TMI Tax Updates - e-Newsletter
January 21, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

TMI SMS

• Hindu Undivided Family (HUF) or its Karta cannot become partner/ Designated Partner (DP) in Limited Liability Partnership (LLP)

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Articles

1. Cost of Utilities is Variable Cost and needs to be Absorbed on the basis of Actual Capacity Utilization

   By: Rakesh Singh

2. BASIC CONCEPTS OF GST (PART-3)

   By: Dr. Sanjiv Agarwal

News

1. EPCES Delegation of SEZs Meet Commerce Minister

2. Justice R.V. Easwar Committee - Recommendations to check or curb litigation/ facilitate speedier disposal - Recommendations to promote ease of doing business and simplify procedures

3. RBI Reference Rate for US $

4. India's Model Bilateral Investment Treaty

5. IDFC Bank Limited included as a Receiving Office for the Second Tranche of Sovereign Gold Bond Scheme 2016

6. Erring officials of customs to compensate the importer personally to the Extent of ₹ 14,69,650/- plus 9% interest for their acts of omission and commission - Abnormal delay in release of seized betel nuts

Notifications

Customs

1. 5/2016 - dated 19-1-2016 - Cus

Import of Goods required for medical, surgical, dental or veterinary use exempted from additional duty leviable u/s 3(5) (SAD) - Seeks to make further amendment to the Notification No.21/2012-Customs dated 17.03.2012

2. 4/2016 - dated 19-1-2016 - Cus

Concessional rate of duty on import of Import of Goods required for medical, surgical, dental or veterinary - Seeks to make further amendments to the Notification No.12/2012-Customs dated 17.03.2012

3. F. No. 394/136/2011-Cus(AS) - dated 19-1-2016 - Cus (NT)

Corrigendum - Notification No. 43/2014 –Customs (N.T.) dated 23.05.2014

DGFT

4. 31/2015-20 - dated 20-1-2016 - FTP

Amendment in export policy of Pulses

Circulars / Instructions / Orders

Companies Law

1. 2/2016 - dated 15-1-2016

Whether Hindu Undivided Family (HUF)/ its Karta can become partner/ Designated Partner (DP) in Limited Liability Partnership (LLP)

Highlights / Catch Notes

Income Tax

• Court Rules Maintenance Charges Taxable as Income from Property or Other Sources; Agreements Upheld as Genuine.

  Case-Laws - HC : Receipt of maintenance charges - liable to be taxed under the head of income from house property OR income from other sources - The Assessees who are signatories to the said agreements cannot be permitted to claim the said agreements to be sham devices and contend that the substance of the maintenance agreements was different from what was expressly recorded therein. - HC
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• Advance Payment Not Income: Assessee Justified in Not Declaring Advance as Income Before Project Completion. Credit Upheld.

  Case-Laws - AT : TDS Credit - assessee during the year was an advance and the actual remuneration was to be quantified at the completion of the project. The assessee therefore was justified in not offering the said amount as income for the year - credit not denied - AT
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• Section 68 Additions Invalid: Buyers' Failure to Prove Income Source Insufficient Without Examination and Admission of Advance.

  Case-Laws - AT : Additions u/s.68 - Failure on the part of the buyers of the flat to establish their source of income cannot be made as the reason to make addition in the hands of the assessee without out examining them when they themselves had admitted for having advanced the amount to the assessee - AT
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• Section 54F Deduction Allowed for Entire First Floor if Used for Self-Occupation, Despite Being Divided into Units.

  Case-Laws - AT : Exemption u/s 54F - contiguous units - first floor is divided into different residential units - In case, the assesse is using the entire first floor area for the purpose of her self-occupation then, AO is directed to allow the deduction in respect of entire first floor - AT
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• Construction Costs on Leased Property: Future Revenue Savings Under Explanation 1, Section 32(1) of Income Tax Act.

  Case-Laws - AT : Expenditure incurred on leased out premises - expenditure incurred on the construction of any structure on the leased premises should result in saving of the revenue expenditure at the subsequent stage - the case of the assessee very much falls within the ambit of Explanation 1 of section 32(1) - AT
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Customs

• Medical Goods Exempt from Additional Duty u/s 3(5); Amendment to Notification No. 21/2012-Customs Announced.

  Notifications : Import of Goods required for medical, surgical, dental or veterinary use exempted from additional duty leviable u/s 3(5) (SAD) - Seeks to make further amendment to the Notification No.21/2012-Customs dated 17.03.2012 - Notification
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• Amendments to Notification No. 12/2012-Customs: Import Duty Reduction for Essential Medical, Surgical, Dental, and Veterinary Goods.

  Notifications : Concessional rate of duty on import of Import of Goods required for medical, surgical, dental or veterinary - Seeks to make further amendments to the Notification No.12/2012-Customs dated 17.03.2012 - Notification
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• Public Officers Held Accountable for Acts and Omissions in Customs and Taxation Cases to Ensure Integrity.

  Case-Laws - HC : The law is well settled that the public officers have to be also held accountable for their acts of omission and commission. - HC
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Corporate Law

• Hindu Undivided Family or Karta Cannot Be Partner in LLP, Recent Company Law Circulars Confirm.

  Circulars : Hindu Undivided Family (HUF) or its Karta cannot become partner/ Designated Partner (DP) in Limited Liability Partnership (LLP) - Circular
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Indian Laws

• Justice R.V. Easwar Committee Recommends Simplifying Legal Procedures to Reduce Litigation and Expedite Case Resolution for Business Ease.

  News : Justice R.V. Easwar Committee - Recommendations to check or curb litigation/ facilitate speedier disposal - Recommendations to promote ease of doing business and simplify procedures
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• Customs Officials Ordered to Pay Rs. 14,69,650 Plus 9% Interest for Delay in Releasing Seized Betel Nuts.

  News : Erring officials of customs to compensate the importer personally to the Extent of ₹ 14,69,650/- plus 9% interest for their acts of omission and commission - Abnormal delay in release of seized betel nuts
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Service Tax

• Service Tax Demand on Goods Supplied During Repair Under Management, Maintenance, and Repair Services Deemed Unsustainable.

  Case-Laws - AT : Management, Maintenance and Repair service - Liability of service tax - the demand of Service Tax against the assessee for the cost of the goods supplied during repair does not appear sustainable - AT
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• Service Tax Liability Clarified for Small ISPs Using Larger Providers; Revenue Authorities Must Follow Board Clarifications.

  Case-Laws - AT : Interconnection service - there is nothing on record to show that small time ISPs who had rendered the services to their clients by taking connection from the appellant had not discharged any service tax liability on the amounts collected by them from their clients/customers. It is settled law that the revenue cannot argue against their own Boards clarification - AT
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Central Excise

• Valuation Case Dismissed: No Legal Basis for Including Central Excise Duty in Finished Goods Costing.

  Case-Laws - AT : Valuation of the goods for which job work was undertaken - determining the cost of an excisable product - basic allegation of non-inclusion of Central Excise duty paid on inputs needs to be included for costing of finished goods has no locus standi - AT
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• Omission of Freight Charges from Invoice Doesn't Affect Excise Valuation for Ex-Factory Deliveries.

  Case-Laws - AT : Valuation - Non-inclusion of freight - The freight amount not being shown in the invoice or some additional income has come to the appellant from freight charges cannot be the reason to add extra amounts in the invoice meant for ex-factory delivery of goods - AT
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• Cylinder Rental and Testing Charges Excluded from Assessable Value for Central Excise; Packing Not Essential for Marketability.

  Case-Laws - AT : Inclusion of cylinder rental charges, testing charges in assessable value - Valuation of goods - the packing of the gases into cylinders is not necessary for making the gas marketable - these charges would not be includible in the assessable value - AT
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• Interest Demand Overturned: Duty Only Payable After February 28, 2005 Amendment, Not From March 1, 2003.

  Case-Laws - AT : Demand of interest - Though the product is made dutiable w.e.f. 1.3.2003, there was no liability to pay duty on that date, as the amendment occurred only on 28.02.2005. - demand of interest set aside - AT
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Case Laws:

• Income Tax

• 2016 (1) TMI 722
  Receipt of maintenance charges - liable to be taxed under the head of income from house property OR income from other sources - Held that:- As it is not open for the Assessees to claim that the express terms of agreements entered into by them should be ignored. The maintenance agreements expressly referred to the payments in question as "Maintenance and service charges". A plain reading of the agreements also indicates that the said charges were payable as consideration for providing services mentioned therein. Further, TDS was also deducted treating the said charges as payments to a contractor. The Assessees who are signatories to the said agreements cannot be permitted to claim the said agreements to be sham devices and contend that the substance of the maintenance agreements was different from what was expressly recorded therein. The CIT(A) as well as the Tribunal had taken note of the specific covenants of the maintenance agreements entered into by the Assessee and had concluded that the consideration received pursuant to the said agreements could not be treated as rental income. - Decided against the assessee.

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• 2016 (1) TMI 721
  Penalty under section 271(1)(c) - adjustments to book profit by AO u/s 115JB - Held that:- The legal position is fairly well settled that when assessment was made on income computed under section 115JB and tax has been paid on income so computed, penalty under section 271(1)(c) cannot be imposed with reference to the additions that would have been made taking into account concealment made by the assessee while making assessment under normal procedure. SEE Commissioner of Income-tax Versus Nalwa Sons Investment Ltd. [2012 (5) TMI 150 - SUPREME COURT OF INDIA ] - Decided in favour of assessee.

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• 2016 (1) TMI 720
  TDS Credit - Accrual of income against advance received - method of accounting - project completion of method - Postponement of income received as remuneration for profession/technical services rendered - whether claim of the TDS was liable to be disallowed - it was submitted that when the assessee has not offered the corresponding tax in the year under consideration, then the claim of the TDS was liable to be disallowed. Held that:- The amount paid to the assessee has not been claimed by the M/s. A.A. Estate Pvt. Ltd. as expenditure but has only been shown as work in progress. So there was a consistency in the accounts of both the payer and the payee. The services rendered by the assessee were also relating to the activities of the builders and developers and as per the MOU, the quantification of the remuneration of the assessee was dependant on the completion of the project and under such circumstances, the assessee was justified to follow the project completion method of accounting. On the completion of the project, the amount quantified as the remuneration of the assessee was offered by the assessee for taxation and the same was accordingly claimed as expenditure by the builder. Till the completion of the project, the amount was not claimed by the builder as expenditure. The Ld. CIT(A) has also taken into consideration the accounting method in relation to different projects and it was found that wherein there was a resultant loss, no income was offered by the assessee; and where there was a profit, the assessee had shown income being the remuneration received by him on certain fixed percentage out of the profits of the project. There was no discrepancy either in the accounts of the assessee nor of the builder. The Ld. CIT(A) therefore after proper appreciation of the evidence on the file has concluded that the amount received by the assessee during the year was an advance and the actual remuneration was to be quantified at the completion of the project. The assessee therefore was justified in not offering the said amount as income for the year. He therefore upheld the additions so made by the AO. We do not find any infirmity in the above well reasoned order of the Ld. CIT(A) and the same is accordingly upheld - Decided in favour of assessee.

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• 2016 (1) TMI 719
  Addition of an expenditure for Business/Sales promotion Expenses - Held that:- From a perusal of the statement, it is clear that the assessee has filed complete details of the bills and vouchers in respect of the entire sales promotion expenses. The CIT(A)'observation that the appellant had produced all bills relating to sales promotion except to the extent of Rs. 1,38,32,946/- is there fore incorrect. It is further noticed that in respect of payment made to P.A.Time Industries, no bills and vouchers have been filed. The payments to this party totalling Rs. 8,70,000/- is negligible compared to the volume of expenditure incurred by the assessee under this head. Even in respect of this expenditure the payment in question has been made by account payee cheques. A perusal of the bills and vouchers shows that the expenditure in question has been incurred on purchase of gift items. Thus it is clear that the assessee has established incurring of business promotion/sales promotion expenses. AO/CIT(A) have not given any valid basis as to why these expenses should not be regarded as permissible deduction. CIT(A) having accepted that the expenditure in question is wholly and exclusively for the purpose of business of the assessee ought to have allowed the entire deduction. He ought not to sustained part of the addition on a wrong assumption that bills in relation to a part of the expenditure were not filed by the Assessee and on this basis sustained part of the disallowance made by the AO. - Decided in favour of assessee. Disallowance of expenses in respect of 17 non-operational branch offices - CIT(A) deleted the addition - Held that:- the expenses in question were incurred for upkeep and functioning of the branches and had to be allowed as deduction. We are of the view that in the light of the facts as brought before CIT(A) the addition was rightly deleted by CIT(A). - Decided in favour of assessee.

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• 2016 (1) TMI 718
  Penalty proceedings u/s.271(1)( c) - Held that:- On the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Karnataka High Court In the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ] we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. - Decided in favour of assessee.

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• 2016 (1) TMI 717
  Unexplained deposits in the assesse’s bank account u/s.68 - AO arrived at the decision to make addition in the hands of the assessee because all the 4 prospective buyers had not filed the return of income and substantiated their sources of income for the amount advanced to the assessee - CIT(A) deleted the addition - Held that:- From the facts of the case it is evident that the assessee had received cash from proposed buyers of the flat and he has also submitted confirmation statement from them. Since the approval of the construction could not be obtained, the assessee has returned the amount received. Further, Ld. CIT (A) has rightly observed that the following facts:- i) The assessee is an individual and has no business activities. ii) The money deposited in the bank a/c was not utilized by the assessee in any manner. iii) Subsequently the cash deposited in the bank were refunded to the prospective buyers of the flats. iv) The joint developer Sri M.Raja Marrison also confirmed to the transactions. We failed to understand as to why the Ld. Assessing Officer wants to make addition in the hands of the assessee when all the four prospective buyers have confirmed that they advanced the cash to the assessee. Failure on the part of the buyers of the flat to establish their source of income cannot be made as the reason to make addition in the hands of the assessee without out examining them when they themselves had admitted for having advanced the amount to the assessee. - Decided in favour of assessee.

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• 2016 (1) TMI 716
  Treatment of carbon credits as Revenue receipts and also not granting deduction u/s.80IA - Held that:- As decided in case of Arun Textiles Pvt. Ltd. v. DCIT [2015 (11) TMI 1055 - ITAT CHENNAI] the receipt from sale of carbon credits has to be considered as capital receipt and accordingly, it is not taxable. Thus, there is no question of considering the same for deduction u/s.80IA of the Act. - Decided in favour of assessee Non- consideration of insurance claim as not eligible for deduction u/s.80IA - Held that:- We find that the material brought on record does not show that the insurance claimed by the assessee has direct nexus with the business income of the assessee and the assessee was not able to show that the receipts received is in relation to current assets or in relation to trading assets of the assessee. Being so, placing reliance by the assessee’s counsel in the case of CIT vs. Meghalaya Steels Ltd. (2013 (7) TMI 175 - GAUHATI HIGH COURT) has no bearing as it is relating to receipt of interest subsidy and also the decision of the Tribunal, Hyderabad Bench in the case of M/s. Coromandel International Ltd. [2014 (12) TMI 220 - ITAT HYDERABAD ] is relating to granting of deduction u/s.80IB of the Act, in respect of excise duty refund. Accordingly, this ground of appeal by the assessee is dismissed. - Decided against assessee

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• 2016 (1) TMI 715
  Allowability of deduction u/s.80IA(4) - Held that:- It is mandatory for the assessee to first satisfy sub-section clause i(a), then (b) then (c), then proviso and so on. In case the concerned assessee fails in any one of the clauses, even if it satisfies the other part of the sub-section, the claim has to be rejected. Now we proceed to decide as to whether the assessee proprietorship concern satisfies sub-section 4(i) of the “Act” or not. For the said subsection, a reading of the provision makes it unambiguous that the concerned claimant has to be an enterprises carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility and it has to be owned by a consortium of such company or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. Admittedly, the assessee is a proprietorship. As we notice from the relevant statutory provision, the enterprise in the nature of proprietorship nowhere finds mention in the mandate of the legislature. So far as catena of the judgments submitted by the AR of the assessee, we notice that they only pertain to section 80IA(4)(i)(b) i.e. regarding the issue of contractor viz-a-vis developer. Hence, we do not deem it appropriate to decide on the said issue since the assessee does not fulfill the condition enumerated in the first part of the statutory provision. - Decided against assessee

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• 2016 (1) TMI 714
  Penalty order u/s.271(1)(c) - addition of work-in-progress, Unsecured Loan, Sundry Creditors and Disallowance of various expenses due to non production of evidence - Held that:- Proceedings u/s.271(1)(c) of the Act are altogether separate proceedings in the Act and should not be over shadowed by the proceedings held before during the assessment for that year and accordingly, we hereby remit the issue back to the file of Assessing Officer with a clear direction to give proper opportunity of being heard to the assessee to examine the reply of the assessee against various disallowances made by the Assessing Officer during the assessment proceedings, supporting evidences, ledger accounts and other records, which the assessee shall submit before the Assessing Officer to examine that whether there was any concealment of income on the part of assessee. - Decided in favour of assessee for statistical purposes.

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• 2016 (1) TMI 713
  Disallowance of interest - CIT(A) deleted the addition - Held that:- There is no finding in the assessment order also to suggest that the assessee did not use the borrowed funds for the purpose of business. In the event that the assessee maintains mercantile system of accounting, has provided interest on the loans from the Ministry in its accounts, and since, there is no evidence to suggest that interest on the loans have been waived by the Ministry, the disallowance of interest invoking the provision of section 36(1)(iii) is not in order, no matter that interest has not been paid on the borrowings from the Government. In view of these findings, we do not find any infirmity in the conclusion arrived at by the ld.CIT(A) while deleting the disallowance of impugned interest. - Decided in favour of assessee Disallowance of 50% of depreciation on Bathinda Plant - CIT(A) deleting the addition - Held that:- As before deleting the addition, the ld. CIT(A) should have afforded an opportunity to the Assessing Officer to examine the sale invoices placed before him for the first time, which has been made the sole basis for deletion of addition. There is also no finding in the impugned order whether the production alleged to have been made before 01.10.2003 was a regular production or on trial basis. In view of these facts, we think it appropriate to restore the issue to the file of Assessing Officer for deciding the issue de novo after examining the evidences laid before the ld. CIT(A) in the form of sale invoices. The Assessing Officer shall also give finding on the contention of the assessee that depreciation is allowable even on the ground of passive use of the asset. The Assessee shall be at liberty to place all evidence, if any, before the Assessing Officer in support of its claim. Needless to say, the assessee shall be afforded reasonable opportunity of being heard before deciding the issue afresh - Decided in favour of assessee for statistical purposes.

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• 2016 (1) TMI 712
  Penalty imposed u/s 158BFA(2) - delay of 10 days in filing the return - Held that:- Levy of penalty under s. 158BFA(2) is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter, the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. In our opinion, the delay of 10 days in filing the return is well within the knowledge of the assessee and the assessee is aware of the consequences of late filing of return. Therefore, it is not a case of deliberate attempt to delay the filing of return and avoid payment of taxes. Hence, the AO, is not right in levying penalty on the assessed income including returned income by invoking first proviso to section 158BFA(2). In the present case, the undisclosed income finally assessed at Rs. 42,59,151/- as per the consequential order passed by AO, giving effect to ITAT order. The assessee admitted a undisclosed income of Rs. 35,00,000/- in the block return. Thus, there was difference of Rs. 7,59,151/- in the assessed income in excess of returned income. The CIT(A), after considering the factual position and also considering the third member decision of ITAT Cochin bench in the case of DCIT vs. Heera Constructions Co P. Ltd [2009 (8) TMI 120 - ITAT COCHIN ], confirmed the penalty on this portion of undisclosed income. CIT(A) rightly deleted the penalty levied u/s 158BFA(2) by the AO on undisclosed income declared by the assessee in the block return and confirmed the penalty on undisclosed income determined by the AO in excess of undisclosed income shown in the block return. Hence, we inclined to up held the order of CIT(A). - Decided against revenue

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• 2016 (1) TMI 711
  Entitlement to exemption u/s 54F - contiguous units - first floor is divided into different residential units - exemption to be allowed to one unit or entire area - Held that:- The CIT(A) directed the AO to conduct an enquiry and allow the exemption in respect of one residential unit. In case, the assesse is using the entire first floor area for the purpose of her self-occupation then, AO is directed to allow the deduction in respect of entire first floor. In case on enquiry, it is found that the area in first floor is divided into different residential units then, deduction may be allowed to the extent of cost of acquisition of one residential unit as per the choice of assesse. Therefore, we are of the opinion that the CIT(A) rightly allowed the claim of exemption u/s 54F and his order does not require any interference. Hence, we inclined to upheld the order of CIT(A) and reject the revenue ground. - Decided against the revenue.

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• 2016 (1) TMI 710
  Disallowance of outstanding liability - Held that:- the assessee has not able to file confirmation letters from the 24 trade creditors. Since the trade liability was not proved by filing the confirmation letters from the trade creditors, we find that the Assessing Officer has judiciously disallowed the above amount and the ld. CIT(A) has rightly confirmed the above disallowance. Therefore, we find no infirmity in the order passed by the ld. CIT(A) on this issue. - Decided against assessee Disallowance towards expenditure incurred in respect of paddy and lorry hiring business - Held that:- The basis for estimating the disallowance was not mentioned in the assessment order. Further, it is not disputed that such expenses are not at all incurred by the assessee. Incurring expenses in running the lorries such as sundry repairs and other recurring expenses are very common. Since the Assessing Officer has partially accepted the expenses incurred by the assessee and made disallowance, considering the nature of the business, we are of the firm view that the Assessing Officer was not justified in making disallowance on estimated basis in the present case. Accordingly, the disallowance made by the Assessing Officer is deleted. - Decided against revenue Disallowance towards advertisement and payment for festivals, etc. - Held that:- As in the absence of original cash bills and the assessee has produced self made vouchers, after considering nature of the claim, the Assessing Officer has fairly estimated and disallowed only 20% of the total claim - Decided against assessee

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• 2016 (1) TMI 709
  Denial of exemption under section 11 - investment in chits on the ground that it is in violation of section 11(5) r.w.s. 13(1)(d) - CIT(A) allowed the claim - Held that:- CIT(A) has observed that the assessee is liable for Rs..1,30,724/- to the Social Forum Kuris and there is no investment on the asset side of the balance sheet as on 31.03.2010. Further in the receipts and payments account as on 31.03.2010 also the payments were made to social form chit account which is nothing but repayments. Therefore, the ld. CIT(A) has held that the assessee has not made any investment in violation of section 11(5) r.w.s. section 13(1)(d) of the Act. The ld. DR could not controvert the above findings of the ld. CIT(A). Accordingly, we find no infirmity in the order passed by the ld. CIT(A) and dismiss the ground raised by the Revenue. - Decided in favour of assessee Loan given to Pavanatma Provincial House, Kerala in violation of section 13(1)(d) - CIT(A) rejected revenue conclusion of violation u/s 13(1)(d) - Held that:- The interest free loan given by the assessee society to other society having similar objects and registered under section 12A of the Act does not violate section 13(1)(d) read with section 11(5) of the Act as the said loan was neither an investment nor a deposit. Accordingly, the ratio lay down by the Hon’ble Delhi High Court in the case of DIT(E) v. ACME Educational Society (2010 (7) TMI 159 - DELHI HIGH COURT ) squarely applies to the facts of the present case since giver and receiver are having similar objects and both are registered trust. Under these facts and circumstances, we confirm the order passed by the ld. CIT(A) on this issue - Decided in favour of assessee

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• 2016 (1) TMI 708
  Penalty u/s 271(1)(c) - disallowance of agricultural income - CIT(A) deleted the penalty - Held that:- It is an undisputed fact that the assessee has claimed any expenditure having incurred for carrying out the agricultural operation for earning agricultural income. During the course of assessment proceedings, the assessee was not able to produce any evidence of having engaged in agricultural activities and agreed to offer the said income for taxation. Once the assessee has agreed to pay tax for the said income, the income so declared by the assessee under the head “Agricultural Income” has no locus standi and it is nothing but undisclosed income under section 68 of the Act claimed under the head “Agricultural Income” to evade tax. Any evidence furnished for having carried out agricultural operation by incurring any expenditure, the income so earned shall be treated as “Agricultural Income”, which is exempt under the Act. In the present case, the assessee has not admitted any gross agricultural income showing expenses towards earning of such agricultural income and agreed to pay tax. CIT(A) has failed to consider the facts in proper perspective and accordingly, we confirm the penalty levied by the Assessing Officer - Decided against assessee Levy of penalty for the disallowance of development liability - CIT(A) deleted the penalty - Held that:- In the present case, the assessee has made an erroneous claim of deduction, which indeed pointed out by the Assessing Officer during the course of 147 assessment proceedings and the assessee has not given proper explanation. Therefore, the claim was added back to the returned income of the assessee. It is not the case that the assessee has furnished true particulars of income in the returned filed by the assessee. Therefore, the decision of the Hon’ble Supreme Court in the case of Mak Data P. Ltd., vs. CIT (supra) relied on by the Department in the grounds of appeal squarely applies to the facts of the present case in hand. Accordingly, we find that there is no illegality in initiating penalty proceedings. In view of the above, we set aside the order passed by the ld. CIT(A) and confirm the penalty levied by the Assessing Officer.- Decided against assessee

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• 2016 (1) TMI 707
  Claim of depreciation on UPS - assessee claimed at 80% whereas Commissioner of Income Tax (Appeals) allowed 60% - Held that:- No infirmity in the order passed by the Commissioner of Income Tax (Appeals) in restricting the depreciation on UPS to 60% as the UPS systems are required for operations of the computers. Hence the UPS becomes part and parcel of the computer systems once they are attached to the computers. Hence they are legible for depreciation @ 60% being the depreciation available for computers. - Decided against assessee Eligibility for deduction under section 10A - Held that:- On going through the provisions of section 10A and sub-clause 2(i)(b) and also sub-section (2)(i) (c) of section 10A, we find considerable force in the submissions of the counsel for the assessee. We are of the view that Assessing Officer and Commissioner of Income Tax (Appeals) have completely overlooked the provisions in rejecting the claim of the assessee that it is not entitled for deduction under section 10A of the Act. Thus, we restore this issue to the file of the Assessing Officer for thorough examination and decide the issue in accordance with law i.e. whether the assessee is entitled for deduction under section 10A of the Act or not.- Decided in favour of assessee for statistical purposes.

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• 2016 (1) TMI 706
  Expenditure incurred on leased out premises - CIT(A) treated as capital in nature liable to be disallowed - Held that:- As decided in assessee’s own case for the assessment years 2005-06 and 2008-09 [2013 (2) TMI 265 - ITAT CHENNAI ] it is essential that the expenditure incurred on the construction of any structure on the leased premises should result in saving of the revenue expenditure at the subsequent stage. In the present case, from the pleadings of both the sides, it cannot be ascertained whether the assessee is getting enduring benefit of revenue nature from the additional structure or renovation/repairs undertaken by the assessee on the leased out premises. Thus, the case of the assessee very much falls within the ambit of Explanation 1 of section 32(1) of the Act. Respectfully following the said decision of the Tribunal, we uphold the order of the Commissioner of Income Tax (Appeals) in holding that expenditure incurred by the assessee on leasehold land is capital expenditure - Decided against assessee

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• 2016 (1) TMI 705
  Purchase and sale of shares - ingenuity of transactions - claim of long term capital gains by assessee - CIT(A) allowed the claim - Held that:- The assessee had duly furnished the evidence of purchase and sale of shares and the long term capital gain earned therefrom. No discrepancy has been brought out by the ld. D.R. in relation to the share transactions done by the assessee with M/s Database Finance Ltd. We, therefore, do not find any infirmity in the order of the ld. CIT(A) while allowing the claim of the assessee. - Decided in favour of assessee

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• Customs

• 2016 (1) TMI 726
  Import of split betel nuts - Writ petition seeking release of split betel nuts - The petitioners asserted that the goods, namely, betel nuts imported by them, were also got tested and nothing spurious was found in the test report of the Export Inspection Agency at Kolkata. - Held that:- Having thus regard to the findings of the adjudicating authority in confiscation proceedings dated 29.11.2013 which also stands fully affirmed by way of dismissal of appeal filed by the department, this Court would find it difficult to accept any of the plea of Custom Department with regard to non-release of the seized articles of the petitioners for a period of nearly one and half year commencing from 28.03.2013 till 09.08.2014. This Court, therefore, would not be required to say anything more about the events which have taken place after releasing of betel nuts on 09.08.2014, inasmuch as, the appeal filed against the adjudicatory final order in confiscation proceedings dated 29.11.2013 was also eventually dismissed on 29.11.2013 some time in November, 2014 which led to return of bank guarantee to the petitioners in view of the order dated 11.11.2014 as quoted above in paragraph no.16 of this judgment. What really amazes this Court is that even after the adjudication in confiscation proceedings were itself dropped, by the final order dated 28.11.2013 when there was no sanction of law under any provision of Customs Act which would have empowered the authorities of the Custom Department to withhold the release of the seized articles of the petitioners inasmuch as the Custom Department and its authorities in fact had no power in law to keep the seized articles in their possession after passing of the final order of adjudication dated 29.11.2013, they still did not release the articles despite the petitioners' application dated 2.12.2013 on a plea that such articles of the petitioners could be released only after the correctness of final adjudicatory order dated 29.11.2013 was accepted by the competent reviewing/appellate authority. This Court again does not find any such provision in the Act which could have enabled the authorities of Customs Department to sit over the final order of adjudication in confiscation proceedings dated 29.11.2013. Thus, having an overall picture this court will have no difficulty in coming to the ultimate conclusion that the petitioners on account of abnormal delay of almost 1½ years caused in release of its seized betel nuts have been put to a perennial loss. Since the authorities themselves had valued and quantified the price of the seized articles, namely, split betel nuts weighing 15.470 M.T. to the tune of Rs. 14,69,650/- on 17.2.2013, the petitioners would become at least entitled to recover this amount from the officials of the Custom Department. By now, the law is well settled that the public officers have to be also held accountable for their acts of omission and commission. Thus, when this Court has found that the petitioners have been put to a loss of at least Rs. 14,69,650/- on account of complete deterioration of quality of split betel nuts solely on account of deliberate laches on the part of the officials of the Custom Department it would direct respondent no.2 to pay a sum of Rs. 14,69,650/- along with interest at the rate of 9% per annum for the period 28.3.2013, the date on which the order of provisional release of the seized article was passed by the competent authority to the order directing release of the seized articles dated 9.8.2014 within a period of three months from today. It is, however, made clear that such amount, which has to be paid by way of compensation for the loss caused to the petitioners on account of delay of nearly 1½ years in release of the seized articles, shall be recovered from the erring officials and for the purposes of fixing individual responsibility on such erring officials this Court would direct the Chairman of Central Board of Excise and Customs Department of Revenue, New Delhi to get an enquiry conducted by an Officer not below in the rank of Chief Commissioner of Customs who must not be posted and/or associated in any manner with Patna Zone of the Custom Department. Decided in favor of appellants.

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• 2016 (1) TMI 725
  Revenue made claim that seized goods are smuggled one without payment of duty - Tribunal found that Revenue failed to prove its allegation - High Court [2006 (5) TMI 39 - HIGH COURT, CALCUTTA] confirmed the order of the the tribunal - Apex Court dismissed the revenue appeal as, No question of law is involved. Even the amount of penalty imposed is negligible.

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• 2016 (1) TMI 724
  Overvaluation of goods with an intent to send out foreign exchange, which was to be subsequently brought in as remittance for export of CD ROMs under DEPB/DEEC Scheme for availing export incentives - Tribunal had decided the case in favor of assessee [2006 (9) TMI 69 - CESTAT, BANGALORE] - Apex Court dismissed the Revenue appeal following the decision in the case of Commissioner of Customs & Anr. v. M/s. Contessa Commercial Co. Ltd. & Ors. [2015 (10) TMI 763 - SUPREME COURT].

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• 2016 (1) TMI 723
  Valuation of import of goods - Rejection of transaction value - Exclusion of over-riding commission - Tribunal in [2014 (9) TMI 948 - CESTAT MUMBAI] has observed that, merely because a lower price is charged, it cannot be held that the transaction value can be rejected unless there is evidence of additional consideration of flow back to the foreign supplier - Apex Court did not see any good ground to interfere with the judgment and order passed by the Tribunal. - Revenue appeal dismissed.

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• Service Tax

• 2016 (1) TMI 704
  Management, Maintenance and Repair service - Liability of service tax - inclusion of Value of goods - cost of the goods supplied during repair - Held that:- Having considered the rival contentions and in view of the settled legal position in the case of Samtech Industries (2014 (4) TMI 995 - CESTAT NEW DELHI), upholding the order of this Tribunal by the Hon'ble High Court of Allahabad [2014 (8) TMI 1023 - ALLAHABAD HIGH COURT] and also in view of the letter of the CBE&C accepted the legal position that the cost of items supplied/sold and there is documentary proof specifically indicating value of the goods, the demand of Service Tax against the assessee for the cost of the goods supplied during repair does not appear sustainable. In this view of the matter, we set aside the impugned order and allow the appeal with consequential benefits. - Decided in favour of assessee.

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• 2016 (1) TMI 703
  Works contract - construction of residential houses - taxability prior to 01/06/2007 and after - Held that:- the applicant is not liable for service tax for construction of independent houses, in view of the Tribunal’s decision in Macro Marvel Projects Ltd. vs. CST, Chennai [2008 (9) TMI 80 - CESTAT, CHENNAI]. The service tax liability of the applicant for the period prior to 01/06/2007 is not on strong ground. Similarly, the tax liability under Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana in terms of Notification No. 28/2010-ST appears not sustainable. The applicants do not have prima facie case regarding claim of pure supply of goods contract, construction of godown and fencing and other work done for Nagar Nigam etc. Considering all these facts and also the fact that they have discharged service tax of Rs. 7.38 lakhs already, we find it fit and proper to order for further deposit of Rs. 7.5 lakhs with proportionate interest - stay granted partly.

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• 2016 (1) TMI 702
  Interconnection service - Online Information Access and/or Database Retrieval Service - From April 2004 to April 2006 - appellant submitted that the demand which has been raised is for interconnection service which is not taxable as per the Boards Circular dated 09/07/2001. - Held that:- the Board did not want to tax the amounts recovered by an ISP for interconnectivity services. Such a stated stand cannot be overlooked by the adjudicating authority who is functioning under the Board. Be that as it may, there is nothing on record to show that small time ISPs who had rendered the services to their clients by taking connection from the appellant had not discharged any service tax liability on the amounts collected by them from their clients/customers. It is settled law that the revenue cannot argue against their own Boards clarification. - Demand set aside - Decided in favor of assessee.

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• 2016 (1) TMI 701
  GTO service - Tribunal [2006 (12) TMI 504 - CESTAT CHENNAI] allowed the appeal of the assessee - Not only the tax effect is minimal, even otherwise the case is squarely covered against the Department by the judgment of this Court in Laghu Udyog Bharthi v. Union of India [1999 (7) TMI 1 - SUPREME COURT OF INDIA]. The appeal is, accordingly, dismissed.

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• 2016 (1) TMI 700
  Condonation of delay in filing of appeal before the Commissioner (Appeals) - HC in [2015 (1) TMI 859 - ORISSA HIGH COURT] refused to condone the delay - Apex Court dismissed the appeal of the assessee.

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• Central Excise

• 2016 (1) TMI 699
  Valuation of the goods for which job work was undertaken - determining the cost of an excisable product - whether the Central Excise duty paid on inputs needs to be included in the costing of the final product for arriving at the assessable value or otherwise? - Held that:- The issue is now settled by the Supreme Court in the case of Daiichi Karkaria (1999 (8) TMI 920 - SUPREME COURT OF INDIA) wherein held that the Central Excise duty paid on the inputs need not be included for arriving at the costing of final product as the availment of Cenvat credit neutralizes the impact of the duty on costing of the finished products. Following the judgement, we hold that the basic allegation of non-inclusion of Central Excise duty paid on inputs needs to be included for costing of finished goods has no locus standi accordingly, on merits we hold that appeal needs to be allowed. The differential duty payable shall be paid by the appellants along with interest and the differential duty will be calculated on the basis of the law settled by the Apex Court as cited hereinabove.

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• 2016 (1) TMI 698
  Valuation - Non-inclusion of freight collected separately, not shown in the invoice, to be added in the assessable value - addition to assessable value - Held that:- The demand of short levy was confirmed on the first issue only on the ground that the freight charges were not mentioned in the invoices and as such the assessee is liable to pay tax on this amount. We find no legal basis for such assertion. The fact that the place of removal is ex-factory as asserted by the appellant has not been disproved by adducing any evidence by the Revenue. That the appellants had arrangement for delivery of goods to the buyer after their clearance from the factory has nothing to do with the assessable value of the goods unless it is established that place of removal for valuation purpose is the delivery point at the buyer's premises. No such evidence is forthcoming in this case. - Decided in favour of assessee Certain amount collected, in excess of actual freight, from the buyers to be added in the assessable value - Held that:- The appellants collected certain amount towards freight from their buyers, but actually spent less amount towards such freight. The Revenue added this excess amount in the assessable value. We find that when the goods are delivered ex-factory and the place of removal is factory gate, the freight element has no bearing on the valuation of the product. The freight amount not being shown in the invoice or some additional income has come to the appellant from freight charges cannot be the reason to add extra amounts in the invoice meant for ex-factory delivery of goods. There should be clear evidence that the invoice price for the goods for delivery at the factory gate is not reflecting the correct value and certain extra consideration is accruing to the appellant. No such evidence has been discussed in the impugned orders. Thus in the absence of evidence such addition to the value is not legal tenable. - Decided in favour of assessee

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• 2016 (1) TMI 697
  Valuation of goods - Inclusion of cylinder rental charges, testing charges in assessable value - transaction value - Held that:- The issue was decided in Goyal M.G. Gases Pvt. Ltd. vs. CCE, Ghaziabad [2014 (8) TMI 657 - CESTAT NEW DELHI] wherein held in the cases where the gases were supplied in the cylinders brought by the customers, it is not disputed that the gases, in question, were marketable as such in as much as a substantial quantity of the gases was being supplied in tankers as well as through pipe line and also in the cylinders brought by the customers and as such, the packing of the gases into cylinders is not necessary for making the gas marketable. In view of this factual matrix, the ratio of the Tribunal's decision in the case of CCE vs. Grasim Industries Ltd.[2003 (12) TMI 101 - CESTAT, NEW DELHI ] would be applicable to this case and these charges would not be includible in the assessable value - Decided in favour of assessee.

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• 2016 (1) TMI 696
  Deduction of discounts from all the clearances - determination of assessable value under Section 4 of the Central Excise Act, 1944 - appellant is deducting cash discounts from the transaction value on the clearances made from their factory to all the customers irrespective of the fact that the customers are not paying the amount in time and the cash discount has not been passed - Held that:- As relying on Purolator India case [2015 (8) TMI 1014 - SUPREME COURT ] it is held that the appellants are entitled for claiming deduction of cash discount from the transaction value on the clearances made from the factory to all the customers. - Decided in favour of assessee

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• 2016 (1) TMI 695
  Reversal of CENVAT credit - calculation of interest - amount of CENVAT credit attributable to inputs used in the exempted goods - Held that:- The appellant has already reversed Rs. 1,90,160.91 which is attributable to the inputs used for manufacture of goods cleared under exemption. Provisions of Rule 6(3) are applicable in this case and the assessee having deposited an amount of Rs. 2,43,600/- on the direction of the Tribunal, they can be extended the benefit provisions of Rule 6(3), regarding the procedure rule followed or opt to reverse the CENVAT Credit attributable to CENVAT Credit. This Tribunal in the case of Mercedes Benz India Ltd. [2015 (8) TMI 24 - CESTAT MUMBAI] has held that these are procedures and non-compliance can be at the most procedural lapse. Thus the proposition is accepted that the amount to be reversed is an amount of CENVAT Credit attributable to the inputs consumed in the manufacture of finished goods, accordingly allow the appeal filed by the appellant to that extent and hold that the lower authority shall work out the interest payable on amount of Rs. 1,90,160.91 and adjust the amount of CENVAT Credit to the already paid of Rs. 2,43,600/- and interest thereof, from the deposit already made by the appellant on the direction of the Tribunal and if any interest is recoverable the same be recovered from the appellant. As regards the penalty, it is held that in the facts and circumstances of the case the same is set aside.

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• 2016 (1) TMI 694
  Demand of interest - appellants cleared the goods without payment of duty - retrospectivity of liability - Held that:- The activity of producing refined edible oil was held to be not a process of manufacture by the Hon'ble Supreme Court in the case of M/s. Shyam Oil Cake Ltd (2004 (11) TMI 109 - SUPREME COURT OF INDIA ). Thereafter a new Chapter Note was inserted in Chapter 15 of CETA, 1985 vide Financial Bill, 2005 inserted on 28.02.2005 making the duty payable w.e.f. 1.3.2003. While brining forth the amendment, it provided for regularizing the duty already paid. The appellants discharged their duty liability on 13.05.2005. The argument on behalf of the Revenue that as the liability to pay duty is made retrospective, the respondents are liable to pay interest from 1.3.2003 onwards does not appear to be attractive. The liability to pay interest arises only when the amount becomes due. The amount falls due only after the insertion of the amendment. The respondents discharged their liability within the time limit. Though the product is made dutiable w.e.f. 1.3.2003, there was no liability to pay duty on that date, as the amendment occurred only on 28.02.2005. In our considered opinion, in the present case, there is no liability to pay interest. Also see Pushti Refineries (P) Ltd. Vs. CCE & ST, Bangalore [2014 (10) TMI 273 - CESTAT BANGALORE ] - Decided in favour of assessee.

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