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TMI Tax Updates - e-Newsletter
November 13, 2014
Case Laws in this Newsletter:
Income Tax
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Articles
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Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Classification of Bypass Toll Road – Building or Plant - the toll road would not qualify as a ‘plant’ so as to entitle the assessee a higher rate of depreciation - HC
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Depreciation - Merely, because the road is laid out does not mean that the Assessee is the owner thereof. He has laid it out for the purpose of the union and for its ultimate vesting in the public - No depreciation - HC
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CIT(A) has wrongly applied the provisions of section 68 in the case of the assessee by stating that the recipient society should also be in a position to identity the donors and establish the capacity to give a donation of the amount mentioned against their names - AT
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Application of provisions of section 292BB – validity of notice - Since the provisions of section 292BB curtails the right of the assessee, it would operate prospectively- AT
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LTCG - no capital gains arises on the sale of agricultural land even though purchaser purchased the property with an intention of selling it for non-agricultural purposes - AT
Case Laws:
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Income Tax
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2014 (11) TMI 357
Levy of surcharge on tax u/s 113 - Block assessment u/s 158BC – Effect of amendment w e.f. 2002 - Amendment retrospective or prospective - Held that:- Following the decision in Commissioner of Income Tax (Central) -I, New Delhi Versus Vatika Township Private Limited [2014 (9) TMI 576 - SUPREME COURT] - the intention of the legislature was to make it prospective in nature - The proviso cannot be treated as declaratory/statutory or curative in nature - the rate at which the tax is to be imposed is an essential component of tax and where the rate is not stipulated or it cannot be applied with precision, it would be difficult to tax a person - it has no retrospective effect - Decided against revenue.
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2014 (11) TMI 356
Disallowance u/s 14A r.w Rule 8D – Interest expenses on dividend income – Held that:- The Tribunal was rightly of the view that once it was duly established that no borrowed funds on which interest was paid had been invested for earning tax free income, no disallowance was permissible u/s 14A - under Rule 8D(2)(ii), a proportionate disallowance out of interest expenditure would be made in respect of interest expenditure which is not directly attributable to any particular income or receipt - Since the entire interest expenditure was attributable to business in which the resultant income was assessable to tax, a disallowance could not be made - The Tribunal rightly deleted a disallowance partially u/s 14A, sustaining the balance of ₹ 0.96 lacs on account of other expenditure to the extent of 0.5 percent of the average value of investment – Relying upon Dhampur Sugar Mills Ltd, Bijnor Vs Commissioner of Income Tax, Bareilly [2014 (9) TMI 791 - ALLAHABAD HIGH COURT] – Decided against revenue. Expenses incurred on transmission lines and contribution paid to the Uttar Pradesh Power Corporation Limited disallowed – Capital expenses or not - Held that:- In Empire Jute Co Ltd Vs Commissioner of Income Tax [1980 (5) TMI 1 - SUPREME Court] it has been held that the true test is to consider the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable - the expenditure which was incurred by the assessee in the laying of transmission lines was clearly on the revenue account - Upon the erection of transmission lines, they were to vest absolutely in UPPCL - The expenditure which was incurred by the assessee was for facilitating the efficient conduct of its business since the assessee had to supply electricity to its sole consumer UPPCL - This was not an advantage of a capital nature – thus, the order of the Tribunal is upheld – Decided against revenue.
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2014 (11) TMI 355
Entitlement for registration u/s 12AA - Held that:- The reasons given by the Original Authority to decline registration is trivial and does not sub-serve the cause of a charitable trust, which seeks registration u/s 12AA - There is no doubt that the Trust got registered the property, which was gifted to it, on 04.02.2010 itself - no fault could be attributed to the trust, when the donor does not physically handed over the possession of the property - the Department was not correct in coming to the conclusion that the genuineness of the trust is in doubt - the donee cannot make conditions or call upon the donor that he should deliver possession immediately - The delay in handing over possession cannot be attributed to the fault of the trust and as a consequence the interference drawn by the Original Authority that there is an error in maintaining the accounts appears to be hyper-technical - The Tribunal was correct in rectifying the error and allowing the appeal – as such no substantial question of law arises for consideration – Decided against revenue.
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2014 (11) TMI 354
Classification of Bypass Toll Road – Building or Plant - Entitlement for higher rate of depreciation - Whether the Tribunal was correct in law in holding that Moradabad Bypass Toll Road (Highway) was a building and not a plant – Held that:- CIT(A) rightly was of the view that the road cannot be said to be ‘plant’ and was a ‘building’ for the purpose of allowing depreciation - in Commissioner of Income-Tax Versus Gwalior Rayon Silk Manufacturing Co. Limited [1992 (4) TMI 3 - SUPREME Court] it has been held that the ‘roads’ would be ‘buildings’ within the meaning of Section 32 of the Act - the real test to construe a structure as a ‘plant’, it is to be seen that the structure is used as a tool or apparatus in the business of the assessee - the structure is so constructed so as to serve the assessee’s special technical requirements which in normal parlance is called the functional test - the toll road has been executed by the assessee on built, operate and transfer basis (BOT) - BOT is a form of project financing wherein a private entity receives a concession from the public sector or for that matter private sector to finance, design, construct and operate a facility stated in the concession contract - This enables the project proponent to recover its investment, operating and maintenance expenses in the project. The facility shall be transferred to the public sector at the end of the concession period - The word ‘build’ signifies construction of a road, whereby the tax payer brings into existence a structure/surface and nothing more - The word ‘operate’ signifies the understanding between the assessee and the public authority to collect charges for the usage of the road - The road is a surface on which the vehicles ply - No special features have been pointed out which serves as tool or apparatus while operating the road - No doubt in some roads toll plazas are erected for collecting the usage charges - These are small booths which are manned at some places and unmanned at some, where the user deposits the money in a machine which opens the gate - To cut costs and minimize the time delay, the usage charges are collected by some form of automatic or electronic toll collection equipment - the manned toll booths/toll plazas are primarily a facility/convenience for collecting the usage charges of the road and nothing more - That would not change the characteristic of ‘road’. ‘Plant’ as defined and understood for tax purposes means tool or equipment used for purposes of business or profession - Toll road would not be a plant in that sense, for, it is a capital asset which when used by any person, who makes payment for the said use, generates and results in accrual of income - It is a capital asset which is the very business of the assessee and not a implement or a tool used by the assessee for his business - the toll road would not qualify as a ‘plant’ so as to entitle the assessee a higher rate of depreciation – Decided against assessee.
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2014 (11) TMI 353
Reopening of assessment u/s 147 – Notice issued beyond four years as provided u/s 148 – Permissibility od deduction u/s 80HHC and 80IB - Held that:- The Tribunal rightly found that on both counts the Revenue has failed to satisfy them that the assessment could have been reopened - notice u/s 148 of the Act is after 4 years from the end of relevant AY 2003-04 - The ground raised is that the deduction has been granted under both section 80HHC and 80IB and which is impermissible – the findings cannot be be treated as vitiated by perversity or any error of law apparent on the face of the record – as such no substantial question of law arises for consideration – Decided against revenue.
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2014 (11) TMI 352
Power to invoke section 263 by Commissioner – Error of law appratent from record or not - Allowability of deduction @ 30% of annual rent u/s 24(a) – Held that:- The Tribunal held that the issue of rental income from the business center has been extensively examined, discussed and then adjudicated by the AO - As against the claim of that being income from house property and not business income, the AO has taken a view that it is assessable as income under the head house property - whether an income can be bifurcated as such and whether a rental income and income derived by providing certain services such as business center could be equated or not was prima facie debatable - whether the reliance placed by the AO on this judgment to arrive at the conclusion was well placed or whether he should have considered the matter in the light of the Special Bench decision is thus an aspect which has influenced the Tribunal in concluding that the ingredients of Section 263 are not satisfied - That is a possible view and which could have been taken - That the said view has been taken by itself was therefore not enough to invoke Section 263 is a conclusion reached - thus, there could be no reasons to state that the order is perverse or vitiated by an error of law apparent on the face of the record – Decided against revenue.
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2014 (11) TMI 351
Allowability of depreciation on toll road - ownership - When a person like the Assessee who is in the business of infrastructure development in execution of such agreement constructs a road and on Build, Operate and Transfer (BOT) basis on the land owned by the Government, can it claim depreciation on the toll road - Held that:- Merely, because the road is laid out does not mean that the Assessee is the owner thereof. He has laid it out for the purpose of the union and for its ultimate vesting in the public. Decision in the case of Noida Toll Bridge Co. Ltd. [2012 (11) TMI 556 - ALLAHABAD HIGH COURT] distinguished - Decided against assessee.
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2014 (11) TMI 350
Applicability of section 115BBC – Addition of donations – Donations made can be treated as anonymous or not - Held that:- The names of the donors along with their addresses were furnished before the Investigation Wing of the department and were also recorded in the books produced by the assessee before the AO - such donations cannot be classified as "anonymous donations" as per the provisions of section 115BBC(3) of the Act - the only requirement u/s. 115BBC(3) is that the names and addresses of the donors are to be recorded - CIT(A) has wrongly applied the provisions of section 68 in the case of the assessee by stating that the recipient society should also be in a position to identity the donors and establish the capacity to give a donation of the amount mentioned against their names – following the decision in Hans Raj Samarak Society Versus Assistant Director of Income-tax (Exemptions), Trust Circle-II, Delhi [2011 (9) TMI 369 - ITAT DELHI] - the CIT(A) erred in confirming the addition of ₹ 12,50,000 as anonymous donations attracting the provisions of s. 115BBC – Decided in favour of assessee. Expenses u/s 40(a)(ia) disallowed – Applicability of provision of section 10(23C) – Held that:- The total receipts reflected in the Income & Expenditure Statement as tuition fees was ₹ 82,89,000 - with respect to suppression of receipts, the AO has to thoroughly verify and examine and arrive at the amount over and above the actual fees accounted for - the eligibility for the assessee u/s 10(23C) is to be determined only after such exercise by the AO, the receipts are at ₹ 82,89,000 and if the suppression of the receipts which totals to ₹ 18,24,000 is being reduced on verification by the AO then the total receipts might figure at less than ₹ 1 crore, which would entitle the assessee for the benefit of section 10(23C) - if the assessee is exempted u/s. 10(23C) the income is not computed u/s 30 to 38 in order to attract disallowance u/s. 40(a)(ia) – Decided in favour of assessee. Addition of expenses – Capital expenses or not – Held that:- The assessee submitted that exemption has been claimed u/s. 10(23C)(iiiad) which states that income received from any university or other educational institution existing solely for educational purposes will not form part of the total income – thus, the matter is remitted back to the AO for adjudication – Decided in favour of assessee. Unexplained cash credits u/s 68 – Held that:- The assessee filed the confirmation letter which stated that the sources of the creditor are the compensation from the Andhra Pradesh Government - FAA in spite of the evidences filed before him ignored the fact of compensation received by the creditor - Copies of confirmation letter, land acquisition draft order, Bank statement of the assessee filed before the First Appellate Authority were filed before Tribunal also - the assessee has proved the cash credit with sufficient evidence – Decided in favour of assessee.
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2014 (11) TMI 349
Justification to invoke section 263 – Erroneous or prejudicial to interest of revenue or not – Held that:- Assessee is receiving incomes from rentals as well as service income from its industrial park - assessee was offering the income from rentals under the head “Income from House Property” and service income under the head “Business” - the time limit for reopening the assessment actually on this issue starts from this date and ends on or before 31.03.2011 - The assessment can be revised i.e., two years from the end of A.Y. in which the order was passed - As far as A.Y. 2007-08 is concerned, there was no order u/s 143(3) but there is an intimation u/s 143(1) dated 30.09.2008 - the issue which was decided in those years in later order was with reference to the subsidy received in A.Y. 2006-07 and subsidy and short term capital gain in A.Y. 2007-08 - The issue of assessing the correct income under the head “Business or Profession” or “House Property” was not an issue at all in those orders - exercising the jurisdiction by CIT to revise the orders u/s 263 on an issue which was already concluded by earlier order cannot be justified – relying upon CWT vs. Darshan Singh [2004 (8) TMI 74 - PUNJAB AND HARYANA High Court] - the additional grounds raised by assessee in these two years that CIT order u/s 263 revising a subsequent order u/s 147 on an issue which did not arise in that order was barred by limitation. The re-computation under the head “Business” would result in granting more depreciation and as rightly demonstrated by assessee in respective years, the computation will result in carrying forward more unabsorbed depreciation to the assessee not only in the impugned years but also in later years upto A.Y. 2012- 2013 - the incomes in the A.Ys. 2007-2008 and 2009-2010 were ultimately assessed under section 115JB on book profits as the normal computation resulted in losses or NIL income - the orders are not prejudicial to the interests of Revenue in any of the AYs - When this was pointed out by assessee in the course of proceedings u/s 263 by giving a detailed workings, CIT not only ignored them but even rejected them on the reason that assessee was entitled for 10% depreciation, whereas, 30% was claimed under the head house property towards repairs, on wrong presumption that the basis for those two claims per se are same - depreciation was claimed on assets which are valued more than ₹ 300 crores whereas 30% on rentals is only a small percentage when compared to depreciation. CIT got carried away by ‘additional depreciation’ and rejected the same holding that assessee has not produced any article or thing nor is engaged in generation or distribution in power so as to fit into the ambit of section 32(iia) - The word used ‘additional’ is not about additional depreciation but alternate claim of depreciation which was not claimed under the head ‘House property income’ - CIT wrongly considered it as a claim of “additional depreciation” ignoring that assessee’s claim of depreciation is under section 32(i) and not under section 32(iia), even as can be seen from the workings furnished - the claim of depreciation under the head “Business” is much more than the claims made under “Income from House Property” which results in not only working out higher losses / depreciation in the impugned years but also in later years as demonstrated before CIT by way of detailed working by assessee - the orders of AO are not prejudicial to the interests of Revenue – Decided in favour of assessee.
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2014 (11) TMI 348
Application of provisions of section 292BB – Notice issued to be deemed valid or not - Held that:- The notice u/s. 144 r.w.s. 158BC of the Act was issued in this case on 29.4.2008 and notice u/s. 143(2) was issued on 2.2.2005 - Since the provisions of section 292BB curtails the right of the assessee in Kuber Tobacco Products Pvt. Ltd. vs. DCIT [2009 (1) TMI 304 - ITAT DELHI] it has been held that section 292BB would operate prospectively - Therefore, section 292BB will not apply to the notice issued on 29.4.2003 u/s. 144 r.w.s. 158BC of the Act - following the decision in CIT vs. Mr. Salman Khan [ 2009 (12) TMI 909 - BOMBAY HIGH COURT] – it relates to the operation of 292BB & 292B which was amended w.e.f. 1st April, 2008 and was came into operation prospectively for the A.Y. 1999-2000 - the order of the CIT(A) is not sustainable as the provisions of s. 292BB cannot be invoked for the relevant period - As the notice u/s. 143(2) was served beyond the time limit prescribed by the Act, the subsequent scrutiny proceedings are null and void – Decided in favour of assessee.
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2014 (11) TMI 347
Computation of amount of deduction u/s 10A - Setting off of unabsorbed depreciation – Held that:- In M/s. Himatsingka Seide Ltd. Versus Commissioner of Income Tax [2013 (10) TMI 823 - SUPREME COURT] it has been held that the unabsorbed depreciation should be taken into consideration while computing the deduction u/s 10B of the Act - the unabsorbed business loss has to be deducted only from the profit available after allowing deduction u/s 10A of the Act – the order of the CIT(A) is modified. Exclusion of Travelling expenses and Software development charges incurred in foreign currency from the amount of “Export Turnover” – Held that:- In CIT Vs. Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT] it has been held that the items excluded from the Export turnover are required from the total turnover also - the amount of travelling expenses and Software development charges incurred in foreign currency is required to be excluded both from Export turnover and Total turnover for the purpose of computing deduction u/s 10A of the Ac - Decided in favour of revenue..
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2014 (11) TMI 346
Transfer pricing adjustment – Selection of comparables – Brescon Corporate Advisors Ltd – Segmental data not provided - Held that:- The company is engaged in carrying on merchant banking and investment activities along with providing project advisory services - A look at the Annual accounts of Brescon Corporate Advisors Ltd. indicates that it has two streams of income, namely, ‘Fee based financial services’ and ‘Other income’ - The assessee’s activity is to tender advice to the Manager about the avenues for making investment in real estate, and, if the Manger agrees to go ahead with such investment opportunity, then, to get involved in the process of finalization of the deal and then provide support services, including maintenance of books of account etc., on the clicking of the deal – there is no rationality in including this company in the list of comparables since no segmental data of the advisory services by this company is available, which component is very small vis-a-vis the entity level operations - Availability of separate data could have possibly made it comparable with the assessee – thus, the company is directed to be excluded from the list of comparables. Khandawala Securities Ltd. – Held that:- There is no data of net income of this component on segment level, except for its gross revenue - it includes equity capital markets transaction execution, mergers and acquisitions advisory, capital raising advisory and transaction execution relating to structured finance, real estate and infrastructure - Thus, out of total of 46% of the gross revenues of this company lying under the overall ‘Corporate advisory services division‘, it is manifest that only some of the activities undertaken by it bear some similarity to those carried on by the assessee - The fact that apart from entity level, no details of this overall segment of ‘Corporate Advisory Services’ are available, further cements the viewpoint – the company is directed to be excluded from the list of comparables. Sumedha Fiscal Services Ltd. – Held that:- The segmental data is available but such segment with the caption ‘Consultancy services’ also encompasses loan syndication, merchant banking, restructuring and other related advisory services apart from consultancy services - The composition of consultancy services simpliciter in this overall segment, which is akin to that of the assessee is not ascertainable - Since the advisory services are not separately identifiable from this broader segment of consultancy services, the overall consultancy segment of the company cannot be considered as comparable – thus, the matter is to be remitted back to the TPO for determination of ALP of the international transaction by considering the remaining four companies as comparable - Decided in favour of assessee. Disallowance u/s 14A r.w. Rule 8D – Held that:- The assessee earned exempt income and did not offer any disallowance u/s 14A - The AO recorded proper satisfaction that the provisions of section 14A were attracted as the assessee had incurred some expenditure for making investment, which was not offered for disallowance – in Maxopp Investment Ltd. Vs. CIT [2011 (11) TMI 267 - Delhi High Court] it has been held that the provisions of section 14A are attracted in such situations - As the assessment year under consideration is 2008-09, the prescription of rule 8D would apply - the AO was fully justified in making disallowance under clause (iii) of rule 8D at 0.5% of the average value of investments – Decided against assessee.
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2014 (11) TMI 345
Payment made as redemption fine treated as deemed income u/s 69C - Import of almond – Held that:- In Commissioner of Income-Tax Versus Ahmedabad Cotton Manufacturing Co. Limited [1993 (10) TMI 1 - SUPREME Court ] it has been held that the statutory impost paid as damages, penalty or interest, if compensatory in nature, it is allowable as business expenditure - the nomenclature was not conclusive - It was concluded that payment, though referred as a penalty, but in fact made in exercise of option available under statutory scheme, in course of assessee’s business, is allowable business expenditure - the payment was made to release the goods, therefore, it can be said to be compensatory as the Customs Authorities were recovering the difference between the market price and import cost - payment was in respect of commercial transaction between two unrelated parties - The assessee had applied for clearance of goods in India - Earlier similar goods have cleared by Customs Authorities under REP licence - The fault or defect in the REP licence was not attributable to the assessee - The assessee was not to be blamed who has not indulged in any offence or incurred any expenditure for the purpose which was prohibited by law. The order of the Tribunal was confirmed holding that the amount paid by the assessee to Customs Authorities was in the nature of redemption fine therefore allowable as business expenditure – thus, the amount paid by the assessee to the Customs Authorities in terms of order dated 27-10-1986 was in the nature of redemption fine and not penalty and it was allowable as business expenditure which enhances the cost of goods - the payment was made by sister concern of the assessee namely M/s Mangla Brothers through Account Payee cheque/DD - The assessee has also furnished GIR No. AV-297-M(2) of M/s Mangla Brothers - there is no reason to doubt the source of payment - the assessee also submitted that after a lapse of 20 years, it is not possible for the assessee to produce the books of account for verifying the relevant entry made regarding payment of ₹ 75 lacs - The fact that the assessee is challenging the disallowance of payment made to Customs Authority clearly establishes that the same was recorded in the books of account and therefore claimed as business expenditure – Decided in favour of assessee.
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2014 (11) TMI 344
Maintainability of appeal u/s 249(4) – Admission of appeal - Payment of Admitted tax made or not – Held that:- The only requirement of section 249(4) is payment of tax due on returned income and there is no time limit prescribed for payment of such taxes - The CIT(A) can use his discretionary power and admit the appeal if he is satisfied about the liquidity crunch or any other reasonable cause for non-payment of taxes - sub-section (4) of section 249 pertains to those assessees who have defaulted in payment of tax or did not file the return - as per section 249(4) of the Act no appeal before CIT(A) should be admitted unless at the time of filing of the appeal, where a return has been filed by the assessee, tax due on the income returned has been paid - In this sub-section, there is a clause (b) which is in respect of a condition where no return at all has been filed by the assessee - A Proviso underneath the section also prescribes that the cases falling under the said clause (b), the CIT(A) can grant exemption from the operation of the clause - An inference can be drawn on combined reading of both the sub-clauses of sub-section (4) of section 249 that in case of default of non-payment of tax an appeal is not to be admitted, but on removal of the defect of non-payment of tax an appeal deserves to be admitted and in one of the condition the assessee can be granted exemption by the CIT(A) – thus, the order of the CIT(A) is set aside and remanded back with a direction to admit the appeal – Decided in favour of assessee.
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2014 (11) TMI 343
Matter remanded by CIT to AO for ascertainment of the nature of land - Leviability of capital gain – Agricultural land situated within 8 km from a Municipality or Panchayat or not – Held that:- The assessee is not exigible to capital gains as the land was situated in an area in the village Kakunur where the population is only 1537 and not within 8 km from a Municipality or Panchayat - The assessee has also offered as income from other sources a sum of ₹ 8,45,000 which only shows that the AO has thoroughly verified the transaction of the assessee with respect to the sale of agricultural land and has taken a conscious view after application of his mind – hence, the order of the AO is neither erroneous nor prejudicial to the interests of the revenue by invoking the provisions of section 263 of the Act - Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer who passed the order, unless the decision is held to be erroneous - An order to be termed as prejudicial to the interests of the revenue, there must be some prima facie material on record to show that tax which was lawfully eligible has not been imposed – relying upon Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY High Court] - the AO applied his mind to the facts of the case and after necessary enquiry, he had passed the assessment order – revenue has not brought any material on record contrary to the facts brought out by the AO - decided in favour of assessee.
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2014 (11) TMI 342
Reopening of assessment u/s 147 – Disallowances made on the same books of accounts rejected earlier - Held that:- The original assessment was completed u/s 143(3) on 24/09/09 - After completion of the original assessment, CIT initiated proceeding u/s 263 of the Act by issuing show cause notice to assessee on 04/08/11 - when CIT has dropped the proceedings u/s 263 on the very same issue on which reopening of assessment was made, AO was not correct in either initiating proceeding u/s 147 or completing the assessment by making disallowance u/s 40(a)(ia) on subcontract payments - AO has reopened the assessment on the basis of P&L account, and ledger account copies enclosed along with return of income, which not only formed part of the record at the time of original assessment but were also examined by AO while completing original assessment - no fresh and tangible material has come to the possession of AO after completion of original assessment on the basis of which AO has come to believe that income has escaped assessment. Only because books of account, bills and vouchers are not available, AO proposed to reject the book result and estimate the profit and accordingly assessment was completed by estimating the profit at 5.5% clear of deductions and expenses - it cannot be said that books of account of assessee were not rejected - CIT(A) was correct in holding that once books of account are rejected, the AO cannot reopen the assessment for making specific disallowances relying upon the same books of account – relying upon Indwell Constructions Vs. CIT [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - initiation of proceeding u/s 147 of the Act is not valid, thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (11) TMI 341
Allowability of claim of deduction u/s 80IB – Quantification of the profit of the assessee from the activity of execution of works contract - Held that:- The assessee is engaged in the business of manufacture of HDPE pipes as well as execution of works contract - CIT(A) upheld the decision of the AO that the interest income received on bank deposits was not eligible for deduction u/s 80IB, and this apparently was accepted by the assessee and the decision of the CIT(A) on that aspect became final - the issue relating to the determination of the profit from the manufacturing division eligible for deduction under S.80IB was dependent on and consequential to the estimation of profit of the assessee from the activity of works contract in as much as the balancing figure, after estimating the profit of the assessee from the activity of execution of works contract, was going to be the profit of the manufacturing division which is eligible for deduction u/s 80IB. CIT(A) rightly after estimating the profit of the assessee from the activity of execution of works contract as per the directions of the Tribunal, proceeded to direct the AO to allow deduction to the assessee u/s 80IB in respect of the balancing figure, which represented the profit of the manufacturing division of the assessee - CIT(A) has not gone beyond the scope of the set aside proceedings, while directing the AO to allow the claim of the assessee for deduction u/s 80IB in respect of the profit of the manufacturing division, which is determined in consequence to the estimation of the profit of the assessee from the activity of execution of works contract – Decided against revenue. Invocation of section 40(a)(ia) – Held that:- CIT(A) has actually deleted the entire disallowance made by the AO u/s 40(a)(ia) by following the decision in COMMISSIONER OF INCOME TAX, KOL-XI, KOL Versus VIRGIN CREATIONS [2011 (11) TMI 348 - CALCUTTA HIGH COURT] - CIT(A) rightly deleted the disallowance made by the AO u/s 40(a)(ia) – Decided against revenue.
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2014 (11) TMI 340
Miscellaneous Application – Rectification of mistake apparent from record or not - Applicability of section 50C – Speaking order passed by Tribunal or not – Held that:- A plain reading of section 50C as a whole makes it clear that filing of an appeal against valuation made by the stamp duty valuation authority for stamp duty purposes only makes the provision contained u/s 50C(2) inapplicable - the Tribunal while considering assessee’s appeal has exhaustively dealt with the terms and conditions of the special power of attorney and has held that nowhere it speaks of transfer of plot in the name of Smt. Neeraja Reddy - there is no documentary evidence to show that physical possession over the property was actually handed over in favour of Smt. Neeraja Reddy except recitals in the sale deed - If assessee’s claim that the property was transferred to Smt. Neeraja Reddy in 1994 is correct, then, there was no necessity of assessee taking responsibility of indemnifying purchaser in the event of any future claim over the property. The Tribunal has not only given a finding that there is no proof of payment of sale consideration of ₹ 1 lakh by Smt. Neeraja Reddy to assessee but the fact that assessee applied for permission to construct a house over the said plot in 2006 also proves that assessee was the owner of the property till it was sold to Shri G. Srinivas Reddy in the AY - the assessee herself declared the capital gain in the impugned AY and not in any earlier AY - the contention of assessee that Tribunal has committed a mistake by not taking into consideration all these facts and evidences while considering assessee’s submission in respect of applicability of section 50C is without merit - the Tribunal consciously came to a conclusion that the property was transferred by assessee in the AY and upheld the applicability of section 50C. - Rectification denied on this ground. The Tribunal has taken a decision in respect of the year of taxability on capital gain as well as the application of section 50C on overall consideration of facts and materials on record as well as the submissions made by parties, there is no reason to accept assessee’s contention that the order by the Tribunal is erroneous - assessee is only trying to reargue his case and wants a review of the order passed by the Tribunal – This is not within the scope and ambit of section 254(2) of the Act, which envisages rectification of mistake apparent on the face of record – Tribunal has not given any finding either way on the aforesaid grounds raised by assessee - Therefore, there is a mistake in the order of the Tribunal to that extent - Decided partly in favour of assessee.
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2014 (11) TMI 339
Addition to the value of FBT made – CBDT instructions appreciated or not – Conference fee paid - Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the claim of the assessee that this expenses was related to fees paid for the employees to participate in the exhibition held at Japan - this expenditure is exempt from FBT by virtue of Sec, 115WB(2)(C) because the provisions of the act provides that fees for participation by the employees in any conference is exempt - apparently the facts with respect to the nature of expenditure incurred by the assessee do not clearly emerge from the order of the AO - thus, the matter is remitted back to the AO for verification. Exclusion of Trade mark fee and Sales promotion expenses - Held that:- The nature of expenditure incurred by the assessee is also not clearly brought out in the order of AO in order to determine the relevant provisions of the Act which could be invoked to bring the expenses under the net of FBT - thus, the matter is remitted back to the AO for verification. Foreign maintenance allowance and staff training expenses – Held that:- CIT(A) has categorically made a finding that these expenditures also includes boarding and lodging - the correct and full classification of expenditure is not split and made clear, and thus the relevant provisions of the Act that should be invoked to the relevant expenditure is also not stated in the order – thus, the matter is remitted back to the AO for fresh consideration – revenue could not bring anything contrary, thus, the order of the CIT(A) is upheld – Decided in favour of assessee.
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2014 (11) TMI 338
LTCG – Transaction of sale of agricultural land – land constitutes agricultural land or not – Held that:- Assessee has purchased agricultural land and put to agricultural use as such earlier - This fact was admitted by AO in the order itself - Even though AO considered that amount spent towards development of agricultural land, the fact was that it was spent for ratification deed and not for any development activity on the agricultural land - assessee has sold only agricultural land which was also used and put to agricultural use earlier and the purpose for which the purchaser utilized the land cannot be considered as an evidence of change of nature of land as was considered by AO - CIT(A) rightly was of the view that the intention of the purchaser has nothing to do with the nature of land so sold by the seller at the time of sale - what the assessee sold during the year to the purchaser is agricultural land and this was evidenced and certified by the revenue records – CIT(A) rightly followed the decision in ClT v. Debbie Almao and Joaqyam Atrnao [2010 (9) TMI 560 - Bombay High Court] - no capital gains arises on the sale of agricultural land even though purchaser purchased the property with an intention of selling it for non-agricultural purposes - assessee's land was used as agricultural land and is away from GHMC limits beyond 8 KMs, the transaction does not give rise to taxable capital gains – Decided against revenue.
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Customs
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2014 (11) TMI 360
Settlement commission rejected the application - full and true disclosure - pendency of case - Seizure of goods - mis-declaration of description and value - on testing, it was found that the fabrics were different composition and GSM than what was declared in the bills of entry - Whether the application contains a full and true disclosure of the manner in which additional duty liability has been derived as required under Section 127B. - Held that:- in view of the fact that in response to the notice dated 21.09.2012, while giving explanation, the petitioner did not disclose full facts and the petitioner made a false statement to clause (viii) as specified in the notice dated 21.09.2012 and the petitioner falsely stated that Section 123 is not applicable to the goods imported by the applicant. The fact remains that Section 123 of the Customs Act was invoked by the Jurisdictional Commissioner. Therefore, the petitioner should have made a full and true disclosure stating that Section 123 of the Customs Act was invoked and if it is the case of the petitioner that on account of the interpretation given by the Special Bench of Settlement Commission, the case could be entertained and they should have given the explanation. Settlement Commission was fully justified in rejecting the petitioner's application that too after taking note of the order passed by the Special Bench of the Commission - Decided against assessee.
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2014 (11) TMI 359
Suspension of Custom Broker License - Prohibition to operate as Customs Broker within the jurisdiction of Cochin Customs - Held that:- The said order is an order suspending the license of the petitioner after granting an opportunity of hearing. Respondent has no contention that the authority has no jurisdiction to pass the order or it has been passed in breach of the rules of natural justice. There being a statutory remedy available, we are of the view that this Court ought not have entertained the writ petition by passing the impugned order. It is well settled by the Apex Court that the exercise of writ jurisdiction can be made by this Court under Article 226 of the Constitution in cases where a statutory remedy is not provided. The Apex Court in this context has laid down in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others [1998 (10) TMI 510 - SUPREME COURT] that when a statutory remedy is provided, the High Court shall not entertain a writ petition, except in cases where the order impugned is passed in violation of principles of natural justice in wholly without jurisdiction or when the vires of the Act is challenged. Thus, we are satisfied that the interim order passed by learned Single Judge cannot be upheld. Consequently, we set aside the interim order passed by learned Single Judge dated 23.09.2014. We, however, observe that the Commissioner of Customs, Mumbai may proceed to finalise the proceedings as early as possible - Decided in favour of Revenue.
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2014 (11) TMI 358
Detension of goods - import of Defective MS CR Sheet Cuttings - petitioner did not submit the copy of the Asian India Free Trade Agreement (AIFTA) Certificate of Origin -benefit of Notification No.46 of 2011-Customs - Misdeclaration of goods - Ineligible certificate for availing benefit of Notification - whether the goods in question have to be retained by the respondents or as to whether the respondents should be directed to provisionally release the goods pending further action by them - Held that:- Sofar as subject import, in the counter affidavit, the respondents have stated that the duty foregone is ₹ 2,08,358/-. This appears to have been calculated on the ground that the petitioner is not entitled for the benefit of Notification No.46 of 2011-Customs. Therefore, while preserving the right of the department to proceed with the investigation not only with subject consignment, but as well as the prior imports, this Court is of the view that the petitioner should be permitted to remove the goods by way of provisionally release pending investigation/issuance of show cause notice and adjudication subject to stringent conditions. This Court is inclined to exercise such discretion in the light of the fact that the duty, which is alleged to have been foregone on the subject import is ₹ 2,08,358/-, as per the counter affidavit and the goods in question are not prohibited items nor any licence is required for import of the said items. Petition is disposed of, by directing the respondents to provisionally release the goods covered Bill of Entry No.6022232, dated 05.07.2014, under Section 110-A of the Customs Act, subject to the condition that the petitioner deposits a sum of ₹ 2,08,358/- and also furnishes a bond to the satisfaction of the respondents as regards any fine or penalty that may be imposed as in the dissuasion of the respondent. On the petitioner making the above remittance and executing the bond to the satisfaction of the respondents, the goods shall be forthwith released. - Decided partly in favour of assessee.
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Service Tax
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2014 (11) TMI 363
Rectification of mistake - Decision given on incorrect judgment - Held that:- though the Tribunal’s final order relies upon the judgment of the Tribunal in the case of Deepak Transport Bus Service vs. CCE, Pune - III (2012 (6) TMI 390 - CESTAT, Mumbai), this order though a stay order, is based on the judgment of Hon’ble Madras High Court in the case of Secretary Federation of Bus Operator Association of Tamilnadu vs. Union of India (2001 (4) TMI 7 - HIGH COURT MADRAS) and also the judgment of Hon’ble Punjab & Haryana High Court in the case of CCE, Chandigarh vs. Kuldeep Singh Gill (2010 (4) TMI 283 - PUNJAB & HARYANA HIGH COURT). The plea that the judgments of these High Courts are not applicable to the facts of this case is a point of law and not a point of mistake apparent from record and, hence, the same cannot be considered at this stage. Moreover, in pursuance of the final order, the matters have already been decided denovo by the Commissioner (Appeals) on the issue of eligibility of the appellants for exemption under Notification No. 1/2006-ST and 6/2005-ST and for this reason, at this stage the impugned order cannot be recalled - Rectification denied.
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Central Excise
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2014 (11) TMI 370
Valuation of goods - Inclusion of transportation charges in assessable value - Held that:- Rule 5 of the Central Excise Valuation Rules, 2000 was amended by Notification No.11/2003-CE (NT) dt. 1.3.2003 and the condition of showing the transportation charges separately in the invoice have been withdrawn. We, further find that there is no allegation against the respondent that they have recovered the transportation charges over and above actually paid by them. It is the contention of the respondent that goods have been sold at their factory gate and whatever the transportation charges paid by them on behalf of the buyers have been charged through debit note. Therefore, we do not find any infirmity in the impugned order. In these circumstances, we hold that the transportation charges collected by the respondents are not includible in the assessable value. - Decided against Revenue.
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2014 (11) TMI 369
Rectification of mistake - Tribunal disposed of two Orders-in-Original and only one of the order number is mentioned in the final order - Held that:- Law as laid down by the Hon’ble High Court of Gujarat in the case of Himanshu Traders (2010 (2) TMI 384 - GUJARAT HIGH COURT) would be applicable as we have considered the merits of the case and it needs to be ascertained whether appellant is eligible for the Cenvat credit or not. Since identical issue as is in the matter is remanded back to the Adjudicating Authority, we find that the error which has crept in the final order of the Tribunal by non-mentioning of OIO No. 10/Dem/2002 needs to be rectified and we do so. - Rectification done.
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2014 (11) TMI 368
Waiver of pre deposit - Input service credit - courier services - whether appellants are eligible to avail cenvat credit of service tax paid on CHA, Courier services and C&F service - Held that:- Following decision of Fenner India Ltd. Vs CST Madurai vide [2014 (7) TMI 355 - CESTAT CHENNAI] - applicant has made out a prima facie case for waiver of predeposit of tax along with interest and penalty. Accordingly, the predeposit of tax along with interest and penalty is waived and its recovery is stayed during pendency of the appeal - Stay granted.
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2014 (11) TMI 367
Classification of criss cross patches of tyre/tube rubber - classification under CSH 4008.21 or under CSH 4008.21 - Held that:- In the case of Unipatch Rubber Ltd. [2007 (11) TMI 434 - SUPREME COURT OF INDIA], the issue travelled up to the Apex court and in appellant's own case, the matter was remanded to the Commissioner (Appeals) to examine the issue afresh and decide the classification. In remand proceedings the ld. Commissioner (Appeals) in the case of Samarth Rubber Products Ltd. [2008 (7) TMI 827 - COMMISSIONER OF CENTRAL EXCISE (APPEALS), PUNE-II] classified the said product under CSH 4016.99 and the said order has been accepted by the revenue. In these circumstances, we hold that the product namely Criss-cross patch of rubber are classified under Chapter heading 4016.99 - Decided in favour of assessee.
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2014 (11) TMI 366
SSI exemption under Notification No. 8/2003-CE dated 01.03.2003 - denial of the benefit of exemption under Notification No. 67/95-CE dated 16.03.95 - final product was cleared without payment of duty - Held that:- Benefit of the Notification is not available to the intermediate product (covered by the expression ‘input’ vis-a-vis final product) where the final product is exempt from the whole of the duty of excise or additional duty of excise or chargeable to ‘nil’ rate of duty. It is submitted that a final product specified under SSI Notification is not one exempt from ‘the whole of the duty of excise’ or chargeable to ‘nil’ rate of duty. It is also pointed out that ld. Commissioner, in the impugned order, has not examined the issue properly appellants have made out prima facie case against the demand of duty. Accordingly, there will be waiver of pre-deposit and stay of recovery in respect of the duty and penalty amounts - Stay granted.
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2014 (11) TMI 365
Duty drawback claim - Wrong application of claim - Held that:- In this case duty drawback claim has been rejected only on the premise that instead of applying under Rule 7 of duty drawback claim Rules, they have applied under Rule 6. The similar issue came up before this Tribunal in the case of Cummins (India) Ltd. Vs. Commissioner of Customs, Pune reported in [2012 (6) TMI 432 - CESTAT, Mumbai] wherein this Tribunal has remanded the matter back to the adjudicating authority to consider the application filed under Rule 6 by the appellant under Rule 7 of the said Rules. Therefore, following the decision of this Tribunal, we remand the matter back to the adjudicating authority to consider the applications filed by the appellant under Rule 7 instead Rule 6 of the said Rules and sanction their eligible duty drawback claims. - Decided in favour of assessee
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2014 (11) TMI 364
Waiver of pre-deposit of duty - Denial of CENVAT Credit on input services - Applicability of Rule 9(1)(b) of CCR - payment of service tax by fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act - Held that:- By Notification No.13/2011 CE (NT) dated 31st March 2011, an amendment had taken place in Rule 9(1)(b) and a new clause (bb) was inserted which deals with the Service Tax with effect from 01.04.2011. A s during the relevant period the provision denying the credit of Service tax was not in force therefore, the applicant has made out a case for 100% waiver of the requirement of pre-deposit. Accordingly we grant waiver of pre-deposit of entire amount of service tax availed by the applicant as CENVAT Credit along with interest and penalty and stay recovery thereof during the pendency of the appeal - Stay granted.
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2014 (11) TMI 362
Demand of differential duty - Provisional assessment - Held that:- Duty has to be calculated after considering the duty payable on all the goods together and therefore excess payment if any will have to be adjusted towards short payment to calculate the differential duty payable - Decision of assessee's own previous case [2011 (10) TMI 201 - KARNATAKA HIGH COURT] followed. Relevant date to pay interest in case of finalization of provisional assessment – interest is liable to be paid by the appellant from 1st day of the next month on the differential duty payable for each month as finalized. Needless to say the interest has to be calculated only if there is a differential duty payable after setting off the excess payment towards short payment - Following decision of CADBURY INDIA LTD. Versus COMMISSIONER OF CUS. & C. EX., PUNE-I [2008 (11) TMI 62 - CESTAT MUMBAI] - Decided in favour of Revenue.
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2014 (11) TMI 361
Defaults in payment of duty beyond thirty days - Held that:- assessee in such situation need not be required to pay the entire default amount in cash and take the CENVAT credit back into the CENVAT credit account instead they have to pay the interest liability on the default amount. That would be sufficient and once the interest amount is paid, the default can be considered as rectified. Following decision of SOLAR CHEMFERTS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, THANE-I [2011 (6) TMI 640 - CESTAT, MUMBAI] - Decided partly in favour of assessee.
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