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TMI Tax Updates - e-Newsletter January 5, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles FOREIGN EXCHANGE – CURRENT ACCOUNT TRANSACTIONS News Guidance Note on Implementation of Reporting Requirements Under Rules 114F To 114H of the Income-Tax Rules, 1962 Auction for Sale (Re-issue) of Government Stock RBI Reference Rate for US $ Circulars / Instructions / Orders Customs F.No.390/Misc./163/2010-JC - dated 1-1-2016 Reduction of Government litigation - providing monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme Court Highlights / Catch Notes Income Tax AO was not justified in holding that the income of the assessee arising from performance of associated drilling activity through the provisions of oil field equipment on hire along with operating personnel, used the exploration/prospecting/extraction of mineral oil were fees for technical services under Section 9(1)(vii) of the Act and was chargeable to tax @ 20% of the gross revenue u/s 115A of the Act and not taxable u/s 44BB of the Act - AT Visit to Get Source TDS u/s 194J - the transaction was a transaction of outright purchase of copyright and not a mere payment for past and future royalties. The price paid for outright purchase of copyright was price paid for acquiring a capital asset - TDS not required - AT Visit to Get Source Expenditure incurred by the assessee with regard to payment of logo charges - payment of royalty and logo charges are revenue in nature, therefore, has to be allowed while computing the taxable income. - AT Visit to Get Source Disallowance of short- term capital loss - When the incident of tax being sale of units occurred prior to the introduction of the bill proposing the amendment in section 94(7) then the additional tax liability cannot be fastened on the transactions of and sale of securities/units by virtue of subsequent amendment. - AT Visit to Get Source Entitlement to deduction u/s.80IA - Fiction created in sub-section does not contemplate to bring set off amount notionally. Fiction is created only for the limited purpose and the same can not be extended beyond the purpose for which it is created - AT Visit to Get Source Transfer pricing adjustment - selection of comparable - Tribunal specified the aspects that may be kept in mind by the DRP while addressing the objections in respect to inclusion / exclusion of comparables - AT Visit to Get Source Entitlement to deduction u/s 10B - it is trite law that accounting entries are not decisive in determining the question of eligibility for a claim of deduction or exemption - AT Visit to Get Source Customs Import of areca nuts (betel nuts) against Duty Free Import Authorisations (DFIA) - Clearance of the subject goods i.e. Betel Nut Splits (not fit for human consumption) under the submitted DFIAs as exemption sought thereunder is not admissible on the subject goods was rightly denied - AT Visit to Get Source Valuation of imported goods - Once it is undisputed fact that the declared value was not accepted and for the purpose of assessment valuation was done on the basis of contemporaneous price of identical or similar goods, further enhancement of value was not permissible. - AT Visit to Get Source 100% EOU - The appellant was entitled to do job work for the principal manufacturer located in DTA. In such a scenario, we are of the view that non-taking of the permission, though a contravention, may not result in confirmation of demand of duty - AT Visit to Get Source Service Tax Exemption to business auxiliary services - the activity would fall within the exemption Notification No. 1/2004-ST dated 10/9/2004, clause (d), that provides exemption to services incidental and ancillary to the promotion of IT Education. - AT Visit to Get Source Central Excise Clandestine removal of goods - assumption / presumption - demand based on the statement - charge of clandestine removal is not sustainable in the absence of any corroborative evidence to the statement of Managing Director - AT Visit to Get Source Denial of refund claim - Valuation - the liquidated damages (LD) had to be factored in to arrive at the correct transaction value which has to be treated as assessable value for payment of Central Excise duty; whatever the duty paid in excess on account of non-factoring of liquidated damages would be liable to be refunded to the appellants - AT Visit to Get Source Cenvat Credit - Job Work - in view of the provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, there is no requirements made either for return of scrap from the premises of the job-worker or for payment of duty in case of non-return of the scrap. - AT Visit to Get Source Case Laws: Income Tax 2016 (1) TMI 138 Reopening of assessment - jurisdiction of AO to issue notice - Held that:- In the instant case, admittedly, the Assessing Officer for the relevant year as well as for the previous assessment years was the Income Tax Officer, Range-I, Agra and not the Assistant Commissioner of Income Tax-I, Agra. Consequently, in our opinion notice for reassessment and the reasons to believe to be recorded can only be done by the Assessing Officer, namely, the Income Tax Officer, Range-I, Agra. Since the same was not done, the notice for reassessment issued under Section 148 of the Act by the Assistant Commissioner of Income Tax-I, Agra was without jurisdiction. We are also of the view that so long as the file of the assessee is not transferred under Section 127 of the Act, all assessment and reassessment can only be done by the Assessing Officer. Consequently, the proceedings initiated by the said authority were without jurisdiction and cannot be sustained. - Decided in favour of assessee 2016 (1) TMI 137 Validity of application for settlement to Settlement Commission - Held that:- We record the contention of the Counsel for the assessee that despite the orders being passed by the Settlement Commission under sub-section (1) of Section 245D and Section 245D(2C) of the Act, the question of fulfillment of all material requirements of a valid application for settlement would be still open for the Commission to examine before further inquiry under sub-section (3) of Section 245D and passing final order under sub-section (4) of Section 245D. Thus, quite apart from the statutory interpretation adopted by this Court in case of Vishnubhai Mafatlal Patel (2012 (12) TMI 1020 - GUJARAT HIGH COURT) and Commissioner of Income Tax Vs. Income Tax Settlement Commission (2013 (7) TMI 95 - DELHI HIGH COURT), even the stand of the assessee and that of the Settlement Commission being that the findings of the Settlement Commission on the fulfillment of the requirements of a valid offer are merely tentative and it will be open for the Settlement Commission to examine these aspects before passing final order under sub-section (4) of Section 245D of the Act. Under the circumstances, we are not inclined to scrutinize the decisions of the Settlement Commission. 2016 (1) TMI 136 Penalty u/s. 271(1)(c) - Held that:- Where an issue is debatable/ arguable, no occasion to impose penalty can arise and the fact that the appeal in quantum proceedings had been admitted, was evidence enough of the issue being debatable. See Nayan Builders & Developers Pvt. Ltd. v/s. ITO [ 2014 (7) TMI 1150 - BOMBAY HIGH COURT] - Decided in favour of assessee. 2016 (1) TMI 135 Applicability of provisions of section 115JB on the assessee being a banking company - Held that:- This issue is squarely covered by the co-ordinate bench decision of this tribunal in the case of UCO Bank vs DCIT [2015 (12) TMI 300 - ITAT KOLKATA] held that the provisions of section 115JB of the Act are not applicable in the case of the assessee bank and further held that the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14 onwards in line with the Notes to Clauses of Finance Act 2012 . - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - non-deduction of tax at source - Held that:- As AR prayed that one more opportunity be given to the assessee for proving the fact of remittance of TDS before the Learned AO during the Asst year 2009-10.we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO , to decide this issue afresh in accordance with law. The assessee is directed to produce evidence of remittance of TDS on the subject mentioned expenditure to the satisfaction of the Learned AO - Decided in favour of assessee by way of remand disallowance u/s 14A - whether could be added to the book profits u/s 115JB ? - Held that:- The provisions of section 115JB of the Act per se would not be applicable to the assessee bank for the Asst Year 2009-10 and hence there is no question of making any addition to the book profits u/s 115JB towards disallowance u/s 14A of the Act.- Decided in favour of assessee. Adoption of municipal value of property for the purpose of assessing rental income from property - Held that:- In the instant case, the Learned CIT(A) had adopted the municipal value of ₹ 20,44,361/- as the gross annual value and proceeded to compute the taxable income from house property on that basis. Against this , the assessee is not in appeal before us. Hence we find that the revenue should not be aggrieved at all in the instant case. In any case, the figures obtained from the website www.magicbricks.com cannot be treated as a reliable evidence. Hence we find no infirmity in the order of the Learned CIT-A.- Decided in favour of assessee. Expenditure incurred towards debit cards - revenue v/s capital expenditure - CIT(A) held as revenue - Held that:- issuance of ATM cum Debit Cards to the customers of the assessee bank is part of the business activity of the assessee and there is no enduring benefit to the assessee out of incurring this expenditure. The Learned CIT(A) had observed that in the past the department had been accepting this expenditure as a revenue expenditure and we find no change in facts and circumstances of the case for the year under appeal with regard to the impugned issue warranting the department to take a different stand. This fact has not been controverted by the revenue before us. Though the principle of res judicata does not apply to income tax proceedings, in our opinion the principle of consistency cannot be given a go bye. Reliance in this regard is placed on the decision of the Hon’ble Apex Court in the case of Radhasaomi Satsang (1991 (11) TMI 2 - SUPREME Court ) . Hence we find no infirmity in the order of the Learned CIT(A).- Decided in favour of assessee. Disallowance u/s 40(a)(ia) - violation of provisions of section 194A in respect of interest on matured deposits - Held that:- From the above meaning as clarified in RBI guidelines, it could be safely inferred that the once a term deposit gets matured, if the customer does not approach the bank for either withdrawing or renewing the matured term deposit, the bank cannot suffer interest applicable to the term deposits for the faults committed by the customer / depositor. Instead the banks are instructed by RBI to pay interest at the rate applicable to savings bank deposits which is much less as compared to the term deposit interest rate. Moreover, the term deposits on maturity becomes repayable by the assessee on demand and gets automatically converted into a demand deposit. The provisions of section 194A (3)(vii) are very clear that the provisions of section 194A(1) shall not apply to demand deposits and hence the assessee bank is not liable to deduct tax at source on interest provided on those demand deposits. Hence in these circumstances, we find that the Learned CIT-A had rightly granted relief to the assessee bank in this regard.- Decided in favour of assessee. Disallowance u/s 14A of the Act read with Rule 8D(2)(ii) - Held that:- The assessee bank has got sufficient own funds to the extent of ₹ 4532.27 crores as on 31.3.2009 which is very much available for making investment of ₹ 242.03 crores and hence it can safely be presumed that no part of borrowed funds were utilized for making investments yielding tax free income. Moreover, the Learned AO had not brought on record any nexus between borrowed funds and amount invested by assessee. There are plethora of judgements in favour of the assessee on the impugned issue. Hence the addition deleted by the Learned CIT(A) in respect of ₹ 13,10,65,100/- by invoking Rule 8D(2)(ii) of the Rules does not require any interference - Decided in favour of assessee. 2016 (1) TMI 134 Chargeability of the income arising from performance of associated drilling activity through the provision of oilfield equipment on hire along with operating personnel - Held that:- Keeping in view the ratio laid down by the Hon’ble Apex Court in the aforesaid referred to case of Oil & Natural Gas Ltd. Vs CIT & Anr. [2015 (7) TMI 91 - SUPREME COURT] set aside the impugned order and direct the AO to accept the claim of the assessee that its Revenue is chargeable to tax u/s 44BB of the Act and not u/s 115A of the Act. AO was not justified in holding that the income of the assessee arising from performance of associated drilling activity through the provisions of oil field equipment on hire along with operating personnel, used the exploration/prospecting/extraction of mineral oil were fees for technical services under Section 9(1)(vii) of the Act and was chargeable to tax @ 20% of the gross revenue u/s 115A of the Act and not taxable u/s 44BB of the Act. - Decided in favour of assessee 2016 (1) TMI 133 Disallowance u/s.14A of the Act by invoking Rule 8D - Held that:- Though Rule 8D of Income Tax Rules 1962 is not applicable, and provisions of Sec.14A of the Act is only applicable for the assessment year 2008-2009 as the Rule was introduced w.e.f. 24.03.2008. The assessee might have incurred certain administrative expenditure to earn this income. Thus we are inclined to direct the Assessing Officer to disallow 2% of exempt income towards expenditure incurred to earn exempt income. - Decided partly in favour of assessee Exclusion of interest on the margin money deposited with the bank while computing the deduction u/s.10B - Held that:- Similar issue was considered by Madras High Court in the case of Dollar Apparels vs. ITO (2007 (2) TMI 120 - HIGH COURT, MADRAS) wherein it was held that interest on deposits with bank even assuming that the bank had insisted for making short term deposits for opening letters of credit is not income derived from export business hence not eligible for deduction u/s.80HHC Disallowance u/s 14A - Held that:- Disallowance u/s.14A r.w. Rule 8D should not exceed the exempt income. The Mumbai Bench in the case of M/s. Daga Global Chemicals Pvt. Ltd. [2015 (1) TMI 1204 - ITAT MUMBAI] sustained the disallowance on applicability of provisions of sec.14A r.w. Rule 8D. However, the alternative claim of the assessee was that disallowance if at all should be made, it should be restricted to exempt income earned and not beyond that. Accordingly, the AO is directed to look at this issue on this angle and decide it afresh. Loss on account of cancellation of forward contracts in forex derivatives - business loss OR speculation loss - Held that:- In this case, the Commissioner of Income Tax (Appeals) given an direction to the Assessing Officer to verify any forward contracts have been cancelled prematurely and verify the reasons for premature cancellation in the light of the order of the Tribunal in the case of London Star Diamond Company (I) P. Ltd vs. DCIT [2013 (11) TMI 424 - ITAT MUMBAI] wherein it was observed that loss arising from cancellation of premature is allowed as business loss. Being so, the assessee cannot have any grievance on this issue as Commissioner of Income Tax (Appeals) has given direction to follow the Tribunal order. Further, we make it clear that loss arising out of derivative transaction in excess of export turnover has to be considered as speculative loss because excess derivative transaction has no proximity with export turnover. 2016 (1) TMI 132 MAT computation - adjustment on account of provision for gratuity and leave encashment while computing the book profits for the purpose of Section 115JB - Held that:- As decided in own case claim of the assessee has to be accepted in the light of decision of Hon’ble Supreme Court in the case of Bharat Earthmovers Vs CIT (2000 (8) TMI 4 - SUPREME Court) wherein it has been held that liability incurred by the assessee under the leave encashment scheme applicable to its employees proportionate to the entitlement earned by the employees subject to ceiling on accumulation not being a contingent liability, provision made thereof is deductible. Therefore, this claim of the assessee has to be accepted. The AO is directed to delete the addition made on account of provision for leave encashment, The contents of the learned counsel for the assessee is that actuarial report is on the record, therefore, the provisions should not be treated as unascertained liability. This report has not been relied upon by the revenue authorities below. There are specific defect in the report. Taking into consideration the findings of the ITAT in assessment year 2000-01, defects in the report and the claim of assessee that in assessment year 2000-01, a miscellaneous application has already been filed. We deem it appropriate to set aside this issue to the file of the Assessing Officer for re-adjudication. - Decided in favour of assessee for statistical purposes. Adjustment on account of provision for bad debts while computing book profits u/s 115JB - Held that:- Assessee was fair enough to conceal that issue is against the assessee as per the explanation 1 to Section 115JB of the Act. - Decided against assessee Adjustment to the value of international transactions of export of guar gum and pet chips - Held that:- Assessee had not gained, the AE had not paid anything and the commodities were sold to the AE at the same price at which those were purchased from the local market, just to retain the Star Export House status. The loss incurred by the assessee was only on account of foreign exchange fluctuation. The structure of the transaction was such for the assessee that it could not make any profit or incur any loss as the transactions were not being undertaken for the sake of any profit. We, therefore, are of the view that the addition made by the AO and sustained by the ld. CIT(A) on account of arm’s length price was not justified because the adjustment on account of arm’s length price of international transactions In the present case, the assessee did not make any profit and sold the goods to the PWT at the same price at which it was purchased from the local market and the PWT in turn sold the commodities to the customers at the same price at which these were bought from the assessee. Therefore, the international transactions with PWT met the arm’s length standard. Therefore, by keeping in view the totality of the facts as discussed herein above the addition sustained by the ld. CIT(A) is deleted. - Decided in favour of assessee Re-computation of depreciation - contention of the Revenue is that explanation 5 to Section 32(i) of the Income Tax, which is inserted with effect from 01.04.2002 was clarificatory in nature and therefore the Assessing Officer has rightly disallowed the depreciation - Held that:- Issue has been decided in favour of the assessee by the Hon’ble Jurisdictional High Court in the preceding assessment years ranging from 1997 to 2001 [2011 (3) TMI 679 - DELHI HIGH COURT ] held that fact remains that in the previous years, i.e., in the year 1995-1996 and 1996-97, the Assessee had not claimed any depreciation. When the assessment order in question was in the assessment year 1997-1998, bringing down the value of the asset purchased by showing notional depreciation for the year 1995-96 and 1996- 97 and allowing the depreciation on the written down value in this manner would be clearly wrong when the depreciation in the previous year has not been claimed at all. - Decided in favour of assessee Allowability of the expenditure on the improvement of lease hold premises u/s 37(1) - Held that:- As decided in assessee's own case expenditure to be treated as Revenue in nature. The finding of fact is a direction that improvement were made in the lease premises by erecting temporary wooden portion and structure, and therefore, the same were revenue in nature and even eligible for deduction under Section 37(i) of the Act. - Decided in favour of assessee Addition being 1/10th of preliminary expenses - CIT(A) deleted the addition - Held that:- Issue has been decided in favour of the assessee by the Hon’ble Jurisdictional High Court in the preceding assessment years ranging from 1997 to 2001 [2011 (3) TMI 679 - DELHI HIGH COURT ] held as there is no reason to disallow the same as it is clear that the Revenue had accepted to amortize the aforesaid expense over a period of ten years and, therefore, for all these ten years, the expenditure is eligible for deduction under Section 35D of the Act.- Decided in favour of assessee Disallowance of advertisements expenses related to glow signs and neon sign - CIT(A) deleted the addition - Held that:- As decided in assessee's own case for the assessment year 1999-2000 by putting the neon signs and glow signs, no asset of permanent nature is created. Simply because self-life of such neon signs is more, may not be of any significance once we keep in mind the important aspect on which the expenditure is incurred i.e. on advertising and marketing - Decided in favour of assessee 2016 (1) TMI 131 Taxability of revenue generated through advertisements in India - Taxability under India-US tax treaty - assessee having a Permanent Establishment (PE) in India in terms of India-USA DTAA - whether the income generated through distribution of channels falls within the meaning of “Royalty” under Article 12 of India-USA DTAA and also u/s 9(1)(vi) of the Act and hence the same is also taxable in India? - Held that:- If the foreign company receives any money from the Indian soil and if it is held to be having a “Permanent Establishment”, then the taxability of the same have to be examined in accordance with the provisions of Indo-US treaty as well as under the provisions of Indian Income tax Act. We have noticed that the assessee had contended before the AO that it is not taxable at all in respect of advertisement revenue and hence we notice that the assessee has not challenged the income worked out by the assessing officer. In the interest of natural justice, we are of the view that the assessee should be provided an opportunity to submit its contentions with regard to the computation of income from advertisement revenues. Hence, for this limited purpose, we restore this issue to the file of the assessing officer. If the assessee does not have to say anything in this regard, the income computed by the assessing officer shall stand. We notice that the assessing officer has made a general observation that the Article 12 of the India-US DTAA shall be applicable without critically analyzing the provisions of the treaty. Though the assessing officer has also referred to the provisions of Explanation 2 to sec. 9(1)(vi) of the Act for examining the definition of the term “royalty”, yet he has not critically discussed about its applicability to the impugned payment. It is pertinent to note that the definition of the term “royalty” given in sec. 9(1)(vi) of the Act as well as in the Indo-USA treaty uses the expression “process”. The said expression has not been defined in the treaty, but the same has been defined in Explanation 6 to sec. 9(1)(v) of the Actinserted by the Finance Act, 2012. We further notice that the various case law relied upon by the assessee has been rendered prior to the insertion of the above said Explanation-6 or the applicability of the above said explanation has not been examined therein. Hence, we are of the view that the question whether the payment received by the assessee for giving distribution rights shall fall in the category of “Royalty” needs to be examined afresh at the end of the assessing officer. Further, while dealing with the issue relating to the advertisement revenue, we have taken the view that assessee is having dependent agent PE. The said fact also needs to be taken into account while examining the issue. In view of the above, we set aside the order of the AO on this issue and restore the same to the file of the assessing officer with the direction to examine the same afresh in the light of discussions made supra and take appropriate decision in accordance with the law, after affording necessary opportunity of being heard to the assessee. 2016 (1) TMI 130 Addition U/s 69C - as per AO furnishing of subsidiary cash book and affidavits regarding cash deposits was an afterthought - CIT(a) deleted addition - Held that:- The ld CIT(A) had examined this issue thoroughly and he directed the Assessing Officer during the assessment proceedings to make inquiry on the evidences submitted by the assessee. The ld Assessing Officer in remand proceeding was able to record the statement of 15 persons who had admitted the amount was deposited with the assessee. They filed affidavit of all the particulars i.e. names, addresses and source of income has been explained through these affidavits. It is a fact that these loans were in cash. There was no negative cash balance on the basis of subsidiary cash book produced by the assessee when the ld Assessing Officer raised the query on negative cash balance. The number of affidavits i.e. total 53 affidavits were submitted by the assessee, which supports the assessee’s case that deposits shown in the cash book were genuine. Therefore, the assessee has proved the cash available with her on given dates. - Decided against revenue Disallowance of salary and wages - CIT(a) deleted addition - Held that:- The assessee’s books of account are audited. The salaries of guards were paid by the telecom company to the assessee after verification. The working made by the ld Assessing Officer on the basis of evidence submitted by the assessee, the ld Assessing Officer have no jurisdiction to instruct how to conduct business and how to deploy the guards for security of the towers. The number of guards employment depend on the requirement of security personnel, which cannot be increased or decreased immediately on increase or decrease of business. It is continuous process and assessee had made these payments to commercial expediency as a prudent business man. The ld CIT(A) has also called for report during the appellate proceedings from the Assessing Officer, which has not been replied by him. The assessee also deducted ESI, which has been paid to the concerned department. Therefore, in absence of contrary evidence with the Assessing Officer, the ld CIT(A) was right in deleting the addition made by the Assessing Officer - Decided against revenue 2016 (1) TMI 129 Penalty u/s 271(1)(c) - Reopening of assessment - lower appellate order deleting depreciation disallowance - Held that:- A perusal of the case file reveals that the installation report of this asset. Page 41 of the paper book reveals lease rent income therefrom in assessee’s P & L account. Page 43 is sales tax challan of the asset. It transpires from the case file that this Kanpur entity went into liquidation. The assessee filed company application before hon’ble Allahbad high court for inspection and possession of its lease asset. More particular, the air pollution control equipment in question by specifically stating value thereof as per lease agreement dated 18-03- 1996. Their lordships passed order 11-12-2002 issuing necessary directions to the official liquidator. He issued intimation to assessee on 08-01-2003 appointing a valuer for inspecting the factory site. This valuer visited the factory site. We confronted ld. department representative with all these overwhelming evidence. He sought time to produce the search inventory. The same stands submitted in the courses of hearing. Page 53 thereof reveals that the very air pollution control equipment was found during the course of search. We observe on the basis of these facts and evidence that the assessee has been able to prove genuineness of its depreciation claim qua the air pollution control equipment in question leased out to M/s Rajendra Steels Ltd, Kanpur. The Revenue’s argument accordingly are declined. We affirm the CIT(A)’s findings extracted hereinabove granting depreciation relief to assessee. The Revenue’s second substantive ground fails. This failure of Revenue’s second substantive ground renders entire reassessment unsustainable in law. All other disallowances/additions of loss on shares and investments and that of depreciation are deleted as a necessary corollary. Section 271(1)(c) penalty relating to depreciation claim hereinabove is allowed since the main disallowance/addition does not survive. - Decided in favour of assessee. 2016 (1) TMI 128 Disallowance of interest paid to the persons who comes u/s 40A(2)(b) - whether it as unreasonable and excessive and restricting and confirming the interest payment to them at 12% as against interest paid at 15% to 18% per annaum on their unsecured deposits as being continued to be paid as in earlier years and accepted by the department in earlier years? - Held that:- A perusal of chart shown by the assessee of interest expenditure incurred in this year and earlier years, we notice that the assessee has not increased the rate of interest to any depositor and in some of the case; the rate of interest has been reduced and paid at a lesser rate as mutually agreed by the depositors. Therefore, as regards the contention of the assessee that the consistency is to be maintained while completing the assessment, we find force in his argument. Further, we find that the assessee is not having any immovable property without which the banks would not lend any loans at a lesser rate as this is one of the primary requirements for taking loans from the banks. Further, we are of the opinion that the consistency should have been followed in completing the assessment proceedings unless there is cogent reason or justifiable grounds for the Revenue to depart from its earlier decisions made u/s 143(3) of the Act. We are of the opinion that the ld. CIT (A) was not right in confirming the disallowance made by the AO on account of interest paid to the persons u/s 40A(2)(b) by holding it unreasonable and excessive and also restricting the interest payment to them @ 12%. Accordingly, we allow the ground of appeal taken by the assessee and order deletion of the same. - Decided in favour of assessee. 2016 (1) TMI 127 Delayed payment of PF contribution - CIT(A) deleted the addition - Held that:- The deduction for the PF/EPF was disallowed by the AO on account of late deposit as specified under the respective Act. The same disallowance was deleted by the Ld. CIT(A) relying in the decision of Hon'ble Apex Court in the case of Alom Extrusions Ltd.(2009 (11) TMI 27 - SUPREME COURT ). In view above we allow the claim of the assessee and uphold the order of the CIT(A) deleting the disallowance made on account of delayed payment of PF contribution - Decided against revenue Addition of interest as unexplained expenditure - according to the Revenue assessee failed to furnish the details and addresses of unsecured creditors - CIT(A) deleted the addition - Held that:- AR drew our attention to pages No. 10 to 12, wherein the details of the loan parties and working of interest was provided. Further, Ld. AR submitted the duly audited balance-sheet, wherein the interest paid to the loan parties for an amount of ₹ 1,85,62,489/- was duly shown which is placed at page 28 of the paper book. We find that AO has disallowed the interest amount of ₹ 83,83,743/- on the misunderstanding of the facts given by assessee. In the books of accounts of the assessee there were admittedly interest expenses of ₹ 1,85,62,489.00. The chart filed by the Assessee before the AO showed only the unpaid interest of ₹ 1,01,78,746.00 as on 31.3.1998. Thus there was no discrepancy whatsoever as presumed by the AO. Accordingly we are inclined not to interfere in the order of CIT(A)- Decided against revenue - Decided against revenue Addition out of interest payment to UCO bank though the assessee debited the same in A.Ys 1993-94 & 1994-95 - CIT(A) deleted the addition - Held that:- As find from the observation of AO that interest was debited in earlier years for the same loan for AY 1993-94 for a sum of ₹ 6,68,422/-. In this connection, it was found that interest was debited by assessee on account of some other loan of UCO bank only and this account was maintained by assessee at Guwahati branch of UCO bank and same amount was also settled by assessee with UCO bank. However, as regards interest charged by assessee of ₹ 17,31,894/- on account of AY 1994-95, AO observed that it has been debited in the books of account of assessee and therefore disallowed. However, Ld. AR has submitted before us that this interest has been reversed in the books of account of that relevant year and in support of its claim a ledger copy of UCO bank in the books of account of assessee is submitted which is placed at page 14 of assessee's paper book, where said interest charged by assessee has been reversed in its books of account in the assessment year 1994-95 only. So it can be inferred that this amount has never been charged in the profit and loss account in its books. From the aforesaid discussion, we find that assessee has not claimed double deduction of interest paid in earlier year and interest paid in relevant year. On this basis, we are inclined not to interfere in the order of Ld. CIT(A) .- Decided against revenue Addition on account of profit earned from sale of assets - CIT(A) deleted the addition - AR submitted that as per the accounting method, a company is to declare the profit arising on account of sale-purchase of its assets by crediting the profit and loss account - Held that:- While determining the profit chargeable the tax under Income Tax Act, the provision of Sec. 32 has to be complied with and accordingly the Ld. CIT(A) deleted the addition made by the AO. From the aforesaid submissions made by Ld. AR and examination of the case, the assessee has given the correct effect of profit arising from sale-purchase of its fixed assets in books of account and adjusting the written down value of its relevant block as per the income tax Act. We find no infirmity in the order of Ld. CIT(A) and we uphold the order of Ld. CIT(A).- Decided against revenue Addition on account of hire charges - AO made the addition for want of supporting evidence - CIT(A) deleted the addition - Held that:- As observed from the assessment order that disallowance was made for non-production of details of the parties to whom the payment was made. The Ld. AR drew our attention on page 18 of the paper book, wherein the party, Aparna Sales Pvt. Ltd. has confirmed the expenses of ₹ 2.40 lakh. Since the sufficient details have been furnished by assessee and accordingly Ld. CIT(A) deleted the addition made by AO. So we uphold the order of Ld. CIT(A).- Decided against revenue Addition being the cultivation expenses incurred - AO made the addition for want of supporting evidence - CIT(A) deleted the addition - Held that:- The AO has just disallowed the expenses of ₹ 2 lacs on estimated basis which is not justifiable as per the law. The AO failed to provide the specific reason for the disallowance. Therefore we are inclined not to interfere in the order of Ld. CIT(A).- Decided against revenue Interest income treated as business income by CIT(A) - AO treated the same as income from other source and applied Rule-8 of IT Rules, 1962 - Held that:- Since this issue has already been covered by the judgment of Hon'ble jurisdictional High Court in the case of Eveready Industries (India) Ltd. (2009 (12) TMI 226 - CALCUTTA HIGH COURT) in favour of assessee and treating the interest income as "business income" and the same is binding on us. Therefore, we uphold the order of Ld. CIT(A) - Decided against revenue 2016 (1) TMI 126 TDS u/s 194J - outright purchase of copyright - non deduction of TDS - Assessee in default - Held that:- The assessee is an Indian company engaged, inter alia, in the business of manufacture and sale of audio cassettes, CDs etc. and also in production of films/TV Serials and in its course of business activities assessee made payments for acquisition of copyright of music/films from the music producers, i.e. transfer of ownership of copyrights for a lump sum consideration. The assessee is not dealing in copyrights or sale or purchase of copyrights is not its business. Accordingly, the transaction was a transaction of outright purchase of copyright and not a mere payment for past and future royalties. The price paid for outright purchase of copyright was price paid for acquiring a capital asset. Accordingly, we are of the view that neither AO nor CIT(A) was justified in treating the assessee in default for not deducting TDS on these transactions. - Decided in favour of assessee. 2016 (1) TMI 125 Disallowance being amortization of lease rent - treating the same as of capital nature by CIT(A) - Held that:- Similar issue in assessee's own case has been decided in respect of Asst. Years 2005-06 to 2007-08 wherein decided the issue in favour of assessee considering the decision of this Court in the case of Sun Pharmaceutical Industries Limited (2009 (3) TMI 587 - Gujarat High Court ) as well as decision of the Hon'ble Supreme Court in the case of Madras Auto Services Pvt. Ltd. (1998 (8) TMI 1 - SUPREME Court), we are of the opinion that the learned Tribunal has committed an error in distinguishing the aforesaid decisions and not applying the same to the facts of the case on hand. Considering the aforesaid two decisions, it is to be held that the aforesaid lease rent was deductible as revenue expenditure and the learned Tribunal has erred in holding that amortization of lease rent paid for the land is capital expenditure. - Decided in favour of assessee Disallowance u/s 14A - Held that:- As the assessee seems to be having sufficient interest free funds out of which investments in funds giving tax free income would have been made and also there is no specific observations by the Assessing Officer that during the previous year any such funds bearing interest have been diverted/applied to investments, income of which is not forming part of total income and, therefore, there seems to be no possibility of application of Rule 8D in relation to interest expenditure. As regards apportionment of administrative and establishment expenses debited to the profit and loss account towards exempt income earned during the year on one hand, assessee which is a limited company has provided audited financial statement along with audit report u/s 44AB wherein no specific disallowance u/s 14A is appearing and on the other hand, the Assessing Officer has not gone specifically through the books of account so as to bring any fact that any such expenditure has been incurred for earning exempt income. Therefore, Assessing Officer was not correct in applying section 14A read with Rule 8D in the case of the assessee. However, looking to past history, previous assessments made and the decision of co-ordinate Bench, as well as accepting the fact that one cannot ignore the possibility of incurring some expenditure for earning exempt income which have been debited to the profit and loss account and to cover up such possibility we are of the view that a lump sum disallowance of ₹ 1,00,000/- will meet the ends of justice.- Decided in favour of assessee in part Reduction in the deduction claimed by assessee under section 80IA - AO has estimated the rate of ₹ 2.23 per unit for units of electricity sold and arrived at a conclusion that assessee earned has not earned any profit rather incurred losses - Held that:- We find that the co-ordinate Bench in assessee's own case for Asst. Years 2005-06 to 2007-08 has decided similar issue by observing deduction allowable to the assessee u/s 80IA in respect of captive consumption of power, the rates fixed by Electricity Board i.e. GEB in the present case, has to be applied and not the price fixed by the legislative mandate. He has also noted that in the present case, the assessee is prevented by legislative mandate from selling power to any person other than GEB and the rates fixed by GEB was ₹ 1.86 per unit only but the GEB is asking the assessee to pay at ₹ 4.55 per unit and hence, he has directed the AO to allow deduction u/s 80IA as claimed, being the market rate of ₹ 4.55 per unit of power. No contrary decision was brought to our notice by the ld. DR and hence, we do not find any reason to interfere in the order of ld. CIT(A) on this issue which is in line with various Tribunal decisions. This issue is decided in favour of the assessee MAT - Computation of book profit under section 115JB - claim for provision for doubtful debt and claim of provision of diminution in value of investment and provision for loss in the derivative were added back to the book profit - Held that:- The issue has been decided by the co-ordinate Bench in assessee's own case for Asst. Year 2004-05 wherein it was fairly conceded by the ld. AR that this issue has to be decided against the assessee as per clause (i) of Explanation 1 to section 115JB and hence, this issue is decided against the assessee 2016 (1) TMI 124 Expenditure incurred by the assessee with regard to payment of logo charges - assessee claimed the same as revenue expenditure but AO treated both the payments as capital in nature and allowed depreciation @ 25% - CIT(A) allowed the claim of the assessee by holding that the payments are in the revenue field - Held that:- We have carefully gone through the order of this Tribunal in assessee's own case for assessment years 2002-03 to 2007-08 wherein found that the payment of royalty and logo charges are revenue in nature, therefore, has to be allowed while computing the taxable income. In view of the order of this Tribunal in assessee's own case for assessment years 2002-03 to 2007-08, this Tribunal do not find any reason to interfere with the order of the lower authority. Merely because an appeal against the order of this Tribunal is said to be pending before the High Court, that cannot be a reason to take a different view. - Decided against revenue 2016 (1) TMI 123 Accumulation of income u/s 11(1)(a) - Held that:- A perusal of the computation of total income done by the AO vide para 8 of the asst. order shows that there was net surplus of ₹ 51,52,825/- before the income being applied for charitable purpose. After applying the said income to the capital expenditure of ₹ 100,04,167 lakhs there remains no income. Therefore, the question of accumulated income for the future years does not arise. The issue in appeal is purely academic in nature does not require any adjudication. Hence, the appeal filed by the assessee society is dismissed. - Decided against assessee. 2016 (1) TMI 122 Disallowance of short- term capital loss - whether loss would have been allowed if the sale were made after nine months as against the applicable law of three months in the month of June 2004 Held that:- There is no dispute that prior to amendment by Finance Act 2004 in the provisions of sec.94(7) of the Act, loss if any, arising from the purchase and sale of securities or units acquired within a period of three months prior to record date and unsold within 3 months after such record date, then the loss on sale of units shall be ignored to the extent of the amount of the dividend or income received which is exempt as per the provisions of the Act. Post amendment the requirement of holding the units has been enhanced to a period of 9 months from the recorded date and therefore, as per amended provisions of sec.94(7), if any person buys or requires any unit within a period of 3 months prior to recorded date and sales/transfers the same within a period of 9 months after such record date, then the loss if any arising from such sale/purchase shall be ignored to the extent of the amount of dividend or income received or receivable which is exempt as per the provisions of the Act. The transaction in question was completed prior to the bill proposing the amendment to be introduced then it is not disputed that the assessee could not visualize the subsequent amendment in the provisions of sec.94(7) and enhancement of tax liability as per the subsequent amendment. When the incident of tax being sale of units occurred prior to the introduction of the bill proposing the amendment in section 94(7) then the additional tax liability cannot be fastened on the transactions of and sale of securities/units by virtue of subsequent amendment. Accordingly, in view of the above discussion and in the facts and circumstances of the case, we hold that by virtue of the amendment vide Finance Act 2004 in section 94(7) no additional tax liability can be imputed on the transaction of sale of M.F.units completed prior to the introduction of bil proposing the amendment. Hence, the addition made by AO by invoking the provision of section 94(7) is deleted. - Decided in favour of assessee 2016 (1) TMI 121 Entitlement for deduction u/s 80HHC - income earned by selling of Duty Entitlement Pass Book licences in the event of the turnover of the assessee exceeding ₹ 10 crores - CIT(A) allowed the claim - Held that:- Learned CIT-A had addressed the deduction u/s 80HHC of the Act by duly considering the third proviso to section 80HHC(3) of the Act by giving detailed workings of deduction in the light of the judgements in the case of Topman Exports vs CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] and in the case of GKW Ltd vs CIT [2011 (7) TMI 86 - CALCUTTA HIGH COURT ]. Hence we are not inclined to interfere with the findings recorded therein. - Decided in favour of assessee. 2016 (1) TMI 120 Undisclosed bank account of the assessee - CIT(A) allowed partial relief - Held that:- Theory of peak credit held making the additions of aggregate deposits in the bank account without giving the benefit of withdrawals made by the assessee from time to time is not justified. The Ld.CITA has rightly treated the peak balance as an unexplained investment made by the assessee in the nature of credits in the said bank account and , therefore, only that addition is only called for. The order of the Learned CITA is, therefore, upheld. - Decided against revenue 2016 (1) TMI 119 Penalty u/s 271(1)(c) - assessee has not substantiating that the source of money was M/s Mangla Brothers - Held that:- Penalty for concealment or furnishing inaccurate particulars was levied and after deleting the quantum addition, there remains no basis at all for levying the penalty. Ordinarily, penalty cannot stand in itself if the addition made in the assessment itself is set aside or cancelled by the superior authority/Court. The penalty cannot stand by itself because false result may be produced by the falsity of one or more of the constituent items in the return. The word ‘inaccurate particulars’ would cover falsity in the final figure and also the constituent elements or items. They simply would mean inaccurate in some specific or definite respect whether in the constituent or subordinate items of income or the end result. Concealment or furnishing inaccurate particulars implies some deliberate act on the part of the assessee in withholding the true facts from the authorities. Since, the basis of levying penalty remains no more in existence, after deletion of quantum addition, therefore, from this angle, the stand of the ld. Commissioner of Income tax (Appeals) is not sustainable. - Decided in favour of assessee 2016 (1) TMI 118 Electricity duty exclusion while calculating the transfer price of electricity duty for computing the deduction u/s 80IA - Held that:- This issue has been decided in favour of the assessee by the Tribunal rder in assessee’s own case for AYs 2002-03 to 2005-06 [2014 (7) TMI 554 - ITAT MUMBAI ] wherein held as we do not find any reason for excluding the element of tax and duty while determining the “market value” of the electricity price per unit supplied by the power unit to the assessee as contemplated in sub–section (8) of section 80IA as we have to follow the provisions as contained in section 80IA(8) for determining the market price, which cannot be arrived by reducing the price by any other factors like taxes, duties, etc., as the same are embedded in the price. - Decided in favour of assessee Calculation of deduction u/s 80IA for reducing the pro-rated indirect expenses of the company from the profit of the power units - Held that:- This issue has been decided against the assessee by the Tribunal in assessee’s own case for the earlier years wherein held that the present issue has been decided by the Tribunal against the assessee right from the assessment year 1999–2000 to 2001–02. The Assessing Officer has apportioned indirect expenses which are to be reduced from the profits of the power unit as worked out in detail at Page–20 of the assessment order. This allocation of indirect expenses to arrive at the profit of power unit has been decided by the Tribunal in the earlier years and, therefore, consistent with the view taken therein, we find no reason to disturb the order passed by the learned Commissioner (Appeals) and, accordingly, the same is affirmed on this issue - Decided against assessee Alternative claim of deduction u/s 80IA in respect of integrated power unit in case the claim for deduction for power unit No. 6A & 6B are not allowed - Held that:- This issue has been treated as infructuous by the Tribunal in the earlier years on the ground that it is purely an alternative claim as the claim for deduction u/s 80IA with regard to unit no. 6 has been allowed, therefore, no separate adjudication is required as admitted by the assessee. Accordingly, in this year also this alternative claim of the assessee is treated as dismissed, being infructuous. - Decided against assessee Disallowance of employees contribution to ESI and Provident fund made after due date - Held that:- out of total payment of ₹ 43,23,169/-, sums aggregating to ₹ 42,61,565/-was paid within the grace period, as prescribed in the relevant statute, therefore, there is no question of disallowance of such an amount. Further, these payments have been made/paid much before the due date of furnishing of return of income as per section 139(1), therefore we hold that all the impugned payment is to be allowed as the same is covered by the amendment to section 43B.- Decided in favour of assessee Disallowance u/s 14A on account pro-rated indirect expenses - Held that:- The assessee has earned dividend income of ₹ 48,74,295/-(treated as exempt) as compared to AY 2004-05 which has been dealt by the Tribunal wherein the assessee has earned dividend income of ₹ 7.87 lakhs. The Tribunal has worked out the disallowance on account of administrative expenses after considering the director’s fee and auditor’s remuneration vis-a-vis the earning of dividend income. If we analyze the figures of 2004-05 and the finding of the Tribunal, then disallowance if at all is required to be made in this year looking to the nature of expenses then on reasonable basis it may not be more than 20,000/-. The assessee itself has offered ₹ 8,187/- for disallowance before the AO. Thus, looking into the facts and circumstances, we propose to disallow ₹ 50,000/- for this year also, which will include the disallowance already offered by the assessee at ₹ 8,187/-. - Decided partly in favour of assessee Addition of profit on sale of investment and reduction of loss on fixed assets in computing the book profit u/s 115JB - Held that:- this issue stands covered against the assessee by the Special Bench decision of the Tribunal in Rain Commodities Ltd. v/s DCIT, [2010 (7) TMI 794 - ITAT HYDERABAD ]. Thus, respectfully following the decision of the Special Bench of the Tribunal, we confirm the addition on account of profit on sale of investment in fixed assets while computing the book profit under section 115JB.- Decided against assessee Disallowance of expenses incurred for earning of exempt dividend income - disallowance u/s 14A whether to be included while computing the book profit - Held that:- This issue would be decided against the assessee in view of the decision of Hon’ble Delhi High Court in the case of Goetze India Ltd. [2013 (12) TMI 607 - DELHI HIGH COURT ] wherein Hon’ble High Court has held that disallowance made u/s 14A would be included while computing the book profit. Since we have already confirmed the disallowance of ₹ 50,000/-, therefore, the same shall also be included in the book profit.- Decided against assessee Generation of steam amounts to formation of power or not so as to be eligible for claim of deduction u/s 80IA for Unit No. 6A and 6B - Held that:- The section provides that the assessee must begin to generate power during the period defined under the statue and the impugned assessment year definitely falls within that period. Lastly, insofar as the observation and the conclusion of the Assessing Officer, which are based on similar reasons as given for Unit–1 to 5, the same is also not sustainable as the Tribunal has already decided the issue on these reasoning in favour of the assessee. Thus, we set aside the impugned order passed by the learned Commissioner (Appeals) on this score and hold that the assessee is eligible to claim deduction under section 80IA with regard to Unit–6 also as a stand alone power generating undertaking. - Decided in favour of assessee Allowability of expenses incurred on repair and maintenance of the building - Held that:- The assessee had taken office on lease and to make it fit for use the aforesaid expenses were incurred on plastering, polishing, false ceiling, electrical fittings, fresh carpets etc. These expenses were incurred on the assets not owned by the assessee. The expenditure in question is to give a better look to the office premises and does not result in acquisition of any asset of enduring nature. Hence, the expenditure so incurred is directed to be allowed as revenue expenditure. We may also mention that depreciation, if any, granted by the department considering the said expenditure as capital expenditure be withdrawn.- Decided in favour of assessee Addition on unutilized Modvat credit to the value of closing stock of raw material in view of provisions of section 145A - CIT(A) deleted the addition - Held that:- The finding of fact as recorded by the learned Commissioner (Appeals) that after making the adjustments made by the assessee in the opening stock and purchase and sale, the net effect is nil appears to be based on fact. Thus, we do not find any reason to deviate from such findings of fact which has not been rebutted - Decided in favour of assessee Allowability of deduction u/s 80HHC while computing the book profit u/s 115JB - Held that:- This ground now stands covered against the assessee in view of the retrospective amendment brought in statute in section 115JB by the Finance Act, 2011 w.e.f. 1 st April 2005. Since this amendment is applicable from the assessment year 2005–06 only, hence, this issue will also go against the assessee 2016 (1) TMI 117 Entitlement to deduction u/s.80IA - whether two power generating units situated in the main manufacturing plants producing news print and writing paper, set up for captive consumption as they did not qualify to be considered as separate industrial undertakings within the meaning of clause (iv) of sub-section (4) of sec 80IA? - Held that:- Eligible business were the only source of income during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business, Once the set off is taken place in earlier year against the other income of the assessee, the Revenue can not rework the set off amount and bring it notionally. Fiction created in sub-section does not contemplate to bring set off amount notionally. Fiction is created only for the limited purpose and the same can not be extended beyond the purpose for which it is created . See Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT - [2010 (3) TMI 860 - Madras High Court ] - Decided against revenue. Incentive on carbon credit - whether is capital in nature? - Held that:- Similar issue was decided by the Andhra Pradesh High Court in the case of CIT v. My Home Power Ltd. (2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT), wherein it was held that income received from sale of carbon credit is considered as capital receipt and not business receipt and not liable for tax under the Act. Accordingly, we agree with the finding of the Commissioner of Income-tax(Appeals) on this ground and dismiss the ground of appeal taken by the Revenue. - Decided against revenue. 2016 (1) TMI 116 Transfer pricing adjustment - selection of comparable - Held that:- From a perusal of the order of the DRP, it is clear that the assessee’s objections / contentions against the inclusion/exclusion of the comparables has not been dealt by the DRP while exercising the appellate jurisdiction against a quasi-judicial order of the TPO, which exercise is sine qua non for deciding the issue as to whether a comparable is comparable to the FAR of the tested party i.e. assessee. Simply by observing that tested party is broadly comparable will not suffice. We are of the opinion that the DRP cannot absolve from its duty without going into the merits of the contention of the assessee as to whether a comparable company is comparable to it or not as envisaged by the Act and Rules governing the subject. Since the DRP has not met the contention of the assessee in respect of inclusion/exclusion of comparable in its order, we deem it fit to remand the matter back to the file of DRP for fresh adjudication. Ex consequenti, the DRP order is set aside and the matter remanded back to the file of the DRP for passing a speaking order in respect of all the grounds raised before it and has to deal with each of the comparables contested above by the assessee. Needless to say that when considering the arguments in respect to selection of the comparables, the DRP must keep in mind the following aspects:- (a) Companies with extra ordinary circumstances, like those which suffered events like merger/demerger, impacting the financial results could not be treated as comparables; (b) Companies which are functionally dissimilar cannot be taken as comparables; (c) Companies acting merely as intermediary having outsourced its activity cannot be considered as comparables; (d) Companies whose directors were involved in fraud cannot be taken as comparable, as their financials are not reliable. The aforesaid aspects may be kept in mind by the DRP while addressing the objections in respect to inclusion / exclusion of comparables and pass a speaking order after giving adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes 2016 (1) TMI 115 Transfer pricing adjustment - selection of comparable - Held that:- From a perusal of the order of the DRP, it is clear that the assessee’s objections / contentions against the inclusion/exclusion of the comparables has not been dealt by the DRP while exercising the appellate jurisdiction against a quasi-judicial order of the TPO, which exercise is sine qua non for deciding the issue as to whether a comparable is comparable to the FAR of the tested party i.e. assessee. Simply by observing that tested party is broadly comparable will not suffice. We are of the opinion that the DRP cannot absolve from its duty without going into the merits of the contention of the assessee as to whether a comparable company is comparable to it or not as envisaged by the Act and Rules governing the subject. Since the DRP has not met the contention of the assessee in respect of inclusion/exclusion of comparable in its order, we deem it fit to remand the matter back to the file of DRP for fresh adjudication. Ex consequenti, the DRP order is set aside and the matter remanded back to the file of the DRP for passing a speaking order in respect of all the grounds raised before it and has to deal with each of the comparables contested above by the assessee. Needless to say that when considering the arguments in respect to selection of the comparables, the DRP must keep in mind the following aspects:- (a) Companies with extra ordinary circumstances, like those which suffered events like merger/demerger, impacting the financial results could not be treated as comparables; (b) Companies which are functionally dissimilar cannot be taken as comparables; (c) Companies acting merely as intermediary having outsourced its activity cannot be considered as comparables; (d) Companies whose directors were involved in fraud cannot be taken as comparable, as their financials are not reliable. The aforesaid aspects may be kept in mind by the DRP while addressing the objections in respect to inclusion / exclusion of comparables and pass a speaking order after giving adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes 2016 (1) TMI 114 Entitlement to deduction u/s 10B - Held that:- The agreement entered by the assessee with its customers clearly show that the parties expected definite results , be it in the nature of new or improved compounds or in the nature of research documentation and each step that assessee had to take for achieving this result was also set out. Such results were to be given to its customers. The activities done by the assessee used sophisticated equipment and methodologies resulting in speciality compounds and documentations. The payments effected by the clients, though based on manhour spent were for such results. Hon Madras High court had again in the case of CIT vs N Venkatraman (2000 (2) TMI 66 - MADRAS High Court ) clearly held that the nature of the state of the what is produced, ie whether an intermediary or final product, could not be criteria for deciding whether an assessee was manufacturing or producing an article or thing. Billing done by the assessee on man hour basis would at the best demonstrate the difficulty in fixing the value of the ultimate production, considering the inherent complexities of the processes involved and the value of the outcome as such. It will not be a reason to say that assessee was being compensated only for the research, irrespective of the final outcome. Thus not only was there exports but the exports were of articles or things produced by the assessee. We are alive to the fact that assessee had in its own books demarcated its receipts into two classes, one for research and other for sale of molecules. But this demarcation will not take away the sheen of its argument that the export earnings were only for the results of the research and this fell with in the meaning of production of an article or thing. In any case it is trite law that accounting entries are not decisive in determining the question of eligibility for a claim of deduction or exemption Thus in our opinion assessee was eligible for claiming the benefit of Section 10B of the Act. Ld CIT was justified in directing so - Decided in favour of assessee. 2016 (1) TMI 113 Deduction being the interest paid representing ‘late payment of interest’ on the monies admittedly borrowed - whether as allowable deduction while computing the income from property as was utilized for acquiring the property whose income was assessed to tax? - Held that:- The claimed deduction has been denied on the basis that the same was not allowable as it was not an interest paid on the capital borrowed from HDFC Bank. There is no dispute that for purchasing the property at Munirka for a consideration of ₹ 9,37,33,600, the assessee had taken loan from HDFC Bank for ₹ 6.50 crores on which the authorities below have allowed the interest paid by the assessee. The property was acquired from Lal Bhai Reality Finance Pvt. Ltd. and ₹ 2,21,879 as interest was paid on the delayed payment of the amount out of the sale consideration to Lal Bhai Reality Finance Pvt. Ltd. The said delayed payment out of the consideration was made on 10.2.2006. Thus, in our view, the interest paid at ₹ 2,21,879 cannot be treated differently in comparison to the interest paid to the HDFC Bank as the very purpose for both the interest was to facilitate the payment of amount in consideration for acquisition of the property. We thus while setting aside the orders of the authorities below in this regard direct the Assessing Officer to compute the interest of ₹ 2,21,879 claimed as allowable while computing income from property as provided under sec. 24(b) of the Act. - Decided in favour of assessee Non commencement of business in the real estate - Held that:- It is an established position of law that any expenditure incurred after the date of setting up of the business is allowable deduction and it is an unrebutted fact of the present case that in the preceding assessment years, as submitted by the Learned AR hereinabove, the expenditure incurred and as debited in profit and loss account like in the year under consideration, has been fully and wholly allowed as deduction. The Learned CIT(Appeals) has himself held at page No. 26 para No. 7.13 of the First Appellate Order that admittedly the loan amount was used as working capital in its real estates business. Under these facts, we are of the view that the Learned CIT(Appeals) was not justified in arriving at a conclusion that the assessee company has not commenced the business of real estates. This conclusion of the Learned CIT(Appeals) is set aside with this finding that during the year the assessee had commenced the business of real estates - Decided in favour of assessee Nature of land - whether the land held and owned by the assessee in Village: Bhondsi measuring 38.09 hector is an agricultural land despite the fact that the same was shown in the balance sheet, under the head “stock in trade”? - Held that:- As contended by the assessee that it had set up the business when it had purchased the land. Otherwise also, as the land was part of the stock in trade since the aforesaid land had been acquired in the course of its business which is an admitted fact and so admitted by when it had been contended by the assessee that it is a developer in real estates and as such in our opinion the said land was a stock in trade. The approach of the assessee is apparently contradictory which cannot be upheld. Thus, in our view, the Learned CIT(Appeals) was right both on facts and in law in not holding that the said land was not a stock in trade as has been contended by the assessee. The assessee has also taken the ground as an alternative contention and was without prejudice as the Revenue had taken the stand that the assessee has not commenced the business in real estates. In view of our findings hereinabove on the issues raised in ground No.3 and the admitted position by the Revenue in the preceding years that the assessee had not only set up the business but had also commenced the same, the contention raised in support of ground No.4 as discussed above does not stand and the same is accordingly rejected, with this finding that the land in question was actually stock-in-trade. Disallowance out of interest paid to HDFC Bank and the bank charges - Held that:- when Learned CIT(Appeals) himself has admitted that funds have been utilized as working capital of the real estates business in his finding in para No. 7.13 at page No. 26 of the order, he was not justified in denying the claimed deduction of interest payments on the borrowed amounts for the investment made in stock in trade. The Learned CIT(Appeals) has disallowed the claimed interest payment on the basis that the business for the purpose of which loan was raised and interest was paid was not commenced. We have decided this issue hereinabove in ground No. 3 that keeping in view the facts and circumstances of the case and the approach of the Assessing Officer in preceding assessment years in allowing the claimed expenditure, the Learned CIT(Appeals) was not justified in coming to the conclusion that the real estates business had not commenced. We thus while setting aside orders of the authorities below direct the Assessing Officer to delete the disallowance of ₹ 39,31,938 claimed on account of interest and bank charges paid against the loan raised for investment in the acquisition of the property - Decided in favour of assessee Disallowance sustained under the head “employees cost” - Held that:- It is a trite law that after the business has been set up, the expenditure incurred is an allowable deduction. The Assessing Officer has disallowed the claim on proportionate basis on an erroneous assumption that there is no income from business of real estates as such, only expenses to that extent there is business income which is allowable. He accordingly computed the disallowance. Besides, there is no material on record to support the allegations of the authorities below that assessee had not incurred the claimed expenditure for the purpose of its business. In absence of such evidence and especially when in the preceding years, similar expenditure has been allowed, we are of the view that there was no justification on the part of the authorities below to make and uphold the disallowance out of the claimed expenditure. We thus while setting aside orders of the authorities below in this regard, direct the Assessing Officer to delete the disallowance - Decided in favour of assessee. Disallowance of expenditure on conveyance and travelling - Held that:- We find substance in the contention of the Learned AR that a disallowance of the claimed expenditure cannot be made on the basis that no prudent businessman would have incurred expenses on travelling and conveyance to the tune of ₹ 11.78 lacs to earn receipts of ₹ 22.36 lacs, especially when no fault has been found in the vouchers and bills furnished in support of the claimed expenditure nor is there any dispute regarding the genuineness of the expenditure of the assessee. We thus while setting aside orders of the authorities below in this regard direct the Assessing Officer to delete the disallowance - Decided in favour of assessee. Treatment to interest income - Business income or income from other sources - Held that:- The business is continuing process and merely because there may not be any income from all resources, of course, which is not the case herein, does not by itself mean that the assessee is not engaged in the business and is not carrying on business activities in that year. Under these facts and circumstances, we are of the view that the Assessing Officer was not justified in treating the interest incomeas income from other sources against the claimed income from business. We thus while setting aside the orders of the authorities below in this regard direct the Assessing Officer to accept the claimed income in question as business income - Decided in favour of assessee. Disallowance u/s 14A - Held that:- As making disallowance under sec. 14A read with Rule 8D, it is a pre-condition for the Assessing Officer to record his satisfaction that the submissions made by the assessee in relation to the expenditure if any incurred for earning the exempt income is not correct. In absence of recording of such satisfaction by the Assessing Officer, the only option available with the Learned CIT(Appeals) was to delete the disallowance.- Decided in favour of assessee. 2016 (1) TMI 112 Unexplained credit entries - Undisclosed income - CIT(A) deleted the addition - Held that:- AO has added the unexplained credit entries with the Dena Bank to the tune of ₹ 88,94,266/- as addition to the total income of the assessee. The first appellate authority has observed that AO’s inference regarding the assessee filing fabricated bank statement is correct. On merits, the AO took note that all the credits from 25.08.2004 to 07.03.2005 are through cheques/transfer entries. He also took note of the fact that an amount of ₹ 23 lakhs are transfer entries from the bank accounts of the family members of the assessee who were his wife and daughters who were having account in the same branch of the Dena Bank. The remaining credits were through cheques from Smt. Padma Bhandari of ₹ 50,50,000/- , Shri S.S.H. Naqwi of ₹ 9 lakhs, rent of the property ₹ 5,000/-, Shri Sheel Mehta of ₹ 5,90,000/- and income-tax refund of ₹ 49,226/-. In respect to the credit of ₹ 50,50,000/-, we find that the CIT (A) has called for the remand report which has been reproduced (supra in para 5.6 of the CIT (A)’s order) wherein, the AO had stated that the said Smt. Padma Bhandari has passed away on 18.04.2008 and the legal heirs of the assessee are not aware of this particular specific information. The AO’s suspicion is only based on the fact that on the day the lady has given cheques to the assessee, similar amount was received by the lady on the same day through cheques for which no possible explanation was filed by the assessee. Other than the said observation of the AO, there was nothing to challenge the identity of the lender. The ld. CIT (A) has stated that the assessment of late Smt. Padma Bhandari was completed for AY 2005-06 u/s 143 (3) of the Act and has stated that credits appearing in the bank account of Smt. Padma Bhandari were from the sale consideration of an immovable property, therefore, just because confirmation was not given in respect to lending of this amount which has been repaid during the year, cannot be said to be undisclosed income of the assessee and, therefore, rightly deleted by the ld. CIT (A) which does not require any interference from our side. - Decided in favour of assessee Addition on account of undisclosed credit entry from saving bank account of Dena Bank - CIT(A) deleted the addition - Held that:- AO has not made any adverse observation against the transfer of the amount into the account of the assessee. The CIT (A) notes that just because the wife did not file the confirmation of lending the said amount, cannot be the ground to make the addition as income from undisclosed sources when the fact is that Smt. Manjusha (assessee’s wife) herself has admitted about the transaction. In the said facts and circumstances of the case, we do not find any merit in the appeal of the revenue on this ground and we uphold the decision of the ld. CIT (A) - Decided in favour of assessee Addition being credit entry in the name of Shri S.S.H. Naqwi and Shri Sheel Mehta - CIT(A) deleted the addition - Held that:- CIT (A) has found that the said amount has been an interest free loan by Shri S.S.H. Naqwi to the assessee and the said amount borrowed has been repaid by the assessee also during the year under consideration, therefore, the transactions are genuine and so he directed to delete the same. Likewise, in the case of Shri Sheel Mehta too, an amount of ₹ 5,90,000/- was said to have been given as an advance and the said Shri Sheel Mehta was the tenant of the assessee and has given an advance for the said property. The AO took note of the fact that the said Shri Sheel Mehta later on changed his mind and did not want the property, so the amount of ₹ 40,000/- was taken as commission and the balance amount of ₹ 5,50,000/- was paid back to Shri Sheel Mehta during the same year. In the remand report, the AO had expressed his satisfaction about the repayment of the said advance taken from Shri Sheel Mehta. In the light of the said facts, the CIT (A) has held that the transactions of both the persons were genuine and, therefore, the amount which was credited in assessee’s account cannot be termed as income from undisclosed sources and therefore, rightly deleted the said addition. Accordingly, we confirm the action of the ld. CIT (A) - Decided against revenue Addition of an amount credited to the assessee’s account by account payee cheques from the assessee’s daughters - Held that:- Before us, it was contended by the ld. AR that the donors were none other than the grand-parents of the donee. Therefore, according to him, the ld. CIT (A) or the AO should not have brushed aside the fact that grand-parents giving a gift to the grand-daughters is not unusual fact. On the other hand, the ld. DR questioned the creditworthiness of the donors, which according to him, has not been proved by the assessee, so the addition was made. We have heard both the parties and we find that this issue of gift, which is being contended by the assessee, as obtained as a gift to grand-daughters from grand-parents, who in turn has transferred the same to the father (assessee) needs to be de novo considered by the AO. Therefore, we set aside the order of the CIT (A) on this issue and remand the matter back to the file of the AO for de novo consideration of this issue. - Decided in favour of assessee for statistical purposes. Addition on account of unexplained cash peak credit - CIT(A) deleted the addition - Held that:- The CIT (A) took note that the purchases of DG set and air-conditioners were through cheques whereas the sale of the said goods were by cash. The ld. CIT (A) took note of the fact that since the sales had taken place on 19.01.2005 and these goods/assets are not reflected in the statement of affairs of the assessee as on 31.03.2005, therefore, he does not doubt the sales and mode of receipt as claimed by the assessee and so he held that there was no justification to hold that the said entries in the account are unexplained and he believed that by the said transaction, an amount of ₹ 20 lakhs of cash was deposited in assessee’s account. Ld. DR could not furnish any material before us to controvert the said finding of the ld. CIT (A). In the absence of any other material to contradict the said transactions made by the assessee, we are inclined to uphold the finding of the CIT (A) that ₹ 20 lakhs cash deposited in the assessee’s account stands explained and cannot be termed as undisclosed income from unknown sources. - Decided in favour of assessee Addition on account of sale of property - CIT(A) deleted the addition - Held that:- Though the copy of the agreement of sale was furnished along with the PAN of the vendee, Shri Ganpat Sharma and the cash receipt of ₹ 2,50,000/- which was made in advance for sale of the roof rights of G-176, Hari Nagar was not accepted by the AO. The assessee brought before the notice of the first appellate authority that the assessee had received ₹ 2,50,000/- in assessment year 2006-07 which has been accepted by the AO in the assessment order passed u/s 143 (3) of the Act. The ld. CIT (A) taking note of the fact that when the AO has accepted the source of ₹ 2,50,000/- in the subsequent year as advance for the roof rights of the property at Jail Road, New Delhi and there was no justification in not accepting the source of this ₹ 2,50,000/- from the sale of the roof rights of the aforesaid property which he had sold in the relevant A.Y. Taking this fact into consideration, the ld. CIT (A) had deleted the said addition. We find that the ld. DR could not controvert this factual aspect that has been brought out in the impugned order. In such a scenario, we have no other option but to uphold the order of the ld. CIT (A). - Decided in favour of assessee Incoming cash as explained in the cash flow statement - Held that:- CIT (A) of sustenance of ₹ 10 lacs, we find that he has given a relief of ₹ 26,77,000/- out of ₹ 36,77,000/- of peak credit added from bank accounts of Dena Bank, HSBC and PNB. However, we find that the ld. CIT (A) has accepted the claim of the assessee that he had received ₹ 20 lakhs from the sale of DG set and air-conditioners, ₹ 8 lakhs from sale of property and rent of ₹ 1,44,490/-, sale of roof rights of ₹ 2,50,000/-, thus amounting to ₹ 31,94,490/-. Therefore, once he has accepted the cash of ₹ 31,94,490/- which has come into the bank accounts of the assessee, then maximum sustenance that can be made to the difference of ₹ 36,77,000/- minus ₹ 31,94,490 i.e. ₹ 4,82,510/-. The total expenses/ withdrawals of March as per the cash flow statement submitted by the assessee is only ₹ 1,94,765/- for marriage expenses of his daughter, which, according to us, is also abysmal low figure when considering the assessee’s income, status and business which he undertakes. Therefore, the amount of ₹ 4,82,510/- would be a reasonable amount to be sustained - Decided in favour of assessee in part Addition u/s 68 - Held that:- if the assessee has not made any entry in his cash book does not mean that the amount deposited in the bank account can be termed as unexplained income of the assessee. Since the matter is being set aside and sent back to the AO for fresh adjudication for the sole ground of the revenue, we are of the opinion that this matter also be remitted back to the file of the AO for fresh adjudication. Therefore, we set aside the order of the CIT (A) and remand the matter back to the AO for de novo assessment. Needless to say, an opportunity of being heard should be provided to the assessee. - Decided in favour of assessee for statistical purposes. Customs 2016 (1) TMI 98 Import of areca nuts (betel nuts) against Duty Free Import Authorisations (DFIA) - whether eligible - Notification No. 98/2009-Cus. dated 11.09.2009 - Held that:- it is pertinent to mention that in the case of Sandur Micro Circuits [2008 (8) TMI 3 - SUPREME COURT], referred to in the above quoted para, it was held that a circular cannot take away the effect of notification statutorily issued. That position is in-controvertible. However, in the present case it is not any circular which is being interpreted but a Public Notice issued in exercise of power conferred under paragraph 2.4 of the Foreign Trade Policy and para 1.1 of the Handbook of Procedures in terms of which an amendment to the Handbook of Procedures has been notified. Thus, the said Public Notice has been issued statutorily; it is not some sort of clarificatory circular. Thus, the judgment of CESTAT in the case of Global Exim (2014 (8) TMI 358 - CESTAT AHMEDABAD) does not come to the rescue of the appellant. Clearance of the subject goods i.e. Betel Nut Splits (not fit for human consumption) under the submitted DFIAs as exemption sought thereunder is not admissible on the subject goods was rightly denied - Decided against the assessee. 2016 (1) TMI 97 Mis-declaration of value & description of imported goods - various goods including AB King Pro (Exercise Bench), 5 in 1 Air O Space Sofa (Inflatable Sofa Bed), Slim N Lift (Female Shorts), Sauna belt (Fat Reduce Belt), Tool Kits, Magic Bullet (Food Processors), Drill M/c and Diamond Blades from China and supplied it to Telebrand and these goods were mainly imported from /through M/s China 5 Star Products and M/s Creative Nations International. Held that:- There is no tangible proof of any payment to the foreign supplier by the Appellants or by Mr. Hitesh Israni of Telebrands India P. Ltd., of any amount over and above the prices mentioned in the foreign suppliers invoices. There is no cogent material whatsoever in the Notice issued to the Appellants for proposing enhancement of the value of the said goods. - It is not in dispute that at the time of import itself, the customs authorities had enhanced the values of the similar goods imported by other importer such as M/s Rico Gems based on the available prices for contemporaneous imports of identical goods by other importers. Once it is undisputed fact that the declared value was not accepted and for the purpose of assessment valuation was done on the basis of contemporaneous price of identical or similar goods, further enhancement of value was not permissible. After detailed examination of facts and records we find that the demand of differential duty and penal action cannot sustain in the facts of the instant case. Since the undervaluation of imported goods is not established, all the other confirmation such as confiscation of the goods, fines in lieu thereof, penalties on all the appellants being consequential to demand of duty, are also not sustainable - Decided in favor of assessee. 2016 (1) TMI 96 Restoration of appeal - Appeal dismissed for non prosecution - Pre deposit order not followed - Held that:- As the said pre-deposit was not made their appeals were dismissed for non-compliance without going into the merits of the case. In view of the case laws relied upon by the main applicant and also after the pre-deposit ordered in the other cases, on the same issue a lesser deposit has been ordered by this Bench, the modification application filed by the main applicant is allowed. It directed that appellant M/s. Jay Mahalaxmi should deposit an amount of ₹ 7,50,000/- (Rupees seven lakh fifty thousand only) within one month and report compliance to to Commissioner (Appeal) - Appeal restored conditionally. 2016 (1) TMI 95 Review petition - Fixing of specific amount of pre deposit - Held that:- It is clear from the CESTAT order dt. 15.9.2014 that the amount of ₹ 23 lakhs was considered sufficient as per deposit. In other words, the amount of ₹ 23 lakhs as pre-deposit has been fixed. Board Circular applies to appeals filed after the amendment of section 129E of the Custom Act on 6.8.2014 - Review denied. 2016 (1) TMI 94 Waiver of pre deposit - Confiscation of goods - Imposition of fine and penalty - Held that:- Same cannot be imposed when the goods are not available for the confiscation. As regards the penalty, we find from the records that the appeal was dismissed by the Tribunal vide Order no. A/840/14/CSTB/C-I dt. 29/4/2014 on account of delay in filing the appeal. However, the same was restored by the Hon'ble High Court of Mumbai [2015 (11) TMI 686 - BOMBAY HIGH COURT] -. As the appeal has been restored after the amendment of Section 129E in August 2014, we direct the appellants to pay 7.5% of the penalty i.e of ₹ 7,500/- within two weeks from the date of this order in compliance to the provisions of section 129E of the Customs Act. On compliance being reported the remaining amount of penalty is waived and its recovery stayed till disposal of the appeal - Partial stay granted. 2016 (1) TMI 93 Suspension of CHA licence - Held that:- Commissioner has revoked the suspension of licence and the appellants were allowed to operate CHA licence - Appeal is infructuous. 2016 (1) TMI 92 100% EOU - Appellant received sandal wood from M/s Karnataka Soaps and Detergents Ltd. (KSDL) for extraction of sandal wood oil on job work basis - due permission for doing the job work was not availed by the appellant from the Development Commissioner - Held that:- No doubt the assessee working under the customs and excise arena is required to follow the procedure laid down under the law and to fulfill the conditions for availment of benefit of any procedure of law. However, it is also well settled that some of the conditions required to be followed by an assessee are procedural conditions. Whereas non-fulfillment of substantive conditions would definitely result in denial of consequent benefit, non-fulfillment of procedural conditions may not. It is the Revenues case that if the permission of the Development Commissioner was sought, it would have been granted by him in the ordinary course. The appellant was entitled to do job work for the principal manufacturer located in DTA. In such a scenario, we are of the view that non-taking of the permission, though a contravention, may not result in confirmation of demand of duty. Accordingly, we set aside the confirmation of duty along with interest and imposition of penalty under Section 11AC of the Central Excise Act - as there is admittedly a violation of the procedures required to be followed by the appellant, we uphold the imposition of penalty under Rule 26 of the Central Excise Rules 2002 but reduce the same to ₹ 2000 - Appeal disposed of. Corporate Laws 2016 (1) TMI 87 Claim for set-off or adjustment - adjudicating the winding up petition - Held that:- Though the claim for set-off or adjustment is made by the respondent towards the alleged damages against the amount payable by it, for the limited purpose of adjudicating the winding up petition, this Court cannot treat such a claim for set-off or adjustment as lacking bona fides. Whether the respondent is really entitled to such setoff or adjustment needs to be adjudicated by the competent Court of law. For the present purpose, it will suffice, if this Court is satisfied that the set-off or adjustment claimed by the respondent is not an afterthought and that it has been consistent in its stand in this regard much before the filing of the winding up petition. On these facts of the case, this Court is of the opinion that as there is a serious dispute regarding the debt claimed by the petitioner, the remedy under Section- 433(e) read with Sections-434(1) (a) and 439 of the Act is not an appropriate one and no order for winding up of the respondent for non-payment of the admitted debt can be passed. The Company Petition is, accordingly, dismissed, however leaving the petitioner free to avail common law remedies for recovery of the amount claimed by it from the respondent. Service Tax 2016 (1) TMI 111 Exemption to business auxiliary services - scope of Notification 14/2004-ST which is “a service incidental or auxiliary to any activity specified in clauses (a) to (c)” - MKCL is rendering services in the field of computer education and the appellant acts as an authorised lead agency. - Held that:- In the first stage, whether the appellant falls within the exemption clause, strict interpretation is required to be made. Once the appellant falls within the scope of exemption, a liberal construction has to be adopted. - We find that in case of sunbeam Infocomm Pvt Ltd [2014 (8) TMI 783 - CESTAT MUMBAI ] where the assessee was providing similar services under an agreement with M/s. MKCL, it was held that the activity would fall within the exemption Notification No. 1/2004-ST dated 10/9/2004, clause (d), that provides exemption to services incidental and ancillary to the promotion of IT Education. - Benefit of exemption allowed. Central Excise 2016 (1) TMI 110 We do not see any good ground to interfere with the judgment and order passed by the Customs, Excise and Service Tax Appellate Tribunal [2014 (11) TMI 118 - CESTAT NEW DELHI]. Accordingly, the Civil Appeal is dismissed. 2016 (1) TMI 109 Appeal against the order of tribunal deleting the penalty [2007 (3) TMI 551 - CESTAT, KOLKATA] - Held that:- duty was not paid on account of a genuine mistake committed by the assessee and the duty along with interest was immediately paid. - order of the Tribunal is neither perverse nor against the material evidence on record. - Decided against the revenue. 2016 (1) TMI 108 Consequences for Delay in payment of duty in terms of the provisions of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules 2008 - apart from interest, revenue has referred to Proviso-7, which also talks about the assessee having not discharged his duty liability. - The contention of the Revenue is that in terms of the said Proviso, where an assessee does not discharge his duty liability in time, his liability for the subsequent months would be dependent upon the total number of packing machines found available in his premises at any time thereafter, if the number of such machines is higher than the number of machines used by the assessee for production. - Revenue ignored the number of machines sealed by them which was never used. Held that:- there is no dispute about the factual position. There is no allegation of any misdeclaration against the assessee as regards the number of machines used for production of goods or the retail sale price of the pouches declared by them. The Commissioner has confirmed the demand of duty by adopting Proviso-7 to Rule 9 and by discarding the assessee's contention that incase of delayed payment of duty it is only Proviso-2 which has to be adopted. Apart from the fact that we agree with the learned advocate's contention that Proviso 7 essentially refer to a situation envisaged by Proviso-6 and will have no applicability to a situation which stands separately considered by Proviso 2 to the said Rule, we find that the issue stands covered by the majority decision of the Tribunal in the above referred situation. Inasmuch as the facts in the present case are identical to the facts involved in the case of Sanket Food Products [2014 (9) TMI 665 - CESTAT MUMBAI (LB)], we find no reasons to take a different view - Decided in favor of assessee. 2016 (1) TMI 107 100% EOU - filing of more than one refund claims per quarter - claim for refund of the accumulated CENVAT credit on input services - scope of the revenue's contention beyond the period of limitation - Held that:- The said issue was settled at the level of the Commissioner (Appeals) vide his orders accepting the assessee's appeals, which were also reviewed and found to be correct. It was in consequence to the said orders that the Assistant Commissioner and Commissioner (Appeals) passed the present impugned orders allowing the appeals. As such, it was not open to the Revenue to enlarge the scope of the proceedings by including some fresh grounds in their memorandum of appeal before the Commissioner (Appeals) or in the memorandum of appeal before the Tribunal. Even though it is the case of assessee that no common CENVATable services were used by them and even though I find that the Revenue in their memorandum of appeals have not referred to any such services, the appeals of the Revenue can be disposed on the sole ground of being beyond the earlier proceedings i.e. the show-cause notice, the earlier orders of the Assistant Commissioner as also the earlier orders of the Commissioner(Appeals) attaining finality. - Decided against the revenue. 2016 (1) TMI 106 Claim of refund of utilized cenvat credit - Export of exempted Battery Operated Cars i.e. Electric vehicles - period from July 2009 to February 2010 - Held that:- Commissioner (Appeals) held in favour of the respondents and by following the number of decisions, held that the assessee is entitled to refund claim. He relied upon the following decisions. 1) Repro India Ltd. Vs. Union of India [2007 (12) TMI 209 - BOMBAY HIGH COURT] 2) CCE Vs. Drish Shoes Ltd. [2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT] - The issue as to whether the unutilized accumulated credit can be refunded to the assessee in case of exports made by them stands fully and finally decided in favour of the assessee by the above referred decisions - Refund allowed. 2016 (1) TMI 105 Cenvat Credit - Input used by the Job worker - Exemption in terms of Notification No.214/86-CE dt. 26/03/1986 - Held that:- The appellate authority has also observed in his impugned order that the issue stands decided. However he has not extended the benefit to the assessee on the sole ground that the period involved in those cases was prior to the period involved in the present case. However he has not referred to any change either in law or in the wordings of the Notification No.214/86-CE so as not to apply the ratio of the said decision. Merely by observing that the appellant has availed credit in respect of furnace oil and Oxygen which has been used by them in the manufacture of the goods cleared without payment of duty in terms of Notification No.214/86-CE, he has set aside the impugned order of the lower authorities. Such an act on the part of the Commissioner(Appeals) reflects upon the predetermined mind and lowers the public faith in the fair outcome of litigation. - Credit allowed - Decided in favor of assessee. 2016 (1) TMI 104 Clandestine removal of goods - assumption / presumption - demand based on the statement - absence of corroborative evidence - appellant submits that in this case there was no shortage of finished goods were found at the time of search and the raw material found short was assumed by the authorities below that same has been used in manufacturing of final product which have been removed clandestinely without payment of duty - Held that:- the case has been made out only on the basis of the statement of Shri Baldev Singh, Managing Director of the appellant and no other evidence in the form of to manufacture of such huge quantity, the consumption of electricity, additional packing material, payment for purchase of additional packing material, payment received for clandestine removal goods, how the goods were transported has been brought on record by the Adjudicating Authority or the inspecting team, therefore, relying on the above said decision cited hereinabove, we hold that charge of clandestine removal is not sustainable in the absence of any corroborative evidence to the statement of Shri Baldev Singh, Managing Director. - Demand set aside - Decided in favor of assessee. 2016 (1) TMI 103 CENVAT Credit - Availment of Credit after clearance of goods - Held that:- Duty of the Department was also to examine whether amortized cost of the moulds and dies formed part of the assessable value of the goods manufactured. That is also not done nor find place in the show-cause notice. So also the Department has not made any enquiry to find out the quantity of the capital goods in the hands of the job worker. In absence of detailed enquiry and result thereof without evidence, it is not possible to make a case by Tribunal to acquire jurisdiction over the same while there was no such allegation appears in the show-cause notice. - Decided in favour of assessee. 2016 (1) TMI 102 Denial of refund claim - Valuation - Reduction in value due to liquidated damage (LD) - delay in supply of the goods to their customers/purchasers as per the clause in the agreement with the buyers, the liquidated damage (LD) charges were deducted as compensation from the invoice price of the goods - Held that:- Decisions quoted above and especially the ratio of the Tribunal’s Larger Bench decision in the case of Victory Electricals Ltd. (2013 (12) TMI 81 - CESTAT CHENNAI ), the liquidated damages (LD) had to be factored in to arrive at the correct transaction value which has to be treated as assessable value for payment of Central Excise duty; whatever the duty paid in excess on account of non-factoring of liquidated damages would be liable to be refunded to the appellants. - Decided in favour of assessee. 2016 (1) TMI 101 Waiver of pre deposit - Clandestine removal of goods - Held that:- Considering the attachment of properties by the Bank, Revenue was directed to ascertain the steps taken to safeguard Revenue. When the matter was listed today for final disposal of the stay petitions, the LD. Advocate submits that the department has attached the properties under Section 142. Ld. AR for the Revenue submitted a copy of the letter dated 01.01.2015 by the Dy. Commissioner of Central Excise, Salem, wherein he has confirmed about the attachment of immovable properties with the sub-registrar, Salem. We also find that the Joint Commissioner (Review) vide letter 04.12.2014, addressed to the Commissioner (AR) enclosed the list of attachment of properties movable and immovable under Rule 9 & 10 of the Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995. The total value of the properties as per Annexure 3A & 3B amounts to ₹ 85,17,99,817/-. After the attachment, the properties were handed over to the appellant for its safe custody. - appellants have not made out a prima facie case for waiver of pre-deposit of dues. - Decided against Assessee. 2016 (1) TMI 100 Cenvat Credit - Job Work - Scrap was returned - Denial of refund claim of duty - duty paid of the scrap at job-worker's premises - Held that:- Ruling relied upon by the learned AR is not applicable as the said ruling relates to the period prior to March, 2000. Accordingly, following the ruling of the Hon'ble Bombay High Court in the case of Rocket Engineering (2006 (6) TMI 66 - HIGH COURT BOMBAY) and also in view of the provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, there is no requirements made either for return of scrap from the premises of the job-worker or for payment of duty in case of non-return of the scrap. Accordingly, I hold that the appellant is entitled to refund of ₹ 5,03,878/-. The impugned order is set aside and the appeal is allowed with consequential benefit. As the amount was paid by way of debit note in the CENVAT account, the appellant is entitled to take back credit of the said amount in their CENVAT Credit account. - Decided in favour of assessee. 2016 (1) TMI 99 Captive Consumption - Exemption under Notification No. 67/95-CE dated 16.3.1995 - Manufacture of full exempted final product - Held that:- Dobby cards are accessories of weaving machine. Weaving machine being capital goods under the Cenvat Credit Rules and accessories of weaving machine also become capital goods in terms of definition of capital goods given under the Cenvat Credit Rules. In view of the above, we find that the aforesaid decisions of the Tribunal are applicable. - Impugned order is set aside - Decided in favour of assessee. CST, VAT & Sales Tax 2016 (1) TMI 91 Demand of VAT - export against form H - rectification of error denied - appellant had sold the car but did not include its value in the returns nor deposited the tax on the sale of fixed assets - Even export sales shown by the appellant were not genuine, because as per documents, the appellant had sold the goods on 25.11.2005 which were dispatched to foreign buyers by the exporters to whom the sale were made against 'H' Forms on 12.12.2005, whereas as per bill of lading, the goods were dispatched on 11.6.2006 i.e. in the next year - failure to explain and produce evidence including purchase vouchers in support of its ITC claim - Held that:- When the appellant filed an application for rectification of the aforesaid order dated 27.2.2012 dismissing its appeal, in the interest of justice, the Tribunal should have afforded an opportunity to the appellant to put forward its case. - Matter remanded back. - Decided in favour of assessee. 2016 (1) TMI 90 Maintainability of appeals - 42 (4) of the Rajasthan Sales Tax Act, 1994 - Held that:- Revision Petition filed by the Revenue has become infructuous, since the main appeal filed by the respondent-Assessee before the learned Tax Board has since been decided. - Petition disposed of. 2016 (1) TMI 89 Levy of tax under the TNVAT Act, 2006 - difference in sales turn over of dry motor mix and clinker as mentioned in Annual Report of the petitioner Company and the turn over reported by the petitioner in its monthly returns under the TNVAT Act,2006 - Held that:- Petitioner contended that they have already collected all the manual copies of returns filed before the other States. Hence, I am of the considered view that in the interest of justice, it would be appropriate to set aside the order impugned in this Writ Petition and remit the matter back to the authorities concerned for passing appropriate order. Therefore, the petitioner is directed to produce all the manual copies of returns to the respondent within a period of two weeks from the date of receipt of a copy of this order. On receipt of the same, the respondent is directed to pass appropriate orders by giving an opportunity of hearing to the petitioner, within a period of four weeks - Petition disposed of. 2016 (1) TMI 88 Detention of consignment - Held that:- The goods were detained on the assumption that, the consignment comprised of goods that had evaded CST, and therefore, there was a possibility of evasion of tax in Kerala as well. Counsel for the petitioner would submit that, it is not in dispute that, the consignee in Kerala had produced Form 16 declaration stating that the goods were purchased for the own use of the consignee and this has not been disbelieved by the respondent. It is also pointed out that, the liability to pay CST, if any, could arise only in the State of Tamilnadu and not in the State of Kerala. - I direct the respondent to release the goods and the vehicle to the petitioner, on the petitioner furnishing a simple bond without surety for the security deposit - respondent shall thereafter transmit the files to the adjudicating authority who shall adjudicate the matter and pass orders, after hearing the petitioner, within two months from the date of receipt of a copy of this judgment, untrammelled by the observations in this judgment - Petition disposed of. Indian Laws 2016 (1) TMI 86 Auction Sale - whether the Fourth Respondent/Appellate Tribunal should have held that the First Respondent/Borrower does not have any right to challenge the ‘Auction Sale’ and the so-called third party purchaser is only vested with the ‘Equitable Right of Redemption’ of the said property? - Held that:- In the instant case, the auction sale notice was published on 09.07.2004 and in Tamil Daily ‘Dina Thanthi’ it was published on 10.07.2004. On 26.09.2008, the fresh auction sale notice was published in Indian Express. As such, there were no irregularities in conducting the sale by the Third Respondent/Bank. Also, it is to be noted that sale notice was sent to all the partners of the First Respondent Firm by the Third Respondent Bank through registered post and that apart, notice was affixed in the premises of the First Respondent and published in newspapers. Dealing with the plea that the properties were sold by the Third Respondent/Bank without obtaining the valuation of the property from the ‘Approved valuer’, the plea of the Third Respondent/Bank is that it had taken the valuation from the ‘Approved valuer’ and on that basis only the ‘Upset Price’ was fixed. Therefore, the contra stand taken on behalf of the First Respondent/Borrower is not accepted by this Court. Insofar as the stand of the First Respondent/Borrower (Firm) is that the Third Respondent/Bank had published the Possession notice only in English Daily and not in Vernacular Language, hence, there is violation of Rule (6) of the Rules, it is to be pointed out that the Third Respondent/Bank in S.A.120 of 2009 before the Debts Recovery Tribunal-III, Chennai, in its order on 09.12.2011 in para 10.12 had stated that the possession notice thus issued by the First Respondent (bank) was served, affixed on the secured assets and also published in two daily newspapers as mandatorily required under Rules 8(1) and (2). It is to be pertinently recalled the words of Robert Frost who said “a bank is a place where they would lend you an umbrella in a fair weather and ask for it back when it begins to rain”. At this stage, one cannot ignore a very vital fact that unless loans are repaid promptly, ‘Money’ will not be under circulation and in fact the Banks/Financial Institutions be in great difficulties. Recently, the members of the Public Accounts Committee of Parliament (Panel) were informed that public sector banks are dealing with 2.55 lakhs crores Non Performing Assets or bad loans which means to 5.2% of total gross advances and the members wanted quick action against defaulters. Also, it is represented on behalf of the Third Respondent/Bank, inspite of sale of properties, the First Respondent/Borrower still owe a sum of ₹ 1,56,72,131.19/-. In the present case, after the confirmation of sale, in favour of the Writ Petitioners and issuance of sale certificates, in Law, the ‘Right of Redemption’ in favour of the First Respondent/Borrower is completely erased. Further, the third party ‘bona fide auction purchasers’ for valuable consideration in the eye of law are to be protected because of the primordial reason that they should not fall a prey to the vicissitudes of fortunes of the numerous proceedings initiated by the First Respondent/Borrower at all forums. As such, the sale of secured assets by the Authorised Officer of the Bank on 13.08.2004 and 09.04.2009, consequent to the issuance of sale notice dated 09.07.2004 and 26.09.2008 are held legally valid by this Court. Instead, the contrary views taken by the Fourth Respondent/Debts Recovery Appellate Tribunal by allowing the said Appeal through its order dated 22.08.2014 are not just, valid and legally tenable one as held by this Court and the same are set aside by this Court to prevent an aberration of justice and to promote substantial cause of justice. Consequently, all the Writ Petitions succeeds.
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