TMI Tax Updates - e-Newsletter
November 11, 2016

Case Laws in this Newsletter:

Income Tax Customs Central Excise

TMI SMS

• Service tax on cross border B2C OIDAR services provided online from a non-taxable territory to consumers in taxable territory in India

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Articles

1. Discontinuation of currency notes of ₹ 500/- and ₹ 1000/- issued by RBI w.e.f. midnight of 08.11.2016

   By: DEVKUMAR KOTHARI

2. APPROVAL OF GST RATES BY COUNCIL

   By: Dr. Sanjiv Agarwal

3. Frequently Asked Questions (FAQs) on Withdrawal of Legal Tender Character of the Old High Denomination Bank Notes

   By: CSSwati Rawat

4. Enrolment of existing taxpayer on GSTN Portal and FAQs on registration and migration of existing taxpayers

   By: Bimal jain

News

1. FM: Process of Tax Reforms will continue and pending GST issues will be resolved soon

2. The Partnership Summit 2017-Andhra Pradesh to Focus on “Partnerships for Sustained Growth in an Emerging Global Economic Order”

3. Old demonitised 500 & 1000 rupee notes will be accepted for making payments towards fees, charges, taxes and penalties payable to the Central and State Governments including Municipal and local bodies;This facility available only till midnight of 11th November, 2016

4. RBI Reference Rate for US $

5. Payment Systems (RTGS, NEFT, Cheque Clearing, Repo, CBLO and Call markets) to remain open on Saturday, November 12 and Sunday, November 13, 2016

6. Some replies given by revenue secretary Dr Hasmukh Adhia on the questions relating to action by incoming tax department in respect of money deposited in banks in old currency

7. Protocol amending the Double Taxation Amending Convention (DTAC) between India and Japan comes into force; Protocol amending the DTAC aims to promote transparency and cooperation between the two countries

8. Indirect Tax Collections up to October, 2016 register an increase of 26.7% over the net collections for the corresponding period last year; Net Indirect Collections stood at ₹ 4.85 lakh crore; 62.4% of the Budget Estimates of Indirect taxes for FY 2016-17 has been achieved till October, 2016

9. Direct Tax Collections up to October, 2016 show an increase of 10.6%; Net Direct Collections stood at ₹ 3.77 lakh crore;44.5% of the Budget Estimates of direct taxes for FY 2016-17 has been achieved

Notifications

Customs

1. 52/2016 - dated 9-11-2016 - ADD

Seeks to levy anti-dumping duty at modified rates on 4, 4 Diamino Stilbene 2, 2 Disulphonic Acid (DASDA) originating in or exported from People’s Republic of China up to and inclusive of 22nd January, 2019

Service Tax

2. 49/2016 - dated 9-11-2016 - ST

Seeks to amend notification No. 30/2012- ST, dated the 20th June, 2016 so as to put compliance liability of service tax payment and procedure on to the service provider located in the non-taxable territory with respect to online information and database access or retrieval services provided in the taxable territory to ‘non-assesse online recipient’

3. 48/2016 - dated 9-11-2016 - ST

Seeks to amend Service Tax Rules, 1994 so as to prescribe that the person located in non-taxable territory providing online information and database access or retrieval services to ‘non-assesse online recipient’, as defined therein, is liable to pay service tax and the procedure for payment of service tax

4. 47/2016 - dated 9-11-2016 - ST

Seeks to amend notification No. 25/2012-ST dated 20th June , 2016 so as to withdraw exemption from service tax for services provided by a person in non-taxable territory to Government, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory

5. 46/2016 - dated 9-11-2016 - ST

Seeks to amend Place of Provision of Services Rules, 2012 so as to amend the place of provision of ‘online information and database access or retrieval services’ with effect from 01.12.1016

Circulars / Instructions / Orders

Service Tax

1. 202/12/2016 - dated 9-11-2016

Withdrawal of exemption from service tax on cross border B2C OIDAR services provided online/electronically from a non-taxable territory to consumers in taxable territory in India-reg.

Highlights / Catch Notes

Income Tax

• No new evidence found by Assessing Officer; no penalty imposed u/s 271(1)(c) of Income Tax Act.

  Case-Laws - AT : Penalty under section 271(1)(c) - AO has not unearthed any new fact from his independent sources which could lead to furnishing of inaccurate particulars by the assessee - No penalty - AT
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• Deductions Allowed for Car Expenses Despite Registration in Directors' Names; Business Use Confirmed by Assessing Officer.

  Case-Laws - AT : Allowability of depreciation and expenses on motor car maintenance, car insurance and interest paid on car loan - cars were registered in the name of the directors - AO himself has accepted the use of the car for the purpose of business of the assessee company - deductions allowed - AT
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• AO Cannot Tax Notional Interest on Loan to Subsidiary; Company's Discretion Upheld in Interest Income Decision.

  Case-Laws - AT : Addition of notional interest on the loan given by the assessee to its wholly owned subsidiary - assessee company took a decision for not booking the interest income - AO cannot tax the interest income on hypothetical basis - AT
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• CWC-NSEZ and freight expenses cannot be disallowed based on estimates; specific defects must be identified.

  Case-Laws - AT : Disallowance of CWC-NSEZ expenses and freight and forwarding expenses - no disallowance can be made merely on the estimate or ad-hoc basis, without pointing out any specific defects in the books of accounts or vouchers. - AT
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Customs

• Import Value Increase by 20% Due to Subsequent Agreement Ruled Illegal and Unsustainable.

  Case-Laws - AT : Valuation of import - enhancement of the value by 20% on the basis of subsequent agreement is illegal and cannot be sustained - AT
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• Customs Authority Must Refund Additional Duties in Compliance with Legal Framework, Avoiding Unnecessary Conditions.

  Case-Laws - AT : Refund of additional duty of customs (ADC) - the authority should act only within the parameters of law and carry out the object of the statute without any extraneous conditions imposed by him - AT
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Service Tax

• India Withdraws Service Tax Exemption on Cross-Border B2C OIDAR Services; Now Taxable for Consumers in India.

  Circulars : Withdrawal of exemption from service tax on cross border B2C OIDAR services provided online/electronically from a non-taxable territory to consumers in taxable territory in India
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Central Excise

• CENVAT Credit Denied for GTA Services on Bio-Manure and Cane-Seed Transport Used by Farmers, Not Manufacturer Appellant.

  Case-Laws - AT : CENVAT credit - input service of GTA - transportation of Bio-manure and Cane-seed - services are utilized by the farmers and not by the manufacturer appellant - credit not allowed - AT
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• Dealers' Expenses Excluded from Vehicle Valuation When Manufacturer Sells at Declared Price with No Extra Consideration.

  Case-Laws - AT : Valuation - motor vehicles - inclusion of certain expenses incurred by the dealers - manufacture are selling their vehicle on a declared price and are not getting any additional monetary consideration from the dealers over and above what is mentioned in the sales invoice - not to be included - AT
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Case Laws:

• Income Tax

• 2016 (11) TMI 374
  Claim deduction u/s 80IA - whether the assessee is entitled to deduction under Section 80IA without setting off the losses/unabsorbed depreciation pertaining to the windmill, which were set off in the earlier year against other business income of the assessee following the decision of M/s.Velayudhaswamy Spinning Mills (2010 (3) TMI 860 - Madras High Court) - Held that:- The Special Leave Petition is dismissed. HC order confirmed [2016 (11) TMI 331 - MADRAS HIGH COURT]. Once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. Allow deduction u/s 801A in accordance with this clarification.

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• 2016 (11) TMI 373
  Deduction u/s 80-IA - whether initial assessment year in section 80-IA(5) would only mean the year of commencement and not the year of claim ? - Held that:- The special leave petitions are dismissed. HC order confirmed [2010 (3) TMI 860 - Madras High Court] the provisions of section 80-IA(5) treating undertaking as a separate sole source of income cannot be applied to a year prior to the year in which the assessee opted to claim relief under section 80-IA for the first time. Depreciation and carry forward loss relief to the unit which claims deduction under section 80-IA, cannot be notionally carried forward and set off against the income from the year in which the assessee started claiming deduction under section 80-IA - Decided in favor of the assessee.

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• 2016 (11) TMI 372
  Entitlement to deduction under section 80HHC - profits and gains "derived from" an industrial undertaking - Held that:- The word "derived from" in Section 80HH of the Income-tax Act, 1961, must be understood as something which has direct or immediate nexus with the appellant's industrial undertaking. Although electricity may be required for the purposes of the industrial undertaking, the deposit required for its supply is a step removed from the business of the industrial undertaking. The derivation of profits on the deposit made with Electricity Board cannot be said to flow directly from the industrial undertaking itself. See Pandian Chemicals Limited vs. CIT (2003 (4) TMI 3 - SUPREME Court). All assessee’s contention cannot be accepted. In facts too, P.R.Prabhakar’s case (2006 (7) TMI 121 - SUPREME Court ) as relied by assessee is distinguishable because one of the essential business of the assessee was activity of commission/brokerage and procuring orders of export for others. The question as to whether that income was “income derived from export business” therefore could not be said to have arisen. In any event P.R.Prabhakar’s case (supra) does not refer to the previous judgment in Cambay Electric Supply Industrial Co. Ltd.’s case (1978 (4) TMI 1 - SUPREME Court)where this court had clearly stated that the expression "derived from" had a narrower connotation than the expression "attributable to" and Pandian Chemicals Limited’s case (supra). - Decided against assessee.

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• 2016 (11) TMI 371
  Payment on account of service tax - allowable as business expenses - Held that:- It is undisputed that the obligation under the Finance Act, 1994 to pay the service tax is on the Respondent-Assessee being the service provider. This obligation has to be fulfilled by the service provider whether or not it receives the service tax from its clients/customers. Non payment of such service tax into the treasury would normally result in demand and penalty proceedings under the Finance Act, 1994. Therefore, as rightly found by the CIT (Appeals) and the Tribunal, the payment is on account of expediency, exclusively and wholly incurred for the purposes of business, therefore, deductible under Section 37(1) of the Act. As the above position, as held by the CIT (Appeals) and the Tribunal, is self evident from the provisions of law. TDS liability - Held that:- ITAT was justified in upholding the order of the Ld CIT(A) and deleting the disallowance made by the A.O. as the assessee is required not to deduct TDS on Rent u/s.194I, on salary u/s.192 and watch and ward expenditure u/s.194C as the same is not paid in lieu of contractual agreement between a security agency and the assessee. No substantial question of law.

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• 2016 (11) TMI 370
  Penalty under section 271B - Period of limitation - Held that:- There are two independent periods of limitation prescribed under section 275(1)(c). If what argued by Shri Singh, learned Senior Counsel, that both period should be read conjunctively, it would not only render the words "whichever is later" redundant but also do violence to simple phrase used by legislature in the aforesaid provision. It is a well settled principle of interpretation that plain reading of a statute must be preferred if it is clear. It must be read as it is and neither anything should be added nor ignored or omitted. We should not assume that legislature has left any scope of imagination or a provision must be read by applying casus omissus. Looking to the facts of the present case, we find that assessments were completed on 31.3.1989 and 30.3.1990 in respect to assessment years 1988-89 and 1989-90. Notices for penalty in respect of assessment year 1988-89 was issued on 2.4.1990 and for assessment year 1989-90, issued on 20.6.1990. Penalty orders were passed in both the cases on 30.10.1990. In our view, penalty orders are within the period of limitation. - Decided against assessee

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• 2016 (11) TMI 369
  Administrative expenditure - Held that:- A perusal of the chart shows that not only trend of administrative expenses have gone progressive in assessment years 1986-87, 1987-88 and 1988-89 but there is much increase in assessment year 1989-90. There was no justification to assume that administrative expenses of 1988-89 were same as that of 1986-87 and CIT (Appeals) has not given any cogent reason whatsoever, to accept this profitability that is why in light of difference in receipts of expenses shown by the assessing officer, Tribunal has not accepted the same and in our opinion rightly so. Tribunal has not found the finding of CIT (Appeals)acceptable and reversing the same, it has accepted profitability as assessed by assessing officer. It is no doubt true that appellate authority cannot pass order of dismissal/rejection without reversing/upsetting findings recorded by Court/ authority below which has not been done by CIT (Appeals) in the present case. For reasons aforesaid, Tribunal has discussed profitability as accepted by CIT (Appeals) and found the same not justified or correct, has rightly declined to accept the same. Order of Income Tax Appellate Tribunal restoring assessment order cannot be said to be faulty or erroneous in any manner.

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• 2016 (11) TMI 368
  Taxability in India - whether the Fees for Technical Services is chargeable to tax in India when Indo-UAE Double Taxation Avoidance Agreement (‘DTAA’) does not contain a clause/Article for taxation of Fees for Technical Services - P.E. in India - Held that:- In the absence of the provision in the DTAA to tax Fees for Technical Services the same would be taxed as per the Article 7 of the DTAA applicable for business profit and in the absence of PE in India, the said income is not chargeable to tax in India. Accordingly, we set aside the orders of the authorities below and delete the addition made by the Assessing Officer.- Decided in favour of assessee

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• 2016 (11) TMI 367
  Depreciation on intangible assets - Held that:- Assessee is eligible for the claim of depreciation u/s 32(1)(ii) on the amount of intangible assets acquired by it as per Business Transfer Agreement, and thus action of lower authorities was not factually or legally justified while making disallowance of the depreciation on the intangible assets. The AO is directed to grant the benefit of depreciation in terms of section 32(1)(ii) upon the intangible assets acquired by the assessee Disallowance made u/s 14A in respect of interest expenditure - Held that:- Factually speaking, the learned representative for the assessee had referred to the Balance-sheet to point out that the Share capital plus Reserves and Surplus amounts to Rs. 318.21 crores as against investment of Rs. 41.65 crores, to point out that sufficient interest-free funds are available to cover the level of investments in question. Under these circumstances, in our view, the disallowance of Rs. 4,55,230/- out of interest expenses by applying the provisions of Rule 8D(2)(ii) of the Rules is unjustified and is hereby set-aside. Thus, on this aspect, order of the CIT(A) is set-aside and Assessing Officer is directed to delete the addition made u/s 14A of the Act. Transfer Pricing adjustment in respect of corporate guarantee given by assessee on behalf of its Associated Enterprise (AE) to the Bank of Bhutan - arm’s length rate of 3.35% determined by the income-tax authorities for determining the Transfer Pricing adjustment - Held that:- considerations which apply for issuance of Corporate Guarantee were distinct and separate from that of Guarantee provided by the banks and, therefore, the two transactions were incomparable. In our considered opinion, similar parity of reasoning is applicable in the present case too because the considerations which weigh for raising of Bonds, that too in Indian market, are quite distinct and incomparable with the instance of providing of Corporate Guarantee to a bank abroad in connection with raising of loan from such bank by the AE of assessee outside India. Therefore, in our considered opinion, the exercise carried out by the TPO to arrive at the arm’s length rate of 3.35% suffers from an inherent misconception as the benchmarking has been done between two incomparable situations. Therefore, we are unable to uphold the said stand of the income-tax authorities. Insofar as the adequacy of 1% rate charged by the assessee is concerned, we find enough reasonableness in the same. It can be safely inferred that providing of Corporate Guarantee was not a ‘critical mass’, which enabled the AE to raise term loan from Bank of Bhutan Ltd. Moreover, the savings to the assessee-company in the shape of lower production costs on procurement of material from the AE is also a relevant factor. Thus, considering the entirety of the facts and circumstances of the case, in our view, Corporate Guarantee fee charged by the assessee @ 1% is well-founded and does not require any Transfer Pricing adjustment. Thus, we set-aside the order of CIT(A) and direct the Assessing Officer to delete the addition

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• 2016 (11) TMI 366
  Disallowance u/s 14A - restriction to amount allowed - Held that:- Reasonable disallowance has to be made in view of provisions of Section 14A of the Act to disallow expenditure incurred in relation to earning of exempt income having regard to the accounts of the assesseee as per mandate of Section 14A of the Act. We have observed that the assessee has earned dividend income of Rs. 10,19,208/- which was claimed as exempt income u/s. 10(34) of the Act and the ld. CIT(A) has restricted the disallowance u/s 14A to Rs. 1 lac. In our considered view, the disallowance of Rs. 1 lac u/s 14A of the Act keeping in view factual matrix of the case is quite reasonable. The A.O. has not undertaken any exercise to work out the disallowance having regard to the accounts of the assessee and merely applied Rule 8D of Income Tax Rules, 1962 in a mechanical manner which cannot be applied for the assessment year 2007-08 and earlier years in view of Hon’ble Bombay High Court decision in the case of Godrej and Boyce Manufacturing Company Limited(2010 (8) TMI 77 - BOMBAY HIGH COURT). Keeping in view of the peculiar facts and circumstances of the case , the ground raised by the Revenue in this appeal w.r.t. computation of disallowance u/s 14A of the Act of the expenditure incurred by the assessee in relation to earning of exempt income lacks merit and is hereby dismissed and we confirm the disallowance u/s 14A of the Act to be at Rs. 1 lacs for the assessment year 2007-08 as sustained by learned CIT(A). Addition on account of provision for write off of the dies - whether no actual sale or disposal of dies has taken place during the year of the old dies which has been shown as written off whereas actually the amount written off is in the nature of provision only? - Held that:- It is the say of the assessee that the dies left with the assessee with respect to Chakan Plant cannot be used because of the various restrictions on the assessee due to the non-compete agreement clauses. It is the say of the assessee that now these dies cannot be used by the assessee and also have became obsolete because of the agreement with MFL whereby the assessee agreed not to compete with MFL in persuant to demerger of Chakan Plant in favour of MFL and non compete-agreement with MFL. As per the assessee these dies were sold in the assessment year 2012-13 for a cost of Rs. 99.93 lacs which has been offered for taxation. All this above contentions of the assessee needs verification and examination both on facts and on legal grounds about the validity and legality of the allowability of the claim of the assessee with respect to write off of old and obsolete dies to the tune of Rs. 1,99,00,801/- and in our considered view, the matter/issue needs to be set aside and restored to the file of the A.O. for necessary verification and examination , and de-novo determination of the issue by the AO on merits. Disallowance of debit balance of creditors written off - failure to prove that the advances were given for the purpose of business and efforts were made for collection of the amounts advanced to the sundry creditors - Held that:- We have observed that the assessee has written off of sundry advances to the tune of Rs. 69,55,477/- and also there was a claim of deduction by MFL of Rs. 1.78 crores in the scheme of demerger of Chakan Plant whereby there was a claim of diminution in the value of debtors and inventories by MFL from the assessee , which was settled for at Rs. 1.10 crores between MFL and the assessee whereby MFL will deduct these amounts from the consideration payable to the assessee and the assessee wrote off the said amount in its books of accounts. The assessee submitted that all the details were given before the Revenue while revenue is disputing the same as complete details were not given nor justification for claiming as business loss or business expenditure as per provisions and scheme of the Act was not given by the assessee with respect to advances of Rs. 69.55 lacs written off and also with respect to the other claim of Rs. 110 lacs . In our considered view, the details submitted by the assessee requires verification and examination of both the claims by the AO on merits in accordance with law .

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• 2016 (11) TMI 365
  Eligibility of claim u/s 080IB - date of completion of the construction of the housing project - Held that:- no functional relationship or dependence between the buildings completed and that not completed (by the specified date – 31.3.2008), which are thus independent of each other. This is as the Revenue’s only objection is that one of the eight buildings comprising the assessee’s otherwise eligible housing project u/s. 80-IB(10), i.e., ‘Krishna Complex’, is not complete by that date; the assessee holding completion certificates (by that date) for the other seven buildings of the project. We, accordingly, see no reason as to why deduction u/s.80-IB(10) cannot be allowed on the part that is completed by 31.3.2008. In our view, therefore, the assessee would be entitled to deduction u/s.80-IB(10) on the building/s comprising the housing project for which it stands issued a completion certificate by 31/3/2008. - Decided in favour of assessee

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• 2016 (11) TMI 364
  Reopening of assessment - income from undisclosed sources - Held that:- We are of the opinion that the AO was justified in issuing the reassessment notice. He had sufficient material, at the time of issuing the notice u/s. 148 of the Act, that certain portion of income had not suffer taxation. We are of the opinion that the order of the FAA does not suffer from any legal infirmity. Therefore, confirming the same we decide the first effective ground of appeal against the assessee. Ingenuine capital gain - addition made as income from undisclosed sources - Held that:- Tax liability can be decided considering the surrounding circumstances and logical inferences based on certain facts. One is required to arrive at the conclusion on the basis of human probability. Human probability cannot be ignored for persons like share-broker not to charge money for the shares sold for months together. Alliance, a company controlled by MC, would not leave the sale price unrealised. It was upon the appellant to discharge the onus which heavily lay on him and he miserably failed. In the case under consideration, it was proved that the apparent is not real. Genuineness of the transaction was examined, not only taking into consideration the documents, but considering the surrounding circumstances were also considered. In our opinion, these aspects were of significance and importance, when the genuineness of the transaction in question was an issue. We find that in the case of Shamim M Bharvani(supra), in almost identical circumstances, the Tribunal has upheld the addition made by the AO. Therefore, we hold that the order of the FAA does not suffer from any legal or factual infirmity. Upholding the same, we decide the second effective ground against the assessee.

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• 2016 (11) TMI 363
  Disallowance on account of ‘sales promotion expenses’ - Held that:- Expenditure so incurred was wholly and exclusively for the purpose of assessee’s business. The relevant assessment years under consideration are A.Ys.2010-2011 & 2011-2012 during which there was no CBDT Circular as referred by AO for making disallowance by branding the expenditure as covered by Explanation to Section 37(1) of the Act. We found that the expenditures were incurred wholly and exclusively for the purpose of business, therefore, same cannot be disallowed by applying CBDT Circular dated 1-8-2012 in respect of years under consideration. In the instant case before us the relevant assessment years are A.Y.2010-2011 & 2011-2012 during which this CBDT Circular was not applicable. As per the details of expenses placed on record, we found that same was in the nature of sales promotion. Neither the AO nor the CIT(A) had doubted genuineness of the expenses nor there is any allegation to the effect that expenses were not incurred for the purpose of business. Even the G.P. and N.P. rate shown by assessee nowhere indicates that assessee had claimed any excessive expenditure under the head sales promotion. No justification in the orders of lower authorities for disallowing sales promotion expenses under Explanation to Section 37(1) during the assessment year 2010-11 and 2011-12 under consideration. - Decided in favour of assessee.

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• 2016 (11) TMI 362
  Validity of reopening of assessment - depreciation claim - Held that:- As far as the facts are concerned they are not in dispute as admittedly the issue sought to be addressed by the AO u/s 154 which was given up is the same issue which was subsequently picked up by him for re-opening. Admittedly the assessment originally was made u/s 143(3) and the issue has been enquired into and examined by the AO himself as the calculation of the depreciation allowable was done by the AO himself. Re-opening in the peculiar facts and circumstances of the case by the AO in the absence of any new material justifying the re-opening and on the very same facts tantamounts to abuse of his power. See BERGER PAINTS INDIA LTD. Versus ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS [2009 (8) TMI 557 - CALCUTTA HIGH COURT] - Decided in favour of assessee

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• 2016 (11) TMI 361
  Rectification of mistake - Held that:- There is a contradiction on basic facts. Where the Assessing Officer in the order passed u/s 143(3) and the order u/s 154 holds that the return declaring an income of Rs. 96,540/- was filed by the assessee. The CIT(A) holds that the NIL return had been filed. Accordingly in order to address the legal position it is first necessary to address the correct facts. As far as the legal issue as laid down in CIT vs Punjab National Bank (2001 (2) TMI 126 - DELHI High Court ) relied upon is concerned, law is clear that once proceedings u/s 143(2) have been initiated, rectification of intimation u/s 143(1) is not permissible. If any Rectification was to be effected in the intimation it can be done u/s 143(3) and not by exercising power u/s 154. Accordingly the issue is restored back to the CIT(A) with the direction to first address the correct facts as the facts noticed by the CIT(A) in the impugned order do not reconcile with the consistent findings of the AO in the 143(3) order and the 154 order. After addressing the correct factual position, the CIT(A) is directed to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard.

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• 2016 (11) TMI 360
  Reopening of assessment - addition u/s 14A - Held that:- From the original assessment order it appears that the assessee had filed all necessary details and material for the purpose of arriving at disallowance u/s 14A of the Act. There is no evidence from the records placed before us that the assessee has failed or omitted to disclose the material / primary facts. These were every much available on record and the Assessing Officer had failed to draw correct legal inference at the time of original assessment from the said primary facts. This cannot be held as error or omission on the part of the assessee and as per the proviso (1) to Section 147 of the Act and reopening of assessment for the year under consideration cannot be sustained. Addition u/s 14A - Held that:- It is not possible that no expenditure were incurred towards earning the exempt income and in view of the A.O., on the basis of order of this Tribunal in assessee’s own case, for the Assessment Year 2008-09 2015 (2) TMI 481 - ITAT DELHI and 2009-10 2015 (3) TMI 58 - ITAT DELHI placed at pages 33-44 of the paper book, we direct Ld. A.O. to calculate the disallowance on the basis of 0.5% of expenditdure. Disallowance made under the head of 'foreign travelling expense' - Held that:- CIT(A) correctly held that out of total foreign travel expenses, assessee had explained an amount of Rs. 8,50,401/- and gave relief to this extent. In respect of balance amount of Rs,3,74,674/-, Ld. CIT(A) held, it to be having source of personal element and restricted the disallowance to 50% of such amount being Rs,1,87,337/-. Disallowance made u/s 40A(2)(b) - Held that:- A.O. and Ld. CIT(A) have admitted to the position that the salary paid to Smt. Pushpa Rathi is almost equal to the salary paid to the other staff members. Thus, L. A.O. has failed to establish the main ingredient to initiate Section 40A, which is, expenditure being excessive or unreasonable. We, therefore, are not agreeable to the ad-hoc disallowance sustained by Ld. CIT(A) when consistently in the preceding years, no such disallowance has been made by the Ld. A.O. We, accordingly delete the disallowance restricted by Ld. CIT(A) on this count.

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• 2016 (11) TMI 359
  Addition of unexplained cash credits under section 68 - Held that:- We concur with the factual findings of the learned CIT(A) that it has been established that the assessee’s son, Dilip Gurnani; daughter Ms. Deepa Hotchandani; brother-in-law Shri Kamal S. Sadhwani and sister-in-law Smt. Manju Kamal Sadhwani, resident and carrying on business abroad, have invested their funds through their bank accounts maintained in India, in the purchase of the said flat. The identity of the investors; close family members and their creditworthiness has been established and the genuineness of the transactions cannot be doubted. We, therefore, uphold the finding of the learned CIT(A) in the impugned order that the amount shown in the names of the four persons (viz. relatives of the assessee) are properly explained and therefore the addition of this amount as unexplained cash credits under section 68 of the Act is to be deleted. - Decided against revenue

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• 2016 (11) TMI 358
  Allowability of expenses on motor car maintenance, car insurance and interest paid on car loan - cars were registered in the name of the directors - Held that:- It is a case of a company which is a separate legal juristic person. There cannot be any disallowance on account of alleged personal user. It was shown that complete details and evidences were submitted in this regard. Nothing has been brought on record by either of the authorities to show any discrepancies in the details and evidences with regard to running and maintenance of motor car, car insurance and payment of interest on car loan furnished by the assessee company. Under these circumstances, we find the action of the lower authorities as unjustified in making the disallowances on surmises and conjectures. Therefore, the AO is directed to fully allow the motor car expenses, car insurance and interest paid on car loan as claimed by the assessee - Decided in favour of assessee Depreciation on motor cars - diallowance of claim as the said cars were registered in the name of the director and not in the name of the assessee company - Held that:- As noted that in this case car was purchased by the assessee company in preceding year i.e. A.Y. 2009-10, wherein depreciation was claimed by the assessee and allowed by the AO. Thus, the said car had entered into block of assets in A.Y. 2009-10. Once an asset is entered into the block of asset and is brought forward as part of opening WDV, there arises no question for not allowing depreciation on the opening amount of WDV of the car, so long as continues to be used for the business of the assessee. It is further noted that in this case, the AO has himself allowed motor car expenses on the same car @50%. Thus, AO himself has accepted the user of the car for the purpose of business of the assessee company. Under these circumstances, contradictory decision could not have been taken for the purpose of allowing depreciation. Thus, taking into account the aforesaid legal position and peculiar facts and circumstances of this case, we find that depreciation is allowable on the car and, therefore, the same is directed to be allowed - Decided in favour of assessee

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• 2016 (11) TMI 357
  Depreciation claim - capital expenditure being technical fee and other expenses, incurred towards setting up of the Hotel project - Held that:- Tribunal decided this issue in A.Ys. 2007-08 in favour of the assessee and held that assessee was entitled to capitalise the amount and claim depreciation thereon. But for the purpose of verification of facts, this issue was sent back to the file of the AO with the direction to verify the amount of expenditure and allowing depreciation accordingly. Thus, this year also we send this issue back to the file of the AO with direction to follow the order of the Tribunal for the A.Ys 2007-08 & 2008- 09 and accordingly allow depreciation after verification of requisite facts. With these directions, this issue is sent back to the file of the AO and may be treated as allowed, for statistical purposes. Disallowance u/s 14A - Held that:- Invocation of section 14A is not automatic. The AO is bound to record his satisfaction before proceeding to make disallowance u/s 14A for more than the voluntary disallowance made by the assessee. The AO in the case before us failed to record any reasoning whatsoever or satisfaction and thus he did not assume jurisdiction to make disallowance u/s 14A read with rule 8D(2) (iii) as per law. Thus the disallowance deleted - Decided in favour of assessee Addition of notional interest on the loan given by the assessee to its wholly owned subsidiary - Held that:- Assessee never recorded the impugned amount in its books of account shows that none of the parties considered the amount of interest for the year under consideration as expenses / income. The assessee company took a decision for not booking the interest income in view of the facts and circumstances of the case as have been discussed in detail in above part of our order. Thus, in the given facts of this case, the impugned amount of interest was merely a hypothetical income, therefore it cannot be considered as income as per principles of ‘real income theory’. The AO has wrongly added it as part of income on notional basis and the same is directed to be deleted. This ground is allowed.

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• 2016 (11) TMI 356
  Disallowance of CWC-NSEZ expenses and freight and forwarding expenses - Held that:- Commissioner of Income-tax(Appeals), on the other hand, examined the details of the expenses and in respect of first disallowance found that in the preceding assessment year vaulting/warehousing expenses were shown separately, whereas in the year under consideration, the said expenses are clubbed with expenses under the head ‘CWC-NSEZ’ and, therefore, the increase in expenses was found to be justified by the learned Commissioner of Income-tax (Appeals). Similarly, under the head ‘freight and forwarding expenses’, the learned Commissioner of Income-tax (Appeals) has examined expenses in detail and found that the increase was mainly on account of the of octroi paid to Municipal Corporation of Mumbai. We find that the assessee has duly explained the increase in the expenses under both the heads as compared to the preceding assessment year before the learned Commissioner of Income-tax (Appeals). Further, we do not find any strength in the ground of the Revenue that learned Commissioner of Income-tax (Appeals) has not exercised the co-terminus power of the Assessing Officer and did not examine whether the expenses were incurred wholly and exclusively for the purpose of business. In our view, the learned Commissioner of Income-tax (Appeals) has examined the details of the expenses and the increase in expenses has been found by him to be justified. In our considered opinion, no disallowance can be made merely on the estimate or ad-hoc basis, without pointing out any specific defects in the books of accounts or vouchers. - Decided in favour of assessee

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• 2016 (11) TMI 355
  Penalty under section 271(1)(c) - Held that:- Assessee made entire disclosure in respect of its claim of expenditure and no false or incorrect particulars have been filed by the assessee. The assessee has also filed explanation for the claim made by it and which is not a malafide. Similarly, the assessee furnished all particulars in respect of claim of interest of Rs. 36 lacs related to loan of Rs. 2 crores from the Indian Air Force Benevolent Fund (IAFBF), however, the interest was disallowed due to dispute of the quantification of the amount in the year. In respect of the claim of loss on the sale of the factory shade and on account of stock and machinery we find that it was duly disclosed and appropriate note was given to the notes to the account to balance sheet. The Assessing Officer has not unearthed any new fact from his independent sources which could lead to furnishing of inaccurate particulars by the assessee. Similarly, all details of bad debt were available on the record. We find that the assessee has disclosed all facts regarding interest and other claims in the audited accounts and complete disclosure was made in notes to accounts and full explanation was furnished during the assessment proceedings and the explanation furnished are found to be bonafide. Also during the period the director of the company was under arrest and the company did not have any qualified persons to compile the return as per law and, therefore, even the interest written back credited to the profit and loss account was not withdrawn in spite of the clear mandate of section 41 (1) of the Act that such written back was not taxable - Decided in favour of assessee

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• Customs

• 2016 (11) TMI 339
  Revocation of CHA licence - export of ‘muriate of potash’ without valid sanction - Held that: - reliance placed on the decision of this Tribunal in K S Sawant & Co [2013 (12) TMI 119 - CESTAT, MUMBAI] where it was held that In our view, the punishment should be commensurate with the gravity of the offence. Revocation is an extreme step and a harsh punishment, which is not warranted for violation of Regulation 13(b). Accordingly, we are of the view that forfeiture of security tendered by the appellant CHA is sufficient punishment and revocation is not warranted. Accordingly, we set aside the order of the revocation and direct the Commissioner of Customs (General) to restore the CHA licence subject to the forfeiture of entire security amount tendered by the CHA. The ends of justice will be met by forfeiture of the security deposit - the revocation of licence of the appellant set aside - appeal partly allowed.

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• 2016 (11) TMI 338
  Valuation - addition on the value of imports on the basis of subsequent agreement - Held that: - the valuation was finalized in respect of import made in the year 1980-81 and the value declared by the appellant was accepted. Subsequently by the order-in-original, the value was revised and the 20% was loaded on the basis of the agreement dated 26.3.1996 for the subsequent period. Even though this agreement was entered into by the appellant with the foreign supplier, but this agreement has not changed the circumstances prevailing at the time of import by the appellant. Therefore, only on the basis of this agreement, the value could not have been enhanced for the previous import - enhancement of the value by 20% on the basis of subsequent agreement is illegal and cannot be sustained - appeal allowed.

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• 2016 (11) TMI 337
  Refund of additional duty of customs (ADC) - misconception of authority - Held that: - The authority is a creature of the statute to carry out the object thereof. He is expected to make the verification of the claim from grass root materials in accordance with law without simply acting on the basis of Chartered Accountant’s certificate. If he simply relies on third party evidence without carrying out his duty under law, there will be only empty formality followed to act in excess of exercise of the power which is not conferred on him. Therefore, the authority should act only within the parameters of law and carry out the object of the statute without any extraneous conditions imposed by him. Public confidence on law and statutory authority should not be shaken - appeal remanded to the Commissioner (Appeals) to dispose the matter in accordance with law within the time stipulated.

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• 2016 (11) TMI 336
  Refund - Notification No. 102/2007-Cus. Dated 14.09.2007 as amended by Notification No. 93/2008 dated 01.08.2008 - Held that: - the Ld. Commissioner (Appeals) has passed the impugned order without granting another opportunity to hear the appellant. The Counsel for the appellant submits that they have furnished all the relevant documents along with the Chartered Accountant Certificate pertaining to the relevant Bill of Entry - Appeal allowed by way of remand.

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• 2016 (11) TMI 335
  Valuation - second hand machinery - rejection of Declared value - rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - concessional rate under N/N. 29/1997-Cus dated 1st April 1997 - EPCG scheme - Held that: - reliance placed on the decision of case of TOLIN RUBBERS PVT. LTD. Versus COMMISSIONER OF CUSTOMS, COCHIN [2003 (11) TMI 90 - SUPREME COURT OF INDIA] where it was held that mode of determination of the value of the goods in question in such matters as has been laid down in Rule 4(1), the transaction value will have to be determined and under the Rule 4(2), if any exceptional circumstance is found then the transaction value indicated in Rule 4(1) will have to be rejected and further determination have to be made under Rule 8 - None of the authorities advert to this Rule or say for what reasons as provided under Rule 4(2) the transaction value will have to be rejected. The show cause notice does not justify rejection of value declared under rule 4 of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - appeal dismissed - decided against Revenue.

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• Central Excise

• 2016 (11) TMI 354
  Clandestine removal of molasses for open market sale - Held that:- When appellant contended that shortage might be due to some fault of employee, the factum that it was not within his knowledge, consent or approval was also to be proved by appellant. Even otherwise, if shortage was due to some negligence on the part of employee, the employee is also an agent of appellant, for any act committed by employee, appellant, being principal is responsible. Hence in present case, onus to prove that shortage was not on account of any objectionable conduct on the part of appellant, was upon appellant which it fails to prove. Tribunal, therefore, was justified in taking a view otherwise and against appellant. Question is answered against appellant. So far as question 1 is concerned, since shortage in physical verification, as already said and evident from record that same was not disputed by appellant, any verification by other authority at some other point of time, would not help appellant and, therefore, question 1 is also answered against appellant.

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• 2016 (11) TMI 353
  Refund claim - exemption under N/N. 108/95-CE - production of certificate for claiming exemption - Held that: - the production of certificate after the clearance of the goods is only a procedural lapse and will not vitiate its genuiness and acceptability for the purpose of clearances with benefit of N/N. 108/95 and by implication for the purposes of refund of duty paid by mistake - refund to be granted - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 352
  Recovery of duty - CENVAT credit - byproduct - Rule 6(3)(b) of Cenvat Credit Rules 2004 - inputs used in or in relation to the manufacture of dutiable goods as well as in exempted product - whether the Press-mud emerges as a by-product during the course of manufacture of Sugar/Molasses be subjected to the provisions of Rule 6(3) of the Cenvat Credit or otherwise? - Held that: - reliance placed on the decision of Balarampur Chini Mills Ltd Vs UOI [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] where it was held that 'sugar' is the final product and molasses is an intermediary product or by-product, therefore, for applicability of Rule 6, the manufacture of dutiable goods and manufacture of exempted goods are conditions precedent. Since waste is never manufactured and it only emerges in the process of manufacture of final product, Rule is not applicable to bagasse which is admittedly a waste, which emerges from the crushing of sugarcane for the manufacture of final product, namely, sugar. Recovery of duty not sustainable - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 351
  Denial of credit taken on capital goods - imposition of penalty u/s 27 - Held that: - the appellant has availed the credit on the capital goods without receiving the same in the factory. Although the appellant was not going to gain any benefit by taking the credit on the capital goods which has not been received in the factory. There is procedural lapse on the part of the appellant. For this, the penalty under section 27 is imposable on the appellant - penalty of Rs. 5,000/- imposed on appellant. Denial of re-credit - time barred - re-credit of excess amount debited in the RG-23A Part II register - Held that: - reliance placed on the decision of SWASTIK SANITARYWARES LTD Versus UNION OF INDIA [2012 (11) TMI 149 - GUJARAT HIGH COURT] where it was held that the claim of the petitioners seeking repayment of such amount cannot be seen as a refund claim made under section 11B of the Act - the appellant entitled to take suo-moto credit of excess amount debited in their RG-23A Part II register. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 350
  Valuation - modification of price list - declared value - comparable price - Held that: - there is nothing erroneous on the part of the appellants to discharge the duty liability on the price of the goods cleared by them as per the instructions of Elder Pharmaceuticals who had contracted with Indian Railways for supply of medicines. The medicines were supplied based upon the contract during 16.01.2000 to 30.08.2000 when transaction value was in force except for the month of June 2000. We find that there is no dispute as to the fact that the Elder Pharmaceuticals had cleared the P & P medicaments to Indian Railways at the price on which appellant had discharged the duty liability. Reliance placed on the decision of NATIONAL RAYON CORPN. LTD. Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY [1997 (6) TMI 336 - CEGAT, NEW DELHI] where it was held that additional duty cannot be demanded if the goods which were cleared on payment of duty were supplied at the lower rate to the purchasers - demand of duty not sustainable - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 349
  Modvat credit - iron ore fines - job work - Rule 57F(4) of Central Excise Rules, 1944 - Held that: - the appellant specifically stated before the lower authorities that they had taken the recredit of amounts reversed by them when they dispatched iron ore fines on receipt of iron ore pellets. Revenue has not contested those submissions made by appellant before them. Once it is established that iron ore pellets are received back from the jobworker, nothing survives in these appeals and the recredit availed by the appellant is correct - the appellant having reversed the CENVAT credit and then subsequently taken recredit on receipt of iron ore pellets is within the provisions of Rule 57F(4) of the Central Excise Rules, 1944 - Modvat credit rightly availed - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 348
  Maintainability of appeal - Abatement of excise duty - Pan Masala/ Gutkha/Chewing Tobacco - the grounds of appeal which were already adjudicated by the ld. Commissioner (Appeals) have again been made out as grounds of appeal before this Tribunal without pointing out as to how the findings of the ld. Commissioner (Appeals) are unsustainable - Held that: - the grounds of appeal which have been adjudicated by the ld. Commissioner (Appeals) have been made as grounds of appeal before this Tribunal without giving any justification and argument as to why the findings of the Ld. Commissioner (Appeals) on the said grounds of appeal are not sustainable. I, therefore, hold that the grounds of appeal before this Tribunal are not sustainable and I reject the Appeal. The respondent shall be entitled for all the consequential reliefs, as per law - appeal dismissed - decided against appellant.

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• 2016 (11) TMI 347
  Denial of CENVAT credit - input service of GTA - transportation of Bio-manure and Cane-seed - the decision in the case of Mawana Sugars Ltd. Vs. Commissioner of Central Excise & Service Tax, LTU, Delhi [2014 (12) TMI 1139 - CESTAT NEW DELHI] relied upon by the ld. Counsel - Held that: - I find that the Service tax paid on the transportation of Bio-manure and Cane-seed shall become input service to the farmers and not to the manufacturer. The case laws relied upon by the ld. Counsel are related to the input services utilized by the manufacturers whereas in the present case the services are utilized by the farmers and not by the manufacturer appellant. Therefore, I hold that Cenvat credit disputed in the matter before me, is not admissible to the appellant - appeal dismissed - decided against appellant.

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• 2016 (11) TMI 346
  Denial of CENVAT credit - limitation bar - Held that: - the said issue is no more res integra but settled by Hon’ble Gujarat High Court in the case of CCE, Surat Vs. Neminath Fabrics Pvt Ltd [2010 (4) TMI 631 - GUJARAT HIGH COURT] where under it has been held that demand notice cannot be considered as time barred even it is issued after one year from the date of detection of the suppression of fact with intent to evade payment of duty. The appellant had admitted to have wrongly availed Cenvat Credit on input invoices/Bills of Entry without receipt of the materials. In my view, therefore, the Ld. Commissioner(Appeals) is right in rejecting the respective appeals and I do not find any reason to interfere with the same - appeals dismissed - CENVAT credit not allowed - decided against assessee.

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• 2016 (11) TMI 345
  Refund claim - valuation - assessable value - inter-connected undertakings - unjust enrichment - Held that: - the refund, if any, filed would have to be subjected to the principles of unjust enrichment. I find the authorities below are confused on the eligibility of refund without verification of the fact whether the incidence of duty has been passed on to the customers or otherwise. The evidences, the appellant referred to in the Appeal paper-book even though submitted before the authorities below to ascertain whether the principles of unjust enrichment was attracted or not, but, the said evidences had not been examined. Therefore, in the interest of justice the matter needs to be remitted to the original authority to verify the aspect of unjust enrichment and decide the eligibility of refund accordingly. Needless to mention, a reasonable opportunity of hearing may be granted to the appellants - appeal allowed by way of remand.

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• 2016 (11) TMI 344
  Valuation - motor vehicles - Whether inclusion of certain expenses by the dealer is included in assessable value - These expenses relate to Pre-Delivery Inspection (PDI), free services provided to customers after sales, training providing to customers, labour involved on replacement of parts, advertisement of vehicles, storage at the dealer's end, repair of vehicles and outward handling of vehicles. - Held that: - the vehicle manufacturers, who are appellant/assessee in 4 appeals before us, are selling their vehicle on a declared price and are not getting any additional monetary consideration from the dealers over and above what is mentioned in the sales invoice - Decided in favor of the assessee.

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• 2016 (11) TMI 343
  Assessable value for payment of Central Excise duty under Section 4 of Central Excise Act, 1944:- admisiblity of "Turnover Tax" deduction from the wholesale price - Held that:- In view of the circular bearing No. 6/28/84-CX-1, dated 14-8-1984, nothing further survives in these appeals. See COMMISSIONER OF CENTRAL EXCISE, BELAPUR Versus PARLE BEVERAGES [2005 (2) TMI 260 - CESTAT, MUMBAI ]

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• 2016 (11) TMI 342
  Valuation - Uniforms for security guards - Mode of valuation - Held that:- No one is present on behalf of the appellant. The appeals are dismissed for non-prosecution. - Ref case:- 2004 (3) TMI 587 - CESTAT, NEW DELHI

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• 2016 (11) TMI 341
  Review petition - Ready Mix Concrete (RMC) and concrete mix (CM) - manufacturing at site - Held that:- We find no error much less apparent in the order impugned [Ref Case - 2015 (10) TMI 612 - SUPREME COURT] saying that RMC manufactured and used at site would not be covered by Notification No. 4 dated March 01, 1997 as it exempts only 'Concrete Mix' and not 'Ready Made Mixed Concrete' and we have already held that RMC is not the same as CM. - Decided against the assessee.

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• 2016 (11) TMI 340
  Prayer for review - Waiver of pre-deposit - Clandestine removal of goods - Financial hardship - Held that:- We find no error apparent on the face of the record to warrant recall of our order [2016 (5) TMI 654 - SUPREME COURT] saying that assessee has not deposited the amount against the order of the Tribunal. The review petition is, accordingly, dismissed.

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