TMI Tax Updates - e-Newsletter
January 5, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• VAT - candy, namely "Swad" - to be classified as Ayurvedic medicine and taxable at 6% as AO failed to prove that it is confectionery item

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• Faulty SCN - evasion of duty is apparent - but, since there was no demand raised in the show-cause notice, the same should not be confirmed

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• Expenditure of commission paid doctors cannot be allowed as assessee failed to substantiate the claim, even if it was allowed during the PY

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• No SCN was given to the assessee before making an order for conducting special audit u/s 142(2A) - assessment order is invalid & bad in law

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Articles

1. DEMONETIZATION, GST AND WAY FORWARD

   By: Dr. Sanjiv Agarwal

2. Section 175 - Inputs removed for job work and returned on or after the appointed day

   By: Pradeep Jain

News

1. GST deadlock continues over dual control, high sea taxes

2. Sensex rebounds on positive infra data; GST meet in focus

3. GST: States demand tax on high sea sales, higher compensation

4. Department of Expenditure, Ministry of Finance takes various initiatives to promote use of mobile banking/e-banking technology for cashless transactions and e-payments in Central Government Ministries/Departments; Redresses 4475 out of 4508 grievances successfully under CPGRAMS;

5. Withdrawal of Legal Tender Character of the old Bank Notes in the denominations of ₹ 500/- and ₹ 1000/- and The Specified Bank Notes (Cessation of Liabilities) Ordinance 2016 (Updated as on January 04, 2017)

6. RBI Reference Rate for US $

7. Cabinet approves Agreement between India and Uruguay regarding Cooperation and Mutual Assistance in Customs Matters

8. Major Initiatives and Achievements of Department Of Industrial Policy & Promotion – 2016

Notifications

DGFT

1. 33/2015-2020 - dated 3-1-2017 - FTP

Amendment in import policy of items classified under Chapter 41 & 43 of ITC (HS), 2012-Schedule-1 (Import Policy)

FEMA

2. 382/ 2016-RB - dated 2-1-2017 - FEMA

Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Second Amendment) Regulations, 2016

Circulars / Instructions / Orders

FEMA

1. 24 - dated 3-1-2017

Exchange facility to foreign citizens

Highlights / Catch Notes

Income Tax

• Taxpayer Not Given Show Cause Notice Before Special Audit Order; Assessment Order Exceeds Limitation Period, Deemed Invalid.

  Case-Laws - AT : No show cause notice was given to the assessee before making the order proposing conduct of special audit u/s 142(2A) - Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law. - AT
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• Enhanced Profits from Section 40(a)(i) Disallowance Eligible for Deduction u/s 10B for 100% EOU.

  Case-Laws - AT : 100% EOU - disallowance u/s 40(a)(i) of the Act is a statutory disallowance and the hence enhanced profits due to disallowance shall be considered for deduction u/s 10B of the Act. - AT
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• Court Rules Company Expenses Non-Allowable Due to Lack of Business Activity in Special Economic Zones.

  Case-Laws - HC : Since the Company had not commenced its business of development of SEZ/Real Estate, the expenditure claimed could not have been treated as the expenditure incurred for the purpose of business - Since the expenditure was not allowable expenditure, it amounted to irregular allowances of loss. - HC
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• Court Denies Deduction for Doctor Commission Payments Due to Lack of Substantiation Despite Past Approvals.

  Case-Laws - HC : Deduction of commission payments made to doctors - even if it is true that in the previous years similar claims were allowed by the AO, in so far as the assessment year in question is concerned since the assessee has miserably failed to substantiate the claim, claim of expenditure not allowed - HC
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• Section 194J of Income Tax Act Not Applicable: Fumigation Activities Require No Technical Skills or Information.

  Case-Laws - AT : TDS u/s 194J - Revenue has not been able to demonstrate the use of any technical information or skill which is required to perform such fumigation activities and, therefore, invoking of Sec. 194J of the Act in the present case is unwarranted - AT
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• ITAT Deletes Additions u/s 68 Due to Doubts Over Transaction Genuineness Involving Shareholder Cash Transfers.

  Case-Laws - AT : Additions made u/s. 68 - main reason for making the addition was that the shareholders have deposited cash in some other bank account which have come to the depositors with banking channel, and then transferred to assessee thus the genuineness of the transactions was doubted - ITAT deleted the additions
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• Taxpayer's Double Deduction of Expenses Disallowed for Claiming Same Costs Twice in Different Years.

  Case-Laws - AT : Disallowance of expenditure - The method followed by the assessee in the instant case amounts to claiming of the expenditure twice, i.e. in the year when the assessee has debited such expenses to the cost of the flats as there was no profit and again during the impugned assessment year when there is profit. This definitely amounts to double deduction - AT
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• Vehicle Owner Can Claim Depreciation on Leased Trucks u/s 32 of Income Tax Act.

  Case-Laws - HC : Benefit of depreciation - vehicles leased out - As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out. - HC
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• High Court Rules TDS Not Applicable on Service Charges Paid to RCDF u/ss 194H and 194J.

  Case-Laws - HC : TDS u/s 194H or u/s 194J - applicability u/s 40(a)(ia) - No TDS on Services Charges made to RCDF - we are not confirming the reasoning adopted by the Tribunal but confirming only the conclusion drawn by the Tribunal. - HC
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Customs

• Boric Acid Import Not Required to Register Under Insecticide Act Due to Lack of Evidence for Insecticidal Use.

  Case-Laws - AT : Import of Boric acid - end use - no evidence has been placed on record to establish that the material has been used for insecticidal purposes and therefore it cannot be said that registration under Insecticide Act is needed. - AT
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• Refined Naphthalene Valued Higher Than Crude, Justifying Lower Authority's Decision to Increase Valuation.

  Case-Laws - AT : Valuation - Obviously the value of refined naphthalene is higher than the crude naphthalene, therefore the enhancement of the value was correctly done by the lower authority - AT
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• Amendment to Shipping Bill Allowed: Omission of Declaration Didn't Affect Export Incentive Benefit for Appellant.

  Case-Laws - HC : Benefit of export incentive - shipping bills did not contain declaration which was required - The omission to file the declaration of the kind we are concerned with, when all other relative materials are present was not vital to the appellant’s case - amendment to the shipping bill allowed - HC
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Service Tax

• Appellant can't claim service tax refund after voluntary payment, interest, and penalty; no error defense allowed.

  Case-Laws - AT : After availing the option of the volunteer payment of service tax, interest and penalty appellant cannot claim that the payment was wrongly made consequently cannot claimed the refund. - AT
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• Unutilized Credit Refund Allowed Without Registered Premises; Non-Registration Not a Valid Reason to Reject Claim.

  Case-Laws - AT : Refund of unutilized credit - Registration not compulsory for refund - non-registration of premises is not sufficient ground for rejection of refund. Appellant is eligible for refund of claim. - AT
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• Refund Claim Approved: Time Limits in Notification No. 41/2007 Supplement Act, Not Grounds for Denial /2007.

  Case-Laws - AT : Rejection of refund claim - N/N. 41/2007 - The time limit prescribed in notification issued from time to time is to supplement the provision of mere act - as the appellant has complied with condition of the notification. Therefore, merely on the ground of limitation refund cannot be rejected - AT
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Central Excise

• Notice Invalid: Show Cause Lacks Demand Despite Identified Duty Evasion Infractions.

  Case-Laws - AT : Faulty show cause notice - It can be seen that the various infractions pointed out above, had resulted in evasion of duty. However, since there was no demand raised in the show-cause notice, the same should not be confirmed. - AT
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• Boilers in CKD/SKD form considered complete for excise exemption under regulations.

  Case-Laws - AT : The manufacture and removal of boiler in part consignments shall be regarded as boiler in complete form - the boiler even if cleared in CKD/SKD condition to the customers site, the same is regarded as boiler and is eligible for exemption. - AT
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• High Court Rules 'Fly Ash' Not a Manufactured Product Under Central Excise Act Section 2(f.

  Case-Laws - HC : Manufacture - Fly Ash - Whether 'fly ash' as formed during the production of electricity is a product, which falls within the meaning of manufacture as defined under Sections 2 (f) of the Central Excise Act? - Held No - HC
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• Reversal of Cenvat Credit u/r 6(3A) Upheld; Non-Compliance with Procedures Doesn't Deny Proportionate Reversal Rights. (3A.

  Case-Laws - AT : Reversal of Cenvat credit on input services - Rule 6 (3A) of CER - merely because appellant has failed to exercise option and follow procedural prescribed under Rule 6(3A), proportionate reversal cannot be denied - AT
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• Central Excise Act Section 11A(2B): No Penalty After Duty and Interest Payment, Department's Action Challenged.

  Case-Laws - AT : Levy of penalty - the appellant is squarely covered by Section 11A(2B) - after payment of duty along with interest by the appellant, the department should have concluded the matter and no penalty was imposable - AT
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VAT

• Candy "Swad" Tax Classification Dispute: Ayurvedic Medicine at 6% or Confectionery at 10%, Burden of Proof Unmet.

  Case-Laws - HC : Classification of goods - candy, namely “Swad” - classified as Ayurvedic medicine and taxable at 6% or as confectionery item taxable at 10%? - The burden was on the Assessing Officer if according to the AO it was a confectionery item, and it did not lead any evidence or produced any material or evidence to discharge the onus. - HC
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Case Laws:

• Income Tax

• 2017 (1) TMI 266
  Enhancing the value of the closing inventory of raw material/ components - Held that:- As decided in assessee own case A Y 2007-08 if valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method. The closing stock of a particular year is the opening stock of the subsequent year. Not the case of the revenue that the method of valuation of closing stock is materially affecting the accounts and profits disclosed by the assessee. This adjustment sought to be made is revenue neutral and at best may result in preponment or postponement of revenue. The issue is whether such exercise is at all required on the ground of materiality. Materiality is a concept which is well recognized both in accountancy and law. Accounting standards notified by the CBDT u/s 145(2) mandate that the concept of materiality be taken into consideration when finalizing the accounts of an assessee. Enhancing the value of closing inventory of finished goods - cost of rejection of semi finished goods and obsolete items - Held that:- As not found that how the loss of the assessee was found to be normal when the assessee submitted that it is an abnormal loss incurred by it during the course of manufacturing process. Further the Ld. dispute resolution panel has also stated that both the cost of normal and abnormal losses have to be loaded to the value of the closing stock is devoid of any merit as it is contrary to the accounting standard issued by the Institute of chartered accountants of India which has been mandated by the Ministry of corporate affairs ,which only says that, only normal losses are required to be included and abnormal losses are required to be excluded for the purpose of the valuation of the closing stock of the finished goods and semi finished goods. Disallowance of provisions made towards net increase in prices of raw materials already supplied by the vendors - Held that:- The provision has been made on a scientific basis by estimating the actual increase in price of material and the amount of material that was already supplied and consumed in the vehicles manufactured up to the end of the year. Considering principles laid down in the case of Rotork Control (2009 (5) TMI 16 - SUPREME COURT OF INDIA), the impugned provision made for an accrued liability is an allowable revenue expenditure in accordance with the mercantile system of accounting. Adjustments should not be made on issues which are revenue neutral. Accordingly there is no justification in sustaining the aforesaid disallowance. Addition estimating the value of the scrap lying in stock as at the end of the relevant previous year on hypothetical and national basis - Held that:- Since doctrine of res judicata is not applicable to income tax proceedings, the Tribunal can deviate from earlier orders passed in the assessee’s own case as in those earlier decisions the provisions of the accounting standard A-S to with respect to valuation of inventories were not considered and whether they apply to the scrap generated in a manufacturing process by the company. Furthermore there is no evidences brought on record by AO that the assessee has sold scrap out of the books. Furthermore the amount of addition working out by the Ld. assessing officer was also on the estimate basis without any quantitative details of the scrap. It is also not the case of the assessee that compared to the earlier years the scrap sold by the assessee is lesser during the year. Addition made is deleted. Addition in respect of liquidated damages recovered from transporters for late delivery of the goods - Held that:- Any estimation without any data for actual delay in delivery would be purely hypothetical and notional, which is outside the realm of taxation under the provisions of the Act. Furthermore, as we have repeatedly held in the preceding grounds of appeal, that a consistent and regular method of accounting, which has always been accepted by the Revenue in the past, should not be disturbed, merely for better presentation of accounts, more so when such exercise is revenue-neutral. We have also noted from the set-aside order dated 26.02.2016 passed by the assessing officer for the assessment year 2008-09, wherein the similar addition made in the original assessment order was deleted, while categorically observing that in the absence of information for late delivery of vehicles being available with the appellant before the end of the year, the liquidated damages could not have been estimated for recognition as income. In view of the above, we delete addition made. Addition in respect of provision for advertisement expenses incurred at the head office made at the end of the relevant previous years which were subsequently reversed in the succeeding year alleging same to be excessive - Held that:- The present disallowance is revenue-neutral, since the impugned amount of provision, as also admitted by the assessing officer itself, was reversed in the succeeding year and consequential offered to tax in that year. If such provision is disallowed in this year, the corresponding reduction would need to be made in the return of the succeeding year, neutralizing the entire tax liability on the appellant company. For the aforesaid cumulative reasons, we hereby delete the disallowance TDS U/S 194C - disallowance under section 40 (a) (ia) incurred on account of provision towards advertisement and publicity expenses provided at the end of the year - Held that:- Considering order of the coordinate bench in case of appellant for earlier years where in it is held that it is reimbursement of expenditure and on this there is no requirement of tax deductions at sources, we are bound to follow the order of coordinate bench and allow ground no 9 of the appeal of the assessee TDS u/s 194H - non TDS on Provision made towards commission paid on institutional sales to dealers - Held that:- The vehicles in the present case are being sold by the dealers, which are normally less than the prevailing market price in view of the institutional sales, and therefore the dealers are being compensated for the sales made by them at concessional price and dealers are selling these goods to the institutional customers on principal-to-principal basis. For the less realization of the sale price by the dealer, they are compensated by the assessee at the predetermined rate. Thus we allow ground No. 10 of the appeal reversing the disallowance made Disallowance of purchases as excessive - addition u/s 40A - Held that:- Referring to assessee's own case we are not inclined to uphold the disallowance made by the Ld. assessing officer on account of the purchases of 7 2.40 crores made from the parties who are related parties in terms of accounting standard 18 issued by the Institute of chartered accountants of India but not in terms of provisions of section 40A (2) of the income tax act. Disallowance of expenditure incurred on account of advisory services availed - Held that:- As gone through the order of the Tribunal for AY 2007-08, wherein while following the settled legal propositions that an assessing officer cannot sit in the arm chair of the business man and decide the reasonableness of expenditure incurred or commercial expediency thereof, deleted the impugned disallowance made by the assessing officer. This disallowance directed to be deleted Tds u/s 194C - disallowance of purchases made from certain Vendors - Held that:- The transaction entered by the appellant for purchase of material from vendors is outside the scope of section 194C of the Act. TDS u/s 194I - exp incurred on account of booking of hotel to convene training courses - Held that:- In view of the aforesaid discussion, we feel that bonafide belief of the appellant for not deduction tax at source from aforesaid payment for taking room on hire on certain solitary occasion(s) cannot be doubted. TDS u/s 194H - expenditure incurred towards quarterly target on turnover discount on trade discount given to the dealers/customers - Held that:- As dealership agreement entered between the appellant and dealers is on a principal-to-principal basis and dealers do not act as agents of the appellant while purchasing and further selling the vehicles. Accordingly, the incentives offered at the time of purchase of vehicles do not fall within the meaning of commission u/s 194H TDS u/s 194C - payment toward room reimbursement of cost of gifts distributed to customers - Held that:- If we see the dominant nature of the transaction, the same is in the nature of purchases or, in other words, contract or sale inasmuch as the appellant never had title in the goods before same were procured by FX and further supplied either to dealers or the appellant. Even where the goods are purchased by the vendor as per the specifications of the purchaser, is not in the nature of work contract covered within the scope of section 194C TDS u/s 194I - payment to forum Aviation’s private limited - Held that:- Appellant had rightly deducted tax at source from the aforesaid payments made to Forum India Aviation Ltd. u/s 194C of the Act. Since the appellant had deducted tax at source under the correct provision, the question of disallowance u/s 40(a)(ia) does not arise. Accordingly, the disallowance made by the assessing officer under that section stands deleted. Treatment given to the gains arising from sale of investments - business income OR capital gain - Held that:- Consistent method has been followed by an assessee to treat the investment as on capital account corroborated with disclosure in balance sheet as investment, the same consistent stand should not be disputed by the assessing officer. It is also not disputed by the Ld. assessing officer that the capital gains arising on the various investments are held for less than 12 months and are not long-term capital gain. In view of the aforesaid reasons also, while respectfully following the appeal orders for AY 2007-08 and 2008-09, we reverse the action of the assessing officer in changing the head of income surplus arising from sale of shares/mutual funds, etc.. Disallowance account of portfolio management services fees on protective basis - Held that:- The revenue could not point out any other decision which can be controverted against the decision of the coordinate bench in the case of the assessee for assessment year 2008- 2009 wherein the PMS expenses from income under the head capital gain is granted as reduction. Following the decision of coordinate bench in appellant’s own case in AY 2008-09, we hold that expenses incurred towards portfolio management fees in respect of investment in mutual funds/ shares is not allowable as business expenditure and same deserves to be allowed as deduction from income from capital gains as per provisions of the Act. Disallowance under section 14A - Held that:- No valid satisfaction was recorded by the assessing officer in the assessment order to reject the method followed by the appellant in computing disallowance u/s 14A, before mechanically resorting to and applying the provisions of Rule 8D of the Rules. In view of such findings, the additional disallowance made by the assessing officer u/s 14A stands deleted on the aforesaid ground at the threshold. That apart, we also agree with the submissions of the appellant that, since the appellant is a cash-rich company, which, in fact, is investing surplus/idle funds in various modes of investments, there could be no nexus of interest-bearing borrowed funds with such investments. Disallowance of expenditure incurred on advertisement on the death anniversary of founder of the assessee company - Held that:- Any expenditure incurred by the company to pay him homage satisfies the test of business / commercial expediency and, thus, cannot be said to be not incurred for the purpose of business. More so when in past assessment years the similar expenditure have been incurred by the assessee but have not been disallowed by the Ld. assessing officer and this fact has not been controverted by the Ld. departmental representative even on the principle of consistency also we are not inclined to upheld the disallowance Addition on account of commission paid to the managing director - Held that:- In making payment of commission to the managing director of the company of 29.50 crore the provisions of section 36 (1) (ii) of the income tax act cannot be applied. The commission’s leading to the percentage of the profit earned by the company has for the companies act and there is an outer limit which is also been fixed in the terms and conditions of employment of the managing director therefore it cannot be said that there is no business expediency in payment of such commission to the managing director of the company. Disallowance of deduction u/s 80 IA in respect of captive power generating unit situated at Gurgaon - Held that:- Considering that three different prices for supply of power are available in the market, the method adopted by the appellant to compute inter-unit transfer price by imputing a reasonable mark-up on its cost of production, i.e., 8.75, which was less than the rate of 9.84 charged by Maruti, was quite a reasonable for the purposes of computing deduction u/s 80IA(4) of the Act. Therefore we reverse the disallowance made by the Ld. assessing officer of deduction of 8 0 7.76 Lacs under section 80 IA, in relation to the generation of power Disallowance of mark to market loss in export of 2 wheelers - Held that:- The aforesaid issue that reinstatement of assets and liabilities on revenue account in foreign currency is allowable business loss under the mercantile system of accounting has been settled by the Supreme Court in the case of CIT vs. Woodward Governor India Pvt. Ltd.[2009 (4) TMI 4 - SUPREME COURT ] TDS u/s 194C OR 194J - disallowance on account of dealer’s conference for deduction of tax at lower rate or wrongful rate - Held that:- The services provided by the vendor, in our opinion, are predominantly physical or, in other words, predominantly not based on mental or intellectual attributes, being that of organizing an event involving booking of hotel, organizing airport transfers, organizing various artistes and professionals to stage the show, etc. The vendor has acted as a ‘one-stop shop’ for the appellant for coordinating with all the other thirty- party professionals or service providers. In our opinion, the predominant attributes in the service so provided by the vendor is that of contract for carrying out work, which would more appropriately be covered u/s 194C instead of section 194J of the Act Disallowance under section 80IC - Held that:- The claim of deduction of the appellant is also duly supported with the audit report in Form 10CCB issued by the auditors, answering each question in the format and how the appellant satisfied all such conditions. In the final assessment order, the assessing officer has not pointed out violation of any such condition precedent. We agree with the submissions of the Ld. Counsel that the various errors (assuming without admitting) in submission of complete details/information by the appellant to the assessing officer, as noted in the assessment order, related to the computation of deduction, on the basis of which entire claim could not have been denied. Accordingly, in our view, the assessing officer was not justified in denying the benefit of deduction Disallowing deduction under section 80 IC - whether the deduction needs to be computed by recording internal unit transfer at market price - Held that:- Even by applying the provisions of section 80IA(8), in our opinion, there can be no substitution of the price at which goods are debited by the eligible unit in its independent books of account. Similarly, with respect to components having value of 6.34 crores, which were transferred by the non-eligible unit to the eligible unit at Haridwar after nominal processing, does not result in enhancement of any market price of such goods. No disallowing deduction u/s 80IC, by enhancing the purchase price by adding certain markup thereon Denial of deduction under section 80 IC - inflation of profit by charging higher basic price - Held that:- We reverse the action of the assessing office in partly disallowing deduction under section 80IC on account of the have profit earned by the assessee in the eligible unit. Disallowance of deduction under section 80 I.C on account of the work and outsourcing of the manufacturing activity - Held that:- The profit earned by the eligible unit is from manufacturing of two wheelers, which is an eligible activity covered under section 80IC of the Act. Outsourcing of certain intermediary processes or procurement of some finished components for assembly thereof in the vehicle does not, in our view, mean outsourcing of the manufacturing operations. Thus, disallowance made by the assessing officer on the aforesaid ground was not based on any valid reasons Disallowance of deduction under section 80 IC of the act on account of profit attributable to advertisement and marketing activities carried out at head office - Held that:- Head office is a separate cost centre and expenses incurred thereat needs to be allocated to various profit centers/manufacturing units on a rational and scientific basis, without any element of profit/markup. The issue raised by the assessing officer in the present ground of appeal is categorically similar to that raised in the aforesaid ground. Accordingly following our findings stated above, we reverse the action of the assessing officer and delete the disallowance made under section 80IC Denial of deduction under section 80 IC on account of other income - Held that:- Interest on loan given at subsidized rates to employees, the source of such income is, thus, not the activity of giving loan, but benefit extended to employees engaged in the business. The first-degree nexus of such income, in our view, is the eligible business carried on by the appellant. Therefore, such income would be eligible for deduction u/s 80IC of the Act. Interest on loans provided for making capital support to vendors – Held that:- Loan has been given to vendors to provide uninterrupted supply of goods to the appellant. The first-degree nexus of giving loan is, thus, business of manufacturing. Accordingly following our findings in the preceding issue, the action of the assessing officer on this account is reversed. Freight recovery from customers - There is no profit element in the aforesaid recovery. In the absence of any income on the aforesaid recovery there was no warrant to deny benefit of deduction under section 80IC on the above Sundry Sales - The sale of some finished components also does not involve any income element inasmuch as semi-finished components are supplied to ancillary units for further processing and finished components procured there from are subsequently debited at cost in the books. There is no profit element in the aforesaid transaction and therefore the benefit of deduction under section 80IC cannot be denied on above Miscellaneous income – cash discounting from vendors - any benefit towards purchase price would have direct nexus with the computation of the aforesaid profits. The aforesaid income is, thus, directly related to business of manufacturing. Accordingly the action of the assessing officer in disallowing deduction under section 80IC on above was not valid and therefore, the action of the assessing officer on aforesaid ground is reversed. Exchange fluctuation gain on import of goods is going to directly reduce foreign exchange liability to be discharged against import of goods being debited in the profit and loss account to arrive at the profits of the eligible business, such benefit has direct nexus with the said business, which is eligible for deduction under section 80IC of the Act. Disallowance of expenses incurred on repairs and maintenance of assets at Nagpur premises alleging that the premises were not put to use - Held that:- These expenses were incurred since the possession was with the appellant and considering the transaction as per the terms and conditions of agreement to sale was executed, the appellant invested sum of 47.21 lacs on the property. Accordingly, the property was clearly in possession with the appellant. In that view of the matter there was no valid basis to disallow the expenses. Disallowance of expenses incurred on purchase of computer software for sending fax - Held that:- Respectfully following the decision of the coordinate bench in the appellant’s own case where it is been held that the software are revenue expenditure and whereas the server purchase are capital expenditure. In view of this we direct the Ld. assessing officer to allow the deduction of expenses on account of purchase of the software including their up gradation treating it as revenue expenditure and to allow depreciation on server purchased treating it as capital expenditure. Disallowance of various expenses incurred on repairs and maintenance to plant and machinery and store said tool consumed - Held that:- No adverse remark in maintenance of books of account has even been pointed by the auditors. Further, AO also on the verification of the books of accounts. On the other records could not point out any expenditure, which is not supported by the relevant evidences. Therefore, in these circumstances, the action of the Ld. assessing officer in making ad-hoc disallowance was purely unjustified and is thus deleted. Disallowance of claim of depreciation in respect of rainwater harvesting system - Held that:- The assessee, in order to fulfill its corporate social responsibility and also in view of the public notice issued to provide safe drinking water for the purposes of use by general public/ inhabitants in the area in which the assessee’s factory is situated, incurred the expenditure on construction of rain water harvesting system, on account of business / commercial expediency. Thus expenditure satisfies the test of having been incurred for the purposes of business. Disallowance of credit card expenses due to non-furnishing of information in prescribed format - Held that:- The company reimburses credit card expenses only after establishing nexus of same with the business activities. The books of account of the appellant are audited and no adverse inference in relation to incurrence of such expenses have been pointed out by the auditors. No unvouched expenditure has been pointed out by the assessing officer. This is not the first year of the incurrence of such expenses. No disallowance on the aforesaid account was made in any preceding assessment year or the succeeding assessment years. Disallowance on account of right above certain obsolete store right - Held that:- The fact that the assessee could not maintain quantitative details of scrap does not lead to a conclusion that the entire claim should be disallowed. AO should have, in our opinion, considered the reasonableness of the claim based on the size of the company, its operations or on the basis of similar comparable cases. As AO does not dispute the realization from the sale of scrap, the disallowance of the entire value of scarp is not justified. Deemed dividend addition - Held that:- Even assuming that the transaction is in the nature of loan, we have to agree with the arguments of the assessee that the transaction cannot be deemed as dividend in terms of exemption provided in clause (ii) of section 2(22)(e) since the loan would be considered as given by HHFL, which is engaged in the business of money lending, in the ordinary course of its business. Therefore, the amount cannot be deemed as dividend in the hands of the assessee. TDS u/s 194J - payment to the person doing the repair job - Held that:- The dealer is playing a role similar to that of the TPA in as much it is making payment to the person doing the repair job. This payment made for service rendered is only being made by the dealer. Applying the proposition laid out in the Board Circular, technically it is the dealer who is liable to deduct tax at source on payments made to the service provided for doing the repair jobs but not the assessee. On this factual matrix, and as Sec.194J is not attracted in this case

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• 2017 (1) TMI 265
  Verification of books of accounts - Auditor’s Report reliance - all the books of account and supporting evidences were destroyed in fire broke out at the assessee-company’s premises - Held that:- Assuming that the Auditor’s report could not have been relied upon, in that case also, the next question would be with respect to estimation of profit. Considering the order passed by Delhi High Court and the Tribunal for AY 2006-2006, the estimation of profit has been considered. Therefore, it cannot be said that any substantial question of law arise in the present Tax Appeal. It cannot be as well said that the learned Tribunal as well as CIT [A] committed any error of law which calls for interference by this Court.

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• 2017 (1) TMI 264
  Annual value determination - Fair rental value u/s 23(1)(a) - Municipal value or actual rent received – Held that:- It is an agreed position between the parties that the issue arising in the present case would stand governed by the decision of this Court in respondent assessee's case relating to Assessment Year 2005-06 decided in Commissioner of Income Tax 12 Vs. Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT ]. In the above view, the impugned order of the Tribunal is quashed and set aside and restored to the Assessing Officer to decide the lis between the parties in respect of the questions raised herein. We direct the Assessing Officer to decide the dispute in accordance with the principles led down by this Court in Tip Top Typography (supra).

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• 2017 (1) TMI 263
  Reference made for special audit under section 142(2A) - non providing reasonable opportunity of being heard to assessee - Validity of assessment order passed under section 143(3) r.w.s. 153A(b) - Held that:- Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (2008 (4) TMI 4 - Supreme Court ), we hold that where no show cause notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law. Another point raised by both the authorities was in respect of extension granted. We are not going into the said factual aspects, in view of our holding that the initial order at the pre-decisional stage passed by the Assessing Officer without show causing the assessee as to whether any special audit should be conducted in his case under section 142(2A) of the Act is bad in law. Hence, consequential orders of extension, if any become of no consequence. Since, we have decided the jurisdictional issue on merits, the other grounds of appeal becomes academic. - Decided in favour of assessee

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• 2017 (1) TMI 262
  Addition u/s 40(A)(2)(a) - related person - disallowing administrative services charges paid by the assessee to TACO - excessive and unreasonable expenditure - Held that:- As decided Tata Johnson Controls Automotive Limited Versus The Dy. Commissioner of Income Tax [2016 (4) TMI 963 - ITAT PUNE ] in on similar issue there is no basis for measuring such services and in the absence of any evidence brought on record to establish that the expenditure incurred by the assessee was excessive i.e. more than market value of the said services, we find no merit in the orders of authorities below in invoking provisions of section 40A(2)(a) of the Act. Accordingly, we direct the Assessing Officer to allow the expenditure in totality in the hands of the assessee as the said expenditure has been laid down in terms of the agreement agreed upon between the parties and is for carrying on of the business of the assessee more efficiently and is allowable as business expenditure. - Decided in favour of assessee Disallowance of transportation and staff welfare expenses - Held that:- The Assessing Officer shall re-examine the documents furnished by the assessee and shall make disallowance only to the extent of vouchers not produced by the assessee in respect of expenditure claimed. If the assessee is able to produce the relevant documentary evidence, no disallowance is to be made under this head. Accordingly, ground Nos. 3 and 4 raised in the appeal for assessment year 2007-08 is allowed for statistical purpose.

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• 2017 (1) TMI 261
  Levy of fees under section 234E in intimation issued under section 200A(1) - default in furnishing the TDS statements - Held that:- As decided in Maharashtra Cricket Association Vs. DCIT(CPC)-TDS, Ghaziabad [2016 (10) TMI 104 - ITAT PUNE] the amendment to section 200A(1) of the Act is procedural in nature and in view thereof, the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Hence, the intimation issued by the Assessing Officer under section 200A of the Act in all these appeals does not stand and the demand raised by way of charging the fees under section 234E of the Act is not valid and the same is deleted. The intimation issued by the Assessing Officer was beyond the scope of adjustment provided under section 200A of the Act and such adjustment could not stand in the eye of law. - Decided in favour of assessee

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• 2017 (1) TMI 260
  Revision u/s 263 - disallowance u/s 14A - Held that:- As Assessing Officer has passed the order after obtaining necessary approval from Addl.CIT u/s.153D of the I.T. Act, therefore, the CIT has no power to revise the order u/s.263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl.CIT u/s.153D of the I.T. Act. Even on merit also, we find the issue relating to disallowance of expenditure u/s.14A since the Assessment Years involved are A.Yrs. 2004-05 to 2006-07 Rule 8D is not applicable. So far as disallowance of administrative expenditure is concerned, the same is debatable issue in the instant case considering the totality of the facts of the case since the entire dividend is from investment in mutual funds. Further only adhoc disallowance of nominal expenditure has been sustained by the Tribunal. We therefore are of the opinion that the Ld.CIT was not justified in assuming jurisdiction u/s.263 of the I.T. Act on the issue of disallowance u/s.14A Similarly, the issue relating to depreciation on assets of Hyderabad Division has been decided by the Tribunal in favour of the assessee for A.Y. 2004-05 onwards by observing that the concept of “Block of Asset” w.e.f. 01-04-1988, individual assets had lost their identity once it entered with the Block of Assets and only the Block of Assets had to be considered. It was held that the test of user had to be applied upon the block of assets as a whole and not on individual assets. On appeal by the Revenue, the Hon’ble High Court in f G.R. Shipping Ltd. [2009 (7) TMI 1169 - BOMBAY HIGH COURT ] dismissed the appeal filed by the Revenue. Therefore, since the Ld.CIT(A) in the instant case has allowed the claim of depreciation on the block of assets installed at Hyderabad Division which were not used during the impugned assessment year by following the decision of Hon’ble Bombay High Court, therefore, in absence of any contrary material brought to our notice we do not find any infirmity in the order of the CIT(A). - Decided in favour of assessee

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• 2017 (1) TMI 259
  Levy of capital gains - eligible transfer - co-owners - assessment year - Held that:- We find that the assessee had placed the registered valuer’s report , the contents of which were not controverted by the ld AO that the market value of the property as on the date of receipt of the possession thereof and indexed cost thereof was more than the consideration received on sale of the property during the assessment year in question. We find that the assessee had placed the computation of capital gains based on this valuation report wherein the net result only resulted in a capital loss of 84,622/- as elaborated in the ld CITA order. The ld CITA observed that this was not disputed by the ld AO in the remand report. The registered valuer had determined the market value of the property sold at 80,80,000/- at the time of construction. The ld AO was not able to bring on record any evidence to suggest that the market value was not correct. Therefore, the ld CITA held that the market value based on registered valuer’s report cannot be brushed aside. We find that the ld CITA had rightly observed that the transfer within the meaning of section 2(47) of the Act had already happened in the year 1997 itself and the execution of the sale deeds in the financial year 2006-07 is only the culmination of the transfer that took place pursuant to development agreement dated 16.7.97. We also find lot of force in the alternative argument of the assessee, without prejudice, that as per the computation placed on record by the assssee, there is no resultant capital gains that could be taxed in the year under appeal. Hence we hold that the ld CITA had rightly deleted the levy of capital gains and had rightly held that the transfer had not taken place in the year under appeal both on law as well as on facts. - Decided in favour of assessee

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• 2017 (1) TMI 258
  Reference to DVO u/s 55A - Computation of capital gain - fair market value of the property as on 01-04-1981 adopted - Held that:- We do not find any infirmity in the order of Ld.CIT(A) on this issue since the issue squarely stands decided in favour of the assessee and against the revenue by the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Doulal Mohta (HUF) [2008 (9) TMI 890 - BOMBAY HIGH COURT] wherein it has been held that reference to the departmental valuation officer can only be made in cases where the value of the capital asset shown by the assessee is less than its fair market value as on 01-04-1981. Where the value of the capital asset shown by the assessee on the basis of the approved valuer’s report was more than its fair market value, reference u/s.55A of the Act, 1961 was not valid. Also see The Commissioner of Income Tax-13 Versus M/s. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT] - Decided against revenue

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• 2017 (1) TMI 257
  100% EOU - Withholding tax u/s 195 - Disallowance made u/s 40(a)(i) - enhanced profits due to disallowance for non deduction of tax u/s 195 considered for deduction u/s 10B - Held that:- The sum , substance and spirit of the afore-stated Circular No. No. 37/2016 dated 2nd November, 2016 is that the Revenue does not want to continue the litigation with respect to disallowance made by the Revenue u/s 32,40(a)(ia), 40A(3), 43B etc. of the Act , which ultimately led to increase in profits which are otherwise eligible for profit linked deduction under Chapter VI-A of the Act. The Board has accepted that the disallowance made u/s 32, 40(a)(ia), 40A(3), 43B etc. of the Act and other disallowance out of specific expenditure related to the business activity may be made by Revenue which led to enhancement of profits against which Chapter –VIA profit linked deductions has been claimed and it is accepted that enhanced profit linked deduction under Chapter VI-A is admissible on the profits so enhanced by the said disallowance made by the Revenue. We find that the Revenue’s appeal and the assessee’s cross objection are duly covered by the CBDT circular although Section 10B of the Act is not placed under Chapter VI-A of the Act rather the same is placed under Chapter-III of the Act but the deductions u/s 10B of the Act are profit linked deductions and hence there is no reason why the same should not be allowed keeping in view the spirit of afore-stated CBDT circular as the deduction u/s 10 B of the Act is also profit linked deduction The use of the word ‘etc.’ clearly denotes that it will apply to similarly placed disallowances and disallowance u/s 40(a)(i) of the Act is also disallowance due to non-deduction of withholding tax as is contemplated by Section 40(a)(ia) of the Act. Hence the CBDT circular will be applicable to deductions u/s 10B of the Act as well to disallowance u/s 40(a)(ia) of the Act as well. Hence the appeal of the Revenue is not sustainable/maintainable in view of afore-stated CBDT circular dated 02-11-2016 and we dismiss the appeal filed by the Revenue , while the C.O. filed by the assessee is allowed as the additions of 1,35,556/- made by the AO are w.r.t. disallowance u/s 40(1)(ia) of the Act. In any case this issue is also covered by decision of Hon’ble jurisdictional Bombay High Court in favour of the assessee in CIT v. Gem Plus Jewellary India Limited in (2010 (6) TMI 65 - BOMBAY HIGH COURT) as disallowance u/s 40(a)(i) of the Act is a statutory disallowance and the hence enhanced profits due to disallowance shall be considered for deduction u/s 10B of the Act. We order accordingly.

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• 2017 (1) TMI 256
  Penalty u/s. 271(1)(c) - assessment u/s 153A - capital gain computation - Held that:- We find that in this case the search action was conducted on 04.03.2010.The return of income in response to notice u/s 153A was filed on 17.10.2011 declaring income of 1,30,36,600/- subsequently, the assessee has revised his declared income to 1,37,77,640/- on 26.12.2011.We noticed that at the time of filing of return of income the assessee had computed long term capital gain as long term because this land was acquired initially through banakhat/agreement for sale on 1st Nov, 1994. for which the purchase deed was registered on 24th Feb, 2006. We have also considered the facts reported by the assessee and occurring of mistake because the period of holding was required to be calculated from the date of registration of purchase document and not from the date of banakhat. We find that assessee has disclosed the complete details of sale and purchase of land. We have noticed that the differences in the income was arising only because of indexation of the purchase of land which was not available in the case of short term capital gain. The original return itself was filed after the search action in response to notice under section 153A of the act which was revised to correct the mistake as elaborated above in this order. Looking to the above facts, we find that correction of working of capital gain in view of above stated facts and circumstances is not the case where the assessee had concealed the particular of income declared only because of search action. Accordingly, we considered that the Ld. Commissioner of Income Tax(A) is not justified in sustaining the penalty levied by the assessing officer. - Decided in favour of assessee.

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• 2017 (1) TMI 255
  Revision u/s 263 - debit on account of education fund and debit on account of contingency fund - Held that:- We find that the learned CIT has observed that apparently expenditure appeared to be capital in nature. On assessee’s not furnishing the necessary evidence of the expenditure being revenue in nature, learned CIT has remitted the matter to the file of the AO and directed the assessee to give his submissions and evidences before him. In our considered opinion, on the facts and circumstances of the issue there is no infirmity in the direction of learned CIT in this regard. Hence we uphold the order of learned CIT for the above issue. Debit in respect to interest capitalized on NPA account - Held that:- It is the assessee’s submission that the assessee has written off this amount of interest debited to the account of parties by writing off the same in profit and loss account and giving credit of same to the account of debtors. It has been submitted that the aforesaid claim is clearly allowable u/s 36(1)(vii) of I.T. Act. Learned counsel has further submitted that the issue is squarely covered in favour of the assessee by the decision of Hon’ble Apex Court in the case of CIT vs. TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT ] for the proposition that writing of the debt in the profit and loss account and the books of account is sufficient for allowance of bad debt. We find ourselves principally in agreement with this proposition. However, this aspect needs factual verification of the books and hence we remit this issue to the file of the AO to examine the issue Disallowance of provision on account of overdue interest - Held that:- No addition is required for overdue interest on NPA. Learned CIT has clearly erred in directing that the same be brought to tax. In our considered opinion, learned CIT was not justified in exercising his power of revision qua this issue. Firstly the issue is covered in favour of the assessee by the decision as above. Secondly even if there were two views possible, the AO has adopted one of the views which cannot be said to be malafide or non acceptable. In such situation, exercise of jurisdiction by the learned CIT is not valid. This is supported by the Hon’ble Apex Court exposition in the case of CIT vs. Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India ] for the proposition that when two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of Revenue unless the view taken by the ITO is unsustainable in law.

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• 2017 (1) TMI 254
  Addition u/s.69A - CIT(A) while upholding the addition made by the Assessing Officer on this account has rejected the submission of the assessee that in subsequent years some of the payments have been made by cheque to these creditors - AO rejected book results u/s.145(3) and went for addition on account of sundry creditors - Held that:- There is no evidence on record that the payments made subsequently to the sundry creditors has come back to the assessee by someway or the other. It is also an admitted fact that the assessee has deducted TDS on the labour charges and the TDS returns have been duly filed, a fact stated before CIT(A) and not controverted by the revenue. At the same time, the assessee also failed to produce the creditors on account of outstanding labour charges or sundry creditors for supply of materials before the Assessing Officer when the summons issued to them were returned back and the assessee was given opportunity by the Assessing Officer to produce those creditors. Under these circumstances and considering the totality of the facts of the case, we are of the considered opinion that adoption of profit rate of 20% on the turnover of 11,56,59,762/- before depreciation, salary and interest to partners will meet the ends of justice. This amounts to an addition of 22,55,365/-, i.e. addition of additional income @ 1.95% (i.e. 20% - 18.05%) on turnover of 11,56,59,762/- We hold and direct accordingly. Disallowance invoking the provisions of section 40(a)(ia) - Non deduction of TDS on payment of interest - Held that:- The Hon’ble Andhra Pradesh High Court in the case of Indwell Constructions (1998 (3) TMI 121 - ANDHRA PRADESH High Court ) has held that separate addition in respect of items falling u/s.40(b) cannot be made to the income estimated u/s.145 after rejecting books of account as all the deductions including disallowance u/s.40(b) which are referred to in section 29 are deemed to have been taken into account while making estimate. Since in the instant case we have already directed the Assessing Officer go for estimation of profit from contract work, therefore, further disallowance u/s.40(a)(ia) in the instant case is not called for. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition invoking the provisions of section 40(a)(ia) Addition u/s.40A(3) - Held that:- As we have already held that no separate disallowance on account of section 40(a)(ia) or 40A(3) is called for once the profit is estimated. Since we have already held that the profit of the assessee in the instant case has to be estimated, therefore, there is no justification for any addition on account of violation of section 40A(3). Accordingly, the order of the CIT(A) is set aside and the ground raised by the assessee has been allowed. GP estimation - material supplied by the Government Department - Held that:- We find as against the total contract receipt of 18,02,57,518/- the Government has supplied materials to the tune of 2,01,75,901/- to the assessee. It is the settled proposition of law that when the material is supplied by the Government Department for utilisation in the construction work, then the profit has to be estimated on the gross contract receipt as reduced by the cost of materials so supplied by the Government Department as the assessee is not expected to make any profit out of it. Under these circumstances the gross profit has to be computed after reducing the cost of materials supplied from the gross contract receipts which the CIT(A) in the instant case has done. Percentage of depreciation @10% on WDV of Civil work worked out by AO on windmill - Held that:- We find the CIT(A) upheld the action of the Assessing Officer in confirming depreciation @10% on the civil construction of the windmill. In the case of Sonai Engineering Pvt. Ltd. (2014 (9) TMI 279 - ITAT PUNE) we have upheld the order of the CIT(A) in holding that cost of work including foundation work is a part of the new windmill and eligible for depreciation at higher rate. We therefore set aside the order of the CIT(A) and direct the Assessing Officer to compute the depreciation @80% or the rate which is applicable to the windmill since such civil construction is an integral part of the cost of windmill erection GP rate determination - Held that:- Difference between the average rate of past years and the rate of GP for the current year was 4.34% out of which the Assessing Officer has already gave margin of 1.50% on account of exceptional circumstances and thereby made GP addition of only 2.84%. We further find during the year there is also no supply of material by the Government Department whereas such supply of material was there in the preceding year to the tune of 2.20 crores. The assessee has not substantially proved how the work is more material intensive and heavy interference by the local political leaders. Under these circumstances, we fail to understand as to how the order of the CIT(A) is erroneous while confirming the order of the Assessing Officer. The Ld. Counsel for the assessee could not bring any cogent evidence so as to take a contrary view than the view taken by the CIT(A). Accordingly, we uphold the order of the order of CIT(A) on this issue. Grounds of appeal No.1 to 3 by the assessee are dismissed.

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• 2017 (1) TMI 253
  Computation of Minimum Alternate Tax (MAT) - Tribunal concluded that the additions made by the Respondent towards excess depreciation written back and provision for land development withdrawn while computing the book profits in terms of Section 115JA - Held that:- In the present case, we are concerned with excess depreciation claimed as well as provision for land development both reduced by the assessee from book profits in its computation for MAT in terms of clause (i) of the Explanation to section 115JA. However, the downward adjustment in terms of this provision is conditional upon satisfaction of the requirement under the proviso thereto i.e. whether the book profit of the earlier year when the reserve/provision was created, was increased by the amounts credited to the profit and loss account in the financial year relevant to the assessment year in question. There is no finding in the orders of the lower authorities in this regard. In fact, reference to clause (i) of the Explanation to section 115JA finds place for the first time at the level of the Tribunal. Submissions have been advanced before us on behalf of the assessee on the satisfaction of the condition set out in the Proviso to sub-clause (i) of the Explanation to s.15JA. This is however, an exercise in fact finding, that has to be gone into by the assessing officer. We thus have no choice but to remit the matter to the file of the assessing officer to redo the computation of book profits in terms of Section 115 JA as it stood at the relevant time, including the applicability of sub-clause (i) of the Explanation to section 115JA and render a finding on the applicability of the proviso thereto.

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• 2017 (1) TMI 252
  Revision u/s 263 - whether the order of the Assessing Officer is erroneous on the ground of not being in accordance with law? - absence of actual business activity - Held that:- CIT in his order has held that the Assessing Officer has not taken into account the relevant consideration of absence of actual business activity of the appellant for the purpose of treating the expenditure claimed as an allowable expenditure. Perusal of the assessment order quoted above substantiates these observations of the CIT. Therefore, in our opinion, the first requisite of law stands satisfied. Loss to the revenue on account of the error in the assessment order - Held that:- The impugned orders observe that the Assessing Company during the previous year, relevant to the Assessment Year 2009-10, has not commenced the business of development of SEZ/Real Estate and that the Company had merely obtained loan from the holding company amounting to 49,81,00,000/- in the financial year 2007-08 and utilized it for investing in share of subsidiary company M/s. Zuari Developers Pvt. Ltd., to the extent of 8,26,75,564/- and giving loans to subsidiary company to the extent of 42,16,40,630/-. The interest paid on the loans amounted to 3,56,51,678/- and other incidental expenses, amounting to 4,69,544/- were charged to the Profit and Loss Account as expenses incurred during the P.Y. relevant to the assessment year 2009-10. On the basis of this business loss of 36,10,09,708/- was computed and claimed as loss to be carried forward to subsequent years. In the opinion of the CIT and ITAT since the Company had not commenced its business of development of SEZ/Real Estate, the expenditure claimed could not have been treated as the expenditure incurred for the purpose of business. As such, it was denied. Since the expenditure was not allowable expenditure, it amounted to irregular allowances of loss. Such loss was allowed to be carried forward to the extent of 1,78,57,950/- and involved notional tax effect of 60,69,917/- (33.99% of 1,78,57,950/-). This notional tax effect is directly attributable to the error in the assessment order. Therefore, even the second requisite is satisfied.

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• 2017 (1) TMI 251
  Disallowance of the loss on sale of shares - conversion of the investment into stock-in-trade disclosed under the head ‘business’ - revised return of income rejected - Held that:- AO was not ready to accept his personal statement which was given by Chartered Accountant before the AO. The AO for the purpose of clarification, he summoned Mr.C.L.Ravindra, Chartered Accountant. When he confirmed his report which related to his statement in the notes on account filed along with revised return of income, the AO was not ready to accept the same, when it is in favour of assessee. This kind of action of AO is not appreciable. Thirdly, the AO called for original copy of minute book of Board meeting. However, the assessee produced the copy of typed copy of minute book. He doubted the typed copy of minute book and he rejected the same. If the surrounding circumstances suggest that the assessee converted investment into stock in trade and also supported by the minutes produced by the assessee, still if he had the doubt, he should have clarified it from Board of Directors who attended the meeting. Instead of this, he rejected revised return of income itself, which is not appropriate. More so, in our opinion, the assessee could make claim even at appellate stage as held by the Supreme Court in the case of National Thermal Power Co. Ltd. in [1996 (12) TMI 7 - SUPREME Court]. We find that the procedural irregularities committed by the assessee either under the Companies Act or Income Tax Act, cannot be considered as a fatal so as to disallow the claim of assessee. Accordingly, we direct the AO to consider the revised return as a valid return filed by the assessee in terms of Sec.139(5) of the Act and complete the assessment as per the revised return filed before him. This ground of assessee is allowed. Addition u/sec.40(a)(ia) - payments to two sub-contractors - Held that:- This issue is squarely covered by the order of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] wherein held that when the “expenses” is not outstanding at the end of the close of the financial year, provisions of the section 40(a)(ia) of the Act cannot be applied. Being so, if the amount is already paid, the provisions of the section 40(a)(ia) cannot be applied. With this observation, we remit the issue to the file of ld. Assessing Officer for fresh consideration. Disallowance being the expenses quantified as per Rule 8D of IT Rules on the application of Sec.14A in the computation of taxable income - Held that:- For assessment year 2009-10, the same issue came for consideration before this Tribunal in the case of M/s Consolidated Construction Consortium Ltd [2016 (2) TMI 230 - ITAT CHENNAI] disallowance u/s.14A r.w. Rule 8D should not exceed the exempt income. The Mumbai Bench in its order in M/s Daga Global Chemicals Pvt. Ltd vs ACIT [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 in the light of the above decision of the Mumbai Bench of the Tribunal

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• 2017 (1) TMI 250
  Deduction of commission payments made to doctors - AO disallowed the said claims on the ground that the assessee had not produced the vouchers - Held that:- Admittedly, on facts, it is clear that though the assessee had claimed deduction of amounts allegedly paid to doctors towards commissions, the assessee did not produce the vouchers or any other supporting documents to substantiate the claim. The assessee did not even disclose the names of the recipients. In other words, these are cases where the assessee had miserably failed to substantiate the claim of having made the payments. In such circumstances, even if it is true that in the previous years similar claims were allowed by the Assessing Officer, in so far as the assessment year in question is concerned since the assessee has miserably failed to substantiate the claim, we feel that the First Appellate Authority ought not have interfered with the assessment order. For the same reason, we are also inclined to think that the Tribunal ought not have upheld the order of the First Appellate Authority holding that it was the practice followed in the business. Therefore, the orders passed by the First Appellate Authority and the Tribunal are set aside. - Decided in favour of the Revenue

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• 2017 (1) TMI 249
  TDS u/s. 194I - addition of short deduction determined on account of TDS payment made to Central Warehousing Corporation (CWC), Container Freight Station (CFS), Bombay Port Trust (BPT) and Airport Authority of India (AAI) for services rendered by such entities which included use of space for storage of imported/exported materials - Held that:- We approve the conclusion of CIT(A) that the payments made to CWC, CFS, BPT and AAI cannot be construed as ‘rent’ for the purposes of Sec. 194I of the Act. Thus, insofar as Ground of appeal nos. 1 and 2 are concerned, same are dismissed. TDS u/s 194J - survey fees paid by the assessee on which no tax was deducted at source - Held that:- No error on the part of CIT(A) because the payments have been made by the assessee in the capacity of an intermediary between its client exporter/importer and the recipients who have conducted the inspection of goods so as to facilitate customs clearance. The reasoning adverted by the CIT(A) is similar to that considered by us while dealing with the payments made to CWC, CFS, BPT and AAI and, therefore, the conclusion drawn by CIT(A) to the effect that assessee cannot be construed as an ‘assessee in default’ within the meaning of Sec. 201(1) and 201(1A) of the Act is hereby upheld TDS u/s 194J - internet charges paid by the assessee on which no tax was deducted at source - Held that:- The parity of reasoning laid down by the Hon'ble Madras High Court in the case of Skycell Communications Ltd. [2001 (2) TMI 57 - MADRAS High Court] eld that the mobile telephone facilities provided by the cell phone companies to their subscribers for making/receiving calls etc. cannot be construed as ‘technical services’ and thus, it cannot be brought into the ambit of Sec. 194J of the Act. In the present case, when the assessee is availing internet services from the broadband service provider, it does not entail that such broadband service provider is making available a ‘technical service’ so as to require the assessee to deduct tax at source u/s 194J of the Act. Therefore, we hereby affirm the order of CIT(A) on this aspect also TDS u/s 194C OR 194I - payment made towards hiring of Forklift/Cranes - Held that:- . Factually speaking, the payments have been made to the contractors for providing services of handling and transportation of cargo after the customs clearances were obtained. Such charges, inter-alia, entailed loading and unloading of cargo for which the contractors utilized Forklifts/Cranes being maintained by them. Quite clearly, assessee has not entered into any contract for hiring of Forklifts or Cranes, but it is a case where the contractor has utilized the same in discharge of his services to the assessee-firm. Therefore, in such a situation, it is not possible to conclude that assessee contracted for renting of Forklifts/Cranes so as to treat the payments as ‘rent’ for the purposes of Sec. 194I of the Act. CIT(A), in our view, correctly came to conclude that the payments have been made by the contractors against work executed on behalf of the assessee which clearly attracts deduction of tax at source u/s 194C of the Act and not u/s 194I of the Act, as contended by the Assessing Officer. Thus, on this aspect also Revenue fails. TDS u/s 194C OR 194J - payments made towards fumigation charges - Held that:- the plea raised by Revenue is without any basis. Factually speaking, it emerges from record that the persons entrusted with the job of fumigation carry out spraying of chemicals, etc. to prevent attack of pests so that cargo/goods being handled by the assessee do not get damaged. Ostensibly, the payments made by assessee would, inter-alia, include cost of chemicals, pesticides, etc. Apart from bald assertions, Revenue has not been able to demonstrate the use of any technical information or skill which is required to perform such fumigation activities and, therefore, invoking of Sec. 194J of the Act in the present case is unwarranted and has been correctly negated by the CIT(A). Thus, on this aspect also, Revenue fails.

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• 2017 (1) TMI 248
  Valuation towards non-compete fee - whether non-compete and brand acquisition were equally important components in the transfer of an undertaking - Held that:- Considering with the apparent intention of the parties to attribute some amount of the total consideration towards Non-compete as seen from clause 3.6 of the Non-compete Agreement. The learned counsel would, upon instructions, suggest that a sum of 1 crore might be adopted as a reasonable valuation towards non-compete fee. In the aforesaid facts and circumstances, the sum of 1 crore towards non-compete appears to be proper and would serve the ends of justice. We are conscious of the fact that in attributing an amount of Rs. One crore towards negative covenant, we are substituting yet another value in preference to those already adopted by the lower authorities. However the factual aspects of the matter, as noted by us in paragraph 11 and 12 have not been taken into consideration, and this, we believe, makes a critical difference. The Substantial Question of Law is answered in favour of the Revenue and against the Assessee

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• 2017 (1) TMI 247
  Additions made u/s. 68 - main reason for making the addition was that the shareholders have deposited cash in some other bank account which have come to the depositors with banking channel, and then transferred to assessee thus the genuineness of the transactions was doubted - Held that:- AO has not pointed out any evidence which shows that amount invested by these companies were not owned by these companies and the money belong to the assessee. Needless to say that when the assessee has furnished the confirmations, Income Tax Returns, Bank Statements of Borrowers, it cannot be said, without brining into additional evidences which even remotely suggests that the transactions are ingenuine, ld. AO cannot say that the amount invested by the depositors is income of the assessee under section 68 of the I.T. Act. Further, the LD DR could not point out before us and infirmity in the order of the ld CIT (A) in deleting the addition. Further, we also do not find any infirmity in the order of the Ld. CIT(A) in deleting the additions of 5.20 Crores with respect to 17 companies to whom the share were issued. In the result, both the grounds of appeal of the revenue are dismissed - Decided in favour of assessee

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• 2017 (1) TMI 246
  Payments to overseas payees located at Switzerland, Canada and USA without deducting any TDS - whether the above remittances were in fact in the nature of fee for royalty/technical services covered by deeming fiction under section 9(1)(vi) and (vii) ? - DTAA applicability - Held that:- There is hardly any dispute about section 90(2) of the Act envisaging that in case there exists a Double Taxation Avoidance Agreement in respect of any country, provisions of the Act apply to the extent they are more beneficial to such an assessee and not otherwise. The assessee in the instant case refers to Indo-Portuguese DTAA containing “make available” condition to be applied in case of its Swiss remittances as per Indo-Swiss DTAA Protocol on the ground that although such a “make available” condition in respect of technical services is not explicitly contained in latter DTAA, same is deemed to have been applicable by virtue of Indo-Portuguese DTAA Protocol specified hereinabove involving a specific condition to this effect. This plea fails to impress upon us. We make it clear that no “make available” articles in respect to fee for technical service is used in Indo- Swiss DTAA or Protocol. The said protocol only postulates that India and Swiss shall enter into negotiation to this effect if former State enters into a DTAA with a member of OECD State either reducing rate of tax or restricting the scope of specified categories of income hereinabove. Revival of section 201(1) and 201(1A) demands pertains to TDS not deducted upon assessee’s canadian and american remittances hereinabove. There is no dispute that India and these countries have entered into DTAAs and same contain “make available” stipulation with respect to the impugned services to be involved in corresponding Article 12(4)(b) in both cases. The Revenue fails to take us through any evidence that assessee’s payees in question based in Canada or USA have made it available their expertise and technical knowhow thereby enabling it to use the same independently without their assistance. It transpires that these payees have merely rendered consultancy services without imparting any knowledge. We find that no reason to interfere with the ld.CIT(A) observation extracted hereinabove quoting various judicial precedents in support as well.

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• 2017 (1) TMI 245
  Disallowance of expenditure - AO disallowed the same on the ground that the expenditure of the preceding assessment years cannot be claimed as deduction during the year - Held that:- The salary and interest to partners for A.Y. 2005-06 and 2006-07 has already been debited to the cost of flats in those years and credited to capital account of partners. Once the same has been debited to the cost of the flat in the preceding assessment years, the assessee cannot claim the same again under the head “other expenses” in the current year. Even though there was no profit in the preceding assessment years, nothing precluded the assessee from claiming the minimum salary paid to the partners in those years. The method followed by the assessee in the instant case amounts to claiming of the expenditure twice, i.e. in the year when the assessee has debited such expenses to the cost of the flats as there was no profit and again during the impugned assessment year when there is profit. This definitely amounts to double deduction. Therefore, do not find any infirmity in the order of the CIT(A) upholding the action of the Assessing Officer in disallowing the expenditure . - Decided against assessee.

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• 2017 (1) TMI 244
  Benefit of depreciation - vehicle were not owned and used but merely financed by the assessee - Held that:- Section 32 requires that the assessee must use the asset for the "purposes of business". It does not mandate usage of the asset by the assessee itself. As long as the asset is utilised for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee - As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out. See Commissioner of Income Tax (I) Jaipur Vs. Baid Leasing & Finance Company Ltd. [2013 (8) TMI 13 - RAJASTHAN HIGH COURT] - Decided in favour of assessee. Deduction of payment of interest - the loans/ advances were provided to the persons related to the Directors without interest and for non business purposes? - Held that:- As decided in S.A. Builders Ltd. Vs. Commissioner of Income Tax (Appeals) Chandigarh and Anr.[2006 (12) TMI 82 - SUPREME COURT] in the present case, the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) on interest free loan. The test, in our opinion, in such a case is really whether this was done as a measure of commercial expediency. In our opinion, the decisions relating to Section 37 of the Act will also be applicable to Section 36(1)(iii) because in Section 37 also the expression used is "for the purpose of business". It has been consistently held in decisions relating to Section 37 that the expression "for the purpose of business" includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. Taking into account the decision of the Supreme Court, we are of the opinion that it was not interest which was from the borrowed fund which was running from the finance which is justified by CIT learned Tribunal. - Decided in favour of the assessee

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• 2017 (1) TMI 243
  Tds u/s 194 - non deduction of tds on deemed divided u/s 2(22)(e) - Held that:- Issue is required to be answered in favour of the assessee. The tax is not liable to be deducted at source u/s Section 194 of the Income Tax Act on deemed dividend to a concern in which shareholder of assessee company is a member as a partner and in which he has substantial interest as per provisions of Section 2(22)(e) of the Act. It can't be covered u/s 194.

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• 2017 (1) TMI 242
  TDS u/s 194H or u/s 194J - applicability u/s 40(a)(ia) - TDS on Services Charges made to RCDF - Held that:- Tribunal as held apropos the payment to RCDF cess, it has not been demonstrated by the Department that any managerial services in this connection have been rendered to assessee by RCDF qua this amount. RCDF is an apex cooperative body and cess is paid to it by virtue of federal structure in Rajasthan cooperative set up. Thus as far as assessee's business is concerned, there is no rendering of any managerial services by RCDF as alleged by the AO u/s 194H and upheld ld. CIT(A) u/s194J. Since there is no rendering of any services and the payment is not made for any managerial services to RCDF, therefore, payment can neither be held as liable for TDS u/s 194H of the Act as commission/brokerage as held by the AO nor u/s 194J for rendering any managerial services as held by the ld. CIT(A). In view thereof, we hold that assessee's impugned payment to RCDF are not liable for TDS. It is true that the counsel for the appellant contended that the the payment which has been made till 16.12.2013 (Annexure-4) on completion of financial year will be applied or not. Therefore, we are not confirming the reasoning adopted by the Tribunal but confirming only the conclusion drawn by the Tribunal. However, question regarding Section 194J & H of the Income Tax Act. It is payment made on the basis of Federation and Membership. It is on the ground of mutuality payment is made.

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• Customs

• 2017 (1) TMI 211
  Export of Indian currency by courier - smuggling- imposition of penalty u/s 114(i) of the Customs Act, 1962 - due diligence to be exercised by courier company - Held that: - there was no act of omission or commission on part of the appellant in alleged smuggling of Indian currency. They did not have the knowledge of the currency hidden in the consignments - I find that the show-cause notice alleges that the export of such currency has been done on numerous occasions and even Customs have failed to detect the same. The currency has been hidden well in the takas of fabrics. In these circumstances, it may be difficult to detect the currency - However, the fact remains that there was a failure on part of M/s Aramex India Pvt. Ltd. - the penalty imposed of 2 lakhs on appellant is higher side and the same is reduced to 50,000/- only - appeal disposed off - decided partly in favor of appellant-courier company.

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• 2017 (1) TMI 210
  Valuation - Misdeclaration of the quantity of goods “iron buttons and fittings” and the value thereof - value of goods enhanced based on contemporaneous imports value - whether enhancement of value sustainable? - Held that: - reliance placed on the decision of the case of Punjab Processors Pvt. Ltd. vs. CC, [2003 (9) TMI 86 - SUPREME COURT OF INDIA], where it was held that customs authorities while assessing value of imports, are not bound by the figures mentioned in the invoice and can rely on contemporaneous evidence to show that the invoice value is not correct - enhanced value justified - appeal rejected - decided against appellant-assessee.

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• 2017 (1) TMI 209
  Classification of imported goods - Boric acid - end use of goods, significant to determine whether the import requires registration or not - certificate of registration from Central Insecticide Board or a certificate of end use from the concerned Ministry/Department of Government of India - it is to be determined whether the goods are used for insecticidal purposes or not and whether registration required or not? - confiscation of goods with imposition of redemption fine and penalty - Held that: - as per ITC (HS), the boric acid is specifically classified under CTH 2810, which is freely importable. From the findings of the Krishi Bhawan committee, it can be seen that the concerned Ministry is of the opinion that if boric acid is used for non-insecticidal purpose, no registration is required under the Insecticide Act, 1968. In other case, however, it may necessary to obtain registration. In the instant case, the imports have been made by the Traders and it is not clear that the boric acid imported have been used for insecticidal purpose - no evidence has been placed on record to establish that the material has been used for insecticidal purposes and therefore it cannot be said that registration under Insecticide Act is needed. Confiscation and penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 208
  Import of second hand machinery - Digital Multifunction Print and Copying Machines - amendment in the Foreign Trade Policy by which the goods have become restricted for import and from that date, prior licence from the DGFT required for import of these restricted goods - Held that: - import of these machines required licence from the DGFT which was not taken by the appellant. Therefore, the appellants have violated the provisions of Foreign Trade Policy and the Commissioner vide the impugned order has rightly passed the order of confiscation and thereafter given an option to redeem the goods on payment of fine of 13,00,000/- u/s 125 of the Customs Act 1962 and also imposed penalty of 6,00,000/- u/s 112(a) of the Customs Act, 1962. The Commissioner (Appeals) has considered all the evidence on record and has come to a right conclusion and in my view, the redemption fine and the penalty imposed by the Commissioner is not excessive and does not warrant any interference by this Tribunal - appeal dismissed - decided against appellant.

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• 2017 (1) TMI 207
  Valuation - 100% subsidiary - related party transaction - enhancement in the value by 120%, on the ground that supplier and the respondent are related person, the value charged by the supplier to the third party supply was 120% more than the value charged to the present appellant - Held that: - the Ld. Commissioner has with proper application of mind addressed the issue not only considering the fact of aspect of commission but also on law point - the appellants which is acting both as distributor and the indenting agent, and third parties in India importing directly from the supplier, both stand at different footing and not at the same commercial level. The lower authority has taken three invoices of third parties for comparison with that of-for the appellants. As per him the third party invoice price on average works out about 120% more than the price of the identical goods imported by the appellants. It is found that taking the price of the third party as bench mark as done by the lower authority, in the first item case, the discount for the appellant comes to 23.3%, and in the second item case it comes to 22.3%. for the third items, no item number has been mentioned, hence it is a matter of question whether they are identical. The findings of the lower authority appears to be factually incorrect. Enhancement of value, by lower authority is set aside - appeal dismissed - decided against Revenue.

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• 2017 (1) TMI 206
  Goods unconditionally cleared and is not available for confiscation - whether the confiscation justified even in the case where the goods are not available for confiscation? - Held that: - Tribunal in the case of Mangalore Refinery and Petrochemicals Ltd. [2012 (9) TMI 712 - CESTAT, BANGALORE], in the similar issue held that, the imported goods, though are liable to confiscation the said goods are not available for confiscation. In such a situation, the question of confiscating the said goods does not arise as the provision for grant of option of redemption under Section 125 will be rendered meaningless - confiscation not justified - appeal rejected - decided against Revenue.

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• 2017 (1) TMI 205
  Valuation - Crude naphthalene or Refined naphthalene - the appellant claims that goods are reject of refined naphthalene which is in common parlance treated are crude naphthalene - whether the goods are crude naphthalene or refined naphthalene and is the value as enhanced by lower authority is correct? - Held that: - It is admitted by the appellant itself that the goods is reject of refined naphthalene, therefore even though it is reject but it is of refined naphthalene therefore the nature of the goods will not get altered due to the rejection, therefore it cannot be treated as crude naphthalene. The analysis report made it very clear that it is 97.35 % purity therefore it cannot be said that it is crude naphthalene. In this facts, it is very clear that appellant has mis-declared the goods as crude naphthalene whereas the goods is refined naphthalene. Obviously the value of refined naphthalene is higher than the crude naphthalene, therefore the enhancement of the value was correctly done by the lower authority - appellant has not only mis-declared the description but also the value - appeal dismissed - decided against appellant.

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• 2017 (1) TMI 204
  Valuation of imported goods - related party transaction - Rule 9(1) (c) of Customs Valuation Rules, 1988 - Held that: - Adjudicating authority in the order-in-original has categorically recorded that the holding of 60% of the shares in the appellant Company by the foreign Company has not influenced the price/value of the imported goods. First appellate authority has not recorded the detailed findings as to how the price has been influenced due to the relationship between the foreign supplier and appellant - the impugned order is short of detailed reasoning and needs to be set aside - an opportunity extended to the first appellate authority to record detailed findings on the issue - appeal disposed off by way of remand.

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• 2017 (1) TMI 203
  Benefit of export incentive - shipping bills did not contain declaration which was required by virtue of a N/N. dated 1.4.2008, which mandated such condition, for claiming export incentive - Did the CESTAT fall into error in upholding the denial of the petitioner’s claim for amendment of its shipping document under Section 149 of the Customs Act? - Held that: - The exporter/appellant’s fault here is that it did not file the requisite declaration. In all other respects, i.e., as to whether they conform to the description in the shipping documents and the value etc continues to be ascertainable because the concerned bills, invoices and other shipping documents are available with the customs authorities. The omission to file the declaration of the kind we are concerned with, when all other relative materials are present was not vital to the appellant’s case. The material which did and does exist is substantial; the appellant should, therefore, be permitted to amend its shipping bill - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (1) TMI 192
  Scheme of amalgamation - Held that:- Considering the approval accorded by the shareholders and creditors of the Transferor Company to the proposed scheme; the affidavit filed by the Regional Director, Northern Region and the report filed by the Official Liquidator, having not raising any objection to the proposed scheme, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Transferor Company will comply with the statutory requirements in accordance with law. Upon the sanction becoming effective from the appointed date of Amalgamation, i.e. 1st August, 2016, the Transferor Company shall stand dissolved without undergoing the process of winding up. A certified copy of the order, sanctioning the scheme, be filed with the ROC, within thirty (30) days of its receipt. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this court to the scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Transferor Company and the Transferee Company. It is made clear, that this order shall not be construed as an order granting exemption, inter alia, from, payment of stamp duty or, taxes or, any other charges, if, payable, as per the relevant provisions of law or, from any applicable permissions that may have to be obtained or, even compliances that may have to be made, as per the mandate of law.

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• 2017 (1) TMI 191
  Scheme of amalgamation - Held that:- Considering the approval accorded by the members and creditors of the Petitioners to the proposed Scheme; the circumstance that the objections raised by the affidavit filed by the Regional Director, Northern Region, Ministry of Corporate Affairs stand satisfied; the report of the Official Liquidator attached to this High Court, whereby no objections have been raised to the proposed Scheme, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under sections 391 to 394 of the Companies Act, 1956. The Petitioners will however, comply with the statutory requirements in accordance with law. A certified copy of the order, sanctioning the scheme, be filed with the ROC, within thirty (30) days of its receipt. Resultantly, it is hereby directed that the petitioners will comply with all provisions of the scheme and, in particular, those which are referred to hereinabove.

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• Service Tax

• 2017 (1) TMI 240
  VCES Scheme - rejection as the figures declared by under VCES did not match with the balance sheet and the profit and loss account - Held that: - I find that the appellant has given a C.A’s certificate which reconciled the figures but the same was not presented before the lower authorities and therefore lower authorities did not get an opportunity to examine the same. On examination of the figures in the profit & loss account and the service tax assessable value did not match for various reasons like the date of payment and date of billing may be different or some services may be for residential renting etc. - matter remanded to the Commissioner (A) to examine the C.A. certificate produced by the appellant and other facts produced by the appellant - appeal disposed off by way of remand.

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• 2017 (1) TMI 239
  Rejection of Refund claim - refund of interest and penalty - GTA services used for transportation of the agriculture produce - denial on the ground that once the appellant have admittedly paid service tax, interest and penalty, they have accepted the liability on their own and amount cannot be refunded - Held that: - From the provisions of section 73(4A), also it can be seen that appellant has option that if any amount of service tax was not paid or short paid, same can be paid suo moto alongwith interest and penalty equal to one per cent. In the same provision, it was provided oncethe payment is made the case shall stand closed thereafter it is not open to challenge either for the assessee or for the department and department cannot issue show cause notice. In such provision, after availing the option of the volunteer payment of service tax, interest and penalty appellant cannot claim that the payment was wrongly made consequently cannot claimed the refund. Appeal dismissed - decided against appellant.

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• 2017 (1) TMI 238
  Business auxiliary services - the appellant is primarily engaged in activity related to harvesting of sugarcane and transportation of the same from the agricultural fields of the farmers who grow such cane to the sugar factory; appellant also provides the services all loading or unloading of such sugarcane in the factory for which they paid the Service Tax - whether the services rendered by the appellant or taxable under the category of ‘Business Auxiliary Services’ or otherwise? Held that: - the issue is no more res integra of this Bench in the case of Dnyaneshwar Trust Vs. Commissioner of Central Excise, Mumbai [2014 (1) TMI 90 - CESTAT MUMBAI], where it was held that harvesting and transporting of sugarcane to the factory will not fall under the category of “Business Auxiliary Services” - demand set aside - appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 237
  Refund of unutilized credit - Rule 5 of CENVAT Credit Rules, 2004 read with N/N. 5/2006-CE (NT) - Time Bar - Held that: - The period has been computed by the authorites below, from the date of export of services instead of computing the time from the date of receipt of foreign currency or the date of invoices - reliance placed on the decision of the case of CCE, ST, Hyderabad Vs M/s Hyundai Motor India Engg (P) Ltd. [2015 (3) TMI 1049 - ANDHRA PRADESH HIGH COURT], where it was held that the export of service the relevant date is the relevant date of invoices and not the date of export services - matter remanded to the original authority for reconsideration of the issue of limitation after taking into account the date of export invoices. Whether the appellant is eligible for refund of credit of service tax paid on various services which were availed on invoices issued to the premises which were not included in the registration certificate? - Held that: - reliance placed in the decision of the case of mPortal India Wireless Solutions (P.) Ltd. Versus Commissioner of Service Tax [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - non-registration of premises is not sufficient ground for rejection of refund. Appellant is eligible for refund of claim. Appeal allowed - matter on remand.

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• 2017 (1) TMI 236
  Business auxiliary services - whether the appellant is required to discharge Service Tax liability on an amount received from M/s Maharashtra Knowledge Corporation Limited under the category of “Business Auxiliary Service”? - M/s Maharashtra Knowledge Corporation Limited (MKCL) had appointed the appellant as Authorized Local Agency for promotion and development of computer training in the state of Maharashtra and responsibility as an Authorized Local Agency, is to promote and market the activities of M/s MKCL. Held that: - the issue is no more res integra as this Tribunal in the case of Sunbeam Infocomm Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-II [2014 (8) TMI 783 - CESTAT MUMBAI] in an identical issue has taken a view in favor of the assessee and held that These activities undertaken by the appellant would certainly come within clause (d) of the exemption Notification 14/2004-ST which is “a service incidental or auxiliary to any activity specified in clauses (a) to (c)” and clause (c) deals with provision of service on behalf of client - demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 235
  Refund claim - N/N. 41/2007 - Service Tax paid under the category of ‘port services’ on documentation charge, terminal handling charge, surrender charges - Held that: - if there is a findings that there was export of goods and services utilised were in respect of the very same exported goods, the department was not correct in rejecting the refund claims - appellant eligible for refund - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 234
  Rejection of refund claim - N/N. 41/2007 prescribes that refund claim should be filed within six months from the date of export - delay in filing refund claim, but within one year of the exports - Time limitation - Held that: - I find that a similar issue came up before this Tribunal in the case of CCE Pune Vs. Chandrashekhar Exports [2015 (11) TMI 1112 - CESTAT MUMBAI] wherein Main conditions as laid down in the act are fulfilled i.e. there has to be export of goods and the service tax liability has to be paid to the service provider and the same must have been used for the export of the goods which conditions are fulfilled by the respondent, and thus, refund was allowed. The time limit prescribed in notification issued from time to time is to supplement the provision of mere act and hold that as the appellant has complied with condition of the notification. Therefore, merely on the ground of limitation refund cannot be rejected - appellant is entitled for refund claim - appeal allowed - decided in favor of appellant.

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• 2017 (1) TMI 233
  Rejection of rebate claim - N/N/. 11/2005-ST dated 19.04.2005 - Time limitation - Held that: - Learned Counsel did not challenge the decision. He further argued that the date of payment of duty is not the last date of the month as has been mentioned in the order but the date on which they make a debit in their Cenvat account. The accounting entry passed in the books was submitted with the office of the learned Commissioner (Appeals) to substantiate that rebate has been claimed within one year from the date of payment of tax which has not been mentioned by lower authorities. I find that this arguments has not been taken before the lower authorities and relied upon documents were not submitted before them. In order to give a fair chance to Revenue, I set aside the impugned order and remand the matter back to the adjudicating authority to decide the matter afresh - appeal disposed off by way of remand.

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• Central Excise

• 2017 (1) TMI 232
  Cenvat credit - MS angles, channels, HR plates, etc - Interest - Penalty - Time limitation - Held that: - I do find merit in the contention put forward by appellant counsel, that when the department has accepted the eligibility of credit for the previous period the department ought not to have issued Show Cause Notice for the present period alleging suppression of facts and thus invoking the extended period of limitation - Larger Bench of the Tribunal in the case of Ultratech Cement Ltd., [2016 (1) TMI 520 - CESTAT NEW DELHI]. The Tribunal in the said case has analysed that the issue whether MS items used for manufacture/fabrication of capital goods etc., was contentious during the relevant period and therefore extended period is not invokable. Whether MS angles, channels, HR plates, etc., used for fabrication of capital goods is eligible for credit has been I held in favor of the assessee in the case of India Cements Ltd., [2015 (3) TMI 661 - MADRAS HIGH COURT ]. The period involved as evidenced by the invoices is prior to 07.07.2009 - Appeal allowed - decided in favor of the assessee.

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• 2017 (1) TMI 231
  Reversal of Cenvat credit on input services - Rule 6 (3A) of CER - appellant has failed to exercise option and follow procedural prescribed under Rule 6(3A) - Held that: - the Commissioner is not justified in insisting that appellant reverse cenvat credit in terms of Rule 6(3)(i) of Cenvat Credit Rules. The claim of the appellant is that they have already reversed on proportionate basis, the cenvat credit along with interest amount payable in terms of Rule 6(3A) - Appeal allowed by way of remand.

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• 2017 (1) TMI 230
  Denial of CENVAT credit - MS rods, Ms angles, channels, joists, beams, aluminium sheets etc. - denial for the reason that MS items like angles etc., do not fall within the definition of capital goods or inputs - Held that: - It is seen that the MS items have been used for fabrication of storage tanks which are used for storing water, chemicals, finished products, pulp etc. The definition of capital goods includes the word “storage tanks” - In the case of ICL Sugars Ltd., [2011 (4) TMI 1065 - KARNATAKA HIGH COURT ] the Hon’ble High Court of Karnataka had occasion to analyse whether storage tanks are capital goods and whether the credit is admissible even though they are fixed to the earth. The issue was held in favor of the assessee Credit allowed - appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 229
  Determination of annual production - whether the order of the Commissioner fixing Annual Capacity of Production is an appellable order - Held that: - Hon'ble High Court of Gujarat at Ahmedabad in the case of Premraj Dyeing & Printing Mills Pvt. Ltd (supra), we hold that the order of Commissioner determining Annual Production Capacity is not an appellable order and therefore failure to file an appeal against the said order cannot be held as ground for rejecting the claim. The only ground of appeal by Revenue before Commissioner [2013 (6) TMI 118 - GUJARAT HIGH COURT] was that the order dated 13.10.1999 passed by Commissioner determining Annual Capacity of Production has not been challenged and therefore the refund should be rejected - Appeal allowed.

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• 2017 (1) TMI 228
  Clandestine clearance - unaccounted stock - forced statements - The stock of Copper ingots as well as Copper wire rods were seized on the ground that these were unaccounted - Confiscation - Interest - Penalty - Held that: - From the records of the deposition during cross examination, it clearly emerges that the original statement has been recorded by the Revenue authorities under duress. During cross examination, Shri S K Chopra has also given different interpretation of the figures contained in two recovered slips. If the later explanation is taken into account, the entire duty demand becomes unsustainable. The allegation of clandestine clearance is to be established by the Revenue on the basis of tangible evidence. Before sustaining the allegations, the same needs to be corroborated and supported by detailed investigation. We find that no investigation has been conducted into the procurement of additional raw material required for manufacture of such huge quantity of goods alleged to have been clandestinely cleared - Nothing has been brought on record regarding payment received for such clandestinely cleared goods. Some cash has been seized from the residence of Director which is alleged to be the sale proceeds of clandestinely cleared goods. Once the allegation of clandestine clearance is not sustained, there is no justification to confiscate the seized goods and currency - Appeal allowed.

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• 2017 (1) TMI 227
  Clandestine removal - Interest - Penalty - Rule 26 of the CER, 2002 - Held that: - It is on record that such activity of repacking and clearance of oil in metal containers in the guise of empty containers has been detected by the Revenue on the basis of investigations undertaken. The finding of such suppression and clandestine clearance also stands admitted. We find that penalty under Section 11 AC has been imposed for an amount equal to the duty evaded. The appellant-assessee has prayed for setting aside such penalty. In this connection, we note that the penalty under Section 11 AC becomes payable the moment duty demands get confirmed under Section 11 A in cases where the allegation of suppression of facts or fraud stands established. In the present case, we find that Shri S.K. Bansal, who is the director of the appellant-assessee, has involved himself in the evasion of Excise duty by clandestine clearance of the goods. But he might have not been aware of the manner of clandestine removal of the goods. It appears that he was not actively involved in the activities but he cannot deny his responsibility - However, keeping in view the facts and circumstances of the case, we reduce the penalty on Shri S.K. Bansal, Director, from 2 lakhs to 50,000/- which will meet the ends of justice - Appeal disposed of.

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• 2017 (1) TMI 226
  Faulty show cause notice - Confiscation - Redemption fine - Personal penalty - Held that: - It can be seen that the various infractions pointed out above, had resulted in evasion of duty. However, since there was no demand raised in the show-cause notice, the same should not be confirmed. I find that Rule 25 of the Central Excise Rules does not require, demand of duty as pre-condition for imposition of penalty. All that the rule prescribes is that the penalty can not exceed the duty on the excisable goods in respect of which any contradiction of the specified nature has been done. The fact regarding contravention and consequential voluntary deposit has not been contested. In the instant case, the demand has not been raised due to faulty drafting, and not because there is no contravention of the specified provisions - Appeal partly allowed.

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• 2017 (1) TMI 225
  Clandestine removal - Interest - Penalty - Rule 25 of CER, 2002 - Held that: - find that as per undisputed facts of the case the clandestine removal made by the company, M/s. Vir Alloys 1,55,799/- the equal amount of penalty was imposed upon the appellant as personal penalty. The appellant is otherwise liable for penalty under Rule 26 of the Central Excise Rules, 2002 - As per this position, I am of the view that penalty of equal amount of duty i.e. 1,55,799 is not justifiable therefore it requires reduction. I therefore reduce the penalty from 1,55,799 to 38,950/- - Appeal partly allowed.

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• 2017 (1) TMI 224
  Refund - Cenvat credit on capital goods - clause -2B of N No. 32/99-CE - Rule- 4 (2) (b) of the CCR 2004 - Held that: - So for as preliminary objection of the Learned AR, regarding filing of two appeal is concerned, it is observed that Com (A) has given only one order No. 38/GHY/CE(A)/GHY/2014 to OIA dt 21/2/14 when two OIA order-in-original number were required to be given when two order-in-originals were being decided. So for as the issue of cash refund of EC & S&H EC is concerned Com (A) in Para-14 of OIA dt 21/2/14 has relied upon the case laws of this bench where the same issue has been decided in favour of the Revenue. In the case of VMI Industries Vs. CCE Jamu [2013 (12) TMI 695 - CESTAT NEW DELHI (LB)] the same issue with respect to area based exemption Notification No. 56/2002-CE dt 14/11/2002 has been decided by CESTAT Delhi by majority in a difference of opinion situation. Regarding taking of balance 50% Cenvat Credit on the capital goods in April 2012 it is observed that Rule 4 (2) (b) of Cenvat Credit Rules 2004 (CCR) does not mandate appellant to take credit compulsorily in the month of April of the next financial year - As the entire exercise is revenue neutral appeal of the appellant to the extent is allowed by setting aside recovery made by the Adjudicating authority on this account - Appeal partly allowed.

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• 2017 (1) TMI 223
  Job work - Liability of duty - Denial of exemption Notification No. 3/2001-CE - denial on the ground that Babcock is clearing boilers in CKD form and not the complete boiler - Held that: - In the appellant’s own case i.e. Thermax Babcock & Wilcox Ltd v. Commissioner OF Central Excise [2015 (5) TMI 631 - SUPREME COURT] and Commissioner of Central Excise v. Thermax Babcock & Wilcox Ltd [2005 (1) TMI 145 - CESTAT, MUMBAI] on the issue of classification in respect of removal of pressure parts of boiler, it was held that the manufacture and removal of boiler in part consignments shall be regarded as boiler in complete form - the boiler even if cleared in CKD/SKD condition to the customers site, the same is regarded as boiler and is eligible for exemption. CENVAT credit - job-work - inputs sent to job-worker - Rule 4(5)(a) of the Rules - Held that: - the appellant are paying 8% on the clearance of boiler under Rule 6 of the CENVAT Credit Rules, 2002. Therefore, they are entitled for CENVAT credit in respect of inputs used in the manufacture of exempted boiler - demand of CENVAT credit on the inputs sent for job-work by Babcock is not sustainable. Liability of duty - whether Thermax is liable to pay duty on the parts manufactured on job-work basis and cleared to the principal Babcock is liable for duty? - Held that: - in the said notification, there is a condition that job-worked goods should be used in the manufacture of final products of the principal and the principal, on the final products so manufactured out of the job-worked intermediate goods, should pay duty on the final product. In the present case, the principal cleared the final products i.e. boiler without payment of duty under exemption Notification No.3/2001-CE dated 01/03/2001. Therefore, even if Notification No. 214/86-CE dated 25/03/1986 is not applicable, it is very clear that any manufacturer, whether on job-work basis or otherwise, manufactures any goods, being the manufacturer of such goods, is liable to pay duty. Payment of duty can only be avoided only when there is an exemption notification on the said goods. In the appellants case, the parts of boiler manufactured by the job-worker undoubtedly dutiable goods. When the principal manufacturer is not discharging excise duty on the boiler, the job-worker, Thermax, is liable to pay duty on the parts manufactured by them and supplied to Babcock. Whether there is any provision for exemption from payment of duty in the case of job-worker under Rule 57F(4) or otherwise? - Held that: - there are contrary views on the issue as to dutiability on the job-worker, for resolving the conflict it is desirable to refer the particular issue to the Larger Bench - who is liable to pay duty, matter referred to Larger Bench

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• 2017 (1) TMI 222
  Manufacture - Fly Ash - Whether 'fly ash' as formed during the production of electricity is a product, which falls within the meaning of manufacture as defined under Sections 2 (f) of the Central Excise Act? - Held that: - The twin tests have to be satisfied in order to bring a product within the ambit of excise duty and satisfaction of solitary test alone would not be sufficient to levy excise duty on the commodity. Therefore, mere marketability of the product alone would not be suffice to levy duty on the 'fly ash', there being no manufacturing process involved. There is no quarrel that the product 'fly ash' is a marketable product - it is clear from the averments of either party and is also not in dispute that 'fly ash' is a by-product during the production of electricity and is not the main manufactured item. Further, the 'fly ash' is not a commodity which can be used as such in the market, but it is usable only as one of the materials in the production of other products. Therefore, there being no manufacture of 'fly ash', but 'fly ash' gets formed as a by-product during the production of electricity, merely because the goods 'fly ash' finds a place in the specific or residuary entry in the schedule it cannot be termed as an excisable commodity, since it satisfies the test of marketability. - mere marketability of the product alone would not be suffice to levy duty on the 'fly ash', there being no manufacturing process involved. Whether the product 'fly ash', which is a by-product during the production/manufacture of electricity could be termed as a waste in order to attract Notification No. 89/95-CE dated 18.5.95? - Held that: - The product is capable of being bought and sold, whereby marketability of the product is such that it has a value in the market. Once a product is said to have a value in the market to enable it to be sold for the purpose of manufacture of various commodities, it cannot be termed as waste or scrap. - Such being the case, learned single Judge has misled himself into giving a finding that the by-product 'fly ash', which is generated during the production of electricity is a waste or scrap and, thereby, Notification No.89/95-CE dated 18.5.95 would stand attracted. The said finding of the learned single Judge is per se erroneous and is liable to be interfered with. The primary issue is answered in favor of the respondent and against the appellants, the incidental issue is answered in favor of the appellants and against the respondent - appeal dismissed - decided partly in favor of appellant.

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• 2017 (1) TMI 221
  Benefit of Notification No. 43/2001-CE(NT) dated 26-6-2001 - duty free procurement - Hexane - denial of benefit on the ground that hexane used not only for De-oiled Cake (DOC) but it is also used for manufacture of oil which is not exported - Held that: - During the manufacture of DOC, soyabeain oil generated unavoidable. The generation of the oil cannot be avoided for the manufacture of DOC. In this fact the Hexane which is procured duty free is used for manufacture of DOC. The N/N. 43/2001 read with concessional duty rules, 2001, the goods for use in manufacture of exports goods are allowed to be procured duty free - no violation of notification or rules made thereunder. Reliance placed on the decision of the own case of appellant CCE Vs. Murli Agro Products Ltd [2007 (5) TMI 388 - CESTAT, MUMBAI], where it was held that The Notification requires that the person desiring to export goods without payment of duty under bond may procure inputs for manufacture of such export goods and declare input, output ratio with respect to the export product and the input. There is no stipulation that each and every product that is manufactured during the process has to be exported. Benefit available - appeal rejected - decided against revenue.

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• 2017 (1) TMI 220
  Eligibility of exemption - N/N. 126/78 dated 27th May 1978 - tank mastics - shalikote T-10,12, 14 and 25 - Held that: - Assessee is entitled to benefit of re-computation of tax liability on ‘shalikote’ as some of the varieties are exempt. Whether this will yield a refund or not is contingent on whether the tax as originally demanded had been discharged or not. In the absence of a computation as ordered by original authority, there is, as yet, no cause of action before us or before the first appellate authority. The claim of excess demand owing to error in computation of demand on clearance of ‘tank mastic’, the matter is remanded back to the original authority for considering this claim of the assessee. At the same time, the original authority is directed to re-compute the duty liability on ‘shalikote.’ - matter on remand for computing the exact duty liability on all the products - appeal dismissed - decided against Revenue.

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• 2017 (1) TMI 219
  CENVAT credit - fraudulent availment of Cenvat credit on invoices obtained from a registered dealer, without actual receipt of goods - case entirely based on recordings of a third party, Sh. Prabhakar who was an employee of dealer, M/s Karnataka Metal Corporation - whether demand justified based on such evidences? - Held that: - The said Prabhakar has not been made a party to the proceedings. Apart from such third party evidences there is nothing on record to establish that the appellant has indulged in the activities of availing fraudulent credit - The Tribunal in the case of M/s Adhikasri Electromech Ltd., & Others Vs CCE, ST, Hyderabad-I [2016 (6) TMI 912 - CESTAT HYDERABAD] had analysed the very same pattern of evidence, and set aside the demand, interest and penalties - demand set aside - appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 218
  Benefit of exemption Notification 3/2001-CE, 10/2002-CE and 6/2003-CE - the respondent has availed CENVAT credit in respect of furnace oil, which was reversed subsequently - Held that: - the learned Commissioner (Appeals) placed reliance in the case of CHANDRAPUR MAGNET WIRES (P) LTD. Versus COLLECTOR OF C. EXCISE, NAGPUR [1995 (12) TMI 72 - SUPREME COURT OF INDIA], where it was held that once the credit is reversed the inputs become as if no credit was availed - on reversal of the CENVAT credit already availed, the assessee is entitled to beneficial exemption Notification - appeal dismissed - decided against appellant-Revenue.

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• 2017 (1) TMI 217
  Valuation - whether the penalty u/r 25 is to be imposed when the value of material supplied free of cost by customer is not added to the assessable value? - The appellant admittedly paid the entire excise duty along with interest on the differential value and also waive the show cause notice. The payment of excise duty and interest has been accepted by the department and no show cause notice was issued - Held that: - the appellant is squarely covered by Section 11A(2B) of the Central Excise Act, 1944 - after payment of duty along with interest by the appellant, the department should have concluded the matter and no penalty was imposable - penalty set aside - appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 216
  MODVAT credit - credit to the extent of 50% - denial on the ground that the supplier, M/s. Fiat India Ltd. at the time of removal of capital goods that is Dies and Moulds paid 50% excise duty and remaining 50% was paid belatedly that is after supply of the capital goods and also after availing cenvat credit by the appellant - Held that: - M/s. Fiat India Ltd. at the time of removal of capital goods that is Dies and Moulds paid 50% excise duty and remaining 50% was paid belatedly that is after supply of the capital goods and also after availing cenvat credit by the appellant In the present case, as of now whatsoever short payment of duty i.e. 50% of the total duty was alleged, has now been paid by the supplier which has been recorded by the lower authority in their orders. For this particular reason as of today there is no issue of wrong availment of modvat credit particularly on the ground that the duty was not correctly paid by the supplier. Credit allowed - appeal allowed - decided in favor of assessee.

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• 2017 (1) TMI 215
  Clandestine removal - natural justice - request by appellants for cross-examination of drivers were ignored by Ld. Commissioner (A) - Held that: - to decide the case the cross examination of witness is necessary as per section 9(D) of the Central Excise Act 1944 and without giving cross examination of witness is gross violation of principle of natural justice, therefore matter needs to be re-adjudicated after giving cross examination of the witness as per the procedure laid down in the section 9(D) of the Central Excise Act 1944 - matter on remand - appeal disposed off.

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• 2017 (1) TMI 214
  Clandestine removal - Interest - Penalty - Held that: - Tribunal in CCE, Chandigarh vs. Vikash Garg [ 2011 (266) ELT 137 (Tri-Del)], which is on similar facts, supports the view that penalty on the partner should be abated - Appeal allowed.

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• 2017 (1) TMI 213
  Captive consumption - Denial of exemption Notification No.67/95-CE - clinker used in the manufacture of cement within the unit. - Penalty - Held that: - the same issue involving large number of cement units. We find that the denial of exemption by the Original Authority is not legally justifiable. A reference can also be made to the decision of the Hon’ble Supreme Court in the case of Ambuja Cement Ltd. [2015 (11) TMI 1413 - SUPREME COURT.]. The Hon’ble Supreme Court allowed the appeal of the assessee for claim of exemption under the above mentioned notification by interpreting the said notification along with Rule 6 of the Cenvat Credit Rules, 2001 - Appeal allowed - decided in favor of the assessee.

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• 2017 (1) TMI 212
  Refund - Rule 96ZH of the C.E.R., 1944 - Notification No. 15/98-CE(NT) - Penalty - Held that: - it is evident that the grounds on which the refund was rejected have not been fully examined by the First Appellate Authority. The First Appellate Authority has examined the ground of limitation and unjust enrichment. However, he has given no findings on the main grounds of rejection by the Adjudicating Authority that no excess duty had been paid by the respondent, substantive requirements of Section 11B of the Act are not met and lack of provision for grant of refund of Modvat credit of capital goods - Appeal allowed by way of remand - decided in favor of the assessee.

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• CST, VAT & Sales Tax

• 2017 (1) TMI 202
  Classification of goods - candy, namely “Swad” - classified as Ayurvedic medicine and taxable at 6% or as confectionery item taxable at 10%? - Held that: - any drug for even prevention of disease or disorder in human beings or animals, and is manufactured exclusively in accordance with the formulae prescribed in the authoritative books, can be said to fall within the definition of a “drug” and once a common parlance test is applied, after noticing the ingredients, as noticed earlier, “Swad” cannot be said to be a toffee, and one takes the same in case of a stomach disorder or for digestion purposes. It can easily be observed that majority of the ailments begin with stomach and majority of the illness emanates from stomach disorder and by & large, any human being to keep his stomach in a proper manner or condition, even for digestion purposes, takes such tablet like “Swad”, which cannot be said to be a toffee or a candy. In my view, merely because it is available in a tea stall or a betel shop or other various places where confectionery items are sold, does not change the character of an item. There is no evidence on record or authoritative material put on record by the AO so that it can be said to be a confectionery item and not a drug. The burden was on the Assessing Officer if according to the AO it was a confectionery item, and it did not lead any evidence or produced any material or evidence to discharge the onus. The Tax Board is just and proper and has rightly held that it is a Ayurvedic medicine with the rate applicable of 6% - petition dismissed - decided against the Revenue and in favor of the assessee.

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• 2017 (1) TMI 201
  Imposition of penalty u/s 22(a)(7) of the RST Act, 1994 - notified goods - declaration form ST-18A - Held that: - R.53 of the RST Act is quite clear and it envisages that even in a case of import from outside the State, declaration form ST- 18A is required to be produced and in the instant case admittedly the declaration form ST-18A was neither produced at the time of the vehicle being searched or even later-on, on a show cause notice. The judgment of Larger Bench of this court in the case of Indian Oil [2015 (11) TMI 1078 - RAJASTHAN HIGH COURT] is squarely applicable to the facts of the case, where it was held that if the declaration form is not produced or not found in a case, it can safely be held that the goods were being transported with the intention of evasion of tax. Penalty sustains - petition allowed - decided in favor of petitioner.

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• 2017 (1) TMI 200
  Imposition of penalty u/s 65 of the Act - suppression of facts - inter State sale - reopening of assessment - Held that: - the reopening of the assessment by the AO appears to be well reasoned taking into consideration that new facts and material came on record at the time of survey and originally the AO accepted the contention, on examining the books of account and once a new material has come on record, the Revenue can always reopen the cases and it cannot be said that it is change of opinion. Insofar as the levy of tax is concerned, the view of the Tax Board appears to be just and proper inasmuch as it was for the assessee to prove by acceptable evidence that it had sold the goods sales tax paid and nowhere it has been proved that even for said turnover the assessee was able to prove that it was sales tax paid. Insofar as the penalty is concerned, in my view, the same is not sustainable for the reason that it is a case of reassessment and admittedly the original assessment was also passed by the AO after examining books of account and other material and it cannot be said that the original assessment was completed without examining the books of account and other material. Admittedly it is not a case of self assessment u/s 23 without calling the assessee but was a scrutiny assessment after examining books of account and the same material has been used against the assessee. Petition allowed - decided partly in favor of petitioner.

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• 2017 (1) TMI 199
  Declaration form ST-18AA - notified goods - sec.78(2) of the Act read with R.53 of the RST Rules - imposition of penalty u/s 78(5) of the Act - Held that: - subclause (b)(iii) of clause (1) of Rule 53, prescribes that it covers person other than a registered dealer as well and in the instant case, if the goods are of a value exceeding 10,000/- or more for use, consumption or disposal within the State, declaration form ST-18AA completely filled in all respect in ink, was required to be carried. In the instant case, the vehicle was intercepted on 4.3.2000. R.53(1)(b)(iii) is applicable in the instant case, where it was mandatory for a person carrying goods above 10,000/- irrespective of status who was required to carry declaration form ST- 18AA and, therefore, at the time when the vehicle was moving, the said provision was in force and was deleted on 24.4.2000, and in my view the finding of the AO as well as Tax Board, is just and proper. Once the above rule prescribes that declaration form was required to be carried, is sufficient to hold that the same being not carried, penalty was inevitable. Petition dismissed - decided against petitioner.

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• 2017 (1) TMI 198
  Levy of entry tax - Rajasthan Tax on Entry of Motor Vehicles into Local Areas Act, 1988 - the respondent did not procure or file declaration form ET-1, which was required to be filled if vehicle is coming from other State - jurisdiction of AO - Held that: - reliance placed in the case of CTO V. M/s P.R. Rolling Mills Pvt. Ltd. [2015 (12) TMI 1477 - RAJASTHAN HIGH COURT], where the court has already taken into consideration the self same question and has decided the petition filed by the Revenue in favor of the Revenue and has directed that the matter would be required to be adjudicated by the Assessing Officer having jurisdiction, and upheld the order of DC(A). The order of the Tax Board is quashed and set aside, the order of Dy. Commissioner (Appeals) insofar as direction to assess the assessee by the Assessing Officer (CTO) having jurisdiction, as above, is upheld. Accordingly, the Assessing Office having jurisdiction will assess the assessee in this regard - matter on remand.

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• 2017 (1) TMI 197
  Grant of eligibility certificate - project report - delay in receiving machinery - Held that: - once the assessee has brought to the notice of the DLSC that certain machines are to be installed in the Industrial Unit and in case machines are received later, there would be a good reason for allowing benefits and such beneficial provisions should not be taken in such a technical manner as has been taken not only by the DLSC but also by the Tax Board. The assessee applied for developing of the area and brought Plant & Machinery with latest technology to develop the industrial area with benefits to all and merely because the application was made after a period of more than six months, in my view, is no reason to reject the claim particularly when both the machines were received within a period of six months from moving the application. In my view even slight delay should have been condoned by the DLSC as well as by the Tax Board - the benefit has to be extended to the two machines which was received later but were found to be part of the project report - petition allowed - decided in favor of petitioner-assessee.

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• 2017 (1) TMI 196
  Imposition of penalty u/Sec.78(5) of the Act - driver/incharge of the vehicle produced Bill No.2114 dt.11.10.1997, Bilty No.228 dt.11.10.1997, and on the next date the owner of the transport company appeared before the Assessing Officer and produced Bill No.2113 dt.11.10.1997 - Held that: - taking into consideration the fact that the driver/incharge has produced at least one bill on the spot bearing No.2114 dt.11.10.1997, the penalty is not leviable on the same and is so far as other bills which have been produced later-on the revenue is well justified and taking adverse view of the bills produced later-on - it would be appropriate to restrict & sustain the penalty only on such bills or bilty produced later-on and it would be appropriate to delete the penalty on the bill and bilty which was produced by the driver/incharge on the spot - appeal partly allowed - decided partly in favor of assessee.

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• 2017 (1) TMI 195
  Sub-contracting - exemption certificate - natural justice - Held that: - adequate opportunities have been granted to the Assessee and if the assessee in all these years could not procure exemption certificate by which such benefits were available then the courts cannot be held responsible and there has to be a finality in the matters. In my view no case is made out for interference of this court as no question of law can be said to arise - denial of exemption justified - petition dismissed - decided against petitioner.

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• 2017 (1) TMI 194
  Classification of goods - items used in installation of Poles and Wires etc - Entry tax - whether the items fall under entry 22 to come within the purview of entry tax? - Held that: - the controversy stands set at rest by the Division Bench judgment of this court in the case of M/s. Harit Polytech Pvt. Ltd. [2015 (3) TMI 828 - RAJASTHAN HIGH COURT], where the court has upheld the validity of Entry Tax by respective state governments. Therefore, insofar as the legal issue is concerned, it is answered against the petitioner. The Tax Board, after elaborate discussion, has taken into consideration and has held that insofar as the remaining 7 items are concerned, they fall within the purview of entry 22, and thus within the purview of Entry Tax and in my view both the Tax Board as well as Additional Commissioner have found as a finding of fact and in the limited jurisdiction of revision petition the question of fact cannot be considered or interfered with, it being essentially a finding of fact. Petition dismissed - decided against petitioner.

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• 2017 (1) TMI 193
  Waiver of deposit, granting of stay on condition - seeking for unconditional grant of stay - Held that: - It is not in dispute that subsequently the order passed by the learned Tribunal in the case of M/s. Yantraman Automac Pvt. Ltd. vs. State of Gujarat [2016 (7) TMI 588 - GUJARAT HIGH COURT] has been confirmed by the Division Bench of this Court. In that view of the matter, the petitioner deserves unconditional stay of the demand, during pendency and final disposal of the revision application before the learned Tribunal. Under the circumstances, the impugned order passed by the learned Tribunal directing the petitioner to deposit / make the payment of 15% of the demand and on such payment rest of the recovery order is to be stayed, cannot be sustained and the same deserves to be quashed and set aside - petition allowed - decided in favor of petitioner.

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• Wealth tax

• 2017 (1) TMI 241
  Additions made in the net wealth of the assessee on account of undisclosed credit balance in the books of the firm M/s Salas S.A. Of Geneva and on the basis of information supplied by Mr. John Ashlyn of M/s Salas S.A. Geneva - ITAT deleted the addition - Held that:- Additions were made in income-tax assessments as well as wealth-tax assessments of some connected assessees of this group on the basis of the statement of Mr. John Ashlyn. Several orders have been passed by the Tribunal in such cases deleting the additions so made. It is found that the ld. Commissioner of Income-tax (Appeals) also overturned the action of the Assessing Officer on the basis of the Tribunal order in assessee's own case. In view of these facts, we are satisfied that the decision of the first appellate authority, being based on the Tribunal's orders, does not warrant any interference. Respectfully following the precedents, we uphold the impugned orders as announced in the open court.

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• Indian Laws

• 2017 (1) TMI 190
  Renewal of Indian Made Foreign Liquor/Foreign Liquor Bar License rejected - non production of lease deed from the owner of the premises - Held that:- n view of the fact that there were two lease agreements submitted to the competent authority, which are having different clauses regarding their continuation of renewal, all the more necessary for the competent authority to insist on production of original lease agreement and the petitioner cannot refuse to produce the documents as required by the respondent authorities for renewal of the application. Since the petitioner did not produce relevant documents, I do not see any error in rejecting the application for renewal. However, since learned Government Pleader for Prohibition and Excise fairly submits that the competent authority would consider the application submitted by the petitioner for renewal even now, if all the relevant documents are submitted by him, while upholding the decision as impugned in the Writ Petition, the petitioner is permitted to submit all the relevant documents as desired by the competent authority in the impugned proceedings and if such documents are submitted, the competent authority shall consider the application of the petitioner for renewal and take appropriate decision. Having regard to the rival claims and two different lease agreements are available with the competent authority, in the interests of justice, it is also necessary to grant an opportunity of hearing to the petitioner as well as owner of the property, before the competent authority arises at a conclusion regarding renewal or otherwise of the lease granted in favour of the petitioner. As and when the relevant documents are submitted by the petitioner, the competent authority shall fix a date for personal hearing of the petitioner as well as the owner of the premises by an advance notice, and in consideration of the respective submissions, decision be taken and communicated to the petitioner with reference to his renewal application within a period of two weeks from the date of submission of documents by the petitioner.

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