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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter October 14, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax TMI SMS TDS - payments made to each lorry owner exceeded Rs. 50,000 - assessee liable to TDS u/s 194C - ITAT miserably failed in its duty - HC News Another Milestone achieved under Pradhan Mantri Jan Dhan Yojana (PMJDY) - Deposits in accounts now exceed ₹ 25,000 crore; accounts having balances in them now exceed 60% RBI Reference Rate for US $ Notifications FEMA F. No. A-12011/02/2014-Ad.ED - dated 16-9-2015 - FEMA Central Government prescribes the mandatory threshold of the aggregate value of Foreign Exchange, Foreign Security or any immovable property, situated outside India as not less than rupees one crore F. No. A-12011/02/2014-Ad.ED - dated 16-9-2015 - FEMA Central Government authorised the officers of the Directorate of Enforcement Income Tax 78/2015 - dated 12-10-2015 - IT Income-tax (15th Amendment) Rules, 2015 VAT - Delhi No. F.3(11)/Fin(T&E)/2009-10/DS-VI/849 - dated 12-10-2015 - DVAT Appointment of Assistant Commissioner cum VATO Circulars / Instructions / Orders DGFT 41/2015-2020 - dated 13-10-2015 Allocation of quantity for export of sugar to EU under CXL quota and to USA under Tariff Rate Quota Highlights / Catch Notes Income Tax Tax relief u/s 90 - the argument that in the absence of an agreement between India and the State, the benefit of Section 90 is not available to the assessee is ex-facie illegal and requires to be set aside - HC Visit to Get Source TDS u/s 194C - payment of transportation of goods - sub-contracting - scope of the term 'Work' - payments made to each lorry owner exceeded ₹ 50,000 - assessee liable to TDS u/s 194C - Tribunal failed to examine the facts - Tribunal ought to have adversely inferred against the assessee for having failed to place material to substantiate its oral assertion - HC Visit to Get Source Deduction U/s. 10B - extra ordinary income - incomes of extraordinary nature are to be excluded and further extraordinary events in any company also make it non-comparable while doing exercise of FAR analysis for comparability purpose - AT Visit to Get Source Superannuation contribution in respect of a promoter Managing Director - it is exclusively incurred for the purpose of business - assessee has deducted tax at the time of making contribution to the superannuation fund and has treated it as part of salary of the concerned directors - No addition - AT Visit to Get Source Bogus commission - at the admitted fact consistently on record is that the commission has been paid to the persons after deduction of tax at source by way of account payee cheque - No addition - AT Visit to Get Source Registration U/s 12AA denied - trustee has given absolute power to dissolve the Trust and utilize the income as per his sweet will. Prima facie, it appears that Dr. Bagaria, sole trustee has used this device to avoid the tax payment of his professional income. - registration was rightly denied - AT Visit to Get Source TDS u/s 194A - amount payable towards loan debited in direct expenses under minor head “excess payment refund" - no fault can be found on the part of the AO for treating these charges as interest and liable for TDS u/s 194A - AT Visit to Get Source Eligibility of deduction u/s.10A - CIT(Appeals) has cast serious aspersions on the veracity of Audit Report filed along the alleged manual return. - Since the assessee has failed to comply with the provisions of section, the assessee is not eligible for claiming deduction u/s. 10A - AT Visit to Get Source Assessment of commission income of providing accommodation entires - CIT(A) estimated the income @5% out of Hawala transactions - an estimate of 2.5% of the total amount receipts received by the Assessee would meet the ends of justice - AT Visit to Get Source TPA - the income from settlement of patent infringement cannot become part of operating revenues either on bulk drug manufacturing (API) segment or on product development service (PDS) segment which are two different segments in which assessee is operating - this income falls under the category of ‘other income’ and not operating revenue - AT Visit to Get Source Customs DTA sale by 100% EOU - wastage in production from Imported Blocks - Challenge the limit of disposal of reject/scraps - Revenue allowed only 2% - Development Commissioner had initially fixed ad hoc norms for wastage in production from Imported Blocks to the extent of 8.92% and wastage to the extent of 27.56% from indigenous blocks - order of revenue is illegal - HC Visit to Get Source Principle of natural justice - it was contended that they have preferred appeal only against addition of royalty amount ordered by the adjudicating authority whereas the Commissioner (Appeals) has gone beyond the grounds of appeal and suo moto set aside the order of the lower authority relating to acceptance of the transaction value - matter remanded back - AT Visit to Get Source Service Tax Valuation - Job work - manufacture of Alcoholic Beverages (i.e., Beer) - The amount “surplus/profit retained by Brand owners (BO)” as claimed by the appellant, had been returned to BO and therefore such amount cannot be included in the taxable value. - AT Visit to Get Source Clinical Trial/Research Service – from 01.07.2003 to 31.03.2006 - amendment in the nature of retrospective or not - the amendment in reality expounded the scope of the definition and therefore, it cannot be clarificatory in nature. - Demand set aside - AT Visit to Get Source Admission fee, remitted prior to the date of introduction of the taxable service cannot therefore be considered as receipt of a consideration for rendition of Commercial Coaching or Training - AT Visit to Get Source Central Excise Imposition of penalty u/s 11AC - Whether conditions u/s 11AC are mandatory or automatic - Held No - preconditions mentioned therein have to be fulfilled. - HC Visit to Get Source CENVAT Credit - Capital goods - For the temporary use for few months in manufacture of only exempted goods will not disable the assessee in availing the CENVAT Credit and utilizing the same for manufacture of dutiable goods - AT Visit to Get Source Levy of SAD - 100% EOU - DTA Clearances - in case of inter-unit stock transfers of the final product, the demand of SAD cannot be held sustainable even though no VAT or Sales Tax was paid on such transactions. - AT Visit to Get Source Denial of refund claim - Unjust enrichment - it is unfortunate that for a small amount of ₹ 92,111/-, the appellant has been fighting the case for about last 20 years. - AT Visit to Get Source Packing activity - first time packing - chemicals brought in tankers can never be termed as brought in bulk packs. - the activity undertaken by the assessee in filling the smaller container from bulk container namely tankers can never fall within the fiction of manufacture - AT Visit to Get Source VAT Levy of sales tax on banks - Dealer or not - whether a bank, which holds hypothecation of vehicles in their favour, would be a dealer within the definition of the expression under Section 2(15) of the Act, merely because the bank seizes and repossesses the hypothecated vehicle and brings it to sale through public auction - Held Yes - HC Visit to Get Source Case Laws: Income Tax 2015 (10) TMI 826 Foreign tax credit ('FTC') allowed with respect to income exempt in India - Section 90(1)(a)(ii), 91, 10A, India-USA DTAA, India-Canada DTAA With respect to the income of the assessee which was exempt in India u/s 10A, assessee paid tax in USA and Canada and claimed in India FTC benefit of the tax so paid in USA and Canada. Tax officer disallowed the claim of FTC on the ground that the said income is exempt in India u/s 10A and therefore does not form part of total income chargeable to tax as per provisions of section 4 of the Act. Relief u/s 10A is in the nature of exemption although termed as deduction and the said relief is only for a period of 10 years after which the said income is taxable. When such exemption is given under Indian Income tax Act, but the said income is taxed in foreign jurisdiction, there is no relief to the assessee at all. Therefore, vide Finance Act, 2003 section 90 was amended. Amended section 90(1)(a)(ii) empowered the Central Government to enter into an agreement with the Government of any country outside India for the granting of relief in respect of income tax chargeable under the Income-tax Act and under the corresponding law in force in that country. India-USA DTAA - India-USA DTAA does not speak about any tax being paid in India as a condition precedent for granting FTC credit - A perusal of Article 25 of India-USA DTAA makes it clear that if an Indian resident derives any income on which tax is paid USA, then credit of such tax shall be granted in India. The said provision does not speak of any income tax being paid by the Indian resident under the Indian Income-tax Act as a condition precedent for claiming the said benefit. Therefore, it is not the requirement of law that the assessee, before he claims credit under the Indo - US convention or under section 90 of the Act, should pay tax in India on such income. India-Canada DTAA - For FTC benefit income must be subjected to tax both in India and Canada - A reading of Article 23 of India-Canada DTAA makes it clear that for an Indian resident to avail FTC benefit in respect of income from sources within Canada, income must be subjected to tax both in India and Canada, i.e., assessee has paid tax both in India as well as in Canada on the same income. Therefore, if the assessee is exempted from payment of tax in India, then if the same income is subjected to tax in Canada, the FTC benefit is not available to the Indian assessee. State Income Tax - The Income Tax in relation to any Country includes Income Tax paid in any part of the country or a local authority. It applies to cases where in a Federal structure a citizen is made to pay Federal Income tax and also the State Income Tax. The Income tax in relation to any country includes income tax paid not only to the Federal Government of that Country, but also any income tax charged by any part of that country meaning a State or a local authority, and the assessee would be entitled to the relief of double taxation benefit with respect to the latter payment also. Therefore, even in the absence of an agreement under Section 90 of the Act, by virtue of the statutory provision, the benefit conferred under Section 91 of the Act is extended to the income tax paid in foreign jurisdictions. India has entered into agreement with the Federal Country and not with any State within that country. In order to extend the benefit of this, relief or avoidance of double taxation, aforesaid explanation explicitly makes it clear that income tax in relation to any country includes the income tax paid to the Government of any part of that country or a local authority in that country. Therefore, even though, India has not entered into any agreement with the State of a Country and if the assessee has paid income tax to that State, the income tax paid in relation to that State is also eligible for being given credit to the assessee in India. Therefore, the argument that in the absence of an agreement between India and the State, the benefit of Section 90 is not available to the assessee is ex-facie illegal and requires to be set aside. - Decided in favour of assessee. No revised return was filed by the assessee under Section 139 (5) of the Act claiming the relief under Section 90 of the Act read with Double Taxation Avoidance Agreement - Held that:- What the assessee is claiming by way of a letter is to bring to notice of the assessing authority the statutory provisions as well as the provisions of the Double Taxation Avoidance Agreement under which the assessee is entitled to claim tax benefit, as the said benefit of tax was not claimed in the return filed under Section 139(1) of the Act. Once the assessee files the necessary particulars and claims relief under the provisions of the Double Taxation Avoidance Agreement, the limitation placed by domestic law would yield to the tax relief provided for under the Double Taxation Avoidance Agreement. Therefore, the assessing authority was not justified in rejecting the said claim on the ground that no revised return is filed under Section 139(5) of the Act. In fact, probably the assessing authority was conscious that it is not a valid ground to reject the claim, he proceeded to consider the claim of the assessee on merits and has rejected the claim on merits also. In view of the aforesaid discussions, the said substantial question of law is answered in favour of the assessee and against the revenue and the assessee is entitled to the tax benefit to the extent set out above. Unavailed MODVAT credit - whether constitutes income under Section 2(24) of the Income-tax Act and liable to tax? - Held that:- whatever may be the accounting practice adopted by the assessee, the cost price of the raw-material should include tax, duty, cess or fee and correspondingly, the said amount should be reflected in the opening stock as well as in the closing stock. Under the MODVAT scheme, once an assessee pays excise duty when the finished goods are liable for excise duty, he is entitled to set-off that duty payable by him as against the duty he has paid while purchasing the raw material. If for any reason, the assessee is not able to exhaust the said MODVAT credit available it continues in his accounts. He can avail the benefit whenever he makes sale and the liability to pay the duty arises. But that amount i.e., the unavailed MODVAT credit cannot be treated as an income till it is availed by the assessee. Section 43B provides that if a deduction is claimed of duty, unless the duty is paid, he would not be entitled to claim deduction. Now, the question before this Court is not claiming deduction as an expenditure. The question is whether the unavailed credit constitutes income which is liable to income-tax in the hands of the assessee. It is clear from the aforesaid pronouncement in Indo Nippon Chemicals [2003 (1) TMI 8 - SUPREME Court] that the unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. Therefore, in terms of the order of the Tribunal, it is open to the assessing authority to recompute the opening and closing balance by adding the duty paid and duty availed but on the unavailed MODVAT credit, there is no liability to pay any tax. Therefore, the substantial question of law is answered in favour of the assessee and against the Revenue. Allocation of commission made - Held that:- Salary includes commission. When the salary paid to a director by the assessee is allocated to the unit which the said director is heading as full time director, the commission paid to him which is a part of salary also needs to be allocated to the units which he is heading. When the salary paid to whole-time director is not dependent on profit the unit which the director is heading is making, the commission payable at the end of the year when the company makes profit, is nothing but a part of the salary. Therefore, it also has to be allocated to the unit which he is heading as a full time director. Though there are four units and each unit is carrying on different activities, assessee maintained separate accounts, preparing separate balance-sheets and also preparing profit and loss account, but in law it is the consolidation of four accounts which would be the account of the assessee. It is from the profits derived by the assessee that the salary is paid. The payment of the salary as it is not dependent on the profit earned by any unit, the basis of commission payable by the assessee to its directors also cannot be made subject to the profit making ability of a unit. Merely because by such allocation the profit margin of 10A unit is going to increase cannot be the basis to allocate the commission paid to the directors proportionately to the profit making unit. In that view of the matter we do not see any justification to deny the benefit which the assessee is entitled to. The impugned orders passed by the authorities has no legal basis. On the contrary it runs counter to the statutory provisions. - Decided in favour of the assessee and against the revenue. Exclusion of AMC profits for the purpose of computing deduction under Section 80IB of the Act, when AMC income is derived from the manufacturing units - Held that:- Customers would get attracted to a product, because of the warranty and the after sales maintenance and hence warranty/after sales maintenance is integral to the manufacturing and business of the undertaking. When the consideration paid for three year warranty is treated as an income eligible for benefit under Section 80IB, we do not see any justification not to extend the same benefit to the income derived from one year warranty + two years AMC for the computer which is sold. The said income has a direct nexus with the manufacturing activity. The said income constitute the income of eligible ' business. It is an income derived from the eligible business in respect of an industrial undertaking which is involved in the manufacture of computers. Therefore, the assessing authority was not justified in not extending the benefit of Section 80IB to the profits derived from AMC contract in relation to the computers manufactured by the assessee. However, it is to be made clear that, if the assessee is deriving any profit under an AMC contract in respect of computers which are not manufactured by them in the industrial unit at Pondicherry the said income does not form part of the eligible business and, therefore, to that extent they are not eligible for benefit under Section 80IB. Substantial questions are answered in favour of the assessee Purchase and sales of monitors - whether constituted a trading activity and thus excludable from the profits of the Pondicherry units for the purposes of computing deduction under Section 80-IB of the Act, when such monitors were part of the computers manufactured and sold by the units? - Held that:- As set out earlier the assessee is carrying on the manufacturing of computers and sale of computers. He has satisfied all the requirements stipulated in sub-section (2) of Section 80IB and he is eligible for the said exemption. The monitors which he has purchased from outside is used as a spare part in the manufacture of computer and it is sold to the customers as such. In other words, those monitors which are used in the computers are not the traded commodities. Therefore, it is a part of the computer and the total consideration of the computer includes the value of this monitor. The profit derived from the said computer includes the sale of the monitor which is a part of the said computer which falls within the first degree. the profit derived from the said sale of monitor as a part of the computer is also eligible for benefit under Section 80IB. However, it is made clear the assessee is not entitled to the benefit of Section 80IB in respect of monitors which are purchased and sold separately as a traded commodity. In fact, the assessee has not claimed any benefit in respect of those monitors. Therefore, the finding recorded by the authorities that the assessee is not entitled to the benefit of deduction under Section 80IB in respect of the monitors which form part of the computer is hereby set aside. Decided in favour of the assessee Exclusion of VAT/GST from export turnover and total turnover for the purpose of computing deduction under Sec. 10A - Held that:- In the instant case, VAT and GST is payable by the purchaser. It is a part of the sale price. The assessee collects the tax and remits it to the Government. It is an indirect tax. The definition of export turnover expressly says what is excluded from export turnover i.e., freight, telecommunication charges or insurance. It has not excluded the VAT and GST payable by the assessee in the foreign jurisdiction. The test to be applied in the light of the aforesaid definitions is excluding the aforesaid three charges from the sale consideration received, sale proceeds received in or brought into India in convertible foreign exchange constitutes the export turnover. If the sale proceeds are credited to a separate account maintained for the purpose by the assessee with any Bank outside India with the approval of the Reserve Bank of India, though the said proceeds are not actually received in India or brought into India, it is deemed to have been received in India and forms part of the export turnover. The finding recorded by the authorities is contrary to law. They have not taken into consideration explanation 2 to sub-sec. (3) of Sec. 10A and thus committed an error. Hence, the said finding requires to be set aside. Accordingly, it is set aside. The substantial question of law is answered in favour of the assessee Transfer of stock - whether took place during the year ended 31.03.2001 and not during the years when the execution and registration of the sale deeds took place? - Held that:- The income tax is charged in the previous year in which such stock-in trade is sold. Sale took place in the assessment year 2004-05 and 2005-06. The power of attorney had been executed in assessment year 2001-02. When stock-in-trade is sold by executing a deed for conveyance and duly registered, the question of the said stock-in-trade being otherwise transferred would not arise at all. Therefore, the argument of the Revenue, that on the day the power of attorney was executed when the entire consideration due under the agreement of sale was received and by virtue of the power of attorney, the power of attorney holder is authorized to develop the property, to sell the property and to receive the entire consideration, it amounts to the stock-in-trade being otherwise transferred leading to the said income being chargeable to income tax in the previous year in which the power of attorney is executed is without any substance. As the stock-in-trade is sold by way of a registered deed, there is no intention to avoid payment of capital gains. On receipt of such capital gains, the capital gain tax has been paid in the previous year in which the stock-in-trade was sold and therefore the order of the Tribunal as well as the order of the assessing authority is contrary to the aforesaid statutory provisions. As such, it is unsustainable in law. Accordingly, the said two orders are set aside. The order passed by the Appellate Commissioner is restored. - Decided in fav0ur of assessee. Entitlment to claim deduction u/s 10A - foreign exchange which is yet to be received during the current assessment year for sale of software - application for extension had been filed and Section 155(11A) of the Foreign Exchange Management Act 1999 and RBI Rules were applicable - Held that:- The assessee is a status holder exporter. The export has been done strictly in accordance with law. Foreign exchange remittances should have been received within six months from and of the financial year. It has not been received. Therefore, an application is filed seeking for extension of time to the Reserve Bank of India. Even to this day the Reserve Bank of India has not rejected the said request. On the contrary, after the period of 6 months, foreign exchange remittances are received and credited to the assessee's account through the Reserve Bank of India. It is in this context merely because the written approval of extension is not passed by the Reserve Bank of India, whether the assessee could be denied the benefit of Section 10A. The Tribunal on consideration of the entire material on record, taking note of the statutory provisions and the object underlying this provision, has come to the conclusion that notwithstanding the fact there is no express order granting approval by the Reserve Bank of India, as it has not been rejected and foreign exchange is received and remitted through the proper channel, the assessee is entitled to the benefit of Section 10A. In the facts of the case, we do not find any error committed by the Tribunal. Therefore, the said substantial question is answered in favour of the assessee Excluding the computer software sales made to STP units in India from "export turnover" for the purpose of computing deduction under section 10A - Held that:- The said question came up for consideration before this Court in the case Tata Elxsi v. Asst. Commissioner of Income Tax [2015 (10) TMI 634 - KARNATAKA HIGH COURT]. This Court has answered the said substantial question in favour of the assessee and against the revenue. Expenses incurred by the Corporate Division - whether cannot be allocated in respect of various business units of the assessee based on the turn over, but at an ad hoc percentage of 20% as held in the earlier assessment years? - Held that:- Assessee. wanted allocation of actual expenditure incurred by each unit. When the Assessing Authority did not agree, they came forward and agreed that each of the units could be allocated 20% of the total expenditure incurred by corporate division. However, the Assessing Authority is of the view that, the allocation of the expenditure related to salary, wages and allowances and directors' fee should be dependent on the revenue generated and therefore he did not accept the allocation of 20% of expenditure to each of the unit. There is no provision of law which is pointed out to us which states that the allocation of expenditure should be proportionate to the revenue generated by a unit when an assessee runs several units. Either it should be actual expenditure incurred or expenditure which is distributed equally to all the units of the assessee. In the instant case when department did not accede to the allocation of the actual expenditure, the assessee has come forward to distribute the entire expenditure equally to all the units and the said procedure is followed consistently by the assessee for more than a decade now. Expenditure incurred by the Corporate Office in respect of its subdivisions. In those circumstances, the Assessing Officer and the First Appellate Authority were not justified in allocating the substantial portion of the amount as the expenses incurred in respect of Section 10A and disallowing the deduction. That is precisely what the Tribunal has held on proper appreciation of the material on record. In that view of the matter we do not find any justification to interfere with the well considered order of the Tribunal. - Decided in favour of assessee. Difference in the price of shares of Wipro Finance Limited, purchased at market value and sold to assessee's advocate and ex-employee at a subsidized price being a colorable devise to avoid tax should be allowable as a capital loss? - Held that:- It is only when we held that the purchase of shares at a premium is a genuine transaction and infusion of capital of ₹ 95 crores is a genuine transaction, the sale made by the assessee for a throwaway price to its ex-employees was held to be sham. Now whether those transactions were for the market price or the shares had no value but purchased on account of the previous contract and thereby the assessee incurred any loss in the business, is a matter to be gone into by the Tribunal. The Tribunal had not gone into the said question and, therefore, the matter is remanded back to the Tribunal to decide the said question and record a finding thereon. Exclusion of 80% of uplinking charges when the appellant and the respondent has agreed upon an exclusion of 5% of telecommunication expenses or attributable to delivery of computer software outside India for the later assessment years - Held that:- Both the parties did not dispute the fact except for the relevant year, the assessee has been allowed exclusion of 5% of telecommunication expenses consistently for all other years. Only in so far as this year is concerned, relying on a judgment which is unconnected, the exclusion has been enhanced to 80%. Absolutely no reasons are forthcoming for deviating from the consistent practice. Under these circumstances, it would be proper to set aside the finding recorded by the Tribunal and remand the matter to the Tribunal to decide the matter afresh taking into consideration the consistent practice followed by the authorities in the case of the assessee itself. That would meet the ends of justice. Interest received under Section 244-A - whether would be taxable in the year of receipt of the said interest without considering the fact that the tax granted as a refund on which interest is computed itself is disputed in appeals by the respondent? - Held that:- Matter is remitted to the Assessing Authority with a direction that he shall first calculate the interest received and amount of refund on the subsequent orders by which the said benefit is sought to be withdrawn and thereafter, calculate the interest taxable under the aforesaid act. 2015 (10) TMI 825 TDS u/s 194C - Disallowance under Section 40(a)(ia) - payment of transportation of goods - sub-contracting - scope of the term 'Work' - payments made to each lorry owner exceeded ₹ 50,000 - whether the provisions of Section 194C of the Act can be invoked only if any single payment exceeds ₹ 50,000/- or can be invoked if the aggregate of payment in an assessment year exceeds ₹ 50,000/-? - ITAT deleted the addition - Held that:- The Tribunal gravely erred in holding that the assessee/appellant had made out a case because the revenue failed to place any material before it, contraverting the vague and mere oral assertion of the assessee. The said reasoning is contrary to all known cannons of the law of evidence, logic and law mandates that the burden and onus is on the person, who alleges a fact, to prove the said fact. The assessee has pleaded that the entries "freight paid" is on account of a mistake committed by their accountant and they have come up with the excuse very belatedly. This being the factual issue, the Tribunal did not deem it necessary to call upon the assessee to demonstrate the said fact, but proceeded to accept the statement as a proven fact. It appears that the Tribunal has diverted itself from addressing the core issue, that is whether the assessee has paid any sums, the aggregate of which exceeds ₹ 50,000/- in the assessment year to any single entity. The Tribunal has not addressed itself to any of the findings of fact rendered by the Assessing Authority. In particular, several instances of the aggregate of payments have exceeded ₹ 50,000/- in the assessment year have been placed on record. It does not render any reasoning to unsettle the finding of the original authority, that even the agreement can also be an oral and that the transactions with the lorry owners/transporters is within the purview of the provisions of the Act as it amounts to carriage of goods other than the railways. The transportation of goods was from its premises to the port and in the course of its export. In the present case, the facts and details are not only hazy but are obfuscated due to lack of clarity. Apart from stating that the ore was required to be transported from point (a) to point (b), no details are provided as to whether the point (b) was a licenced or registered place, where minerals could be stored there, etc., It is seen that a huge sum amounting to ₹ 5=00 crorers is spent merely for transportation of iron ore from point (a) to point (b), no details are forth coming whether the transportation is in the course of business or is being transported to the hands of end user. In such situation, this Court finds it hard to believe the version put out by the assessee. On the other hand, the Tribunal ought to have adversely inferred against the assessee for having failed to place material to substantiate its oral assertion. Consequently, the order of the Tribunal is vitiated and requires to be interfered with - Decided in favour of the revenue. 2015 (10) TMI 824 Validity of reopening of assessment - taxation of advertisement and distribution revenue was to be governed by MAP resolution and the competent authorities of USA and India had agreed to an attribution of 10% of the total revenue generated from the said distribution and advertisement sales agreement to be treated as business income - Held that:- A detailed questionnaire had been issued to the petitioner, which was duly replied to. As many as 38 queries had been raised and a detailed reply alongwith all annexures and supporting documents were furnished by the petitioner in response to the queries raised. The copies of the relevant agreements, the generation of income and the tax treatment given by the petitioner to the said income was duly disclosed to the assessing officer. The material based on which the reopening has been sought to be done by the department was available before the assessing officer at the time of the framing of the assessment under Section 143. Not only was the same before the Assessing Officer, the Assessing Officer has referred to the same in the Assessment Year and taken note of the same. Thus on perusal of the reasons we find that no fresh information or material has been referred to in the reasons recorded for seeking to reopen the assessment. The material that is referred to is the very same material that was already before the Assessing Officer at the time of framing of the assessment under Section 143 (3) of the Act and even the reasons record that „from the perusal of the assessment record, it is observed that’. This clearly shows that the assessing officer has sought to re-appreciate the material that was already there at the time when the assessment was framed under Section 143 (3). Thus, as seen from above, it is clearly a case of change of opinion, which is clearly not permissible. AO has merely intended to revisit the concluded assessments - Decided in favour of assessee. 2015 (10) TMI 823 Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee 2015 (10) TMI 822 Registration under Section 12AA denied - activity of letting out of the premises to a lessee which is carrying on purely commercial activities, is contrary to the objects of the Assessee society - ITAT allowed the claim - Held that:- While an appeal has probably been filed by the Revenue for AY 2008-09, such appeal does not seem to have been numbered or listed before the Court even once. She states that for the subsequent AY 2011-12, the AO has himself granted exemption under Sections 11 and 12 of the Act. She pointed out that the fact of the building having been let out by the Assessee was known to the Revenue even at the stage of grant of registration under Section 12 A with effect from April, 2004. With there being no proper enquiry conducted by the AO into the facts of the case to determine if the manner of application of the income by the Assessee would disentitle it to exemption under Sections 11 and 12 of the Act, the Court is unable to discern any legal infirmity in the impugned orders of the CIT (A) or the ITAT. For the same reason, the Court is also not inclined to remand the matter to the AO to de novo start the exercise afresh. - Decided in favour of assessee. 2015 (10) TMI 821 Rectification of mistake - withdrawing the deduction allowed in terms of Section 80 HHC of the Act by the Assessing Officer in the order passed in terms of Section 154 - According to the Assessing Officer, the mistake was on the part of the assessee in not filing an auditor's certificate at the time of filing of the return. But, according to the assessee, in his reply to the notice under Section 263, the mistake was on the part of the Assessing Officer in not giving an opportunity under Section 139(9).Held that:- The types of mistakes that could be rectified under Section 154 are also two fold. While Sub-section (1) uses the expression "any mistake apparent from the records", Sub-section (2) uses the expression "rectifying any such mistake which has been brought to its notice". Therefore, the thinking in the mind of the Commissioner as well as the Tribunal that Section 154 is available only to correct a mistake apparent from the record, may not be in tune with the Scheme of Sub-section (2) of Section 154. Mistakes can be of several kinds. An omission to produce the record is as much a mistake as an omission to take note of a record. Therefore, the Tribunal as well as the Commissioner were wrong in presuming that the case would not fall under Section 154. Hence, the questions of law are answered in favour of the assessee. 2015 (10) TMI 820 Stay petition - fairness of procedure adopted by the Tribunal in dealing with their petitions for stay - Held that:- In the light of the grievance of the appellant that they did not have a fair opportunity, we only wish to remove that grievance of the appellant by disposing of these appeals with certain directions to the Tribunal. We make it clear that we are not recording any finding on the complaints made by the appellant in their grounds of appeals, but we wish to redress their grievance with regard to the procedure adopted. The appeals are admittedly slated for hearing on 8.10.2015. There is a dispute as to whether the stay petitions or the appeals are to be taken up for final hearing on 8.10.2015. But, we are of the considered view that in the light of the grievances expressed by the appellant about the fairness of the procedure adopted by the Tribunal, it would be better to give the choice to the Tribunal to take up on 8.10.2015, depending upon the Tribunal's convenience, either the stay petitions or the main appeals and dispose either of the two within a period of two weeks. Therefore, both the appeals are allowed, the common order of the Tribunal is set aside and the matters are remitted back to the Tribunal. - Decided in favour of assessee. 2015 (10) TMI 819 Interest on investments in corporate bonds - whether fell within the scope of the definition of 'interest' in Section 2(7) of the Interest Tax Act, 1974 ? - Held that:- If the case on hand had arisen solely out of the Income Tax Act, 1961, we would not look into the definition of the expression 'interest' under the Interest Tax Act, 1974. The case on hand has arisen out of the provisions of the Interest Tax Act, 1974. Apart from defining the expression 'interest' in Sub-Section (7) of Section 2, the Interest Tax Act also contains another indication under Sub-Section (10) of Section 2. Under this Sub-Section, the Interest Tax Act, 1974 makes it clear that only those words and expressions used in that Act, but not defined therein, would have the same meaning assigned to them in the Income Tax Act, 1961. Therefore, it is only in cases where an expression is not defined in the Interest Tax Act, 1974, for the purpose of application of the said Act that we have to borrow the definition of the same expression in the Income Tax Act, 1961. This case is not of the said type. Therefore, we are of the view that the decision of the Supreme Court in Sahara India Savings and Investment Corporation Limited [2009 (11) TMI 25 - SUPREME COURT OF INDIA] wherein held that for the purpose of Interest Tax Act, 1974, interest on loans and advances will not cover under Section 2(7), interest on bonds and debentures bought by an assessee as and by way of investment. The Court clarified that interest on investments is not taxable as interest under Section 2(7) of the Act is squarely applicable to the facts of this case. - Decided in favour of the assessee 2015 (10) TMI 818 Disallowance of loan acquisition costs - Disallowance of expenditure incurred on the issue of non convertible debentures and commercial papers by considering it to be deferred revenue expenditure - ITAT allowed asessee's case - Held that:- Although a statement has been made in the memorandum of appeal that appeals are "learned to have been filed” in this Court by the Revenue in respect of the ITAT's orders for AYs 2003-04 and 2004-05, Mr N. P. Sahni, learned Senior Standing Counsel, candidly states that he has no details of any of those appeals having been listed before this Court after having been numbered. The Court notes that the orders of the ITAT for AYs 2003-04, 2004-05 and 2005-06 were passed more than three years ago on 20th April, 2012. If since then any appeal had been filed with the Revenue and had been listed before the Court, it is unlikely that those details would not be available with either the Revenue or the Assessee. The Court, in this circumstance, proceeds on the basis of the statement made on behalf of the Assessee that, till date there is no information regarding any appeals having filed by the Revenue in respect of the orders of the ITAT for the earlier said AYs. The Court notices that in respect of other items of expenditure incurred by the Assessee for AYs 2001-02 and 2002-03, for e.g., the expenditure incurred on advertisement and publicity, the stand of the Revenue that they should be treated as deferred revenue expenditure was not accepted by this Court. In its decision in CIT v. Citi Financial Consumer Finance Ltd. (2011 (3) TMI 622 - Delhi High Court) for AYs 2001-02, 2002-03, the Court held that "in the income-tax law, there is no concept of deferred revenue expenditure. Once the Assessee claims the deduction for the whole amount of such expenditure, even in the year in which it is incurred, and the expenditure fulfils the test laid down under Section 37 of the Act, it has to be allowed - No substantial question of law - Decided against revenue. 2015 (10) TMI 817 Leviability of interest under Section 12 and 12A of the Interest Tax Act and Section 220(2) of the Income Tax Act on assessee - Held that:- The proceedings impugned in the present appeal are only consequential to the original order of assessment. The original order of assessment has been upheld by this court [2014 (9) TMI 429 - MADRAS HIGH COURT] wherein the order of the Tribunal got reversed. It was on the basis of the very same order of the Tribunal, the present impugned order has been passed. Therefore, the order of the Tribunal impugned in this appeal should also meet with the very same fate. Hence, the question of law is answered against the assessee. 2015 (10) TMI 816 Validity of reopening of assessment - Held that:- Information in the shape of communication made by DCIT, Central Circle 2(1) is specific and clear demonstrating the modus operandi of L.T. Shroff and Group. The name of B D Ashokbhai is available in the list resemble with the assessee and, therefore, Assessing Officer can reasonably harbour a belief that income belonging to the assessee has escaped from taxation. Therefore, he has rightly reopened the assessment and issued notice to both the assessees u/s. 148 of the income tax act. We do not find any merit in this fold of contention. Addition in the case of Ashokbhailal Chokshi, Assessment Year 1995-96, and in the case of M/s. Chokshi Bhailal Dahyabhai and Co. for Assessment Year 1995-96 and 1996-97 - Held that:- Hon’ble Supreme Court way back 1980 in the case of Kishanchand Chellaram vs. Commissioner of Income Tax reported in [1980 (9) TMI 3 - SUPREME Court] dealing with an assessment year 1947-48 has observed that, if the opportunity to cross-examine the witness upon whose statement reliance is being placed was not granted, then, that statement recorded behind the back of assessee cannot be used in evidence. According to the department, it is possessing a diary which contains names of different individual/office/firms who had either deposited the money with LT Shroff or availed loan facility. Now, the evidence which we have extracted above nowhere gave a pointer towards the assessee in clinching way. We have reproduced the explanation of Kalpesh Takkar given in his assessment proceedings. We find that as far as assessee is concerned, it only say B.D. Abdullal Dhujibhai Manek Chowk. Against all the other concerns, their office telephone no. residence phone no. were being mentioned. There is no corroborative evidence apart from this explanation of L.T. Shroff. This is a diary written by a third person found at the premises of the third person. It was not written by assessee. The assessee repeatedly asked to bring the author and give him an opportunity to cross-examine. If that man is not traceable, then it does not mean that assessee would be deprived of his right to verify how his name has been mentioned in the alleged diary. When he has no alleged connection with L.T Shroff, the department ought to have collected some other corroborative evidences which can establish the nexus or link between the assessee and L. T Shroff. The evidence collected by the department is not worthy of credence, more particularly in view of the judgment of Hon’ble Supreme Court in the case of CBI vs. V.C. Shukla & others reported in [1998 (3) TMI 675 - SUPREME COURT ]. There is no independent evidence on the record, therefore, we are of the view that addition with the help of this much information can not be made. We allow all the three appeals and delete the additions. - Decided in favour of assessee. Penalty u/s 271(1)(c) - Held that:- Perusal of sub-clause III would indicate that in case it is proved that assessee has concealed particulars of income or furnished inaccurate particulars then, in addition to taxes, if any, payable by him, a sum which shall not be less than but which shall not exceed the three times of the amount of taxes sought to be evaded by reason of concealment of particulars of income will be payable by the assessee. In the present case, we have deleted the quantum addition, therefore, the charge against the assessee of evading the taxes on the addition no more survive. There cannot be any penalty which can be computed in the present case. As a result, this appeal is also allowed and penalty is deleted. - Decided in favour of assessee. 2015 (10) TMI 815 Unexplained advances - CIT(A) deleted the addition - assessee has income from salary and other sources - Held that:- CIT (A) has decided the case categorically and assessee has not honoured the disclosure in the return because no incriminating documents were found during the course of search. The ld. CIT (A) had given various reasons of retraction and also has considered the evidence for not honouring the statement made under section 132(4) of the IT Act. The ld. D/R had not controverted the findings given by ld. CIT (A). It is a legal proposition that statement recorded under section 132(4) has evidentiary value but is rebuttable presumption. The assessee has produced the evidence before ld. CIT (A) and he came to the conclusion that addition made by the AO was not justified. The case laws referred by the assessee also support the assessee’s case. Therefore, we uphold the order of ld. CIT (A). - Decided against revenue. Charging of interest under section 234B - ignoring adjustment of amount lying in P.D. Account - Held that:- The case laws referred by the assessee are squarely applicable. Therefore, interest charged under section 234B is not justified as assessee’s cash was lying with the department in P.D. account. The assessee had made request to adjust the advance tax from the cash seized and lying in P.D. Account, from time to time. - Decided in favour of assessee. 2015 (10) TMI 814 Deduction U/s. 10B - extra ordinary income - AO only excluded the Sales Tax and Excise Duty for arriving at total turnover for the purpose of computing deduction U/s. 10B - AO also disallowed claim on employee stock options - CIT(A) allowed par relief - CIT(A) confirming the order of AO in excluding patent infringement income of ₹ 97,03,57,916/- received in convertible foreign exchange from the export turnover of the eligible 100% Export Oriented Undertaking for the purpose of computing deduction under section 10B - Held that:- This issue was decided in AY 2008-09 [2015 (10) TMI 790 - ITAT HYDERABAD] against assessee stating the income from settlement of patent infringement cannot become part of operating revenues either on bulk drug manufacturing (API) segment or on product development service (PDS) segment which are two different segments in which assessee is operating and accordingly we agree with the DRP’s stand that this income falls under the category of ‘other income’ and not operating revenue. Not only that the income does not pertain to the relevant financial year nor the costs are incurred in the year under consideration. If without the cost, the income is included in the computation of operational profits, the same gets skewed because of inclusion of: extraordinary items. It was decided in number of cases by the Tribunal that incomes of extraordinary nature are to be excluded and further extraordinary events in any company also make it non-comparable while doing exercise of FAR analysis for comparability purpose. - Decided against assessee. Quantification of amount eligible for deduction under section 10B - common corporate overheads should be apportioned on the basis of ratio of turnover of the unit to the ‘total turnover’ of the company and in this manner reducing the eligible profits under Sec. 10B as concluded by CIT(A) - Held that:- This issue was decided in AY 2008-09 [2015 (10) TMI 790 - ITAT HYDERABAD] as held that even in the case where the unit starts production only at the fag end of the year cost of working on that unit throughout the year for establishing / starting production may not result in allocation of actual expenditure if turn over is considered. In view of this, since Assessing Officer has not given any rationale in adopting the turnover as the basis, ignoring the assessee’s method, we are of the opinion that allocation of expenditure as was done by the assessee is more rationale and is in tune with the principles laid down by the Institute of Cost Accountants and also for the purpose of Company Law. Therefore, considering the detailed objections raised by the assessee as placed in the objections to the DRP, we are of the opinion that the allocation by the assessee is to be upheld. Assessing Officer is directed to accept the assessee’s allocation of corporate overheads - Decided in favour of assessee. Amount debited towards Employee Stock Option Plan - not an expenditure incurred in connection with an existing liability and therefore to be disallowed for computing the taxable business profits as held by CIT(A) - Held that:- The difference (discount) between the market price of the shares and their issue price is "expenditure" in the hands of the assessee because it is a substitute to giving direct incentive in cash for availing the services of the employees. There is no difference between a case where the company issues shares to the public at market price and pays a part of the premium to the employees for their services and another where the shares are directly issued to employees at a reduced rate. In both situations, the employees stand compensated for their effort. By undertaking to issue shares at a discount, the company does not pay anything to its employees but incurs the obligation of issuing shares at a discounted price at a future date. This is nothing but "expenditure" u/s 37(1) -The liability cannot be regarded as being "contingent" in nature because the rendering of service for one year is sine qua non for becoming eligible to avail the benefit under the scheme. Once the service is rendered for one year, it becomes obligatory on the part of the company to honor its commitment of allowing the vesting of 25% of the option. The liability is incurred at the end of the first year though it is discharged at the end of the fourth year when the options are exercised by the employees. The fact that some options may lapse due to non-exercise / resignation etc does not make the entire liability contingent - However, the obligation to issue shares at a discounted premium does not arise at the stage the options are granted. It arises at the stage that the options are vested in the employees. The amount deductible has to be determined based on the period and percentage of vesting under the ESOP scheme - Therefore, considering the request, we restore this issue to the file of the Assessing Officer to examine the claim afresh in the light of decision of the Hon’ble Special Bench of the ITAT Bangalore in the case of M/s. Biocon (2013 (8) TMI 629 - ITAT BANGALORE ) - Decided in favour of assessee for statistical purposes. Superannuation contribution in respect of a promoter Managing Director - disallowance of claim as contribution to superannuation fund is covered u/s 36(1)(iv) the same cannot be allowed u/s 37 - Held that:- On going through the facts and materials on record, we are of the view that the expenditure incurred is allowable as deduction if not u/s 36(1)(iv) but u/s 37 of the Act as it is exclusively incurred for the purpose of business. Moreover, it is not disputed that assessee has deducted tax at the time of making contribution to the superannuation fund and has treated it as part of salary of the concerned directors. That being the case, the expenditure incurred should be allowed as a deduction. - Decided in favour of assessee 2015 (10) TMI 813 Bogus commission - CIT(A) deleted the addition - revenue asked to remand the matter for reconsideration - Held that:- In the absence of any cogent argument or reason canvassed before us by Revenue remand cannot be directed. In order to so direct atleast some shortcoming in the nature of evidences filed and consideration should have been pointed out so as to justify such a demand. A matter cannot be remanded for the mere asking. A perusal of the impugned order at page 8 shows that the major commission payment out of these 8 people has been paid to Sri Padma Sinha, Sri Nirmal Singh, Sri Daljit Singh Sandhu in whose case PAN details were made available and in the case of the remaining 5 people the confirmations alongwith their telephone numbers and address details were provided. Apart from that it is seen that the admitted fact consistently on record is that the commission has been paid to the persons after deduction of tax at source by way of account payee cheque. - Decided against revenue. Excess payment u/s 40A(2) (b) - CIT(A) deleted the addition - Held that:- Carefully examining the working of the commission paid to Sh. Vipin Malhan is on the sales executed by him from 20.06.2001, the date of agreement between the company and Sh. Vipin Malhan. The sales effected by the company for the period up to 19.06.2001 has been reduced from the total sales while calculating the commission paid to Mr. Vipin Malhan. The order of the AO dated 28.02.2005 under appeal and the Remand Report submitted by him vide F.No. ACIT/Circle/Noida/Remand Report/06-07 dated 20.07.2006 have been examined very carefully. The AO has not expressed any doubt on the genuineness of the agreement executed between the company and Sh. Vipin Malhan and also on the system of payment of commission. The AO has not expressed any doubt on the services rendered by Sh. Vipin Malhan to the company. The AO has worked out commission on the figure of ₹ 2,40,24,500/- being income from web packages alone while the company has calculated the commission on reconciled sales. The copy of the statement showing working of the commission paid to Mr. Vipin Malhan had been sent to the AO along with the reply of the AR for his comments. However in the Remand Report submitted by the AO, find that the AO has not made any adverse comments on the working of the figure of the sales as arrived at and the commission of ₹ 29,35,002/- worked out at @ 10% of the total sales of ₹ 2,93,50,020/- besides the commission of ₹ 3,37,500/- paid as an associate member of the company. AO was not justified in making an addition of ₹ 8,88,052/- on this account to the income of the appellant. On a consideration of the entire factual matrix of the case which we have brought out in the earlier part of this order in great detail, we find in the absence of any rebuttal on facts no interference in the impugned order is warranted. In the facts as they stand for want of any contrary fact or argument the departmental ground is dismissed and the impugned order is upheld. - Decided against revenue. 2015 (10) TMI 812 Entitlement to claim deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee 2015 (10) TMI 811 Disallowance of VSAT charges for non-deduction of tax - charges paid by the assessee to Stock Exchange - CIT(A) deleted the addition - Held that:- Payment of VSAT/lease line charges to the stock exchange without deduction of tax at source is covered in favour of assessee by the decision of Hon'ble Bombay High Court in the case of Angel Capital & Debit Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT ]. Similar issue has been considered by various benches of the Tribunal as well as assessee's own case for the assessment year 2005-06 and 2006-07 and the issue has been decided in assessee's favour stating VSAT and Lease Line charges paid by the assessee to Stock Exchange were merely reimbursement of the charges paid/payable by the Stock Exchange to the Department of Telecommunication. Since the VSAT and Lease Line charges paid by the assessee do not have any element of income, deducting tax while making such payments do not arise - Decided in favour of assessee. Penalty paid to SEBI - CIT(A) deleted the penalty - Held that:- This issue is also covered by the decision of Angel Capital & Debit Market Ltd (supra) as that the amount paid as penalty was on account of irregularities committed by the assessees clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such as case the explanation to Section 37 would not apply.- Decided in favour of assessee. Disallowance of mark to market loss on account of derivative transactions by considering the same to be contingent loss - Held that:- Taking into account the details and the explanations submitted by the AR and taking into account the guidance note issued by ICAI, which the companies have to follow, besides the several case laws cited by the Revenue authorities and by the AR, we are of the opinion that the assessee has rightly claimed the provision in the Profit & Loss Account Respectfully following the decision of the Tribunal in assessee's own case, we do not find any merit for the disallowance made by the AO on account of provisions for loss on mark to market.- Decided in favour of assessee. Disallowance made u/s.14A - Held that:- As we found that the assessment year under consideration is A.Y.2007-08, in which rule 8D is not applicable keeping view the decision of the Tribunal in assessee own case vis-a-vis the decisions of other benches of the Tribunal, we restrict the disallowance to the extent of 10% of the dividend income. - Decided partly in favour of assessee. Disallowance of transactions charges paid without deduction of tax at source - CIT(A) deleted the addition - Held that:- Considering case of Mehta Vakil & Co. Pvt.Ltd. [2015 (10) TMI 757 - ITAT MUMBAI] wherein after considering the decision of Hon'ble Bombay High Court in the case of Kotak Securities Ltd., [2011 (10) TMI 24 - Bombay High Court], wherein held since both the revenue and the assessee were under the bonafide belief for nearly a decade that tax was not deductible at source on payment of transaction charges, no fault can be found with the assessee in not deducting the tax at source in the assessment year in question and consequently disallowance made by the assessing officer under Section 40(a)(ia) of the Act in respect of the transaction charges cannot be sustained. - Decided in favour of the assessee. 2015 (10) TMI 810 Penalty u/s 271(1)(c) - addition made u/s 43B - assessee furnished inaccurate particulars of income to reduce the taxable income and did not substantiate its claim of expenses - Held that:- Merely because there were some discrepancies, it cannot be held that the assessee intended to evade tax. The assessee had rectified the same and had accepted the mistake before the AO. The assessee also chose not to prefer appeal before the first appellate authority, itself shows that the mistakes were not wilfull. For this act of assessee penalty u/s 271(1)(c) may not be levied in respect of the addition made u/s 43B, the assessee had declared in the audit report the bonafide error which do not find place in the return filed by the assessee.The delayed payment in respect of employees’ contribution to PF & ESI needs to be given liberal approach. Employer/employees’ contribution towards provident fund payments made after the due date prescribed under the Employees’ Provident Fund Act and Rules made there under but before the due date for furnishing the return of income under sub sec. 1 of sec. 139 of the Act, are allowable under s.36(1)(va) read with sec. 2(24)(x) and sec. 43B of the Act. This is not a fit case for levy of penalty u/s 271(1)(c) as there has been no concealment on behalf of the assessee. The error that was brought to the notice in respect of depreciation was a bonafide error, which was corrected by the assessee by filing revised return during the assessment proceedings. The remaining additions made by the AO do not call for levy of penalty under this provision because these are mere disallowances made by the AO but not conclusive evidence of concealment. We, therefore, by keeping in view the ratio laid down in the judgment of Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ) and Price Water House Coopers Pvt. Ltd. vs. CIT reported in (2012 (9) TMI 775 - SUPREME COURT) passed by the Hon’ble Supreme Court and jurisdictional High court in the case of of DCIT vs. Nepa Limited reported in (2015 (10) TMI 63 - ITAT INDORE) delete the penalty u/s 271(1)(c) of the Act levied by the AO and confirmed by the ld. CIT(A). - Decided in favour of assessee. 2015 (10) TMI 809 Condonation of delay - extraordinary delay of 344 days in re-filing the appeal - Held that:- Apart from saying that the appeals have been filed in the discharge of official duties and that some delay has taken place since the concerned officer had to perform other functions as Assessing Officer (‘AO’), there is no satisfactory explanation for the extraordinary delay. There appears to be some casualness on the part of the counsel for the Revenue in attending to the defects pointed out by the Registry. Consequently, the Court is not inclined to condone the delay in re-filing the appeal.- Decided against revenue. Reopening of assessment - whether the ITAT was justified in quashing the reassessment proceedings under Section 147/148 on the ground that there was no specific material with the AO to hold that any income has escaped assessment - Held that:- The decision of the ITAT appears to have turned entirely on facts. It is observed by the ITAT that there was nothing on record before the AO even in the form of any specific information that the Assessee had converted black money into white through an entry provider. Further, while in the notice issued to the Assessee for four years, the AO had observed that ₹ 27 lakhs, ₹ 62 lakhs, ₹ 4.80 crores and ₹ 6.96 crores respectively had escaped assessment, the additions actually made for the respective years were ₹ 27 lakhs, ₹ 10 lakhs, ₹ 1.5 crores and ₹ 10 lakhs respectively. This meant that the AO was himself “not sure that the entire amount which was mentioned in the report of the investigation was on account of the escaped income of the Assessee.” This also showed that the AO had not applied his mind before issuing notice under Section 148 of the Act. No substantial question of law arises for determination - Decided against revenue. 2015 (10) TMI 808 Reopening of assessment - information from the Office of the DIT (Inv.)-1, New Delhi has been received that the assessee M/s Shri Govind Kripa Builders P. Ltd. has received an accommodation entry in to its Bank account from different companies/concerns during the financial year 2007-08 relevant to asstt. Year 2008-09 so as to introduce its unaccounted money into its accounts - Held that:- It is seen that the ITAT has in the impugned order for the Assessment Year 2008-09 [2015 (10) TMI 798 - ITAT DELHI] relied upon the judgment of this Court in Signature Hotels P. Ltd. v. ITO [2011 (7) TMI 361 - Delhi High Court] and come to the conclusion that the Assessing Officer did not apply his own mind to the information and the materials forming the basis of the information. The Court finds no legal error whatsoever in the ITAT coming to the above conclusion. In the facts and circumstances of the present case, no substantial question of law arises for determination by the Court. - Decided in favour of assessee. 2015 (10) TMI 807 Rectification of mistake - administrative expenses has been directed by the Tribunal to be disallowed even when, there was no specific ground taken by the Revenue and, secondly, the depreciation has been disallowed even on the portion of the premise, on which the assessee was using it for its own business purpose i.e., it was having its office in the said premises - whether the income from business centre should be treated as “business income” or “income from house property”? - Held that:- Insofar as the administrative expenditures are concerned, the Assessing Officer himself has worked out the disallowance of administrative expenditure after allocating on the basis of the receipts of the house property from the total receipts. This was a very reasonable basis for allocating administrative expenditure and once the income has been assessed as income from house property, then whatever administrative expenditure is pertaining to income from house property gets disallowed. There is no mistake apparent from record insofar as the direction of disallowance of administrative expenditures are concerned because what is disallowable is only 16% of the administrative expenses. As regards the second plea of depreciation that, at least it should have been allowed on the portion of the property used by the assessee for its office use, we find that no such ground has been raised by the assessee nor any specific plea was made. Besides this, the Tribunal has directed to disallow the deprecation, which was a logical corollary when the leasing income has been held to be assessed under the head “income from house property”. Thus, there is no mistake apparent from record which can be said to be rectifiable within the ambit of section 254(2). The assessee’s miscellaneous application is thus dismissed. 2015 (10) TMI 806 Bad debts claimed by assessee as business loss - CIT(A) treating the bad debts as business loss u/s 28 - whether the block assessment has been completed by applying deeming provisions and despite agreeing that conditions laid down u/s 36(1) (vii) are not satisfied? - assessee is the Karta of the HUF - assessee before the Tribunal had challenged the order of the CIT(A) restricting the bad debts to ₹ 25,26,000/- as against the claim of ₹ 1,46,54,468/- - Held that:- It is undisputed fact that both the authorities below have admitted that appellant was carrying on the money lending business. But both the authorities failed to interpret the provisions of S. 36(1)(vii) r/w S. 36(2) in its proper perspective when it comes to the money lending business. The interpretation of the provision contained in CI. (i) of sub. S. (2) of S. 36 and second part of this clause starting from "or represents money lent in the ordinary course of business of banking or money lending which is carried on by the assessee" leads to only conclusion that it deals with different types of activities not at all related to those with the first part of business activities. In other words the submission is that in the case of advances/ loans made by any concern doing business of banking or money lending it was not obligatory that such advances/loans or part thereof should be shown to have become irrecoverable and consequently written off in the accounts of the assessee in the previous year. The money lent as part of money lending business being stock-in-trade automatically comes into revenue account. In other words it need not be taken into account in computing the income as required in the first limb in relation to money lending business to prove that it is on revenue account. As per second limb it should be found out in relation to money lending business that debt is advanced in the ordinary course of money lending business. If this debt is not advanced in the ordinary course of business, it would not qualify for deduction as bad debt. The only condition laid down in second part of Sub. S. (2) of S. 36 of the Act is that the amount should be advanced in the ordinary course of business which by itself proves its revenue nature and no further conditions are required to be satisfied which are only applicable with regard to debts qualifying as bad debts in the first part of sub. S. (2). Revenue authorities were not justified in restricting the claim of bad debts/business loss to ₹ 25,26,000/- as against claim of assessee for ₹ 1,46,54,468/-, because debt in question having been undisputedly advanced in assessee’s ordinary course of money lending business, so this part of claim of bad debt of ₹ 1,46,54,468/- is allowable u/s.36(1)(vii) read with second limb of sub-section 2 of section 36 of the Act. The Assessing Officer is directed accordingly - Decided in favour of assessee. 2015 (10) TMI 805 Addition u/s 68 - non grant of sufficient opportunity to the assessee to file confirmation letters - Held that:- As in the present case, a perusal of the records shows that the Assessing Officer had granted five hearing opportunities to the assessee. The assessee had provided the addresses of creditors as available in his records. It is not the case of Revenue that the assessee has not cooperated or is negligent in prosecuting his case. It is a case where the assessee could not get confirmation letters in time from creditors. It is alleged that the first appellate authority has not granted sufficient opportunity to the assessee to file confirmation letters. Thus, the case law on which the learned Departmental representative has placed reliance are distinguishable on facts itself. Be that as it may, now the assessee has placed on record confirmation letters from the creditors. We are of considered opinion that in order to verify the genuineness of confirmation letters, the matter needs a revisit to the Assessing Officer. Accordingly, we remit the issue back to the file of the Assessing Officer to decide the issue afresh after verifying the veracity of the confirmation letters and considering the opening balance of the creditors. - Decided in favour of assessee for statistical purpose. 2015 (10) TMI 804 Registration u/s 12AA denied - Administrative Commissioner rejected the application of the assessee only on the ground that the mandatory clause was not incorporated in the bye laws - Held that:- Section 12AA does not say that any mandatory clause has to be incorporated in the bye laws. The Administrative Commissioner has to examine the genuineness of the activity of the trust within the meaning of section 2(15) of the Income-tax Act. In this case, the Administrative Commissioner has not examined the genuineness of the activity of the trust. This Tribunal is of the considered opinion that the Administrative Commissioner has to examine the application of the assessee as provided in section 12AA(1) r.w.s. 2(15) of the Act and satisfy himself about the genuineness of the activity of the object of the trust. Since the same was not examined by the Administrative Commissioner, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Administrative Commissioner. Accordingly, the order of the Administrative Commissioner is set aside and the issue is remanded back to reexamine the matter afresh regarding the genuineness of the activities of the trust. The Administrative Commissioner shall examine specifically why the society was formed by the Government officials to implement health care programme when they are otherwise supposed to implement the policy of Government of India and Government of Kerala as well. The Administrative Commissioner shall bring on record the genuineness of the activity of the trust and its object and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee.- Decided in favour of assessee for statistical purpose. 2015 (10) TMI 803 Addition u/s. 69B - undisclosed investment in purchase of (1/2 share) property - CIT(A) deleted the addition by admitting additional evidence - Held that:- It is not the case, where the AO has brought on record any contrary material to substantiate that assessee or her mother Smt. Sudha Garg has paid any other amount as has been mentioned in the sale deed executed before the Registrar of properties. It is also not the case of the AO that there is any other contrary or supportive evidence which corroborates the stand taken by the AO except the value adopted by the Registrar of properties for purposes of stamp valuation. We find that Ld. CIT(A) has stated in his order that no inquiry was conducted by the AO before invoking the provisions of section 69B of the Act and no evidence is brought on record by the AO that some extra consideration was paid by the assessee for acquiring the property over and above the amount of sales consideration as shown in the sale deed. It is not understood as to why the value taken by the Registrar of properties for purpose of stamp duty payable can be considered as the sole consideration, and not any amount higher or lower than that. Payment of stamp duty cannot be sole criteria to presume that assessee must have paid that much amount for purchase of the property. We find that Ld. CIT(A) has rightly observed that in case, there was any doubt to the AO, he should have referred the matter to the Valuation Officer for valuation of the property before invoking the provisions of section 69B of the Act. We find that Ld. CIT(A) also in agreement with the Ld. AR that even the provisions of section 50C cannot be invoked in the case of the assessee, as assessee is one of the purchaser of the property, and provisions of section 50C applies to the Seller of property. We find that Ld. CIT(A) has rightly observed that Ld. AO has also not brought on record to show that any contrary view was taken by the Assessing officer of the Seller for the said property. CIT(A) has rightly get support from the judgment of the Hon'ble SC in the case of KP Varghese Vs ITO (1981 (9) TMI 1 - SUPREME Court) and therefore, the addition made by the AO for an amount of ₹ 13,58,550/- was rightly deleted by the Ld. CIT(A). - Decided in favour of assessee. Investment made in purchase of property out of advance taken by the mother (Smt. Sudha Garg) of the assessee against sale of her property is investment of the assessee from undisclosed sources - CIT(A) delted the addition - Held that:- Neither it is a case of the AO that Smt. Sudha Garg is not the mother of the assessee, nor it is disputed that the amount of ₹ 11,00,000/- was not received by Smt. Sudha Garg on the dates mentioned above. We find that it is also seen from the impugned order, that there is no discussion by the AO that Smt. Sudha Garg or the purchaser of the property Shri Ram Prasad was ever called by him before taking any contrary view or to disbelieve the agreement to sellJn the present case, assessee never said that she had made any payment for purchase of the plot which has been purchased by her mother in joint name of the assessee, against a sale consideration of ₹ 10,00,000/-. Since no payment is claimed to have made by the appellant to make investment in the plot purchased by her mother in her joint name, and no contrary evidences are brought on record by the AO before concluding that assessee made any investment out of undisclosed sources, and what those sources are, Ld. CIT(A) did not find any reason to sustain the addition made by the AO for an amount of ₹ 5,00,000/- which is not supportive by any corroborative evidence. Therefore, Ld. CIT(A) has rightly deleted the addition of ₹ 5,00,000/-. - Decided in favour of assessee. 2015 (10) TMI 802 Non deduction of TDS on transportation expenses - disallowance u/s 40(1)(ia) - Held that:- The payment was made by the assessee to Mr. Suresh on various occasions and in turn he has made payment to the truck owners/drivers and the assessee has not furnished any details of the truck owners/drivers to the lower authorities. Moreover, it has always taken a plea that the payment has been made to the employees of the assessee who have undertaken the responsibility of transporting cylinders and the truck owners gave the bills to Mr. Suresh and in turn he paid to the truck owners. It means that Mr. Suresh acted as a sub-contractor to the assessee and as soon as Mr. Suresh enters into sub-contract with the assessee, the assessee’s case comes under the purview of sec. 194C(1) of the Act. Thereafter, it is not required to see whether the assessee paid charges to the transporter or not. The activity carried on by Mr. Suresh on behalf of the assessee will be simply an activity of transportation of cylinders by truck and the assessee is liable to deduct TDS. With regard to payment made to Mr. Suresh, the Ld. AR tried to impress the Bench by stating that the payment has been made to various truck owners which less than ₹ 1,20,000/- to each transporters. The material brought on record suggest that the assessee made payment of ₹ 1,29,84,892/- to Mr. Suresh on 23 occasions. Being so, as per record, the argument of the assessee’s counsel is devoid of merits and contrary to the facts - Decided against assessee. 2015 (10) TMI 801 Registration U/s 12AA denied - as per CIT(A) object of the Trust are not charitable and the activities of the Trust are not genuine and consultancy charges receipts shown by Trust is income of its sole Trustee - Held that:- It is a fact that Shri Bhagwana Ram Bagaria is sole trustee of the assessee Trust for the life, is a qualified Doctor and an expert in joint replacement in orthopedic department. As per clause-12, the sole Trustee may at any time, dissolve the Trust and spend the entire income and corpus of the Trust for charitable purposes. This clause shows that trustee has given absolute power to dissolve the Trust and utilize the income as per his sweet will. Prima facie, it appears that Dr. Bagaria, sole trustee has used this device to avoid the tax payment of his professional income. Whatever evidence available on record shows that object of the Trust is neither charitable nor genuine. Therefore, we uphold the order of the learned Commissioner of Income Tax, Jaipur-II, Jaipur. - Decided against assessee. 2015 (10) TMI 800 Disallowance u/s 201(1) and 201(1A) - non deduction of TDS on work of supply, erection and commissioning of lift - payment under the works contract v/s contract of sale - CIT(A) deleted the disallowance - Held that:- This issue is covered by judment of Hon’ble Supreme Court in the case of State of Andhra Pradesh vs Kone Elevators (India) Ltd (2005 (2) TMI 519 - SUPREME COURT OF INDIA) observing that the contract is not a ‘work contract’ but only a ‘contract for sale’ and therefore, no TDS is applicable. Consequently interest charged u/s 201(1A) in both the years was deleted . - Decided in favour of assessee. Non deduction of tax from the payments made to certain customers debited in direct expenses under minor head "excess payment refund" - Held that:- It is crystal clear that from the plain reading of sec. 2(28A) of the Act that money paid in respect of amount borrowed or debt incurred, is interest payable in any manner. The definition of interest in Sec. 2(28A) after referring to the interest payable in any manner in respect of any moneys borrowed or debt incurred proceeds to include in the terms money borrowed or that incurred, deposits, claims and ‘other similar rights or obligations’ and further includes any service fees or other charges in respect of the money borrowed or debt incurred which would include deposit, claim or other similar rights or obligations as also in respect of any credit facility which has not been utilized. Thus, the statutory definition given u/s 2(28A) of the Act regards amounts which may not otherwise be regarded as interest, as interest for the purpose of statute. The definition of interest has been carried to the extent that even the amounts payable in transactions were money has not been borrowed and that has not been incurred, are brought within the scope of its definition, as in the case of service fees paid in respect of a credit facility which has not been utilized. Undisputedly, in the instant case, the amounts were paid in respect of an obligation in respect of purchase of flat through agreement, therefore, no fault can be found on the part of the AO for treating these charges as interest and liable for TDS u/s 194A of the Act. The mere fact that the assessee did not choose to characterize such payment as interest, will not take such payment out of the ambit of the definition of “interest”, in so far as payment made by the assessee was in respect of an obligation incurred with earlier flat agreement holder . The assessee has essentially incurred an expenditure and the amount of charges paid was with respect to the amount incurred by the flat agreement holder and the period for which money was so utilized by the assessee. - Decided against assessee. 2015 (10) TMI 798 Validity of Reopening of assessment - Held that:- After hearing both the parties and considering the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011 (7) TMI 361 - Delhi High Court] wherein held that reassessment proceeding were initiated on the basis of information received from the Director of Income Tax (Investigation) that the petitioner had introduced money during the financial year 2002-03 as stated in the Annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assesee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income.Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of ₹ 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed. As above issue is exactly the similar to the issue involved in the present appeal we quash the reassessment proceedings. - Decided in favor of the Assessee . 2015 (10) TMI 797 Rejection of books of account - AO estimated the income at 12.5% of the gross bill based grounds as payments made to labourers are not verifiable and TDS not effected on transport payment - Held that:- We find that the Assessing Officer himself confirmed the fact of producing proper bills and vouchers in a letter issued by him on 9.12.2011. Further, the names and addresses of the labourers from whom payment vouchers were obtained are available on record. However, the Department has taken a plea that the CIT(A) has given relief in this case without giving an opportunity to the Assessing Officer or without calling for any remand report. Since the assessee has proved that it has produced proper bills/ vouchers and the Assessing Officer has confirmed the availability of relevant names and addresses of the labourers vide his letter dated 16.12.2012, hence it is not necessary for the CIT(A) to ask for a remand report. We find that due to discrepancies found in the accounts, the Assessing Officer has estimated the income at 12.5% of the gross bills minus recoveries and rejected the books of account. Taking a consistent view, as in the decision of Sainath Estates Pvt. Ltd. (2013 (9) TMI 528 - ITAT Hyderabad ) we direct the Assessing Officer to restrict the disallowance to 5% of the labour payments. - Decided partly in favour of revenue. 2015 (10) TMI 796 Rectification of mistake - mistake of facts in the order of the Hon'ble ITAT as that addition on the issue involved has been confirmed on substantive basis in the case of Shri Sendhabhai M Desai (individual). The same is however not so as the addition has been deleted by Ld. CIT(A) - Held that:- We have noted that the alleged mistake, if any, had not emanated from the order of the Tribunal. In fact, learned CIT(A) in his order in the case of the AOP has made an observation that the concerned CIT(A) in the case of Sendhabhai M. Desai, Individual, has confirmed the addition. In fact that was the source of the mistake. The impugned mistake, if at all, did not attribute to Tribunal. Moreover, the matter was decided not only because of that reason but it was decided on the merits of the case. It is clear that a finding was given in the case of the Individual that the impugned addition was merely on surmises and conjecture. While computing the brokerage income, the AO had estimated the same and that too found to be on presumption. Therefore, a question was raised during the course of hearing that in a situation when a substantive addition could not be upheld in the hands of the individual then how it is possible to uphold a “protective addition” pertaining to the same income. The impugned income was once deleted on merits from the hands of the Individual, therefore on those very reasoning that very addition was deleted by the Appellate Authority from the hands of the AOP. Even, the Respect Co-ordinate Bench has examined all those aspects on merits and thereupon after analyzing few case laws have came to the conclusion that the AOP was not in existence and therefore, the addition was wrongly made. Even, if we consider the grievance of the Revenue Department that the Tribunal has committed a mistake by wrongly recording a fact about the confirmation of addition in Individual capacity by learned CIT(A), but then simultaneously other fact shall also remain intact that the Tribunal has given a finding that the AOP was not in existences and hence the addition was improper. Moreover, the alleged wrong fact had emanated from the order of learned CIT(A), therefore, the mistake, if any, was a mistake of learned CIT(A) and not the Tribunal. The impugned order of the Tribunal has been passed after due consideration of the facts and circumstances of the case, therefore, need not to be disturbed; because any tinkering may tantamount to review of the order which is not permissible u/s.254(2) of IT Act. The Misc. Application of the Revenue Department is hereby dismissed. 2015 (10) TMI 795 Eligibility of deduction u/s.10A - Held that:- From perusal of the orders of the authorities below, we find that it is not the delay in filing of the return alone which has made the assessee ineligible to claim deduction u/s.10A. The assessee has not been able to comply with other conditions as laid down in the section to be eligible to claim deduction. The assessee was not able to furnish a copy of special audit report in the prescribed form; No evidence was brought to show that the export proceeds were received in India in convertible foreign exchange within the specified time, no evidence was brought on record to show that assessee was rendering services from STPI unit. Although the assessee has submitted before the CIT(Appeals) that Form No.56F was filed along with the manual return of income, however, the CIT(Appeals) has cast serious aspersions on the veracity of Audit Report filed along the alleged manual return. There are conditions in the date of receiving payments and date of signing of the report. Since the assessee has failed to comply with the provisions of section, we are of the considered opinion that the assessee is not eligible for claiming deduction u/s.10A of the Act. Accordingly, this appeal of the assessee is dismissed. 2015 (10) TMI 794 Addition u/s 40(a)(ia) - non deduction of TDS on sundry creditors - Held that:- We find that assessee is correct in submitting that sundry creditors of ₹ 1,21,33,00 cannot be disallowed u/s 40(a)(ia) of the Act without bringing on record that the said amount represents current year expenditure which is payable. It is clear that the said amount represented sundry creditors and did not represent expenditure related to current year. Hence the ld. CIT(A)’s order for disallowance of ₹ 1,21,33,003 is set aside. Short deduction of TDS - Held that:- Assessee has made out a case that AO has given a finding that there was short deduction of tax and he has not given a clear finding that there is no deduction of tax. If the case was of short deduction then as per the decision of the Tribunal in the case of SK Tekriwal which was approved by the Jurisdictional High Court [2012 (12) TMI 873 - CALCUTTA HIGH COURT] no disallowance u/s 40(a)(ia) of the Act can be made. Hence this issue that there was only a case of short deduction needs to be verified by the AO. Hence we remit the issue to the file of the AO to examine as to whether there was a case of short deduction or non deduction of tax Non deduction of TDS on amount paid to truck owners as hire charges - Held that:- Assessee submitted that there was some error on the part of the counsel who represented the assessee before the authorities below. In this regard the ld. Counsel of the assessee has given a chart regarding the payment of the hire charges payable. As regards serial no. 1 and 2 in the chart payment of TDS was made upto the date of filing of the return and the same has to be allowed. Hence we remit this issue to the file of the AO to verify the date of deposit of the TDS in this case and delete the disallowance if the deposit of TDS has been done upto the filing of the return. Late deposit of tds - claimed to have been deposited after 30.09.2009. - Held that:- In this regard also we agree with the submission of the ld. Counsel of the assessee and give direction that it should be allowed as per the provision of section 40(a)(ia) of the Act. 2015 (10) TMI 793 Validity of reopening of assessment under section 147 - A.R. submitted that that the Assessee’s objection to reassessment proceedings were not passed by a separate order but were disposed by the A.O in the assessment order dated 22.03.2006 passed u/s. 143(3) r.w.s. 147 - Held that:- As decided in case of General Motors India Pvt. Ltd. [2012 (8) TMI 714 - GUJARAT HIGH COURT ] A.O is mandated to decide the objection to the notice u/s. 148 and supply or communicate it to the Assessee. The Assessee gets an opportunity to challenge the order in a writ petition. Thereafter the A.O may pass the re-assessment order. We hold that it was not open to the A.O to decide the objection to notice u/s/ 148 by a composite assessment order. Assessing Officer was required to first decide the objection of the Assessee filed u/s. 148 and serve a copy of the order of the Assessee and after giving reasonable time to the Assessee for challenging his order it was open to him to pass an assessment order. This was not done by the A.O therefore the order on the objection to the notice u/s. 148 of the assessment order passed under the Act deserved to be quashed. Revenue has not brought any contrary binding decision of Hon’ble Apex Court or Hon’ble jurisdictional High Court in support of its contention that the order disposing of the objections of the Assessee to reassessment proceedings along with the assessment order is in order and therefore valid as per law. - Decided in favour of assessee. 2015 (10) TMI 792 Deduction u/s 54F against the long term capital gain - CIT(A) allowed the claim - Held that:- Insofar as the assessee’s claim for deduction under section 54F is concerned, the same has been found to be admissible by the Assessing Officer in the order giving effect to the learned Commissioner (Appeals). As regards the submissions of the learned Departmental Representative, we do not find any merit, firstly, because, the learned Commissioner (Appeals) is empowered to admit the additional ground and allow the claim for deduction if it is permissible in accordance with law and secondly, The learned Commissioner (Appeals) has merely directed the Assessing Officer to verify the claim of the assessee and allow the claim in accordance with the law which, in turn, has been found to be admissible. Thus, there is no infirmity in the order of the learned Commissioner (Appeals) and accordingly we do not find any merits in the ground raised by the Revenue and, therefore, the same is dismissed. - Decided against revenue. 2015 (10) TMI 791 Assessment of commission income of providing accommodation entires - CIT(A) estimated the income @5% out of Hawala transactions - - Held that:- The Assessee was receiving some commission for providing accommodation entries. He has also noted that Assessee as well as Shri Ashish Patel of Radhe group had claimed that Assessee was entitled for commission at 1.5% of the bills raised. Before us, no material has been brought on record by either of the parties to controvert the aforesaid findings of CIT(A). We also find that CIT(A) has concluded that Assessee must have earned something more that was admitted during the search proceedings and the Assessee was a Hawala giver and in such Hawala transactions, the normal commission charged by Hawala was 5% of the value of such transactions. We find that CIT(A) has not brought on record any material to arrive at the basis for working out the commission at 5% and at the same time the Assessee and the Revenue has also not brought on record any material to support their respective contentions. In view of the aforesaid and considering the totality of the facts, we are of the view that the ends of justice shall be met if an estimation of income earned by the Assessee is made in the present case. We are of the view that an estimate of 2.5% of the total amount receipts received by the Assessee would meet the ends of justice. We thus direct accordingly and thus these grounds of the Assessee and Revenue are partly allowed - Decided partly in favour of assessee. Penalty under section 271(1)(c) - CIT(A) giving relief of 95% of penalty imposed - Held that:- CIT(A) has held that for levy of penalty it should be found that all the conditions of section 271(1)(c) must exist before levy of penalty and that it is for the Revenue to establish that such conditions exist. We find that there is no such finding recorded by CIT(A) in the impugned order passed by him that all the conditions for levy of penalty were fulfilled before levy of penalty in this case and that Revenue has established that such conditions exist. We find that the only finding recorded by CIT(A) for confirming the penalty in this case was that Assessee was abating in tax evasion. The act of abatement in tax evasion for some other person could not be made the basis for levy of penalty u/s. 271(1)(c) on the Assessee. We further find that CIT(A) has passed a cryptic order. On these facts of the case, we are of the view that the impugned order could not be sustained. However in the interest of justice to both the parties, we consider that it shall be appropriate to restore the issue of penalty u/s. 271(1)(c) to the file of A.O to pass a de novo order in accordance with law after providing reasonable opportunity of hearing to the Assessee and A.O shall record a clear finding on the issue that the conditions for levy of penalty u/s. 271(1)(c) exists and proved in this case - Decided in favour of revenue statistical purpose. 2015 (10) TMI 790 Transfer pricing adjustments - Adjustment towards interest on advances provided to Xiamen Mchem Pharma (Group) Ltd., and Xiamen Mchem Laboratories Ltd., (Associated Enterprises) - DRP direction TPO adopting interest rate of Libor + 2% as against interest rate of Libor + 1% charged by the tax payer - Held that:- Since the DRP has accepted +1% on guarantee commission, we do not see any reason to vary as far as the interest charged, which is also + 1% over and above the LIBOR. It should be accepted that LIBOR rate is a valid CUP available externally. Therefore, LIBOR + 1% charged by the assessee can be considered as at arms length, in the absence of any other comparables where LIBOR + 2% is charged. We are of the opinion that assessee charge at LIBOR + 1% interest on the trade advances given is at arms length. It is also to be kept in mind that assessee has not advanced any funds as such to the Associated Enterprises and the transaction is on goods supplied on a credit period of 3 months. Therefore, on the facts of this case, as the DRP accepted similar rate of + 1% for guarantee fee vide its order referred above, we uphold the assessee s contention that LIBOR + 1% is at arms length. However, this finding should not be considered as a precedent either in assessee s own case in other assessment years or in any other case as this decision was given in the light of fact that DRP itself has accepted the guarantee commission of + 1% on its next objection. - Decided in favour of assessee. Reducing the operating profits of the tax payer being the income from settlement of patent infringement suit credited to profit and loss account - whether the income accounted by the assessee will become operational income for the purpose of arriving at the operational profit? - Held that:- The Assessing Officer has excluded the same stating that the same is nothing but notional revenue. We agree with the finding of the Assessing Officer as held by the DRP that the income from settlement of patent infringement cannot become part of operating revenues either on bulk drug manufacturing (API) segment or on product development service (PDS) segment which are two different segments in which assessee is operating and accordingly we agree with the DRP s stand that this income falls under the category of other income and not operating revenue. Not only that the income does not pertain to the relevant financial year nor the costs are incurred in the year under consideration. If without the cost, the income is included in the computation of operational profits, the same gets skewed because of inclusion of extraordinary items. It was decided in number of cases by the Tribunal that incomes of extraordinary nature are to be excluded and further extraordinary events in any company also make it non-comparable while doing exercise of FAR analysis for comparability purpose. For the reasons stated above, we agree with the Assessing Officer/DRP that this income from settlement of patent infringement cannot be considered as operational income while working out the segmental profits or as total profits of the assessee for the purpose of comparison. At best, it can be considered as another segment of income for which no expenditure was charged, but the same cannot be included in either of the segmental operations of the assessee - Decided against assessee. Transfer pricing adjustment - segmental financials certified by the cost auditors and the profit margins arrived between the AE and non-AE transactions - Held that:- We are of the opinion that the DRP s order on this issue is not fully based on the facts. While accepting that the segmental financials certified by the cost auditors and the profit margins arrived between the AE and non-AE transactions are comparable, why the DRP did not accept the entire segmental finances furnished with reference to two business segments is not explained. There is no reason to reject the segmental accounts when they are partially accepted for internal comparison as was done by the DRP extracted above. In view of this, we are of the opinion that TPO should have based his analysis on the segmental financials reported by the assessee duly certified by cost auditors. Various case law relied upon by the assessee also, supports the above which, we do not intend to extract in this order. Suffice to say that since assessee operates in two business segments whose profit margins are entirely different, the segmental reporting undertaken by the assessee based on the cost audit report should be the basis for necessary analysis by the TPO. Selection of comparable - Held that:- TPO should re-do fresh analysis of the comparables and analyse the fresh adjustments, after giving due opportunity to the assessee. Since assessee s segmental profits and its profit margins between AE and non-AE are also available, the TPO can examine whether the internal CUP available with the one of the business segments can be accepted as such. In case it is not possible to accept then, fresh comparables should be selected and PLI has to be determined so as to examine assessee s profit margins. For this purpose, we set aside the order of TPO with reference to the determination of ALP on these two segments and direct the TPO to undertake fresh search and compare with the segmental profits submitted by the assessee. However, he is free to examine segmental profits - Inclusion and exclusion of some of the receipts and cost claimed are proper or not. TPO s comparison should be based on segmental profits alone and not at the entity level. Moreover, the assessee is also objecting to arriving at the cost, as far as the PDS is concerned. These objections also should be examined and clear finding should be given, while doing the T.P. analysis. Therefore, while accepting the assessee s objections in the grounds raised, we restore the issue to the file of the TPO for fresh determination based on the segmental profits and selection of comparables if required. Include reimbursement of expenses received by the tax payer as subject to Arms Length pricing under sec.92CA - Held that:- this issue required to be examined by the Assessing Officer/TPO in detail whether the said amount claimed to have received by the assessee as reimbursement expenses are indeed reimbursement or not. In case of reimbursement at cost of the expenditure incurred on behalf of the AEs and has not formed part of the expenditure claimed as operating cost of the assessee then, the reimbursement should not be considered as part of assessee s sales. The amounts should be excluded in computing the operating profits. Since the Assessing Officer has not examined and it is also not on record whether the said expenditure was not part of claim under section 37(1) of the I.T. Act in the regular computation or not, in the interest of justice, we remit the matter back to the file of the TPO to examine the facts and to exclude only in the case the said amount is reimbursement of expenditure and there was no claim by the assessee in its computation of income - Decided in favour of assessee for statistical purposes. Non entitlement to deduct expenditure disallowed in the hands of Astrix Laboratories Limited (a resident J.V Company) under sec. 92CA - Held that:- there is no dispute with reference to the receipt of these amounts, one as an income i.e., management fee of ₹ 1.12 crores and other being the reimbursement of expenses of ₹ 1.05 crores. As far as the reimbursement of expenditure is concerned, we have already directed in the earlier ground to consider the nature of amount and exclude from the computation for the purpose of transfer pricing on verification. Therefore, to that extent, the claim will be a double claim. With reference to the management fee, we are not sure why there is an adjustment in another domestic transaction, if contentions of assessee are correct. If transaction is between two domestic companies transfer pricing regulations does not apply in the impugned year. If one domestic company paid to its AE and assessee receives from AE, the transactions are different in nature. Whether the same can be allowed in the hands of other domestic company or not has no bearing in the assessee s hands as the said amount was received and was accepted by the assessee to be taxed. We approve the DRP observation that taxability or otherwise of the amount in one hand does not affect the adjustment in other hand unless it is provided so in the Act. - Decided against assessee. Non granting the benefit of the (+/-) 5% standard deduction as per the proviso to Section 92C(2) - Held that:- This ground is legal in nature and depending on the facts, the Assessing Officer is directed to consider this adjustment of plus or minus 5% as per the provisions of the Act if the ALP determined is within the range. This ground is restored to the file of the Assessing Officer to be examined as the main issue of adjustments were already restored to the TPO against grounds No. 3 to 8. Deduction claimed u/s. 10B in respect of Export Oriented Undertaking situated at Jeedimetla (Unit 3.2) - Held that:- The DRP, however, noticed that the issue is subject to revisional proceedings by the CIT and the writ petition is pending before the Hon ble High Court of A.P. Since the matter is contested at the Higher Forum legally, the DRP considered it fit not to interfere with the stand of the Assessing Officer but however, directed the Assessing Officer to follow the Judgment of the Hon ble High Court of A.P. as and when issue was decided. It further suggested that demand on account of disallowance of deduction be kept in abeyance till the decision of the Hon ble High Court of A.P. The assessee has raised this issue before us but submitted that the matter is subjudice. Since the DRP has already given clear directions on this issue, we uphold the directions of the DRP with an observation that the Assessing Officer should follow the same as and when that issue is decided by the Hon ble High Court of A.P. - Decided in favour of assessee for statistical purposes. Disallowance of amount debited to Profit Loss account in respect of Employee Stock Option Scheme - Held that:- he difference (discount) between the market price of the shares and their issue price is expenditure in the hands of the assessee because it is a substitute to giving direct incentive in cash for availing the services of the employees. There is no difference between a case where the company issues shares to the public at market price and pays a part of the premium to the employees for their services and another where the shares are directly issued to employees at a reduced rate. In both situations, the employees stand compensated for their effort. By undertaking to issue shares at a discount, the company does not pay anything to its employees but incurs the obligation of issuing shares at a discounted price at a future date. This is nothing but expenditure u/s 37(1) -The liability cannot be regarded as being contingent in nature because the rendering of service for one year is sine qua non for becoming eligible to avail the benefit under the scheme. Once the service is rendered for one year, it becomes obligatory on the part of the company to honor its commitment of allowing the vesting of 25% of the option. The liability is incurred at the end of the first year though it is discharged at the end of the fourth year when the options are exercised by the employees. The fact that some options may lapse due to non-exercise / resignation etc does not make the entire liability contingent - However, the obligation to issue shares at a discounted premium does not arise at the stage the options are granted. It arises at the stage that the options are vested in the employees. The amount deductible has to be determined based on the period and percentage of vesting under the ESOP scheme - Therefore, considering the request, we restore this issue to the file of the Assessing Officer to examine the claim afresh in the light of decision of the Hon ble Special Bench of the ITAT Bangalore in the case of M/s. Biocon (2013 (8) TMI 629 - ITAT BANGALORE ) - Decided in favour of assessee for statistical purposes. Quantification of amount eligible for deduction under section 10B - common corporate overheads should be apportioned on the basis of ratio of turnover of the unit to the total turnover of the company and in this manner reducing the eligible profits under Sec. 10B as concluded by CIT(A) - Held that:- Unit starts production only at the fag end of the year cost of working on that unit throughout the year for establishing / starting production may not result in allocation of actual expenditure if turn over is considered. In view of this, since Assessing Officer has not given any rationale in adopting the turnover as the basis, ignoring the assessee s method, we are of the opinion that allocation of expenditure as was done by the assessee is more rationale and is in tune with the principles laid down by the Institute of Cost Accountants and also for the purpose of Company Law. Therefore, considering the detailed objections raised by the assessee as placed in the objections to the DRP, we are of the opinion that the allocation by the assessee is to be upheld. Assessing Officer is directed to accept the assessee s allocation of corporate overheads - Decided in favour of assessee. Claim of depreciation on brought forward written down value in respect of non-compete fee - Held that:- Since, ITAT has already ordered the depreciation to be allowed in assessment year 2002-2003, consequently, depreciation has to be allowed by the Assessing Officer in this year. He is empowered to take rectification proceedings in case that order was not upheld by the Hon ble High Court. In view of this, to that extent of claim of depreciation amounting to ₹ 8,89,893/- on brought forward written down value, Assessing Officer is directed to allow the depreciation after verifying the WDV figures. The depreciation cannot be allowed on an amount of non-compete fee, which was in fact paid to the Managing Director of the Company for not taking any employment. This cannot be considered under section 32(1) as an intangible asset. Disallowance of weighted deduction under section 35(2AB) - Held that:- fter considering the submissions of the assessee, we agree with the assessee that it is entitled for 150% of the amount actually spent as weighted deduction under the provisions of sec.35(2AB). Since the amount of ₹ 32,73,07,418/- was the actual amount certified by the relevant authority, the assessee is entitled for the deduction at 150%. Since the Assessing Officer allowed only 100% claimed, we direct the Assessing Officer to allow balance 50% thereof - Decided in favour of assessee. Disallowance of deduction @ 100% in respect of the balance R D expenditure for which the prescribed authority denied weighted deduction - Held that:- Assessing Officer and DRP has not applied their mind to the amounts involved. Since the entire claim of the assessee was rejected summarily without examining the facts, we are of the opinion that this expenditure of ₹ 56,35,712/- in respect of R D expenditure is to be considered under section 35(1), if not for the weighted deduction under section 35(2AB). Assessing Officer is directed to examine the necessary expenditure and allow the claim. Decided in favour of assessee for statistical purposes. Customs 2015 (10) TMI 833 DTA sale by 100% EOU - wastage in production from Imported Blocks - Challenge the limit of disposal of reject/scraps - Revenue allowed only 2% - Development Commissioner had initially fixed ad hoc norms for wastage in production from Imported Blocks to the extent of 8.92% and wastage to the extent of 27.56% from indigenous blocks. Held That:- By allowing only 2% of reject /waste disposal the Respondent is going against its own policy as enumerated in Clause 6.8( e) and 6.8 (d) of Foreign Trade Policy which is unjust and arbitrary in nature and does not stand any test of reasoning – the actions of the Board had caused loss of revenue to the State - Impugned order is set aside - Appeal allowed in favour of assessee. 2015 (10) TMI 832 Necessity for Detention of Passport – Petitioner alleged for smuggling – Suspected the presence of Gold in Home Appliances bought – Held That:- Authority vested with Customs to detain passport under S. 110(3) no longer remains res integra and act of respondents is not without any authority. Even according to the respondents, detention of the passport of the petitioner, incorporated as one of the conditions in Ext. P3 order granting bail, is only to ensure availability of the petitioner till the investigation is completed. This can be ensured by such other means or measures as well. Detention of the passport virtually disables the petitioner from pursuing his business and earning his living, apart from adversely affecting his right to meet the family, who are settled at Dubai. Passport could be released subject to furnishing adequate security, either in the form of immovable property or Bank Guarantee to the satisfaction of the respondents, till the proceedings are finalised – Decided partly in favour of the Petitioner. 2015 (10) TMI 831 Waiver of pre-deposit - Dispute regarding deposit of Bank guarantee – Judgment held earlier directs petitioner to give a Bank Guarantee for 20% of the differential duty – Petitioner contends that all necessary documents with full information as per the statutory provisions certified by the Sri Lankan authorities have been produced and there cannot be any doubt regarding the origin of goods –Further held that condition for providing Bank Guarantee is unreasonable and arbitrary – Revenue supported the stand taken by the Commissioner of Customs on imposing the condition of bank guarantee and cited the case of Mohammed Fariz and Co. v. Commissioner of Customs [2011 (3) TMI 1338 - KERALA HIGH COURT] in support. Held That:- Direction to call upon the petitioners to furnish Bank Guarantee/Cash deposit to the extent of 35% or 20% of the differential duty will be too harsh - Petitioners shall be permitted to release the goods covered on condition of their executing Indemnity Bond agreeing and undertaking to pay the amount of differential duty imposed by the Customs authorities while making the final assessment, instead of Bank Guarantee – Order modified in favour of the Petitioner. 2015 (10) TMI 830 Valuation of goods - Inclusion of royalty - Held that:- Ground of appeal is very weak. It states that the importer had imported parts from their collaborator to manufacture goods of foreign collaborator's brand name. Interestingly, we find that in the present case there is no import of goods on the value of which the amount of royalty is sought to be added. There is no evidence of actual import in the appeal papers. In any case we note that in terms of Rule 10(1)(c) of the Customs Valuation Rules, royalty may be added to the price of the goods only if the same is a condition of the sale of the imported goods being valued. This is established law as held in various judgments of the Apex Court including the case of Commissioner of Customs Vs. Ferodo India Pvt. Ltd. [2008 (2) TMI 12 - Supreme Court]. Revenue has not established that the royalty is paid as a condition of the sale of goods being valued. - Decided against Revenue. 2015 (10) TMI 829 Principle of natural justice - order beyond the scope of SCN - it was contended that they have preferred appeal only against addition of royalty amount ordered by the adjudicating authority whereas the Commissioner (Appeals) has gone beyond the grounds of appeal and suo moto set aside the order of the lower authority relating to acceptance of the transaction value. Held that:- appellant has accepted adjudication order insofar as it related to acceptance of transaction value and related party transaction and they preferred appeal only against addition of royalty amount to transaction value – Commissioner (A) can pass order enhancing duty or penalty but only after giving notice to appellant and then pass order – Commissioner (A) has not followed principles of natural justice and has violated procedure by going beyond grounds of appeal preferred by appellant and suo moto set aside order – Therefore impugned order set aside – Matter remanded back to commissioner (A) and decide matter afresh – Application disposed of. 2015 (10) TMI 828 Remand of matter – Consideration of issue relating to penalty and fines – Appellants received order of Commissioner (A) remanding matter to adjudicating authority –However there is no finding regarding fine and penalty and has upheld same – Hence, there was confusion whether adjudicating authority will decide on fine and penalty which resulted in delay of 50 days in filing appeal – Held that:- Commissioner (A) in impugned order remanded matter to adjudicating authority on ground that appellants have already obtained amendment of advance licence from licensing authority and directed original authority to consider case based on advance licence – Since on merit case already remanded to adjudicating authority, question of imposition of fine and penalty is linked to merits of case which is pending before adjudicating authority – When appellants main grounds before Commissioner (A) is to set aside order including confiscation, lower appellate authority holding that there is no prayer for reduction of fine and penalty is not correct – When issues on merit is remanded, fine and penalty also is to be decided by adjudicating authority afresh in his denovo proceedings – Adjudicating authority directed to decide merits of case and on issue of confiscation, fine and penalty – Decided in favour of appellant. Corporate Laws 2015 (10) TMI 827 Challenge to Notice inviting bids for sale of Secured assets under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act – Secured creditor - Petitioner claims the amount outstanding to be ₹ 267.76 lacs which differs from the amount claimed by the Respondent of ₹ 105.65 crores – Petitioner contends that notice under Section 13(4) for assignment of debts is not permissible as the same is mentioned in Section 5 and the Respondent could have taken other measures. Held that:- Respondents have taken the action of assignment of debt under clause (a) of Section 13(4) the legality of which has been examined by the DRT - Intended assignment of debt by secured creditor is an independent transaction, which does not affect either the liability or the rights of the borrower – Notice of sale has been challenged before the DRT and the matter challenged in the present writ, both are independent of each other – Found no merits in the present writ as such dismissed – Decided in favour of the Respondent. Service Tax 2015 (10) TMI 863 Condonation of delay - Dismissal of the appeal before the tribunal on the ground of delay of 262 days – Appellant submitted the reason of negligence of the consultants to file the appeal in time and the prolonged illness of his brother as reasons of delay – Held That:- We do not see how these two facts taken together cannot constitute sufficient cause for the delay in filing the appeal.The appellant ought not to be visited with the drastic consequence of dismissal of the appeal without the same being considered on merits on account of the Advocate/consultant’s default in not having filed the appeal in time. Added to this is the fact that during the original period of limitation it is not as if the appellant was guilty of any negligence.The appellant was pre-occupied in looking after his ailing brother. - Delay condoned - Matter restored before the tribunal. 2015 (10) TMI 862 Confirmation of demand by the Commissioner ignoring the decision of Larger Bench as cited by the Appellant - Applicability of Decision in the case of Paul Merchants Ltd. v. Commissioner of C.EX., Chandigarh [2012 (12) TMI 424 - CESTAT, DELHI (LB)] - Export of services - services of money transfer. Held That:- when an assessee cites a decision of the Larger Bench of the Appellate Tribunal, before the adjudicating authority under the Finance Act, 1994, as amended, it will be incumbent upon the adjudicating authority to follow the decision of the Larger Bench of the Tribunal, unless the factual situation in the case before the adjudicating authority calls for a different interpretation. - No difference is pointed out by the Commissioner in either of the two cases, thus matter to be reconsidered afresh and same cannot overlooked 2015 (10) TMI 861 Delay in pre-deposit – Appeal dismissed by Tribunal for failure to deposit the amount in time – Appellant contends that copy of order was received on the last date for pre-deposit – Appellant deposited the amount within two weeks and his conduct is neither culpable nor negligent – Revenue holds that adequate time was granted and Appellant should have deposited the amount – Held That:- Appellant cannot be deprived of his right to seek adjudication on merits as he has deposited the amount of pre-deposit – Appeal allowed in favour of the Appellant. 2015 (10) TMI 860 Jurisdiction of High Court - Demand of service tax - clearing and forwarding service - Held that:- question squarely falls within the Explanation carved out under section 35G of the Act and there fore, the High Court would not have any jurisdiction to adjudicate the said issue as held by the judgment passed by the honourable Division Bench of this court in the case of Commissioner of Central Excise v. Mangalore Refineries and Petro chemicals Ltd. [2010 (9) TMI 756 - KARNATAKA HIGH COURT]. In terms of the said judgment, the appeal lies to the apex court under section 35L, which court alone would have jurisdiction to decide the said question. - Decided against Revenue. 2015 (10) TMI 859 Valuation - Job work - manufacture of Alcoholic Beverages (i.e., Beer) - inclusion of surplus/profit retained by the Brand owners (BO, M/s UBL) - Held that:- the amount returned to BO is in so far as “surplus/profit” of BO, cannot be included in the taxable value. The amount “surplus/profit retained by BO” as claimed by the appellant, had been returned to BO and therefore such amount cannot be included in the taxable value. Valuation - inclusion of reimbursement of expenses - Job work - Held that:- In view of the decision of the Hon’ble Delhi High Court in the case of M/s Intercontinental Consultants and Technocrats Pvt Ltd [2012 (12) TMI 150 - DELHI HIGH COURT], we hold the reimbursable expenses paid to the appellant in so far as cost and expenditure as stipulated under Rule 5(i) Service Tax Valuation Rules, 2006 can not be included in the taxable value. Waiver of Penalty under Section 76 & 78 – Service rendered for manufacture of Alcoholic Beverages (i.e., Beer) - Held That:- while challenging constitutional validity of the levy before the Hon’ble High Court, they also paid their Service Tax alongwith interest as per their determination before issue of the Adjudication order. In such situation, the appellant shown the reasonable cause for waiver of penalty under Section 76 and 78. – Penalty waived. 2015 (10) TMI 858 Clinical Trial/Research Service – from 01.07.2003 to 31.03.2006 - amendment in the nature of retrospective or not - Revenue contends that the same is taxable due to an addition of Explanation in respect of the definition of the Technical Testing and Analysis as per Section 65 (106) of the Finance Act, 1994. Held That:- the original definition clearly excluded all these services from the definition since the expression, any service provided in relation to human beings and animals is very wide and therefore was no need for exclusive definition. On the other hand the definition prior to amendment would give an impression that technical testing and analysis can be definitely said to be in relation to human beings or animals was excluded. To make it includable in the definition, the amendment becomes necessary. Therefore, as contended by the appellants, the amendment in reality expounded the scope of the definition and therefore, it cannot be clarificatory in nature. Issue is no more res integra - Amendment in reality expounded the scope of the definition and therefore, it cannot be clarificatory in nature – Impugned orders are unsustainable and are set aside - Decision made in the case of B.A. Research India Ltd. [2010 (2) TMI 230 - CESTAT, AHMEDABAD] and Synchron Research Services Pvt. Ltd. [2011 (8) TMI 357 - CESTAT AHMEDABAD] followed – Decided in favour of the Appellant. 2015 (10) TMI 857 Levy of service tax, interest and penalty - Goods Transport Agency Service - Held that:- The issue is no longer res integra and is covered by the decision of this Tribunal in South Eastern Coal Fields Ltd. [2014 (8) TMI 857 - CESTAT NEW DELHI] and Western Coal Fields Ltd. Vs. C.C.E., Nagpur, a decision [2015 (8) TMI 108 - CESTAT MUMBAI]; the latter decision following the earlier. This Tribunal ruled that issuance of a consignment note is non- derrogable ingredient for classification of an activity as Goods Transport Agency Service defined in Section 65 (50b) of the Act - Since there is no issuance of consignment note by transporters who provided the services to the appellant, there is no rendition of GTA service, legitimizing levy and collection of tax under that category - Decided in favour of assessee. 2015 (10) TMI 856 Denial of abatement benefit - GTA service - exemption Notification Nos.32/2004-ST and 35/2004-ST, both dated 3.12.2004 - Held that:- The issue is no long res integra. The decision of this Tribunal in Paliwal Home Furnishing vs. C.S.T., Delhi [2010 (12) TMI 369 - CESTAT, NEW DELHI] ruled that certificates by Goods Transport Agency on their letterheads regarding non availment of credit on inputs or capital goods for providing GTA service is sufficient compliance and a GTA service recipient would be entitled to avail the benefits of abated tax liability, under the relevant Notifications - impugned order is unsustainable - Decided in favour of assessee. 2015 (10) TMI 855 Demand of service tax on amount received in advance prior to introduction of levy - commercial training and coaching service - Remission of service tax - tax on admission fee - Held that:- The principle is well established and is constitutionally enshrined, that levy and collection of tax requires legislative authority (Article 265). The legislation should clearly express and identify the taxable event, the rate of tax and the person on whom the liability falls. Admittedly, Commercial Coaching or Training was enacted to be a taxable service with effect from 1.7.2003. Admission fee, remitted prior to the date of introduction of the taxable service cannot therefore be considered as receipt of a consideration for rendition of Commercial Coaching or Training. - Decided in favour of assessee. Central Excise 2015 (10) TMI 852 Determination of annual capacity - duty liability under Rule 96ZP(3) - Held that:- Court in Bansal Alloys & Metals Pvt. Ltd's case (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT) while deciding the question of vires of Rules 96ZO(3), 96ZP and 96ZQ of the Rules held the said provisions to the extent of providing for mandatory minimum penalty without mens rea and without any element of discretion as excessive and unreasonable restriction on fundamental rights being arbitrary and were accordingly declared to be ultra vires the Act and the Constitution. - no substantial question of law arises in this appeal - Decided against assessee. 2015 (10) TMI 851 Waiver of pre deposit - Held that:- Tribunal had addressed the issues raised on merits touching the assessments, however that, it failed to note that the appellant had also the plea that its financial condition is not sound enough to deposit the amount involved and the irreparable harm will be caused to the appellant, if the amounts are ordered to be deposited - ends of justice would be satisfied if the amount of pre-deposit is trimmed down - Partial stay granted. 2015 (10) TMI 850 Validity of order of settlement commission - Interpretation of Section 32-O(i) - Imposition of penalty - Suppression of facts - Held that:- if there is any concealment in that application and a penalty has been imposed by the Settlement Commission on the ground of such concealment, then a second application before the Settlement Commission is barred, in my interpretation of Section 32-O(i) of the said Act. The order of the Settlement Commission does not specify whether this kind of a penalty was imposed on the writ petitioner. Just because a penalty is imposed on a show-cause notice the writ petitioner’s application before the Commission was not entertained - Settlement Commission is directed to reconsider its order dated 28th March 2014 in the light of the above observations and if it is found that the penalty has not been imposed on the writ petitioner in an application for settlement under Section 32E, on the ground of concealment of particulars of their duty liability in that application, then the Commission will proceeded to consider their case on merits. - Petition disposed of. 2015 (10) TMI 849 Imposition of penalty u/s 11AC - Whether conditions u/s 11AC are mandatory or automatic - Held that:- From the provisions of law, it does not support the contention of the learned Counsel for the appellant as it is clear therefrom preconditions mentioned therein have to be fulfilled. Therefore, we do not find any reason to interfere with the judgment and order of the learned Tribunal. - Decided against Revenue. 2015 (10) TMI 848 Levy fo penalty - differential duty paid was before issuance of SCN - Valuation - Non inclusion of amount received through debit notes - Held that:- The entire amount of duty demand relates to designing of dies and tools charges on which the appellants have paid the differential duty for the year 1998-2001 before the issue of first SCN. We do not find any evidence and moreover it is clearly certified by the chartered engineer in his affidavit dated 06.12.2002 confirmed the number of components that could be manufactured from the moulds and dies. We hold that the respondents are liable for payment of differential duty of ₹ 1,24,509/- on the components on the amortized value for the year April 95 to June 1998. Since the respondents already paid the differential amount, the same is liable for appropriation. - Decided partly in favour of assessee. 2015 (10) TMI 847 Reversal of Credit / Demand of duty - removal of Capital goods after use on which no credit was taken initially - Held that:- During the relevant period that capital goods on which CENVAT Credit has been taken are removed from the factory of the manufacturer of final product is required to pay an amount equivalent to the duty of excise on the said capital goods on removal. As is noted from the facts that the appellant here-in had not manufactured any goods at the factory premises, which were purchased by them along with capital goods. It is also to be noted that when CENVAT Credit is availed by the manufacturer and is not contested by the department during the material period and credit was availed, the purchaser of the capital goods cannot be saddled with the duty liability of CENVAT Credit which was availed by the original manufacturer as I do not find any provisions of law which indicate so - main appellant has purchased the capital goods from M/s. McCoy and had not availed benefit of CENVAT Credit on the capital goods by the said M/s. McCoy. In my considered view, the department should have demanded the Central Excise duty equivalent to CENVAT Credit availed on capital goods from M/s. McCoy, as having sold the assets they have parted with the capital goods on which CENVAT Credit was availed. There was a transfer of running industrial unit to the appellant there-in hence the High Court has come to a conclusion that the successor is liable to discharge the excise dues. In the case in hand, there is no excise dues which have been confirmed against the seller of the capital goods namely M/s. McCoy. In the absence of there being any dues that has been confirmed against M/s. McCoy, the same cannot be recovered from the main appellant - impugned order which confirmed the demand of duty as ineligible CENVAT Credit is unsustainable and liable to be set aside - Decided in favour of assessee. 2015 (10) TMI 846 CENVAT Credit - Capital goods - initially used for exempted goods - later used for dutiable goods also - Held that:- Expression exclusively used “also includes intention to use” as provided under Rule 6(4) of the Cenvat Credit Rules. As the appellant had admittedly informed the Revenue at the time of commencement of production that it will utilize the said machinery installed for manufacture of both dutiable and non-dutiable products, it cannot be said that the said machinery is exclusively used for manufacture of the exempted goods. Capital goods in question have a life over several accounting years and as such the intention at the time of installation is also the relevant factor. For the temporary use for few months in manufacture of only exempted goods will not disable the assessee in availing the CENVAT Credit and utilizing the same for manufacture of dutiable goods. It is also an admitted fact that the CENVAT Credit so availed have been utilized only after Nov. 05 whereas the production of dutiable goods started admittedly in June, 05. Thus, I hold that the respondent assessee is entitled to CENVAT Credit on the capital goods in question - Decided against Revenue. 2015 (10) TMI 845 Denial of CENVAT Credit - Capital goods - whether the welding electrodes used in the maintenance of machine etc., the CENVAT Credit on the same is allowable or not? - Held that:- following the ration of the earlier decision of this Tribunal in the case of Ultratech Cement Ltd. (2015 (10) TMI 621 - CESTAT MUMBAI), the impugned order is set aside - Decided in favour of assessee. 2015 (10) TMI 844 Denial of CENVAT Credit - Conversion of EOU to DTA Unit - Carry forward of unutilized CENVAT Credit - The entire case of the Revenue is that the amounts which have been carried forward after reversal of appropriate duty on the inputs lying in stock, finished goods and WIP, the balance credit lapses as per the provisions of sub-rule 3 of Rule 11 of Cenvat Credit Rules while it is the case of the appellant that they are eligible to utilize the amount for discharge of duty liability on other products manufactured by them. Held that:- adjudicating authority has not disputed the fact that the appellant utilized the carried forward CENVAT credit towards discharge of their duty liability in respect of goods i.e. aggregates, components and parts of tractors. This undisputed facts would mean that the appellant herein was not manufacturing only exempted agricultural tractors but was also manufacturing other products on which duty liability arises. - from bare perusal of the sub-rule the same will apply only in a situation where final products are exempted and lying in stock. In our considered view the above sub-rule may not be applicable in the facts of this case which is not disputed that there is a discharge of Central Excise duty liability on the other finished products manufactured and cleared like aggregates, components & parts of tractors. - Decision in the case of Shree Baba [2014 (11) TMI 749 - CESTAT NEW DELHI] followed - Impugned order is set aside - Decided in favour of assessee. 2015 (10) TMI 843 Demand of interest u/s 11AB - Assessee contends that demand of interest was not quantified in the show cause notice and therefore, such show cause notice has no validity - Held that:- Delhi High Court in the case of M/s Kwality Ice Cream Company (2012 (1) TMI 88 - Delhi High Court ), held that period of limitation prescribed for claim of principal amount should also apply to the claim for interest thereon. In view of that, the Commissioner (Appeals) is required to examine as to whether the demand of interest is barred by limitation in the light of the decision of the Hon’ble High Court. - Matter remanded back - Decided in favour of assessee. 2015 (10) TMI 842 Denial of CENVAT Credit - Job work - Held that:- Job worker used liquid ammonia supplied by the appellant. The output thereof that came back to the appellant was nitrogen. Both the supply and receipt of the input and finished goods was through pipeline. There is no deviation to that. Once there is no deviation, learned Commissioner (Appeals) should have considered whether the concern which used liquid ammonia of the appellant for manufacture of nitrogen for onward transmission to the appellant was job worker. He has not done that. Had there been consideration the dispute on the allowability of CENVAT credit would have been reduced. There is no contradictory finding in the appellate order. Therefore on that aspect appellant succeeds. Certain tools manufactured by the appellant in its factory were meant for re-use thereof on behalf of their client. Therefore, only an invoice was raised and excise duty was collected from their clients and the duty so collected was paid to Treasury. Such duty paid tools were used for clients. Therefore, there cannot be denial of the CENVAT credit of the duty paid which has legitimately gone to Treasury - no dealing with the pleading resulting in violation of principles of natural justice calls for redressal. Commissioner (Appeals) has recorded no clearance of the tools shall disentitle the appellant to the CENVAT credit. - Decided in favour of assessee. 2015 (10) TMI 841 Duty demand - value of Trading goods clubbed into the demand - assessee was manufacturing computer system as well as trading activity of parts of computers. - Held that:- Advocate appeared before the Commissioner (Appeals) and requested that whatever they have submitted before the earlier Appellate authority and the documents submitted earlier holds good for the purpose of passing of the order in the present proceedings. It is also submitted that the invoices represent only the sale of parts and not computer system and therefore, demand of duty on trading goods cannot be sustained. In our considered view, the Commissioner (Appeals) should have examined the documents of the trading goods. - we set aside the impugned order. The matter is remanded to the Commissioner (Appeals) to decide afresh - Decided in favour of assessee. 2015 (10) TMI 840 Validity of order of Commissioner Appeals - When the appellate authority has recorded that there was a discrepancy between the weighment slip and the recorded stock, reconciliation ought to have been made at the interest of justice. Assessee required the documents to be provided by the Department for its defence. But that was not done. Learned Commissioner (Appeals) without going into the matter came to the conclusion that when the documents were not given to respondent adjudication is to be set aside, which is wrong - Commissioner (Appeals) has recorded that cross-examination was not given. When that was not done, adjudication ought not have been be set aside - when the goods were not available on the plea of theft, learned Appellate authority took a view that the matter is beyond show-cause notice. He has not brought out how and in what circumstance the adjudication arose on such count. - Matter remanded back - Decided in favour of Revenue. 2015 (10) TMI 839 Levy of SAD - 100% EOU - DTA Clearances - whether in respect of stock transfers of goods to the appellant’s sister units, where no VAT has been paid, the SAD would be liable to be paid by them or not - Held that:- An identical issue was considered by the Tribunal in the case of STI Industries Vs. CCE, Daman [2014 (2) TMI 405 - CESTAT AHMEDABAD] and by taking note of the precedent decision of the Tribunal in the case of Micro Inks Vs. CCE, Daman [2014 (2) TMI 207 - CESTAT AHMEDABAD], it was held that in case of inter-unit stock transfers of the final product, the demand of SAD cannot be held sustainable even though no VAT or Sales Tax was paid on such transactions. Inasmuch as the issue is fully settled in favour of the assessee by the above referred decisions of the Tribunal, we set aside the impugned order - Decided in favour of assessee. 2015 (10) TMI 838 Power not to recover the dues - Benefit of 11C - Notification No.32/2005-CE (NT) dated 22.8.2005 - Classification under 4823.90 or under 4801.00 - held that:- A part of the Commissioner's order holding the classification under heading 4823.90 was also put to challenge by the respondent, before the Tribunal and vide its Final Order No.1069/2006 dated 18.5.2006, the classification of Newsprint in reel form was held to be falling under heading 4801.00 and the respondent's appeal was allowed. If that be so, the objection of the Revenue that the goods must fall under heading 4801.00 so as to earn the benefit of exemption Notification stands overruled by the Tribunal's decision and is no longer available to them - only objection of the Department is as regards the classification of the goods in question, which is no longer available to them having been set aside by the Tribunal's order passed on the appeal filed by the assessee and as such, we find no merits in the Revenue's stand - Decided against Revenue. 2015 (10) TMI 837 Denial of abatement claim - whether the MRP Price minus abatement should be the basis of valuation of free distribution of physician samples - Held that:- There is no clarity in the finding of the Adjudicating Authority, and therefore, it is difficult to decide the case on facts and law. Hence, the Adjudicating Authority is required to examine the case afresh after considering the submission of the appellants and the case laws relied upon by the appellants and to pass order in accordance with law. Needless to say that, the Adjudicating Authority shall give proper opportunity of hearing before passing the order. The appeal filed by the appellant is allowed by way of remand - Decided in favour of assessee. 2015 (10) TMI 836 Denial of refund claim - Unjust enrichment - Held that:- It is very strange that the Commissioner (Appeals) has not considered the verification of the Range Officer of the Central Excise, who found that the appellant issued credit notes to all the concerned 18 dealers in respect of the excess duty earlier paid and charged from the said dealers. In other words, the appellant had passed the element of excess Central Excise duty benefit to the respective customers and the department clearly verified the said issue and established that there had not been any question of unjust enrichment as per the facts of the case. Therefore, the impugned order of the Commissioner (Appeals) has not been based on the facts on record and does not deserve sustainability under the eyes of the law - It is unfortunate that for a small amount of ₹ 92,111/-, the appellant has been fighting the case for about last 20 years. From the facts on record and the discussion above, it is clear that there has been no unjust enrichment to the appellant namely, M/s Paper packaging Pvt. Ltd. and they deserve sanction of refund claim of ₹ 92,111/-. It is ordered that the refund amount of ₹ 92,111/- be sanctioned and paid to the appellant within 8 weeks from the day, the appellant approaches the Department of Central Excise for sanction of the said refund. - Decided in favour of assessee. 2015 (10) TMI 835 Waiver of pre deposit - Imposition of penalty - Held that:- Order-in-original does not indicate that any amount is appropriated against the present appeal. This fact is not disputed by the learned counsel for the appellant. Whatever amount was deposited has already been appropriated in another case. The said amount cannot be taken for purpose of compliance with the requirement of Section 129E(iii) - Under the circumstances, the objection raised by the Registry is correct and the appellant is required to deposit 10% of the penalty imposed in the present appeal, which has not been done. In the interest of justice, the appellant is given time upto 3 rd September 2015 to deposit the said amount and report compliance on 4 th September 2015, pending which the appeal will be dismissed for non-compliance with the provisions of Section 129E(iii) of the4 Customs Act, 1962. - Decided conditionally in favour of assessee. 2015 (10) TMI 834 Packing activity - first time packing - Manufacturing activity or not - it was contended that receipt of the chemicals in tanker lorries cannot be considered as a bulk packing. - Held that:- chemicals brought in tankers can never be termed as brought in bulk packs. So the assessee was not repacking the goods from bulk packs to retail packs. Accordingly the activity undertaken by the assessee in filling the smaller container from bulk container namely tankers can never fall within the fiction of manufacture Present case is squarely covered by the clarification of the Board vide Circular 910/30/2009-CX dated 16.12.2009 and this Tribunal has also taken similar view in large number of cases starting from Ammonia Supply Co. (2001 (5) TMI 81 - CEGAT, COURT NO. III, NEW DELHI) and in view of the consistent stand of the Tribunal - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (10) TMI 854 Levy of sales tax on banks - Dealer or not - whether a bank, which holds hypothecation of vehicles in their favour, would be a dealer within the definition of the expression under Section 2(15) of the Act, merely because the bank seizes and repossesses the hypothecated vehicle and brings it to sale through public auction - Held that:- Explanation III under Section 2(15) includes even the disposal of goods that are unclaimed. In respect of unclaimed goods, the seller does not claim ownership. But, he exercises a right to dispose of the goods. If Explanation III covers the sale of even unclaimed goods, the contention that the seller must be in a position to pass on title, may not stand. - What is made mandatory by certain statutes like the Motor Vehicles Act, 1988, the Registration Act, 1902, etc., are only the registration of certain types of documents. The sale by itself is complete once the transaction is over. For the public to recognize or the courts to recognize such sales, registration is made mandatory in these sales. Explanation III covers all types of cases. Therefore, the said contention cannot be accepted. On the distinction sought to be drawn to the decision of the Supreme Court in Federal Bank, it should be pointed out that though the Supreme Court was concerned in that case with the exercise of a statutory right of sale, we do not think that the exercise of a contractual right to bring a hypothecated property to sale, could be excluded on that account. Explanation III covers even the sale of unclaimed goods. If sale of unclaimed goods can be included within the purview of Explanation III, the distinction sought to be drawn between a statutory right of sale and a contractual right of sale, cannot stand. Hence, we are of the considered view that the question of law has to be answered against the assessee. - Decided against assessee. 2015 (10) TMI 853 Demand of turnover tax - Compounded rate of tax - assessee sought withdrawal of permission to pay tax at compounded rate - Tribunal held that the assessee is not liable to pay tax at compounded rate in view of the fact that there was no purchase or sales during the months in question and granted relief - Held that:- legislative intention is that if the compounding is allowed, the tax will be paid on the basis of the amount arrived at in clause (a) or (b) of Section 7 whichever is higher. As far as clause (a) is concerned, it is fixed with reference to the purchase turnover. Undoubtedly, clause (a) applies in this case in the sense that there was purchase turnover for the months up to August 2010 and perhaps the tax was being collected on the said basis, provided it was higher than the sum arrived at on the basis of applying clause (b). Assessee does not have a case that he did not have any turnover and that the amount of tax could not be arrived at on the basis of the operation of clause (b). Therefore even proceeding on the basis that the tax which should be arrived at on the basis of applying clause (a) is nil, the amount of tax which should be arrived at on the basis of clause (b) would have to be arrived at and since if that tax is by any account higher than the amount which is arrived at under clause (a), the assessee would be liable to pay the said amount. In this regard, we must notice that it is not a case of a regular assessment under section 5. This is a case where the assessee on his own volition opted for compounding. The assessee must be taken to have ventured to accept liability to pay tax at compounded rates, with all the perils and benefits which accompanied such a decision and having accepted the same, it is not open to the assesse to turn around and extricate himself from the liability which stares at him by virtue of the unambiguous provisions contained in section 7 of the Act. - Decided in favour of Revenue. Wealth tax 2015 (10) TMI 799 Addition on account of Flat at Goa to the net wealth of the assessee - CIT(A) deleted the addition - Held that:- It is undisputed that the assessee owned only one flat at Goa which was a residential property. Section 5(1)(vi) of Wealth Tax Act provides an exemption to one house or a part of a house or a plot of land under the section for an individual or HUF. In the given facts and circumstances the assessee deserves for this exemption. The Revenue has failed to bring any contrary facts on the grounds.Keeping all these facts in view, we find no infirmity in the order of the CWT(A). - Decided against revenue. Addition of various outstanding balances shown with various parties - CIT(A) deleted the addition - Held that:- After hearing we hold that these balances were in the nature of commercial transactions which are not taxable under the Wealth Tax Act, 1957. It is also pertaining to note that such outstanding balances were never brought for the taxation under W.T. Act by the Assessing Officer either in preceding or in any succeeding years. Therefore, on account of rule of consistency also, assessee deserves for relief, which has been rightly granted by the CWT(A). Considering all these aspects, we find no fault in the order of the CWT(A). - Decided against revenue. Addition of ₹ 60 lacs made by the Assessing Officer on account of factory Land at Namoli, Surajpur of ₹ 50 lacs and factory land and building at Namoli, Surajpur of ₹ 10 lacs - Held that:- Estimating value of the asset AO has not taken help of any valuation report. Further valuation is necessary to arrive at the correct value of the assets. AO has not done so. In view of these facts, we remand the issue back to the file of Assessing Officer. - Decided in favour of assessee for statistical purposes.
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