single Judge has committed ex facie error or has exercised discretion in a perverse manner. If the learned Single Judge has taken one possible view when two views are possible, it may not be a case for interference. As such, if the matter is examined in light of the same, the learned Single Judge has exercised discretion by granting interim protection upon condition to deposit 50% of the tax amount which could be approximately around 336 crores, since in any case, the protection is already granted for the interest and the penalty. As such, in our view, it cannot be said that the discretion has been exercised by the learned Single Judge in a perverse manner or that the learned Single Judge has committed any ex facie error while granting the interim protection which may call for interference in an intra- Court appeal. By virtue of the interim order of the learned Single Judge, the appellant may be required to deposit about 337 Crores, whereas as against the VAT amount, if calculated for the period after April 2010 to March 2014 it comes to 544 Crores. Under the circumstances, if the lump-sum figure of 337 Crores which may be required to be deposited by the order of the learned Single Judge is considered as against the amount of 544 Crores, it cannot be said that the ultimate effect of imposing a condition to deposit the amount while granting interim protection is not by properly balancing the rights nor it can be said that any unreasonable view has been taken by the learned Single Judge while modulating the interim protection. We do not find any case made out for interference to the order passed by the learned Single Judge so far as it relates to grant of interim protection on condition to deposit 50% of the tax amount. However, we make it clear that our observations in the present order shall not prejudice rights of the parties to approach the Apex Court for appropriate modification and/or clarification of the order of the Apex Court in the pending S.L.P. and if any clarification or modification is so made by the Apex Court, the right of the parties shall stand governed accordingly. Appeal dismissed - decided against appellant.

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• 2017 (1) TMI 910
  Valuation - pepper - the dealer has purchased the second quality pepper and has evaded tax on the basis of comparison of the price of such pepper with the market price of the first quality pepper - the First Appellate Authority directed the Assessing Authority to accept the books of accounts and revise the assessment of the assessee - Held that: - There is no material before us to conclude that this factual finding is perverse. In the light of the said factual finding, we cannot say that the order passed by the First Appellate Authority in interfering the matter to the Assessing Authority is illegal - the order passed by the First Appellate Authority confirmed - revision allowed - decided in favor of Revenue.

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