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TMI Tax Updates - e-Newsletter
January 27, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Highlights / Catch Notes
Income Tax
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Arm's length price - loan transactions with Associated enterprise - Assessee's profits are exempt u/s. 10B - There is no case that assessee would benefit by shifting profits outside India - AT
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Denial of deduction u/s 54F - Compensation received treated as income from undisclosed source – The gains arising on the transfer of such asset is liable to be treated only as LTCG - AT
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Exemption u/s 54 - Firstly the assessee invested the amount of sale consideration in flat under cinstruction - But due to some conflicts, the amount was refunded back to the assessee - exemption allowed subject to verification - AT
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The expenditure has been incurred on mobile phones and LCD on which assessee is entitled to claim depreciation - The expenditure are capital expenditure forming part of block of assets - AT
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Penalty u/s 221 - The assessee has not sufficient funds on the date of return of income to pay tax - The levy of penalty under section 221 is discretionary in view of the second proviso to section 221 - AT
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Levy of Interest u/s 234B(3) - when the re-assessment was concluded u/s 143(3) r.w.s. 254(1) of the Act on a reduced income, the interest chargeable u/s 234B of the Act cannot be higher than what has been levied in the original assessment - AT
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The sale of goodwill in the present case results in generation of capital receipts in the hands of the assessee out of his profession and as such do not come within the ambit of the provisions of section 55(2)(a) - AT
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Amount paid to the tenants for evicting the shops while computing gains earned by assessee on sale of shops allowed as deduction - AT
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All the evidences establish that assessee was non-resident and earned salary outside India which was received by him outside India and therefore was not taxable in India - AT
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Nature of payment – services in question are services for supply of information which assessee is not using for any technical know how - not in the nature of royalty u/s 9(1)(vi) - AT
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Cancellation of protective assessment – The protective assessments are liable to be quashed if the substantive assessments got confirmed - AT
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The term “assessee” used in sec. 54B/54F of the Act cannot be extended to mean the major married daughters - AT
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FBT - the airline crew members for whom the airport pick-up and drop has been incurred are not employees of the assessee, the expenditure cannot be treated as liable for fringe benefit tax u/s 115WB(2)(D) - AT
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Interest u/s 234B - the assessee was not required to pay advance tax, as the advance tax payable by the tax payer is to be calculated, by reducing the tax on current income, by the amount of tax which would be “deductible or collectable“ at source - AT
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Addition made u/s 68 - The availability of funds representing the intangible additions should be quantified not with reference to what the assessee offered for taxation but what was actually adopted in assessments for taxationp - AT
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Deduction u/s 80HHE of the Act – profit of the eligible business to be considered and not profit of all the business to be considered - AT
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The foreign exchange gain was income derived by export business of the assessee, and, eligible for deduction u/s 10A of the Act - AT
Customs
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Confiscation of goods - Mis declaration of goods - import of Multi Media Speakers for Computers of varying models - provisional release allowed - HC
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Denial of benefit of exemption Notification No. l48/94-Cus. - If the department has mis-placed these certificates, the appellants cannot be blamed for the lapses/inefficiencies on the part of the department - AT
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Whether the appellant (a courier company) herein had misdeclared the cargo which landed in Ahmedabad to Qatar Airways - Held no - AT
Service Tax
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The trips made by the rent-a-cab service provider for unofficial work, prima facie, would not be eligible for availment of Cenvat credit under the provisions of Cenvat Credit Rules, 2004 - AT
Central Excise
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Rejection rebate claim due to export - Explanation offered by petitioner that due to ignorance of law he could not follow the procedure of filing ARE-I, also does not appear to be genuine and creditworthy. - HC
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Remission of duty - storage loss and remission of excise duty leviable on 895 quintals of sugar beyond the permissible limit of 0.5 is not condonable - HC
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Penalty u/s 11AC - Interest u/s 11AB - Suppression of facts - Tribunal set aside the interest solely on the ground that the duty was paid prior to the show cause notice. - Interest cannot be waived - however penalty waiver is correct - HC
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Dismissal of stay application - mere absence of an appellant or his counsel on one date, “may” not be sufficient to dismiss an application/appeal for default. - HC
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Tribunal dismissed the appeal for non compliance - appellant's plea that as the unit has since closed down, the appellant has no funds, could have been relevant if the appellant had agreed to deposit some part of the duty claimed. - HC
VAT
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Denial of benefit of concessional rate of tax on purchase - geographical restriction - transfer of the manufactured goods by the Petitioner to the other depots situated outside the State of Jharkhand is “used for any other purpose“ within the meaning of Section 13(3) for imposing the differential rate of tax - HC
Case Laws:
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Income Tax
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2014 (1) TMI 1368
Adhoc disallowance of expenditure incurred in cash - Held that:- The details furnished by the assessee before the Assessing Officer/ CIT (A) are not open to third party scrutiny and they have not sustained to severe scrutiny of the Revenue Authorities - The adhoc disallowance made by CIT(A) was justified - Partly allowed in favour of assessee. Disallowance out of expenditure like bank charges, office maintenance, telephone expenses, staff salary, depreciation - Held that:- These are the expenses to be taken to the work-in-progress as ‘expenses of the business’ to be carried forward till the projects are complete as appellant is following the project completion method - These expenses in work-in-progress can be considered at the time when the projects are complete and revenue is recognized - The allowance of expenditure is deferred because of the method followed by the appellant on completion of project only - Assessee should not be allowed to deviate from this method without there being no specific and sustainable reason - Decided against assessee. Non-deduction of TDS - Held that:- As the assessee is following the project completion method, the expenses in work-in-progress can be considered at the time when the projects are complete and revenue is recognized -The impugned expenses on which no TDS is made cannot be disallowed in this year as it is not charged in the P&L Account - The claim is to be deferred till the revenue recognized in the year in which the project is completed - Decided against assessee.
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2014 (1) TMI 1367
Unaccounting stock - rejection of books of accounts - Whether income surrendered during survey is assessable as income u/s 69 or business income - Held that:- The Assessing Officer has pointed out discrepancies/defects in the books of accounts and thereafter rejected the book result - The survey team has taken the physical inventory and after comparing the inventory recorded in the regular books of accounts came to the conclusion that the assessee has unaccounted stock of Rs. 95,94,251 - Physical cash found during survey, when compared with the cash balance shown in the regular cash book, the same was found to be excess by Rs. 9,00,749 - The Assessing Officer has also pointed out certain instances, which indicated discrepancies in the books of accounts. - The Assessing Officer's action in rejecting books of accounts was correct. Addition on account of low G.P. rate - The sale of assessee has increased to Rs. 13.31 crores as compared to sale of immediately preceding assessment year at Rs. 11.65 crores - It is a well settled proposition that increase in turn over can be achieved only by sacrificing some margin in gross profit rate - Taking into account increase in sale vis-à-vis gross profit rate shown in the earlier years, the Tribunal found it suitable to apply gross profit rate of 2.50 % - The Assessing Officer is directed to work out trading addition by applying gross profit rate of 2.50 % on the sales of Rs. 13,31,26,701 - Decided in favour of Revenue.
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2014 (1) TMI 1366
Provision for bad and doubtful debts - Held that:- Decision in State Bank of Patiala vs. CIT [2004 (5) TMI 12 - PUNJAB AND HARYANA High Court] followed - Creatin provision for bad and doubtful debts equal to the amount mentioned in section 36(1)(viia) is a must for claiming such deduction - As the assessee has not made a Provision for bad and doubtful debts in the books of account equal to the amount of deduction sought to be claimed under Section 36(1)(viia) of the Act, the lower authorities were justified in restricting the deduction to Rs.50,00,000/-, being the amount of Provision actually made in the books of account - Decided against assessee.
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2014 (1) TMI 1365
Arm's length price in relation to loan transactions with Associated enterprise - Held that:- Decision of co-ordinate bench in Cotton Naturals (I) Pvt. Ltd. Versus vs. DCIT, Circle 3(1), New Delhi [2013 (6) TMI 174 - ITAT DELHI] followed - CUP method is the most appropriate method in order to ascertain arms length price of the international transaction as that of the assessee - Where the transaction was of lending money in foreign currency to its foreign subsidiaries the comparable transactions was of foreign currency lended by unrelated parties - The financial position and credit rating of the subsidiaries will be broadly the same as the holding company - In such a situation, domestic prime lending rate would have no applicability and the international rate fixed being LIBOR should be taken as the benchmark rate for international transactions – Decision in Siva Industries and Holding Ltd. vs. ACIT [2012 (10) TMI 890 - ITAT CHENNAI] followed - Assessee's profits are exempt u/s. 10B - There is no case that assessee would benefit by shifting profits outside India - In this case the loan agreement was for fixed rate of interest - The LIBOR has been accepted as the most suitable bench mark for judging Arms' length price in case for foreign currency loan – The adjustment made by TPO is not correct – Decided in favour of assessee.Decided against assessee.
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2014 (1) TMI 1364
Denial of deduction u/s 54F of the Act - Compensation received treated as income from undisclosed source – Held that:- Once the assessee has entered into an agreement for the purchase of space which is specified and the place is also specified then it becomes the right of the assessee and such right is an asset which has a value -The gains arising on the transfer of such asset is liable to be treated only as LTCG - As long as the source of the receipt is not disputed, the same cannot be treated as undisclosed income of the assessee – the fact that assessee has received the amount on the transfer of the right vested in him does not bring the receipt under the purview of the head "income from other sources", especially when the said receipt falls under the specific head "being income from capital gains" - "Income from other sources" is a residuary head - gains derived by the assessee on the transfer of the right to purchase the flat being liable to tax under the capital gains, the assessee would be entitled to benefit of deduction u/s 54F of the Act –the order of the CIT(A) set aside and the AO is directed to treat the "receipt" on the transfer of the right to purchase the flat as LTCG and grant the assessee's benefit of deduction u/s. 54F of the Act – Decided in favour of Assessee.
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2014 (1) TMI 1363
Arm's length price in respect of interest charged on loan - Held that:- The issue has been restored for fresh adjudication with a direction to the assessing officer to examine and calculate the differential interest to be levied for the relevant period instead of charging differential interest for the entire period of one year. Arm's length price in respect of guarantee to the Bankers of subsidiaries - Held that:- The assessee has rendered a service to its US subsidiary for which it must charge fees at an arm's-length - The issue has been set aside for determining the quantum of corporate guarantee rates following the principle laid down in the aforesaid case. Purchase of software disallowed u/s 40(a)(ia) - Held that:- The licence is purchased everytime by the assessee when it has to sell it to its customer - The amount paid for software is simply purchase cost of trading goods because the licence in respect of software is not obtained by the assessee - The perpetual licence is given directly to the end customer by the vendor company - The payments made by assessee to the Netherlands company will not fall under the ambit of Royalty as per Article 12 of the India-Netherlands DTAA - No withholding tax is liable to be deducted - Decided in favour of assessee. Expenses toward technical consultancy charges - Held that:- The UK and USA subsidiaries did only contractual work parcelled out to it whose results were given to clients directly and no technical knowledge was made available to assessee - The payment would not fall under fee fo technical services even as per DTAA - Decided in favour of assessee. Whether communication expenses are to be exluded from export turnover - Held that:- Decision in Patni Telecom Pvt. Ltd. vs. ITO [2008 (1) TMI 452 - ITAT HYDERABAD-A] followed - The said expenses are not to be deducted from export turnover - The issue has been restored for fresh adjudication. Whether profit on account of foreign exchange fluctuation be reduced from export turnover - Held that:- Decision in Sanyo LSI Technology India Private Limited [2014 (1) TMI 1257 - ITAT BANGALORE] followed - The foreign exchange gain was income derived by export business of the assessee, hence, eligible for deduction u/s 10A of the Act - On account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business - Decided in favour of assessee.
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2014 (1) TMI 1362
Exemption u/s 54 - Held that:- Firstly the assessee invested the amount of sale consideration in flat under cinstruction - But due to some conflicts, the amount was refunded back to the assessee - The assessee immediately thereafter deposited the same with another builder for purchase of flat - The intention of the assessee was to immediately invest his capital gain from transfer of long term capital asset towards acquiring of residential flat and there was no intentional delay on the part of the assessee for not appropriating the net consideration - In this case the assessee will be allowed deduction only for the amount invested alongwith the amount incurred on stamp duty and incidental expenses within a period of three years as stipulated u/s 54F - The issue has been restored for fresh adjudication - Partly allowed in favour of assessee.
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2014 (1) TMI 1361
Acceptance of additional evidences - Held that:- The assessee could not submit any document to substantiate that the assessee had commenced the project after 1st October 1998 - The learned Commissioner (Appeals), on a perusal of the audited Balance Sheet and Profit & Loss account for the assessment year 2000-01, has given a finding that the project had started after 1st April 1999 i.e., much after 1st October 1998, therefore, benefit of section 80IB(10) cannot be denied - On a perusal of these audited Balance Sheet for the assessment years 1999-2000 and 2000-01, which were filed for the first time before the learned Commissioner (Appeals), it is seen that prima-facie it cannot be inferred that there was no opening work-in- progress with regard to these particular project as apparently there is no clear cut demarcation of work-in-progress of old and new projects - Profit & Loss account shows that there is an opening work-in- progress of 2,48,50,382 - Without any bifurcation, it is very difficult to infer about the conclusion drawn by the learned Commissioner (Appeals) - It does constitute additional evidence which requires opportunity for verification and examination by the Assessing Officer – The issue has been restored for fresh adjudication. Whether the assessee be treated as developer for deduction u/s 80IB(10) – Held that:- The assessee has got substantial right for developing the land as a developer and there is entire transfer of right to the assessee for development of the property - The assessee is also substantially entitled to sell the entire units and will also appropriate all the sale proceeds - Out of the said sale proceeds, the assessee was entitled for 95% of the receipts – Decision in case of CIT v/s Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] followed - The assessee need not be a land owner but should have substantial right to develop the property with all the risk and responsibility - The assessee can be held to be a developer for the purpose of claiming deduction under section 80IB(10) – Decided against Revenue.
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2014 (1) TMI 1360
Professional fees - Held that:- The assessee has made two payments to two different parties - NSPL and NSCPL - Out of the two parties only NSCPL was engaged in accomodation entries - Only payment made to NSCPL shall be disallowed which have already been disallowed by the assessee himself in its return of income - If it would again be disallowed it will constitute double disallowance - Decided in favour of assessee. TDS - whether the payment made by assessee to various mandals for putting its banner and hoarding are in the nature of advertisement expenses - Held that:- As per the CBDT circular dated 08.08.1995 - When there is a contract for putting up hoardings in the nature of advertising contract, provisions of section 194C of the Act would be applicable - If a space is taken on rent and the banners are put on the said space, so hired, they are for the purpose of gaining publicity - Mere publicity could not be a criteria to decide whether the said payments is subject to provisions of section 194C of the Act or section 194I of the Act - The CIT(A) has stated that assessee has made payments to the Mandals etc under a contractual obligation - During the Utsav/festivals seasons the organizers provide space to various persons to put its banners and charge fee from them, not only that the purpose to advertise their products but for providing space to them - The said payment to the mandals could be treated towards rent for the space provided by them to the assessee for putting its hoarding and banners - TDS was required to be deducted u/s 194I of the Act - Decided in favour of assessee. Miscellaneous expenses for purchase of mobile phones - Held that:- The expenditure has been incurred on mobile phones and LCD on which assessee is entitled to claim depreciation - The expenditure are capital expenditure forming part of block of assets - Decided against assessee.
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2014 (1) TMI 1359
Variation in valuation of land - Held that:- The AO was satisfied with the explanation with regard to source of investment - The CIT(A) held that that the subject transaction does not yield to any income chargeable to Income tax - The transaction affects only the work-in-progress - He directed the AO to reduce the work-in-progress to be carried forward by an amount of Rs. 38.40 lakhs - Decided against Revenue.
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2014 (1) TMI 1358
Unexplained cash credit - Held that:- The assessee has opened a bank account and deposited the money received from third person - The assessee failed to explain on what account the money has been received by her - The assessee also failed to sustantiate her claim that the amount was received from third person - Assessee should establish nexus between the receipt of money by Smt. Baddam Kalavathy and passing the same to the assessee - The issue has been restored for fresh adjudication.
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2014 (1) TMI 1357
Penalty u/s 221 - Held that:- The assessee has not sufficient funds on the date of return of income - the Assessee is not a habitual defaulter and that the assessee had made the payment of taxes due under section 140A immediately after three months without any notice from the department, it can be held that there was a reasonable and sufficient reason in view of the second proviso to section 221 - The levy of penalty under section 221 is discretionary in view of the second proviso to section 221 - Decided in favour of assessee.
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2014 (1) TMI 1356
Permanent establishment – Levy of tax – DTAA between India and Malaysia - Whether the Malaysian Branch of the assessee-company is a permanent establishment in Malaysia – Held that:- The decision in Union of India & another Vs. Azadi Bachao Andolan & another reported as [2003 (10) TMI 5 - SUPREME Court] followed - the Malaysian branch of the assessee has the status of permanent establishment in Malaysia - the income of Malaysian branch of the assessee is income earned in Malaysia and by virtue of DTAA that income is liable for taxation only in Malaysia. There is nothing on record to deny the Malaysian branch of the assessee company the status of a permanent establishment operating in Malaysia - the taxability of the income of the assessee and its Malaysian branch is governed by the DTAA entered into between India and Malaysia - The income generated in the hands of the Malaysian branch of the assessee company is rent and interest income - They are all generated from assets situated outside India – thus, as per the terms of the DTAA the income of Malaysian branch of the assessee company is liable for taxation in Malaysia - Once it is liable for taxation in Malaysia, DTAA makes it clear that the said income is not subjected to the jurisdiction of Indian taxation – Decided against Revenue.
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2014 (1) TMI 1355
Original assessment set aside – No findings for commencement of business – matter already restored for fresh consideration - Held that:- The CIT (A) had grossly erred in coming to a conclusion that the only issue of charging of interest u/s 234B of the Act survives for adjudication - If that were to be so, the earlier Bench would have given a specific direction to the AO to address only issue of charging of interest u/s 234B of the Act as ascribed by the CIT (A) - when the assessee had sought to raise an additional ground in its cross objection, there was no trace of any objection from the then learned DR for admitting such an additional ground by the Bench - Thus, it is explicit that after having duly considered the rival submissions and also the facts of the issue, the earlier Bench thought it fit to accede to the request of both the parties. The CIT (A) was also incorrect in observing that the ITAT did not examine the issue on merits at all, but, only advised to re-look by the AO - When both the parties have pleaded for restoration of the issue(s) to the AO for fresh adjudication, naturally, the earlier Bench was left with no other alternative, but, to accede to their requests - when the DR agreed that the issues raised by both the assessee and the Revenue be restored to the Assessing Officer for fresh adjudication and the Tribunal order having attained finality, the Tribunal's direction cannot be circumvented – The authorities below have not properly understood the directions of the earlier Bench in a better perception for which it was intended to – the issue remitted back to the AO for fresh adjudication. Levy of Interest u/s 234B(3) of the Act – Held that:- The omission of the officer to levy interest u/s 234 B(3) in the reassessment completed u/s 147 which could have been rectified u/s 154 did not desist the officer from levying interest under the very same provision, when the reassessment was revised a second time u/s 147 - The levy of interest u/s 234B was valid - in the present case when the original assessment was concluded on a total income of Rs.65.76 lakhs, interest u/s 234B of the Act was charged at Rs.17.28 lakhs and finally when the re-assessment was concluded u/s 143(3) r.w.s. 254(1) of the Act on a reduced income of Rs.61.79 lakhs, the interest chargeable u/s 234B of the Act cannot be higher than what has been levied in the original assessment – Decided partly in favour of Assessee.
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2014 (1) TMI 1354
Deletion of disallowance of provisions for warranty – Held that:- The FAA had given a finding of fact that assessee was following a scientific method based on the past experience - for arriving at the conclusion that a logical system was followed by the assessee, FAA had considered the chart submitted by the assessee – The decision in Court in the case of Rotork Controls India P. Ltd Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] followed - if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and the facts show that defects existed in some of the items manufactured and sold, then provision made for warranty in respect of such sophisticated goods would be entitled to deduction from the gross receipts under section 37 – thus, the opinion of FAA is correct – Decided in favour of Assessee. Deletion of adjustment in book profits u/s 115JB of the Act - Provision of warranty, gratuity and leave encashment adjustment – Held that:- The decision in Deputy Commissioner of Income-tax, Circle 1(2), Baroda Versus Inox Leisure Ltd. [2013 (2) TMI 353 - GUJARAT HIGH COURT] followed - addition of gratuity as unascertained liability under clause (c) to explanation 1 to section 115JB was not warranted - The provision for warranty is an ascertained liability and cannot be added back for computing book profit u/s.115JB of the Act - provision towards leave encashment of employees was unascertained liability and added it book profit - The Tribunal had rightly held that provision for leave encashment could not be considered contingent liability for computing book-profit u/s.115JB of the Act – Decided against Revenue.
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2014 (1) TMI 1353
Recalculation of disallowance u/s 14A of the Act r.w. Rule 8D(ii) of the Rules ordered – Held that:- while making the disallowance u/s.14A of the Act, AO had not recorded the reasons for invoking the provisions of Rule 8D(ii) of the Rules – also, he did not consider the net interest amount – if interest has been paid and received for the same transaction then only net amount of interest has to be considered for apportionment - AO cannot ignore the interest paid/received while making disallowance under section 14A r.w Rule 8D – Relying upon The Morgan Stanley India Securities Ltd. [2014 (1) TMI 1260 - ITAT MUMBAI ] - there could be no dispute that since the amount of interest debited to the Profit & Loss Account as on net basis the disallowance of interest should also be made only with reference to the net interest. Disallowance of expenses u/s 37(1) of the Act - Transaction charges and turnover fees – Held that:- FAA should have not admitted the bifurcation given by the assessee, without obtaining a report from the AO - FAA, a senior officer of the hierarchy of the department is supposed to follow the rules prescribed by the Act - He can direct the AO to submit a remand report or make further inquiries and AO is bound to follow his instructions - AO has specifically taken a ground about not given him an opportunity to verify the claim made for the first time before the FAA - Whatever was the basis of calculation of disallowance it should have been forwarded to the AO, because the AO is the appropriate authority to look in the pieces of evidences - FAA is entitled to admit new evidences and decide the matter without referring to the AO but those are extra ordinary situations –the matter remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee.
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2014 (1) TMI 1352
Sharing of common pool expenses - Held that:- Decision in Ahuja Platinum Properties(P) Ltd. Versus JCIT & ACIT [2014 (1) TMI 743 - ITAT MUMBAI] followed - It was accepted by the AO in that M/s. Jaygopal Consultancy Services Private Limited was functioning on 'no loss no profit basis' and no commercial activity was carried out by it except for incurring expenses on behalf of the group companies as a 'pool company' - The cost is recovered in proportion to the construction/development cost incurred by each of the group companies - No case for invocation of section 40A(2)(a) of the Act is made out - It cannot be said that the payment was not for purpose of business or was excessive or unreasonable - Decided against Revenue. Interest paid by the assessee to sister concern - Held that:- There has been no factual examination of the matter by the ld. CIT(A) for the current year - The rate of interest, is subject to market fluctuations over time - The rates in the instant case are increasing with reference to the rate of 19.5% for A.Y. 2003-04, being at 21.25% for A.Y. 2005-06, declining marginally to 20.50% for A.Y. 2007-08 - There is no basis to the finding of the brokerage rate at 3%, which again cannot be considered as constant in a free and competitive market - In the regime of declining interest rates, the same ought to be much lower - The reliance by the ld. CIT(A) on the order by his predecessor for A.Y. 2003-04 is thus completely misplaced - The interest rates are subject to variation over time, so that a finding in its respect would need to precede a factual examination and determination - The issue has been restored for fresh adjudication. Disallowance u/s. 40A(2)(a) in respect of purchase of building material from associate concerns - Held that:- No material had been brought on record by the Revenue to prove the claim by the Assessing Officer that the rate charged by the associate concern, M/s. Topaim Properties Pvt. Ltd., was on the higher side - Decision in Ahuja Platinum Properties(P) Ltd. Versus JCIT & ACIT [2014 (1) TMI 743 - ITAT MUMBAI] followed - Decided against Revenue. Disallowance u/s 36(1)(iii) of the Act – Relatable Interest – The CIT(A) has paased the order having been influenced by the year-end balances, also adopted by the A.O. in the instant case which may not be indicative of the correct fund availment obtaining during the year - It is the average outstanding during the year and not the year-end balance that is relevant - Interest, would depend on the resource actually utilized - The interest incurred, a part of which is disallowed for diversion for non-business purposes, is only in terms of its average utilization - As funds are generally raised only for business purposes, the assessee would need to establish non utilization of interest-free funds for business purposes as at the beginning of the year - The issue has been restored for fresh adjudication.
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2014 (1) TMI 1351
Whether transfer of goodwill amounts to long term capital gain - Held that:- Following G.K.Choksi & Co [2007 (11) TMI 7 - Supreme Court of India] - The word 'business' occurring in cl.(iv) of s.32(1) by no stretch of imagination, can be said to include 'profession' as well - If the expression 'business' is interpreted as including within its scope 'profession' it would not mean that the lacuna has been made good by giving a wider interpretation to the word business - There is nothing in s.32(1)(iv) which envisages the scope of word 'business' to include in it 'profession' as well - If the expression 'business' is interpreted to include within its scope 'profession' as well, it would be doing violence to the provisions of the Act. Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law. It can be safely construed that business and profession are two different streams and treatment has to be given differently in case the statue provides for taxing any income under the head 'business' only - The income arising out of sale of goodwill in case of 'profession' relates to the personal competence of the 'professional' - In profession, goodwill is gained by an individual from his personal skill and experience which he gains over the period of time - The sale of goodwill in the present case results in generation of capital receipts in the hands of the assessee out of his profession and as such do not come within the ambit of the provisions of section 55(2)(a) - Decided in favour of assessee.
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2014 (1) TMI 1350
Disallowance u/s 14A - Held that:- The assessee's assertion that the entire interest expenditure was attributable to business income was "not backed by any evidence or material on record - The CIT(A) made no mistake in upholding the disallowance in terms of section 14A read with Rule 8D - Decided against assessee.
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2014 (1) TMI 1349
Disallowance of expenditure u/s 48(1) - Held that:- The shops sold during the year were already in possession of tenants - The assessee has actually paid Rs. 9,92,000/- for vacating the shops to the tenants - The ld. CIT(A) has recorded factual finding regarding actual payment of eviction to the tenants as per sale deed so executed - The action of the CIT(A) was justified for giving deduction of Rs. 9,92,000/- paid to the tenants for evicting the shops while computing gains earned by assessee on sale of shops – Decided against Revenue. Disallowance of long term capital gain – Held that:- No depreciation was claimed by assessee on the shops sold by the assessee durig the year - The observation of the Assessing Officer to the effect that depreciation were claimed on these shops in earlier years, are not supported by material on record - The Assessing Officer has not considered indexed cost of acquisition claimed by assessee at Rs. 39,52,699/- while computing capital gains nor CIT(A) has deliberated on this issue – Provisions of section 50 are not applicable in this case - The issue was restored for fresh adjudication.
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2014 (1) TMI 1331
Deletion of penalty u/s 271(1)(c) of the Act – Held that:- The decision in ITO vs. Balotra Cooperative Marketing Society Ltd. followed - To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous - Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c) - A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars – the order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1330
Deletion of disallowance u/s 40(a)(ia) of the Act – Requirement of depositing TDS before due date u/s 139(1) of the Act – Held that:- The provisions of Section 40(a)(ia) have been amended by Finance Act, 2010 to allow the deduction of expenses if the tax is paid before the due date of filing of the return, which has been done by the appellant - amendment to the provisions of Section 40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from 01.4.2005 - Consequently, any payment of tax deducted at source during previous years relevant to and from A.Y. 2005-06 can be made to the Government on or before the due date for filing return of income under section 139(1) of the Act. The decision in ITO vs. Shri Nem Chand Jain followed - The assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however, it was paid before the due date of filing the return specified in Section 139(1) of the Act - amendments in Section 40(a)(ia) is having retrospective operation – the addition u/s 40(a)(ia) of the Act cannot be made if the payment of tax deducted at source has been before the due date of filing the return of income for the year under consideration - payment of TDS has been made before the due date of filing of the return u/s 139(1) of the Act – thus, the CIT(A) was fully justified in deleting the addition made by the Assessing Officer – decided against Revenue.
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2014 (1) TMI 1329
Deduction u/s 80IA of the Act – Entitlement for deduction for deduction u/s 80IA of the Act – Held that:- The decision in Goetze (India) Limited Versus Commissioner of Income-Tax [2006 (3) TMI 75 - SUPREME Court] followed - no fresh claim can be made before the AO in the form of revised return - he is not competent to adjudicate the issue of deduction of FBT - Though the counsel appearing on behalf of the assessee relied upon the decision of the ITAT (Third Member) Delhi, the learned D.R. could not place before us any decision where a contrary view was taken - the powers of the learned CIT(A) are independent and the CIT(A) can take into consideration any claim made before him for the first time - the CIT(A) committed an error in law in not adjudicating the issue on merits – the order of the CIT(A) set aside – Decided in favour of Assessee.
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2014 (1) TMI 1328
Disallowance made on account on interest expenses – Held that:- The undisputed fact remains that the assessee was awarded the contract-work and the work was further subletted to the sub-contractor and the money given to the sub-contractor was for execution of work - Nothing has been brought on record that money was given for any other purpose - In the absence of same, CIT(A) was justified in holding that the money was advanced for business purpose – thus, there was no infirmity in the order of the CIT(A), the same is upheld – Decided against Revenue. Allowance in respect of TDS – Held that:- The CIT(A) has given direction to the AO to verify the claim of assessee in respect of TDS from hard-copies of certificates and also confirmation of the deductor - Since the CIT(1A) as such has not given any relief, there was no infirmity in the order of the CIT(A), the same is upheld – Decided against Revenue.
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2014 (1) TMI 1327
Nature of income – Interest received on mobilization advance – Reduction in claim u/s 80IA of the Act - There was no merit in the order of authorities below with regard to reduction in 80IA claim - this amount is reduced from the cost of the project and as per the contract, this amount to be given credit as misc. receipts in the project account - There is diversion of this interest by overriding title with the contract conditions. The receipts were not taxable in the hands of assessee - Relying upon CIT vs. Bokaro Steel Limited [1998 (12) TMI 4 - SUPREME Court] - the interest earned on the advances made to the contractor to facilitate the construction activity of putting together a very large project were held to be capital in nature - As these advances are to ensure that the work of the contractors proceeded without any financial hitches so as to help the contractors - Such arrangements made are inextricably connected with the construction of the project and such receipts adjusted against the charges payable to the contractor reduce the cost of construction - As per the arrangement of the assessee with Railways, , interest charged on mobilization advances is to be credited to the concerned product under the misc. receipts which ultimately reduces the cost of the project and the project is the asset of the Ministry of Railways – order of the CIT(A) set aside – Decided in favour of Assessee.
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2014 (1) TMI 1326
Levy of penalty u/s 271C of the Act – Non-deduction of TDS on rent payment u/s 194I of the Act – Held that:- The premises for which the rent payment was made by the assessee, was co-owned by five persons, thus, if the total amount of the rent payment is divided among these five co-owners, the amount of rent paid to each person is much below the threshold limit available to per person, and hence, it has to be accepted that there may be bona fide belief of the assessee that no TDS is deductible u/s.194I – thus, the provision under section 271C is not applicable for this default u/s194I of the act and the penalty is not justified for the default – Decided in favour of Assessee. Levy of penalty for default u/s 194A of the Act – Held that:- The default is in respect of about 35 persons, and the total default is of Rs.4,91,710/- being the amount of TDS which was required to be deducted by the assessee under section 194A, but it was not deducted - number of persons from whom TDS was not deducted is about 3.5% of total persons from whom TDS was to be deducted under section 194A – thus, penalty under these facts, is not justified because there was substantial compliance of TDS provisions u/s.194A of the Act – Decided in favour of Assessee.
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2014 (1) TMI 1325
Issues not properly addressed as per section 143 of the Act – Held that:- No specific ground was raised before the CIT(A), and hence, there is no decision by the learned CIT(A) on this aspect - since there is no decision of the learned CIT(A) on this aspect, the order of the CIT(A) set aside and the matter restored for fresh adjudication to decide the aspect as to whether the AO was justified in making adjustment while passing intimation under section 143(1). Deletion made u/s 40(a)(ia) of the Act – Failure to appreciate the effect of amendment made u/s 40(a)(ia) of the Act – Held that:- Relying upon CIT Vs. Royal Builders [2014 (1) TMI 136 - GUJARAT HIGH COURT] - The amended provision of Section 40 (a)(ia) clearly gives the time to the assessee to deposit the TDS on or before the due date specified in subsection (1) of Section 139 of the Act - The amendment came into effect from 1.04.2010 - The disallowance was made by the AO under section 40(a)(ia) of the Act on this basis that no TDS was deducted by the assessee in respect of the payment and therefore, the same is required to be disallowed - assessee could not produce any evidence in support of his contention – thus, the order of the CIT(A) set aside and the matter remitted back for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1324
Validity of Revision u/s 263 of the Act – Deduction u/s 80P of the Act – Held that:- The assessing officer has passed a cryptic order and it does not contain any discussions on the issues pointed out by the CIT in the revision order – the CIT held that the assessment order is erroneous and prejudicial to the interests of revenue and accordingly set aside the assessment order with a direction to the Assessing Officer to pass appropriate order as per law after giving sufficient opportunity to the assessee - As decided in COMMISSIONER OF INCOME-TAX Versus TOYOTA MOTOR CORPORATION [2008 (4) TMI 231 - DELHI HIGH COURT] that the proceedings before the AO are quasi-judicial proceedings and a decision taken by the AO in this regard must be supported by reasons - the assessment order should be passed with or contain proper reasons on various issues – the CIT would have pointed out the implication on the tax computation if it is decided against the assessee, in which case the assessment order passed by the assessing officer would become prejudicial to the interests of the revenue – the CIT was justified in passing the revision order and thus, no interference is called for – Decided against Assessee.
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2014 (1) TMI 1323
Addition made on turnover – Held that:- The NP rate of 7% was applied by the CIT(A) on the basis of the previous history explained by the assessee and the same was found quite reasonable – On the basis of these findings of fact and no adverse material found against the assessee, would clearly show that no evidence was found during the course of survey that the turnover of the assessee has increased substantially as against the turnover declared in the earlier years - thus, the authorities below instead of considering the history of the assessee for the purpose of estimating the turnover of the assessee should not have applied the stock turnover ratio method for the purpose of computing turnover of the assessee - Method applied was not proper in the facts and circumstances of the case and in absence of any adverse material on record against the assessee, the proper and reasonable course should have been to estimate the turnover of the assessee considering the history of the assessee which was found reasonable basis for applying NP rate of 7% - in none of the earlier years turnover of the assessee have exceeded Rs.8.25 lacs - considering the past history of the assessee, the turnover of the assessee is estimated at Rs.15 lacs upon which 7% profit rate the profit would be estimated at Rs.1,05,000/- - The assessee has already declared income of Rs.72,000/- on estimate basis and after giving benefit of the same, resultant addition would be maintained at Rs.33,000 – the order of the CIT(A) modified – Decided partly in favour of Assessee.
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2014 (1) TMI 1322
Determination of income u/s 44BB of the Act - Receipts of service tax to be included in gross receipts – Held that:- The decision in M/s Sedco Forex International Drilling Inc., C/o Nangia & Co., Versus Additional DIT, International Taxation, Dehradun [2012 (7) TMI 250 - ITAT, DELHI] followed - The service tax is a statutory liability like custom duty - reimbursement of custom duty paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement - service tax being a statutory liability, would not involve any element of profit and accordingly, the same could not be included in the total receipts for determining the presumptive income - The AO is directed to exclude service tax from the gross receipts for the purpose of determining the income under Section 44BB of the Income-tax Act, 1961 – Decided in favour of Assessee. Amount included in gross receipts u/s 44BB of the Act - Reimbursement of actual expenses – Held that:- The decision in CIT and Another Vs. Halliburton Offshore Services Inc. - [2007 (9) TMI 230 - UTTARAKHAND HIGH COURT] followed - The amount had been received by the assessee - Therefore, the Assessing Officer added the said amount which was received by the non-resident company rendering services under the provisions of section 44BB and imposed the income tax – Decided against Assessee.
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2014 (1) TMI 1321
Disallowance on account of staff training expenses – Held that:- No FBT was paid in respect of staff training - It cannot be denied that some of the employees were going to the company's various areas of operation and since the amount have been debited by the company, therefore, no additional evidence is possible to substantiate this claim – thus, the disallowance is restricted and the AO is directed to allow training expenses. Disallowance on account of customer expenses – Held that:- In the details of FBT report in respect of sale promotion, total expenditure shown is Rs. 4,09,015/-, therefore, it cannot be said that the assessee has paid FBT on whole of the customer expenses - vouchers are not available - However, it is also correct that disallowance has been made on higher side – the disallowance of Rs. 2.00 lakhs would meet the ends of justice – order of the CIT(A) set aside and the AO is directed to disallowance of Rs. 2.00 lakhs on account of customer care. Disallowance on account of selling and distribution expenses – Held that:- The disallowance has also been made on excessive basis, thus, the disallowance is restricted to 15% of Sales and Distribution of the expenses - the order of the CIT(A) set aside and the AO is directed to allow 15% of SND expenses. Disallowance on account of Vehicle Running and Maintenance Expenses – Held that:- For personal usage of vehicles, disallowance of 10% is justified – order of the CIT(A) set aside and the AO directed to Accordingly we set aside the order of the ld. CIT(A) and direct the Assessing Officer to make disallowance @ 10% of the total expenditure - Decided partly in favour of Assessee.
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2014 (1) TMI 1320
Failure to furnish details of interest on enhanced and delayed payment of compensation – Held that:- The decision in Commissioner of Income-tax, Faridabad Versus Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT ] followed - Interest is different from compensation - Interest received u/s 28 of Land Acquisition Act is to be treated as part of the compensation and therefore, is exempt - interest u/s 34 is towards delay in payment and therefore, the same is to be taxed - the ld. CIT(A) has adjudicated the issue and remitted the matter to the file of Assessing Officer only for verification of the components of interest u/s 28 & 34 – thus , no interference is required in the order of the CIT(A) – matter remitted back to the AO for verification – Decided in favour of Revenue.
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2014 (1) TMI 1319
Addition made on total sales – Held that:- The Assessing Officer proposed to apply the GP rate of the immediately preceding year - whether the GP rate of immediately preceding year is 13.05% or 12.97%, it is a matter of computation from the details available on record before the Assessing Officer – So far as disallowance of 5% is concerned, Assessing Officer himself has proposed to disallow the expenses claimed in the profit & loss account - Once a GP rate is applied, all the items of trading account, viz., sales, purchases, closing stock as well as the expenses which are debited to trading account, are deemed to have been considered while working out the GP rate – thus, it cannot be again considered for the purpose of estimated disallowance - the Assessing Officer is directed to disallow 5% of the expenses excluding the purchases and other expenses which are considered while working out the gross profit rate – Decided partly in favour of Assessee.
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2014 (1) TMI 1318
Annulment of re-assessment proceedings u/s 147 of the Act – Allowability of sponsorship expenses – Held that:- The decision in CIT Vs. Orient Craft Limited [2013 (1) TMI 177 - DELHI HIGH COURT] followed - The Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more - This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer - a less strict interpretation of the words "reason to believe" vis-a-vis an intimation issued under section 143(1) can cause to the tax regime -There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147 - Even if there is no regular assessment, the review of the earlier proceedings is not possible - original assessment was completed under Section 143(3) and during the course of assessment proceedings, the Assessing Officer examined the aspect of sponsorship expenditure – Decided against Revenue.
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2014 (1) TMI 1317
Taxability of Income in India - Employment outside India – Held that:- The decision in British Gas India (P) Ltd. [2006 (7) TMI 582 - AUTHORITY FOR ADVANCE RULINGS] followed – A careful reading of cl. (c) of s. 6(1) Expln. (a) would show that the requirement of the Explanation is not leaving India for employment but it is leaving India for the purposes of employment outside India - For the purpose of the Explanation, an individual need not be an unemployed person who leaves India for employment outside India - the assessee was not resident during the relevant period as he has left India for the purpose of employment outside India - His stay during the financial year was less than 182 days in India – thus, his status was non-resident during the relevant financial year. Relying upon Shri Anurag Chaudhary v. CIT [2010 (2) TMI 15 - AUTHORITY FOR ADVANCE RULINGS] - All the evidences establish that assessee was non-resident and earned salary outside India which was received by him outside India and therefore was not taxable in India - order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1316
Qualification u/s 115VD and 115VC of the Act – Tonnage tax on qualifying ship – Qualifying Company – Held that:- The decision in Assistant Commissioner of Income-tax Versus West Asia Maritime Ltd. [2011 (7) TMI 1017 - ITAT CHENNAI] followed for the purpose of qualification of tonnage tax benefit - the ship was operated by the assessee for transporting thermal coal from one location to another location within the country, is a qualifying ship u/s 115VD and the assessee is entitled for the benefit of tonnage tax scheme provided under Chapter XII-C - The place where the board of directors of the company made their decision would not be India just because the two of the directors were in India - Attendant circumstances as to whether the said persons were residents of India or residing abroad or whether functioning from an office abroad were all required to be seen before coming to a decision regarding the place of effective management – the aspect requires a fresh look by the Assessing Officer for verifying the actual and effective place where the decisions were taken by the board of directions with regard to the affairs of the assessee company - Therefore, while holding that the ship was indeed a qualifying ship for enjoying the TTS, the issue as to whether assessee qualified under section 115VC of the Act, remitted back to the Assessing Officer for fresh consideration – Decided partly in favour of Revenue. Deletion made u/s 14A of the Act – Held that:- As the disallowance under section 14A is concerned, there is no doubt that Rule 8D applied only from A.Y.2008-09 as decided in Varun Shipping Co. Ltd. Versus Additional Commissioner of Income-tax - 5(3), Mumbai [2011 (11) TMI 370 - ITAT MUMBAI] – the matter is already set aside the issue as to whether assessee was eligible for TTS, back to the Assessing Officer for consideration afresh - thus, it will be appropriate if the Assessing Officer once again consider the question of disallowance if any, to be made under section 14A of the Act for all these years, afresh. Addition to be made in book profits u/s 115JB of the Act - Provision for loan on revision of foreign currency loans – Held that:- It was included by the assessee as a part of establishment and other expenses, Assessing Officer had simply taken a presumption that it was a provision - Assessing Officer had not gone into the accounts to see whether the claim was made by the assessee through its Profit and Loss appropriation account or, its P&L account. Ld. CIT(A) had given relief to the assessee for a reason that, assessee was eligible for TTS under Chapter–XIIG of the Act - CIT(A) had relied on Sec.115VO, which exempted a tonnage tax company from the application of Sec.115JB of the Act – the matter is already set aside the issue as to whether assessee was eligible for TTS, back to the Assessing Officer for consideration afresh – thus, the order set aside and the matter remitted back for the fresh adjudication – Decided partly in favour of Revenue.
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2014 (1) TMI 1315
Disallowance of labour charges u/s 40(a)(ia) of the Act – Held that:- The CIT(A) has mentioned that assessee has deducted TDS on the payments made on account of labour charges and no disallowance u/s 40(a)(ia) of the Act is to be made – the assessee had made payment only of Rs.97,00,942/- out of total payment of Rs.1,76,36,423/- by bearer cheques and rest of the payments were made by account payee cheques and/or by bank transfer CIT(A) has not considered the submission of the assessee made before him as to whether any payment made by bearer cheques fall in any of the exception as provided under Rule 6DD of Income-Tax Rules – order of the CIT(A) set aside and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of salary paid – Held that:- The assessee has not been able to place any evidence on record to justify that Ms. Sonal Bhatt was actively working for the firm save and except placing on record five/six vouchers stated to be signed by her for approving the payments - each voucher is of less than Rs.100/- and only one the voucher is of Rs.1,000 – assessee contended that Ms. Sonal Bhatt is MBA and also one of the partner in the firm as per deed of partnership – order set aside and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1314
Disallowance u/s 40(a)(ia) of the act - Payment of commission /brokerage – Held that:- The assessee claims that the payment has direct nexus with the sale of vehicles and it is in the nature of sales promotion expenditure - The assessee also claimed that the brokerage / commission was paid to the middlemen for bringing the customers for purchase of vehicle from the assessee - tax was not deducted, hence, there was no infirmity in the order of CIT(A) – thus, addition is confirmed – Decided against Assessee. Disallowance u/s 40(a)(ia) of the Act - Addition towards advertisement, consultancy and audit fees – Held that:- When the payments were made for advertisement, consultancy and audit fees, then, tax has to be deducted – thus, the CIT(A) has rightly confirmed the disallowance u/s 40(a)(ia) made by the assessing officer – Decided against Assessee. Addition under capital gain – No transfer of property made u/s 2(47) of the Act - Held that:- For the purpose of levy of capital gain tax there shall be a transfer of capital asset within the meaning of section 2(47) of the Act - the assessee claims that this deletion was due to revaluation of the capital asset and not because of any transfer - The assessing officer has not examined the issue in the light of definition given in section 2(47) of the Act – order of the CIT(A) set aside ad the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of Interest u/s 44AB of the Act – Documentary proof not made – Held that:- Only on the basis of the audit report, the claim of the assessee towards payment cannot be allowed - Apart from that if the assessee claims that the payment was made to the respective banks on the funds borrowed from them it is not difficult for the assessing officer to verify the payment from the respective banks. The assessing officer being a quasi- judicial authority is expected to call for respective details and the payment from the respective bankers and thereafter decide the matter - the penal interest paid for the delayed payment is compensatory in nature for use and enjoyment of the money belonging to the bank, therefore, it is not for infraction of law - the genuineness of the payment has to be examined by the assessing officer – order of the CIT(A) set aside and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Penalty levied u/s 271(1)(c) of the Act – Disallowance of payment of interest – Held that:- As the quantum appeal was considered in the earlier part of the order, the issue of disallowance of interest was remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1313
Valuation of property – Computation of long term capital gain – Held that:- The assessee had adopted the value as per the registered valuer report whereas the AO had adopted the value as per the DVO who had valued the property as on 1.4.1981 - The DVO had valued the property on the basis of two comparable sale instances - the assessee had specifically asked for details of comparable sale instances so as to file reply in the matter - full details of property giving the name of the road and registration no. etc had not been given - once the DVO/AO is relying on comparable cases the detail of properties is required to be given to the assessee so that it could file proper reply - on the land/ property there was full-fledged structure which was used for ware housing purposes, value of which had been taken at nil - The matter regarding the valuation of structures requires fresh consideration as even the structure was old it could not be said that the value was nil – thus, the matter remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1312
Validity of Re-assessment u/s 147/148 of the Act – Sanction from Additional CIT not taken – Violation of Section 151 of the Act - Deletion made u/s 68 of the Act – Unexplained cash credits – Commission paid from undisclosed sources – Held that:- The decision in CIT vs. Suman Waman Chaudhary [2008 (2) TMI 568 - BOMBAY HIGH COURT] followed - The express requirement of Section 151 (2) is that of grant of sanction for issuance of a notice u/s 148 of the Act, by an Assessing Officer not below the rank of Joint Commissioner, where a period of more than four years has elapsed since the passing of an assessment order u/s 143 (1) of the Act – the approval had not been accorded by the Addl. CIT, but had been sought for from the Commissioner, the action of the Tribunal in quashing the assessment proceedings was upheld by the Hon'ble High Court, holding that this was not an irregularity curable u/s 292B of the Act – thus, the issuance of the notice u/s 148 of the Act in the present case is a nullity, and the same is not curable u/s 292B of the Act – the reassessment and all proceedings are quashed – Decided in favour of Assessee.
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2014 (1) TMI 1311
Rejection of books of accounts – Error in applying the Net Profit rate – Held that:- There were certain discrepancies in the receipts disclosed in the return of income and the TDS certificate - The assessee had submitted various vouchers - These vouchers are not numbered however, narration at the back of these cash vouchers show that the assessee was making the payment to the labourers on various dates after calculation of their work hours and converting them to the days by dividing the same with 8 hours. The CIT (A) has not distinguished the assessee's case with these comparable with cogent reasons - the comparables must have some bearing on the estimate of gross profit - The assessee is providing labour at mandies for marking, storaging, loading and unloading, cartage of agricultural produces which requires some skill to perform that work - assessee need not to employ regular employees as the season is only for 30 - 35 days - Making and storaging require little bit of specialization, therefore, the wage rates paid above the minimum wage or wages in MANREGA Scheme were justified - the loading and unloading in cartage work in agricultural produce in the mandis is also a tedious work – thus, any adverse inference cannot be drawn with regard to wage rate for 8 hours – thus, it will be appropriate to estimate the net profit at 2% of the gross receipts after allowing interest and remuneration to the partners – Decided partly in favour of Assessee.
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2014 (1) TMI 1310
Ex-parte judgement passed without serving of notice – Disallowance of Deduction u/s 10(23C) of the Act – Society registered for imparting education – Held that:- The assessee is a society established for the purpose of imparting education and not for the profit motive - it is clear from the constitution of the society, that the assessee society was running a B.Ed. college under the name and style of Aditya College of Education at Warehouse Road, Ch. Dadri, Distt. Bhiwani - The college was provisionally affiliated with Maharshi Dayanand University, Rohtak - The provisional affiliation of the college was withdrawn by the University and the college was not allowed admission for the B.Ed course for the session 2009-10 – The assessee has been condemned unheard - the assessee did not willfully absent itself before the Assessing Officer in the assessment proceedings - It could not appear before the Assessing Officer because the Society had been closed down on the withdrawal by the MD University, Rohtak of affiliation to the college run by the society – it would be proper to remit back the matter – Thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1309
Compliance of the provision of Section 50C of the Act - Error in adopting circle tare as per section 50C of the Act – Reference to the valuation officer not made - Value adopted exceeds the fair market value of the property - Deemed value of sale consideration adopted – Held that:- Relying upon SHRI ANIL KUMAR JAIN Versus INCOME TAX OFFICER [2014 (1) TMI 442 - ITAT DELHI] - it was incumbent upon the Assessing Officer to refer the matter for valuation to a Valuation Officer has provided in sub-section 50C(2) of the Act - The view taken by the Assessing Officer as well as confirmed by the Commissioner of Income Tax(A) is not correct - Since the Assessing Officer failed to refer the matter to the valuation officer u/s 50C(2) of the Act, it would be proper to restore the matter back to the file of the Assessing Officer for a fresh adjudication after referring the matter to the Valuation Officer u/s 50C(2) of the Act – Decided in favour of Assessee.
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2014 (1) TMI 1308
Deletion made on account of difference in receipts – Variation in value as per TDS certificates and receipts and receipts shown in P&L account – Held that:- It depends upon the factual finding as to what is the correct amount of receipt of the assessee - the assessee's customer M/s Protonics Systems India Pvt. Ltd. has raised a debit note and has also given a confirmation letter of the turnover, along with particulars of its PAN No. Income-tax assessment details etc. - The AO has not conducted any verification or inquiry, on these documents - There is no finding that these evidences are false or incorrect - the discrepancy was a bonafide error which is not attributable to the assessee – Decided against Revenue. Reasoning of the AO ignored - Held that:- The assessee has produced documents to demonstrate that it had wrongful taken input credit for the earlier periods - This fact was pointed out by the audit party - On coming to know of this wrong credit, the assessee made the payment during the current financial year – the order of the CIT (A) upheld that the actual payment of Excise Duty is allowable during the year – Decided against Revenue.
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2014 (1) TMI 1307
Claim of short term capital gain treated as business income – Profits from purchase and sale of shares – Held that:- The assessee was mainly engaged in the business of Arbitrage and Jobbing for which he maintained his office and kept staff for which certain expenses were incurred - the portfolio of shares was maintained by the assessee simply as an Investor' and not as a Trader' - The business of Arbitrage and Jobbing is distinct from that of investment in the purchase and sale of shares - shares were held by the assessee as investment and not stock in trade – decided against Revenue. Deletion made on account of arbitration charges – deduction claimed on arbitration charges paid – Held that:- The details placed before the first appellate authority in support of claim for deduction on account of arbitration charges, were not filed before the Assessing Officer and further the learned CIT(A) did not obtain any remand report from the A.O – it would be proper to set aside the order and remit the matter back to the AO for fresh adjudication – Decided partly in favour of Revenue.
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2014 (1) TMI 1306
Allowability of expenditure u/s 35(1)(iv) of the Act – Expenditure on scientific research – nature of expenses – Capital expenses u/s 35(1)(i) or Revenue expenses u/s 37(1) of the Act – Held that:- The expenditure being admittedly on scientific research, there is no basis for not allowing the claim u/s. 35(1), only whereupon, i.e., on a finding of it not falling or being covered u/s. 35, could the scope of the same falling u/s.37(1) be considered - the assessee stands allowed deduction of the expenditure for that year u/s. 37(1) – thus, The AO is directed to allow the assessee's claim in respect of the scientific expenditure incurred on research expenses for the current year/s u/s 35(1)(iv) of the act - the assessee having itself considered it as capital expenditure – thus, no amount would survive for being carried over as the WDV of the relevant 'block of assets' u/s. 43(6) - the assessee having already secured full deduction for the immediately preceding year/s – Decided in favour of Assessee.
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2014 (1) TMI 1305
Deletion on account of capitalization of software expenses -Held that:- The decision in ITO, COY WARD 1(2), NEW DELHI Versus ACL WIRELESS LTD. [2012 (12) TMI 732 - ITAT NEW DELHI] followed - CIT(A) has rightly observed that the expenditure in question was incurred as a matter of routine, for the business and commercial expediency of the assessee’s business, i.e., consultancy business - The CIT (A) has also declared that the capitalization of such expenses in preceding years was for the period prior to the commencement of the assessee’s business - Right from the commencement of the business of the assessee, the expenses started being claimed as revenue, every year – Decided against Revenue. Deduction made u/s 40(a)(ia) of the Act – TDS not deducted – Held that:- Merely because the assessee has reversed the entry of the expenditure claimed in one year in the subsequent year would be no ground for allowability of such expenditure in the year in which deduction is claimed - For allowability of the expenditure, the assessee has to establish that the expenditure was incurred during the year under consideration wholly and exclusively for the purpose of business - the assessee has not established how the expenditure is allowable in the year under consideration except arguing that the entry for the claim of expenditure has been reversed in the subsequent year –the order of the CIT(A) reversed - the expenditure was rightly disallowed by the Assessing Officer – Decided against Revenue. Deletion of capitalization of licence fee paid – Held that:- The assessee made the payment of license fee to M/s Nuance Communication, a Belgian company, as per the agreement for procuring license for use of its voice software and the agreement was operative for one year only - The above factual finding recorded by learned CIT(A) has not been controverted by the Revenue - Once the license fee was paid only for one year, by no stretch of imagination, it can be treated as capital expenditure – order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1304
Penalty u/s 271(1)(c) of the Act – Re-opening of Assessment - Held that:- Section 271(1)( c) does not envisage levy of penalty in respect of the issues where there is possibility of more than one interpretation and the additions made by the revenue are on account of difference of opinion about the provisions of the Act or in this case the treaty - Further, the fact that the appellant has not challenged the assessment order passed u/s 147 should not influence the decision while deciding that whether the appellant was liable for penalty u/s 271(1)( c) of the Act - The income of the assessee during re-assessment proceedings was not enhanced as is apparent from the assessment order and it was only the rate of tax which has been increased from 15% TO 20% - Since there is no change in the income declared and income assessed by the Assessing Officer, it cannot be said that there were any concealment of income – the order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1303
Penalty u/s 271(1)(c) of the Act – Held that:- The order of the CIT(A) upheld - It cannot be held as an inflexible rule that when the assessee agrees to have certain items included in his total income, he makes an admission which by itself would warrant the imposition of penalty - It would be a wrong notion deciding the penalty proceedings that once a surrender is made of any amount, the assessee can be straightaway penalized without asking the Assessing Officer to bring some other material and further proof establishing the dishonest concealment of the undisclosed income and the falsity of the return and without affording the assessee an opportunity to show that the surrendered amount was in reality his undisclosed income or that it was for certain other reasons that the assessee had made surrender of the amount - no addition on account of sundry creditors can be made unless the trade liability had ceased to exist, even if no confirmations are filed – Relying upon CIT vs. Sita Devi Juneja [ 2009 (12) TMI 34 - PUNJAB AND HARYANA HIGH COURT]. Mere fact of surrender could not necessarily be an admission of assessee that amount surrendered was undisclosed income and liable to be subjected to penalty – Relying upon CIT of CIT vs. Punjab Tyres [1986 (7) TMI 77 - MADHYA PRADESH High Court] - no penalty u/s. 271(1)(c) can be levied when the assessee has surrendered certain amount in the assessment proceedings - The requirements of sections 271(1)(c) had not been satisfied so as to bring the case of the assessee within the same - Thus, the penalty could not be levied on the amount surrendered by the assessee, unless there was material on the record to show that the surrendered item was his income - there was no case of furnishing of inaccurate particulars of income so as to make the appellant liable for penal consequences – thus, the order passed by the AO u/s 271(1)(c) levying penalty is cancelled – Decided against Revenue.
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2014 (1) TMI 1302
Short term capital gain treated as business income – Authenticity of valuation of stock - Held that:- The main object of the company clearly show that it want to carry on financing business other than banking business within the meaning of Banking Regulation Act, 1949 - In the light of the Memorandum of Association, in the immediate preceding assessment year and also in the subsequent assessment year, there is not even a single item of income which could be said to be in pursuance of the main object of the company - the assessee has shown income only from share transactions. The capital gains has been shown under the head business income - the assessee has never filed any revised return claiming the income under the head capital gains - The contention that the assessee has been showing the investment under the head investment in the balance sheet do not hold any water because book entries cannot justify the nature of transaction – Relying upon Kedarnath Jute Manufacturing Co. Ltd. Vs CIT [1971 (8) TMI 10 - SUPREME Court] - the assessee clearly show that the assessee has not done any business in pursuant to its main object - Then how the auditors are mentioning that the assessee has maintained purchase and sales register - This also shows that the assessee has done business in shares – there is no reason to interfere in the findings of the CIT(A) - The gains arising out of share transaction have been rightly taxed under the head profits and gains of business or profession. Computation of profits – Held that:- The profits the profit of the assessee arising out of the transactions in shares is to be treated as business income – the AO is directed to recompute the profit after allowing all the expenses directly related to this business of the assessee – AO is further directed to adopt the value of stock of shares at cost or market price whichever is lower. Disallowance u/s 14A of the Act – Held that:- As the matter is already restored to the AO – thus, The AO is directed to make a reasonable disallowance u/s. 14A of the Act without applying Rule 8D for the treatment of capital gains under the head "business income" after giving a reasonable opportunity of being heard to the assessee – Decided in favour of Assessee.
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2014 (1) TMI 1301
Addition made u/s 68 of the Act – Held that:- The addition has been on the premise that U.S.Chawla HUF had a meager income of Rs. 1.42 lakh and hence there was no possibility of advancing loan of Rs. 3,50,000 to the assessee - No material has been brought on record to indicate that transactions declared were not accepted by the Revenue - the source of the money cannot be disputed - There is no bar in advancing loan out of other amounts legally available - As regards the remaining amount of Rs. 1,00,000, it is seen that U.S.Chawla HUF received an amount of Rs. 1.08 lakh from Monarch as commission, which was offered for taxation - the assessee has fully discharged the onus cast upon it to prove the genuineness of the loan transaction of Rs. 3.50 lakh from U.S.Chawla HUF – order set aside - Decided in favour of Assessee. Deletion made on account of advances appearing in the balance sheet – Held that:- There was no reason to come to the conclusion that the amount of advances can be taxed in the when the equal amount of sale effected by the assessee in the subsequent year has been accepted - If the amount of advance is taxed in this year and the sales are taken as receipt in the subsequent year, it would amount to double taxation of income - the advances were received by cheque and the addresses of persons who gave the advances were duly supplied at the assessment stage – the deletion made is upheld – Decided against Revenue. Deletion made on account of loan taken from various parties – Held that:- There was outstanding loan payable by the assessee to Mrs.Amrit Chawla which was in fact paid on 02.08.2005 - This loan was taken by the assessee from Mrs.Amrit Chawla in earlier year as the same was appearing as opening credit – A copy of the gift deed along with her address and permanent account number was also given to the Assessing Officer - She acknowledged the deposit of loan with the assessee by way of proper receipt - the assessee was successful in discharging the onus cast upon it to prove the genuineness of the loan received from Mrs. Amrit Chawla. The addition u/s 68 was made by the Assessing Officer on account of these two alleged loans received from two minors - there was no question of filing the separate returns - No material has been placed on record to indicate that the gifts shown to have been received by them from relatives and others were ever disclosed in the hands of their father - the question of accepting the genuineness of gifts could not arise - As the entire CIT(A)'s order is based on the premise that the genuineness of the gifts was accepted by the Revenue – the order for this issue is set aside and the matter remitted back to the CIT(A) for fresh adjudication – decided partly in favour of Revenue.
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2014 (1) TMI 1300
Consideration taxed on contracts - Works carried outside India – Identification of onshore/offshore services – Services entered by unrelated parties – Held that:- During the year also MUT pipeline project, MSP platform project of ONGC and GMR (operation and maintenance contract) of GMR power Corporation were continuing relevant to the assessment years 2004-05 or earlier years whereas the project HMI (sub-station) of Hyundai Motors India Ltd. has continued from the assessment year 2006-07. In the assessment year 2007-08, the Tribunal has dealt with the issue relating to MUT pipeline project, MSP platform project, of ONGC, and GMR (operation and maintenance contract) projects which are also under consideration in the assessment year in question - The contracts are divisible - The receipts pertaining to designing, fabrication and supply of material, the activities carried out outside India is not taxable in India - The ground relating to MUT pipeline project, MSP platform project, of ONGC and GMR (operation and maintenance contract) projects in favour of the assessee that outside the receipts pertaining to designing, fabrication and supply of material, activities carried out outside India is not taxable in India - So far as taxability of receipts pertaining to HMI (sub station) of Hyundai Heavy Industries Ltd. is concerned the matter is set aside and remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee. Entire revenue taxed – Operations carried on outside India – Applicability of Provision of Article 7(3) and 7(5) of DTAA - Fabrication carried out of India – Held that:- The decision in Hyundai Heavy Industries Co. Ltd. Versus Director of Income-tax (International Taxation) [2011 (5) TMI 858 - ITAT DELHI] followed - The receipts pertaining to designing, fabrication and supply of material, the activities carried out outside India is not taxable in India. Error in computing income chargeable to tax – Disallowance of expenses for various projects outside India – Held that:- The decision in Hyundai Heavy Industries Co. Ltd. Versus Director of Income-tax (International Taxation) [2011 (5) TMI 858 - ITAT DELHI] - The AO has taxed 90% of the receipts from these contracts under a particular method then, cannot treat the remaining 10% in a different way and even a taxed gross amount by disallowing cost and estimated the profit - the order of the AO set aside with a direction to him to take 10% of the gross revenue after allowing sub contracts cost – Decided in favour of Assessee. Error in bringing tax interest at marginal rate under Article 12(5) of DTAA – Held that:- The decision of the authorities below on remained that interest on Citi Bank deposit was out of surplus earned by the PE and therefore effectively connected with the PE and is to be taxed at the normal rate application to the profits of the business of a foreign company - In absence of rebuttal of this finding of the authorities by the assesee, there was no reason to interefere therewith – Decided against Assessee. Levy of Interest u/s 234B and 234D of the Act – Held that:- The decision in Director of Income Tax vs. Maersk Company Ltd. [2011 (4) TMI 886 - Uttarkhand High Court] followed - As soon as tax is deducted at source by the person responsible to make payment the liability of the assessee to pay the tax gets discharged - If the tax is not deducted it is payable by the assessee directly as provided u/s 191 of the Act - the liability to pay interest u/s 201 (IA) is on a person who fails to deduct the tax at source - it is absolute and is upon the person responsible for deducting tax at source till the date it was actually paid - the liability to pay interest u/s 234B of the Act arises only if the assesee is liable to pay advance tax u/s 208 and has failed to pay such tax or where the advance tax paid by the assessee under the provisions of section 210 is less than 90% of the assessed tax – the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1299
Disallowance of deduction u/s 80IB of the Act - Profit from the sale of developed plots – requirements of Section 80IB not fulfilled – Held that:- The assessee has got approval for development of housing project – though, during the year, the assessee has just undertaken development of plots and their sales, no construction activity was undertaken in respect of residential units proposed on such plots - Deduction u/s 80IB(10) specifically provides for deduction in respect of profit earned on development and construction of housing projects on or after 1st day of October, 1998 - Deduction u/s 80IB(10) is subject to condition of undertaking, development and building of housing project - Thus, the construction and development of housing projects is sine qua non for claim of deduction u/s 80IB(10) subject to fulfilment of other conditions - the assessee has just developed the plots and sold them - No construction activity was undertaken during the year - Thus, the assessee is not eligible for claim of deduction in respect of profit earned on sale of developed plot insofar as there was no profit on sale of residential units – Decided against Assessee.
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2014 (1) TMI 1298
Mandatory requirements of section 40(a)(ia) of the Act – TDS required to be deducted whether paid or payable - Allowability of charges – Hire charges paid and relief granted – TDS not deducted - Scope of tax deduction u/s 40(a)(ia) of the Act – Expenses u/s 28 and Section 30 to 38 of the Act – Held that:- The legal proposition made by the Commissioner of Income tax (Appeals) that interest expenditure is directly covered by section 28 and, therefore, section 40(a)(ia) will not apply for the reason that the section applies only to those expenses covered by sections 30 to 38 cannot be accepted - The law has provided a comprehensive system for deciding what are profits and gains of business or profession and how profits and gains of business or profession will be computed - When an exhaustive provision is made in the Act, it is not possible to hold that section 28 itself provides for expenditure and, therefore, the assessee can claim the expenditure of interest payment as an expenditure deductible at source itself under section 28 of the Act. Relying upon CIT Vs. Sikandarkhan N.Tunvar & Ors. [2013 (5) TMI 457 - GUJARAT HIGH COURT] - the provisions of section 40(a)(ia) cover not only the amounts which are payable as on 31st March of a particular year but also which were paid during the end of the year – Decided partly in favour of Revenue. Application of Section 194C of the Act – Held that:- Commissioner of Income Tax (Appeals) has not dealt with the aspect of whether the provisions of section 194C apply to the hire charges paid by the assessee so as to invoke the provisions of section 40(a)(ia) of the Act – As the CIT (Appeals) has not dealt with this aspect, thus, the issue is remitted back to the CIT(A) for fresh adjudication – Decided partly in favour of Assessee.
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2014 (1) TMI 1297
Nature of Receipts – Business receipts or not – Compensation received by the assessee – Held that:- The assessee firm made the payment in the course of purchase of land - Prior to the same, assessee firm was brought into existence for business activities - The intention of the assessee was to develop the land which could not be materialized because the Government of Maharashtra denied to sell the land to the assessee though there was no breach of terms and conditions on the part of the assessee - The Hon'ble Supreme Court has not directed the State Government to give possession as per agreement but allowed compensation to be paid to the assessee as a measure to quantify the amount of compensation at 11% p.a. simple interest - the amount payable to the assessee will be for hardship or prejudice occasioned to the assessee –thus, it makes clear that the amount received by the assessee was in the nature of compensation – Thus, the CIT(A) was justified in holding that the amount received by the assessee is a business receipt – Decided against Revenue. Year of accrual and taxability of the compensation received – Held that:- The compensation is received for breach of terms by government of Maharashtra - The compensation is received for loss sustained by the assessee accrued in the year of receipt as decided in CIT Vs. A. Gajapathy Naidu [1964 (4) TMI 6 - SUPREME Court] - The amount of compensation has crystallized on the event of decision of the Hon'ble Supreme Court which has taken place in the F.Y. 2004- 05 relevant to the A.Y. 2005-06 – thus, The amount of compensation received was liable for consideration as business receipt in A.Y. 2005-06 as claimed by the assessee after considering allowable deductions under the Income- tax Act, 1961 - the CIT(A) was justified in directing the Assessing Officer to delete the addition for A.Y. 2001-02 , 2002-03 and 2003-04 – Decided against Revenue. Disallowance of pre-operative expenses u/s 37(1) of the Act - Held that:- The order of the CIT(A) upheld - The assessee has incurred expenditure during the period AY. 2000-01 to 2003-04 in relation to the proposed transaction of land purchase - The assessee has treated the said expenses as deferred expenses and has shown the same under the head pre-operative expenses on the asset side of the Balance sheet - All the expenses relating to a particular project are identified and are claimed as deduction only in the year the project is completed - The income of the project is offered to tax in the year in which the project is completed - The project got terminated in the A.Y. 2005-06 and hence the expenditure in relation to the project incurred under the head pre-operative expenses during the course of the project i.e. A.Y. 2000-01 to 2005-06 has been claimed in A.Y. 2005-06 - Relying upon Wall Street Construction Ltd. Vs. JCIT [2005 (9) TMI 228 - ITAT BOMBAY-F ] - in the case of assessee following project completion method true profits can be determined only when entire cost of the project, direct or indirect including financing cost is added to the value of work in progress - the CIT(A) deleted the pre- operative expenses claimed by the assessee in the A.Y. 2005-06 – Decided against Revenue.
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2014 (1) TMI 1296
Maintainability of Appeal to the Tribunal u/s 254 of the Act – Penalty levied u/s 271FA of the Act – Held that:- The decision in The Sub Registrar Sub Registrar Office Versus The DIT (Intelligence)[2014 (1) TMI 1055 - ITAT COCHIN] followed - Nowhere in section 253 mentions the order passed by Director of Income Tax (Intelligence) or any other officer of the Income Tax department levying penalty u/s 271FA is appealable before the Tribunal - The Tribunal being a quasi-judicial authority established under the provisions of the Income Tax Act cannot travel beyond the provisions of the Act - Therefore, unless and until an appeal is specifically provided section 253 of the Act against the order levying penalty u/s 271FA, the Tribunal is of the considered opinion that the present appeal is not maintainable before this Tribunal. Consent of a litigant party will not confer any jurisdiction of a judicial or quasi-judicial authority unless and until it is otherwise conferred by the legislature - Therefore, the consent/direction of the Director of Income Tax (Intelligence) will not confer any jurisdiction on the Tribunal unless sit is provided for in the income tax Act by the Parliament. The legislature treated sections 271 and 271A as separate and independent sections - section the reference of section 271 in section 253(1)(a) or 253(1)( c) may not be included section 271FA - the omission to include section 271FA in section 253 may be unintended – thus, it is open to the department to bring to the notice of the concerned authority about the omission to provide appeal before the Tribunal for making consequential amendment to section 253 of the Act in case the department found that the omission is unintended – thus, appeals are not maintainable before the Tribunal against the order of the Director of Income Tax (Intelligence) levying penalty u/s 271FA of the Act –though, the assessee is at the liberty to challenge the impugned order of the Director of Income Tax (Intelligence) before the appropriate forum in a manner known to law – Decided against Assessee.
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2014 (1) TMI 1295
Penalty u/s 272A(2)(c) of the Act – Stay application – Held that:- The penalty u/s 272A has to be levied by an officer not lower than a Joint Director or Joint Commissioner of Income-tax - A consequential amendment ought to have been made by the legislature - This omission may be unintended - it is open to the department to bring the same to the notice of the concerned authority to make necessary amendment, if they are advised so - Even otherwise, an order imposing penalty u/s 272A(2)(c) falls under Chapter XXI - the penalty levied by the Joint Commissioner, who is lower in rank than CIT(A) is appealable before the CIT(A) u/s 246A(q) - an appeal has to be filed before the CIT(A) instead of directly filing the appeal before this Tribunal - In view of the above, the permission sought by the Branch Manager to withdraw the appeal is granted - the appeal and the stay application is dismissed as withdrawn.
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2014 (1) TMI 1294
Deletion made under the head miscellaneous receipts – Held that:- The assessee has advanced to his brother a sum of Rs.10.00 lakhs on various dates during the financial year 2003-04 and the same was repaid during the current year - This is evident from the statement of accounts and the affidavit filed by the assessee - The Revenue has not produced any material to dispel the findings of the learned CIT (A) – the decision of the CIT (A) upheld and does not call for interference -Decided against Revenue.
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2014 (1) TMI 1293
Opportunity of being heard - Profits computed on presumptive basis – Held that:- The CIT(A) decided the appeal of the assessee holding that sufficient time has been given to the assessee to present his submissions/evidences – it would be appropriate to decide the grounds raised by the assessee being conscious of the fact that the assessee should not suffer on account of the actions of the AR of the assessee – Relying upon M/s Godawari Housing Pvt. Ltd. Vs ACIT [2014 (1) TMI 1054 - ITAT DELHI] - it would be proper to remit the issue back to the CIT(A) for fresh adjudication after giving the the assessee a reasonable opportunity of being heard – Decided in favour of Assessee.
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2014 (1) TMI 1292
Addition of Rs.1,40,00,000 made by AO – Explanations and evidences ignored – Addition made for agricultural income – Held that:- The whole case should be relooked again by Assessing Officer and it is directed that Assessing Officer should make proper and detailed enquiries before arriving at any conclusion regarding additions if any. Therefore, the case is remitted back to office of Assessing Officer - The CIT (A) has not given any directions rather he had decided on the issues unlike in the earlier year however, substantial facts remains same – the present appeal needs be also re-adjudicated by Assessing Officer - The Assessing Officer on the basis of relevant record and information from the Income Tax record of the Shri Rajender Singh Khetasar as well as from any other source can arrive at the appropriate decision - None of the observations will preclude the Assessing Officer from making additions if on the basis of facts and circumstances of the case, the Assessing Officer establishes that the amount received represented income of the assessee – Decided in favour of Assessee.
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2014 (1) TMI 1291
Deletion made on account of unexplained cash credit u/s 68 of the Act – Held that:- The assessee was deriving income from salary - No explanation whatsoever was given to the Assessing Officer, despite several notices - The assessee has only produced some of the vouchers before the Assessing Officer in remand proceedings - She has not furnished all the relevant details before the Assessing Officer -. Commissioner of Income Tax (A) has given an observation that assessee has filed the necessary details and the Assessing Officer has not examine the same - there is totally contradictory finding by the Assessing Officer in the Assessing Officer's remand report and the Ld. Commissioner of Income Tax (A) in his appellate order - assessee has not submitted the details of her business to the Assessing Officer in the return of income – the matter remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Cross objection to be entertained – Held that:- The cross objections raised by the assessee needs to be reconsidered by the AO – Decided in favour of Assessee.
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2014 (1) TMI 1290
Allowability of depreciation u/s 32 of the Act - Deletion made on depreciation on car – Held that:- The Assessing Officer disallowed the depreciation due to two factors the first factor being non registration in the name of company and the second factor being the nature of business of assessee wherein the necessity of such luxurious car was not warranted - For claiming depreciation existence of two conditions is a must - That is asset must be owned wholly or partly by the assessee and secondly it should be used for the purpose of business or profession of the assessee - Assessee has not debited any amount for petrol or diesel which proves that vehicle was not used for the purpose of business or profession of the assessee - The Assessing Officer has though observed that business of the assessee did not require such luxurious car but he could not corroborate his findings with the facts from the profit and loss account – assessee contended that in the succeeding year the claim was allowed does not carry any force as in that year, asset might have been used for the purposes of business of assessee which does not seem to be the case the present year as profit and loss account of assessee does not show any expenditure to have been incurred on account of petrol/diesel – matter remitted back to the AO for re-adjudication – Decided in favour of Revenue. Deletion made on proportionate interest - Interest on borrowed capital paid and interest free loans advanced to sister concerns – Held that:- It has been made by Assessing Officer on the basis of assumptions only - The actual facts and figures as per balance sheet of the assessee do not indicate that interest bearing funds were diverted for interest free advances - assessee has not taken any loans and advances on which interest was paid and rather it has paid interest on the purchase of shares which were purchased on credit from share broking firms – there was no infirmity in the order of CIT (A) on this ground – Decided against Revenue.
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2014 (1) TMI 1289
Disallowance of proportionate interest expenses u/s 36 of the Act - Loan extended to a unit u/s 80IA of the Act – Computation of net profit – Held that:- The decision in CIT Vs Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] followed - the addition for the assessment year 2007-08 and 2008-09 made on account of disallowance of interest since the term loan obtained by the assessee company from outside source is comparatively much less than own Capital & Reserves - where the assessee has own funds or interest free funds then the presumption would be that such loans extended by the assessee would be from its own funds/interest free funds - Thus, for both the assessment year 2007- 08 and 2008-09 are allowed in favour of the assessee. Set off of losses in co-gen power plant against the profit of paper unit – Held that:- The CIT(A) has directed the learned AO to reduce the income of the eligible undertaking viz., power plant claiming deduction u/s 80IA of the Act by brought forward business losses of that undertaking – Relying upon ACIT V/s Goldmine Shares and Finance (P).Ltd. [2008 (4) TMI 405 - ITAT AHMEDABAD ] - Assessee has not produced any contrary decisions, there was no reason to interfere in the order of CIT(A) – Decided against Assessee. Enhancement of Income chargeable to tax – Expenditures diverted – Excess coal consumption in Unit II and Unit III claimed - Held that:- The assessee had not co-operated with the CIT(A) during the appellate proceedings satisfactorily by producing all the relevant materials - the CIT(A), after detailed examination of the issue based on the available documents, arrived at the conclusion that the balance cost attributed to HP Steam used in electricity generation in Unit-III would be Rs.41,61,167/-, for which, addition has to be made - the casual attitude of the assessee requires to be discouraged for not co-operating before the Revenue – the matter remitted back to the CIT(A) for fresh adjudication – Decided in favour of assessee. Depreciation granted on furniture and fixtures of Managing director’s residence – Held that:- Providing furniture at the residential house of the Managing Director of the assessee company, is nothing but perquisite offered to the Managing Director by the assessee company and, therefore, the same has to be taxed as such in the hands of the Managing Director and at the same time, the assessee company should be allowed depreciation for such assets since it is put to use during the course of the business of the assessee company – Decided in favour of Assessee. Inflation of purchases of waste papers from various vendors – Held that:- The Assessing Officer has not pointed out any specific purchases as non-genuine - The appellant/assessee had maintained all the evidences of purchases made along with delivery challans, weigh bridge receipts etc. - The appellant/assessee had also produced the suppliers in response to summons issued u/s 131 of the Act - The rejection of books of account of the suppliers cannot be made as a basis for estimating addition in the hands of the appellant/assessee - Payments to all these suppliers were made by cheque and all the purchases were accounted - The CIT(A) has made elaborate finding and he is quite justified by allowing the issue in favour of the assessee – Decided against Revenue. Maintenance of books of accounts – Held that:- It would be appropriate that for verification of the matter is required - thus, it would be remitted back to the CIT(A) for fresh adjudication – Decided in favour of Revenue. Benefit of deduction u/s 80IA(4) of the Act - Treatment of steam – Can steam be treated as power or not – Held that:- The captive power plant of the assessee is not a plant for generating electricity alone, but it is so designed to generate Low Pressure Steam as well in substantial quantity - the Low Pressure Steam produced by the assessee's plant is not residue by-product, but a product by itself - the assessee company had utilized more quantity of steam in its overall operation with respect to manufacturing of paper than generation of electricity. The assessee was utilizing 60% of steam produced for drying of paper in the paper industry and only 40% was used for generating power/electricity - the LP steam generated from the operation of co-generation plant was residue by-product - The co- generation plant ends up producing two products i.e. electricity and low pressure steam - the co- generation plant installed in the assessee's factory produces two products viz. 60% low pressure steam and 40% high pressure steam generating electricity - When steam held under pressure is released, it contains force which is capable of rotating the turbine - By using coal as fuel, two types of steams are generated one being high pressure steam at 495 degree centigrade having steam enthalpy of 815.95 K. CAL/Kg., which is the input for electricity generation and the other being low pressure steam of 270 decree centigrade having steam enthalpy of 718.4 K. CAL/Kg drawn from the plant for utilizing in the paper drying machine for producing paper - The arguments taken up by the revenue were not before the CIT(A) for consideration – thus, the matter remitted back to the CIT(A) for fresh adjudication – Decided in favour of Assessee. Adoption of rate of electricity produced – Held that:- The decision in Assistant Commissioner of Income-tax- 1(2), Raipur Versus Godavari Power & Ispat Ltd [2011 (11) TMI 107 - ITAT, BILASPUR] - The price charged for such transfer should correspond to the market value of such goods or services on the date of transfer, "market value" for this purpose means the price that such goods or services would ordinarily fetch in the open market - price at which the State Electricity Board supplies power to its consumers is to be considered to be the market value for transfer of power by the assessee's electricity generating undertaking for captive consumption and not the price at which power is supplied by the assessee to the Board – Decided against Revenue. Allowability of Interest expenses – Unaccounted disclosed income used for renovation of bungalow – Held that:- The CIT(A) made a clear finding that no borrowed funds were used by the assessee company for incurring such expenditure since the entire amount was admitted as unaccounted income - the CIT(A) deleted the addition of Rs.6.00 lacs – there is no reason to interfere in the findings of CIT(A) – Decided against Revenue. Shortage of stock – Held that:- Both the parties advanced various arguments in support of the respective claim, but no material was brought on record to arrive at a logical conclusion – the issue is remitted back to the CIT(A) for fresh adjudication – Decided in favour of Revenue.
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2014 (1) TMI 1288
Method of Transfer pricing adjustment – Arithmetic mean of operating margins for arriving at ALP - Selection of comparables – Held that:- TPO considered that as per the agreement, the risk of quality, packing, marking, quality of the goods, insurance of the goods etc. lie with the assessee - the assessee owned up all risks under the agreement - TPO proceeded to make profit margin of three companies and arrived at mean of the profit margin at 11.94% - the TPO suggested the bench markup on the cost of the assessee for the above transactions and suggested ALP adjustment - the adjustment was recommended by TPO and the addition has been made by the AO by considering the three comparables – the entities are not only in the manufacturing of pharmaceuticals products but are also in the business of sale/exports of pharmaceutical products, and whereas assessee has only acted on behalf of the GPL to effect export of the pharmaceutical products to GIR which at the most is in the nature of trading. The assessee has functioned only as a trader - the assessee is not adding any margin on the product sold in such trading activity though the assessee initially incurred the expenditure to undertake activity of advertisement, shipment, insurance and tours and also used its assets /rights in the shape of permission and registration possess by it – all the expenses incurred by the assessee have been reimbursed to it by GPL - it cannot be said that the assessee did not employ any assets for such export activity undertaken by it - CIT(A) has rightly held that the three comparables considered by TPO and taking operating profit margin of 11.94% is not correct as those comparable companies/entities are in the manufacturing of pharmaceutical products and are also in the sales/ export of the same whereas the assessee is in a non-manufacturing export activities - the additional evidence and to seek remand report from the AO in respect of the three comparables entities furnished before him by the assessee. The due adjustment of the working capital assumed by the assessee as well as the comparable entities are to be considered for determining the ALP of the transaction - the assessee had not assumed any risk in respect of marketing of the product, realization of sales proceeds, risk of quality etc.. –matter remitted back to the AO for fresh adjudication to compute ALP afresh in respect of the international transaction of the assessee with the Associated Enterprise (GIR) – Decided in favour of Assessee. Allowability of standard deduction u/s 92C(2) of the Act – Held that:- Since the matter is remitted back to the AO to make a afresh study by considering the comparables to arrive at ALP of the transaction under consideration and give due adjustments as per Rule 10B of the Rules – thus, it is not necessary to decide this issue as to whether the CIT(A) has given direction to allow 5% deduction to the assessee correctly or not – Decided in favour of Assessee.
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2014 (1) TMI 1287
Disallowance made u/s 40(a)(ia) of the Act – TDS not deducted - Lease line, VSAT and transaction charges paid to NSE and BSE – Held that:- The decision in Commissioner of Income-tax - 4(3) Versus Kotak Securities Ltd. [2011 (10) TMI 24 - Bombay High Court] followed - the liability to TDS u/s.194J is confirmed in respect of the transaction charges - the Revenue as well as the assessees having proceeded for nearly a decade on the basis that section 194J is not applicable to the transaction charges, here the court is making an exception for the application of section 40(a)(ia) for the first year, i.e., A.Y. 2005-06; the provision of section 40(a)(ia) having been inserted on the statute by Finance (No.2) Act, 2004, w.e.f. 01.04.2005 - The non-deduction of tax at source for lease line and VSAT charges stands since confirmed by the hon'ble jurisdictional high court - As regards the transaction charges, nominality of the amount paid - deductibility or otherwise of tax at source on all the three charges under reference had been a subject matter of dispute between the assessees and the Revenue since AY 2005-06, section 40(a)(ia) would stand attracted in respect of transaction charges for the current year. Restriction of disallowance u/s 14A of the Act r.w Rule 8D of the Rules – Held that:- the decision in Godrej and Boyce Mfg. Co. Ltd. vs. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - the disallowance u/s.14A(1) restricted only to indirect (administrative) expenses at 0.5% of the average value of investment - the assessee is having adequate funds available with it, no presumption as to the borrowings having been applied, even to the proportionate extent, in funding the tax exempt investments, would arise – the restriction made by CIT(A) upheld – Decided against Revenue. Disallowance of membership expenses – Held that:- Club membership expenses does not represent a capital expenditure as no asset or advantage or benefit of an enduring nature to the trade arises by virtue of the said expenditure - The same only gives rise to a privilege to use the facilities of the club - the club membership, as obtained by the assessee, is not transferrable as per the bye laws and the Rules of the relevant clubs, and toward which he would place material on record - The deletion in respect of the expenditure upheld - The club membership paid in the normal course of business - the club memberships does not yield any advantage of enduring nature so as to be construed as a capital expenditure, as inferred by the Revenue – Decided against Revenue.
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2014 (1) TMI 1286
Disallowance u/s 14A of the Act r.w Rule 8D of the Act – Held that:- The submissions of the assessee have not at all been reflected or addressed in the Assessing Officer’s order or the remand report - Assessing Officer’s order does not consider these aspects in any manner - Assessing Officer simply stated that the reply of the assessee is silent in this regard - the assessee has made elaborate submissions before the CIT (A) - Assessee has also filed the bank statements before the CIT (A) and requested for admission - Assessing Officer has not properly considered these submissions - He has observed that assessee has not submitted anything new and has further observed that sufficient opportunity had been given to the assessee in assessment proceedings – Relying upon Maxopp Investment Ltd. vs. C.I.T. [2011 (11) TMI 267 - Delhi High Court ] - determination of the amount of expenditure in relation to exempt income under Rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard – the CIT(A) has not addressed the assessee’s submissions that investment was done out of preference share issue receipts and no interest bearing funds are involved – Decided in favour of Assessee.
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2014 (1) TMI 1285
Nature of payment – Payment can be treated as Royalty u/s 9(1)(vi) of the Act r.w Article 12 of DTAA or not - Benefit of tax treaty between India and Singapore – Assessee resident of Singapore – Held that:- The nature of services rendered to the appellant does not qualify for the definition of 'royalty' either in terms of the Income-tax Act, 1961 or the DTAA between India and Sri Lanka - there is no specific clause relating to taxation of fee for technical services in India-Sri Lanka DTAA - the payments made by appellant to CSPL can only be taxed as business profit under Article 7 of the DTAA and not as fee for technical services under the provisions of domestic law - business profits of CSPL or CTU or Sites cannot be taxed in India and it is held that no tax is required to be deducted in respect of payment made by the appellant to CSPL for conducting clinical trials outside India. The services in question are services for supply of information which assessee is not using for any technical know how but it is working as a conduit for supply of this information further to BHAG - Thus, the assessee is making remittance for procurement of commercial information for onward transmission to the principal BHAG - the remittance made by the assessee is not for availing technical services and does not amount to royalty and is not liable for withholding taxes as held by assessing officer - The order of CIT(A) is upheld – Decided against Revenue.
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2014 (1) TMI 1284
Cancellation of protective assessment – Held that:- The assessments have been made on substantive basis and on protective basis in the hands of assessees - When all the assessees challenged the assessment orders passed in their respective hands - Tribunal did not accept the methodology adopted for determining the peak credit and accordingly held that the computation of peak credit requires to be re-computed in accordance with the discussions made in the order of the Tribunal. Accordingly, the matter relating to the determination of income was set aside to the file of the assessing officer. The protective assessments are liable to be quashed if the substantive assessments got confirmed - the Ld CIT(A) confirmed the substantive assessments made in the hands of Shri K.P. Abdul Majeed, he has cancelled the protective assessments made in the hands of the assessees - Shri K.P. Abdul Majeed is the real beneficiary of the partnership firms and their bank accounts, which means, the substantive assessments made in the hands of Shri K.P. Abdul Majeed have been confirmed by the Tribunal - the Tribunal is also required to uphold the order of the CIT(A) in cancelling the assessments made in the hands of the assessees - if orders passed by the Tribunal in the case of Shri K.P. Abdul Majeed confirming the substantive assessments are reversed by any higher appellate forum, then the protective assessments made in the hands of the assessees herein shall automatically get converted into substantive assessments – Decided partly in favour of Assessee.
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2014 (1) TMI 1283
Deletion made u/s 36(i)(iii) of the Act – Disallowance on interest free loan – Held that:- The contention of the assessee that it has sufficient interest-free funds and law is well settled that if the interest-free funds are available with the assessee, then disallowance in respect of the advances made to sister-concern is not justified – Relying upon CIT vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] if the interest free-fund is more than the borrowed fund, then no disallowance of interest is called for - the AO is directed to verify whether the assessee is having sufficient interest-free funds to give advances to sister-concerns – Decided in favour of Revenue. Deletion made u/s 40(a)(ia) of the Act – Payment made without deducting TDS at the time of making payment – Held that:- The CIT(A) has decided the issue after following the decision in the case of Merilyn Shipping & Transports Versus Assistant Commissioner of Income-tax, Range-1, Visakhapatnam [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] - which has been admittedly declared as not a good law by the Hon'ble Jurisdictional High Court - assessee contended that even otherwise also no disallowance is called for as the expenditure is merely a reimbursement, therefore no provisions of tax deduction at source would be applicable - This being a new contention raised before the Tribunal - this issue requires to be redecided by the AO in the light of the contention of the assessee that the expenditure as incurred was a reimbursement, therefore tax was not to be required to be deducted – matter remitted back to the AO for Fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1282
Imposition of Penalty u/s 271BA of the Act – Bonafide belief on non-applicability of section 92B of the Act – Investment made in subsidiary companies – Condonation of delay on the reasonable cause for non-obtaining of report u/s 92E of the Act – Held that:- As per the wording of section 271BA, the AO may direct the concerned person to pay the penalty - The word 'may' used in the section denotes that it is the discretion of the AO to impose or not to impose the penalty - This discretion is subject to the restrictions as imposed by Section 273B of the Act - The word 'may' also includes the word 'may not' – Relying upon Malik Ram v. State of Rajasthan [1961 (4) TMI 84 - SUPREME COURT] - the words "may approve" in the section, properly construed, must also include "may not approve" - The AO did not consider the explanation of reasonable cause of bonafide belief given by the assessee in its failure to furnish the report under Section 92E in time - Even CIT(A) did not bother to look into or consider the said explanation given by the assessee - The authorities below failed to take note of provisions of Section 273B as well as the use of word 'may' in Section 271BA. The explanation given by the assessee is satisfactory to the effect that the delay in furnishing the report under Section 92E was not intentional, rather due to mistaken bonafide belief that the transaction involving the investment of money in equity shares of its subsidiary company by the assessee-company was not within the scope of International transactions as defined under Section 92B of the Act - As soon as, the assessee-company came to know that it was required to furnish the report under Section 92E, it filed the same before the AO - The explanation put forth by the assessee-company falls within the scope of phrase "reasonable cause" as provided under Section 273B of the act – thus, the penalty imposed upon the assessee set aside – Decided in favour of Assessee.
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2014 (1) TMI 1281
Taxability of Royalty u/s 9(1)(vi) of the Act and Article 12 of Ireland DTAA - Payment received from customers – Held that:- The decision in CIT (IT) v. Wipro Ltd. [2011 (10) TMI 473 - KARNATAKA HIGH COURT] followed - a customer of the present assessee made payment without deduction of tax at source u/s 195 of the Act - the payments made for online use of database was for licence to use said database and hence the consideration was royalty, liable for deduction of tax at source u/s 195 of the Act – Decided against Assessee.
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2014 (1) TMI 1280
Validity of reopening of assessment u/s 147 of the Act – Held that:- Sections 147 and 148 are charter to the Revenue to reopen earlier assessments and also protected by safeguards against unnecessary harassment of the assessee - They are sword for the Revenue and shield for the assessee - Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147 - The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer - the Commissioner has simply put "approved" and signed the report thereby giving sanction to the AO - Nowhere the Commissioner has recorded a satisfaction note not even in brief - it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction - Relying upon United Electrical Co. (P.) Ltd. v. CIT [2002 (10) TMI 86 - DELHI High Court] - the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio – Decided in favour of Assessee.
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2014 (1) TMI 1279
Verification of original return furnished or not u/s 139(1) of the Act - Acknowledgement of return in violation of provision of Rule 46A of the Act – Held that:- The disentitlement for carry forward of loss under section 80 comes into play only when income tax return disclosing the loss sought to be carried forward, is not filed within the time prescribed under section 139(1) - the income tax return was originally filed within the due date - disentitlement under section 80 cannot come into play - the Assessing Officer did not even bother to examine the records in assessee's case and preferred to be guided by database records - The CIT (Appeals) remitted the matter to the file of Assessing Officer for necessary verification for allowing the set off of carry forward loss if same is admissible. Admission of additional evidence – Held that:- the contention is devoid of any merit - A document which is already on the file of Assessing Officer cannot be treated as additional evidence - The original income tax return was filed before the Assessing Officer and was very much part of his assessment records – order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1278
Mistake apparent on the face of record – Typographical error - Deletion of expenditure – Held that:- It was not the case of the CIT(A) without adhering to the procedure to be followed for enhancement of the income but was to direct the AO to consider the expenditure to be incurred for earning income from other sources after having adjudicated the earning of income from business and the capital gains whether isolating earning of income from other sources was to be considered at a reduced amount when the AO computed the income to be taxed was from the net profit as per profit and loss account which also included the credits on account of income from other sources and capital gains, therefore culminating only to the disallowance of Rs.1,00,000/- expenditure when the Tribunal after having deliberated on the issue had categorically directed the AO to delete the addition of Rs.1,00,000 - There was no typographical error as pointed out by the counsel in the petition that the AO was directed to delete the disallowance of Rs.1,00,000 expenditure which he had already considered allowable in view of the CIT(A) having accepted the claim of expenditure from other incomes was not to be re-considered - the matter the only mistake apparent from records could be that the AO has been directed to delete the addition is modified – Decided in favour of Assessee.
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2014 (1) TMI 1277
Non-grant of quantum of Interest u/s 244A of the Act - Whether the assessee could contest an order of assessment in appeal on the ground of non- grant of or otherwise the quantum of the interest granted u/s 244A of the Act – Held that:- Relying upon Caltex Oil Refining (India) Ltd. vs. CIT [1992 (12) TMI 23 - BOMBAY High Court] - The assessee had preferred a valid appeal, warranting adjudication - The ld. CIT(A) having not adjudicated the matter, holding the same as not appealable, the matter would warrant being restored back to his file for the purpose - it is the assessing authority who has to grant the interest, and whose order contains no reference to any reason for the non-grant of the mandatory interest u/s.244A - the law clearly prescribing the same for being granted along with the refund – order set aside and the matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee.
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2014 (1) TMI 1276
Disallowance u/s.14A of the Act r.w Rule 8D of the Act – Utilization of borrowed capital - Indirect expenses – Held that:- The assessee has not been able to show the utilization of borrowed capital, on which interest stands paid/allowed, as exclusively for assets other than those yielding tax-free dividend income - As such, the prescription of proportionate disallowance as per Rule 8D(2)(ii) would apply – Relying upon Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - With regard to the payment of the bank charges, the fact has not been brought to the notice of the tribunal for the first time; the same forming part of the written submissions before the CIT(A), who though has failed to consider the same – the matter remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee. Confirmation of rebate u/s 88E of the Act – Securities transaction tax – Held that:- The transactions for both types of the businesses, i.e., on own account and for the clients, being essentially the same, so that they entail the same set of activities – thus, expenditure, though leading to varying incomes; the brokerage income itself varying from 0.1% to 1%, the proper basis for allocation of expenditure would be the turnover, rather than the gross income arising there-from – the issue is again restored back to the file of the AO for fresh consideration – Decided in favour of Assessee. Disallowance u/s 40(a)(ia) of the Act – Held that:- The decision in Kotak Securities Ltd. vs. Addl. CIT [2008 (8) TMI 592 - ITAT MUMBAI] followed – the TDS provision of section 194J would apply only in respect of transaction charges, and not to the VSAT and lease line charges - the Revenue succeeds in part, so that the disallowance would stand restricted to the amount of transaction charges paid to the Stock Exchange – Decided partly in favour of Revenue. Disallowance of non-compliance charges – Held that:- The decision in Haji Aziz and Abdul Shakoor Bros. vs. CIT [1960 (11) TMI 15 - SUPREME Court] followed - A penalty for a violation of the law is not an allowable expenditure as the same cannot be considered as an incident of the business - The Explanation to section 37(1), introduced by Finance (No.2) Act, 1998, w.r.e.f. 01.04.1962, further fortifies this legal position - Also in Prakash Cotton Mills (P.) Ltd. v. CIT [1993 (4) TMI 3 - SUPREME Court] the nomenclature of the levy would not be determinative, and the nature of the default (for which the penalty is being levied) as well as the scheme of the statute providing for the impost is to be examined, to see if it is compensatory or penal in character, so that to the extent it is compensatory, the same would be an allowable expenditure - The data uploaded from the eNet server could not be tallied with the exchange record due to technical reason/s - it cannot be regarded as compensatory merely for the reason that it is for a procedural default, even as it appears the assessee has complied with the procedure – the matter remitted back to the AO for fresh adjudication – Decided partly in favour of Revenue.
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2014 (1) TMI 1275
Disallowance of interest reduced u/s 36(1)(iii) of the Act – Held that:- There was no occasion to hold that the assessee is inflated the cost of project by Rs.25 lakhs or charging less interest from the sister concern at the rate of 14%, against 15% interest paid by the assessee – the amount of Rs.2 crores was directly paid to M/s Vestas RRB (I) Pvt. Ltd. by the bank – thus, there is no question of doubting that the same was not for the purpose of business - the entire interest paid by the assessee was for commercial purposes – the disallowance set aside – Decided in favour of Assessee and against Revenue. Loan amount – Held that:- The assessee indulged in financial business and almost the entire loan has been utilized for repayment of other creditors, which was on account of business expediency - The CIT(A) has noted that the repayment of loan was not for business purpose, however, nothing has been brought on record, how the same was not for the business purpose - the case of the assessee required to be considered in right perspective - The loan was not utilized somewhere else other than the business purpose - it cannot be said that the same was not for the business purpose. Disallowance of interest – Held that:- The AO has disallowed for the reason that the funds were utilized for non-business purpose - The CIT(A) has not given any finding on this issue - this amount is also allowable for the reason that the loan was taken from the shareholders in earlier years and interest paid in earlier year was not disallowed - there was no reason to disallow the interest on the amount of loan taken from the shareholders paid during the year – the addition made deleted – Decided partly in favour of Assessee.
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2014 (1) TMI 1274
Chargeability to tax - Whether the amount is chargeable to tax as per Article 7 of the DTAA – Held that:- The AR was fair enough to accept that CMA may be considered as the dependent agent of the assessee - Thus, it satisfies the requirement of Article 5 of the DTAA - CMA was the agent of the assessee and hence constitutes its permanent establishment in India. Determination of Business profits as per Article 7 of the DTAA – Income computed u/s 44B of the act – Exemption granted under Article 8 of the DTAA - Held that:- The income in respect of 21 voyages which has been considered as chargeable to tax in India as per Article 7 of the DTAA is the amount on which the assessee paid commission etc. to CMA, which is its AE and also a dependent agent - The receipt in the hands of the CMA has been determined at ALP under due process of law – The decision in Delmas, France vs. ADIT(IT) [2012 (1) TMI 9 - ITAT MUMBAI] followed – where the associated enterprise (that also constitutes a PE) is remunerated on ALP, then nothing further would be left to attribute to the PE – thus, the income in respect of 21 voyages cannot be included in the hands of the assessee - Decided partly in favour of Assessee.
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2014 (1) TMI 1273
Addition made on account of discounting charges paid to bank - whether such discount/interest was incurred by the assessee in carrying on of its business – Held that:- The Tribunal in its earlier order directed the Assessing Officer to examine the nature of interest/discount incurred and its nexus with the carrying on of the business - it is apparent that after recording the dates on which notices were issued, the A.O. reproduced the original order passed by him u/s 143(3) and thereafter reproduced its confirmation by the learned CIT(A) in the first round. The Assessing Officer simply repeated the assessment and first appellate authority's order without discussing anything new about the matter on which the Tribunal gave direction - The present assessment order was passed by the A.O. on 18.12.2006 after filing of the above referred documents by the assessee - the Assessing Officer did not make a whisper in the assessment order of such details having been filed by the assessee - This fact has been elaborately considered by the learned CIT(A) – the CIT(A) has recorded that these expenses were incurred during the course of business - order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1272
Validity of order u/s 143(3) r.w section 144C of the Act - Application withdrawn from Dispute Resolution Panel – Held that:- The assessee had filed a letter before DRP for withdrawing the objections - If DRP was of the view that assessee did not have option to withdraw the objections once they have been filed then as per rules of natural justice it was required to adjudicate objections filed by the assessee - The action of DRP has prevented the assessee from availing the other alternative of filing the appeal before CIT(A) - If that door is closed then matter has to be first adjudicated either by DRP or by CIT(A) and then appeal can be filed before the Tribunal - the order of DRP which has not adjudicated the issues on merits - The direction of DRP to AO is binding on AO so assessee also could not represent before AO against the additions made in the draft order – thus, the request of the assessee has to be accepted in the interest of justice - the matter restored to the DRP to adjudicate all the issues on the objections filed by the assessee as per law by way of speaking order after giving the assessee a reasonable opportunity of hearing – Decided in favour of Assessee.
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2014 (1) TMI 1271
Entitlement for deduction u/s 54B and 54F of the Act – Investments made in the name of daughters – Capital gains - Held that:- The benefit of exemption u/s 54B and 54F could be given to an assessee only if the new property is purchased in his own name – Relying upon Jai Narayan Vs. ITO [2007 (8) TMI 295 - PUNJAB AND HARYANA HIGH COURT] - The investments have been made in the name of married daughters and apparently both of them are also majors - Thus, it is not a case of joint ownership along with the assessee - Both the daughters of the assessee shall have every right over the property purchased in their respective names - Thus, it cannot be said that the intention of purchasing the properties was not to give benefit to them - The assessee claims that she has entered into a purchase possession agreement with her two daughters - the agreement does not actually effect transfer of assets to the name of the assessee – also, the agreements have been entered only to show some compliance with the provisions of sec. 54B/54F of the Act - the term “assessee” used in sec. 54B/54F of the Act cannot be extended to mean the major married daughters – Decided against Assessee.
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2014 (1) TMI 1270
Fringe benefit u/s 115WB(2)(D) and u/s 115WB(2)(B) of the Act - Provision of free transport towards airport pickup and drop for airline crew members - Cost of transport charges for visiting guests - Night dropping of employees – Held that:- The Central Board of Direct Taxes in Circular No. 8 of 2005, dated August 29, 2005 clearly specifies that there must be an employer-employees relationship for the purpose of treating the expenses as fringe benefit - the airline crew members for whom the airport pick-up and drop has been incurred are not employees of the assessee, the expenditure cannot be treated as liable for fringe benefit tax under section 115WB(2)(D) of the Act. Also the visiting guests cannot be treated as employees of the assessee and the complimentary pick-up and dropping charges incurred on account of visiting guests also do not fall under the purview of the fringe benefit tax under section 115WB(2)(B) of the Act - In respect of the night dropping of the employees the shift ends in the early morning at 1.30 am, the same being on account of pick-up and drop of the employees from their residence to the place of work and returning them to their residence is not liable to be treated as fringe benefit also in view of the Circular issued by the Central Board of Direct Taxes in Circular No.8 of 2005 dated August 29, 2005 – Decided in favour of Assessee.
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2014 (1) TMI 1269
Deletion of depreciation u/s 32 of the Act – Charitable institution eligible for depreciation u/s 32 falling under Profits and gains from business and profession – Held that:- The decision in Commissioner Of Income-Tax Versus Sheth Manilal Ranchhoddas Vishram Bhavan Trust [1992 (2) TMI 51 - GUJARAT High Court] followed - the income of the assessee-trust has to be computed on commercial principles and therefore, depreciation has to be allowed - allowing the deduction on purchase of assets as application of income u/s.11(1) is not equivalent to allowing deduction for the purpose of computing income, but in fact, the income remains same and the only effect of considering acquisition of asset as application of income is that such income is treated as exempt income – thus, it cannot be said that allowing exemption u/s.11(1) of the Act in respect of acquisition of asset on this basis that it is application of income is akin to allowing deduction of an expenditure but it is in fact an incentive provision allowing the charitable-trust the benefit of having exempt income - depreciation has to be allowed as per the decision of Hon'ble Gujarat High Court which is binding on us and it is not resulting into allowing of double deduction – Decided against Revenue.
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2014 (1) TMI 1268
Gains arising u/s 41(1) of the Act – No amount actually received by the assessee – Held that:- The order of Hon'ble Tribunal in the case of assessee dated 20-12- 2007 is followed which was passed by it subsequent to the order of Tribunal in the case of M/s Hemraj Trading Company - the directions given by the Tribunal to the assessing officer were very clear that only if the amount has been received by the partners of the firm, the same can be taxed in the hands of the assessee - Before assessing officer partners have field affidavits mentioning that no such amount has been received by them which were accepted by assessing officer - Even then he has gone ahead with taxing this amount in the hands of the assessee - the addition made by AO and sustained by Ld. CIT(A) deserves to be deleted - CIT(A) has mentioned that though the sale tax authorities had initially issued sales tax refund in the name of M/s Hemraj Trading Company but the revisionary authorities realized the mistake and demanded back the refund along with the interest from the recipient - The matter was under litigation till the time Ld. CIT(A) passed his order - Therefore in case in between sales tax refund amount is received by the partners, assessing officer will be free to proceed as per law – Decided in favour of Assessee.
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2014 (1) TMI 1267
Interest u/s 234B of the Act - Payment of advance tax – Held that:- Interest u/s 234B is levied for the failure to pay advance tax as per the provisions of S. 208 and 209 of the Act - All the assessee here are non-resident companies - The assessee's case is that, if the Assessing Officer's stand that the Revenues received by these G.E. Overseas Entities are held as liable to tax in India, then, as per S.195 of the Act, the payers of such income were under an obligation to deduct tax at source and consequently, in terms of pre-amended S. 209(1)(d) of the Act, the assessee was not required to pay advance tax, as the advance tax payable by the tax payer is to be calculated, by reducing the tax on current income, by the amount of tax which would be "deductible or collectable" at source under the Act, during the said F.Y. – the decision in Director of Income Tax Versus M/s. Jacabs Civil Incorporated / Mitsubishi Corporation [2010 (8) TMI 37 - DELHI HIGH COURT] followed - it would not be permissible for the Revenue to charge any interest under Section 234B of the Act – also , the Tribunal has rightly held that the assessee was not liable to pay any interest under Section 234B of the Act – Decided against Revenue.
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2014 (1) TMI 1266
Rejection of books of accounts – Estimation of income 8% on gross receipts – Held that:- In case of certain expenses the bills and vouchers were not produced at all while in case of a large number of expenses only self made vouchers were produced - The assessee was also asked to submit complete addresses and PAN of the trade creditors - Since the expenses claimed by the assessee are not fully verifiable, the correctness of the books of account of the assessee was not satisfied – thus, the lower authorities are justified in rejecting the books of account of the assessee. Wherever the gross contract receipts exceed Rs. 40 lakhs the provisions of section 44AD are not applicable - Therefore, the profit can be estimated either at lower than 8% or above 8% depending upon the factual situation - for the purpose of estimating the profit various factors such as the profit ratio of the assessee in the earlier year, profit ratio of the similarly placed traders in the same locality, demand for the product, availability of labourers, raw materials, etc., and the time gap available for executing the contract work, etc., have to be taken into consideration – thus, reference to earlier order of this Tribunal for the purpose of estimating the profit is justified - Income of the assessee has to be estimated at 8% on main contract and 5% on subcontract receipts – thus, the Assessing Officer is directed to estimate the income of the assessee at 8% on main contract receipts and at 5% on subcontract receipts. Addition made u/s 68 of the Act – Unexplained credits – Held that:- It is for the assessee to provide the explanation for cash credits, when the assessee has not pleaded that the cash credits came out of the past intangible additions, it would not be open to the Tribunal to hold that the cash credits would be covered by such additions – Relying upon CIT vs. G. M. Chennabasappa [1958 (9) TMI 78 - ANDHRA PRADESH HIGH COURT] - The omission to claim set off of past intangible additions against cash credits would give rise to a presumption that the former amounts were not available for set off - When the alternate plea that tangible additions in the past could take care of cash credits of current year is not taken at the earlier stage and no materials are placed on record to substantiate the same, rejection of such plea would be justified - The availability of funds representing the intangible additions should be quantified not with reference to what the assessee offered for taxation but what was actually adopted in assessments for taxation - the assessee failed to show how the addition u/s 68 is related to estimated income - the assessee's contention on telescoping on addition towards unexplained credit on the addition made towards business income is rejected and the addition made u/s. 68 is sustained in its entirety – Decided partly in favour of Assessee.
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2014 (1) TMI 1265
Condonation of delay – Deduction u/s 80HHC of the Act – profit on sale of DEPB licence - Held that:- The assessee was not guilty of negligence or such attributes in not filing the appeals before the Tribunal in time - In fact, the assessee-company has earnestly made a follow-up of its claim of deduction under section 8OHHC in respect of the DEPB - This is clear from the fact that the assessee has claimed deduction – Thus, it would be just and proper to condone the delay caused in filing the appeals – Delay condoned. The quantum of deduction available to the assessee under section 8OHHC in the light of DEPB is to be recomputed by the assessing authority as decided Topman Exports vs. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - The assessee is entitled for the benefit to the extent explained by the Hon'ble Supreme Court – the matter is remitted back to the AO for re-computation quantum of deduction u/s. 80HHC of the Act – Decided in favour ofAssessee.
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2014 (1) TMI 1264
Deletion of penalty u/s 271(1)(c) of the Act – Disallowance of deduction u/s 80P of the Act – Held that:- The Assessing Officer did not allow the claim of the assessee u/s 80P(2)(e) made the disallowance – thus, it cannot be said that the assessee did not disclose all the particulars truly because the claim of deduction u/s 80P(2)(e) was made in the returned income - The Assessing Officer did not accept the claim of the assessee and that can be a ground for making the addition but not for levying the penalty u/s 271(1)( c) of the Act – Relying upon CIT vs Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] - Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars - Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c) - The CIT(A) was fully justified in deleting the penalty levied u/s 271(1) ( c) of the Act by the Assessing Officer because in the present case also all the informations were given by the assessee in the return of income, so the assessee cannot be held guilty of furnishing inaccurate particulars of income or concealment of income – Decided against Revenue.
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2014 (1) TMI 1263
Deduction u/s 40(a)(ia) of the Act – The decision in ASSTT COMMISSIONER OF INCOME TAX Versus SHRI MK GURUMURTHY [2012 (6) TMI 293 - ITAT, Bangalore] followed - The assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however it was paid before the due date of filing the return specified in Section 139(1) of the Act - addition u/s 40(a)(ia) of the Act cannot be made if the payment of tax deducted at source has been before the due date of filing the return of income for the year under consideration - payment of TDS has been made before the due date of filing of the return u/s 139(1) of the Act – thus, the CIT(A) was fully justified in deleting the addition made by the Assessing Officer – Decided against Revenue.
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2014 (1) TMI 1262
Deletion of tax liability u/s 115JB of the Act – Rebate u/s 88E of the Act – Held that:- The decision in CIT Vs Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT] - The CIT(A) accepted that the facts of the case are covered by the decision of Mumbai Special Bench and allowed the claim of bad debts to the tune and on the grievance of the assessee relating to the calculation of tax on book profit, the Ld. CIT(A) accepted the assessee’s submission that the issue at hand is covered by the decision of Bangalore Bench of ITAT in the case of Horizon Capital Ltd. Vs ITO and directed the AO to allow rebate u/s. 88E for STT paid by the assessee from the income tax on the income computed u/s. 115JB of the Act - This is the mode in which tax already paid is handed back at the time of final computation – Decided against Revenue. Deletion of bad debts made – Held that:- The decision in The Commissioner of Income Tax Versus Shri Shreyas S. Morakhia 2012 (3) TMI 103 - BOMBAY HIGH COURT ]followed - the requirements of section 36(2)(i) are fulfilled where a part thereof is taken into account in computing the income of the assessee – thus, the assessee was entitled to deduction by way of bad debts under section 36(1)(vii) read with section 36(2) in respect of the amount which could not be recovered from its clients in respect of transactions effected by him on behalf of his clients – Decided against Revenue.
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2014 (1) TMI 1261
Cancellation of Penalty u/s 271(1)(c) of the Act – Held that:- The appeal was filed in contravention of limit cannot be sustained –Relying upon ACIT Vs. Satish Chand Jain 2006 (8) TMI 329 - ITAT DELHI] - the tax effect involved in the appeal filed by the Revenue being less than the limit as prescribed in the board circular, the same is not maintainable - the appeals filed by the Revenue prior to the Circular also be covered by the monetary limit of the Circular – Decided against Revenue.
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2014 (1) TMI 1260
Deduction u/s 80HHE of the Act – profit of the concerned business is to be considered or profit of all the business to be considered - net result is loss - Held that:- The net result of the computation in respect of any source of business, if it is a loss, can be adjusted against the income from any other business as provided in section 70(1) - Therefore, when Explanation (d) provides that the expression “profits of the business” means the profits of the business as computed under the head “Profits and gains of business”, it means the profits of the eligible business as computed under the aforesaid head - It has possibly been enacted to clarify or explain that the profits of the eligible business is not what the books of account of the assessee show and it can only be what the assessment order shows - It is also significant that sub-section (3) as well as Explanation (d) refer only to “profits of the business” and not the profits of all the businesses carried on by the assessee - This reasoning also takes care of the argument of the learned CIT DR based on section 80IA(5) – relying upon Datamatics Limited. Versus Assistant Commissioner Of Income-tax, Circle 8 (1), Mumbai [2007 (2) TMI 237 - ITAT BOMBAY-H] - The Assessing Officer has not expressed any opinion on this point because according to his calculation the figure of business profits was negative and, therefore, even at the threshold the assessee’s claim could not be entertained – What would be the export turnover and the total turnover is not the subject matter of the present appeal - The ground as taken by the assessee is allowed - the deduction u/s 80HHE as claimed by the assessee allowed – Decided partly in favour of Assessee. Disallowance u/s 14A of the Act – Held that:- The disallowance has been made in a proper manner by the assessee and even if the method adopted by the AO is to be adopted, even then, there cannot be a major difference in the disallowance, in fact, the computation made in the SOF in accordance with the AO's method also - the disallowance is coming at exactly the same figure - the disallowance cannot be sustained – Decided in favour of Assessee.
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2014 (1) TMI 1259
Disallowance of expenses – Expenses incurred on behalf of principal - Gift, chandla, diwali and personal expenses – Held that:- Relying upon A.P.L. (India) P. Ltd. vs. DCIT [2004 (10) TMI 260 - ITAT BOMBAY-E] - The Advocate has agreed that he will have no objection if sundry expenses are disallowed to the extent of 25% of the expenses – thus, the order of the CIT(A) set aside and the AO is directed to make the disallowance of 25% of the sundry expenses – Decided partly in favour of Assessee. Relief allowed out of Diwali expenses and gift expenses – Held that:- The disallowance was restricted to 50% - it is a question of making estimate for disallowing the expenditure for non-business purposes or unsupported by the evidences – it would be adequate if the total disallowance sustained by the learned CIT(A) towards these expenses is restricted to 50% - thus, The disallowance being restricted to 50% of the disallowance in respect of all the expenditure – Decided partly in favour of Assessee.
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2014 (1) TMI 1258
Disallowance of sundry expenses – Payment of dock charges – Held that:- Relying upon A.P.L. (India) P. Ltd. vs. DCIT [2004 (10) TMI 260 - ITAT BOMBAY-E] - The Advocate has agreed that he will have no objection if sundry expenses are disallowed to the extent of 25% of the expenses – thus, the order of the CIT(A) set aside and the AO is directed to make the disallowance of 25% of the sundry expenses – Decided partly in favour of Assessee.
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2014 (1) TMI 1257
Whether profit on foreign exchange be included in export turnover - Held that:- Decision in Sutlej Cotton Mills Ltd. v. CIT [1978 (9) TMI 1 - SUPREME Court] followed - Where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business - If the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature - The foreign exchange gain was income derived by export business of the assessee, and, eligible for deduction u/s 10A of the Act - Decided in favour of assessee. Whether telecommunication and traveling expenses be included in total turnover for deduction u/s 10A - Held that:- Decision in ITO v. M/s. Sak Soft Ltd [2009 (3) TMI 243 - ITAT MADRAS-D] followed - The CIT (A) is justified in excluding the expenditure incurred towards freight, telecommunication charges etc., by company from both export turnover and total turnover for the purposes of deduction u/s 10A of the Act - Decided in favour of assessee.
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Customs
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2014 (1) TMI 1347
Conviction u/s. 13(1)(d) and 13(2) of the Prevention of Corruption Act (PC Act) - Invocation of R.19 of CCS (CCA) Rules, 1965 - Preponderance of probability - Held that:- It is true that in departmental enquiry charges could be proved based on principles of preponderance of probabilities and in criminal case as settled by the courts, charge is to be proved beyond doubt and as regard departmental enquiry initiated against the petitioner is concerned, it is pending at the stage where enquiry officer has submitted its report and as per procedure provided under R.14 of Rules 1965 enquiry officer's report is still to be examined by the disciplinary authority and finding recorded in the enquiry report yet not attained finality and at the same time there is judicial enquiry initiated against the delinquent petitioner and the charges proved beyond doubt and in the instant case charge of corruption was instituted against the petitioner and after regular trial he has been convicted by the competent court of jurisdiction u/S.7, 13(1)(d) read with 13 (2) vide judgment dt.28.7.2008, however, on appeal being preferred, sentence has been suspended by the Court of Appeal vide order dt.19.8.2008. Suffice it to say that at the stage show cause notice dt.22.8.2013 no suspicion or doubt can be attributed and it is always open for department to examine and take appropriate action what the law contemplates. After going through the judgment impugned, this Court does not find any manifest error being committed by the learned tribunal in passing the impugned judgment which may require interference - Decided against Petitioner.
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2014 (1) TMI 1346
Confiscation of goods - Mis declaration of goods - Assessee prays for provisional release of goods - import of Multi Media Speakers for Computers of varying models - Held that:- Section 110-A of the Customs Act, 1962 provides for provisional release of goods, documents and things seized pending adjudication. Any goods, documents or things seized under Section 110 of the Act, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security and conditions as the Commissioner of Customs may require. The only reason for non-release of the goods is that the petitioners have misclassified and mis-declared the goods in question. The respondents, on investigation, found that the differential duty has to be paid even for the provisional release of the goods. The investigation has to be completed and thereafter, adjudication has to be done for assessment of the value - as the goods in question are not prohibitory items under the provisions of the Act and having regard to the foregoing reasons and discussions and considering the facts and circumstances of the case, provisional release of the goods in question is ordered conditionally - Decided partly in favour of assessee.
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2014 (1) TMI 1345
Denial of benefit of exemption Notification No. l48/94-Cus. - Failure to produce copies of the required certificates - Held that:- Notification No. 148/94-Cus. itself provided for condonation of delay in submission of the certificates which the lower authorities failed to do. That is why this Tribunal remanded the matter for re-consideration, after condoning the delay in the submission of utilization of certificates, for verification of the certificates already submitted. Now the department has again rejected the benefit on a new ground that the appellant has failed to submit the certificates, which is very strange, to say the least. From the records of the case, it is abundantly clear that the appellant had submitted the distribution certificates under the cover of letters dated 29-8-1994, 22-2-1997 and 27-3-1997. The dated signature and seal of the department on the copies of these letters very clearly show that the department did receive these distribution/utilization certificates. If the department has mis-placed these certificates, the appellants cannot be blamed for the lapses/inefficiencies on the part of the department - Decided in favour of assessee.
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2014 (1) TMI 1344
Valuation of goods - Mis declaration of goods - whether the appellant (a courier company) herein had misdeclared the cargo which landed in Ahmedabad to Qatar Airways - Held that:- there is no mention as to the consignment was in an identifiable courier company bag of the appellant. The ld. counsel would demonstrate before me that the appellant has got specific courier bags wherein appellant’s name is printed in ink along with their address. I find that the panchanama does not indicate that there was a declaration from the sender as regards as the contents in the courier bag. I find that the appellant cannot be held as a person who tried to evade customs duty by misdeclaring the description of the goods, inasmuch as, on perusal of the courier bill of entry filed by the appellant, I find that appellant has filed the said bill of entry based upon the papers received by him from Qatar Airways as well as the sender of the goods from abroad. If the procedure of handing over the courier bags to the courier agency starts only at the courier baggage cell as per procedure, that also after the clearance is done by the authorities, Therefore, appellant cannot be held of filing incorrect declaration - Following decision of Rajesh Krishna Kumar Vadke [2005 (8) TMI 598 - CESTAT, MUMBAI] - Decided in favour of assessee.
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2014 (1) TMI 1343
Waiver of pre-deposit - Stay of recovery - Search, seizure and confiscation of baggage - Attempt of illegal export - Non-compliance with Section 129E - Power to revise - Held that:- Tribunal has the power of remand whereas the Central Government under Section 129DD does not have it. The scheme of law requires a remand of this case to the Commissioner (Appeals) for decision on the baggage-related issue on merits. The scheme does not seem to foreclose or sidestep the Appellate Commissioner’s jurisdiction to deal with the substantive issue on merits - Central Government does not have the power to remand the case to the Appellate Commissioner. The Government may revise an order passed on merits by Commissioner (Appeals) on a baggage-related issue. There is no revisable order of the Commissioner (Appeals) - Matter remitted back - Assessee directed to make a pre deposit - Decided partly in favour of assessee.
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Corporate Laws
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2014 (1) TMI 1342
Validity of auction sale - Auction of mortgaged property of loan guranter - Petitioner has also prayed to declare the auction in question as nullity. Since auction took place during the pendency of the review application - during the pendency of the case before the Tribunal the auction took place, the petitioner raised finger over the several illegalities committed in the auction proceeding - Tribunal rejected petitioner's application holding that auction had already taken place before passing the final impugned judgement and as such the irregularities in auction is not a new fact on which basis impugned order be reviewed - Held that:- Tribunal has not appreciated the petitioner's claim of impleadment and amendment of application correctly as the material information provided to the petitioner regarding irregularities happened in the auction are the relevant and necessary facts which could have been taken on record and since, if the auction is set-aside the same shall prejudice the right of the auction purchaser. I am of the view that the application for impleadment of auction purchaser could have also been allowed. The several irregularities in auction which has been pointed out before this Court require adjudication by the tribunal itself. Order dated 29.11.2010 passed on the application for review is quashed and Review application is allowed and the order dated 03.01.2008 passed in S.A. No. 98 of 2007 is reviewed with the direction that the petitioner's application for impleadment and amendment shall stand allowed to make necessary amendment in S.A. No. 98 of 2007 and thereafter it shall be heard and decided a fresh by the Debt Recovery Tribunal, Lucknow after providing opportunity of hearing to the parties concerned - Since the property auctioned is a dwelling house of the petitioner and the stay order passed by this Court is operating till date, I hereby provide that meanwhile the petitioner shall not be dispossessed from the house in question - Decided in favour of petitioner.
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FEMA
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2014 (1) TMI 1348
Violation of FEMA - Imposition of penalty - Sale of foreign currency at higher value - Held that:- there was no scope to allege a violation of paragraph 3 of the FLM or for that matter Sections 6(4) and 6(5) of FERA, 1973. Based on the interpretation of Sections 6(4), 6(5) of FERA, 1973 and paragraphs 3 & 9 of the FLM, we have held that the Original Authority, the Appellate Tribunal as well as the Division Bench of the High Court failed to appreciate the issue in the proper perspective while holding the appellant guilty of the violation alleged - sale of foreign currency at higher value was not the basis for the contravention and imposition of the penalty as against the Appellants. Sale effected by the Appellants on a rate higher than the rate prevailing in the market was not the basis for the alleged violation of paragraph 3 of the FLM read with Sections 6(4), 6(5) and 7 of FERA. In the confiscation order passed by the Customs Authorities, where again the Appellants were also one of the noticees, no fault was found as against the Appellants on that ground - impugned orders by which the Appellants were found guilty of the violation of paragraph 3 of FLM read with Sections 6(4), 6(5) and 7 of FERA and the consequential imposition of penalty of Rs.50,000/- was wholly unjustified. The impugned orders are liable to be set aside and they are accordingly set aside. If the Appellants have parted with the penalty amount imposed under the impugned orders, the Respondent is directed to refund the same to the Appellants along with simple interest at the rate of 6% per annum, within two months from the date of this judgment - Decided in favour of assessee.
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Service Tax
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2014 (1) TMI 1379
Benefit of Notification No. 1/2006 - Commercial or Industrial Construction service and Works contract service – Demand of Service tax - Penalty u/s 76, 77 and 78 - Held that:- The appellant was engaged in providing the service of commercial or industrial construction service and works contract service – Held that:- Assesse had not included the value of steel and cement supplied by the service receivers for the purpose of payment of service tax and at the same time the assesse had availed the benefit of Notification No.1/2006-ST which provides for abatement subject to the condition that the gross amount shall include the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service - Relying upon Jaihind Projects Ltd. vs. CST, Ahmedabad [2010 (1) TMI 186 - CESTAT, AHMEDABAD] - the value of materials provided or supplied or used by the service provider were required to be included - the value of goods supplied by the receiver to the provider were required to be included if the benefit of Notification No.1/2006 was availed - stay not granted.
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2014 (1) TMI 1378
Transfer of case - Head office situated in Mumbai - Held that:- appeal arising from an order passed by the Commissioner of Service Tax, Mangalore shall be maintained before us and heard by this bench only in terms of CESTAT Public Notice No. 2/2005 dated 05.08.2005 - Decided against Appellant.
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2014 (1) TMI 1377
Waiver of pre-deposit of service tax - Management, Maintenance and Repair services - Benefit of small scale service provider notification - Held that:- appellant himself took the service tax registration under the said category Management, Maintenance and Repairs Services and started depositing service tax from that date. It was for him to come forward and pay the service tax till 31.03.2008, which he has not done so. In our view, service tax liability arises on the appellant - service tax liability needs to be reworked out, based upon the amount received and the benefit of small scale service provider notification and also the value is to be considered as cum-tax value - appellant has not made out prima facie case for the complete waiver of the amounts involved - Conditional stay granted.
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2014 (1) TMI 1376
Denial of cenvat credit – Rent-a-cab Service – Waiver of Pre-deposit - Cabs used by the employees as well as their family members for unofficial work - Held that:- The trips made by the rent-a-cab service provider for unofficial work, prima facie, would not be eligible for availment of Cenvat credit under the provisions of Cenvat Credit Rules, 2004 - the entire issue needs to be gone into detail – Thus, the appellant is directed to deposit an amount of Rupees one lakh as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.
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2014 (1) TMI 1375
Waiver of pre-deposit - Denial of CENVAT Credit - Credit on Job work - Credit availed on GTA service on job work material - Held that:- service utilized in manufacture of goods on job work basis could be held to be eligible for Cenvat credit - applicant has made out a prima facie case for waiver of pre-deposit of entire amount of tax, interest and penalties. Accordingly, pre-deposit of tax along with interest and penalties is waived and its recovery is stayed during pendency of the appeal - Following decision of Sterlite Industries (I) Ltd. Vs Commissioner [2004 (12) TMI 108 - CESTAT, MUMBAI] - Stay granted.
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2014 (1) TMI 1374
Waiver of pre deposit - Availment of CENVAT Credit - Cenvat credit taken more than the Service tax actually paid - Held that:- appellant has not been bale to produce any evidence that they had paid the tax only on the amounts received. I find that if the department has to make out an offence case against the appellant, it is the responsibility of the department to show that appellant had received the amount but did not pay the Service tax by exercising powers available under the statute. If that has not been done, appellant is entitled to claim that he has paid the tax correctly. In the absence of any evidence to show that appellant has not paid the tax on the-amount received and in the absence of specific allegation in the show cause notice or in the findings of the lower authorities, I find that appellant has made out a prima facie case for complete waiver. Accordingly, the requirement of pre-deposit of the dues is waived and stay against recovery is granted during the pendency of appeal - Stay granted.
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2014 (1) TMI 1373
Waiver of pre-deposit of Service Tax - Penalties under Sections 76 and 77 - Works Contract - Held that:- appellant is laying sewerage/drainage pipe-line for Ahmedabad Municipal Corporation or Ahmedabad Urban Development Authority. The adjudicating authority has held that these two organizations are not established solely for sanitation and are also engaged in the trade and commerce - appellant has made out a prima facie case for waiver of the pre-deposit of the amounts involved - Stay granted.
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2014 (1) TMI 1372
Waiver of pre-deposit of service tax - Penalty of equal amount under Section 78 - Banking and Other Financial Services - Out of pocket expenses - Held that:- Bulk of the amount relating to the dispute has been collected under the head “out of pocket expenses”. According to the learned Chartered Accountant, most of the amounts relates to postage/courier charges in relation to the various activities undertaken by them which were after the services of BOFS rendered and these activities should not be treated as part and parcel of the said service and, therefore the same were excludable. On a careful reading of the provisions of Section 65(12), Section 65(105)(zm) and the provisions of the Section 67 of the Finance Act, we are of the, prima facie, view that the services rendered by them cannot be held to be completed till the same is communicated to the concerned persons. Further, the question of giving effect to LC or payments based on the LC cannot be effected, without the communication through SWIFT - prima facie, that the appellant do not have a strong case in their favour - Partial stay granted.
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2014 (1) TMI 1371
Waiver of pre-deposit of Service Tax - Penalty u/s 77 & 78 - Held that:- goods after processing are returned to the original raw materials supplied by DSP, and the finished product produced from the processed raw materials are cleared on payment of duty, is also not in dispute. We find that the conditions of Notification 8/2005-S.T., dated 1-3-2005 as amended, are satisfied. In these circumstances, the applicants are able to make out a prima facie case for total waiver of pre-deposit. Therefore, the requirement of pre-deposit of all dues adjudged is waived and recovery of the same is stayed during pendency of appeal - Stay granted.
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2014 (1) TMI 1370
Convention service - Room renting - Held that:- Renting of hotel rooms cannot be held to be covered by the definition of ‘Mandap Keeper’ inasmuch as the hotel has an identity, personality and function quite distinguishable from that of a mandap. In any case, we find that the activity of giving hotel rooms to the customers, who might organize function in the hotel is an activity entirely different from the Mandap Keeper activity. The definition of Mandap Keeper nowhere covers the temporary occupation of hotel rooms for the purpose of boarding and temporary residence. It is not disputed that no function is held in the hotel room which is used for the purpose of staying in the same - issue decided in the case of Mandap Keeper Service is equally applicable to convention service also stands covered by the earlier order of Commissioner (Appeals) as also by the Tribunal’s decision in the case of Rambagh Palace Hotels Pvt. Ltd. [2013 (12) TMI 556 - CESTAT NEW DELHI] - Stay granted.
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Central Excise
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2014 (1) TMI 1341
Waiver of the predeposit - Confiscation of goods - Imposition of penalty - Whether the impugned oder dated 13.5.2013 passed by the Tribunal is correct in law by directing the appellant to deposit Rs.38,00,000/- when the appellant has a strong prima facie case on merits as well as financial hardship - Held that:- Following decision of M/s. L.G. Electronics India Pvt. Ltd. Versus Commissioner of Central Excise, Noida [2009 (6) TMI 29 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.
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2014 (1) TMI 1340
Rejection rebate claim due to export - Interpretation of notification - Non fulfillment of procedure prescribed in Notification No. 19/2004-C.E.(N.T.) dated 06.09.2004 issued under Rule 18 of Central Excise Rules, 2002 - Rejection of benefit of notification dated 06.09.2004 - Held that:- provision has been made for the benefit of exporter but simultaneously, it also cannot be overlooked that the Government of India has also to lay down the procedure which will discourage mischievous and scrupulous persons in indulging in any mischief. At every stage, officials of respondents-authorities would come into picture to verify the exact commodity etc. which is sought to be exported in respect whereof rebate is being claimed. This is to verify that the goods actually exported are same of description, value etc., as claimed - The notification dated 06.09.2004 very clearly has said that rebate can be claimed in the manner the procedure has been laid down therein. It is difficult to hold that detail procedure regarding filing of ARE-I, which is the foundation in respect of verification of commodity sought to be exported and its exportability etc. is not mandatory but directory or condonable. I find no hesitation in confirming the view taken by respondent no. 1 that the procedure laid down in notification dated 06.09.2004 with respect to filing of ARE-I is mandatory. Explanation offered by petitioner that due to ignorance of law he could not follow the procedure of filing ARE-I, also does not appear to be genuine and creditworthy. It is not the case of the petitioner that the export in question is his first transaction of export. He himself claimed to be a "Merchant Exporter" and dealing in export transactions. Such a person, if claim that he was not aware of the procedure, is very dubious statement and it is difficult to belief it - procedure with respect filing of ARE-I, looking from the view of straight and simple principle of interpretation, as also looking from the angle of its objective, purpose etc., in my view, is obligatory, the order impugned in the writ petition, cannot held faulty in any manner - Decided against assessee.
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2014 (1) TMI 1339
Condonation of storage loss and remission of excise duty leviable on 895 quintals of sugar - Remission of duty amount - Demand the duty of 895 quintals of sugar, which was found as storage lost - Held that:- Present case is one where storage loss was detected. The respondent never informed about storage loss. It has been noted in the order that on sufficient reasons storage loss upto 0.5% is condonable. It has been further noted by the Commissioner that the storage loss of 598 quintals, which is to the extent of 17% beyond the permissible limit of 0.5 is not condonable - remission of Central Excise duty could not have been allowed in view of non-disputed fact that storage loss was of 895 quintals - Decided in favour of Revenue.
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2014 (1) TMI 1338
Penalty u/s 11AC - Interest u/s 11AB - Suppression of facts - Contravention of provision of Central Excise Act and Rules - Intention to evade payment of duty - Payment made issuance of SCN - Whether or not the CESTAT was in error in holding that the penalty imposed under Section 11AC and the interest charged under Section 11AB of the Central Excise Act, 1944, are not sustainable if the duty is paid before issuance of show cause notice irrespective of the fact that evasion of duty was detected by the department and the demand was made under the proviso to Section 11A(1) on reason of suppression of facts or wilful misstatement of contravention of the provisions of Central Excise Act and Rules made there under with intent to evade payment of duty - Held that:- payment made whether before or after show cause notice, does not alter liability for penalty and the finding of the Tribunal holding that no penalty under Section 11AC of the Act could be imposed, if assessee had deposited short paid amount of excise duty before issuance of show cause notice was held to be a misconceived interpretation by the Tribunal, whereby the Tribunal overlooked the two explanations which qualified the main provision of Section 11A(2-B) and accordingly, set aside the order passed by the Tribunal. In the show cause notice dated 10.10.2001, except for stating that the respondent/assessee has contravened the provisions of the Rules, there is no specific allegation so as to hold the respondent/assessee guilty of having committed fraud, collusion or suppression of facts or made any willful misstatement with an intent to evade payment of duty. In terms of the provision of section 11AC of the Act, the authority is bound to record a prima facie finding that there was an intent to evade payment of duty by suppressing the materials facts or by making willful mis-statement or by committing fraud or collusion. Thus, in the absence of any such specific allegation in the show cause notice, the authorities cannot mechanically impose penalty under Section 11AC of the Act. After the assessee submitted their explanation, the Adjudicating Authority while passing the order dated 24.09.2002, only observed that there is possible manipulation of scrap accounts to show higher production than what would have been normally produced and there is no finding that the first respondent/assessee was guilty of willful mis-statement or suppression of facts or act of fraud with an intention to evade payment of duty - in the absence of any specific findings having been recorded by the authorities, so as to make provisions of Section 11AC of the Act applicable to the case of the assessee, we have no hesitation to hold that the imposition of penalty was totally unjustified and the order of the Tribunal setting aside the penalty, is to be confirmed for reasons other than mentioned by the Tribunal. Tribunal set aside the interest solely on the ground that the duty was paid prior to the show cause notice. The settled legal principle is that interest leviable under Section 11B of the Act is for the money withheld and the levy of interest is automatic and that is why it is termed to be compensatory. However, penalty is for default and therefore punitive and unless reasonable cause is shown, penalty is not imposable. This distinction was not taken into consideration by the Tribunal when admittedly, the Tribunal confirmed the demand of duty, which was paid belatedly by the respondent/assessee. Thus, the duty having been paid belatedly, the interest on such duty is automatic and the assessee is liable to pay the interest - Decided partly in favour of Revenue.
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2014 (1) TMI 1337
Waiver of pre deposit - Tribunal dismissed appeal for failure to make pre deposit - Held that:- dismissal of an appeal for failure to deposit the amount of pre-deposit determined, in essence, deprives a party its right of filing an appeal but as facts of the present case prima-facie disclose an unmitigated fraud perpetuated by the appellant while availing cenvat credit on raw material allegedly procured by them from various sources, are not inclined to grant any relief to the appellant - The appellant is a manufacturer in non-alloy steel ingots and availed benefit of cenvat credit on raw material procured by them from various sources. A search of the appellant's premises revealed that inputs were not received by the appellant and the transactions which formed basis for availing cenvat credit, were mere a paper transactions. The appellant's supervisor and melter made statements which clearly prove that the material received could not be used for melting. A finding of fact was also recorded that out of 203 invoices, corresponding goods received are not available with regard to 142 invoices. Out of ten transporters, seven were found to be nonexistent and three have denied having transported material to the appellant. The registration numbers of four trucks were found to be fake - no reason to hold that the CESTAT committed any error in directing the appellant to deposit ₹ 60 lacs of duty determined by the respondents. The second appeal was rightly dismissed for failure to abide by the order of pre-deposit - Decided against assessee.
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2014 (1) TMI 1336
Dismissal of stay application - Non apperance of counsel - whether the CESTAT was justified in dismissing the application for stay for nonappearance of the appellant or his counsel - Held that:- mere absence of an appellant or his counsel on one date, “may” not be sufficient to dismiss an application/appeal for default. Courts/Tribunals are constituted to decide disputes on merits and, therefore, dismissing an application/appeal on the first occasion of non-representation, in our considered opinion, may not be the right course to adopt. A perusal of the facts reveals that counsel for the appellant addressed a letter, Annexure A-7, to the CESTAT, praying for an adjournment as he had been advised rest on account of severe cervical pain. It appears that the letter was not placed before the CESTAT, for otherwise we are sure that the CESTAT would have adjourned hearing of the application - matter restored to CESTAT - Pre deposit demanded - Decided partly in favour of assessee.
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2014 (1) TMI 1335
Demand of duty - Manufacturing activity stopped due to hardship - Inability to pay excise duty - Invocation of Section 11A - Imposition of Compounded levy of tax - Held that:- On a perusal of Rule 96ZP of the Rules, it is evidently clear that it is a procedure of self-assessment where the manufacturers of hot re-rolled products falling under the different sub-headings in the Central Excise Tariff Act, are bound to debit the amount calculated at the rate of ₹ 400/- per metric tonne at the time of clearance from the factory in the account-current maintained under Rule 173G(1) of the Central Excise Rules, 1944, and the duty liability is to be complied as detailed in Clauses I and II under Rule 96ZP of the Rules. In terms of sub-rule (1A) of Rule 96ZP, if a manufacturer removes any of the said products without complying with the requirements of that sub-rule, such goods are liable to confiscation and the manufacturer shall be liable to a penalty not exceeding three times the value of goods or ₹ 5,000/-, whichever is greater. Sub-rule 3 of Rule 96ZP starts with a non-obstante clause and in fact, it is a facility given to the manufacturer, by which, the manufacturer, may, in the beginning of each month from 1st day of September, 1997 to 31st day of March, 1998 or any other financial year, pay a sum equivalent at the rate of ₹ 300/- multiplied by the annual capacity in metric tonnes. We term this as a facility in the light of Clause I(a) to Rule 96ZP, which mandates the amount to be paid at the rate of ₹ 400/- per metric tonne by 31st day of March, 1998. Imparting the elements of the scheme of tax administration/recovery under Section 11A to a specially compounded levy scheme as provided under Rule 96ZP, would be wholly arbitrary and it would disturb the very functioning of the special scheme and the time limit prescribed under the special scheme, cannot be done away with by the time limit specified under the normal procedure under Section 11A - assessee had come under the compounded levy scheme with effect from 1997 and when they switched over to this, the credit lying unutilised, be in the inputs or in the final products, lapsed in terms of sub-rule (17) of Rule 57F - assessee has availed the benefit of a specially compounded levy scheme - therefore question of adjustment of the modvat credit as against the liability under Rule 96ZP, does not arise. However, it is open to the assessee to seek for reversal of credit, if any, lying to their credit, if so permitted under law - Following decision of COMMISSIONER OF CENTRAL EXCISE, PONDICHERRY V. SHARADHA CASTINGS (P) LTD. [2009 (4) TMI 525 - MADRAS HIGH COURT] - Decided partly in favour of assessee.
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2014 (1) TMI 1334
Waiver of pre deposit - Both the units were running as one single unit and had claimed exemption of small units operating separately - Held that:- goods worth Rs.80,13,000/-, which was seized, were directed to be released on payment of redemption fine of Rs.8,50,000/- in one case and Rs.1 lac in another case for redeeming the goods. The appellants could have redeemed the goods on payment of Rs.9,50,000/- and used the sale proceeds for payment of Rs.50 lacs - The balance sheets as the income tax returns filed today support that the firms and their partners do not have sufficient means, but that considering that proprietor of one of the firm was partner in another firm, which was running the business claiming exemption as separate units, the order passed by the Tribunal for a deposit of Rs.50 lacs only by consolidated order in both the cases, has taken into consideration the submission both with regard to prima facie case and the undue hardships, which may be caused to the appellants - No substantial question of law arises - However time limit for deposit extended - Decided partly in favour of assessee.
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2014 (1) TMI 1333
Restoration of appeal - tribunal dismissed the appeal for non compliance of stay order - Held that:- The appellant is unable to point out any fact or press into service any legal provision that would raise an inference that permission, beyond the permissible limit, was granted. The appellant's plea that it applied for further permission on 09.03.2008, is irrelevant, as the appellant is unable to refer to any order accepting this application. As regards the appeal, the Tribunal rightly dismissed the appeal for want of compliance - appellant's plea that as the unit has since closed down, the appellant has no funds, could have been relevant if the appellant had agreed to deposit some part of the duty claimed. In the absence of any such offer, the financial distress of the appellant cannot be considered - Decided against assessee.
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2014 (1) TMI 1332
Waiver of pre deposit - Duty demand - Imposition of equivalent penalty and interest - Whether in the facts and circumstances of the case, the Appellate Tribunal was justified in directing the Appellant to pre-deposit ₹ 1,00,00,000/- under section 35F of the Act - Held that:- during the hearing before the Tribunal, the appellant have stated that 90% of its turnover is in respect of traded goods whereas 10% of its total turnover is in respect of manufactured goods. Keeping that in view, the pre-deposit of the confirmed demand of ₹ 1.27 Crores was reduced to ₹ 1 Crore. Thus, for all the above reasons, we find no reason to interfere with the order of the Tribunal in the facts of the present case at this stage. The submissions made on behalf of the appellant would require consideration in depth and the same could appropriately only be done at the time of final hearing of its appeal before the Tribunal - However, the time to make the pre-deposit stands extended from 30 November 2013 to 31 January 2014 and on producing evidence of the same before the Tribunal - Following decision of Furniture Products Ltd. v. CCE [2009 (12) TMI 606 - CESTAT, CHENNAI] - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2014 (1) TMI 1381
Denial of benefit of concessional rate of tax on purchase - geographical restriction - AO denied the benefit of concessional rate of tax on purchase of raw materials by the Petitioner used for manufacturing the goods which has been transferred by way of stock transfer outside the State in terms of Section 13(1)(b) - Demand of differential duty - Held that:- State is free to impose the condition that for earning the concessional rate of tax, the sale must take place within the State of Jharkhand or in the course of inter-state sale. One of the considerations while granting concessional rate of tax would be its effect on the revenue of the State. While so granting concessional rate of tax, the loss of revenue to the State is an important factor to be borne in mind. Language of the Second proviso inserted by the amendment is to be interpreted bringing it in harmony with the other provisions of the Act. Giving a purposeful interpretation of the language in the Second proviso it will be reasonable to hold that Second proviso, inserted by amendment, stipulates that "the goods manufactured using the goods purchased at the concessional rate of tax under Section 13(1)(b) has to be sold within the State of Jharkhand or in the course of inter-state trade and commerce. This interpretation of the Second proviso advances the legislative purpose and object which the Second proviso intended to serve - Decided against the petitioner. Contention & Reliance upon Polestar Case [1978 (2) TMI 186 - SUPREME COURT OF INDIA] - geographical restriction - Held that:- Under Section 5(2)(a)(ii) of Bengal Finance (Sales Tax) Act, 1941 as applied in the Union Territory of Delhi, the prescribed form was to be filed by the purchasing dealer. In the light of the provisions of the said Act and that the declaration form to be filed by the purchasing dealer, the Hon'ble Supreme Court held that the intention of the assesse was evidenced by the declarations given by them to the selling dealers at the time of purchase and therefore in the absence of consequential amendment in the Form of declaration, the purchasing dealer cannot be said to have committed breach of the statement made in the declaration. Therefore, the ratio of the decision in Polestar Case cannot be applied to the case in hand. Following the decision in the case of M/s. ICI India Ltd. & Anr. versus State of Orissa &Ors. [2007 (9) TMI 380 - SUPREME COURT OF INDIA] held that:- transfer of the manufactured goods by the Petitioner to the other depots situated outside the State of Jharkhand is "used for any other purpose" within the meaning of Section 13(3) for imposing the differential rate of tax. - Decided against the assessee. Escaped assessment - held that:- Since the Petitioner had chosen to challenge the demand notice and also the order of assessment for the assessment years 2004-05 and 2005-06, the Department was perhaps waiting for the matter to reach finality. In such facts and circumstances, the Petitioner cannot contend that in respect of the assessment years 2002-03 and 2003-04 the Department has not invoked Section 13(3) and thus acquiesced the returns filed by the Petitioner claiming stock transfer. - Decided against the assessee.
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2014 (1) TMI 1380
Validity of notice of reopening of the assessment - Jurisdiction of Court - Held that:- third respondent while authorising a reopening of the reassessment for the year 2004-05 has furnished a tangible basis upon which the formation of belief has been founded. The search which was conducted upon M/s. Parmarth Iron Pvt. Ltd., Bijnor resulting in recovery of data maintained in the electronic form indicated transactions of a value of ₹ 4.31 crores with the petitioner for the year 2004-05. The petitioner has undoubtedly disputed having had any transaction with the aforesaid party but this is not the matter which falls for consideration at this stage. The point to be noted, as is reflected in the original order of the assessment dated 5 January 2007, is that for the year in question the petitioner reflected total purchases of only ₹ 1.22 lacs and sales of ₹ 54,114/-. On this material, it cannot be held that the formation of belief was extraneous or that the grounds which weighed with the third respondent have no nexus with the formation of belief. Section 12-A of the Trade Tax Act provides that in any assessment proceedings, when any fact is specially within the knowledge of the assessee, the burden of proving that fact shall lie upon him, and in particular, the burden of proving the existence of circumstances bringing the case within inter alia any of the exceptions, exemptions or reliefs mentioned in Section 3-A, shall lie upon the assessee and the assessing authority shall presume the absence of such circumstances - Once the Court has come to the conclusion that the jurisdictional requirement of reopening and reassessment has been duly met, there is no reason to interfere with the impugned action of the authorities - Decided against assessee.
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Indian Laws
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2014 (1) TMI 1369
Request for information - Inspection of documents - Partial information provided - Remaining information declined being personal information - Held that:- while, ordinarily, such information should be considered to be personal in nature, as per the decision of the Supreme Court in the above case, it could be disclosed in larger public interest as held by the Supreme Court itself. All we need to decide is whether the information is likely to serve any larger public interest or not. In the present case, if what the Appellant has submitted is true, namely, that vigilance clearance has been granted to all or some of these officers by the CVC while various complaints of the vigilance nature were either pending or under enquiry against them, then, it would be absolutely necessary that this information should be disclosed because that would serve a larger public interest by exposing what these officers are like in reality. If some officers facing various kinds of enquiry for their acts of omission or corruption end up getting further appointments or career promotion, it cannot be in the interest of the society. Although the respondent very categorically asserted that it was not the CVC practice to grant vigilance clearance to officers facing enquiries, even then, in view of the submissions made by the Appellant, we would like the CPIO to revisit the records in respect of all these three officers and to find out if, indeed, vigilance clearance had been granted while enquiries are pending either in the CVC or elsewhere. If he finds any truth in this claim, then he must disclose the desired information in totality. We direct the CPIO to complete this exercise within 15 working days of receiving this order and to communicate to the Appellant either the information or his finding - Decided in favour of Appellant.
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