TMI Tax Updates - e-Newsletter
January 22, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Indian Laws

TMI SMS

• Valuation of the service of construction provided by a builder to a landowner, who transfers his land/development rights to builder - CBEC

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

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Articles

1. Chronicle of Added Capital-Deposit

   By: sachin bhola

News

1. Exchange Rate of Foreign Currency Relating To Imported and Export Goods Notified

2. India Signs Financing Agreement with World Bank for US$ 250 Million for Jhelum and Tawi Flood Recovery Project

3. Rate of basic customs duty on certain specified medical device increased from 5% to 7.5%; Simultaneously, exemption from additional customs duty (SAD) on these medical devices has also been withdrawn, and they will now attract 4% SAD; Further, to give fillip to domestic manufacturing, basic customs duty is being reduced to 2.5% along with full exemption from SAD on raw materials, parts and accessories for manufacture of medical devices, falling under headings 9018 to 9022

4. RBI Reference Rate for US $

5. India signs Financing Agreement with World Bank for US$ 250 million for Bihar Kosi Basin Development Project

Notifications

Customs

1. 14/2016 - dated 21-1-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 22nd January, 2016

2. 1/2016-Customs(CVD) - dated 19-1-2016 - CVD

Seeks to levy definitive countervailing duty on import of Castings for wind-operated electricity generators whether or not machined, in raw, finished or sub-assembled form, or as a part of a sub-assembly, or as a part of an equipment/ component meant for wind-operated electricity generators originating in, or exported from the People's Republic of China for a period of five years

DGFT

3. 33/2015-2020 - dated 21-1-2016 - FTP

Amendment in Paragraph 4.18 of the Foreign Trade Policy 2015-20

4. 32/2015-20 - dated 20-1-2016 - FTP

Amendment in import policy conditions of Natural Rubber under Exim code 4001 10 of Chapter 40 of ITC (HS), 2012 - Schedule - 1 (Import Policy)

Circulars / Instructions / Orders

Service Tax

1. F.No.354/311/2015-TRU - dated 20-1-2016

Report of the High Level Committee; recommendation regarding valuation of flats for levy of Service Tax

Highlights / Catch Notes

Income Tax

• High Court Orders Broader Interpretation of Interest Waiver u/s 234C; Reassessment by Chief Commissioner Required.

  Case-Laws - HC : Waiver of interest u/s 234C - Paragraph 2(b) of the notification cannot be read restrictively, to mean that waiver of interest u/s 234 'C' is available only to cases of windfall, since that would be too myopic - Chief Commissioner of Income Tax directed to reconsider - HC
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• Assessing Officer's Error: Disallowing Payment u/s 194C for Purchases Not Covered by This Section.

  Case-Laws - AT : TDS u/s 194C - Assessing Officer erred in law in making disallowance despite the facts that the said amount is paid for purchases and section 194C of the Act is not applicable - AT
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• Transfer of shares in joint venture company not considered a slump sale u/s 2(42C) of Income Tax Act.

  Case-Laws - AT : Sale of shares of joint venture company - slump sale - Section 50B - assessee has transferred is the shares in UHEL and this transfer of shares cannot be considered to be a slump sale of an undertaking within the provisions of Sec. 2(42C) - AT
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• Depreciation on Wooden Interiors: Not Rectifiable u/s 154 Due to Complexity and Dispute.

  Case-Laws - AT : Rectification u/s 154 - the issue whether the deprecation @100% or 15% on interiors which are purely wooden structures is a debatable point as it requires examination of details and cannot be rectified by exercising the power vested u/s 154 - AT
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• Penalty Imposed for Concealment of Income Detected in Scrutiny Assessment u/s 271(1)(c) to Prevent Evasion.

  Case-Laws - AT : Penalty u/s 271(1)(c) - since the income has been detected on account of scrutiny assessment and would be evaded if the scrutiny assessment was not done the penalty on concealment should be imposed. - AT
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• VAT Discrepancies: Purchase Returns Valid Despite Objections if Transaction Confirmed, No Evidence of Unaccounted Sales Found.

  Case-Laws - AT : Addition on account of difference in purchases - Objection may of VAT authorities if the VAT rules require actual movement but even in that situation, the claim of purchase return cannot be rejected when both parties are confirming and there is no evidence of sale outside books or closing stock - AT
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• TDS Orders on Trade Discounts u/s 194H Issued Hastily, Violating Right to a Fair Hearing.

  Case-Laws - AT : TDS u/s 194H - trade discount allowed to prepaid distributors - it is evident that the Commissioner of Income Tax (TDS) has in a hurriedly manner without affording opportunity of hearing to the assessee has passed the impugned orders by violating the principle of audi alteram partem - AT
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• Assessing Officer's Notional Disallowance of Section 80IC Sales Proportion Ruled Unsustainable by Law.

  Case-Laws - AT : Excess deduction u/s 80IC - the notional disallowance made by the AO by taking proportionate sales of eligible 80IC and non 80IC units cannot be held as sustainable and in accordance with law. - AT
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DGFT

• Import of Natural Rubber Suspended for Advance Authorisations from January 21, 2016, Until March 31, 2016.

  Notifications : Facility for import of Natural Rubber under Advance Authorisations issued or revalidated on or after 21.01.2016 will not available with immediate effect up to 31.03.2016.
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Service Tax

• Drawback Claims and DEPB/EPCG Applications Excluded from Business Auxiliary Services Scope; No Promotion Involved.

  Case-Laws - AT : Provision of services in relation to filing drawback claims, filing application for DEPB, EPCG licences etc. - The scope of Business Auxiliary Services (BAS) does not cover the activities of appellants as they do not deal with promotion or marketing of goods or services - AT
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• Car Seller's Extra Charges Not Business Support Services Under Service Tax Law, Court Rules.

  Case-Laws - AT : Provision of additional services to the purchaser of Cars - collection of RTO registration charges, Smart Card Fees, Vehicle Registration Fees and other extra charges - Business Support Services or Not - Held No - AT
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• Court Invalidates Delayed Adjudication; Orders Fresh Decision Within 30 Days of New Hearing Completion.

  Case-Laws - HC : Validity of adjudication order passed 17 months after the personal hearing was over -The show cause notice shall be adjudicated afresh and on appearance of the Petitioner a fresh order would be passed by the Adjudicating Authority within a period of 30 days from the date of conclusion of personal hearing. - HC
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• CBEC Clarifies Service Tax Valuation for Builders in Land Transactions, Ensuring Accurate Assessment and Streamlined Process.

  Circulars : Valuation of the service of construction provided by a builder/developer to a landowner, who transfers his land/development rights to builder - CBEC clarifies
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Central Excise

• Refund Denied for Unjust Enrichment; Buyer Didn't Debit Cenvat Credit with Disputed Duty Amount Claimed for Refund.

  Case-Laws - AT : Refund claim - unjust enrichment - it is an admitted fact that the buyer has not debited cenvat credit along with the amount of duty in dispute as claimed by the respondent as a refund - refund not allowed - AT
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• Cars Valuation for Self-Use: Rule 8 Not Applicable, Use Rule 11 with Rule 4 for Accurate Cost Assessment.

  Case-Laws - AT : Valuation - determination of cost of production of goods manufactured by another unit - cars manufactured by assesse for their own use - Rule 8 is not directly applicable and it would be more appropriate to determine the value under Rule 11 read with Rule 4 and the assessee has paid the duty correctly. - AT
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• Appellant Faces Duty for Undervaluation Due to Bailing Charges; Authorities Use Extended Limitation Period.

  Case-Laws - AT : Undervaluation of assessable value - appellant has shown in the invoices itself that they are receiving bailing charges which are only for the additional/special packing sought by the buyer - duty confirmed invoking the extended period of limitation - AT
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• No Penalty for Company as Write-Off Deemed Revenue Neutral u/s 11AC of Central Excise Act.

  Case-Laws - AT : Penalty u/s 11AC - procedural lapse - written off of inputs as obsolete in their books of account and did not reverse Cenvat credit pertaining to them - it is a situation of revenue neutrality and appellant has not gained anything by writing off these inputs as obsolete - No penalty - AT
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Case Laws:

• Income Tax

• 2016 (1) TMI 758
  Salary computation - whether any benefit or allowance other than dearness allowance is to be included in the basic salary of the assessee for computation of gratuity and leave encashment under Section 10(10) and 10(10AA)? - Held that:- The authorities below on appreciation of material on record have concurrently recorded that the computation of benefit of gratuity and leave encashment under Sections 10(10) and 10(10AA) of the Act are to be governed by the definition of 'salary' as per Rule 2(h) Part A, Fourth Schedule. Learned counsel for the assessee was not able to demonstrate that the approach of the authorities below was erroneous or perverse or that the findings of fact recorded were based on misreading or misappreciation of evidence on record so as to warrant interference by this Court. Madras High Court in K. Gopalakrishnan v. Central Board of Direct Taxes and others (1993 (4) TMI 33 - MADRAS High Court) Section 17 of the Income-tax Act contains a definition for the purpose of section 15, 16 and 17 of the Act. Explanation 1 to section 36(1)(iia) of the Income-tax Act is to the effect that the expression "salary" in that clause includes the pay, allowances, bonus or commission payable monthly or otherwise. Hence, the contention of the petitioner that the expression "salary" found in section 10(10) and section 10(10AA) of the Income-tax Act should be given a wider meaning than found in clause (h) of rule 2 of Part A of the Fourth Schedule is wholly untenable. Thus, the petitioner is not entitled to the grant of any part of the prayer made by him in the writ petition - Decided in favour of revenue

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• 2016 (1) TMI 757
  Waiver of interest under Section 234C - whether petitioner/assessee's explanation was satisfactory of acceptance for the benefit of waiver of interest charged under Section 234C by invoking clause 2(b) of the notification dated 26.06.2006, Annexure-B? - Held that:- Admittedly the Chief Commissioner without making reference to any material over manufacture, sales, production of automotive parts by the petitioner during the 1st quarter of the financial year 2009-10, was not justified in concluding that petitioner could have by an internal mechanism, anticipated the spurt in increase in profit in the last quarter of the year, for payment of Advance Tax. It is no doubt true that petitioner did not experience a windfall during the last quarter of the financial year 2009-10, but did have an increase business income. Paragraph 2(b) of the notification cannot be read restrictively, to mean that waiver of interest under Section 234 'C' is available only to cases of windfall, since that would be too myopic. In fact discretion is invested in the Chief Commissioner to be exercised judiciously, based on facts and circumstances, since not circumscribed by any fetters. If as noticed supra, and at the cost of repetition petitioner suffered decrease in current income in the three consecutive previous years, coupled with global recession in automotive industry, an admitted fact, it was imminent for the Chief Commissioner to have exercised judicious discretion in petitioner's favour. In considered opinion, in the facts and circumstances, petitioner's explanation is acceptable, calling for exercise of discretion by the Chief Commissioner under paragraph 2(b) of the notification dated 26.06.2006, Annexure-B, over the extent of interest waiver. In the result, petition is allowed. The order impugned is quashed and the proceeding remitted for consideration by the Chief Commissioner, insofar as it relates to the extent of waiver of interest charged under Section 234C in terms of paragraph 2(b) of the notification dated 26.06.2006, Annexure-B. Compliance within four weeks from the date of receipt of a copy of this order.

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• 2016 (1) TMI 756
  Addition on account of brand building and advertisement expenses - CIT(A) deleted the addition - Held that:- The assessee was incurring the expenses under consideration for its sales promotion and those expenses were incurred from year to year in the regular course of business. Therefore, those were revenue in nature and as such the ld. CIT(A) rightly deleted the addition made by the AO. - Decided in favour of assessee Addition made by the AO on account of depreciation - CIT(A) deleted the addition - Held that:- In the present case, it is not in dispute that the assessee grouped the POS Terminal Hardware under the head Plant & Machinery. One set of POS Terminal was consisted of a monitor, A CPU, A Printer, a scanner, Card swipe machine and a UPS. The aforesaid items were integral part of computer system which were entitled for a depreciation @ 60%. Therefore, the ld. CIT(A) rightly directed the AO to allow the depreciation @ 60% instead of 25% allowed by him.- Decided in favour of assessee Disallowance of deprecation on sealed premises - CIT(A) deleted the addition - Held that:- CIT(A) rightly directed the AO to allow the depreciation on the assets of the assessee which were included in the block of assets. See CIT Vs Oswal Agro Mills Ltd. (2010 (12) TMI 947 - Delhi High Court) and CIT Vs Sonal Gum Industries (2009 (2) TMI 84 - GUJARAT HIGH COURT ) - Decided in favour of assessee

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• 2016 (1) TMI 755
  Disallowance of depreciation on Goodwill - Held that:- the claim of the assessee company needs to be verified with reference to the agreements and other documents which has now been filed as additional evidence before us and the books of account by the assessee company. As such, we remit the matter back to the file of A.O. for deciding the issue afresh after considering the agreements along with the assets acquired, other evidences as submitted by the assessee company and the books of accounts of the assessee company to arrive at the conclusion on the issue in the light of various decisions cited by the assessee company in accordance with law. Needless to say that proper and adequate opportunity of being heard shall be granted to the assessee company by the AO in accordance with the principles of natural justice. We must clarify that we have not commented on the merits of the claim of the assessee company about payment of goodwill for acquisitions of the business of 'Sangam Direct' which shall be adjudicated by the AO on merits after considering the contentions along with evidences submitted by the assessee company without being influenced by our observations in this appeal. - Decided in favour of assessee for statistical purposes. Disallowance of preliminary expenses written off u/s 35D - Held that:- The assessee company has incurred an amount of Rs. 70 lacs towards increase in authorized share capital, out of which 1/5th of such expenses i.e. Rs. 14 lacs was claimed as deduction u/s 35D of the Act. The assessee company has taken this plea before us for the first time that these expenses are relatable to extension of undertaking which has not been verified by the authorities below. We are also aware that the Hon'ble Supreme Court in the case of Brooke Bond India Ltd.(1997 (2) TMI 11 - SUPREME Court ) and Punjab State Industrial Development Corporation Limited (1996 (12) TMI 6 - SUPREME Court ) has held that these expenses incurred for increase in authorized capital are capital expenditure. This claim of the assessee company that these expenses incurred for increase in authorized capital are relatable to the extension of undertaking needs to be verified by the authorities below and accordingly we set aside the orders of authorities below and restore the matter back to the file of A.O. for necessary verification and decide the issue afresh on merits - Decided in favour of assessee for statistical purposes. Disallowance of loss of stock being the difference between the book stock and physical inventory - CIT(A) allowed the claim - Held that:- the assessee company is dealing in slow moving items which are prone to pilferage, wastage, breakage and damages etc. The items dealt with the assessee company are perishable in nature specially fruits, vegetables, liquid items etc. which could not have been sold to customers after the date of expiry as these items have limited life. The assessee company is stated to have claimed the write off of such stock based on applicable accounting standards which are mandatory in nature but failed to submit details of differences between physical stock and book stock before the authorities below, which is filed before us but the same need verification by the authorities below. In our considered opinion and in view of the interest of justice, this matter need to be restored to the file of A.O. for the limited purpose of verification of the genuineness of the claim of losses on account of slow moving perishable items between physical stock and book stock as claimed by the assessee company. - Decided in favour of revenue for statistical purposes.

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• 2016 (1) TMI 754
  Grant of interest u/s 244A - refund due to the assessee company on account of Tax deducted at source(TDS) being excess of the tax payable by the assessee company on income computed as per the Income Tax Act,1961 against which the TDS certificates were not filed by the assessee company - Held that:- Hon'ble Bombay High Court in the case of Larsen & Toubro Ltd. (2010 (6) TMI 414 - Bombay High Court ) has categorically held that the assesse is entitled to interest on TDS due to the assessee even if the TDS certificates have been filed late if the tax was deducted and deposited with the exchequer in time, the interest has to be granted to the assessee from 1st day of assessment year in accordance with Section 244A of the Act and not from the date of filing of TDS certificates with the Revenue. The facts in the instant appeal before us are identical to the facts before Hon'ble Bombay High Court in the case of Larsen and Toubro Limited(supra) and the Revenue has not contradicted the same before us. Respectfully following the same, we reject the contentions of the Revenue and dismiss this appeal by directing the AO to grant interest on refund due to the assessee company on account of excess TDS claim wef 01- 04-2004 and not from the date of submissions of TDS certificates by the assessee company - Decided in favour of assessee.

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• 2016 (1) TMI 753
  TDS u/s 194C - disallowance of job work charges without deduction of TDS - CIT(A) deleted the addition - Held that:- See case of BDA Ltd. vs. ITO (TDS) (2004 (3) TMI 11 - BOMBAY High Court ), wherein it is held that supply of printed materials constitutes sale under the sale of Goods Act; and section 194C of the Act is not applicable. In that case it was held that supply of printed packaging labels merely because the printing was done as per requirement/specifications of the assessee, it could not be said that any work was carried out on behalf of the assessee. We find that similar issue was dealt by various courts, wherein it has been held that supply of any article or thing fabricated according to the specification of the purchaser and the property in such article passes to the person only after the same is delivered, the contract will be a contract on sale and as such falls outside the purview of section 194C of the Act. Therefore, the Assessing Officer erred in law in making disallowance despite the facts that the said amount is paid for purchases and section 194C of the Act is not applicable. Accordingly, no disallowance by invoking the provisions of section 40(a)(ia) of the Act can be made. - Decided in favour of assessee. Disallowance of set off of unabsorbed depreciation loss against current year’s income - CIT(A) allowed the claim - Held that:- In view of the ratio laid down in the case of General Motors India Pvt. Ltd V DCIT (2013) [2012 (8) TMI 714 - GUJARAT HIGH COURT ] we are of the considered view that the unabsorbed Depreciation loss of A.Y. 1997-98 & 1998-99 is allowable and should be adjusted with the total computed income unabsorbed Depreciation loss should be carried forward. The CIT(A) has rightly allowed the claim of unabsorbed depreciation loss of the assessee and we confirm the same - Decided in favour of assessee.

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• 2016 (1) TMI 752
  Disallowance as excess deduction claimed u/s 35(2AB) - Held that:- The brief facts are that deduction u/s 35(2AB) was claimed by the assessee in respect of research and development expenses incurred at New Mangalore and KRS Gardens research centre. Application was made with DSIR dated 28.03.2001. The recognition of the research unit was granted by the DSIR vide its letter dated 03.07.2002 for New Mangalore unit and letter dated 04.12.2002 for KRS Gardens research unit. In view of these facts, it clearly emerges out that assessee had made the applications well in time. Thereafter, granting of approval by the competent authority was not in the control of the assessee. In our considered view, under these circumstances, the approval would relate back to the date of the application. Similar view has been taken by Hon ble Madras High Court in the case of CIT vs. Wheels India Ltd. (2010 (11) TMI 42 - Madras High Court). Thus, keeping in view the clear position of law and the facts of this case, stand of the Revenue on this issue is rejected. The other issue raised by the AO in disallowing the deduction was that no agreement has been entered as contemplated by section 35(2AB). In this regard also we have noted that the assessee has made requisite compliance as has been required by the prescribed competent authority and compliance of all the procedural requirements has been examined by the competent authority while granting approval. In our considered view, we should look substantive compliance of the provisions. Documentation in any particular format and its approval in a particular manner is not object of this action. - Decided in favour of assessee Disallowance of interest expenditure u/s 14A - Held that:- It is noted from the perusal of the schedule that there is no fresh investment towards investment of domestic companies. Only one entry is appearing in the name of addition of shares of BDH Industries Ltd.. It has been brought to our notice that during the year, the assessee has acquired shares of this company at book value on account of amalgamation of Bombay Drugs Pharma Ltd. into itself. It is further brought to our notice that no cash outflow was required for acquiring these shares. Thus, in fact no amount has been invested for making any fresh investment during the year. Thus, the facts remain identical to the assessment year 2001-02, and therefore, the benefit of decision taken by the Tribunal in aforesaid year shall also be available in the impugned year. Therefore we allow Ground of assessee s appeal, deleting the disallowance made by the AO in toto. - Decided in favour of assessee Disallowance relating to payments made beyond the grace period for Provident Fund and ESI u/s 36(1)(va) read with section 2(24)(x) - Held that:- The undisputed facts are that the entire payment has been made before the due date of filing the return. Similar issue came before the Tribunal in assessee s own case for A.Y. 2001-02, wherein Hon ble Tribunal has allowed relief to the assessee relying upon the judgment of in the case of Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT ] and Vinay Cement Ltd. [2007 (3) TMI 346 - Supreme Court of India ] - Decided in favour of assessee Computation of deduction u/s 80IB - CIT(A) in directing the AO to reduce 30% of the export profits of unit eligible for deduction u/s 80IB before claiming amount of deduction u/s 80HHC - Held that:- This issue is no more res integra in view of the judgment of the Hon ble jurisdictional High Court in the case of Associated Capsules Pvt. Ltd. v. DCIT Anr.(2011 (1) TMI 787 - BOMBAY HIGH COURT ) in which it has been held that restriction u/s 80-IA(9) is not applicable at the stage of computing deduction u/s 80HHC but only at the stage of allowing deduction u/s 80HHC.- Decided in favour of assessee Deduction of indirect costs by 10% of export incentives for the purpose of computing profits from trading exports u/s 80HHC rejected - Held that:- This ground is also covered in favour of the assessee by the judgment of the Hon ble Supreme Court in the case of Hero Exports v. CIT [2007 (11) TMI 13 - Supreme Court of India ]. In this case it has been held that the principle of attribution is applicable to cases falling u/s 80HHC(3)(b) and therefore, part of indirect cost has to be apportioned to expenses incurred for earning export incentives. 10% of total income has been held as fair estimate in this case. - Decided in favour of assessee Foreign Exchange Fluctuation Gain - treated as income from other sources by CIT(A) as against the assessee s claim as business income - Held that:- We have gone through orders of the lower authorities and showing and find that a sum of Rs. 2,17,810/- marked as foreign exchange fluctuation has been put under the head miscellaneous income. Thus in all fairness, we send this issue back to the file of Ld. CIT(A) to re-adjudicate the same after giving adequate opportunity hearing to the assessee.- Decided in favour of assessee for statistical purposes. Scrap sales - treated as part of total turnover for the purpose of claiming deduction u/s 80HHC - Held that:- Hon ble Supreme Court has decided this issue in favour of the assessee in CIT vs. Punjab Stainless Steel Industries (2014 (5) TMI 238 - SUPREME COURT) wherein it has been clearly held that sale proceeds generated from sale of scrap would not be included in total turnover. Thus, respectfully following the judgment of Hon ble Supreme Court, we direct the AO to exclude the amount of sale proceeds of scrap sales, from amount of total turnover for the purpose of computing deduction u/s 80HHC. - Decided in favour of assessee Interest allowable u/s 57 - Held that:- Assessee would be satisfied if claim is allowed u/s 57(iii). We find force in the alternative submissions of the Ld. Counsel. Ld. CIT(A) has rightly allowed the claim u/s 57 of the Act, therefore, we uphold the order of Ld. CIT(A) on this ground - Decided in favour of assessee Netting off of interest receipts against interest payment and apply the explanation (baa) of section 80HHC only in respect of net amount of interest confirmed Exclusion of Excise Duty from the total turnover for the purpose computation of deduction u/s 80HHC - Held that:- This issue has also been settled by the Hon ble Supreme Court in the case of CIT v. Laxmi Machine Works [2007 (4) TMI 202 - SUPREME Court ] holding that the excise duty is not includible in the total turnover in the formula contained in section 80HHC.- Decided in favour of assessee Transfer pricing adjustment - price charged by the assessee company to its AE as reasonable and did not require any upward revision as per CIT(A) - Held that:- The issues with regard to transfer pricing adjustment have to be resolved following a mechanism and complying with the provisions as contained in chaper X, dealing with the transfer pricing issues as contained in sections 92-92F and connected rules as contained in Rules 10A,10B,10C,10D and 10E of Income Tax Rules 1962. These sections and rules prescribe various methods that may be employed to establish arm s length price, explaining applicability of each method, the documentation required to be maintained and form of the certificate to be issued by auditors in this regard. These regulations provide that any income arising from the international transactions shall be determined having regard to the arm s length price. This issue has now been decided in various courts that where international transactions are involved with AE, then arm s length price has to be determined in line with the aforesaid provisions. It is noted by us that Ld. CIT(A) has decided this issue without taking into account the effect of these provisions. Therefore, in our considered view, this issue needs to be sent back. - Decided in favour of revenue for statistical purposes.

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• 2016 (1) TMI 751
  Sale of shares of joint venture company - slump sale - CIT(A) treating the sale of shares by the Appellant of its joint venture company as transfer of an undertaking ( i.e. slump sale u/s. 2(42C) of the Act) and hence, determining the capital gain tax liability u/s. 50B, instead of section 48 - Held that:- Considering the provisions of Sec. 50B and Sec. 2(42C) of the Act, in our considered opinion what the assessee has transferred is the shares in UHEL and this transfer of shares cannot be considered to be a slump sale of an undertaking within the provisions of Sec. 2(42C) of the Act, thereby making the applicability of the provisions of Sec. 50B of the Act inapplicable. See Mrs. Bacha F. Guzdar Vs CIT [1954 (10) TMI 2 - SUPREME Court ] - Decided in favour of assessee.

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• 2016 (1) TMI 750
  Addition made u/s 43B for late deposits of ESI and employees contribution to the PF - CIT(A) deleted the addition - Held that:- CIT(A) has relied upon the amendment to proviso of section 43B through Finance Act., 2003. We also find that it is a undisputed fact the dues were deposited before the due date of filing of return of Income Tax. Therefore, the learned CIT(A) has rightly deleted the addition and we do not find any infirmity in the same - Decided against revenue Disallowance of interest paid to Sale Tax Department on account of delay of payment of tax - CIT(A) deleted the addition - Held that:- We find that the assessee has paid interest on Sale Tax dues for delay in deposit of the same which is a compensatory in nature and is nowhere in the form of penalty. The learned CIT(A) has already confirmed the amount representing penalty. In view of the above, we do not see any infirmity in the order of learned CIT(A) - Decided against revenue

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• 2016 (1) TMI 749
  Disallowance made u/s.40(a)(ia) - disallowance on the reason that the expenditure is covered u/s.28 and not covered under sections 30 to 38 - CIT(A) deleted the disallowance - Held that:- The provisions of sec.194C of the Act cannot come into play when the payments have been made to agents of a non-resident company and relied on the order of the Kolkata Bench of the Tribunal in the case of Taj Leather Works v. ACIT (2012 (7) TMI 300 - ITAT KOLKATA ). To uphold this argument also, there is no details of non-resident companies whether they have any PE business connection in India or not. Without bringing any material on record, the argument of the assessee’s counsel cannot be upheld. The Special Bench of the Tribunal, in the case of Merilyn Shipping and Transports v. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ), held that when the payments are not outstanding as payable at the end of the close of the year relevant to the assessment year, the provisions of sec.40(a)(ia) cannot be invoked. Considering the judgment of the Special Bench of the Tribunal, in the case of Merilyn Shipping and Transports v. ACIT (supra), we are inclined to remit the issue for fresh consideration. - Decided in favour of revenue for statistical purposes. Disallowance u/s 43B - addition made in respect of employees contribution to PF and ESI - whether the sum were remitted within the due date of filing the return of income? - CIT(A) deleted the addition - Held that:- Sums were not credited by the respective assessee to the employees’ accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees’ contribution to the employees’ account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act. Consequently, all these appeals are allowed and the impugned judgement and orders passed by the CIT(A) in deleting the disallowances made by the AO are hereby quashed and set aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fund made by the AO is hereby restored. - Decided against assessee

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• 2016 (1) TMI 748
  Penalty u/s 274 read with section 271(1)(b) - nonappearance of the assessee on 09.10.2012, for the said date notices were issued u/s 143(2)/142(1) - Held that:- The explanation of the assessee before the ld. CIT(A) was that her sister-in-law Mrs. Anju Gupta was suffering from severe disease and had to be hospitalized on 06.10.2012. Thereafter on the date of hearing i.e. 09.10.2012, Sh. Satya Prakash Gupta “head of the family” and “father-in-law” of the assessee became ill and had to be hospitalized due to heart attack. In our opinion there was a reasonable cause for non-appearance for the hearing fixed on 09.10.2012, as such the confirmation of penalty levied by the AO u/s 271(1)(b) of the Act was not justified. In the present case, it appears that the AO levied the penalty for 7 assessment years running from 2005-06 to 2011-12 and the ld. CIT(A) deleted the penalty for the 4 assessment years i.e. the assessment years 2008-09 to 2011-12, considering the explanation of the assessee as plausible. However, the same explanation was not considered as proper for the remaining assessment years i.e. assessment years 2005-06 to 2007-08. In my opinion, the stand taken by the ld. CIT(A) was not justified particularly when he was satisfied that there was a proper and plausible explanation for the 4 out of the 7 assessment years for which penalty was levied by the AO u/s 271(1)(b) of the Act. Therefore, considering the totality of the facts delete the penalty levied by the AO and sustained by the ld. CIT(A). - Decided in favour of assessee

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• 2016 (1) TMI 747
  Carry forward of unabsorbed depreciation - CIT(A) allowed the claim - grievance of the Revenue appears to be that the application filed by the respondent assessee company is barred by limitation - Held that:- Assessing Officer is duty-bound to intimate the losses which are entitled to be carry forward. If the Assessing Officer fails to do so, the right of the respondent assessee is to carry forward such losses is in no way affected. The right conferred upon the assessee to carry forward the losses of the previous years for a specified period is an absolute unqualified statutory right is nowhere conditional upon the quantification or intimation of the losses. That apart keeping in view the provisions of Clause II to sub-section (3) of Section 153, the period of limitation is not applicable to the proceedings consequent upon the orders of appellate or revisional authorities. Therefore, we do not find any reason to interfere with the orders of Ld. CIT(A).- Decided against revenue

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• 2016 (1) TMI 746
  Rectification u/s 154 - depreciation @100% or 15% on interiors which are purely wooden structures - Held that:- Rectification under Section 154 can only be made when a glaring mistake of fact or law committed by the Officer passing the order as apparent from the record. Rectification is not possible when question is debatable. Moreover, a point which was not examined on the facts or in law cannot be dealt with as a mistake apparent from the record. Therefore, we hold that the issue whether the deprecation @100% or 15% on interiors which are purely wooden structures is a debatable point as it requires examination of details and cannot be rectified by exercising the power vested under Section 154 of the Act. Therefore, we quash the order of the Assessing Officer passed under section 154 of the Act and allow this ground of appeal. - Decided in favour of assessee

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• 2016 (1) TMI 745
  Penalty u/s 271(1)(c) - income has been detected on account of scrutiny assessment - Held that:- It is evident that the assessee had received the amount of Rs. 5,38,854/-, which should have been made the assessee curious about this entry in his bank account. Therefore, it is clear that this amount had not been truly disclosed and explained by the assessee at the time of filing of its return of income, therefore, this amount was treated as concealed income and therefore, the reliance was placed upon on the decision of Zoom Telecommunication Ltd. (2010 (5) TMI 34 - DELHI HIGH COURT) wherein it has been held that since the income has been detected on account of scrutiny assessment and would be evaded if the scrutiny assessment was not done the penalty on concealment should be imposed. Therefore, the AO was fully justified in imposing the penalty u/s. 271(1)(c) of the I.T. Act, 1961 and Ld. CIT(A) was also right in reducing the amount of TDS and rightly confirmed the penalty of Rs. 1,25,306/- instead of Rs. 1,45,906/-. Hence, no reason to interfere with the well reasoned order passed by the Ld. CIT(A) - Decided against assessee.

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• 2016 (1) TMI 744
  Addition on account of difference in purchases as shown by the assessee in its trading account and as shown in the books of M/s. Escorts Tractor Ltd - CIT(A) deleted the addition - Held that:- The action of the Assessing Officer of rejecting the claim of the assessee regarding the purchase return and making addition of entire amount as income of the assessee is without any basis because the purchase return of this amount, as claimed by the assessee, has been duly confirmed by M/s Escorts Ltd. being the seller and all the differences pointed out by the Assessing Officer have been duly reconciled as per categorical finding of CIT(A) in his order and none of these finding of CIT(A) could be controverted by Learned D. R. of the Revenue. We also feel that this objection of the A.O. that the Debit Notes are on plain paper loses its significance once the fact of purchase return is confirmed by the seller i.e. M/s Escorts Limited. The objection on the basis of this allegation that there is no evidence of actual movement of tractors on purchase return is also not significant in view of confirmation by the seller i.e. M/s Escorts Limited. Moreover, it was also explained that purchase return of 1001 tractors and subsequent purchase of same tractors was affected in view of some amendments in VAT rules and in view of this, actual movement is not necessary at least for Income Tax Purposes. Objection may of VAT authorities if the VAT rules require actual movement but even in that situation, the claim of purchase return cannot be rejected when both parties are confirming and there is no evidence of sale outside books or closing stock - Decided against revenue Addition on account of carrier fuel expenses and repair & maintenance expenses - rejection of books results - - CIT(A) deleted the addition - Held that:- In the present year, the fuel expenses is 36.87% and repairs and maintenance expenses is 6.32% and the same was 40.68% and 4.51% in assessment year 2006-07 and 44.38% and 5.58% in assessment year 2007-08. Since the expenses claimed by the assessee in the present year is at par with such expenses in preceding two years and no adverse material has been brought on record by the Assessing Officer for making this disallowance and the same was made on this arbitrary basis that the payment was not made by the assessee by ignoring the explanation of the assessee that the payment was made by sister concern by debiting the account of the assessee firm, we find no reason to interfere with the order of learned CIT(A). - Decided against revenue

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• 2016 (1) TMI 743
  Assessment of interest income - business income or income from other sources - Held that:- The assessee has not brought any material to show that interest income is taxable under any other head except income from other sources and therefore, we are of the considered opinion that the order of the Ld. CIT(A) is not sustainable because interest income is definitely taxable under the head income from other sources, until and unless, it is shown by the assessee that this interest income is taxable under some other head and since in the present case, the assessee has not so established, we hold that the interest income in the present case is correctly assessed by the AO under the head income from other sources. Hence, we reverse the order of the Ld. CIT(A) on this issue and restore that of the AO. - Decided in favour of revenue. Determination of value of property - Addition made on the basis of report of the registered valuer submitted for the value of capital work in progress regarding construction of Hotel China Gate - CIT(A) deleted the addition - Held that:- Addition is not made by the AO on estimate basis but this is on the basis of actual basis between investment declared by the assessee and valued by the registered valuer as per the valuers report submitted by the assessee itself. This addition was deleted by the CIT(A) on this basis that the addition was made by the AO subject to rectification as per outcome of DVO’s report. This is not the case of the Ld. CIT(A) that DVO has determined the value of the property at or near to the value of investment shown by the assessee. Hence, we are of the considered opinion that the order of the Ld. CIT(A) on this issue is also not sustainable. - Decided in favour of revenue. Disallowance of brokerage expenditure and staff welfare expenses - Held that:- Regarding disallowance of Rs. 10,000/- deleted by the Ld. CIT(A) out of staff welfare expenses, we are of the considered opinion that no interference is called for in the order of Ld. CIT(A) on this issue also because AO estimated Rs. 20,000/- as disallowable for the reason that the expenses is not fully verifiable and as against this, it was estimated by the Ld. CIT(A) that disallowance of Rs. 10,000/- out of staff welfare expenses is reasonable. We are of the considered opinion that in the facts of the present case, estimate by Ld. CIT(A) appears to be reasonable and hence, we decline to interfere in the same. Regarding disallowance of Rs. 1.00 lakh out of brokerage expenditure, we find that no cogent reasoning is given by the AO in the assessment order for making this disallowance and therefore, we feel that the entire disallowance out of brokerage expenses should have been deleted by the Ld. CIT(A) instead of deleting Rs. 50,000/- out of Rs. 1.00 lakh. We delete the entire disallowance of Rs. 1.00 lakh out of brokerage expenses. Accordingly, Ground No.3 of revenue is rejected whereas grounds raised by the assessee in the CO are allowed.

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• 2016 (1) TMI 742
  TDS u/s 194H - non-deduction of tax at source u/s. 194H on trade discount allowed to prepaid distributors - denial of opportunity of hearing in violation of the principles of natural justice as objected by assessee - Held that:- One of the pillars of principles of natural justice is audi alteram partem i.e. no one should be condemned unheard. The principles of natural justice are firmly grounded in Article 14 and 21 of the Constitution of India. The principles have to be mandatorily applied irrespective of the fact as to whether there is any statutory provision or not. In the present case, we find that the assessee was not afforded any opportunity, much less the sufficient opportunity to give reply to the show cause notice. As has been pointed out by the ld. AR, the show cause notice was issued and served on Sunday i.e. weekly holiday, directing the assessee to appear the very next day. The Hon'ble Supreme Court of India has time and again emphasized that the principles of natural justice have to be adhered while discharging administrative, quasi-judicial or judicial functions. In the instant case, from the facts on record it is evident that the Commissioner of Income Tax (TDS) has in a hurriedly manner without affording opportunity of hearing to the assessee has passed the impugned orders by violating the principle of audi alteram partem. Thus, the impugned order is liable to be set aside on this ground alone. - Decided in favour of assessee.

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• 2016 (1) TMI 741
  Excess deduction u/s 80IC - whether the assessee has claimed less expenses against 80IC units, thereby manipulating the accounts? - AO held that the assessee has claimed travelling expenses, legal and professional expenses, tender fee, commission, audit fee and director’s remuneration disproportionately without any basis and the same was to be allocated and claimed in proportionate to the sales allocated to the eligible 80IC units and non 80IC units, made the impugned disallowance and reduced the deduction claimed by the assessee u/s 80IC deleted by CIT(A) - Held that:- We are in agreement with the conclusion of the ld. CIT(A) that the expenses like travelling, legal and professional fees, tender fees, commission etc are in the nature of direct expenses which can be linked to the sales of respective units. While the assessee is maintaining separate books of account supported by bills and vouchers and all relevant details which were audited by the competent auditors and the claim of the assessee u/s 80IC of the Act was also verified and certified, then while the AO has not pointed out any defect in the financial statement and separately maintained books of accounts of the assessee and the AO has not raised any doubt in regard to the correctness, completeness of the financial statement and results of the assessee, then the notional disallowance made by the AO by taking proportionate sales of eligible 80IC and non 80IC units cannot be held as sustainable and in accordance with law. Under the above-noted factum and circumstances, the action of the AO in reducing the claim of deduction u/s 80IC cannot be held as correct and justifiable and thus we are inclined to hold that the ld. CIT(A) was rightly in directing the AO to delete the impugned addition. We are unable to see any ambiguity or perversity or any other valid reason to interfere with the order of the first appellate authority - Decided against revenue

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• Customs

• 2016 (1) TMI 729
  Classification of Hospital Operation Theatre Lamps - Tribunal in [2006 (7) TMI 410 - CESTAT, BANGALORE] has classified the goods under CSH 9018.19 as Other Electro Medical Apparatus - Apex Court dismissed the revenue appeal as tax effect involved in the instant appeal is negligible.

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• 2016 (1) TMI 728
  Import of Paper - Whether Waste paper or stock lot of Light Weight Coated Waste Paper in rolls of assorted width - Exemption under Notification No. 21/2002-Cus. - Tribunal has extended the benefit of exemption in [2007 (2) TMI 515 - CESTAT, MUMBAI] - Apex Court dismissed the revenue appeal as tax effect involved in the instant appeals is negligible.

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• Service Tax

• 2016 (1) TMI 740
  Conodonation of delay in filing of an appeal before Commissioner (Appeals) - appellant submitted that the delay in filing appeal before the Commissioner (Appeals) occurred mainly due to the reason that the appellant handed over the papers to Advocate Shri S.K. Sharma who did not follow up the case in time. - Held that:- there is no power to condone delay beyond condonable period under Section 85 (3A) of the Finance Act, 1994. - Commissioner (Appeals) cannot exercise powers beyond condonable period of limitation under Section 85 of the Finance Act, 1994. - Condonation denied - Decided against the assessee.

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• 2016 (1) TMI 739
  Business Auxiliary Services - provision of services in relation to filing drawback claims, filing application for DEPB, EPCG licences etc. - change in the definition w.e.f. 10/09/2004 - . It is argued on behalf of the appellant that in spite of the amendment, the service provided by them does not fall under any of the categories (i) to (vii) under the Business Auxiliary Services head. - Held that:- the service provided by the appellant does not fall under any of the sub-Clause (i) to (vii) of Section 65 (19) under the head Business Auxiliary Services. We take notice of the fact that the appellant have neither facilitated sale of any goods of their client nor service. It is admitted fact that the appellants are not involved in any activity directly relating to promoting or marketing of goods. The appellants provided services like filing drawback claims, filing application for DEPB, EPCG licences, processing application for Star Export House Certificate etc. The scope of Business Auxiliary Services (BAS) does not cover the activities of appellants as they do not deal with promotion or marketing of goods or services. There is no incidental or auxiliary service to such marketing. - Demand set aside - Decided in favor of assessee

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• 2016 (1) TMI 738
  Provision of additional services to the purchaser of Cars - collection of RTO registration charges, Smart Card Fees, Vehicle Registration Fees and other extra charges - Business Support Services or Not - Held that:- The findings recorded by the lower authorities are incorrect as the definition of Business Support Services as per section 65(104c) of the Finance Act - Demand is unsustainable and liable to be set aside - Decided in favor of assessee.

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• 2016 (1) TMI 737
  Validity of adjudication order passed 17 months after the personal hearing was over - It was contended that this unreasonable and unexplained delay itself vitiates the conclusion reached in the impugned order. - Held that:- In view of this affidavit and the stand taken by the Commissioner, we set aside the impugned order only on the ground of delay and which is long, unreasonable and unexplained in passing the adjudication order. - The impugned order dated 23rd January 2014 is, therefore, quashed and set aside. The show cause notice shall be adjudicated afresh and on appearance of the Petitioner a fresh order would be passed by the Adjudicating Authority within a period of 30 days from the date of conclusion of personal hearing. - Matter remanded back.

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• 2016 (1) TMI 736
  Classification of service - Broker v/s Commission agent - activities of the respondent assessee as ship brokers - Tribunal in [2012 (12) TMI 477 - CESTAT NEW DELHI] set aside the demand by observing that, From the nature of their activity it is clear that brokers are purely intermediaries who do not act on behalf of either ship owner or the charterer and, therefore, they cannot be said to be commission agents & not covered by the definition of 'Business Auxiliary Service" - Apex Court dismissed the revenue appeal on ground of delay as well as on merit of the case.

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• 2016 (1) TMI 735
  Restoration of appeal - Non compliance of pre deposit order - HC in [2014 (7) TMI 668 - MADRAS HIGH COURT] has observed that, Tribunal has, in our considered opinion, rightly dismissed the appeal for non-compliance of the provisions of Section 35-F of the Central Excise Act. - No substantial question of law arises - Apex Court dismissed the appeal of the assessee.

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• Central Excise

• 2016 (1) TMI 734
  Entitlement to exemption under Notification No. 6/2000-CE, 3/2001-CE and 6/2002 -CE denied - Revenue contended that that both the units of the respondents are located on the same plot. - Held that:- The scope of exemption hitherto available to paper mills after clubbing the clearance from more than one factory of a manufacturer as now being extended to allow the exemption to each factory separately. The original authority also relied on the Central Excise registration given to these units separately for different products. After such detailed examination, the lower authorities concluded that the exemption of Central Excise duty on specific quantity of paper and paper board manufactured by unit 1 and 2 of the respondents during the impugned period was admissible for them separately. After careful consideration of the finding of the original authority we find no reason to interfere with the same as all the points raised in appeal have been discussed and decided by the original authority. We fully agree with the finding of the adjudicating authority for the reasons stated above. Accordingly, we dismiss the appeals filed by the Revenue.

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• 2016 (1) TMI 733
  Refund claim - whether the respondent has passed the bar of unjust enrichment as held by Commissioner (Appeals) ? - Held that:- The appellants paid duty under protest and burden of duty passed on to the buyers at the time of issuance of invoices. The buyers also took cenvat credit thereof and have not reversed the credit while issuing debit notes to the respondent.As these facts are not in dispute by mere issuing debit notes, the respondent is not able to discharge the burden of unjust enrichment. In this case, it is an admitted fact that the buyer has not debited cenvat credit along with the amount of duty in dispute as claimed by the respondent as a refund. In the circumstances, relying on the decision in the case of Oriental Textile Processing Co. (P) Ltd. (2012 (5) TMI 247 - CESTAT, NEW DELHI ), we hold that the ld. Commissioner (Appeals) is in error in holding that the respondent has passed unjust enrichment. Therefore, the impugned order is set aside - Decided in favour of revenue

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• 2016 (1) TMI 732
  Determination of value - determination of cost of production of goods manufactured by another unit - cars manufactured by assesse for their own use - extended period of limitation invoked - whether details about the cost of production etc. were not made available to the department? - Held that:- As in this case the cars cleared have not been utilized for further manufacture of goods but were used by the officials of the company in connection with the business. In our view, Rule 8 is not directly applicable and it would be more appropriate to determine the value under Rule 11 read with Rule 4 and the assessee has paid the duty correctly. We also find that the Larger Bench of this Tribunal in the case of Ispat Industries Ltd. (2007 (2) TMI 5 - CESTAT, MUMBAI ) supports the contention of the assessee. We also find force in the contention of the assessee that extended period is not invokable. We do not find any justifiable ground in the show cause notice so as to invoke the extended period. Even the learned Commissioner (Appeals) has dropped the penalty keeping in view the issue involved is interpretation of law. In our view, in the facts and circumstances of the case, invoking the extended period of limitation is not justified. - Decided in favour of assessee.

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• 2016 (1) TMI 731
  Undervaluation of assessable value - invoking extended period of limitation proposing recovery of duty on the ground that such bailing charges are includable in the assessable value - Held that:- In this case the show cause notice has been issued by invoking extended period of limitation and some period in the show cause notice falls during the extended period of limitation. As it is an issue of interpretation of valuation rules and appellant has shown in the invoices itself that they are receiving bailing charges which are only for the additional/special packing sought by the buyer. Therefore, mala fides against the appellant stands unproved. In these circumstances, we hold that the extended period of limitation is not invocable. Consequently, penalties are also not imposable.

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• 2016 (1) TMI 730
  Penalty under Section 11AC - procedural lapse - written off of inputs as obsolete in their books of account and did not reverse Cenvat credit pertaining to them - Held that:- In this case although at the time of writing off as obsolete of inputs in question, the appellant was required to reverse the Cenvat Credit as per Rule 3(5)(b) of the Cenvat Credit Rules, 2004. But later on, these inputs have been used by the appellant in manufacturing of final product and these inputs were lying in their factory itself. In these circumstances, hold it is a situation of revenue neutrality and appellant has not gained anything by writing off these inputs as obsolete. In these circumstances, hold that it was only the procedural lapse on the part of the appellant. Therefore, mandatory penalty under Section 11AC is not imposable. But for procedural lapse by the appellant, penalty under Rule 27 of the Cenvat Credit Rules, 2002 is imposable. Therefore, impose a penalty under Rule 27 of the Cenvat Credit Rules, 2002 to the extent of Rs. 5,000/-.

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• Indian Laws

• 2016 (1) TMI 727
  High Court acquitted the respondent - Conviction for commission of offence under section 8(c) read with sections 21, 25 and 29 of the Narcotic Drugs & Psychotropic Substances Act, 1985 (NDPS) - Held that:- The High Court has not considered the other material on record which according to trial court established identity of sample sent for chemical examination with the contraband which was seized, and has also overlooked the effect of forwarding memo to godown which contained seal No.12, and effect of remanding Magistrate endorsement. Merely because no departmental action had been taken against PW-9 for mentioning seal No.11 instead of seal No.12 the prosecution case could not have been disbelieved. It is trite law that while reversing the Judgment the reasons given by the trial court ought to have been taken into consideration along with the entire evidence in that regard. Same has not been done by the High Court. As such without commenting on the merits of the case we find the judgment and order of the High Court to be unsustainable. Same is hereby quashed and we remit the case to the High Court to decide the appeal afresh in accordance with law duly considering the reasoning employed by the trial court and the entire evidence.

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