TMI Tax Updates - e-Newsletter
October 7, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Levy of interest u/s 234C is an automatic, it cannot be restricted to the "tax due on Returned income" as referred u/s 139(1) - Tri

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• TDS u/s 195 - AMC contract - non-resident payee as no PE in India, therefore his business income not taxable in India - No TDS liability

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Articles

1. PETITION BEFORE NATIONAL COMPANY LAW TRIBUNAL UNDER SECTION 14 OF COMPANIES ACT, 2013

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Commerce and Industry Minister says steps have been taken to sort out the implementation issues related to CEPA and improve bilateral trade as well as trade balance with Japan

2. RBI Reference Rate for US $

Notifications

Customs

1. 124/2016 - dated 6-10-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 7th October, 2016

Income Tax

2. 89/2016 - dated 4-10-2016 - IT

Income-tax (24th Amendment) Rules, 2016 - Expenditure for obtaining right to use spectrum for telecommunication services.

Circulars / Instructions / Orders

VAT - Delhi

1. 15/2016-2017 - dated 3-10-2016

Speedy disposal of all refund claims

FEMA

2. 5 - dated 6-10-2016

Import Data Processing and Monitoring System (IDPMS)

Highlights / Catch Notes

Income Tax

• Income-tax (24th Amendment) Rules, 2016: Clarifies tax treatment for telecom companies on spectrum rights expenditure.

  Notifications : Income-tax (24th Amendment) Rules, 2016 - Expenditure for obtaining right to use spectrum for telecommunication services. - Notification
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• Single Truck Used for Business Depreciation Benefits; Section 44AE Presumptive Income Not Applicable Due to Non-Rental Use.

  Case-Laws - AT : The assessee under consideration has one truck only and the same was being used for purpose of business, hence depreciation should be allowed to the assessee - since the truck are not used for renting, provisions of presumptive income U/s 44AE not applicable - AT
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• Land Sale Loss Classified as Business Loss, Not Capital Loss; Assessing Officer to Adjust Tax Addition.

  Case-Laws - AT : Nature of loss on sale of land - Intention of the asseesse at the time of purchase was clearly to earn profit and hence loss arising from the sale of the land was clearly business loss and not short term capital loss and hence the AO is accordingly directed to delete the addition - AT
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• No Penalty for Audit Delay u/s 271B: Assessee Finalized Books Post Credit Notes, Deemed Beyond Control.

  Case-Laws - AT : Levy of penalty u/s. 271B - Delay in getting the accounts audited and obtaining tax audit report u/s. 44AB - The assessee finalized its books after receiving credit notes - The delay in finalization of accounts was beyond the control of assessee - No penalty - AT
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• Unexplained share capital leads to addition u/s 68; identity proven but genuineness and creditworthiness not demonstrated.

  Case-Laws - AT : Unexplained share capital and premium received - addition u/s 68 - As assessee has been able to just prove the identity of the company but unable to prove the genuineness & creditworthiness the parties, additions confirmed - AT
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• Assessee's Request to Amend Property Sale Consideration from Rs. 20.74 Crore to Rs. 2.27 Lakh Denied Due to Clear Documentation.

  Case-Laws - AT : Slump sale - valuation of property - assessee wants to rectify the total consideration paid and received by other parties which is clearly mentioned in the sale deed by substituting the sale consideration at ₹ 2,27,386/- in place of original sale consideration of ₹ 20,74,64,400/- - A shocking explanation - Not allowed - AT
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• Payments to MMRDA for leasehold rights and additional FSI considered capital expenditure, exempt from TDS u/s 194I.

  Case-Laws - AT : TDS u/s 194I - assessee paid by the assessee to MMRDA for acquiring lease hold rights and additional FSI for the leased plot - payment for acquiring leasehold land is a capital expenditure - No TDS liability - AT
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• CIT Cannot Direct AO to Initiate Penalty Proceedings During Assessment Review u/s 263.

  Case-Laws - AT : If CIT finds, while examining the records of an assessment order u/s 263, that AO has not initiated penalty proceedings, he cannot direct initiation of penalty proceedings because penalty proceedings are not a part of assessment proceedings - AT
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• Court Rules Interest Levy u/s 234C Mandatory, Even for Returns Filed After Section 148 Notice.

  Case-Laws - AT : Charging of interest u/s 234 - return of income filed in response to notice u/s 148 - that levy of interest u/s 234C is an automatic and the interpretation of charging of interest u/s.234C cannot be restricted to the "tax due on Returned income" as referred u/s 139(1) - AT
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• Cash Deposits in Partners' Accounts Identified as Firm's; No Interest Obligation on Assessee Firm for These Funds.

  Case-Laws - AT : Unexplained amount deposited in the accounts of the partners was the cash deposit of the assessee firm, therefore, merely deposit of the said amount in the accounts of the partners, do not make the assessee liable to pay the interest to its partners on its own money - AT
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Customs

• Courier Company Penalized for Failing to Detect Mis-declaration in Consignment Weight, Despite Due Diligence Obligation.

  Case-Laws - AT : When Customs could detect the mis-declaration simply by examining the weight of the consignment with respect to declaration made, it could have been possible for Courier Agency exercising due diligence to detect the same - the due diligence has not been exercised by the courier company - Penalty on courier company confirmed though reduced - AT
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• Confiscation of Photocopier Parts Justified Under Customs Regulations: Import of Incomplete Machines Deemed Non-Compliant.

  Case-Laws - AT : Import of parts of old and used photocopier machines - the subject goods are not complete second hand photocopiers but they are parts of old and used photocopier machines. - confiscation justified - AT
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• Importer Exempt from Countervailing Duty as Cenvat Credit Not Admissible, Condition Deemed Unmet.

  Case-Laws - AT : Exemption from payment of CVD - condition of non-availment of Cenvat credit was not fulfilled in as much as Cenvat credit was not admissible to the importer and the question of fulfilling of the said condition does not arise. - AT
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Service Tax

• Cenvat Credit Applies to Transportation Costs of Hazardous Waste in Manufacturing Process, Eligible for Tax Credit.

  Case-Laws - AT : Cenvat Credit - input services - transportation cost of the hazardous waste which was generated during the course of manufacture of finished goods - credit allowed - AT
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• Appellant Excluded from "Tour Operator Service" Definition; Tour Planning Managed by M/s Gujarat Ambuja Cements Ltd. from 2004.

  Case-Laws - AT : Tour operator service - All the planning of tours have been made by M/s Gujarat Ambuja Cements Ltd. In that circumstances, w.e.f, 10/9/04, the appellant is, out of the ambit of 'tour operator service'. - AT
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• Appellant Must Pay Service Tax on Imported Services from Netherlands-Based Company on Reverse Charge Basis Since April 18, 2006.

  Case-Laws - AT : Import of services from non-resident associate group company situated in Netherland - Reverse charge - The appellant is liable to pay service tax on services received from foreign entity on reverse charge basis with effect from 18.04.2006 - AT
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• Service Tax Demand Overturned: Appellant Complies with Notification No. 18/2009-ST, Commission Below 1% FOB Value.

  Case-Laws - AT : Commission paid to overseas agent - reverse charge - Benefit of Notification No. 18/2009-ST - appellant has complied with the condition of the notification - commission paid to the overseas commission agent is less than 1% of the FOB value of the exported goods - Demand of service tax set aside - AT
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• Contractor's Loading Service Not Classified as Manpower Recruitment; Alters Tax Implications Under Service Tax Regulations.

  Case-Laws - AT : Service for loading goods by the contractor on weight basis - the activity of loading/unloading cannot be termed as supply of Manpower Recruitment Agency Service - AT
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Central Excise

• Exemption Granted for Supplying 'Dissolved Acetylene' to Atomic Energy Department under Notification 10/97-CE Based on End-Use. /97CE.

  Case-Laws - AT : Benefit of exemption under notification 10/97-CE - end-use of the goods - appellant eligible for benefit of exemption under notification 10/97 for supplies of ‘Dissolved Acetylene’ to the Department of Atomic Energy- AT
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• Cenvat Credit Valid on Commission to Consignment Agents; Premises Considered Place of Removal, Supports Correct Credit Claim.

  Case-Laws - AT : Cenvat Credit - The premises of the consignment agents are covered in place of removal. The appellant correctly taken cenvat credit on commission paid to consignment agents as same has been included in the assessable value. - AT
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• Cement Duty Evasion Case: 0.4% Weight Variation in Bags Deemed Permissible, Within 1% Allowable Range.

  Case-Laws - AT : Evasion of duty - packing of excess cement of about 200 gms. in each bag - weight declared was of 50 kgs - The weight of 50.200 kgs. per bag found by the Department - same is allowable being within the range of 1% variation - AT
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• Cenvat Credit Approved for Noise Monitoring Services Used in Employee Welfare as Essential to Manufacturing Operations.

  Case-Laws - AT : Cenvat Credit - Noise Monitoring service - The said service used for the welfare of the employees and is essential for the manufacturing activity - credit eligible. - AT
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• Excess Transport Charges Excluded from Assessable Value u/r 5 for Additional Excise Duty Calculation.

  Case-Laws - AT : Valuation - the provisions of Rule 5 of Central Excise Rules complied with and the excess of transportation charges need not to be included in the assessable value for discharge of additional excess duty- AT
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• Price Escalation Clause Justifies Demand for Supplementary Invoice Despite Non-Receipt of Payment from MSEB.

  Case-Laws - AT : Price escalation clause - supplementary invoice on the basis of the price escalation given by MSEB - whether demand is justified on the ground that supplementary invoice was raised but at the same time amount not received from MSEB? - Held Yes - AT
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• Refund Claim Approved for Unjust Enrichment; Consistent Pricing Before and After Freight Dutiability Clearance.

  Case-Laws - AT : Refund claim - unjust enrichment - the price remained the same before and after the clearances in respect of dutiability of the equalized freight, hence refund is admissible. - AT
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• Classification of Scalp Products: Ayurvedic Medicine or Cosmetics? Common Parlance Test Plays Key Role in Chapter 33 Decision.

  Case-Laws - AT : Classification - P&P Ayurvedic Medicine or Cosmetics under Chapter 33? - products are used for scalp irritation and loss of hair - primary function of these items is care and not cure. - common parlance test continues to be determinative test for classification - to be classified as Ayurvedic medicine - AT
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• Erection and commissioning charges excluded from assessable value for taxation under central excise regulations. Independent activities not included.

  Case-Laws - AT : Valuation - erection charges and integration and commissioning of machinery are not includable in the assessable value as they are not related to the sale of goods but for independent and distinct identified activity - AT
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Case Laws:

• Income Tax

• 2016 (10) TMI 222
  Addition on account of unaccounted Stock - Held that:- Since the propositions canvassed by Ld AR is supported by the fact that stock register was maintained by the assessee up to 12.03.2010 when the search was conducted on 17.03.2010. The Assessing Officer ought to make the reconciliation for 5 days transactions to work out the discrepancies. He further submitted that addition can not be made merely based on the statement of the assessee.Therefore, in view of the factual aspects discussed above, we are of the view that the addition made by the Assessing officer on account of unaccounted stock Rs. 5,63,608/- was purely a guess work and should be deleted. Accordingly, we direct the Ld. CIT(A) to delete the addition. Income from playing truck is business income or presumptive income U/s 44AE - Held that:- We are of the view that there is merit in the submissions of the Ld. AR for the assessee, as the propositions convassed by him are supported by the facts cited above. The Assessee keeps one truck for his business purpose and in rare cases it was rented by the assessee to outsiders. It is not the business of the assessee to keep the truck for plying. The Ld. AR argued that the truck wasgiven for hiring when it was free and the income from so hiring should be treated as business income based on materiality concept. In view of the factual aspects discussed above, we are of the view that the assessee under consideration has one truck only and the same was being used for purpose of business, hence depreciation should be allowed to the assessee and income may be assessed under the head income from business. - Decided in favour of assessee

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• 2016 (10) TMI 221
  Deemed dividend addition u/s 2(22)(e) - whether the amounts received by the assessee was neither advances or the loan, but was mere advances in the nature of deposit made by the three companies for their business requirement? - Held that:- In the instant case, sum advanced to the assessee by the three companies were purely on commercial consideration and was business advance as such, same cannot be treated as deemed dividend u/s 2(22)(e) of the Act, hence we hold that authorities below are not right in treating the aforesaid sums as deemed dividend. The AO is accordingly directed to delete the addition. - Decided in favour of assessee Disallowance of business loss on sale of land - holding the loss to be as short term capital loss - Held that:- admittedly assessee is in the business of real estate and infact it has also entered into M/s Selene Constructions Pvt. Ltd. And M/s Juventus Estates Pvt. Ltd. for acquiring land on their behalf. As such, one thing is more than apparent that the assessee is in the business of sale and purchase of land. Further, the aforesaid land was acquired by the assessee for the purpose of its business and it had not acquired such land for the purpose of investment, hence evenif it is assumed that land in this sector was not part of the deal with such companies, it would not alter the nature of transaction from business to investment. It is settled law that nature of transaction has to be seen at the time of purchase and if at the time of purchase, intention was to earn profit then it would be business transaction and if the property is purchased for the purpose of holding the same then the same would be investment. In the instant case, intention of the asseesse at the time of purchase was clearly to earn profit and hence loss arising from the sale of the land was clearly business loss and not short term capital loss and hence the AO is accordingly directed to delete the addition - Decided in favour of assessee

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• 2016 (10) TMI 220
  Levy of penalty u/s. 271B - Delay in getting the accounts audited and obtaining tax audit report u/s. 44AB - Held that:- As per the provisions of section 44AB of the Act the, the assessee was required to get accounts audited for the assessment year under appeal on or before 30-09-2008. However, the assessee could get the accounts audited on 20-01-2009. Thus, there was delay of 3 months and 20 days in getting the accounts audited and obtaining tax audit report u/s. 44AB of the Act. A perusal of the written submissions filed by assessee and impugned order shows that the delay in getting the accounts audited was for the reason that the Accountant of the assessee left his service without finalization of the accounts. The assessee engaged the service of another Accountant. The newly appointed Accountant took some time to pick up the threads of the work left in between by the outgoing incumbent. Further, it has been submitted that the major source of income of assessee is service charges received from M/s. Maxpro Associates, a sister concern of assessee. The income from M/s. Maxpro Associates is accounted on the basis of credit notes issued. Since, M/s. Maxpro Associates could not finalize its books of account in time, M/s. Maxpro Associates issued credit notes to the assessee for the last quarter of the financial year ended on 31-03-2008 in December, 2008. The assessee finalized its books after receiving credit notes from M/s. Maxpro Associates. However, the assessee filed the tax audit report as envisaged u/s. 44AB of the Act along with the return of income within the extended time for filing of return of income u/s. 139(4) of the Act. The explanation furnished by the assessee for delay in finalization of accounts and getting the same audited thereafter seems to be plausible. The delay in finalization of accounts was beyond the control of assessee. In the absence of finalization of accounts it was not possible for the assessee to get the same audited within the time specified under the provisions of the Act. Mere delay in filing of tax audit report as envisaged u/s. 44AB would ipso facto not attract the penalty where the delay in filing of audit report has been reasonably explained. The Co-ordinate Bench of the Tribunal in the case of Prachin Land Infra Pvt. Ltd. Vs. ITO (2013 (11) TMI 1668 - ITAT PUNE) in similar circumstances where the Assessing Officer levied penalty u/s. 271B for obtaining the Audit Report on 11-02-2009 as against the statutory date of 31-10-2007, deleted the penalty levied u/s. 271B of the Act - Decided in favour of assessee

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• 2016 (10) TMI 219
  Unexplained share capital and premium received - addition u/s 68 - Held that:- Assessee is trying to assert again and again upon the PAN, IT returns, bank statement and confirmations of the impugned 5 parties but has nowhere tried to clarify or disclose the fact which has embedded in the financial statement of these 5 parties which speaks in itself that they are paper companies. Further if it has been genuine transaction and assessee company is asked to produce the new share holders who have been allotted a substantial portion of equity shares, he would have easily called upon the investors. The investors could have come along with all the financial documents and could have clarified about his intention to make investment in the equity shares of the company because every investor wants to earn income from investment in the form of dividend as well as expects appreciation in the valuation of shares with the growth of business. As assessee has been able to just prove the identity of the company but unable to prove the genuineness & creditworthiness of the impugned 5 parties. In the result, the sum of Rs. 3.5 crores has rightly been treated as unexplained money u/s 68 of the Act by the ld. Assessing Officer. We set aside the order of ld. CIT(A) and restore that of the Assessing Officer - Decided in favour of revenue

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• 2016 (10) TMI 218
  Slump sale - valuation of property - capital gains on building and rental income - uideline value adopted by the Stamp Valuation Authority for the purpose of Stamp Duty - Held that:- In the present case, the assessee shows the sale consideration through valid sale deed executed on 9.11.2011 at Rs. 20,74,60,400/-. However, after a long period of around three years, n 17.12.2014, the assessee said to be rectified the sale deed through registered rectification deed and lowered the sale consideration to Rs. 2,27,386/-. The valuation by DVO was under sec. 50C was at Rs. 20,48,38,430/-. The Assessing Officer considered the original sale deed value reflected in the original sale deed dated 9.11.2011 at Rs. 20,74,60,400/- which is higher than the value determined by the DVO at Rs. 20,48,38,430/- and accordingly, calculated the capital gains. In our opinion, DVO’s valuation to be considered for calculating the capital gains. The sale deed is executed on a stamp paper and signed by both the parties to the sale deed, witnessed by appropriate witnesses. Being so, any apparent error noticed after the execution of the sale deed could be rectified by rectification deed. In the present case, the assessee wants to rectify the total consideration paid and received by other parties which is clearly mentioned in the sale deed by substituting the sale consideration at Rs. 2,27,386/- in place of original sale consideration of Rs. 20,74,64,400/-. This is not a factual error pertaining to this transaction and the reason submitted by the ld.AR for rectification is shocking to the conscious of the Bench. In our opinion, such rectification cannot be given any credence and it cannot be said that it is bona fide. The assessee’s contention is that the purchaser also agreed that the consideration passed was only Rs. 2,27,386/- and actually the consideration of Rs. 20.74,64,400/- is not at all passed to the other party. We cannot appreciate this argument of the assessee’s ld. AR. We do not say that there cannot be chances of occurring some mistakes. It may happen in the process of execution of documents and that mistake cannot be to such exent of changing the consideration in such a manner. There can be typing errors in mentioning the sale value at figures as compared to in words and this type of errors can be said that typographical errors happened in the normal course. The assessee with the malafide intention, after a period of three years, changed the consideration which cannot be appreciated by this Tribunal. Accordingly, we are of the opinion that the consideration shown in the original sale deed dated 9.11.2011 i.e Rs. 20,74,64,400/- has to be considered for determination of the capital gain arising out of the transfer of the capital asset in this case. We therefore, do not find any reason to interfere with the order of the Assessing Officer on this issue. - Decided in favour of revenue

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• 2016 (10) TMI 217
  TDS u/s 194I - assessee paid by the assessee to MMRDA for acquiring lease hold rights and additional FSI for the leased plot - CIT(A) held the payment was not in the nature of rent as defined in Section 194I of the IT Act, and is not liable for TDS - Held that:- A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire ‘G’ Block of BKC. The Development Control Regulations for BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area. The decision of the Hon’ble Jurisdictional High Court in the case of Khimline Pumps Ltd. (2002 (9) TMI 94 - BOMBAY High Court ) squarely and directly apply on the facts of the case wherein held that payment for acquiring leasehold land is a capital expenditure. Considering the entire facts in totality in the light of the judicial decisions vis-à-vis provisions of Sec. 194-1, definition of rent as provided under the said provision, we do not find any reason to tamper or interfere with the findings of the Ld. CIT(A) which we confirm - Decided in favour of assessee.

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• 2016 (10) TMI 216
  Revision u/s 263 - as per Commissioner Assessing Officer has failed to initiate penalty proceedings under section 271(1)(c) of the Act on the addition of Rs. 2,20,72,000/- to the total income - Held that:- In the case Addl. CIT v. J.K. D'Costa [1981 (4) TMI 68 - DELHI High Court ] it has been held that if the Commissioner finds, while examining the records of an assessment order under section 263, that the Assessing Officer has not initiated penalty proceedings, he cannot direct initiation of penalty proceedings because penalty proceedings are not a part of assessment proceedings. The Commissioner cannot pass an order under section 263 pertaining to penalty. The direction of the Commissioner to initiate penalty proceedings under section 271(1)(c) of the Act while setting-aside the assessment requires to be cancelled. - Decided in favour of assessee

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• 2016 (10) TMI 215
  Charging of interest u/sec.234C on return of income filed in response to notice u/sec. 148 - whether no interest u/s.234C of the Act should be charged on Return of income filed in compliance to notice Sec. 148 of the Act as the chargeability provisions are applicable only to the Return of income filed u/s.139(1)? - Held that:- The provisions of charging of interest u/s.234C of the Act is automatic and assessee need not be provided an opportunity. Further, we perused the Explanations to the provisions of Sec. 234C of the Act ‘’the tax due on returned income’’ shall be reduced by (i) tax deducted and collected at source, (ii) the amount of relief of tax allowed under sections 90 and 90A and deduction from the Indian income –tax payable, allowed under section 91, and (iii) tax credit allowed to be set off under section 115JAA/115JD from the tax on the total income. The assessee firm cannot interprete that the ‘’tax due on Return income’’ shall imply only to the Return of income filed u/s.139(1) of the Act were income is declared. The provisions of Sec.234C of the Act are mandatorily applicable in respect of deferment of payment of advance tax as per the rates prescribed in the previous year relevant to subsequent assessment year and interest is charged. We are of the considered opinion that levy of interest u/s.234C of the Act is an automatic and the interpretation of charging of interest u/s.234C of the Act cannot be restricted to the ‘’tax due on Returned income’’ as referred u/sec. 139(1) of the Act is not logical interpretation and cannot be accepted in the Court of law. The ld.CIT(A) has dealt exhaustively on the applicability of provisions and the Explanations and upheld the order of the ld. Assessing Officer, on charging of interest u/sec.234C of the Act on return of income filed in response to notice u/sec. 148 of the Act. Hence, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) - Decided against assessee.

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• 2016 (10) TMI 214
  Reopening of assessment - disallowance of expenses towards the interest paid to the partners of the firm - Held that:- Once neither the question was asked from the assessee nor any enquiry was conducted by the Assessing Officer nor he applied his mind on the deductibility of the interest to the partners, therefore in our view, no opinion was formed by the Assessing Officer in the original assessment proceedings in this regard. Since we have held that no opinion was formed by the Assessing Officer in the original assessment proceedings, therefore, the reopening made by the Assessing Officer on the same facts cannot be said to be bad in law and is in accordance with law mentioned hereinabove. By respectfully following the judgment of Full Bench of Hon’ble Delhi High Court in the case of Usha International (2012 (9) TMI 767 - DELHI HIGH COURT ) we uphold the reopening proceedings for the reassessment. Moreover, in the light of the above judgment referred hereinabove, it does not matter even if the reopening/reassessment are sought to be initiated on the basis of the material already available on the record in the original assessment proceedings. - Decided against assessee Disallowance of interest paid to the partners towards the capital contribution - Held that:- Since the assessee had admitted that the amount of Rs. 62,65,,456/- as unexplained cash deposits of the assessee, though, the said amount was applied by the assessee to the capital account of the partners. In our view, the assessee cannot claim the interest on its own amount. The interest is only payable to the assessee if the amount is brought in by the partners as a capital or the capital is borrowed by the assessee from the third party. Since the assessee has admitted that the amount brought in was the bogus capital of the assessee, therefore, the assessee is not liable to the deduction in the payment of the interest to its partners. In our view, the income tax is required to be calculated in the right hands i.e assessee and the submissions of the assessee that the said amount has already been declared by the assessee’s partners in the individual returns of income is of no consequences. For the default or wrong application of the interest by the partners in their returns of income will not be come in the way to tax the assessee for wrong deduction in the return of income of the assessee. The income tax is tax on the person who is in law duty bound to pay the interest. The plea of the double tax, in our view, is also not maintainable as the assessee is claiming the deduction of the interest paid in its account whereas the partners are paying the tax on the interest earned on the alleged capital introduced by the company in the capital account of the partners. As we have already held unexplained amount deposited in the accounts of the partners was the cash deposit of the assessee firm, therefore, merely deposit of the said amount in the accounts of the partners, do not make the assessee liable to pay the interest to its partners on its own money. In the light of the above, the income chargeable to tax as escaped assessment has the interest of Rs. 8,66,831/- was not brought to tax in the case of assessee and the assessee has wrongly claimed the deduction in the original assessment proceedings. In view of the above discussion, we also dismiss this ground No. 2 of the assessee’s appeal.

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• 2016 (10) TMI 213
  Interest on money borrowed for investment in shares - whether the assessee purchased the shares for the purpose wholly and exclusively of making or earning income or whether she did so for the purpose of acquiring control of the company? - Held that:- In the present case, as we noted earlier, the assessee had acquired about 28 per cent of the shares in the company M/s M. Gulab Singh & Sons Pvt. Ltd. That by itself would not establish that the shares were purchased for the purpose of acquiring control over the company. However, as we have also held, it is not an acquisition of over 50 per cent of the equity share capital alone that would allow gaining control over a company. The purpose of acquisition of shares must be ascertained after considering all the facts and circumstances of the case. In the present case, the assessee acquired about 28 per cent of the shares in the company. It is true that the Malhotra group owns the entire shareholding in the company. When a party buys shares in a company, it is reasonable to presume that it does so wholly and exclusively for the purpose of making or earning dividend income. If a party expects the company to do well presently or in future, it is but natural that it would seek to acquire as many shares as it can. This too would be wholly and exclusively for the purpose of making or earning income therefrom. Parties do not acquire control for control’s sake. In the present case, the other members of the group held 72% of the equity shares. There is nothing to indicate that the assessee herself or in concert with others intended acquiring control for any reason. Our attention was not invited to anything that indicates any reason for the assessee acquiring the shares for the purpose of acquiring or even maintaining control. It is reasonable then to presume that the assessee acquired the shares wholly and exclusively for the purpose of making or earning income. The Tribunal appears to have proceeded only on the basis that the entire shareholding of the company is held by the appellant along with other members of the group including her husband and her husband’s HUF and the fact that the dividend had not been declared. There could always be prospects of the company doing well in future. Indeed, if that was not the expectation, the appellant would not have invested in the company at all. There is merely a finding that the real intention appears to be to hold and acquire the control of the company, as otherwise the assessee and the other family concerns, in which she is also interested, would not have invested large amount by way of investment particularly when the company had not declared any dividend. We observed earlier, neither of these reasons by itself warrants the conclusion that the shares were acquired wholly and exclusively for the purpose of control and that they were not acquired wholly and exclusively for the purpose of making or earning income. In the facts and circumstances of this case, these two factors even taken together do not warrant the conclusion arrived at by the Tribunal. In the facts and circumstances of this case, it was held that the assessee was not entitled to a deduction under Section 57(iii). Even the judgments referred to in that case proceeded on the basis that the shares were purchased with a view to acquiring a controlling interest in the company and in prosecuting a share-holders’ litigation. The judgment does not militate against our view in Commissioner of Income-Tax vs. Amritaben R. Shah, [1999 (4) TMI 73 - BOMBAY High Court]. The questions of law are, therefore, answered in favour of the assessee.

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• 2016 (10) TMI 209
  Granting registration to the assessee under Section 12-AA - Held that:- The applicant-assessee could not produce the books of accounts in respect of the expenses claimed by the applicant for verification of the activities of the Trust and, therefore, on the strength of the material available on record, the Commissioner of Income-tax concluded that the society is not carrying out any charitable activities. Other findings were also recorded in relation to the existence of the premises and the lease deed executed and further in view of various orders and judgments referred to came to the conclusion that on the tests applying on the strength of such judgments, the registration sought as a charitable institution could not be granted to the respondent-assessee. The Tribunal considered the appeal preferred by the assessee against the same and then recorded it's satisfaction to the effect that a perusal of the Trust Deed, the reply submitted by the assessee and the evidence relating to the activities in the shape of a detailed report that was available on record including certain news-items published was sufficient to construe that the activities of the trust were being carried out for charitable purposes. The order also records that the assessee has given the list of donors and also the terms of lease that was obtained for the premises to establish the educational institution for Vedic Studies. The Tribunal, therefore, itself assessed the material that was already there on record and came to the conclusion that the Commissioner of Income-tax had omitted to consider the same and based its findings on surmises and conjectures.

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• 2016 (10) TMI 205
  Vires of Rule 28AA of the Income Tax Rules, 1961 - Certificate for deduction at lower rates or no deduction of tax from income other than dividends - whether no TDS need be reduced from the payments made by TV channels to the petitioner with respect to sale/distribution/exhibition of cinematographic films by the petitioner to such TV channels for exhibition by such TV channels - Held that:- We do not think that this Court should delve into the merits of the contentions urged especially on account of the fact that any exemption for the deductor not to deduct tax in terms of Rule 28AA has to be considered by the competent authority. As far as Ext.P6 is concerned, it is with reference to the application submitted by the petitioner for exemption of payment of tax for the year 2009. Substantial change has now been made in Rule 28AA so far as assessing officer is entitled to issue a certificate if the tax liability of person justify deduction of tax at lower rate and no deduction of tax could be made. The earlier restriction imposed under Rule 28AA has been taken away by the present amendment. Under such circumstances, it is for the petitioner who is involved in such transactions to approach the assessing officer concerned and seek for necessary concession in terms of Rule 28AA. I do not think that any further direction is required to be issued as statutory provision is available to take care of such situations. An interim order had been passed by this Court permitting tax to be deducted by the respective deductors only at 3% in terms of Ext.P4. The said situation shall continue for a period of one month to enable the petitioner to approach the assessing officer with a proper representation and on receipt of the said representation, the assessing officer shall consider the same and pass appropriate orders within a period of one month from the date of receipt of the representation.

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• 2016 (10) TMI 203
  TDS u/s 194J - assessee in default on account of non deduction of tax at source u/s 194J on the amount of transaction charges paid by the assessee to National Stock Exchange of India (in short, NSE) - Held that:- Services provided by the stock exchange to the assessee does not fall in the category of “technical services” as has been envisaged in section 194J and, therefore, respectfully following the judgement of Kotak Securities Ltd Vs CIT (2016 (3) TMI 1026 - SUPREME COURT) it is hereby held that assessee was not required to deduct tax at source from the payment made to NSE. Thus, grounds raised by the assessee are allowed.

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• 2016 (10) TMI 202
  Exemption of long term capital gain under section 54 - whether the condition relating to "construction" of flat instead of condition relating to "buying" of the flat is applicable while allowing the exemption ? - Held that:- The assessee had sold the property on 04- 03-2011 and, therefore, as per section 54, the assessee was required to construct a new residential house by 04-03-2014 since section 54 allows exemption to an assessee of long term capital gain arising from sale of residential house if the amount of capital gain is invested in construction of new residential house within a period of 3 years. There is no specific requirement that assessee should also obtain the possession of the same within the period of three years. The emphasis is upon the utilization of the amount in purchase / construction of the new residential house. It is noted that undisputedly, the assessee invested a sum of Rs. 1,03,50,932 which was more than the capital gain earned by the assessee. In our opinion, the Ld.CIT(A) rightly drew support from the circular issued by the CBDT No.672 dt 16-12-1993. It is further noted by us that section 54 is a beneficial provision intending to provide benefits to the assessee with a view to boost investment in housing infrastructure. Thus, while interpreting such provisions, an effort should be made in the direction so as to find out how the benefit of deduction can be granted and not to find out how the same can be denied. In case the assesse has fulfilled the conditions in substance, then the benefit should not be denied on mere technicalities. In our view, the assessee has made compliance of the requisite conditions of section 54 and, therefore, the benefit has been rightly granted by The CIT. See CIT vs Hilla JB Wadia [1993 (3) TMI 7 - BOMBAY High Court] - Decided in favour of assessee.

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• 2016 (10) TMI 201
  Addition u/s 69A and 69C - deposit of penalty amount on behalf of the jewellers - Held that:- The assessee’s explanation regarding his commission income from carrier business has been accepted by the Revenue for the year under consideration. Further, nothing has been brought on record to suggest that the assessee is the owner of the gold and silver jewellery other than the documents received from the Commercial Sales tax department which we have already examined or the assessee has any other sources of income other than the income from carrier business. In light of above we delete the addition made u/s 69A of the IT Act. Further, the assessee’s explanation regarding deposit of penalty amount on behalf of the jewellers is also found reasonable and we see no justification in the addition made by the AO u/s 69C of the Act which is hereby deleted. - Decided in favour of assessee

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• 2016 (10) TMI 198
  Unexplained cash credit - peak credit theory - CIT(A), after taking into consideration the deposits and withdrawals restricted the peak addition at Rs. 3,14,434/- Held that:- The ld. DR before us could not adduce anything whether with respect to the peak credit assessed by the ld. CIT(A) is wrong. We find that the assessee has offered peak credit composition on the basis of transaction recorded in the bank account and that the CIT(A) and the Revenue could not point out any defect in the same. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has accepted the peak credit after AO’s remand report and with careful calculation. We find no infirmity in the order of the CIT(A) in stating with the part addition on the basis of the peak credit and part addition based on the net profit of the assessee - Decided against revenue

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• 2016 (10) TMI 197
  Registration to the appellant u/s.12AA withdrawn - Held that:- The provisions of section 12AA(3) mandates the cancellation of registration on satisfaction of either of twin conditions i.e. activity of the trust are not genuine or are not being carried out in accordance with the objects. When there is no change either in the objects of the assessee trust during the year under consideration or any diversion of the activity from the earlier year. Giving money to another trust would not amount to change of activity of the trust or the activities carried out by the assessee are not in accordance with the objects. However it may be a subject matter of application of money for the purpose of objects of the trust which falls under Section 11 of the Act. Therefore the issue of application of income is a subject matter of allowance of exemption under Section 11 in the assessment and cannot be a ground for cancellation of registration. It is pertinent to note that the Commissioner has accepted this fact that the fund given to other trust namely Malankara Catholic Diocese of Puttur was also granted registration under Section 12AA of the Act and therefore the objects of the said trust was also considered and accepted as charitable in nature. Since this is a subject matter of assessment therefore we do not express any opinion or view on the issue of application of income for the purpose of exemption under Section 11 of the Act in the present proceedings. Thus when there is no change in the activity of the assessee as well as the objects of the assessee then the mere transfer of the fund to the other trusts registration under Section 12AA does not fall in the ambit of provisions of section 12AA(3) of the Act for cancellation of registration. In view of the above facts and circumstances of the case, we hold that the Commissioner was not justified in cancelling the registration and accordingly we set aside the impugned order of cancellation of registration. - Decided in favour of assessee.

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• 2016 (10) TMI 196
  Cess on green leaf - whether it is allowable expenditure or not? - Held that:- As decided in CIT-vs- AFT Industries Ltd. [2004 (7) TMI 81 - CALCUTTA High Court] the assessee should have been allowed cess on green leaf by the AO - Decided against revenue Subsidy received - whether taxable as income of the Assessee u/s 41(1) or income from other sources - Held that:- There is no dispute of the amount on subsidy received, is taxable as income of the assessee under section 41(1) of the Act. The subsidy under consideration is a operative expenses/ direct expense of the business, therefore, it should be shown under the head ‘income from business or profession’ only. It is always open for the assessee to raise new ground which was not raised by the assessee before the AO. Addition u/s 14A - Held that:- As the assessee had sufficient own funds to finance its investment and the AO failed to establish the linkage and the nexus between exempt income and the expenditure incurred by the assessee. Apart from this, the AO has not recorded any satisfaction with regard to provision of section 14A read with rule 8D. Therefore, we are of the view that the addition made by the AO under rule 8D (2)(ii) Rs. 44,85,098/- should be deleted. So far the addition by the ld. AO under rule 8D(2)(iii) at Rs. 12,30,089/- is concerned, it is towards general and administrative expenses which normally a company incurs while making investment decision. In the investment decisions, the Board of Directors of the companies are involved and the finance department is also involved therefore, there should be some expenditure. Therefore, there are certainly some expenses which the company might have incurred to earn the exempt income. Therefore, the disallowance made by the ld. AO under rule 8D (2) (i) Rs. 100,000/- and Under Rule 8D(2)(iii) at Rs. 12,30,089/- is confirmed by us and the addition made under rule 8D(2)(ii) amounting to Rs. 44,85,098/- is deleted.

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• 2016 (10) TMI 195
  Addition u/s 35D - expenditure incurred for increase in Authorised Capital of the Company - Held that:- The assessee has debited an amount of Rs. 104,000/- as preliminary expenses on account of expenditure incurred in the case of fees and stamp duty payable to increase the authorized capital u/s. 35D of the I.T. Act We find that according to provisions of section 35D(ii) of the Act the kinds of expenses claimed by the assessee are not specifically covered in the section 35D(ii). Hon’ble supreme court in the case of Brook Bond India Ltd. [1997 (2) TMI 11 - SUPREME Court ] has held that the fees paid to registrar for increase in authorized share capital is a capital expenditure.In Commissioner of Income Tax vs. Hindustan Insecticides Ltd (2001 (2) TMI 75 - DELHI High Court ) held that the fee paid to Registrar of Companies for increasing the authorized capital is a capital expenditure. It is not possible to get such deduction under section 35D unless it is coupled with the extension of an industrial undertaking or in connection with setting up of a new industrial undertaking.We find that this disallowance was confirmed by the Ld. Commissioner of Income Tax(A) by giving a specific finding that the assessee is not fulfilling the conditions imposed under sub-sections (1) and (2) of section 35D, we, therefore, uphold the order of the Ld. Commissioner of Income Tax(A) - Decided against assessee Disallowance u/s. 14A - Held that:- We find that the assessee submitted before the lower authorities that it has not earned any exempt income during the year. The Assessing Officer has also not provided any detail of exempt income earned by the asssessse during F.Y. 2008-09. The Ld. Commissioner of Income Tax(A) held that the appellant has not been able to show before the Assessing Officer that no interest expenses have been incurred by it in relation to the assets capable of generating exempt income. The ld. counsel relied on the decision of the co-ordinate bench in the case of Shr Nandlal J. Agarwal vs. DCIT, Circle-1 Ahmedabad [2015 (7) TMI 1139 - ITAT AHMEDABAD] where it was held that the disallowance under section 14A cannot be made when no income is claimed to be exempt in that particular year after relying on the decision of Hon’ble jurisdictional high court in the case of Commissioner of Income Tax vs. Corrtech Energy (P) Ltd. (2014 (3) TMI 856 - GUJARAT HIGH COURT). In view of the above mentioned facts and circumstances and after considering the legal findings, we allow the appeal of the assessee on this ground as lower authority has not pointed out generation of any exempt income during the particular year. - Decided in favour of assessee.

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• 2016 (10) TMI 194
  Transaction of shares - whether the impugned transactions of purchase of shares and sale thereof tantamounts to an investment activity or a trading activity? - Held that:- The CBDT Circular No.6/2016 dated 29.02.2016 clarifies that once a particular stands has been taken by the assessee to such purchases in a particular assessment year it shall remain applicable in subsequent assessment years also and the taxpayers shall not be allowed to adopt divergent stand in different assessment years. Clearly, the CBDT Circular (supra) attempts to tone down the ongoing controversy on the issue in favour of the assessee. We find on fact that the action of the assessee is consistent with the aforesaid CBDT Circular. Consequently, gains arising on sale is required to be taxed under the head ‘capital gains’ only. We also take note of the averments made on behalf of the assessee that several purchases made in the earlier year and declared as ‘capital investment’ in the Balance Sheet of the earlier year were also sold and gain arising therefrom formed part of the impugned capital gains arising in this year. We, thus, find no reason to impugne the declared intention of the assessee that the share were acquired as capital asset. In the aforesaid view of the matter, we find considerable merit in the arguments raised on behalf of the assessee. Hence, in our view, the assessee is entitled to treat the gains arising on purchase and sale of shares in the impugned assessment year as short term capital gains as claimed. Accordingly, the action of the Revenue on the issue requires to be reversed. - Decided in favour of assessee.

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• 2016 (10) TMI 193
  Addition u/s 40A - payment of expenditure in cash - Held that:- On certain facts available on record such as confirmation of the parties, identity of the payee, payment made by bearer cheques, etc. as noted above. In the present case, we do not find any evidence referred to by the CIT(A) which is formed the foundation for granting the relief. The CIT(A) has merely reiterated the findings given by his predecessors and the ITAT in the earlier year. The question is essentially factual and requires ascertainment of certain facts. The assessee is duty bound to explain the circumstances which compelled him to discard the provisions of section 40A(3) or (3A) of the Act and explain business expediency for making payment otherwise than by account payee cheques each year. These facts are not at all clear on record. The ‘Statement of Facts’ filed before the CIT(A) also does not appear to explain the cause for contravention of the provisions of section 40A(3) or section 40A(3A) of the Act. Thus, facts of the case, for departure from mandate of section 40A(3) or (3A) requires to be appreciated. In this view of the matter, we restore the matter back to the file of the Assessing Officer for examination of the relevant facts de novo in accordance with law in the light of the ratio laid down by the Co-ordinate Bench of the Tribunal in assessment year 2008-09. Needless to say, assessee shall be afforded proper opportunity of being heard while determining the issue.

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• Customs

• 2016 (10) TMI 225
  Imposition of penalty - mis-declaration of goods - Courier company - can the appellant be held responsible for any mis-declaration done by the consignor or consignee as they are merely a courier company? - Held that: - the Regulation 13 of the Courier Imports and Export (Clearance) Regulations, 1998 prescribed an obligation to authorized couriers shall exercise due diligence to ascertain the correctness and completeness of any information which he submits to the proper officer with reference to any work related to the clearance of import goods or of export goods. When Customs could detect the mis-declaration simply by examining the weight of the consignment with respect to declaration made, it could have been possible for Courier Agency exercising due diligence to detect the same - the due diligence has not been exercised by the courier company - penalty reduced keeping in view the infringement and facts of the case - decided partly in favor of appellant.

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• 2016 (10) TMI 224
  Import of parts of old and used photocopier machines - Confiscation under section 111 of the Customs Act, 1962 - imposition of redemption fine under section 125 of the customs act, 1962 - imposition of penalty - import of used spares of photocopier like Top Glass, Cabnets, Operation Key Board, A.C. Supply PCB, D.C. Controller PCB, Lamp Regulator PCB, etc - amendment to Para 2.17 of the Foreign Trade Policy (FTP) by Notification No. 31 (RE-2005)/2004-2009 dated 19.10.2005 - applicability of the decision in the case of Atul Commodities Pvt. Ltd. C.C [2009 (2) TMI 18 - SUPREME COURT ] - Held that: - the subject goods are not complete second hand photocopiers but they are parts of old and used photocopier machines. The decisions quoted above by the appellants are with reference to the import of second hand photocopiers and the same did not cover various parts of old and used photocopiers. When the goods in question are different than the goods under consideration by the Hon ble Supreme Court in the case of Atul Commodities Pvt. Ltd. the decisions would not be applicable to the present case - confiscation justified. Quantum of redemption fine and penalty - reliance placed on the decision in the case of Rex Printing Press Vs. Commissioner of Customs, Kolkata [2004 (12) TMI 229 - CESTAT, BANGALORE] - redemption fine and penalty imposed are extremely high - Held that: - redemption fine and penalty imposed by the original adjudicating authority are not proportionate to the contravention(s) committed by appellants - the redemption fine and the penalty are reduced to 10% and 5% of the assessable value of the goods respectively. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (10) TMI 223
  Exemption from payment of CVD - Notification No. 30/2004-CE dated 09/7/2004 - import - PVC coated fabrics - Polyester Knitted Fabrics - non-textured Polyester cloth - condition of non-availment of cenvat credit - Held that: - the issue is similar to the case M/s SRF Ltd., M/s ITC Ltd Versus Commissioner of Customs, Chennai, Commissioner of Customs (Import And General), New Delhi [2015 (4) TMI 561 - SUPREME COURT], and the decision is relied upon. - condition of non-availment of Cenvat credit was not fulfilled in as much as Cenvat credit was not admissible to the importer and the question of fulfilling of the said condition does not arise. Exemption allowed - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 200
  Imposition of penalty under Section 112(a) of Customs Act, 1962 - import of rough diamonds - restriction on import - Kimberley Process Certificate - seizure - confiscation of rough diamonds under section 111 of the Customs Act, 1962 - Shri Narendra Raval the owner of rough diamonds - is Shri Narendra Raval involved in the illegal import or smuggling of seized Rough Diamonds brought by Shri Jorabhai and Shri Premabhai? - Held that: - the only evidence against Shri Narendra Raval is the statement of Shri Premabhai dated 22.04.2011. In the absence of other evidences corroborating and supplementing the said statement, Shri Narendra Raval cannot be held guilty on the basis of such uncorroborated statement only, that too of co-accused. The decision in the case of Vinod Solanki vs. UOI [2008 (12) TMI 31 - SUPREME COURT] has been relied upon. Shri Narendra Raval, a Kenyan citizen and, resident at Nairobi, no penalty is imposable on him as per the provisions of Customs Act which has jurisdiction within the territory of India only - jurisdiction of Customs Act to foreign citizen and to territory beyond India - Held that: - the issue is academic. The decision in the case of C.K. Kunhammed vs. CC [1992 (3) TMI 199 - CEGAT, MADRAS] would apply. Imposition of penalty set aside - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 199
  Absolute confiscation - discretion exercised by adjudicating authority in denying option for redemption of confiscated goods - concealment of Indian Currency in the hand baggage of departing passenger - confiscation of currency under section 113 of the Customs Act, 1962 - imposition of penalty under section 114(1) of the Customs Act, 1962 - is the adjudicating authority justified in denying option for redemption of confiscated goods and ordering absolute confiscation? - Held that: - no legally acceptable proof has been produced which could indicate that the impugned currency was generated out of legal dealings and who actually is the owner or owners of this currency. The passenger initially co-operated with the investigation but later on took a reverse summersault. The real owner remained behind the scene and used the passenger as a stooge in the act of smuggling. The currency, thus, attempted to be sent out of India through a carrier in a clandestine manner. It is, therefore, obvious that the impugned currency was not free from taint and was generated and procured through illegal channels. The outflow of currencies in illegal and clandestine manner does give a telling blow to the economy of the country. Additionally, the currencies in cash form can be and is invariably used in several economically, politically, international crimes as it is very difficult to trace the source in cash transactions. Hence, it is necessary to deal sternly with such offences whenever come to notice. The decision in the case of SHEIKH MOHD. OMER Versus COLLECTOR OF CUSTOMS, CALCUTTA AND OTHERS [1970 (9) TMI 36 - SUPREME COURT OF INDIA] relied upon. Absolute confiscation of the Indian currency justified - appeal dismissed - decided against appellant.

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• Corporate Laws

• 2016 (10) TMI 212
  Scheme of arrangement between the Transferor company and the Transferee Company - shares swaping - Held that:- The recommendations of SR Batliboi ii) The objections filed by Manisha Tele Sanchar Private Limited and Mr. Srinivasraghvan Seshadri are also rejected. iii) The objections filed by M/s. Jindal Securities Private Limited and M/s. Aman Finvest Private Limited are rejected with costs of Rs. 1 lac payable to the Common Pool fund of the Official Liquidator within three months from today. iv) The petition filed by the petitioner transferor company for sanctioning the scheme of arrangement being Exhibit-A is allowed and the scheme of arrangement is sanctioned. The scheme of arrangement shall be binding creditors and equity shareholders of both the Transferor and Transferee companies. v) The petitioner transferor company is allowed to file the sanction order of this court with the Registrar of Companies within a period of thirty days from the date of approval from the Department of Telecommunications for transfer/ merger of licenses/ authorizations as set out in the scheme Annexure-A. vi) The order in prescribed Form No.42 be issued separately by the Registrar as per Rule 84 of the companies (court) Rules, 1959 after the approval by the Department of Telecommunication for transfer/ merger of licenses. vii) The Official Liquidator shall be entitled to Rs. 50,000/- from the Transferor company towards miscellaneous expenses.

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• Service Tax

• 2016 (10) TMI 242
  Commission paid to overseas agent - reverse charge - Benefit of Notification No. 18/2009-ST dated 07.07.2009 - Whether in the facts and circumstances of the case, the demand of service tax is correct under the reverse charge mechanism from the appellant by denying the benefit of Notification No. 18/2009-ST on account of technically lapses - Business Auxiliary Service. Held that:- the appellant is receiving service of overseas commission agent and paying commission to the said agent. The benefit of notification has been denied due to reason that the appellant has not produce BRC and have not filed original copy of invoices and the return form the EXP-1 and EXP-2. In fact, the basic of requirement of notification has not been disputed by the Revenue, therefore, substantive benefit cannot be denied on account of technical lapses has held by the Hon'ble High Court of Bombay in the case of Union of India Vs. Farheen Texturisers (2010 (7) TMI 982 - BOMBAY HIGH COURT). Further by the Hon'ble High Court of Allahabad in the case of J.S. Gupta & Sons (2015 (7) TMI 379 - ALLAHABAD HIGH COURT) the payment made to the overseas commission agent not in disputed. The appellant has filed all the shipping bills and copy of invoices issued by the overseas agent. These fact has not been disputed by the Revenue. In that circumstance, I hold that the appellant has complied with the condition of the notification. Further, I observed that the commission paid to the overseas commission agent is less than 1% of the FOB value of the exported goods. Therefore, the appellant is entitled for benefit under Notification No. 18/2009-ST. Consequently, no service tax can be demanded under the category of 'Business Auxiliary Services' under reverse charge mechanism. Chargeability - Service tax - Whether the activity of loading/unloading by the contractor is chargeable to service tax under the category of Manpower Recruitment Agency Services or not - Held that:- the demand of service tax has been confirmed under the category of Manpower Recruitment Agency service for loading goods by the contractor on weight basis. As contractor has entered into agreement with the appellant on weighment basis. In that circumstances, the activity of loading/unloading cannot be termed as supply of Manpower Recruitment Agency Service therefore, the demand under such category is not sustainable. - Decided in favour of appellant

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• 2016 (10) TMI 241
  Import of services from non-resident associate group company situated in Netherland - Reverse charge - Held that:- when the services are provided by a foreign service provider having no office in India, we find the legal position has been settled by the Hon 'ble Bombay High Court in Indian National Shipowners Association [2008 (12) TMI 41 - BOMBAY HIGH COURT] which has been affirmed by Hon'ble Supreme Court. [2009 (12) TMI 850 - SUPREME COURT OF INDIA]. The appellant is liable to pay service tax on services received from foreign entity on reverse charge basis with effect from 18.04.2006. Penalties levied on the appellants are waived in terms of Section 80 of the Act. Cenvat Credit availed on the basis of duty paid documents TR-6 Challans for the eligible period is upheld. - Decided partly in favor of assessee.

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• 2016 (10) TMI 240
  Tour operator service - Invokation of extended period of limitation - Demand - appellant providing buses to M/s Gujarat Ambuja Cement Ltd. company on contract basis for plying their employees from their factory to residence and vice-versa - Held that:- as per definition of tour operator w.e.f. 10/9/04, 'tour operator' is a person who is planning, scheduling, organizing or arranging the tours but in the case in hand, the appellant is not planning, scheduling, organizing or arranging the tour but merely supplying the bus at the request of Gujarat Ambuja Cements Ltd.. All the planning of tours have been made by M/s Gujarat Ambuja Cements Ltd. In that circumstances, w.e.f, 10/9/04, the appellant is, out of the ambit of 'tour operator service'. Further, we find that for the period prior to 10/9/04 the demands have been confirmed by invoking extended period of limitation as the issue liability of service tax under tour operator service was in dispute in that circumstances the extended period of limitation is not invokable for the demands prior to 10/9/04. - Decided in favour of appellant

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• 2016 (10) TMI 239
  Cenvat Credit - credit on construction service - discrepancy in duty paying documents - extended period of limitation - Held that:- In the show cause notice it is not alleged that the assessee has taken credit with malafide intention. Moreover, the credit has been taken by the assessee after intimating to the department that the assessee is going to take credit on construction service. Earlier it has not been objected to. In that circumstance, the extended period of limitation is not invokable - Credit allowed - Decided in favor of assessee.

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• 2016 (10) TMI 238
  Cenvat Credit - input services - transportation cost of the hazardous waste which was generated during the course of manufacture of finished goods - Held that:- without removing of hazardous waste from their factory, the appellant is not able to run their factory, therefore, the removed of hazardous waste is essentially and transportation of the hazardous waste is entitled as input service to the appellant. - Credit allowed - Decided in favor of assessee.

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• 2016 (10) TMI 237
  Works contract - composite contract - it was contended that it cannot be vivisected into two parts containing supply of goods and provision of services for the sake of levying service tax - Held that:- prior to the introduction of works contract service from 01.07.2007, composite contracts cannot be vivisected to ascertain the service value of any transaction in order to levy service tax, especially when the law grants no authority. - After considering the submissions made by both the parties and perusal of the judgment of the Hon’ble Supreme Court in the case of Larsen and Toubro Ltd.(2015 (8) TMI 749 - SUPREME COURT), we are of the considered opinion that the impugned order is not sustainable in law - Demand set aside - Decided in favor of assessee.

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• 2016 (10) TMI 236
  Rectification application - 4th respondent has filed a counter affidavit in which it has been stated that there was a mistake in so far as the award amount being communicated and the details of such work awarded has also been produced by them. It has been categorically stated that the amount of Rs. 57,25,526/- indicated in the communication to the Assistant Commissioner, Service Tax, was a typographic error and the actual amount is only Rs. 5,72,526/-. Held that:- considering the fact that the mistake has been categorically admitted by the 4th respondent it is only proper that the rectification application be considered. The 3rd respondent shall re-adjudicate the issue. There is also a contention raised by the petitioner that the construction carried out by the petitioner is of only two residential apartments and to come within the definition of a “complex”, there should be more than 12 residential units as per Clause 91(a) of Section 65 of the Finance Act, 1994. The respondent however would contend that the same is a question to be adjudicated upon by the assessing officer since even different awards made and carried out by different contractors if exceeding the limit would come within the definition. This is an aspect which need not be considered by this Court at this point of time since this Court is directing re-adjudication of the matter by the 3rd respondent. - Petition disposed of directing re-adjudication of matter

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• 2016 (10) TMI 235
  Restoration of appeal of the PSU - demand of service tax - service tax was deposited in the consolidated fund of India under the Head 0044? - Held that:- the appellant is being deprived of hearing of its appeal on merits only for the reason that initially the Tribunal, vide order dated 30.10.2006, had referred the matter to the Committee on Disputes in terms of the order passed by Hon'ble the Supreme Court in Oil and Natural Gas Commission's case (supra). It is not in dispute that the Committee on Disputes thereafter directed the parties to sit across the table and resolve the dispute vide order dated 2.11.2006, but the dispute could not be resolved. There is no Committee on Disputes in existence, which would take further view on the aspect that the matter already referred by it for settlement between the parties, in fact, could not be settled, hence, the appellant should be permitted to pursue the appeal. In these circumstances, the appellant cannot be left without any remedy. The order passed by the Tribunal dated 25.10.2012 declining to restore the appeal is set aside. The matter is remitted back for re-consideration thereof on merits.

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• Central Excise

• 2016 (10) TMI 234
  Denial of CENVAT credit - input service - commission paid to consignment agents - whether the denial of cenvat credit on commission paid to consignment agents, on the ground that the said service is not eligible as input service and consignment agent service is beyond the place on removal of goods, is justified? - Held that: - Section 4(c)(iii) of the Central Excise Act, 1944 defines place of removal as "a depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory". The premises of the consignment agents are covered in place of removal. The appellant correctly taken cenvat credit on commission paid to consignment agents as same has been included in the assessable value. Cenvat credit on commission paid to consignment agent allowed - appeal allowed - decided in favor of assessee.

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• 2016 (10) TMI 233
  Evasion of duty - packing of excess cement of about 200 gms. in each bag - weight declared was of 50 kgs - Standard of Weights and Measures (Packaged Commodities) Rules, 1977 - whether excess packing of 200 gms. of cement per bag amounts to evasion of tax? - Held that: - in CBEC Circular No.876/14/2008-CX, dated October 20, 2001, there is a provision to allow 1% variation in weight for the cement filled in per bag for the purpose of levy of central excise duty. It means that 1% cement in excess or loss for each bag is allowable. Reference can also be made to Standard of Weights and Measures (Packaged Commodities) Rules, 1977, wherein 1% variation for cement bag is allowable. The weight of 50.200 kgs. per bag found by the Department - same is allowable being within the range of 1% variation - appeal dismissed - decided against Department.

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• 2016 (10) TMI 232
  Denial of CENVAT credit - manufacturers of Cast Articles of Iron and Aluminium - whether the services are input service eligible for CENVAT credit? - courier service - Held that: - the issue already decided in the case of M/s. Servall Engineering Works Pvt. Ltd. Versus CCE, Salem[2016 (5) TMI 889 - CESTAT CHENNAI] where it was held that so far as services related to cell phone, courier agency as well as telephone operator services are concerned, it is quite possible as to the use of those services for the purpose of manufacturing and commercial activity of the appellant. Therefore, CENVAT credit claimed in respect of service tax paid thereon are allowed - CENVAT credit allowed on courier service. Noise Monitoring service - Held that: - the said service is a pollution control requirement to run the factory. The said equipment is used to control the noise levels in the factory providing an equitable work atmosphere to the workers. The said service used for the welfare of the employees and is essential for the manufacturing activity - credit eligible. O & M of RO plant - Held that: - the said service is used for purification of the water used for the manufacturing activity. Manufacturing activity also requires purified water without which the quality of production cannot be maintained. Hence the credit is eligible on the said service. AMC service for pest control equipment - Held that: - AMC service for pest control equipment is essential as the said service is used for proper functioning of the factory. It is indispensible in the manufacturing process as it is vital to keep the machines and the manufactured products without the risk of damage - the said service eligible for credit. Appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 231
  Valuation - Demand of differential duty - freight charged for transportation of explosives to various coal fields - whether transportation charges need to be included in the assessable value to demand differential duty? - Held that: - the provisions of Rule 5 of Central Excise Valuation Rules 2000, are directly applicable, wherein it is provided that the transport cost need not to be included in the assessable value if it is billed on the invoice and collected. The respondent had not billed for more transportation charges than actually paid by them. In the absence of contrary evidence indicating that the respondent collected excess freight, it is held that the provisions of Rule 5 of Central Excise Rules complied with and the excess of transportation charges need not to be included in the assessable value for discharge of additional excess duty - appeal rejected - decided against Revenue.

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• 2016 (10) TMI 230
  Price escalation clause - supplementary invoice on the basis of the price escalation given by MSEB - whether demand is justified on the ground that supplementary invoice was raised but at the same time amount not received from MSEB? - Demand of duty with interest and penalty - Held that: - The transformers/finished goods have already been dispatched to MSEB. The central excise duty is liable to be paid as soon as the invoices are raised - appeal rejected - decided against appellant.

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• 2016 (10) TMI 229
  Refund claim - unjust enrichment - duty on the element of equalized freight from the factory to the depots of the respondent - equalised freight not includable in the assessable value - Held that: - once the Tribunal has held that equalized freight amount needs to be excluded from the assessable value for discharge of duty liability, nothing survives in the matter. The first appellate authority has held that the price remained the same before and after the clearances in respect of dutiability of the equalized freight, hence refund is admissible. Appeal allowed - decided in favor of Revenue.

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• 2016 (10) TMI 228
  Classification of goods - P for infection for lice and nits in hair; for arresting Hair loss; for washing dry and oily hair, for facial spots and blemishes, for glowing face, for improving dark skin complexion etc. - Held that: - the labels annexed to the appeal memorandum indicates that the items manufactured by the appellant are indicated as ayurvedic medicine as per manufacturing licence issued by the Food and Drug Authorities. The content and ingredients of the product also indicate that they contained ayurvedic substances which are recorded in authentic ayurvedic books and instruction and indication for which the items are to be used also indicate that they are for a specific period of use. A plain reading of the said label would indicate that these are to be used as medicine in ayurveda. The issue decided in the case of CCE vs. Ishaan Research Lab (P) Ltd [2008 (9) TMI 4 - SUPREME COURT] where it was held that the product is Ayurvedic medicines. The decision in the case of CCE vs. Ciens Laboratories [2013 (8) TMI 467 - SUPREME COURT] also followed where it was held that the primary function of these items is care and not cure. Reliance also placed in the decision in the case of CCE vs. Shree Baidyanath Ayurved Bhawan Ltd. [2009 (4) TMI 6 - SUPREME COURT] for the proposition that common parlance test continues to be determinative test for classification. Product classified as Ayurvedic medicine - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 227
  Valuation - Transaction value under Section 4 of Central Excise Act, 1944 - whether an amount charged over and above the sale price shown in central excise invoice as erection and commission charge is includable in the assessable value or otherwise? - Held that: - the issue is no more res integra as identical issue in the case of Petals Engineers Pvt Ltd. Versus Commissioner of Customs & Central Excise, Goa [2016 (3) TMI 570 - CESTAT MUMBAI] is decided where it was held that erection charges and integration and commissioning of machinery are not includable in the assessable value as they are not related to the sale of goods but for independent and distinct identified activity - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 226
  Denial of benefit of exemption under notification 10/97-CE dated 01.03.1997 - ‘Dissolved Acetylene’ - end use of the product, consumable - requirement of certificate by the officer not below the rank of Deputy Secretary of the Government of India as to the end use of the goods - Held that: - appellant produced a certificate and on perusal of the same, it was found that the said certificate is signed by the Deputy Director, who is of the rank of Deputy Secretary to the Government of India. It was evident from the certificate that inputs to be used for the research purposes and benefit of exemption notification 10/97 is applicable. Since the Tribunal is a last fact finding authority and such factual matrix on verification and correlation and of use of ‘Dissolved Acetylene’ cleared to Department of Atomic Energy and certificate issued thereof, requirement of the notification duly fulfilled - appellant eligible for benefit of exemption under notification 10/97 for supplies of ‘Dissolved Acetylene’ to the Department of Atomic Energy - appeal allowed - decided in favor of appellant.

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• 2016 (10) TMI 192
  Quantum of Bank Guarantee - amount of bank guarantee reduced to 5% - financial hardship - provisional release of goods on furnishing of B-11 bond - Is the reduction in the amount of Bank Guarantee justified? - Held that: - it is only a typographical discrepancy. The decision in the case of CC & Ors. Vs. M/s Navshakti Industries Pvt. Ltd. & Anr. 2011 (5) TMI 149-Supreme Court and CESTAT referred, where it was held that the bank guarantee amount deserves to be reduced to 5% of the value of the goods as at the time of release of goods in any case the assessee has to pay full amount of duty - provisional release of goods ordered with modification that the bank guarantee of 5% of the value of the goods only to be furnished - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2016 (10) TMI 211
  Validity of order of assessment - TNVAT Act, 2006 - denial of input tax credit - Held that: - the petitioner though has sought for certain details, the same have not been furnished to the petitioner and the assessments have been completed. Therefore, the Court of the view that the matter can be remanded to the respondent for fresh consideration so as to enable the petitioner to produce proof to show that the dealers with whom they had transactions had valid registration, on the date of transaction. Apart from that, the petitioner can seek for details with regard to cross verification of the buyers and sellers as per Annexure-I and such details can be furnished by the assessing officer and after which, the petitioner can be allowed to submit further objections and assessments can be re-done - writ petition allowed - matter remanded for fresh consideration.

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• 2016 (10) TMI 210
  Validity of order of assessment - reversal of ITC - interstate sale falling under Section 8(1) of the CST Act, 1956 - Form-WW for the year 2013-14 along with a Covering Letter dated 31.12.2014 with the Chartered Accountant's Report required to be submitted under Rule 16 A of the TNVAT Act - time limit extended for submission of Form-WW for the Assessment Year 2014-15 - whether the assssment order passed by respondents without considering Form-WW justified? - Held that: - on account of the amendment to the rule extending the time limit for submission of Form-WW, the petitioner submitted the same on 06.01.2016. Furthermore, in the Auditor's Report filed under Section 63 A of the TNVAT Act, specifically, it has been stated that the ITC has been reversed to the extend of 3% w.e.f. 11.11.2013. The respondent directed to redo the assessments for the years 2013-14 and 2014-15 in respect of the petitioner's TIN No.33270460111 after considering all the documents. - the Writ Petition allowed - the matters remanded to respondent for fresh consideration after affording an opportunity of hearing to the petitioner and considering the documents produced by him and redo the assessments in accordance with law.

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• 2016 (10) TMI 208
  Imposition of duty under M.P. VAT Act, 2002 or the M.P. Commercial Tax Act, 1994 - reopening of assessment - IMFL - Rectified Spirit - whether by virtue of Entry No.18 to Schedule-I of the M.P. Commercial Tax Act, 1994 or Entry No.47 to Schedule-I of the M.P. VAT Act, 2002, the manufactured product i.e. IMFL or Rectified Spirit being an excisable article is liable to be taxed under the Commercial Tax Act, 1994 or the VAT Act, 2002 as the case may be? - assessment year prior to 1.4.2013 - Held that: - the decision in the case of Gwalior Alcobrew Pvt. Ltd. Vs. State of M.P. & Others [2016 (9) TMI 355 - MADHYA PRADESH HIGH COURT] relied upon where it was held that foreign liquor manufactured in the State of M.P. and exported to other State is an excisable article and even though it is exempted from payment of excise duty but being an excisable good on which the State Government may levy excise duty under the Excise Act, recovery of Commercial tax or VAT tax is not permissible. Goods found to be not taxable - reopening of assessment not required - various other questions raised in the matters particularly with reference to Rectified Spirit not required to be answered - writ petitions allowed - decided in favor of petitioner.

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• 2016 (10) TMI 207
  Sale of property conducted by Revenue authorities - property having an extent of 6.59 ares in Sy.No.112/3-1 of Block 67 of Erattupetta village - Section 50 of the Kerala Revenue Recovery Act - attachment of property for recovery of duty with interest - prohibitory order passed by Court on 08/03/2011 - whether the sale could have been confirmed in view of the prohibition in the judgment of this Court in W.P.C.No.7119/2011? - amnesty scheme - Held that: - in the order in W.P.C.No.7119/2011, Court had imposed a restriction on further recovery steps to be taken only on an application being submitted by the petitioner. Admittedly, the application was submitted only on 12/03/2011. True that Court had granted the petitioner seven days' time to submit an application; but the fact remains that recovery steps were to be kept in abeyance only if an application was submitted within the stipulated time and thereafter recovery steps were to be kept in abeyance till a decision is taken on such application. Even according to the petitioner, he submitted an application for amnesty on 12/03/2011 which was allowed on 17/03/2011. He was granted time to remit the amount on 31/03/2011 and he did not remit the amount. Therefore the petitioner was not entitled to the benefit of amnesty. No steps were taken by the revenue authorities after filing an application dated 12/03/2011 and the sale was confirmed only on 29/10/2011 - error on the part of the revenue authorities in conducting sale of property and purchasing the property at Re.1/- especially when there were no bidders. Material irregularity in the issuance of notice - Held that: - no such ground found. Present writ petition has been filed only to delay the process of recovery of sales tax dues. An amount of more than Rs. 4 crores is to be paid by the petitioner in addition to tax dues and his attempt is only to delay the process of recovery. No interference required with the sale conducted by the Revenue authorities - writ petition dismissed - decided in favor of Revenue.

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• Indian Laws

• 2016 (10) TMI 206
  Restoration of the petitioner to his original position with all consequential benefits - punishment of reduction to a lower rank - disposal of cases at the instance of the petitioner during the pendency of the revisions before the Commissioner, Commercial Taxes Department, Jharkhand, Ranchi - failure to file reply to SCN - loss caused to the State Exchequer due to misconduct on part of the petitioner - Held that: - the petitioner in pursuance to the direction of the Joint Commissioner, Commercial Taxes Department passed the order in appeal on 07.07.2010 and the said appeals were remanded by the appellate authority and the petitioner was never informed regarding pendency of the revision cases before the learned Commissioner, Commercial Taxes. Therefore, the petitioner discharged his officer's duties with sincerity. Hence, there has been no laxity and dereliction of duty on the part of the petitioner, in disposing of the said appeals and ultimately in the revision petition disposed of by the learned Commissioner, Commercial Taxes, Government of Jharkhand, Ranchi, no alleged financial loss has been caused to the Government and, therefore from the very initiation of charge till its culmination, the petitioner has become scapegoat and victim of the circumstances. The charge alleged against the petitioner has not been discussed nor the charge of ante dating have been proved so as to fasten guilt on the petitioner as evident from the inquiry report. Therefore, the inquiry report is perverse and the punishment order passed by the disciplinary authority on the basis of perverse inquiry report being legally unsustainable, is liable to be quashed. Restoration of the petitioner to his original position with consequential service benefits - petition allowed - decided in favor of petitioner.

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• 2016 (10) TMI 204
  E-auction sale validity - E-auction sale was held contrary to the mandate of the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI Act’) - Held that:- When there is no 30 days gap from date of publication on 13.02.2016 to date of sale held on 14.03.2016, the sale held is liable to be set aside by declaring as null and void. Accordingly and in the result, the Writ Petition is allowed : a) By declaring the E-auction sale dated 14.03.2016, covered by E-auction sale notice dated 10.02.2016, that was published in Eenadu Telugu Daily News Paper dated 13.02.2016 as null and void. b) In this regard, coming to the rights of the auction purchaser, as laid down in Mathew Varghese [2015 (1) TMI 461 - SUPREME COURT ] the auction purchaser is entitled to refund of the amount deposited by him along with interest at 18%p.a. from the date of each such deposit, from the secured creditor bank, so as to recover from the debtor as part of the amount of the secured loan due. c) Needless to say that remedy is left open as laid down in Mathew Varghese supra for the secured creditor bank to proceed afresh for sale of the property by public auction or the like as per the due procedure under law, if the writ petitioner/Debtor fails to liquidate the debt as per the right of redeeming the debt available till transfer of the property by public auction and registration. d) Copy of this order shall be marked to the District Registrar, Kurnool, of Kurnool District, for effecting necessary cancellation and changes in his records in terms of Section 31(2) of the Specific Relief Act, 1963.

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