TMI Tax Updates - e-Newsletter
November 11, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. REVISION OF SERVICE TAX RETURNS

   By: Dr. Sanjiv Agarwal

News

1. Auction for Sale (Re-Issue) of Government Stocks

2. Shri Jayant Sinha Takes Over as Minister of State for Finance

3. RBI Reference Rate for US $

Notifications

Customs

1. 107/2014 - dated 7-11-2014 - Cus (NT)

Appointment of officers under section 4 of the Customs Act , 1962

2. 106/2014 - dated 7-11-2014 - Cus (NT)

Seeks to amend Notification No. 132/2009-Customs( N.T.), dated 09.09.2009

3. 105/2014 - dated 7-11-2014 - Cus (NT)

Seeks to amend Notification No. 83/2014-Customs( N.T.), dated 16.09.2014

4. 104/2014 - dated 7-11-2014 - Cus (NT)

Seeks to amend Notification No. 79/2014-Customs( N.T.), dated 16.09.2014

5. 103/2014 - dated 7-11-2014 - Cus (NT)

Seeks to amend Notification No.78/2014-Customs( N.T.), dated 16.09.2014

6. 102/2014 - dated 7-11-2014 - Cus (NT)

Seeks to amend Notification No 77/2014- Customs(N.T.) , dated 16.09.2014

SEZ

7. S.O. 2774 (E) - dated 27-10-2014 - SEZ

To set up an IT/ITES Special Economic Zone at Rajiv Gandhi Infotech Park, Phase-II, Village Hinjewadi and Mann, Taluka Mulshi, Pune Maharastra.

Circulars / Instructions / Orders

VAT - Delhi

1. 16/2014-15 - dated 10-11-2014

Filing of online return for 2nd quarter of 2014-15 – extension of period thereof.

Income Tax

2. F. NO. 279/MISC/52/2014-(ITJ) - dated 7-11-2014

Consolidation of earlier instructions u/s 143 r.w. section 142 towards a Non-Adversarial Tax Regime providing scope of enquiry in cases selected for scrutiny.

Highlights / Catch Notes

Income Tax

• Transfer of Technical and Marketing Know-How Taxable as Revenue Receipt, No Termination of Income Source Found.

  Case-Laws - AT : Taxability of amount received on transfer of technical know-how and marketing know-how – there was no cessation of source of income - taxable as revenue receipt - AT
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• No penalty for Long Term Capital Gain tax error due to Chartered Accountant's advice; considered a bona fide mistake.

  Case-Laws - AT : Penalty u/s 271(1)(c) – the concessional rate of tax on Long Term Capital Gain was applied on the basis of the advice of the Chartered Accountant, therefore, it was a bona fide mistake - no penalty - AT
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• Interest on Non-Performing Assets: Section 43-D Requires Strict Adherence to Statutory Language Without Deviation.

  Case-Laws - AT : Interest accrued on Non-Performing Assets – If the statute is so clear that an interpretation can easily be made, then that exact meaning should be given to the language of the Section - section 43-D has to be applied in its letter and spirit - AT
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• Cash Receipts from Previous Year's Sundry Debtors Not Taxable Again in Assessment Year 2009-10.

  Case-Laws - AT : Cash receipts of sundry debtors – Once the sundry debtors are appearing in the earlier years’ balance sheet and shown in the return of income for the AY 2008–09, then how an addition on account of sundry debtors can be made in the AY 2009–10 - AT
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• Unrealized Losses on Commodity Derivatives Can Be Deducted if Reasonably Anticipated, Even Without Crystallization.

  Case-Laws - AT : Unrealized loss on the commodity derivatives - Even when loss has not yet crystallized, a deduction is to be granted in respect of a reasonably anticipated loss - AT
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• Section 148 Notice Requires Additional Notice u/s 143(2) for Valid Reassessment Process Compliance.

  Case-Laws - AT : Requirement to issue notice u/s 143(2) with a notice u/s 148 - any issue of notice prior to that date cannot be treated as a notice on a return filed by the assessee pursuant to a notice u/s 148 of the Act - AT
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• Assessing Officer's Stock Valuation Dispute: Inappropriate Rate Used for Diverse Basmati Rice Varieties, Including Pusa Basmati Rice.

  Case-Laws - AT : Valuation of closing stock - AO has adopted the rate from the last bill - it it is in respect of only one variety of pure basmati and, therefore, could not be taken as the basis for valuing the entire stock, which included the Pusa basmati- AT
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• Speculation Loss Disallowed: Actual Pepper Delivery Excludes Section 43(5) Speculative Transaction Provisions Under Income Tax Act.

  Case-Laws - AT : Speculation loss disallowed – If the assessee has actually taken delivery of pepper and thereafter sold it, then the provisions of sec. 43(5) cannot be applied- AT
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• Section 69C Misapplied: Recorded Expenses Already Explained in Regular Books of Account.

  Case-Laws - AT : Unexplained expenses u/s 69C – addition in question was wrongly made u/s 69C of the Act as the expenditure was accounted for in the regular books of account and hence the source is obviously explained - AT
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Customs

• Appellants Penalized for Fraudulent Duty Drawback Claims and Misdeclaration of Goods; Show Cause Notice Charges Upheld.

  Case-Laws - HC : Fraudulent claims of duty drawbacks - Mis declaration of goods -charges levelled in the show cause notice stood established against the appellants - levy of penalty confirmed - HC
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Service Tax

• Cenvat Credit Denied for Input Services in Manufacturing by Job Workers, Court Rules.

  Case-Laws - AT : Cenvat Credit - Scope of input services - Manufacturing Activity carried out by the job worker - assessee cannot avail the cenvat credit - AT
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• Insufficient Evidence to Classify Services as Management Consultancy Due to Lack of Proof of Chartered Accountant Involvement.

  Case-Laws - AT : Merely because there is no evidence to show that services received are from the Chartered Accountants nor there is any evidence to show that payments made by appellants are towards reimbursement of Chartered Accountant services per se not sufficient to sustain classification under management consultancy - AT
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• SBI India Exempt from Service Tax on VPN Services; No "Online Information and Database Access" Received from Abroad.

  Case-Laws - AT : Nature of Virtual Private Network (VPN) services - import of services - SBI India have not received “Online information and database access or retrieval” service from foreign service providers - demand set aside - AT
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Central Excise

• EOU Granted CENVAT Credit on Duty Paid for Capital Goods Post-Debonding; Stay Issued in Case.

  Case-Laws - AT : 100% EOU - Denial of cenat credit after debonding of the unit - amount was paid at the time of de bonding - credit should be allowed on the duty paid on the capital goods at the time of de-bonding of the unit - stay granted - AT
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• Printing on Jumbo Rolls Not Manufacturing Under Central Excise Law; Uses Non-Toxic, Food-Grade Ink.

  Case-Laws - AT : Manufacturing activity or not - jumbo rolls are first trimmed on their edges to remove torn portions and then printed in rotary printing machines with specific designs with the aid of non toxic, non-poisonous & specially formulated food grade liquid printing ink - not a manufacturing activty - AT
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• Exemption Granted for Goods Production Using Undeclared Methods; Stay Issued in Area-Based Case.

  Case-Laws - AT : Area based exemption - production of goods without using the declared plant and machinery - even if the production was by using the alternate method not declared to the department, the benefit of the exemption cannot be denied - stay granted - AT
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• Returned TV Sets Not Manufacturing; Full Cenvat Credit Reversal Required, Partial Stay Granted.

  Case-Laws - AT : Process undertaken on the TV sets received back cannot be considered as manufacture. Therefore, the appellant should have reversed the entire amount of Cenvat credit taken at the time of return of TV sets - stay granted partly - AT
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Case Laws:

• Income Tax

• 2014 (11) TMI 297
  Stay petition u/s 220(6) – Prima facie case to grant stay or not – Held that:- When the assessee has filed appeals before the appellate authority and filed the stay petition raising several contentions and when there is a statutory provision for filing a stay petition u/s 220(6) of the Act, the appellate authority is expected to consider the stay petition and pass a reasoned order after hearing the parties – assessee has specifically sought for an opportunity of personal hearing - revenue is not justified in calling upon the petitioner to pay the demand for various assessment years – thus, the order dated 31.3.2014 and 08.10.2014 set aside and the revenue is directed to consider stay petition u/s 220(6) – Stay granted.

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• 2014 (11) TMI 296
  Taxability of amount received on transfer of technical know-how and marketing know-how – Held that:- CIT(A) rightly recorded that the assessee has only shared the technical know-how with M/s Glenmark and did not transfer the right to use technical information (know-how) - the assessee had only parted with the marketing know-how and did not transfer the same - the consideration received on cessation of source of income shall constitute capital receipt - there was no cessation of source of income - Hence the amount of Rs. 20.00 crores received on transfer of technical know-how and marketing know-how was related to sharing of relevant information only and is taxable as revenue receipt in the hands of the assessee – Decided against assessee. Transfer of self generated trade mark named “Sensur” – Held that:- The assessee has not controverted the finding given by the CIT(A) that the assessee has bifurcated the consideration between different intangible assets as mutually agreed between the assessee and buyer and the same is not supported by any credible evidence - the assessee has not given any basis for bifurcation of the consideration between “trade mark” and “good will” - the consideration of Rs. 3.00 crores be divided between the “trade mark” and “good will” in the ratio of 75% and 25% - the 75% portion of Rs. 3.00 crores pertaining to trade mark shall not be taxable during the year - The balance amount pertaining to good will shall be taxable as Capital gains – Decided partly in favour of assessee. Taxability of non-compete fees relating to transfer of three bands – Held that:- The assessee had received non-compete fee for not competing with the purchaser of the marketing know how relating to Nitro Glycering based formulations for a period of five years - there was loss of source of income from marketing of Nitro Glycerine based products for a period of five years, it was a capital receipt - the assessee effectively lost the source of income for a period of three years by entering into “non-compete agreement” - “Right to manufacture” is different from “Agreeing not to manufacture” - the amount received as noncompete fee is not taxable during the year – thus, the order of the CIT(A) is set aside – Decided in favour of assessee. Taxability of transfer of trade mark and marketing right of animal husbandary division – Business receipt or not - Held that:- The consideration can be bifurcated between “trade mark” and “good will” in the ratio of 75% and 25% on the reasoning that the trade name generally carry more weight in trade circles - The consideration received on transfer of trade mark shall not be taxable and the consideration received on transfer of good will is taxable under the head “Capital gains” - The amount received on transfer of marketing know-how is taxable as decided in earlier assessment year - Decided partly in favour of assessee. Disallowance of interest expenditure u/s 14A – Interest paid on borrowed funds – Held that:- CIT(A) rightly noticed that the assessee had invested a sum of Rs. 1.25 crores in the years relevant to the AY 1994-95 and 1995-96 and in those years, the assessee had own funds - These factual findings have not been controverted by the revenue – the order of the CIT(A) is upheld – Decided against revenue. Chargeability of interest u/s 234B – Income computed u/s 115JB – Held that:- The Hon’ble Supreme Court does not enact any law, but it only interprets the law, meaning thereby the interpretation given by the Hon’ble Supreme Court shall be applicable from the date of inception of the relevant provision - the tax authorities are justified in charging interest u/s 234B of the Act for non-payment or under payment of advance tax on MAT tax payable u/s 115JA/115JB of the Act – Decided against assessee.

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• 2014 (11) TMI 295
  Purchases made disallowed – Genuineness of purchases - Held that:- The genuineness of the purchases is suspected only for the reason that the five parties were not available in the given addresses - the AO himself, during the course of remand proceedings, have obtained the bank statements of the five parties - It is in the common knowledge of everybody that the bank account, now a days, could be opened only on submission of proper documents - the assessee has furnished the Sales tax documents of the five parties and also their income tax details to prove their existence - the assessee has furnished many documents to prove the existence of the parties and they have not been controverted by the AO - the assessee had made the payments to the above said parties by way of account payee cheques - the transactions have been routed through the bank accounts - In the absence of any material, the view taken by the tax authorities that the purchases amount is liable to be disallowed u/s 40A(3) of the Act cannot be accepted – the AO has accepted the fact that the quantity details of purchases and sales have been reconciled by the assessee - CIT(A) was not justified in confirming the disallowance of purchases – Decided in favour of assessee. Donation expenses disallowed – Held that:- CIT(A) has confirmed the disallowance on the reasoning that the payment is not related to the carrying on of the business – the order of the CIT(A) is upheld – Decided against assessee. Disallowance out of telephone expenses – Held that:- Since the assessee could not furnish proper explanations - the assessee did not furnish any convincing explanation or the letter obtained from Shri Mahendra Sanghvi regarding the usage of telephone – the order of the CIT(A) is upheld – Decided against assessee. Disallowance of 20% amount under Hamali and Cartage Charges – Held that:- The expenses incurred entirely on cash payment and further they were not supported by any evidence - no fresh evidence or arguments were advances – thus, the order of the CIT(A) is upheld – Decided against assessee

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• 2014 (11) TMI 294
  Maintainability of appeal – Tax effect less than prescribed monetary limit for filing appeal –Tax effect less than Rs. 4 lacs – Revision of monetary limits through circular - Held that:- Following the decision in CIT Vs M/s. P. S. Jain & Co. [2010 (8) TMI 702 - Delhi High Court] - the Board has rightly taken a decision not to file references if the tax effect less than the amount prescribed - The same policy for old matters needs to be adopted by the Department - Instruction No.5/2014 FNo279/Misc.142/2007-ITJ(Pt) dated 10th July, 2014 will apply to pending appeals also for the reason that the same is exactly identical to earlier instructions - also in The Commissioner of Income Tax v. Smt. Vijaya V. Kavekar [2013 (2) TMI 451 - Bombay High Court] it has been held that the applicability of circular was considered and the monetary limit was increased and appeals were to be filed only in cases where the tax effect exceeded Rs. 4 Lacs - no appeals would be filed in the cases involving tax effect less than Rs. 4 Lacs notwithstanding the issue being of recurring nature - the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases – revenue could not point out any of the exceptions - this being a low tax effect case, the appeal cannot be admitted – Decided against revenue.

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• 2014 (11) TMI 293
  Penalty u/s 271(1)(c) – Inaccurate particulars furnished or not - Whether offering the tax at a concessional rate applicable on a different category of income would amount to furnishing inaccurate particulars of income attracting the provisions of section 271(1)(c) - Held that:- The Long Term Capital Gain arose on sale of paintings, therefore, the income from Long Term Capital Gain from sale of paintings is not allowable for concessional rate of tax as per the proviso to section 112(1) of the Income Tax Act - Though, by applying concessional rate of tax at 10% on the ground that the assessee has not taken the benefit of indexed cost for computation of Long Term Capital Gain would help the assessee if in the return of income, the assessee has given the impression that the Long Term Capital Gain is arising from the transfer of listed shares, bonds, securities etc., however, in the return of income the assessee has mentioned the capital gain arising from the sale of paintings - The source of income has been explained by the assessee in all the return of income which remains same and, therefore, there is no change in the source of income and the category of income which is specified as capital gain from sale of paintings then even if the assessee has applied incorrect rate of tax in the revised return, it would not constitute that the assessee has changed the class/nature of income eligible for concessional tax u/s 112(1) of the Income Tax Act. When there is no attempt on the part of the assessee to show the Long Term Capital Gain in a different category then merely because a concessional rate of tax was applied in the revised return does not ipso facto lead to the conclusion that the assessee has concealed the particulars of income - all the facts and circumstances supports the explanation of the assessee that the concessional rate of tax on Long Term Capital Gain was applied on the basis of the advice of the Chartered Accountant, therefore, it was a bona fide mistake - The explanation is quite reasonable as per the Explanation 1B of section 271(1) of the Income Tax Act particularly in view of the fact that the assessee did not claim the benefit of indexed cost while computing the Capital Gain – thus, the order of the CIT(A) is upheld for deleting the penalty by following the decision in Price Waterhouse Coopers (P.) Ltd. Versus Commissioner of Income-tax, Kolkata [2012 (9) TMI 775 - SUPREME COURT] – Decided against revenue.

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• 2014 (11) TMI 292
  Jurisdiction of CIT to invoke revisional jurisdiction u/s 263 - Prejudicial to the interest of Revenue or not - Necessary details and evidences for the claim of benefit were duly furnished before the AO or not – Held that:- The observation of the CIT that necessary enquiries were not made or necessary details were not furnished by the assessee or examination of the same by the Assessing Officer is not substantiated - CIT has not pointed out any error in the order as to how it is erroneous and prejudicial to the interest of Revenue - requisite details were duly furnished by the assessee and the same were duly examined by the AO - there is a distinction between “lack of enquiry” and “inadequate enquiry” - necessary details were produced and examined by the AO, thus, it is not a case of lack of enquiry by the AO – relying upon Reliance Gas Transportation Infrastructure Ltd. vs. CIT [2014 (1) TMI 800 - ITAT MUMBAI] - there must be material before the Commissioner to satisfy himself that two requisite provided u/s. 263 are present, otherwise power cannot be exercised at the whims and caprice of the Commissioner. An incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 - The phrase “prejudicial to the interest of the Revenue” u/s. 263, has to be read in conjunction with the expression “erroneous” order by the AO - every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue - assessment u/s 143(3) of the Act was framed by the AO after obtaining necessary details from the assessee and further it were examined by him - even if, the same has not been spelt elaborately in the assessment order it cannot be said that there is a lack of enquiry or prejudice has been caused to the Revenue, the order of the Commissioner is set aside – Decided in favour of assessee.

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• 2014 (11) TMI 291
  Transfer pricing adjustment – Determination of ALP – CUP or TNMM- Held that:- The assessee applied CUP as the most appropriate method for benchmarking the international transactions undertaken by it - what persuaded the TPO to observe departure in these two later years from the consistent stand taken by him in the immediately preceding four years up to A.Y. 2006-07 in following the CUP method, is not available on record - There may have been some change in the factual position necessitating the adoption of TNMM in these later years- the mere fact that the TPO adopted TNMM in a later year can be no ground to argue before the tribunal that the same method be followed in a preceding year, which stand has been specifically rejected by him in the instant years - the application of TNMM on this reason alone cannot be upheld, more specifically, when in the immediately preceding year, where the facts are admittedly similar, the tribunal has restored the matter to the TPO for de novo adjudication – thus, as decided in assessee’s own case for the earlier assessment year it has been held that the matter is remitted back to the TPO/AO for fresh adjudication – Decided in favour of revenue. Renovation and maintenance expenses disallowed – Held that:- The sum was not towards any renovation of building, but, paid to a company, namely, Towerbase Services Pvt. Ltd., as maintenance charges for Vasant Vihar office on monthly basis - Month-wise details of such payment made aggregating to Rs. 25.20 lac were made available to the CIT(A), which were sent to the AO for comments - No objection was taken by the AO to the correctness of the nature of amount in the remand report – the order of the CIT(A) in allowing deduction for the full amount, which was incurred for the maintenance of office on monthly basis is upheld – Decided against revenue. ISO certification fee paid by the assessee deleted – Held that:- The payment of ISO certification fee is a routine expenditure incurred on annual basis - By no stretch of imagination it can be considered as amounting to acquisition of a capital asset or advantage of an enduring nature - thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 290
  Expenses incurred wholly for business purpose not excluded - Addition of various expenses not incurred for collective benefit of employees to value of fringe benefits u/s 115 WB (2) – Held that:- Before AO and CIT(A) assessee contended that all the expenses have been incurred for the purpose of business and were having no collective benefit to the employees but however the contention of the Assessee was not accepted by the AO as he relied on the deeming provisions of s. 115WB(2) of the Act – in M/s TOYOTA KIRLOSKAR MOTOR PVT LTD Versus ADDL COMMISSIONER OF INCOME TAX [2012 (6) TMI 484 - ITAT, Bangalore] it has been held that the deeming fiction u/s 115WB(2) is not attracted if the expenditure does not result in any benefit to employees - even in the circumstances provided in subsection (2) of s. 115WB of the Act "fringe benefits" can be deemed to have been provided by the employer to his employees, only in cases where the prescribed expenditure is incurred in consideration for employment – thus, no addition on account of FBT can be made – Decided in favour of assessee.

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• 2014 (11) TMI 289
  Expenses claimed in trading and P&L account disallowed – bills/vouchers for verification produced by assessee or not - Held that:- CIT(A) sustain the rejection of books of account by the AO and the CIT(A) further proceeded to estimate the income of the assessee by taking G.P. rate of 11.22% of the assessee for immediately preceding year i.e. 1996-97 which was also accepted by the Department - CIT(A) rightly held that the assessee has shown gross profit on the total sales leading to G.P. rate of 9.47% - CIT(A) noticed decline in G.P. rate of 1.75% of the total sales during the year under consideration - the FAA estimated the income of the assessee by taking G.P. rate of 11.20% which was worked out to 70,98,512/- as against the declared G.P. of Rs. 59,98,881/- declared by the assessee in the return of income - Thus the CIT(A) was quite justified in making the addition, thus, the order of the CIT(A) is upheld – Decided against revenue. Disallowance of interest deleted – Held that:- The AO has made disallowance of interest but the AO has not brought out any adverse material or fact to support the disallowance of interest and the addition has been made without establishing the nexus of borrowed funds with the funds advanced as interest free loan - the AO has picked up interest free loan an advance given to Ms. Salini Saxena and to Pythen Mines P. and has made disallowance of entire amount of interest claimed by the assessee in P& L A/c but we are unable to see any nexus of borrowed funds with the funds advanced to the debtors as interest free loan – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 288
  Interest accrued on Non-Performing Assets – Applicability of CBDT Circular - Held that:- Following the decision in assessee’s own case for the earlier assessment year, it has been held in Maharashtra Nagari Sahakari Bank Ltd. [2014 (11) TMI 240 - ITAT PUNE] - Vide an explanation (d) r.w.s. 36(1)(viia) annexed to section 43-D the definition of the entities incorporated by the section have been defined and in the absence of any contrary material, the assessee is covered by one of the entities, hence the provisions of section 43-D are to be applied - The CBDT u/s.119 of the I.T. Act has power to issue Circulars in exercise of its statutory powers - If the Board consider it necessary to lay down certain Rules and then direct the sub-ordinate authorities, such directions are required to be followed and such Circular would be binding on the Department unless and until held as ultra vires by a court of law - in terms of CBDT Circular the interest is to be added as income only when actually received or credited in respect of the "sticky advances" while making assessment for a financial institution. Interpretation of the language of the statute – Concept of real income approved in the case of banking business – Held that:- If the statute has used the terminology for the chargeability of interest on the basis when "credited" or "actually received", then no ambiguity has been left by the Statute - If the statute is so clear that an interpretation can easily be made, then that exact meaning should be given to the language of the Section - section 43-D has to be applied in its letter and spirit - assessee has directly taken the interest to the Balance Sheet and it is not routed through the Profit & Loss Account – thus, there is no reason to interfere in the order of the CIT(A) – Decided against revenue.

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• 2014 (11) TMI 287
  Cash receipts of sundry debtors – Held that:- The assessee is a commission agent deriving commission income from agricultural produce - Most of his transactions are with either farmer or small vendors wherein the transactions are mostly carried out in cash - Once the sundry debtors are appearing in the earlier years’ balance sheet and shown in the return of income for the AY 2008–09, then how an addition on account of sundry debtors can be made in the AY 2009–10 – CIT(A) has not given any cogent reason insofar as in confirming the addition of sundry debtors - If at all there was any doubt on account of sundry debtor as on 31st March 2008, then the same should have been the subject matter of adverse view in the AY 2008– 09 and not in this year - the addition on account of sundry debtors stands deleted as it does not pertain to this year. Cash deposits - Whether the assessee has been able to give any plausible explanation with regard to the source of deposit of cash or not - Held that:- Once such an explanation was given, then the CIT(A) should have made prima–facie enquiry or asked the AO to examine assessee’s contention - in the nature of assessee’s trade, the transactions are mostly in cash and the payment from the debtors are generally realised in cash only - If the assessee has given the addresses as per the list which consists of several debtors, at least some of them should have been enquired on sample basis – thus, the matter is to be remitted back to the AO for examination of explanation as to the source of deposit in the bank account was from debtor’s realization, the AO may carry out enquiry from some of the debtors on test check basis to see whether the amount from such debtors have been realised by the assessee in this year. Ad-hoc disallowance of 25% of expenses – Held that:- The expenses appearing are mostly verifiable from the fact that the are the expenses against which the payment is made by cheque to statutory body - Insofar as the other operational expenses for sums it have been incurred in cash which are not open for full verification - Thus, if any ad–hoc disallowance is called for, then the same should be 25% - Decided partly in favour of assessee.

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• 2014 (11) TMI 286
  Retention money deleted – Held that:- The amount has been retained by the authorities as per the terms of contract for satisfaction of the various obligations and liabilities of the assessee under the contract - The assessee is recognizing the revenue from contract after reducing the amount retained by the authorities in pursuant to the terms of contract and offering the amount to tax on final settlement of account or on receipt of the retention money after deduction if any by the authorities - when the assessee is following this method of accounting regularly and consistently and which has been accepted by the AO in all the earlier years then the AO is not permitted to take a different view to de hors the principal of consistency until and unless the facts for the year warrants to take a different view – also in CIT Vs. Associated Cables (P) Ltd. [2006 (8) TMI 135 - BOMBAY High Court] it has been held that the right to receive the retention money is accrued only after the obligations under the contract are fulfilled and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained – Decided against revenue. Labour charges and site expenses deleted – Held that:- The assessee has made the expenses of Rs. 58,17,088/- in cash and all the vouchers on the cash payment are not verifiable, therefore, the disallowance made by AO on these two accounts amounting to Rs. 25,00,000/- is excessive and very high, thus, a reasonable disallowance on these two accounts would be Rs. 2.50 lacs – the AO is directed to the disallowance to Rs. 2,00,000/- on account of labour charges and Rs. 50,000/- on account of site expenses – Decided partly in favour of revenue. Addition of purchases expenses deleted – Held that:- The AO issued the summons u/s 131 to the suppliers of the assessee from whom the assessee made the purchases - without discussing anything about the evidence produced by the assessee in respect of the claim except pointing out some wrong PAN No., the AO had made the addition on the basis of the report of the inspector of income tax - when the assessee has produced income tax returns, VAT returns and all other relevant documents and evidence to show the genuineness of the business transaction and purchase made by the assessee from these parties then the burden is shifted on the AO to prove the contrary - the return of income and confirmation filed by the assessee in respect of the claim which is not found to be false - when the assessee has produced all relevant evidence which could have been produced in respect of the claim of the purchases then in the absence of any contrary record or finding to the effect that the record produced by the assessee was not correct or genuine, the disallowance made by the AO merely on the basis of the report of inspector is not sustainable – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 285
  Deletion u/s 68 - Share capital and share application money – Commission income earned from activities of providing accommodation entries - Held that:- Assessment was completed u/s 144 and therefore application for admission of additional evidence under Rule 46A was filed with Ld. CIT(A) and CIT(A) after inviting remand report from AO has held that share applicants were having PAN numbers and they have admitted to have made investments in the company and we also find that share applicants were directors or their relatives - the AO has even recorded her statement - CIT(A) has rightly deleted the addition – The A.O. had calculated the alleged income by applying a notional rate of 2.5% on the amount of deposits in the bank account - Other than deposits in the bank account there is no proof with the A.O. to arrive at the conclusion that assessee was earning commission income - CIT(A) has rightly deleted the same - Decided against revenue. Addition made on protective basis – Held that:- There was no evidence available on record to prove /establish that the assessee was engaged in providing accommodation entries - there is no material in place to prove that the assessee was engaged in providing accommodation entries in respect of credits in the bank account, it was justified on the part of CIT(A) to convert the protective addition of Rs.,36,05,233/- into substantive addition - the addition should have been restricted to a sum of Rs. 10 lacs for entries referred to in the reasons recorded by the AO u/s 148 - the total addition of Rs. 36,05,233/- is set aside and restrict the addition only to the extent of Rs. 10 lacs being the accommodation entries noted in the reasons recorded by the AO – thus, the matter is remitted back to the AO for fresh adjudication - as no detailed inquiry or investigation has either been made by the AO or CIT(A) in respect of these two entries aggregating to Rs. 10 lacs - Decided partly in favour of revenue.

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• 2014 (11) TMI 284
  Unrealized loss on the commodity derivatives - Regular method of accounting followed by assessee – Held that:- While anticipated profit for forward contracts are not taken into account but anticipated losses are duly taken into account in computation of business profits – in DCIT v. Bank of Bahrain & Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI] – it has been held that binding obligation accrued against the assessee the minute it entered into forward foreign exchange contracts - a consistent method of accounting followed by assessee cannot be disregarded only on the ground that a better method could be adopted - The assessee has consistently followed the same method of accounting in regard to recognition of profit or loss both, in respect of forward foreign exchange contract as per the rate prevailing on 31st March - A liability is said to have crystallised when a pending obligation on the balance sheet date is determinable with reasonable certainty. The considerations for accounting the income are entirely on different footing - As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period - The forward foreign exchange contracts have all the trappings of stock-in-trade - where a forward contract is entered into by the assessee to sell the foreign currency at an agreed price at a future date falling beyond the last date of accounting period, the loss is incurred to the assessee on account of evaluation of the contract on the last date of the accounting period i.e. before the date of maturity of the forward contract. Even when loss has not yet crystallized, a deduction is to be granted in respect of a reasonably anticipated loss - Since the provisions for anticipated losses are reversed in the beginning of the next year, these deductions are completely tax neutral and the impact is confined to the timing of deduction - there cannot be a double deduction of the same loss- first one at the end of this accounting period and second one at the point of time when the transaction is finally settled - as long as the assessee has reversed this provision in the beginning of next year and thus effectively adjusted this loss against loss or profit finally realized commodity derivatives, no objection can be taken to this claim – thus, the matter is remitted back to the AO – Decided in favour of assessee. Transfer pricing adjustment – Determination of ALP - Service received or benefit and/or services received duplicate in nature or not – Held that:- The very foundation of the action of the TPO is thus devoid of legally sustainable merits - the payments are made under an arrangement with the AE to provide certain services - it is a call taken by the assessee whether the services are commercially expedient or not and all that the TPO can see is at what price similar services, whatever be the worth of such services, are actually rendered in the uncontrolled conditions - as for the evidence for each of the service stated in the agreement, it is not even necessary that each of the service, which is specifically stated in the agreement, is rendered in every financial period - The actual use of services depends on whether or not use of such services was warranted by the business situations whereas payments under contracts are made for all such services as the user may require during the period covered - As long as agreement is not found to be a sham agreement, the value of the services covered under the agreement cannot be taken as 'nil' just because these services were not actually required by the assessee - the services were actually rendered under the agreement and the services did justify the payments - in the absence of prerequisites for application of CUP methods being absent, it was not open to the TPO to disregard the TNMM employed by the assessee - No defects have been pointed out in application or relevance of TNMM in this case – the order of the TPO is set aside –Decided in favour of assessee.

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• 2014 (11) TMI 283
  Requirement to issue notice u/s 143(2) with a notice u/s 148 - Condition precedent for issuing notice fulfilled or not - Whether notices u/s 143(2) is mandatory in a reopened procedure and whether notices issued prior to the reopening would satisfy the requirement specified u/s 143(2) of the Act – Held that:- Issue of a notice u/s 143(2) of the Act, is mandatory even in a re-assessment proceeding initiated u/s 148 of the Act has been clearly laid down in ALPINE ELECTRONICS ASIA PTE LTD. Versus DIRECTOR GENERAL OF INCOME TAX & OTHERS [2012 (1) TMI 100 - DELHI HIGH COURT] that Section 143(2) was applicable to a proceedings u/s 147/148 also, since proviso to section 148 of the Act, granted certain specific liberties to the revenue, with regard to extension of time for serving such notices - issue of notice u/s 143(2) was procedural in nature - Section 143(2) of the Act, was a mandatory requirement and not a procedural one - a notice u/s 143(2) of the Act has been issued to the assessee, but on the date when such notice was issued viz., 23-09-2010 assessee had not filed any return pursuant to the reopening notice u/s 148 of the Act. Once the original return filed by the assessee was subject to processing u/s 143(1) of the Act, the procedure of assessment pursuant to such a return, in our opinion came to an end, since AO did not issue any notice within the 6 months period mentioned in proviso to section 143(2)(ii) - if the income has been understated or the income has escaped assessment, an AO is having the power to issue notice u/s 148 of the IT Act - Notice u/s 148 of the Act, issued to the assessee required it to file a return within 30 days from the date of service of such notice - any issue of notice prior to that date cannot be treated as a notice on a return filed by the assessee pursuant to a notice u/s 148 of the Act - there was no valid issue of notice u/s 143(2) of the IT Act, and the assessments were done without following the mandatory requirement u/s 143(2) of the IT Act – it rendered the subsequent proceedings all invalid - CIT(A) had only adjudicated on a position where there was no service of notices u/s 143(2) of the IT Act – thus, the assessment order of the CIT(A) is set aside – Decided in favour of assessee.

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• 2014 (11) TMI 282
  Deletion of disallowance u/s 40(a)(ia) – Held that:- The assessee has deducted the tax at source on 31.03.2009 and deposited it in May/June, 2009 – following the decision in DCIT vs. Rajasthan Art Emporium [2014 (11) TMI 43 - ITAT JODHPUR] - the amendment brought in by Finance Act, 2010 in the provisions of section 40(a)(ia) should be read as clarificatory in nature and applied retrospectively - the entire expenditure has been paid by the assessee and nothing remains payable as on the end of the year – thus, the order of the CIT(A) is upheld – Decided against revenue. Delayed deposition of Employees Contribution to PF & ESI – Held that:- Following the decision in CIT vs. Hindustan Organics Chemicals Ltd. [2014 (7) TMI 477 - BOMBAY HIGH COURT] - the Employees Contribution to PF & ESI has been found allowable if the same is paid till the due date of filing return of income u/s 139(1) - even the employees contribution to PF and ESI has been found allowable if paid prior to the due date of filing return u/s 139 (1) – Decided against revenue. Advertisement and Publicity Expenditure – Held that:- Complete details of payment to each individual is available with the assessee along with the details of work done - the AO without going into details of the issue has made the disallowance as he has applied provisions of section 40A(3) without considering the fact that many parties are involved and payment to none of them exceeds Rs. 20,000 – the order of the CIT(A) is upheld – Decided against revenue. Disallowance out of discount expenses deleted – Held that:- Apparently the AO appears to have not applied his mind and not gone into detailed enquiry of the matter - CIT(A) has perused the material made available before him which is part of regular books of accounts of the assessee - CIT(A) rightly found that as there are many parties involved in total discount of Rs. 23,000/- , provision of section 40A(3) does not apply – thus, the order of the CIT(A) is upheld – Decided against revenue. Disallowance on interest expenses in interest free advances given to sister concern deleted – Held that:- The AOhas observed about reducing the interest cost without finding any nexus of advance to sister concern with the interest bearing funds - Assessee has ample interest free funds as capital of partners - the partners fund has been given to sister concern – relying upon CIT vs. Arihant Avenue & Credit Limited [2014 (10) TMI 790 - GUJARAT HIGH COURT] – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 281
  Levy of interest u/s 201(1) & 201(1A) – Held that:- Tax includes surcharge - non deduction of tax is equally applicable in respect of non deduction of tax on surcharge also - the CIT(A) is not justified in distinguishing the order of this Tribunal – assessee contended that the recipient of the amount has already paid the tax and surcharge – the contention needs to be examined as decided in Hindustan Coca Cola Beverage P Ltd vs [2007 (8) TMI 12 - SUPREME COURT OF INDIA] – thus, the matter is remitted back to the AO for verification as to whether the recipient of the amount has already paid taxes or not including surcharge – Decided in favour of assessee. Levy of penalty u/s 271C – Non-deduction of TDS on interest payment to partnership firm – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assesees, being individuals, have paid interest to the partnership firm, in which they are partners - the belief entertained by the assessees that they were not liable to deduct tax at source on the interest paid by them to the partnership firm in which they are partners, can be considered as a “reasonable cause” in view of the legal position existing between a partner and the partnership firm - the explanation offered by the assessee fits in the category of “reasonable cause” in terms of sec.273B of the Act – thus, the order of the CIT(A) is set aside – Decided in favour of assessee.

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• 2014 (11) TMI 280
  Rejection of books of accounts u/s 145(3) – Valuation of closing stock of paddy basmati – Held that:- The assessee had given detailed reasoning before AO for adopting the market rate at Rs. 1841/- per qtl. in respect of valuation of paddy basmati stock - Assessee had duly explained that it used to purchase Poosa basmati and pure basmati but the entire stock was entered into stock register without making any such distinction - The assessee had also pointed out that the market rate of Pusa Basmati was Rs. 1500/- whereas pure basmati was Rs. 2040/- per qtl. But assessee had adopted rate of Rs. 2133/- per qtl. in respect of pure basmati – the AO has adopted the rate from the last bill - The assessee's contention that it is in respect of only one variety of pure basmati and, therefore, could not be taken as the basis for valuing the entire stock, which included the Pusa basmati - purchase bills clearly showed that the assessee was making purchases of Pusa basmati as well as pure basmati, the estimation made by assessee of market rate for valuation of stock, could not be faulted and invocation of penal provisions was not justified as the assessee's explanation could not be branded with any mala fide – relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] – the order of the CIT(A) is set aside. Confirmation of penalty u/s 271(1)(c) - Genuineness of assessee’s explanation - Held that:- The bill is dated 23-9-2006 and that is also one of the reasons given by the AO for making disallowance, observing that GR is pre-dated - This cannot be a basis for arriving at any adverse conclusion - Thus, there is overwhelming evidence to come to the conclusion that the supply to the assessee was made on 23-9-2006 - it cannot be lost sight of that the goods were supplied from Delhi to Karnal, which is not very far so as to take a period of one month for delivery of goods - on account of non-furnishing of evidence of installation of transformer, a vie could be taken against the assessee in assessment proceedings but when it comes to levy of penalty, there has to be a concrete evidence on record, establishing that assessee made a false claim, to saddle the assessee with penalty, demonstrating that the explanation furnished by the assessee was false – thus, the order of the CIT(A) levying penalty u/s 271(1)(c) is to be set aside – Decided in favour of assessee.

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• 2014 (11) TMI 279
  Disallowance u/s 14A – Computation under rule 8D(2)(ii) - Held that:- It is only the interest on borrowed funds that would be apportioned and the amount of expenditure by way of interest that will be taken will exclude any expenditure by way of interest which is directly attributable to any particular income or receipt - interest expenses directly attributable to tax exempt income as also directly attributable to taxable income, are required to be excluded from computation of common interest expenses to be allocated under rule 8D(2)(ii) - Since there is mistake in computing the disallowance, net current assets is to be considered while applying the formula under Rule 8D of the I.T. Rules instead of gross current assets – thus, the AO is directed to re-compute the disallowance and decide the issue afresh – Decided partly in favour of assessee. Speculation loss disallowed – Held that:- It is proper to examine the issue afresh on the plea of the assessee that it has actually taken delivery of pepper - If the assessee has actually taken delivery of pepper and thereafter sold it, then the provisions of sec. 43(5) cannot be applied – thus, the matter is remitted back to the AO for fresh consideration. Bad debts disallowance – Held that:- The Assistant Commissioner of Income tax is not correct in disallowing the bad debts on the ground that it was not offered as income in earlier years and hence conditions u/s. 36(2) was not satisfied - The amounts written off were considered as income in the earlier years and hence bad debts written off should have been allowed as expenditure - allowing dues from client written off as bad debts on the ground that the conditions u/s. 36(2) were not satisfied is also not justified - The assessee is a stock broker and the amounts receivable from clients which includes brokerage payable by the client was a part of the debt and the debt had been taken into account in the computation of income, the conditions stipulated in section 36(1)(vii) and 36(2) stood satisfied - both the grounds have not been properly adjudicated – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of assessee.

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• 2014 (11) TMI 278
  Unexplained expenses u/s 69C – Entire sales represents income from undisclosed sources or not - Held that:- Following the decision in ACIT, Central Circle-21 New Delhi Versus Glorious Club Pvt. Ltd. [2014 (4) TMI 440 - ITAT DELHI] CIT(A) found that sales had been made by account payee cheques and duly reflected in stock registers and supported by sale and purchase vouchers – the AO in his remand report did not comment adversely on the contentions of the assessee in respect of purchases and sales – thus, the CIT(A) rightly deleted the additions - source of the expenditure incurred in purchases is obviously explained - the Revenue did not place any material for controverting the findings of facts recorded by the CIT(A) - the addition in question was wrongly made u/s 69C of the Act as the expenditure was accounted for in the regular books of account and hence the source is obviously explained – thus, the order of the CIT(A) is upheld – Decided against revenue. Disallowance of expenditure and depreciation – Held that:- Following the decision in Assistant Commissioner of Income Tax, Versus /s Blue Luxury Impex Pvt. Ltd., (Formerly known as Alfa Engitech (P) Ltd. [2012 (7) TMI 467 - ITAT DELHI] - in the absence of any basis, when the Revenue did not even identity any specific amount of expenditure, which was not related to the business of the assessee, the order of the CIT(A) is to be upheld – Decided against revenue.

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• Customs

• 2014 (11) TMI 301
  Restoration of appeal - Ex parte order passed - Non appearance of assessee before Tribunal - Held that:- No notice of listing of appeal on 5.2.2014 was served upon the assessee and it was under these circumstances that the counsel or representative of the appellant could not appear on the due date. No material has been referred to by the learned counsel for respondent No.1 to establish that notice of date of hearing fixed for 5.2.2014 was ever served upon the appellant. In fact, the Tribunal itself has observed that the notice sent for 5.2.2014 was returned unserved. In such circumstances, it could not be held that the appellant had intentionally avoided to receive the notice. Moreover, unless a litigant is gross negligent in pursuing the litigation, the litigant should not be made to suffer for any bonafide error - Appeal restored before tribunal.

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• 2014 (11) TMI 300
  Confiscation of goods - Imposition of redemption fine - import of old and used pipes - Held that:- the appellant has imported Propping pipes and classified the same under CTH 7308 4000. The CTH 7308 40 deals with equipment for scaffolding, shuttering, propping or pit-propping. - Therefore, same are held as capital goods - impugned goods are freely importable as per para 2.17 of the Foreign trade Policy. Therefore, as no licence is required for importation of the said goods, the confiscation of the impugned goods was not warranted. Accordingly, confiscation is set aside. - Following decision of Cinda Engineering & Constructions P. Ltd. [2013 (11) TMI 947 - CESTAT BANGALORE] - Decided in favour of assessee.

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• 2014 (11) TMI 299
  DEBP benefit - Notification No. 94/96-C.E., dated 16-12-1996 - Held that:- same goods which had gone without suffering duty from exempted area that does not lose character of exempted goods even on re-importation when there was no substantial change to be dealt differently under law - In the absence of contrary evidence to show that the goods exported were different from the goods re-imported that cannot be held otherwise and no levy of customs duty can be ordered - Decided in favour of assessee.

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• 2014 (11) TMI 298
  Fraudulent claims of duty drawbacks - Mis declaration of goods - Tribunal after examining the entire evidence and material on record upholding the claim of the revenue and also penalties imposed by the adjudicating authority affirmed the findings of the adjudicating authority relating to mis-declaration of the goods and wrongful claim of Duty Drawback/DEPB credit - Held that:- The adjudicating authority on appreciation of evidence and analysing various reports and documents had concluded that the appellants had fraudulently claimed Duty Drawback/DEPB credit by way of exporting mis-declared goods through CFS (OWPL) Ludhiana. The appellants had exported the goods declaring them as Gear Cutting Tools of Cobalt bearing High Speed Steel, Heat Resistant Rubber Tension Tape and Gaskets under Drawback incentive schemes and had received/claimed drawback. It was concluded that the charges levelled in the show cause notice stood established against the appellants - The view taken by the Tribunal is a plausible view which has not been shown to be illegal or perverse in any manner - Decided against assessee.

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• Service Tax

• 2014 (11) TMI 314
  Waiver of pre deposit - Construction of residential and commercial complex service - Held that:- Even if there is a transfer of undivided share of land and a separate agreement is entered into for construction of apartment, the agreement would not lead to the service of construction of residential complex but only a part of the complex. This became exigible only after the insertion of explanation. As regards the second differentiation, we do not find any relevance. what was being sold and agreed to be constructed was an apartment which is nothing but part of a residential complex and therefore prior to 01/07/2010, it could not have been taxed and since the nature of transaction does not make the difference of the outcome, the decision in the case of Krishna Homes [2014 (3) TMI 694 - CESTAT AHMEDABAD] would apply since it examines the issue in great detail and has considered all aspects. Unfortunately the decision in the case of LCS City Makers [2012 (6) TMI 363 - CESTAT, CHENNAI] was not brought to the notice of the Bench. In our opinion, what is required to be seen is what exactly is the agreement for. If the agreement is not for the whole complex, for the period prior to 01/07/2010, prima facie, there cannot be any demand. In view of the above discussion, we consider that the appellant has made out a prima facie case for waiver of pre-deposit of balance dues and recovery thereof for 180 days from the date of this order. - Stay granted.

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• 2014 (11) TMI 313
  Cenvat Credit - Scope of input services - Manufacturing Activity carried out by the job worker - Revenue denied the credit to the assessee as his is neither the manufacturer nor the service provider - GTA Service - Sales Promotion Services - Held that:- Manufacture of the goods is carried out by the job workers, and excise duty liability also discharged by them. The Cenvat Credit is relatable to the goods which is manufactured and the person who is manufacturing the goods. Therefore, the Cenvat Credit in respect of inputs service relatable to the manufacture of goods can only be availed by the actual manufacturer and not by anyone else. The respondent, since not undertaking any manufacturing activity nor they discharging the excise duty liability cannot be entitled to take Cenvat Credit merely on the basis that invoices of input service is in their name and payment of service invoices made by them. As regards the loan licence concept it is for the purpose of Drug Act. However, as regards the concept of manufacture, availment of Cenvat Credit, discharging of excise duty liability there is no separate provision in respect of pharmaceutical goods manufactured on loan licence basis by some other manufacturer. As per Central Excise provision irrespective of ownership of the goods, the person who undertakes the manufacturing of the goods shall only be considered as manufacturer. Therefore, the respondent by any stretch of imagination is not the manufacturer of the goods in the present case. If this is so, then the respondent is also not entitled for Cenvat Credit in respect of any services relatable to the goods which is not manufactured by the respondent but manufactured by the job workers. respondent is not entitled for the Cenvat Credit in respect of GTA, Sales Promotion, etc. - Decided in favour of Revenue.

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• 2014 (11) TMI 312
  Waiver of pre-deposit – Classification of service – Legal consultancy service or Management consultancy service – Held that:- It was for the department to establish that the payment made was for service of management consultancy to rebut evidence shown by appellant – Merely because there is no evidence to show that services received are from the Chartered Accountants nor there is any evidence to show that payments made by appellants are towards reimbursement of Chartered Accountant services per se not sufficient to sustain classification under management consultancy – just because IBM US has issued invoice and there is no evidence to show that it is actually reimbursement, it has been held that this amounts to management consultancy service. We are not able to appreciate at this prima facie stage. In view of the above, the demand for service tax under the category of management consultancy service, in our opinion, prima facie is not sustainable. In the absence of any evidence to show that the foreign service provider was licensed by Telegraphic Authority of India, in terms of precedent decisions on this issue, levy of service tax cannot be sustained - appellant has been able to make out a prima facie case except for Rs. 67,228/-. Accordingly, the appellant is directed to deposit an amount of Rs. 1 lakh within eight weeks - Partial stay granted.

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• 2014 (11) TMI 311
  Management, Maintenance and Repair services - appellant is performing the statutory/sovereign function - appellant is an agent of Government of Maharashtra. - Held that:- Appellant are providing these services in accordance with MID Act 1961 and Rules framed there-under and the activity undertaken by them is mandatory and statutory functions therefore, the activity as per the said Circular are not liable to service tax. Section 97 of the Finance Act, 1994 and the Notification No. 24/2009 dated 27.7.2009 exempts the services of maintenance and repairs of roads. Therefore, the appellant are not require to pay service tax on their activity as discussed above. The appellant are executing their work which is statutory in nature. demand is for two periods - one from 1.10.2011 to 30.06.2012 and the second is from 01.7.2012 to 30.09.2012 when the negative list came into effect but the show-cause notice has been issued on the basis of definition of Management, Maintenance and Repair service has stood prior to 01.07.2012. Therefore, as post 01.07.2012 the provisions are not existing therefore, the demands for the period post 01.07.2012 are not maintainable. - Decided in favour of assessee.

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• 2014 (11) TMI 310
  Nature of Virtual Private Network (VPN) services - import of services - Information access/retrieval or Online information and database access or retrieval service - Receipt of service from foreign service provider - Held that:- data centre is located abroad to which the foreign offices have access for data and its retrieval. The ownership of data is quite clearly with the SBI foreign offices. Equant have not provided any data for access/retrieval. They have simply enabled the connectivity. They have provided connectivity which enables the FOs to access/retrieve data online. The responsibility of Equant is to ensure that network VPN functions properly. The Commissioner has totally misread the meaning of “Services provided in relation to online information and database access or retrieval”. Clearly the service provided has to relate to information access/retrieval. And EQuant has not provided information and database. The ownership of data is with the FOs. This is a vital fact. The Commissioner's finding that it is not necessary that the original data should emerge or originate from the provider of VPN network is an incorrect reading of section 65(75) and 65(105)(zh). The service provided by Equant will more aptly fall under telecommunication service if provider is licensed under Indian Telegraph Act. Reliance is placed on the case of United Telecom Ltd. (2008 (8) TMI 191 - CESTAT, BANGALORE). SBI India have not received “Online information and database access or retrieval” service from foreign service providers. Therefore, demand of service tax, interest, fees and penalty is not sustainable. - Decided in favour of assessee.

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• Central Excise

• 2014 (11) TMI 309
  Classification of welded wire mesh - used as poultry form accessory to cover the cages - Classification under Heading 7314 or under heading 8436 - Held that:-We have seen the Entry 8436.99, which existed prior to 2005 and the one which existed post 2005. The Entry in the new Tariff includes the parts of the Poultry keeping machinery. - Commissioner, Hyderabad vide his separate order-in-original dated 16.05.2014, passed in the case of wire mesh has taken note of the above developments and has held that wire mesh meant for use in the poultry form is properly classifiable under Heading No.8436 91 00. The Hon’ble Delhi High Court dismissed the writ petition [2012 (3) TMI 326 - Delhi High Court] pertaining to the earlier Entry No.8436, which related to only a Poultry Keeping Machinery and it is held that wire mesh cannot be treated as poultry keeping machinery. We are of the view that the same may not be strictly applicable to the new Tariff Entry, which specifically included the parts of the poultry keeping machinery. Apart from the above, we also note that the said decision of the High Court of Delhi was challenged before the Hon’ble Supreme Court by way of filing an SLP and vide [2014 (10) TMI 774 - SUPREME COURT], the SLP was allowed to be withdrawn so as to pursue the matter with the Commissioner (Appeals).The Hon’ble Supreme Court specifically directed that, in case, the appeal is entertained by the Commissioner (Appeals), it will be considered on its own merit, uninfluenced by no observation of the Delhi High Court. - Prima facie case is in favor of assessee - stay granted.

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• 2014 (11) TMI 308
  Denial of refund claim - Wrong classification of goods - Held that:- having promised that Assessee would produce a certificate from the Jurisdictional Superintendent that Cenvat credit has not been availed by M/s Ashok Leyland Ltd. and since the appellant has failed to do so, we cannot really find fault with the authorities below for rejecting the refund claim. It was submitted by learned counsel that the department could have verified. Having made a promise that they would produce certificate, taking a view that the department should have done it subsequently, in our opinion, is not correct. Nevertheless, in view of the fact that prima facie, we find that the appellant may be eligible for refund, we consider it appropriate that the matter should be remanded to the original adjudicating authority.

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• 2014 (11) TMI 307
  Waiver of pre-deposit - 100% EOU - Denial of cenat credit after debonding of the unit - amount was paid at the time of de bonding - Held that:- Appellants are registered as an 100% EOU for manufacture of Carbon Brushes falling under Chapter Sub-heading 8545 2000 of the Central Excise Tariff Act, 1985. On perusal of the final exit order dated 23.02.2012 issued by the Deputy Commissioner of Central Excise, MEPZ Special Economic Zone and HEOUs, Chennai, that after obtaining no due certificate from the Deputy Commissioner of Central Excise that they have remitted all the dues, the Development Commissioner has allowed for the final exit from 100% EOU status. We also find that the appellants discharged appropriate duties on the stock of inputs lying and on the capital goods and availed credit as they continued as DTA unit in the same premises. first proviso to Sub-rue (1) of Rule 3, stipulates that the credit should be allowed on the duty paid on the capital goods at the time of de-bonding of the unit and in terms of para-8 of Notification No. 22/2003. Prima facie, the applicant has made out a strong case for waiver of pre-deposit relates to the interpretation of Cenvat Credit Rules and the proviso for availing cenvat credit on the capital goods at the time of de-bonding - Stay granted.

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• 2014 (11) TMI 306
  Manufacturing activity or not - The jumbo rolls are first trimmed on their edges to remove torn portions and then printed in rotary printing machines with specific designs with the aid of non toxic, non-poisonous & specially formulated food grade liquid printing ink (purchased from manufacturers of those products). Thereafter the rolls are slit to the specified, required width. - Held that:- alleged process does not amount to manufacture - Decision in the case of RGL. CONVERTORS [2003 (3) TMI 157 - CEGAT, NEW DELHI] followed. - Decided in favor of assessee. Nevertheless, the primary and the lower appellate Authorities in this case, despite adverting to the judgment of this Tribunal and without concluding that the judgment had suffered either a temporal or plenary eclipse (on account of suspension or reversal of its ratio by any higher judicial authority), have chosen to ignore judicial discipline and have recorded conclusions diametrically contrary to the judgment of this Tribunal. This is either illustrative of gross incompetence or clear irresponsible conduct and a serious transgression of quasi-judicial norms by the primary and the lower Appellate Authorities, in this case. - appeal of the assessee allowed with costs of Rs. 10,000/- payable by Revenue to the appellant-assessee

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• 2014 (11) TMI 305
  Denial of exemption from duty - Removal of goods from factory - Assessee claims that it is not a manufacturer - Held that:- Commissioner(Appeals) has denied the benefit of treatment of the bought out items valued for exclusion on the ground that the documents were not submitted before the original authority at the time of adjudication of the case. there is no evidence to show that appellants have manufactured those items or they were received by the appellants. on the bought out items, excise duty had already been paid and therefore question of payment of excise duty again does not arise. It was pointed out by referring to the show-cause notice that the allegation in the show-cause notice is limited to wrongful availment of Notification No.6/2003-Cus. and nowhere there was an allegation that bought out items were integral part of PLC manufactured and supplied to BTPL. - Matter remanded back - Decided in favour of assessee.

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• 2014 (11) TMI 304
  Waiver of pre deposit - Eligibility for cenvat credit of various items parts and accessories, components etc. used for maintenance of the captive power plant - Held that:- If a process or activity is so integrally connected to the ultimate manufacture of goods so that without that process or activity, manufacture may, even if theoretically possible, be commercially inexpedient, the goods intended for use in such process or activity would be treated as used in the manufacture of goods. The expression used in Rule 2(k) of CCR, 2004 in the definition of "input" is "used in or in relation to the manufacture of final product whether directly or indirectly", whose scope is much wider than the scope of the expression "used in the manufacture". Therefore, in our view, any activity without which the manufacture of final product, though theoretically possible, is not commercially feasible, would have to be treated as having nexus with the manufacture of final product and the inputs used in such activity would be eligible for cenvat credit. impugned order is prima facie contrary to the provisions of the law and the appellant have a strong prima facie case in their favour and the requirement of pre-deposit under section 35F in these circumstances would cause undue hardship to the appellant. Therefore, the requirement of predeposit of cenvat credit demand, interest thereon and penalty is waived for hearing of the appeal and recovery thereof is stayed during pendency of appeal - Following decision of assessee's own previous case [2014 (9) TMI 683 - CESTAT CHENNAI] - Stay granted.

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• 2014 (11) TMI 303
  Waiver of pre deposit - Area based exemption - production of goods without using the declared plant and machinery - Benefit of the exemption notification no.50/03-CE dated 10.06.2003 - Non commencement of commercial production on or before 31.3.2010 - Held that:- the fact that there was commercial production in the factory in March, 2010, is not denied. The Department also accepts that there was production in March 2010 but not by using the declared machinery and by using some alternate method. The reason given by the appellant for using the alternative method is that they were getting small orders for small quantity and, therefore, they had manufactured small quantity instead of using the main plant for large scale manufacture. When the fact of commencement of production of the final product and its sale stands accepted by the department, even if the production was by using the alternate method not declared to the department, the benefit of the exemption cannot be denied. - they have strong prima facie case in their favour - Stay granted.

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• 2014 (11) TMI 302
  Waiver of Pre-deposit - Repairing of TV sets - Manufacturing activity or mere repairing activity - CENVAT credit eligibility - Differential duty - Whether TV sets removed on payment of duty are the same ones' received for repairs and removed - Whether appellant could not have taken Cenvat credit of the duty paid on TV sets which were received back by them and sold again - Assessee failed to account for receipt of returned goods vis-a-vis dispatched items as required under Rule 16 of the Cenvat Credit Rules - Adjudicating authority also dismissed statement submitted by assessee matching the removed TV sets with the received ones without verification with available records - Held that:- appellant simply paid the duty applicable at the time of removal of repaired TV sets taking a stand that the process undertaken by them amount to manufacture. In our view, having regard to the nature of the product, manufacturing process and activity undertaken by the appellant as per their own statement, the process undertaken on the TV sets received back cannot be considered as manufacture. Therefore, the appellant should have reversed the entire amount of Cenvat credit taken at the time of return of TV sets to their factory and not the amount payable on fresh removal of TV sets as duty during the relevant period. - Partial stay granted.

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