Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 21, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Exemption u/s 11 - until and unless registration is granted no exemption can be claimed only on the basis that application has been submitted for registration - HC
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AO has correctly rejected and held that the assessee is not eligible to exemption u/s 11 as its registration has been ceased to exist for the assessment year under consideration for non-compliance of the terms and conditions stipulated while granting certificate u/s 12AA by the CIT - AT
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Levy of penalty u/s. 271(1)(c) - AOhas issued notice in without striking of irrelevant clause in the standard proforma (printed form). Since, the notice issued u/s. 274 is vague, the same is invalid and the subsequent proceeding arising therefrom are thus vitiated. - AT
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Notice issued u/s 147 in respect of an entity which ceases to exist by virtue of amalgamation order under section 394 of the Companies Act - would be illegal and unsustainable. - HC
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Addition u/s 69C - bogus purchases - AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statement/affidavit of third parties - AT
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Addition u/s 69C - bogus purchases - there is no evidence brought on record by the AO to establish that the said payments were routed back to the assessee, the addition made by the AO under section 69C of the Act is unsustainable - AT
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Credit of TCS denied - the nature of TCS is nothing but tax which has been statutorily recognised in the Income tax Act, and the Rules are enabling and procedural in nature and absence thereof cannot result in denial of credit of TCS. - AT
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Revision u/s 263 - The view taken by Ld. AO is a plausible view, which is supported by various judicial precedents. The assessment order passed cannot be called to be erroneous though may be prejudicial to the interest of the revenue - AT
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TDS u/s 195 - payment for software - the ‘royalty’ has been specifically defined in the treaty and amendment to the definition of such term under the Act would not have any bearing on the definition of such term in the context of DTAA. A treaty which has entered between the two sovereign nations, then one country cannot unilaterally alter its provision - AT
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Treating the short term capital gains(STCG) as long term capital gains (LTCG) - Four hospitals of the assessee were owned by it for a period of more than 36 months and that it is a case of slump sale - order of CIT(A) confirmed - AT
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Taxability in India - “slot hire charges” received by the assessee - The DRP has grossly erred in not reading the order of AAR properly which has caused undue hardship of the assessee. The order of the AAR had attained finality. - AT
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Mere possession of assets by itself does not constitute a belief that income of the years in question had escaped assessment. Thus, the reassessment proceedings are based on presumption and suspicion and not on the basis of any specific instance of escapement of income. - AT
Customs
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Valuation - rejection of transaction value - The original adjudicating authority has only recorded that the pricing of the imported goods made are as per price list supplied by the supplier of the collaborator. This is not sufficient to discharge the liability in tennis of the Customs Valuation Rules, 1988 - AT
Corporate Law
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Scheme of Amalgamation - Requirement of convening meetings - Since the Transferor Company has no secured creditors, therefore the question of convening a meeting thereof does not arise. - HC
Service Tax
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Classification of services - amounts received as commission by the appellant for underwriting services rendered classifiable under the head Underwriting Services and is taxable. - AT
Central Excise
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CENVAT credit - input services - sales commission - 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 - AT
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Valuation - Transaction value u/s 4 or MRP based value - when chewing tobacco pouches containing less than 10 gms. of net weight were put together (12 to 52 numbers) in the polythene bag whether to consider such polythene bag as a multi piece pack or a wholesale pack? - The impugned goods cannot be subjected to as MRP based assessment u/s 4A - AT
VAT
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Post sale discount - To deny the benefit of deduction only on the ground of omission to reflect the trade discount though actually granted in future, in the tax invoice/bill of sale at the time of the original transaction would be to ignore the contemporaneous actuality and be unrealistic, unfair, unjust and deprivatory. This may herald as well the possible unauthorised taxation - SC
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Valuation - If taxable turnover is to be comprised of sale/purchase price, it is beyond one's comprehension as to why the trade discount should be disallowed, subject to the proof thereof, only because it was effectuated subsequent to the original sale - SC
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Entry tax - malted barley / barley malt, hops pellets and maize flakes are not agricultural / horticultural produce falling under entry 2 of Schedule II of the Act and they are not exempted from the levy of tax under the Act - HC
Case Laws:
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Income Tax
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2017 (1) TMI 1011
Addition u/s 68 - Held that:- The inquiries made from searched parties or the statements were made available to the assessee. In these circumstances, the mere assumption that some of the parties were bogus and that the amounts attributed to them were suspect could not be sustained. So far as M/s Stalwarts Realtors Pvt. Ltd. and the amount of ₹ 50 lacs added to its account was concerned, the ITAT concluded that since the amount was shown by M/s Stalwarts Realtors Pvt. Ltd. and in fact accounted for, the question of it being bogus or suspect in the hands of the assessee did not arise. No substantial question of law - Decided against revenue
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2017 (1) TMI 1010
Revision u/s 263 - ITAT held that the CIT's order directing the AO to obtain the addresses of sundry creditors and verify them is not according to the parameters and principles governing the exercise of powers by the Commissioner under the provisions of section 263 - Held that:- The tribunal while upsetting the finding recorded by the CIT with regard to the verification of the sundry creditors, does not record anywhere in his order that the details as provided by the assessee of the sundry creditors were ever subjected to any kind of the verification. This contention is correct. The order of the tribunal does not record that even though material was there before it, whether the genuineness of the document was ever subjected to any kind of the examination, especially in relation to the sundry creditors whose amounts amounted to almost ₹ 2 crores. In the absence of any findings being recorded with regard to the verification of the details, no doubt prejudice would be caused to the interest of revenue if without examining the details any order was passed. The order of the tribunal is set aside. The order of the CIT is affirmed. - Decided in favour of the department.
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2017 (1) TMI 1009
Expenditure incurred in excavating a drain to discharge effluents - whether is revenue or capital expenditure? - Held that:- The Special Leave Petitions are dismissed. HC order confirmed [2013 (12) TMI 1420 - PUNJAB & HARYANA HIGH COURT] wherein it was held that, expense incurred upon construction of the drain for release of effluents have conferred benefit of an enduring nature upon the assessee.
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2017 (1) TMI 1008
Transfer of case - whether the order under Section 127(2) of the Act satisfies the requirements spelled out in the Statute? - Held that:- A transfer order would mean that the authority to which the assessee is faced, points have to be canvassed, would be somewhere else then this would also undoubtedly be important on its part. As against this, the Revenue’s interest would be to ensure that a holistic and cohesive view of all is taken with regard to a series or pattern of transactions or investments involving multifarious parties. In a case, like the present one, search and seizure proceedings have been taken place and notices have been issued under Section 153C of the Act, it would ordinarily be in the interest of justice of all i.e. the assessee and the Revenue alike, that if parties are scattered across the different Cities and States, a common view is taken by one Assessment Officer, that must be the intent and objective. In the process, the inconvenience to the assessee would be to a large measure would be obviated because the Assessment Officer – or for that matter, the assessee would not be put to inconvenience in referring back and forth the orders of each of the other properties that have been searched and the view taken. This would also avoid possible conflicting views that may spell chaos. In view of the foregoing reasons, the Court finds no merit in this petition. The writ petition alongwith pending application is accordingly dismissed.
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2017 (1) TMI 1007
Denial of grant of registration u/s 12AA - trust not yet commenced - Held that:- As held in Commissioner of Income Tax-II Vs. R.S. Bajaj Society [2014 (1) TMI 761 - ALLAHABAD HIGH COURT] the registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity - At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced - The enquiry of the Commissioner of Income-tax at such preliminary stage should be restricted to the genuineness of the objects - Decided against Revenue.
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2017 (1) TMI 1006
Exemption u/s 11 - assessee has not mentioned registration number and date in the ITR-7 - registration under Section 12AA - Held that:- As under amended provision, as is applicable in relevant assessment year, not only making of application for registration of trust is necessary but even registration of trust as such is a condition provided in statute. Thus, until and unless registration is granted no exemption can be claimed only on the basis that application has been submitted for registration. In the present case, despite the fact that admittedly no registration certificate has been issued to respondent till date, still exemption has been granted by authorities below. This is not consistent with requirement of Section 12A(1), as is applicable for relevant assessment year with which we are concerned.- Decided in favour of Revenue.
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2017 (1) TMI 1005
Compounding of the offence under Section 276B rejected - petitioner had omitted to deposit amounts deducted as tax, from the sums payable under various contracts - Held that:- In the present case petitioner’s failure to deposit the amount collected was beyond its control and was on account of seizure of books of accounts and documents etc. But for such seizure, the petitioner would quite reasonably be expected to deposit the amount within the time prescribed or at least within the reasonable time. Instead of considering these factors on their merits and examining whether indeed they were true or not, the Chief Commissioner felt compelled by the text of para 8(v). That condition, no doubt is important and has to be kept in mind, cannot be only determining. In the present case, the material on record in the form of a letter by the Superintendent of CBI also shows that a closure report was in fact filed before the competent court. Having regard to all these facts, this Court is of the opinion that the refusal to consider and accept the petitioner’s application under Section 279(2) cannot be sustained. The impugned order is hereby set aside. The Chief Commissioner is hereby directed to consider the relevant facts and pass necessary orders in accordance with law within six weeks after granting a fair opportunity to the petitioner in that regard. The petition is allowed in the above terms.
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2017 (1) TMI 1004
Validity of reopening of assessment - claiming of excessive loss - Held that:- We find that the communication dated 11th March, 2016 received by the Assessing Officer along with the extract of the survey report as relevant to the Petitioner's case was, in fact, received by the Assessing Officer. This was the material on which he formed a reasonable belief that income chargeable to tax has escaped assessment. Assessing Officer on the basis of this analysis of the data has come to a reasonable belief that income chargeable to tax has escaped Assessment. This view/ belief on the part of the Assessing Officer is his subjective view which is not shown to be perverse. Therefore, the challenge to the above belief on the basis of the data could be made by the Assessing Officer at the time of hearing before the authorities under the Act. Thus, establishing that no amounts are to be added to declared the income. Absence of income chargeable to tax escaping Assessment we find that it is undisputed position that no Assessment Order under Section 143(3) of the Act was passed. This is admittedly only a case of an intimation under Section 143(1) of the Act. Therefore, ExplanationII (b) of Section 147 of the Act would apply and it would be a deemed that income chargeable to tax has escaped Assessment as the examination by the Assessing Officer of the information received from the ADIT (Inv.) Ahmedabad, reveals claiming of excessive loss. We are not inclined to entertain the Petition, as the Petitioner can raise these very issues before the authorities under the Act. We are satisfied that the Assessing Officer on the basis of material available before him and the reasons as recorded thereon had reasonable belief to conclude that income chargeable to tax has escaped assessment.
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2017 (1) TMI 1003
Reopening of assessment - deduction under section 80IB (10) claimed - Held that:- Considering the reasons recorded to reopen the assessment for the A.Y. 2010-2011 and even considering the material on record, more particularly facts narrated in the speaking order disposing of the objections, it is not the case on behalf of the revenue that during the year under consideration i.e. A.Y. 2010-2011 and 2011-2012, there was any violation and/or breach of any of the conditions of section 80IB(10) of the Act. At the relevant time and during the years under consideration i.e. A.Y. 2010- 2011 and 2011-2012 when the assessee claimed deduction under section 80IB(10) of the Act with respect to the units for which deduction under section 80IB(10) of the Act was claimed, the same was in order and there was no allegation with respect to those units for which deduction under section 80IB(10) of the Act was granted and/or there was no breach of any of the conditions of section 80IB(10) of the Act. During the years under consideration when the assessee claimed deduction under section 80IB(10) of the Act with respect to the units sold during the years under consideration, the same was found to be in order. Therefore, the same cannot be withdrawn for any act or omission on the part of the assessee in the subsequent assessment year. Thus, it cannot be said that there was any failure on the part of the assessee in not disclosing true and correct facts necessary for the assessment for the years under consideration i.e. A.Y. 2010-2011 and 2011-2012. Therefore, assumption of jurisdiction under section 147 of the Act to reopen the assessment beyond the period of four years is without authority of law and as such contrary to section 147 of the Act. - Decided in favour of assessee
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2017 (1) TMI 1002
Depreciation claim - whether shuttering be treated to be part of plant and will be entitled for 100% deduction or less than that? - Held that:- If statute permitting depreciation at a particular rate itself has been amended and such amendment is applicable to disputed period of assessment, it is a substantial question of law and can be raised before this Court but since it may also involve some factual investigation, we find it appropriate to remand this matter to Tribunal to look into this aspect and pass a fresh order in accordance with law. In view of above, appeal is allowed partly. Impugned order dated 30.04.2015 is modified only to the extent that parties shall be allowed to address Tribunal on aforesaid question and after giving opportunity of hearing to both parties, Tribunal shall decide such question in accordance with law, expeditiously.
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2017 (1) TMI 1001
Addition on account of difference in opening balance of sundry creditor namely MTA - Held that:- We find that the balance of sundry creditor was brought forward in the year under consideration from the previous financial year. As such, we find that the corresponding purchase in relation to impugned sundry creditor was booked by the assessee in the immediate preceding year which has been allowed in the earlier year. Therefore, in our considered view, the issue of sundry creditor does not pertain to the year under consideration before us. As the issue is not arising for the sundry creditor in the year under consideration, therefore, no disallowance can be made. On merit as well we find that the MBC has confirmed the value of the tickets sold to the assessee which is exactly matching as shown in the books of account of the assessee. To the contrary, Ld. DR has not brought any defect in the confirmation received from MBC. Simply assessee has booked the sundry creditor liability with MTA out of ignorance cannot form the basis for the addition of such sundry creditor. Similarly what policy is being adopted by MBC for recognizing the sales Revenue has no bearing to the facts of the case. On perusal of the ledger of MTA, we find that the accounts were settled in the year under consideration. - Decided in favour of assessee Addition on account of non disclosure of income from interest - AO made the addition on account of difference in the net profit shown by assessee in its profit and loss account and profit shown in the computation of income - Held that:- On perusal of audited profit and loss a/c of assessee along with computation of income, we find that assessee in its profit and loss a/c has not shown any remuneration to the partners but same was shown in the profit and loss account appropriation. However the amount shown in the computation of income was after deduction of partner’s remuneration. Therefore, mismatch in figure was observed. Therefore after considering the submission of the assessee, we find no difference between amount of profit shown in the profit and loss account and in the computation of income. As such, we find no infirmity in the order of Ld. CIT(A). - Decided in favour of assessee Addition on account of diversification of interest bearing fund to interest free loan - Held that:- There is no dispute with regard to amount of debtor shown in the balance-sheet vis-à-vis interest free loan provided by assessee. In the absence of any specific finding with regard to diversion of fund we are not agreed with the arguments placed by Ld. DR. Similarly, we also find that it is the discretion of the assessee to charge or not to charge interest from the debtors. The AO cannot enter into the shoes of assessee for deciding to charge interest on the amount of debtor shown as on 31.03.2008 in its balance sheet. In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for - Decided in favour of assessee Addition on account of difference in gross profit - Held that:- From the perusal of remand report, it is ample clear, that there is no cogent reason for rejecting the books of account and estimating the gross profit @ 0.41%. This fact has been duly accepted by AO in its remand report. In this view of the matter, we find no reason to interfere with the findings arrived by the Ld. CIT(A). Under the circumstances, this issue of Revenue’s appeal is dismissed. Disallowance on account of credit entries found in the books of account of assessee - Held that:- We find that the addition was made by AO on account of non-submission of supporting documents by assessee in respect of credit entries found in the books of account of assessee. Now, before us Ld. AR for the assessee first time submitted that the ledger copy of MVE which constitute the additional documents but the same has not been verified by Authorities Below. Needless to mention that the additional document was not submitted before Authorities Below but it does not mean that he should be deprived of justice. Thus restore the matter to the file of AO for fresh adjudication. This ground of assessee’s appeal is allowed for statistical purpose in terms of above.
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2017 (1) TMI 1000
Addition u/s 68 - unexplained share application money - proof of genuineness of the funds - Held that:- Assessee company has filed source to prove the genuineness of the funds invested in the shares of the assessee company. The Assessing Officer had no information about the accommodation entry alleged to have been received by the appellant. There is no statement with reference to these companies that they were providing accommodation entries. There was no cash deposit found in the bank accounts of these companies. Therefore, the addition made by the Assessing Officer on the basis of simply a letter received from Investigation Wing cannot be treated as accommodation entry and the addition cannot be sustained on the basis of such letter without bringing adverse materials on records. The assessee has furnished all necessary documents to prove the genuineness of the transactions and creditworthiness of the investor company before Assessing Officer. Hence, the addition made by the Assessing Officer u/s 68 of the I.T. Act of ₹ 40,00,000/- was rightly deleted by the Ld. CIT(A) - Decided n favour of assessee
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2017 (1) TMI 999
Disallowance of deduction u/s 10(23C)(iiiad) - assessee society is an educational institution, also registered u/s 12A - Held that:- The exemption u/s 10(23C)(iiiad) of the Act is available to an institution, which is solely exists for educational purposes. Therefore, the phrase used as “solely” means that not for the purposes of profit. Therefore, plain reading of the said Section means that an educational institution, which is engaged solely for the purpose of imparting education is solely for the purpose of imparting education is qualifies for the exemption u/s 10(23C)(iiiad). In the case of the assessee, we find that the assessee society has not carried out any other activity other than education, therefore, the assessee is eligible for deduction u/s 10(23C)(iiiad) of the Act. - Decided in favour of assessee Rejection of registration u/s 12AA - the assessee has failed to file return of income u/s 139(4A) read with section 121 to Section 139(1) - Held that:- for making eligible to exemption u/s 11 in accordance with the certificate granted u/s 12A by the CIT, Bhopal, the assessee should have filed its return of income within the due date as prescribed u/s 139(1) of the Act read with Explanation 2 to Section 139(1) of the Act and in accordance with the provisions of Section 139(4) of the Income-tax Act, 1961. Since the assessee has failed to furnish the return as per the terms and conditions laid down while granting the registration to the Society, the AO has correctly rejected and held that the assessee is not eligible to exemption u/s 11 as its registration has been ceased to exist for the assessment year under consideration for non-compliance of the terms and conditions stipulated while granting certificate u/s 12AA by the Commissioner of Income-tax, Bhopal. - Decided against assessee Addition as surplus on sale of land as short term capital gain - Held that:- We have considered the facts and find that the assessee is found to be eligible for exemption u/s 10(23C)(iiiad) of the Act, hence surplus earned on account of sale of land at ₹ 58.68 lakhs has been applied for purchase of construction of land amounting to ₹ 276 lakhs. Hence, the surplus earned on this transaction by the Society not taxable, as the income of the society is held as exempt in our finding as given in ground no.1 above. This ground is, therefore, allowed in favour of assessee Addition on account of unsecured loan - Held that:- We find that the Society is eligible for exemption u/s 10(23C)(iiiad) as held in ground no.1 above. Further, the assessee has filed the confirmations of the creditors explaining the source of source, who in turn, obtained loans from the persons, who are also facing Court cases for non return of such loans. Further, the amount has been invested by the Society in land and building. Hence, the borrowed funds have been utilized for the benefit of the Society. Therefore, the finding of the lower authorities are without any basis and not in accordance with law. Therefore, the addition made on account of unexplained cash credit is deleted. - Decided in favour of assessee
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2017 (1) TMI 998
Disallowance & enhancement of Bad debt claim - Allowability of bad debts in terms of section 36(1)(vii) r.w.s. 36(2) - scope for estimation for determining eligibility of claim - Held that:- We note that the AO has resorted to estimate disallowance of bad debt at ₹ 2,58,046/- being 10% of the total bad debts claimed. We totally fail to understand the rationale for such estimation. Clearly, the AO has acted in a non challant and mechanical manner without any accord with the purport of the provisions of section 36(1)(vii) r.w.s.36(2) of the Act. The allowance for bad debt is either allowable or not allowable based on evaluation of facts objectively. There is no scope for estimation for determining eligibility of such claims. Such uncalled for action cannot be thus sustained at all. On facts, the AO has admitted that party-wise break-up of the bad debt has been provided by the assessee for his consideration. The sole basis for rejection of the bad debt is lack of justification towards genuineness of bad claim without any elaboration. The CIT(A), on the other hand, has resorted to enhancement on the ground that requisite details have not been filed. The stand of the AO for disallowance and that of CIT(A) are on a mutually contradictory footing. We note that there is no quarrel to the fact that the assessee has written off the debt as irrecoverable in its financial account. It is well settled that the Department cannot insist on demonstrative and infallible proof that a debt has turned bad. There is no requirement in law for the assessee to establish that the impugned debt in fact has become bad in the view of the decision in the case of TRF Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT ). As per the scheme of the Act, the aforesaid claim of the assessee is admissible for deduction either in the form of bad debt or alternatively in the form of business loss and thus cannot be denied in wholesome without any sound basis. Both the authorities have failed to pinpoint any justifiable cause for drawing adverse inference. Thus, the action of the CIT(A) cannot be validated and requires to be reversed. As a result, appeal of the Assessee is allowed.
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2017 (1) TMI 997
Levy of penalty u/s. 271(1)(c) - disallowance of ‘goodwill written off’ - concealment of income or for furnishing of incorrect particulars of income - Held that:- A perusal of the assessment order shows that while recording satisfaction for initiating penalty proceedings u/s. 271(1)(c), the Assessing Officer in paragraph 4 of the order has stated that the penalty proceedings are initiated u/s. 271(1)(c) for filing wrong particulars of income and in concluding paragraph of the assessment order he has stated that show cause notice u/s. 274 r.w.s. 271(1)(c) to be issued for concealment of income/furnishing inaccurate particulars of income. This shows that the Assessing Officer is himself not clear whether the penalty is to be levied for furnishing of inaccurate particulars of income or concealment of income. A further perusal of the notice issued u/s. 274 r.w.s. 271(1)(c) which has been reproduced here-in-above further reveal that there is ambiguity in the notice with respect to charge for levy of penalty. It is not clear from the notice whether the penalty is being levied for concealment of income or furnishing of inaccurate particulars of income. The Assessing Officer has issued notice without striking of irrelevant clause in the standard proforma. Since, the notice issued u/s. 274 is vague, the same is invalid and the subsequent proceeding arising therefrom are thus vitiated. See Commissioner of Income Tax Vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that notice u/s. 274 of the Act should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271(1) are mentioned would not satisfy the requirement of law. - Decided in favour of assessee
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2017 (1) TMI 996
Levy of penalty u/s. 271(1)(c) - unexplained deposits in the Bank account - addition u/s 68 - Held that:- The notice issued for levy of penalty u/s. 271(1)(c) does not clearly spell out the charge for levy of penalty, therefore, the same is defective, null and void and the subsequent proceedings arising there from are vitiated. Accordingly, the penalty is liable to be cancelled on this account alone. The deposits made in the bank account were not routed through cash book of the assessee. The entries are made in the bank passbook and there are no cash credit entries in the cash book of the assessee. Therefore, the addition made u/s. 68 is not sustainable. Once, the addition is held as not sustainable, there is no question of levy of penalty on such addition. Purchase of scooter a perusal of bank statement clearly shows that a sum of ₹ 41,378/- has been debited from the account of assessee on 13-08-2008 for payment to Nilesh Motors. The Assessing Officer has made addition in respect of cash credits in the Bank account. Since, the payment has been made from same bank account for purchase of scooter, this would result in double addition. Therefore, such an addition is not sustainable and therefore does not attract penalty u/s. 271(1)(c) of the Act. Undisclosed investment in plots - The dispute is only with regard to the assessment year in which transaction has to be recorded in the books of account. Under such circumstances we are of the view that no penalty is to be levied on addition, where the dispute is with regard to year of taxability. - Decided in favour of assessee
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2017 (1) TMI 995
Admission of additional evidence by the tribunal - Validity of Chamber Summons - appellant seeks to introduce further evidence by way of an Arbitral award which is in the nature of a consent award - eligibility to Section 54F - there is an allotment letter but not construction was made - amount not deposited in the Capital Gain account with Bank - Held that:- The amendment now sought and which seeks to include the copy of the arbitral award as well as certain correspondence the appellant seeks to extend reliance upon the additional evidence to these documents over and above the Additional Evidences Paper Book filed before the Tribunal. The documents have sought to be relied upon in the form of the Arbitral award is pursuant to an Arbitral agreement dated 20th December, 2013 as we have observed earlier which is more than a year after the impugned order was passed. Furthermore, the correspondence sought to be relied upon in the above present Chamber Summons as part of the amendment sought by at paragraph xv on page 6 of the appeal paper book are the very same documents which were filed before the Tribunal along with the Additional Evidences Paper Book. In our view, the amendment sought is impermissible. We are not inclined to allow the Chamber Summons and we therefore declare Chamber Summons as dismissed.
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2017 (1) TMI 994
Penalty u/s. 271(1)(c) - claim for depreciation on account of purchase of machinery - Held that:- We find that the assessee had made claim for depreciation on account of purchase of machinery, that the AO had directed it to produce various details with regard to the purchase, including the copies of the invoices/ purchase bills, sources of funds, bank charges etc., that the scrutiny revealed that certain expenses were capital in nature. He called for further explanation from the assessee in that regard. It was only after the inquiry made by the AO,that the assessee admitted that the claim made by it were not as per the provisions of the Act,that he admitted to pay tax on disputed items. It is not a case that the assessee on its own made the offer and had accepted that by mistake it had not paid taxes on the disputed items.Had the case not been selected for scrutiny and had the AO not inquiry the return filed by it would have been processed as it was filed. The assessee himself admitted that claim made by it were disallowable. We are of the opinion that allowabiltiy of claim of depreciation in subsequent years would not justify the action of the assessee not to file a bonafide claim. It is not the duty of a taxpayer to determine the tax liability for a particular year. The AO has been assigned the role of tax administrator in the Act.The assessee has to make only bonafide claim in the returns of income.To decide the taxability or otherwise of such items is the domain of the AO.In this background,we are of the opinion, that the order of the FAA does not suffer from any legal infirmity. - Decided against assessee
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2017 (1) TMI 993
Levy of penalty u/s. 271(1)(c) - addition in respect of shortage in stock and unrecorded investment - Held that:- In the present case, we find that the Assessing Officer during assessment proceedings has made addition in respect of shortage in stock and unrecorded investment on estimation. It was pointed by the ld. DR that the assessee had agreed for addition. Addition on the basis of estimation may be sustainable in assessment proceedings but criterion and yardstick for imposing penalty u/s. 271(1)(c) of the Act are different from these applied for making the additions. It is a well settled law that no penalty u/s. 271(1)(c) should be levied where additions are made on estimations. Further, no penalty u/s. 271(1)(c) can be levied merely on the ground that the assessee has agreed for the addition. - Decided in favour of assessee
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2017 (1) TMI 992
Disallowance u/s.14A read with Rule 8D - Held that:- It is a settled position that if an assessee incurs interest expenditure for carrying out its business,same has to be allowed.Disallownace can be made if it incurs interest expenditure for earning exempt income.Shares and securities have been held by the assessee as stock in trade,so,there wa no justification in disallowing the interest expenditure. As in the case of India Advantage Securities Ltd.(2015 (6) TMI 140 - BOMBAY HIGH COURT) held that disallowance of expenses can be made which are incurred for earning dividend. For that purpose,the figures under the head Investment could be taken and some charges apportioned for the purpose of computing the expenses. AO, except for the year under appeal,has allowed the interest expenditure for earlier and subsequent years. He has not given any reasons for deviating from the stand taken in earlier years. Thus we hold that there was no justification in disallowing the interest expenses - Decided n favour of assessee
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2017 (1) TMI 991
TDS u/s 194A - disallowance u/s 40(a)(ia) - assessee failed to deduct tax at source on the amount of interest paid - Held that:- Once, the interest income in the preceding year was shown in the return of income as “Income from other sources” and accepted as such by the AO, then, in the present year the same cannot be re-characterised in the assessment order of the present year merely for the purpose of applying provisions of section 194A. Such kind of superfluous exercise is not permitted under the law. Thus, as per law and facts of this case, the case of the assessee is not covered u/s 194A as the mandatory condition of there being turnover exceeding a sum of ₹ 40 lakhs is apparently missing in this case. Thus, assessee was not obliged to deduct TDS u/s 194A. Thus, the AO as well as the Ld. CIT(A) have erred in making disallowance u/s 40(a)(ia). - Decided in favour of assessee
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2017 (1) TMI 990
Validity of reopening of assessment - notice issued to non-existent entity - Held that:- In the present case, the Court notices that the impugned notice was issued against a non-existent entity i.e. M/s. Rishi Promoters which had ceased to exist by virtue of order of this Court dated 20.02.2013. The date of its amalgamation was in fact earlier. Apparently, the respondent-revenue was aware of this and despite that it proceeded to issue the impugned notice. The judgment in Spice Entertainment (2011 (8) TMI 544 - DELHI HIGH COURT ) and Dimension Apparels (P) Limited (2014 (11) TMI 181 - DELHI HIGH COURT ), though rendered after the final assessment was completed, are clear that such notice and proceedings emanating from it are unsustainable. Rustagi Engineering Udyog (P) Ltd. (2016 (3) TMI 31 - DELHI HIGH COURT ) takes the logic further and holds that notice issued under section 147 of the Act in respect of an entity which ceases to exist by virtue of amalgamation order under section 394 of the Companies Act, would also be illegal and unsustainable. - Decided in favour of assessee.
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2017 (1) TMI 989
Search not supported by the original form - Misinterpreting the documents produced in form No.45 while issuing search warrant under Section 132 - Held that:- All firms were referred ever since Ratan Mandir was carrying out their activities in the residential house at Vijay Gopalji Ka Mandir, Johari Bazar Jaipur. Therefore, the findings arrived at are to be viewed in view of form No.45. We make it clear that these are tentative findings on the basis of zerox copy. While reconsidering the matter, the Tribunal will call for the original record and will examine the documents and will hear both the parties and examine all the parties including Raj Kumar Sharma, Rana and Department. Only on this one point, we are of the opinion that the Tribunal has seriously committed an error in reversing the finding of the CIT(A). It is required to be reappreciated by the Tribunal. We know that the matter is remanded back almost after 13 years but the findings which are arrived at by the Tribunal requires to be arrived at after reappriciation of the evidence and the same will be done after calling for the original documents and after giving opportunity to both sides namely Raj Kumar Sharma and Rana for inspecting the documents and offering their comments.
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2017 (1) TMI 988
Penalty under section 271(1)(c) - addition on the basis of entries found in kaccha books - Held that:- Unless during the course of search, the assessee was found to be owner of any money, bullion, jewellery or other valuable things or articles, Explanation 5 would not apply. Thus, it emerges out that concept of concealment in the present appeals is being conceived on the basis of entries found in kaccha books. This inference has been drawn on the basis of Explanation 5. If the Explanation 5 is taken out and held as not applicable, then it would reveal that the department does not have any material harbor a belief that income has been concealed. This was a lacunae in Explanation 5 and that is the reason that after 1.6.2007 a new Explanation i.e. Explanation-5A has been appended which infers the income embedded in the entries found in the note books during the course of search. As n the present case the income of the assessee has been determined on the basis of seized material found during the course of search. These entries were found in katchha book. Hon’ble High Court in the case of Pr.CIT Vs. Shri Jignesh Venilal Koralwala [2016 (7) TMI 938 - GUJARAT HIGH COURT] has held that Explanation 5 would not be applicable unless during search, the assessee is found to be owner of any money, bullion, jewellery or other valuable article or thing is found. No such things were found during the course of search and addition was made on the basis of narrations in the diary. - Decided in favour of assessee
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2017 (1) TMI 987
Addition u/s 69C - bogus purchases - Held that:- AO has not brought on record any material evidence to conclusively prove that the said purchases are bogus. Mere reliance by the AO on information obtained from the Sales Tax Department or the sworn statement of two parties before the Sales Tax Department, without affording the assessee any opportunity to cross examine those witnesses in this regard or the fact that these parties did not respond to notice under section 133(6) of the Act, would not in itself suffice to treat the purchases as bogus and make the addition. If the AO doubted the genuineness of this said purchases, it was incumbent upon him to cause further inquiries in the matter to ascertain the genuineness or otherwise of the transactions. Without causing any further enquires in respect of the said purchases, the AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statement/affidavit of third parties, Shri Pradeep Vyas and Ketan Shah; without the assessee being afforded any opportunity of cross examination of that persons and for non-response to notices under section 133(6) of the Act. Moreover, as correctly observed by the learned CIT(A), when the payment for the said purchases to the concerned two parties is through proper banking channels and there is no evidence brought on record by the AO to establish that the said payments were routed back to the assessee, the addition made by the AO under section 69C of the Act is unsustainable. - Decided in favour of assessee.
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2017 (1) TMI 986
Credit of TCS denied - TCS certificates are in different names and carry different PANs - Held that:- If we look at the provisions of section 206C read with section 190 of the Act, the nature of tax collection at source (TCS) is exactly identical to TDS and it is in the nature of tax on income which has been collected at source in respect of specified business and the nature of goods as specified in section 206C of the Act. In light of above, the credit for TCS should be given to the assessee which is finally and lawfully assessed to tax in respect of the corresponding income on which TCS has been collected. The fact that there are no specific rules which have been provided in the Income tax Rules in respect of credit of TCS in such situations on the lines of Rule 37BA, in our view, doesn’t disentitle the assessee to claim credit of TCS in whose hands the income is finally assessed to tax. The reason for the same is that the nature of TCS is nothing but tax which has been statutorily recognised in the Income tax Act, and the Rules are enabling and procedural in nature and absence thereof cannot result in denial of credit of TCS. In the instant case, AR has submitted that the income has been brought to tax in the hands of the assessee firm and accordingly the credit for TCS should be granted to the assessee firm. In this regard, we find that there is no findings of fact by the AO in this regard and in A.Y. 2012-13 the ld. CIT(A) has stated that “the claim of the appellant that all the income of partners of the firm has been include in the income of the appellant is also not fully verifiable from the documents filed by the appellant. In light of above discussions, we set-aside the matter in both the years to the file of the AO with the directions to verify whether the corresponding income in respect of which TCS has been claimed by the assessee firm has been brought to tax in the hands of the asessee firm or not. Where after due examination and verification, the AO find that the corresponding income has been brought to tax in the hands of the assessee firm, the AO is directed to allow credit for TCS in the hands of the assessee firm.
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2017 (1) TMI 985
Revision u/s 263 - whether AO order is erroneous, as well as prejudicial to the interest of the revenue? - Assessing Officer did not consider the aspect of whether the depreciation was allowable to the assessee under the given set of circumstances - Held that:- In the present facts of the case, Ld. AO had made enquiries regarding the additions that has been made to the fixed assets and the assessee had given details including the bills of purchase of the plant and machinery in that regard. All these are part of the record of the case. Assessment order cannot be termed as erroneous unless it is not in accordance with law. If an Income Tax Officer acting in accordance with law makes an assessment and takes a plausible view, the same cannot be branded as erroneous by Ld. PR CIT, simply because according to him order should have been written more elaborately. CIT has not been able to successfully establish through his enquiry that the order passed by Ld. AO is unsustainable in law. Moreover the view taken by Ld. AO is a plausible view, which is supported by various judicial precedents. The assessment order passed cannot be called to be erroneous though may be prejudicial to the interest of the revenue. As both the ingredients does not stand fulfilled of being erroneous, as well as prejudicial to the interest of the revenue, the order passed by Ld. PR. CIT is hereby quash and set-aside. - Decided in favour of assessee
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2017 (1) TMI 984
TDS u/s 195 - payment made by the assessee for use of software owned by USA company - whether is not “royalty” subject to deduction of tax at source - retrospective amendment - Held that:- Issue raised by the Ld. DR that the Explanation 4 to section 9(1)(vi) which has been with brought by Finance Act 2012 with retrospective effect in section 9(1)(vi), therefore, the meaning and definition of ‘royalty’ as given therein should be read into the DTAA is unable to be appreciated because the retrospective amendment brought into statute with effect from 01.06.1976 cannot be read into the DTAA, because the treaty has not been correspondingly amended in line with new enlarged definition of ‘royalty’. The alteration in the provisions of the Act cannot be per se read into the treaty unless there is a corresponding negotiation between the two sovereign nations to amend the specific provision of “royalty” in the same line. The limitation clause cannot be read into the treaty for applying the provisions of domestic law like in Article 7 in some of the treaties, where domestic laws are made applicable. Here in this case, the ‘royalty’ has been specifically defined in the treaty and amendment to the definition of such term under the Act would not have any bearing on the definition of such term in the context of DTAA. A treaty which has entered between the two sovereign nations, then one country cannot unilaterally alter its provision. Thus, we do not find any merit in the contention of the Ld. DR that the amended and enlarged definition should be read into the Treaty.” - Decided in favour of assessee
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2017 (1) TMI 983
Disallowance of interest - Held that:- Considering the peculiarity of the facts of the present case when the assessee has sufficient surplus fund available with them at their disposal to lend to its sister concern at lower rate of interest compared to the other non-related parties no disallowance was warranted. Hence, we do not find any infirmity or illegality in the order passed by Commissioner (Appeals)in deleting addition which require our interference - Decided in favour of assessee Disallowance of bogus purchases @ 23% of the total purchases - Held that:- Considering the facts that the genuineness of the purchases made by the assessee was not doubted by ld Commissioner (Appeals) the disallowance restricted @23% to our opinion is at higher side. Thus as per our considered opinion the disallowance @ 15% of total impugned purchases would be sufficient to meet the end of Justice. We accordingly direct the AO to calculate the disallowance is of impugned bogus purchases @15% of total cost of impugned purchases. With this observation the appeal of the assessee is partly allowed.
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2017 (1) TMI 982
Addition on account of negative net worth of the undertaking under slump sale while computing capital gains u/s.50B - Held that:- We find that the assessee and FHL had entered into a business agreement, that as per the agreement excess liabilities arising during the transition period had to be adjusted from the lump-sum amount of ₹ 186.58 crores,that during the process of transaction liability of ₹ 43.36 crores arose. In these circumstances, the FAA had rightly held that lump-sum consideration received by the assessee had to be taken at ₹ 143.1 crores [Rs.1 86.58 crores(-) ₹ 43. 36 crores]. We are of the opinion that the order of the FAA does not suffer from any factual or legal infirmity. Therefore, upholding the same we decide ground 1.b(i) against the AO. Allowing deduction from lump-sum consideration received by the assessee - Held that:- We find that in pursuance of the agreement, entered into by the assessee, with FHL Escrow Account was opened,that ₹ 15 crores was kept in the said account for settling the future liabilities,that the assessee was to receive the amount from the Escrow a/c.after a period of 2 years,that a liability amounting to ₹ 2.79 crores arose and was settled during the year,that the assessee had filed a revised return and made the claim about it, that there is no doubt about the incurring of the expenditure.The assessee had produced necessary evidences in that regard and same were found to be genuine by the FAA. In these circumstances,we are of the opinion that there is no need to interfere with the order of the FAA. Treating the short term capital gains(STCG) as long term capital gains (LTCG) - Held that:- As referred to proviso (1) of section 50B of the Act if assets were to be assessed under the head STCG all should have existed below 36 months,that even if one of the assets existed for a period more than three years same has to be treated as Long term asset. There is no need to interfere with the order of the FAA,as four hospitals of the assessee were owned by it for a period of more than 36 months and that it is a case of slump sale.Upholding his order,we dismiss Gr.No.2. Disallowance u/s 14A - Held that:- We find that assessee had not earned any exempt income during the year, nor had it claimed any expenditure against any tax free income.Thus,the twin pre-condition for invoking the provisions of section 14A r.w.r.8D of the Rules i.e.,earning of exempt income and claiming expenditure to earn the same,are missing.Therefore,confirming order of the FAA we decide the last ground of appeal against the AO.
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2017 (1) TMI 981
Taxability in India - whether “slot hire charges” received by the assessee was covered by Article 8 of the Indo UAE DTAA? - Permanent Establishment (PE) in India - Held that:- Reading of order of AAR [1997 (10) TMI 393 - ADVANCE RULING AUTHORITY] in its entirety makes it clear that AAR had decided in clear words that the impugned income i.e. income from slot hire charges shall be part of income from shipping operations and would be eligible for the benefit of Article 8 of DTAA between India and UAE and thus not liable for tax in India. The DRP has grossly erred in not reading the order of AAR properly which has caused undue hardship of the assessee. The order of the AAR had attained finality. Thus, this issue was no more open to be decided in any other manner by the AO or DRP. Under these circumstances, we decide this issue in favour of the assessee.
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2017 (1) TMI 980
Validity of reopening of assessment - reasons to believe - change of opinion - possession of assets by assessee - Held that:- There is no mention of what type of information the Department had about the assessee’s shop and another shop A/c hall along with vehicles, godowns and other assets. Neither the nature/source of information nor any specific allegation is mentioned. Mere possession of assets by itself does not constitute a belief that income of the years in question had escaped assessment. Thus, the reassessment proceedings are based on presumption and suspicion and not on the basis of any specific instance of escapement of income. Looking at the general and non-specific nature of reasons on the basis whereof the assessments have been reopened cannot be held as a valid basis for reopening. The reasons utterly lack in terms of objective, application of mind and specific instance; and, in considered view, a reasonable belief on this basis of reasons cannot be formed so as to issue notice u/s 148 of the Act. Supreme Court in the case of CIT vs Kelvinator of India Ltd,(2010 (1) TMI 11 - SUPREME COURT OF INDIA ) has held that the reasons must be specific, should have objective and a live connection with the escaped income and there should be a proper form of belief. - Decided in favour of assessee
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2017 (1) TMI 979
Unexplained cash deposited in bank account - whether the amount found deposited in the assessee’s bank account can be stated to be explained by the sale of agricultural land to M/s Triveni Infrastructure Development Co. by the assessee’s father or not? - Held that:- No effort has been made by the tax authorities to address the affidavits of the assessee and his father admittedly on record. Specific land was sold by the assessee’s father and the cheques issued by M/s Triveni Infrastructure Development Co. were not honoured by the Bank is a consistent unrebutted claim on record. The amount ultimately was handed in cash by M/s Triveni Infrastructure Development Co. is also a consistent claim on record. Copies of bank pass books of its father and son of the assessee in support of the affidavits filed are also stated to be on record. Thus find that on these material documents there is no discussion whatsoever in the orders of the tax authorities. Accordingly, holding the order devoid of discussion on material facts, the impugned order is set aside and the issue is restored back to the file of the AO directing the said authority to pass a speaking order denovo in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes.
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Customs
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2017 (1) TMI 968
Valuation - addition of value of drawings, designs etc. in terms of Rule 9(1)(b)(iv) of Customs Valuation Rules, 1988 - inclusion of royalty in invoice - Know-How Agreement - Condition for sale - Held that: - there is no express clause that the supply of technical knowhow against payment of technical knowhow fee and royalty is linked to sale. However, technical knowhow required to manufacture these products has been transferred to the appellant and it entitles them to manufacture the same. However, appellants are not free to disclose the technical knowhow to any other person in terms of clause 8 & 12 of the agreement. It is obvious that it is not open to the appellant to source the material from any person other than the foreign collaborator as it is not possible to part with the designs and drawings of the components to anyone else without concurrence of the collaborator - this aspect of the agreement has not been specifically examined by the original adjudicating authority. Appeal disposed off by way of remand.
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2017 (1) TMI 967
Advance Licence Scheme - imposition of penalty - noncompliance with the export obligation - Held that: - The case of the petitioner being a supporting manufacturer is not borne out by the records. Even when an exparte order was passed after sufficient opportunities of personal hearing being extended, but not availed of in appeal, the petitioners did not come forward with the above case - The order passed is based on non-compliance and that has been established and proved. It is not for the authorities to go on waiting for the petitioners to produce the relevant proof - petition dismissed - decided against petitioner.
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2017 (1) TMI 966
Valuation - rejection of transaction value - foreign collaboration agreement - related party transaction - Held that: - Order-in-Original clearly records that appellant and the foreign collaborator are related in terms of Rule 2(2) of the Customs Valuation Rules, 1988. If that was so, it was incumbent on the adjudicating authority to give finding in terms of Rule 4(3)(a) and (b) of the Customs Valuation Rules, 1988. We find no such in the order of the original adjudicating authority either in terms of Rule 4(3)(a) or (b) of the Customs Valuation Rules, 1988. The original adjudicating authority has only recorded that the pricing of the imported goods made are as per price list supplied by the supplier of the collaborator. This is not sufficient to discharge the liability in tennis of the Customs Valuation Rules, 1988 - the Order-in-Original is not speaking order so much as there is no material to back the assertion made in the said order. Matter is remanded to the original adjudicating authority to pass a speaking order - appeal allowed by way of remand.
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2017 (1) TMI 965
Levy of cess - Agricultural Produce Cess Act, 1940 - export of Prawns/Shrimps - refund of cess paid by appellant - unjust enrichment - Held that: - The appeal filed by the assessee has been entertained. Thereafter, on the ground of time barred claim of the assessee, the department seeks to review the order, which ofcourse have been entertained by the department, after an expiry of the limitation period of 90 days. Under such circumstances, without looking into the merits of the case, the learned Single Judge directed the appellant herein to approach the Appellate Tribunal. Considering that the review has been made belatedly, whether it is untenable or not, there appears to be unjust enrichment as fixed by the department. As such, the amount refunded should not have been recovered, which was being paid by the assessee to the department. In consideration of the provisions under Section 129D (2) and the admitted dates that has been cited in the writ petition, the review is barred by limitation and hence the same is liable to be quashed. When there is violation of principles of natural justice and the question of maintainability, the same can be questioned under Article 226 and 227 of the Constitution of India. Learned Single Judge has rejected the writ petition solely on the ground that the writ petitioner is the beneficiary. However, we find that the refund has been recovered. They are independent and distinct and are not connected to each other. Order of the learned Single Judge and the order dated 31.10.2014 of the Commissioner (Appeals) is set aside, which is barred by limitation - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (1) TMI 961
Scheme of Amalgamation - Requirement of convening meetings - nature of scheme - Held that:- In the present case, by virtue of the proposed scheme, the entire business and undertaking of the Transferor Company is being taken over and transferred to the Transferee Company. Further, upon the proposed scheme coming into effect, as consideration, there will be no issuance of new shares by the Transferee Company to the shareholders of the Transferor Company in view of the circumstance that the latter is the wholly owned subsidiary of the former. Therefore in the instant case, on the proposed scheme coming into effect, no variation in the rights of the equity shareholders of the Transferee Company shall be caused. Resultantly, judicial discretion can be exercised to dispense with the requirement of convening the meetings of the equity shareholders of the Transferee Company, in the case of a wholly owned subsidiary being amalgamated into the Transferee Company, on the ground that no variation in rights thereof is contemplated by way of the proposed scheme. In so far as the creditors of the Transferee Company are concerned, no variation in their rights is being proposed by way of the proposed scheme. Thus rights of the creditors of the Transferee Company, pre and post amalgamation, as against the Transferee Company would not stand varied. In so far as the requirement of convening a meeting of the unsecured creditors of the Transferor Company is concerned, by lifting the corporate veil, in the present case, of wholly owned subsidiary being amalgamated with its holding company, it would be established that the creditors of the Transferor Company are, and have always been, dealing with the Transferee Company de-facto though they are the creditors of the Transferor Company de-jure. Further, it has been noted that, upon the proposed scheme coming into effect, all the existing liability, debts, duties, obligations, inter alia, of the Transferor Company shall in any event stand transferred to the Transferee Company. Therefore, no variation in the rights of the unsecured creditors of the Transferor Company is proposed. Hence, in effect, it could not be said that any ‘compromise or arrangement’ is being offered by way of the proposed scheme to the creditors or shareholders of the Transferee Company; or the unsecured creditors of the Transferor Company. Therefore, in view of this circumstance and the foregoing discussion, the requirement of convening a meeting of the creditors and equity shareholders of the Transferee Company; and the unsecured creditors of the Transferor Company, to consider, and if thought fit, approve, with or without modifications, the proposed scheme can be dispensed with. Directed accordingly. Since the Transferor Company has no secured creditors, therefore the question of convening a meeting thereof does not arise. Ordered accordingly.
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2017 (1) TMI 960
Scheme of amalgamation - Held that:- Considering the approval accorded by the shareholders and creditors of the Petitioner/Transferor Company to the proposed scheme; the report filed by the Official Liquidator, having not raised any objection to the proposed scheme; and in light of the observations made by the Regional Director to the proposed scheme, which stand satisfied, as noted herein above, 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/Transferor 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/Transferor 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 Registrar of Companies, within 30 days of its receipt.
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2017 (1) TMI 959
Scheme of Amalgamation - requirement of convening and holding the meetings - Held that:- The requirement of convening and holding the meetings of the unsecured creditors of the applicant/transferee company, to consider and if though fit, approve, with or without modification, the proposed Scheme of Amalgamation, is dispensed with. Further, a prayer has also been made for seeking dispensation with the requirement of the Applicant/Transferee Company, to approach this Hon’ble Court, from filing second motion petition seeking sanction of the Scheme of Amalgamation. In support of this prayer, it has been urged that the Transferor Companies are the wholly owned subsidiaries of the Applicant/Transferee Company and upon scheme becoming effective, no new shares in the Applicant/Transferee Company will be allotted in lieu of the shares held by it and its nominee in the Transferor Companies. The entire share capital of the Transferor Companies shall stand cancelled and be extinguished without any further act or deed. It has also been stated that the interest of the creditors of the Applicant/Transferee Company shall remain unaltered. Therefore, there is no arrangement, which is proposed with the Shareholders or the Creditors of the Applicant/Transferee Company. In view of the foregoing and in view of the settled position of law, the requirement of the Applicant/Transferee Company to file a petition seeking sanction of the scheme, is dispensed with.
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Service Tax
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2017 (1) TMI 978
Withdrawal of appeals - question involved relates to rate of duty/valuation, and the appeal shall be maintainable to Apex Court - Held that: - considering the request made by Mr.Dave, learned advocate appearing on behalf of the appellants, and without considering the merits of the case as well as the question of maintainability, appellants are simply permitted to withdraw both the appeals - appeal dismissed.
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2017 (1) TMI 977
Erection, Commissioning and Installation Services - Management, Maintenance and Repair Services - period prior to 16.06.2005 and subsequent to that period till 30.09.2007 - demand of tax, interest and penalty - Held that: - the appellant’s job was to fabricate and erect the machinery in the factory of Ultratech, this would fall under the category of Erection, Commissioning and Installation Services; hence the service tax liability and interest thereof is upheld - a bonafide error might have occurred in the non-payment of service tax liability which was made good by the appellant on being pointed out. The provisions of Section 80 of finance Act, 1994 invoked penalty imposed u/s 76, 77 and 78 of Finance Act, 1994 is set aside - appeal disposed off - decided partly in favor of assessee.
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2017 (1) TMI 976
Classification of services - amounts received as commission by the appellant for underwriting services rendered - whether classified as Underwriting Services or as Banking and Other Financial Services? - time bar - Held that: - the activity of 'Underwriting' is now settled by the, Tribunal against the appellant in the case Jubilant Life Sciences Ltd v. Commissioner of Central Excise, Noida [2013 (5) TMI 393 - CESTAT NEW DELHI] as taxable - services classifiable under the head Underwriting Services and is taxable. Extended period of limitation - Held that: - extended period can be Invoked as the activity was not brought to the Notice of the authorities - there is nothing to substantiate the claim of the appellant that they were under a bona fide belief that the activities undertaken by them were not taxable. Appeal dismissed - decided against assessee.
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2017 (1) TMI 975
Levy of tax - Management, Maintenance and Repair Services for 2006-2009 and 2009-10 - Site formation service for the period 2008-09 and 2009-10 - imposition of penalties - Held that: - appellant had discharged the service tax liability in respect of construction of residential complex service and supply of tangible goods and also paid interest thereof. We find that the appellant could have misunderstood the provisions of the tax liability under those two heads and hence invoking the provisions of Section 80 of Finance Act, 1994, we set aside the penalties imposed on the appellant on these two services. As regards the service tax liability on Management, Maintenance and Repair Services, we find that the said maintenance and service were undertaken by the appellant in respect of the roads and as well as the construction of roads - Section 97 of Finance Act, 1994 categorically mandates for non-levy of service tax in respect of Management, Maintenance and Repair of roads during the period from days 16.06.2005 to 26.07.2009 (both days inclusive) - demand of tax and interest set aside. As regards Site formation service carried out for the railways authorities, the adjudicating authority has only held that the exemption under notification 17/05 is not applicable on the ground that they had not provided any document in support of the contention that the excavation has been related to the activity of railways - The documents which are produced before us and the claim the appellant before the lower authorities in reply to the show-cause notice, specifically states that they undertaken these services in respect of the construction of the road for the railways is proved - demand set aside. Penalties on all services set aside - service tax liability with interest on the Construction of Residential and Supply of Tangible goods for use upheld, as same are not contested - appeal disposed off - decided partly in favor of assessee.
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Central Excise
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2017 (1) TMI 974
CENVAT Credit - Welding Electrode - whether the welding electrodes would fall under the category of capital goods? - Held that: - 'capital goods' as defined under Rule 2(b) of Rules, 2002 and 2(a) of Rules 2004, in substance, are pari-materia with the 'capital goods' specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein - reliance placed in the case of M/S Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise [2015 (5) TMI 569 - ALLAHABAD HIGH COURT], where it was held that it cannot be said that "Welding Electrodes" satisfy the requirement so as to constitute 'component' of items mentioned in column nos. 1 to 4 of table in Rule 57Q(1) of Rules, 1944 - decided against assessee. Whether tribunal suffers from substance, learned counsel keeping in view the fact It is extremely non speaking? - Held that: - Tribunal has followed another judgment dealing with similar question decided by Karnataka High Court in Commissioner of Central Excise and Service Tax, LTU. vs. ABB Ltd., [2011 (3) TMI 248 - KARNATAKA HIGH COURT] and it is not shown to this Court that said judgment of Karnataka High Court does not cover dispute in this appeal, therefore, order of Tribunal cannot be said to be bad for want of reasons since reasons contained in the judgment followed by Tribunal would form part of order of Tribunal also - decided against Revenue. Appeal allowed - decided partly in favor of assessee and partly in favor of Revenue.
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2017 (1) TMI 973
Maintainability of appeal - monetary limit for filing appeal - Held that: - an appeal shall not be filed before the High Court in case where the monetary impact is less than ₹ 15,00,000/-. In the instant cases tax effect is less than the limit of ₹ 15 lakhs as prescribed in the Instructions issued by the Ministry of Finance Department of Revenue Central Board of Excise & Customs, in F.No.390/Misc./163/2010-JC, dated 14.12.2015, and hence, both the appeals stand dismissed as not pressed, preserving the substantial question of law for determination in an appropriate case - appeal not maintainable.
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2017 (1) TMI 972
Refund claim - Credit availed on sales commission was reversed, now refund sought for - denial on the ground that the service tax paid on commission is beyond the place of removal - 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 - It is to be understood that there need not be manufacture unless there is sale of product. To increase the manufacturing activity encouragement is being given for increased sales. Hence, the commission paid on sales becomes part of sales promotion resulting in increased manufacturing activity. Reliance also placed in the case of Ambika Overseas [2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT], where it was 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. Refund allowed - appeal allowed - decided in favor of assessee.
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2017 (1) TMI 971
CENVAT credit - input services - sales commission - denial on the ground that the sales commission is a post-sale activity and hence not covered under the definition of input services as per the CCR, 2004 - time limitation - Held that: - sales commission becomes part of sales promotion which gets squarely covered under Rule 2(l) of Cenvat Credit Rules, 2004 and the appellants are eligible to take credit of service tax - the Hon’ble High Court of P & H in the case of Ambika Overseas [2011 (7) TMI 980 - PUNJAB & HARYANA HIGH COURT] have 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 assessee.
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2017 (1) TMI 970
Valuation - Transaction value u/s 4 or MRP based value u/s 4A of Central Excise Act, 1944 - retail pouches containing tobacco weighing 6 gms. and 7 gms. each - The said pouches are then packed in a polythene pack. The polythene pack contained 52/ 42/40/32 pouches - when these chewing tobacco pouches containing less than 10 gms. of net weight were put together (12 to 52 numbers) in the polythene bag whether to consider such polythene bag as a multi piece pack or a wholesale pack? Held that: - there are two legal requirements for a commodity to be taxed under MRP based assessment the first one is requirements under SWM Act and rules made thereunder and the second one is notification under Section 4A of the Central Excise Act, 1944. While the retail pouch may be sold in number, the sale is with reference to the weight of tobacco contained in the said pouch. As an analogy we can mention that toothpaste in tubes and talcum powder in packs are sold in numbers. But the reference is to the weight contained, either of toothpaste or powder inside the pack. The price is directly influenced by the weight of the content. The buyer and the seller is fully aware that the product is sold by its quantum though for convenience it is put in unit packages. Hence, it is clear that product like chewing tobacco is sold always with reference to the weight contained in the pouch though the pouch as a unit is sold. Accordingly, we are in agreement with the conclusion reached by the lower authority in the impugned order on this count. In Loknath Prasad Gupta [2006 (8) TMI 58 - CESTAT, KOLKATA], the Tribunal held that 25 pouches of Khaini each containing 5 gms./9 gms. packed in polythene packs without MRP in such package is not governed by valuation under Section 4A. This order of the Tribunal has been affirmed by the Hon’ble Supreme Court in Commissioner of Central Excise, Rajkot Versus M/s Makson Confectionery Pvt. Ltd. [2010 (9) TMI 10 - SUPREME COURT]. Board Circular dated 28/02/2002 which clarified the scope of application of provision of Section 4A. It was noted that SWM Act, 1976 and Rules made thereunder are administered by the State Governments. In case of doubt a clarification may be obtained from the concerned Department of the State Government. In the present case, we note that for a situation covered by same set of facts, clarification was sought by the industry from the Legal Metrology Department. In response to letter dated 28/07/2003 of All India Tobacco Manufacturers Association, the Director of Legal Metrology, Department of Consumer Affairs, Government of India vide his letter dated 22/08/2003 clarified the legal position to the effect that all packages below 10 gms. are totally exempt from the purview of rules - Further, in accordance with Rule 2 (x) and Rule 29 the package containing 10 or more retail packages, common wholesale package, need not carry retail sale price declaration thereon. The impugned goods cannot be subjected to as MRP based assessment under Section 4A - appeal dismissed - decided against Revenue.
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2017 (1) TMI 969
CENVAT credit - various services - input service in terms of Rule 2 (l) of Cenvat Credit Rules, 2004 or not? - nexus with manufacturing activity - Held that: - the credit on these services cannot be denied on restrictive interpretation as adopted by the lower authorities. As already noted the appellants gave a long list of decided case laws justifying that the legal position in respect of these various input services which has been consistently and favourably settled in favour of the appellant - CENVAT credit allowed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (1) TMI 964
Validity of assessment order u/s 39 of the Act - notice has been issued without forming any opinion as to the turnover escaping assessment as required under sub-section (1) of section 43 - whether before issue of notice u/s 43 of the Act, assessment can be completed u/s 39? - natural justice - whether the impugned order is passed arbitrarily, without jurisdiction and against the principles of law so as to quash the same? - Held that: - the best judgment procedure adopted by the assessing authority must be related to some evidence or material and must be more than their suspicion. It appears none of the material or evidence has been produced or relied upon by the opposite party to come to a conclusion that average business of the petitioner comes to ₹ 15,000. Moreover, when the petitioner is engaged in selling of some low cost tiffin, and some rasgola at no stretch of imagination the daily business would reach to such an amount. It is a fact that he has engaged six persons including himself and his brother. The best judgment assessment as required to be followed under law to make assessment u/s 43(1) of the Act being not followed by the opposite party, the impugned order is illegal, bad in law, vulnerable and liable to be quashed - petition allowed - decided in favor of petitioner.
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2017 (1) TMI 963
Validity of order u/s 48(5) of the U.P. Value Added Tax Act, 2008 - at that time of seizure of the vehicle, none of the relevant documents were available in the vehicle - Held that: - seizure had taken place at Kushinagar, which does not fall in the way, if the goods were been sent to M/s Goel Edible Ltd, Industrial area at Sant Kabir Nagar. Statements of the driver has also been relied upon, according to which the wheat was being taken to Bihar. The authorities have further found that there was an interpolation in the stock register, and over writing clearly suggest that the assessee subsequently, was trying to alter the records so as to explain the transaction in its own account. The fact that the goods were seized at a place which does not situate upon the route on which such goods were being transported; the interpolation in the records in the stock register etc. are relevant facts, and opinion based thereupon to hold that the accounts have not been properly maintained, and that there was an intention to evade payment of tax, cannot be said to be erroneous or perverse so as to warrant any interference in exercise of revisional jurisdiction. Revision fails - decided against revisionist.
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2017 (1) TMI 962
Levy of purchase tax - whether the petitioner-sugar mill was liable to pay the purchase tax on the sugarcane purchased by it from the growers - Held that: - the matter is no longer res integra. The issue involved in these appeals stands concluded against the appellant by this Court in M/s AB Sugars Ltd's case [2015 (8) TMI 62 - PUNJAB & HARYANA HIGH COURT], where Analyzing the provisions of the Finance Act, the Supreme Court observed that it provides for levy of different types of commercial taxes which are generally leviable in the State of Bihar and that the object of the Sugarcane Act was to regulate the production, supply and distribution of sugarcane intended for use in sugar factories and for taxation of sugarcane and matters incidental thereto - The legislature has imposed the tax. The amounts collected may well be available to the legislature to be spent for the purposes mentioned therein and in the statement of objects and reasons. These are aspects which can be gone into only by the Supreme Court and not by this Court for accepting these submissions would in effect result in this Court holding that the judgment of the Supreme Court in Jagatjit Sugar Mill’s case (1994 (10) TMI 259 - SUPREME COURT OF INDIA) is not good law. Appeal dismissed - decided against assessee.
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2017 (1) TMI 958
Post sale discount - discount accorded by the credit notes from the total turnover - discount earlier allowed by assessing authority - subsequently, recognizing only discounts mentioned in the tax invoices as eligible for deduction from the total turnover in terms of Rule 3(2)(c) of the Rules, the Assessing Authority passed the rectification orders dated 21.05.2012 under Section 41(1) of the Act, disallowing the deduction of post sale discounts earlier awarded by the corresponding credit notes - whether disallowance of discount justified? Held that: - the requirement of reference of the discount in the tax invoice or bill of sale to qualify it for deduction has to be construed in relation to the transaction resulting in the final sale/purchase price and not limited to the original sale sans the trade discount. However, the transactions allowing discount have to be proved on the basis of contemporaneous records and the final sale price after deducting the trade discount must mandatorily be reflected in the accounts as stipulated under Rule 3(2)(c) of the Rules. The sale/purchase price has to be adjudged on a combined consideration of the tax invoice or bill of sale as the case may be along with the accounts reflecting the trade discount and the actual price paid. Though words in a statute must, to start with, be extended their ordinary meanings, but if the literal construction thereof results in anomaly or absurdity, the courts must seek to find out the underlying intention of the legislature and in the said pursuit, can within permissible limits strain the language so as to avoid such unintended mischief - the legislature, while occasioning the amendment to the first proviso to Rule 3(2)(c) of the Rules, was either ignorant or unaware of the prevalent practice of offering trade discount in the contemporary commercial dispensations. This is more so, as trade discount continued to be an accepted item of deduction - The first proviso has thus to be so read down, to be in consonance with the true intendment of the legislature and to achieve as well the avowed objective of correct determination of the taxable turnover. The contrary interpretation accorded by the High Court being in defiance of logic and the established axioms of interpretation of statutes is thus unacceptable and is negated. If taxable turnover is to be comprised of sale/purchase price, it is beyond one's comprehension as to why the trade discount should be disallowed, subject to the proof thereof, only because it was effectuated subsequent to the original sale but evidenced by contemporaneous documents and reflected in the relevant accounts. Appeal allowed - decided in favor of assessee.
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