TMI Tax Updates - e-Newsletter
November 14, 2015

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise

TMI SMS

• Clarifications on Swachh Bharat Cess - Swachh Bharat Cess will be calculated on abated value and will be applicable on reverse charge also

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• There is no distinction between habitual & one time offenders u/s 73(3) - If service tax with interest is paid before SCN, no penalty u/s 76

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Articles

1. New section 133C of the Income-tax Act, 1961 – an analysis

   By: DEVKUMAR KOTHARI

2. MEDICAL TREATMENT OF EYES FOR IMPROVING THE VISION HAS AN ELEMENT OF PERSONAL EXPENDITURE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Tenure of the High Level Committee(HLC) to interact with Trade & Industry on Tax Laws Extended by one year beyond 25th November, 2015

2. CBDT to set-up a 'Taxpayers' Lounge' at the India International Trade Fair - 2015 to Highlight the Various Taxpayer-Friendly Initiatives Taken by the Department Among Others

3. Clarifications on Swachh Bharat Cess - Swachh Bharat Cess will be calculated on abated value and will be applicable on reverse charge also

Notifications

Service Tax

1. 25/2015 - dated 12-11-2015 - ST

Seeks to provide composition rate for Swachh Bharat Cess as applicable to ST under sub-rules 7,7A,7B,7C of rule 6 of STR, 1994

2. 24/2015 - dated 12-11-2015 - ST

Seeks to provide that provisions of notification No. 30/2012 - Service Tax dated the 20th June,2012 shall be applicable for the purposes of Swachh Bharat Cess - Applicability on reverse charge

3. 23/2015 - dated 12-11-2015 - ST

Seeks to amend notification No.22/2015-ST dated the 6th November, 2015 so as to specify that Swachh Bharat Cess will be calculated on abated value.

Highlights / Catch Notes

Income Tax

• Court Rules Against Department's Attempt to Offset Taxpayer Refund with Later Demands; Emphasizes Fairness in Tax Refunds.

  Case-Laws - HC : Grant of refund with interest - department seek to adjust the refund with subsequent demand - it would amount to putting a premium over the wrong act of the revenue of not refunding the amount when due and adjusting the same against the demands which have accrued much later in point of time - HC
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• Tax Year Stands Alone: Previous Year's Outcome Doesn't Guarantee Current Benefits, Each Year Assessed Independently.

  Case-Laws - HC : Assessee cannot claim any benefit by urging that no addition under similar circumstances was made by the then Assessing Officer for the assessment year 2005-06, as each year is independent and such addition depends upon facts and circumstances existing at the relevant time - HC
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• Notice u/s 201 for FY 2007-2008 declared invalid due to time-bar; issued past the deadline.

  Case-Laws - HC : Validity of notice under Section 201 - insofar as the Financial Year 2007-2008 is concerned, in the circumstances of this case, no order can be made under sub-Section (1) of Section 201 after 31.03.2011. Since the notice itself had been issued on 17.02.2014, it is clearly time barred. - HC
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• Protective Assessment Invalidated as AO Confirms Payment by M/s Om Metal; CIT(A) Deletes Protective Addition.

  Case-Laws - AT : Protective assessment - when the AO accepts that the cash payment has been made by M/s Om Metal then protective addition in the hands of assessee is not sustainable and the same was correctly deleted by the first appellate authority i.e. CIT(A) - AT
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• No Penalty for Fertilizer Business Due to Monsoon Impact u/ss 271D & 271E of Income Tax Act.

  Case-Laws - AT : Penalty u/s 271D and 271E - violation u/s 269SS&T - When assessee has to buy fertilizer to a huge extent depend upon monsoon and necessity of the farmers also. Keeping in these aspects assessee has to carry his business. - No penalty - AT
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• Deductions for House Property Income: Standard Deduction & Interest on Borrowed Capital u/ss 24(a) & 24(b).

  Case-Laws - AT : Standard deduction and interest paid on housing loan - Once the income is assessable under the head house property, consequent deductions being standard deduction u/s 24(a) and interest paid on borrowed capital u/s 24(b) should be allowed while computing the income from house property. - AT
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• Penalty u/s 271(1)(c): Rental Income Addition Doesn't Automatically Justify Penalty; Assessment and Penalty Proceedings Are Separate.

  Case-Laws - AT : Penalty under section 271(1)(c) on addition of rental income - the assessment proceedings and penalty proceedings are quite distinct and the findings given in the assessment order are not conclusive. Accordingly, mere addition of amount as income is not the criteria to levy penalty. - AT
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• Reassessment Proceedings Allowed u/s 147 Despite Prior Intimation u/s 143(1), No Block by Section 143(3) Steps.

  Case-Laws - AT : Reopening of assessment - failure to take steps u/s.143(3) will not render the AO powerless to initiate reassessment proceedings u/s.147 r.w.sec.148 of the Act, though the intimation was sent u/s.143(1) of the Act. - AT
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• Exemption Denial u/ss 10A & 10B IT Act: Disallowed Provisions to Count as Business Profit for Deductions.

  Case-Laws - AT : Denial of exemption u/s.10A/10B in respect of provisions no longer required written back - disallowance made with regard to provision is to be considered as part of business profit for the purpose of determining deduction u/s.10A/10B of the Act. - AT
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Customs

• Court Upholds Rs. 10 Lakhs Penalty for Illegally Selling Duty-Free Diamonds and Gold Domestically Instead of Exporting.

  Case-Laws - AT : SEEPZ - allegation of Clandestine clearance of duty free goods, a large quantity of diamonds, gold etc. in the domestic market instead of exporting - Keeping in view the over all facts, the penalty of ₹ 10 lakhs cannot be considered on the higher side - AT
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• Penalty for Misdeclaration u/s 114AA Overturned; Importers Not Liable for Shipper's Mistake.

  Case-Laws - AT : Misdeclaration of goods - Penalty u/s 114AA - On coming to know the mistake they were able to explain the mistake. If the shipper made a mistake, the importer/CHA cannot be penalized for it. - AT
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• Fraudulent Duty Drawback Claims Case Exposes Revenue's Delay in Handwriting Verification Despite Clear Forgery Evidence.

  Case-Laws - AT : Availment of fraudulent duty drawback claim - Fabrication and forging of documents - IThe case is full of flaws. It is not explained why for many years Revenue did not get the handwriting of the accused verified by the handwriting expert. This is especially so when Shri GS Kohli admittedly forged the signatures of all other agencies such as banks, steamer agents, RBI, DGFT etc - AT
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Indian Laws

• Swachh Bharat Cess: Calculate on Abated Value of Taxable Services, Applicable Under Reverse Charge Mechanism.

  News : Clarifications on Swachh Bharat Cess - Swachh Bharat Cess will be calculated on abated value and will be applicable on reverse charge also
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Service Tax

• Claim Denied: Appellant Cannot Recover Rs. 3 Lakhs Due to Unjust Enrichment Doctrine, Already Recovered from Customers.

  Case-Laws - AT : Refund claim - Unjust enrichment - barring an amount of ₹ 3 lakhs, the appellant themselves were admitting that the remaining amount has been recovered from their customers. Even the amount of ₹ 3 lakhs which according to them has been paid by from their own resources cannot be considered for refund as the doctrine of unjust enrichment would be applicable at this stage - AT
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• Service Tax Dispute: Advertisement Agency Service Reclassified as "Sale of Space or Time for Advertisement Service.

  Case-Laws - AT : Waiver of pre deposit - Advertisement Agency - the service seems to be more appropriately covered under the scope of Sale of Space or Time for Advertisement Service - prima facie find that the appellant is not covered under the scope of advertising agency service - AT
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Central Excise

• CENVAT Credit Utilization: No Penalty Imposed for Excess Withdrawal as Funds Remain Available for Future Payments.

  Case-Laws - AT : Excess utilization of cenvat credit - Even if they would have paid duty in a particular fortnight by PLA, i.e. without excess withdrawal, the so called as withdrawal would be available to them for payment in the next fortnight - No penalty - AT
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• Export Duty-Free Inputs: Demand Dismissed as Appellants Prove Export Through EOU Successfully.

  Case-Laws - AT : Procurement of inputs free of duty for use in manufacturing of export goods - The only condition in the notification is that appellant has to produce proof of export of the final product. - the goods have been cleared to EOU and appellants have produced proof of export through EOU - demand set aside - AT
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• CENVAT Credit Denial Contested: Locomotive Activities Linked to Manufacturing Process, Qualifying as Input for Benefits.

  Case-Laws - AT : Denial of CENVAT Credit - locomotive - the activities carried out with the help of locomotive, has a nexus with the manufacturing process, and as such, as per the clear and unambiguous definition of input, the locomotive cannot be denied the cenvat benefit. - AT
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Case Laws:

• Income Tax

• 2015 (11) TMI 546
  Grant of refund with interest - department seek to adjust the refund with subsequent demand - Held that:- Petitioner is entitled to a direction to the respondent to forthwith refund to it the entire amount of refund without any adjustment being made against such amount, inasmuch as, the respondent cannot be permitted to take advantage of his own wrong in not refunding the amount due and payable to the petitioner at the appropriate time in terms of the provisions of the Act, and then seek to set off the refund against a demand subsequently raised, otherwise it would amount to putting a premium over the wrong act of the respondent of not refunding the amount when due and adjusting the same against the demands which have accrued much later in point of time. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The respondent is directed to forthwith, within a period of fifteen days from the date of receipt of this order, refund the entire amount of Rs. 17,08,78,351/- to the petitioner together with interest under section 244A of the Act in accordance with law, without making any adjustment in relation to any demand which arises after the date of this order. - Decided in favour of assessee.

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• 2015 (11) TMI 545
  Advances for purchase of raw material from two concerns being trade creditors as interest free loan - whether advances were made for commercial expediency? - Held that:- The Assessing Officer, CIT(A) and the Tribunal had concurrently concluded that the advance to M/s Chirag Spinning Mills amounting to Rs. 15 lacs appearing as opening balance had remained outstanding at the end of the year. The assessee had failed to show that the advance was made for purchase of yarn or for any other business transaction. Similarly, in the case of Dina Nath & Sons, there was opening balance of Rs. 2,69,659/- whereas against another purchase of Rs. 2,29,890/-, the assessee had made payment of Rs. 2,27,590/- retaining outstanding balance of Rs. 2,67,359/-. It was also held not to be for business purposes as the assessee had failed to explain why the purchase made during the year was not adjusted out of the said amount. In the light of the concurrent findings of fact recorded by the Assessing Officer, CIT(A) and the Tribunal, the assessee cannot claim any benefit by urging that no addition under similar circumstances was made by the then Assessing Officer for the assessment year 2005-06, as each year is independent and such addition depends upon facts and circumstances existing at the relevant time. - Decided against assessee.

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• 2015 (11) TMI 544
  Validity of notice under Section 201 - period of limitation - Held that:- The proviso to sub-Section (3) stipulates that an order can be passed at any time on or before 31.03.2011. This makes it clear that insofar as the Financial Year 2007-2008 is concerned, in the circumstances of this case, no order can be made under sub-Section (1) of Section 201 after 31.03.2011. Since the notice itself had been issued on 17.02.2014, it is clearly time barred. Consequently, the impugned notice dated 17.02.2014, as also the order dated 14.03.2014, cannot survive. They are set aside. - Decided in favour of assessee.

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• 2015 (11) TMI 543
  Disallowance of expenditure incurred by the assessee on repairs, maintenance and miscellaneous expenditure - CIT(A) scaled disallowance down to 15% - Held that:- As find from the remand report is that AO with regard to the repair charges stated that assessee’s claim appeared to be in order except for the differences mentioned by him at para 3 of the remand report. Same opinion has been given by him with respect to other repairs also. Very same view has been taken by him with regard to the miscellaneous expenditure also. Only major lacuna that has been pointed out by the AO is that some of the bills / invoices relate to preceding assessment year. CIT (A) worked out the percentage of difference between figures shown in the ledger entries and the supporting bills and found that difference varied between 1 to 23%. He therefore considered that an addition of 15% would be sufficient to address the deficiencies pointed out by the AO. In the face of the remand report of the AO, reproduced by us above, and the quantum of variation pointed out therein, we are of the opinion that the disallowance of 15% sustained by the CIT (A) was reasonable. - Decided against revenue. Disallowance of depreciation on assets given by assessee under finance lease - CIT(A) allowed the claim - Held that:- AO himself has stated in the assessment order that though assessee termed the lease as financial lease, the terms of the lease did not provide for transfer of ownership to the lessee automatically at the end of the lease. Only reason why the lease was considered to be financial in nature was that the lease period was more or less on par with the life of the assets which were leased out and the renewal of the lease was at the option of the lessee for a nominal rent. However, in our opinion none of these can substitute the clause in the lease agreement which specified that the ownership of the assets continued to be with the assessee. Insurance for the leased products were borne by the assessee. Assessee was the owner and held the title of the assets. Giving an equipment on lease by itself can be considered as a business. We are of the opinion that by virtue of the decision of Hon’ble Apex Court in I. C. D. S (2013 (1) TMI 344 - SUPREME COURT), assessee having capitalised the assets in its books was eligible for claiming depreciation thereon.- Decided against revenue. Disallowance of warranty provisioning done by the assessee - CIT(A) allowed the claim - Held that:- It is an admitted position that the warranty provisioning for the relevant previous year was much higher than that of the preceding year, though the sales of the assessee were more or less of the same scale. Assessee itself in its letter dt.12.01.2005 to the AO had stated that there was change in methodology in computing the warranty cost. None of the lower authorities have verified whether the change in methodology was based on a scientific principle and whether the computation done by the assessee was in accordance with the law laid down by the Hon’ble Apex Court in the case of Rotork Controls India P. Ltd (supra), where assessee was also a party. We are of the opinion that this issue requires a fresh look by the AO. We set aside the orders of authorities below and remit the issue back to the file of the AO for consideration in accordance with law declared by the Hon’ble Apex Court in the case of Rotork Controls India P. Ltd (2009 (5) TMI 16 - SUPREME COURT OF INDIA). - Decided in favour of revenue for statistical purpose. Disallowance u/s 40(a)(i) - default in depositing the tax deducted at source - CIT(A) delted disallowance - Held that:- Hon’ble Delhi High Court in the case of Oracle Software India Ltd (2007 (5) TMI 204 - DELHI High Court) had held that once tax was deducted at source within the relevant previous year, disallowance u/s.40(a)(i) of the Act could not be made on the ground that the remittance thereof was made in the next financial year. We are of the opinion that CIT (A) was justified giving relief to the assessee. - Decided against revenue.

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• 2015 (11) TMI 542
  Protective assessment - Addition on investment in land from undisclosed income - CIT(A) deleted the addition - Held that:- CIT(A) noted that the appellant/assessee was able to convince the AO that it had only made cheque payments to M/s Om Metal and no cash payment has been made by the assessee company. The CIT(A) also noted that the cash payment has been made by M/s Om Metal and the property was not purchased in the name of present assessee and as such there is not enough evidence to allege ‘cash payment’ to the assessee and the AO also does not say that cash payment was made by the assessee. Furthermore, the CIT(A) also concluded that even if the amount paid, including cash portion, on the above transaction is taken at Rs. 75 crores (including Rs. 20 crores advance). For another 10 acre land, the extant assessee’s share in the said amount worked out to much less than the amount paid by the assessee by cheque. In this situation, when the AO accepts that the cash payment has been made by M/s Om Metal then protective addition in the hands of assessee is not sustainable and the same was correctly deleted by the first appellate authority i.e. CIT(A). We are unable to see any valid reason to interfere with the impugned order and we uphold the same on this ground. - Decided against revenue. Addition u/s 68 - CIT(A) deleted the addition - Held that:- While we analyse last operative paras of CIT(A), it is amply clear that the AO added as received from NKP Holding Pvt. Ltd. (NKPH) on three different dates and source of the same was fully explained as the bank account was maintained by Shri N.K. Jain in his name which appeared in the copy of the bank statement. These entries were very well reflected in the bank statement of account with Punjab National Bank. The CIT(A) also noted that confirmation from NKPH was submitted before the AO during assessment proceedings and from the assessment order for AY 2007-08 passed in the case of NKPH, the AO has not disturbed the returned amount and the same has been accepted. In view of above noted facts, the CIT(A) rightly concluded that the amount added by the AO was received by the assessee from NKPH and when there is no adverse inference in the case of NKPH, the same cannot be held as unexplained in the case of assessee. Hence, we are in agreement with the conclusion of the CIT(A) that the protective addition in the hands of assessee is not sustainable and he rightly directed the AO to delete the same.- Decided against revenue. Unexplained cash credit - CIT(A) deleted the addition - Held that:- CIT(A) correctly appreciated the relevant facts of the case and rightly held that amounts received by the assessee were received by the assessee from M/s Macro Leafin, a group concern which was also assessed by the same AO and when there is no adverse finding in the case of M/s Macro, there is no valid ground to treat the same amount as unexplained in the case of the assessee. Hence, CIT(A) was correct in deleting the protective addition in the case of the assessee and we are unable to see any valid reason to interfere with the same and we uphold the conclusion of the CIT(A) on this sole issue.

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• 2015 (11) TMI 541
  Disallowance u/s 14A - CIT(A) deleted the addition accepting additional evidence - Held that:- the instant case, the assessment year involved is prior to AY 2008-09, and the ld. AO has expressed his dissatisfaction with the correctness of the claim of the assessee with regards to the expenditure incurred against exempted income, we are of the opinion that the findings in the case of Maxopp Investment Ltd. vs. CIT (2011 (11) TMI 267 - Delhi High Court) are squarely applicable. Respectfully, following the findings, we remit the matter back to the file of ld. AO and direct to determine the amount of expenditure incurred towards earning exempted income, on the basis of a reasonable and acceptable method of apportionment. Foe acceptance of additional evidence in view of the judgements of the jurisdictional High Court in the case of Manish Buildwell (2010 (12) TMI 760 - ITAT - Delhi (E)) and Modern Charitable foundation (2011 (5) TMI 204 - Delhi High Court), we are of the opinion that the AO should be given opportunity to verify the additional evidence furnished by the assessee before the ld CIT(A). Accordingly, we direct the ld CIT(A) to forward all the additional evidence to the ld. AO. Decided in favour of revenue for statistical purposes.

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• 2015 (11) TMI 540
  Validity of assessment order u/s 143(3) r.w.s 153C - Addition u/s 68 - Held that:- For the proposition that “when no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law. See case of Shri Govind Agarwal [2014 (2) TMI 810 - ITAT MUMBAI] In the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the additions made in the assessment u/s 68 on account of share application money. Decided in favour of the assessee.

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• 2015 (11) TMI 539
  Computation of capital gain - adoption of Fair Market Value of share in lieu of value of sale consideration - Held that:- In this case the assessee was allotted 3000 shares of M/s MRPL on 29.09.2004 at its face value of Rs. 10/- each. The same has been sold on 01.12.2006 to its group company. The merger scheme in which the exchange ratio of shares Of MIPL & MRPL was formulated was on 26.02.2007 and the exchange ratio so determined was further subject to approval of Delhi High Court, which came on 10.09.2007 i.e. after a gap of 9 months (approx) from the date of sale of shares. The assessee kept the shares and he would have got 1,35,000 equity shares of MIPL only on 08.04.2008 i.e. the date of allotment of shares after merger as stated above or in other words after 18 months from the date of sale. It was only prospective benefit attached with the shareholding of the assessee in the MRPL as on date of sale. We find that the case law referred by the Ld. CITA(A) in his impugned order in the case of CIT v/s. Infosys Technologies Ltd. (2008 (1) TMI 17 - SUPREME COURT OF INDIA) supports the case of the assessee wherein it was held that if prospective benefit is in the nature of income or specifically included, by the legislature as part of income, the same is not taxable. We are of the considered opinion that the adoption of Fair Market Value of share in lieu of value of sale consideration as declared by the assessee is not valid particularly when there is no provision under the law to include prospective benefit in the ambit of the word "income". Therefore, the Ld. CIT(A) has rightly allowed this ground and deleted the addition in dispute, which does not need any interference on our part - Decided in favour of assessee. Assessment u/s 153C - Held that:- We find considerable cogency in the assessee’s counsel submission that if no incriminating material belonging to the assessee were found during search period, the assessment made is without jurisdiction and proceedings initiated u/s. 153C is null and void. See CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] - Decided in favour of assessee.

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• 2015 (11) TMI 538
  Exclusion of telecommunication expenditure and foreign currency expenditure from total turnover while computing the deduction available u/s.10A - Held that:- Parity has to be there between export turnover and total turnover while excluding items from the export turnover. CIT (A) correctly directed exclusion of telecommunication expenditure and foreign currency expenditure from total turnover while computing the deduction available u/s.10A as relying on case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - Decided against revenue. Exclusion of all comparables that were having any related party transactions (RPT) from the list of comparables considered for bench marking the pricing of international transactions of the assessee as per CIT(A) - Held that:- CIT (A) fell in error in directing exclusion of comparables which were having any RPTs. RPT ratio has to be considered at 15% in accordance with the above decision. Vis-a-vis argument of the Ld. AR that a few of the companies which come back to the list of comparables, still had to be excluded, for other reasons, we are of the opinion that the submission warrants consideration. These companies will be considered by us when we take up the appeal of the assessee, while adjudicating on the grounds taken by the assessee seeking exclusion of certain comparable companies. - Partly in favour of revenue. Eligiblity for 5% deduction while making the ALP analysis relying on proviso to Section 92C(2) - Held that:- The impugned assessment year being 2005-06, the proviso to Section 92C(2) as it stood prior to substitution brought in by Finance (No.2) Act, 2009, w.e.f. 1.10.2009 applied. The question whether + / - 5% disallowance could be allowed as a standard deduction, had come up before this Tribunal in the case of Sap Labs India P. Ltd v. ACIT [2010 (8) TMI 676 - ITAT, BANGALORE ]. CIT (A) had followed the Coordinate Bench decision in Sap Labs India P. Ltd (supra), wherein it was held that prior to the substitution, the second limb of the old proviso could be construed as a standard deduction available to the assessee. - Decided against revenue. Exclusion of certain companies from the list of comparables questioned by assessee - Held that:- . Though abnormal profits as such may not be a reason for exclusion of a company from the list of comparables, if such abnormal profits were caused due to amalgamation then unless contribution of the amalgamating company to the profits are brought out, in our opinion, comparability gets eroded. We are therefore of the opinion that Exensys Software Solutions Ltd, has to be excluded from the list of comparables. Infosys Technologies Ltd and Satyam Computers Ltd be excluded based on functionality for the former and unreliable financial results for the latter. No sufficient data to come to a conclusion that Thirdware Solutions Ltd was into software product development and not in software development services. Its revenue stream does show some licence income, but there was substantial software services income also. We are therefore of the opinion that the issue whether Thirdware Solutions Ltd can be considered as a good comparable requires a fresh look by the AO / TPO, after getting requisite information from the concerned company. Hence, comparability of Thirdware Solutions Ltd is remitted back to the file of AO / TPO. Tata Elxsi Ltd, and Sankhya Infotech Ltd directed to be excluded as these companies were functionally different.. TPO has been able to demonstrate that Flextronics Software Systems Ltd was predominantly into software development service. Just because an insignificant portion of revenue was generated from sale of products and related services or business process outsourcing, a conclusion cannot be drawn that it was not into software development services. We are therefore of the opinion that Flextronics Software Systems Ltd was properly considered as a good comparable. Coming to Foursoft Ltd, admittedly RPT was in excess of 15% is directed to be excluded. Geometric Software Solutions Co. requires a fresh look by the AO so as to verify whether RPT exceeded 15%

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• 2015 (11) TMI 537
  Revision u/s 263 - Lower Gross and net profit shown by assessee - Held that:- Past history of the assessee shows that in none of the years books of accounts were rejected in absence of stock register. In AY 2007-08, the gross profit ratio of assessee was 11.51 % and in the current year it is 12.09% respectively therefore there is increase in the gross profit rate further the letter dated 19.07.2010 of the assessee also showed number of transformers repaired by the assessee. The letter also clearly explains the fall in the net profit ratio is because of payment of higher interest. The Ld. CIT has presumed net profit ratio of 8% on sales as well as 20% on job working without giving any comparable cases or any other reason. Therefore we do not find any reason to confirm AO has not made requisite inquiry on this aspect. Hence, we are of the view that Ld. CIT was not justified in making addition on account of gross profit. We do not find any error in the order of assessing officer on this count. Verification of sundry creditors on unsecured loan - Held that:- Assessee has furnished required details called for along with explanations in writing as well as all confirmations of the sundry creditors as well as lenders stating their name, address and PAN and also contra accounts along with the balance sheet and income tax returns of lenders. In case of TDS credit given to assessee AO has made inquiries from third parties. Further ld. CIT is under belief that sundry creditors and lenders remains unconfirmed which fact is not borne out from submission made by assessee and not controverted by revenue. Therefore order passed after such verification cannot be termed as erroneous. - Decided in favour of assessee.

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• 2015 (11) TMI 536
  TDS u/s 194C - payment for freight charges on goods received by the assessee - Held that:- It is clear from the bill dt.17.04.2004 available on record that Kanakadurga Lorry Office was not the owner of the lorry. For application of Section 194C of the Act, it is essential that there is a contract between the assessee and the person who is transporting the goods. Question before us is whether Shree Gajanan Industries who was the supplier to goods the assessee had engaged the lorry owner through Kanakadurga Lorry Office at the behest of the assessee or on its own. If it was on the direction of the assessee that the lorry was engaged by the supplier, then we can construe the contract as one between the assessee and the lorry office. It might be true that the assessee paid to the lorry owner the balance of the amount due for the transportation. However, existence of agreement for transportation, whether oral or written, if any, between the assessee and Shree Gajanan Industries, as to how the supplies were to be made, viz., whether it was the responsibility of the seller to find the transporter and transport it to the assessee’s premises, or it was under direction of the latter the former was doing so, was never verified by the lower authorities. We are of the opinion that this issue requires a fresh look by the AO for verifying all aspects of the payment of freight charges.- Decided in favour of assessee for statistical purpose. Payments effected to Hariharan Logistics for freight and forwarding of goods exported by the assessee - Held that:- As assessee can always plead that recipient of the amounts had accounted the income and filed returns and hence the rigors of Section 40(a)(ia) of the Act could not be applied to it. However, question whether the recipients of payments had indeed accounted the amounts and returned the income therefrom in their return of income requires to be verified. We are of the opinion therefore that this issue also requires a fresh look by the AO. - Decided in favour of assessee for statistical purpose.

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• 2015 (11) TMI 535
  Penalty u/s 271D and 271E - violation u/s 269SS T - Held that:- The assessee is into the business of fertilizer in a remote place i.e. Jeelakarragudem. The explanation of the assessee is that funds are borrowed for the purpose of business necessity and borrowed funds are kept in the bank. So far as usage of the funds are concerned, it is the assessee who has to decide it has to be withdrawn immediately or thereafter according to the business necessities. The business of the assessee is relating to an urorganised sector deals with the needs of the farmers. When assessee has to buy fertilizer to a huge extent depend upon monsoon and necessity of the farmers also. Keeping in these aspects assessee has to carry his business. There is no doubt that assessee is having a bank account in Hyderabad. However, simply because he is having a bank account at Hyderabad, it cannot be said that he has to borrow the funds in the way of cheque or repayment also in the way of cheque. It depends upon the business necessity of the assessee, the assessee has to take a decision. The authorities below admitted that he is into the business of fertilizer and carrying his business in a remote village. There is nothing on record to disbelieve the explanation given by the assessee. In so far as usage of the funds are concerned, it is left to the assessee to decide to use the funds according to the business necessities/demands. In view of the above facts and circumstances of the case, we find that there is a reasonable cause for the assessee not strictly complied with the provisions of section 269SS of the Act. Therefore, the funds borrowed by the assessee for the business necessity more than the prescribed limit not amounting to violation u/s 269SS 269T of the Act. Therefore, consequently no penalty u/s 271D E of the Act can be imposed. - Decided in favour of assessee.

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• 2015 (11) TMI 534
  Addition on interest paid to HDFC Bank - CIT(A) deleted the addition - Held that:- It is undisputed fact that the assessee has invested Rs. 50 lakhs in the partnership firm and as a result of this investment, it has earned remuneration of Rs. 6 lakhs and share of income of Rs. 32,48,000/- from the firm. Unless this investment is being made, the assessee would not have earned these two incomes. The A.O. disallowed the interest paid on loan on the sole ground that the income from the partnership firm is exempt in the hands of the assessee and the remuneration received from the firm is for the services rendered by him to the firm. Therefore, there is no nexus between investments and income earned from the firm. We do not agree with the stand of the A.O., for the simple reason that there is a nexus between investment and income earned. As a result of investment in the firm, the assessee has earned these two incomes, i.e. Rs. 6,00,000/- remuneration, which is taxable in the hands of the assesse and also share of profit of Rs. 32.48 lacs, which is exempt, as it has already suffered tax in the hands of the firm. Therefore, expenditure incurred on the borrowed funds for investments in share capital of firm should be allowed as business expenditure. - Decided in favour of assessee. Disallowance of standard deduction and interest paid on housing loan - Held that:- The property so let out is consisting of land and building. The assessee has acquired the said property in the year 2004 by borrowing a loan from commercial bank and assessed the income under the head income from house property right from the beginning. The department accepts the stand of the assessee in the earlier years, cannot dispute now under the same set of facts. The AO was of the view that the property was predominantly was a vacant site and having a small building cannot be considered as a house property to assess the income from said property under income from house property. We do not agree with the contention of the Assessing Officer, for the reason that the annual vale of any buildings or land appurtenant thereto of which the assessee is a owner, income from such property is chargeable under the head income from house property. Further, Once the income is assessable under the head house property, consequent deductions being standard deduction u/s 24(a) and interest paid on borrowed capital u/s 24(b) should be allowed while computing the income from house property. The CIT(A), has rightly deleted the additions made by the Assessing Officer. - Decided in favour of assessee. Estimated income from the house property - CIT(A) deleted the addition - Held that:- The two properties are different in the sense that assessee’s property is a residential property situated in a residential locality of Nallakunta area, Hyderabad, whereas assessee wife property which is situated at Himayatnagar, a posh commercial locality. To arrive at an annual value one has to refer to section 22 of the Act. The said section prescribes the mode of computation of annual value which is the higher of the gross annual value received by the assessee, municipal valuation and fair market value of the property. In the present case, the municipal valuation of the said property as per the assessee’s claim is Rs. 10,544/- and the assessee has received annual rent of Rs. 96,000/-. Further, the fair market value of the property cannot be ascertained from the same locality as the relevant materials are not available on record. So, from the above, it is very clear that the gross rent received by the assessee is higher of these three. The assessee has rightly adopted the gross annual value of Rs. 96,000/-, whereas the assessing officer without bringing on record any comparable cases, simply compared the property, which is situated in a different locality and estimated the income. The CIT(A), after examining the details of the property deleted the additions made by the A.O. Therefore, for the reasons stated above, we do not find any infirmity in the order of the CIT(A) and accordingly delete the additions made by the A.O. and dismiss the ground raised by the revenue. - Decided in favour of assessee. Disallowance of Advertisement charges u/s 40a(ia) - Held that:- The issue is squarely covered in favour of the assessee by the decision of this coordinate bench in the case of Merilyn Shipping & Transport Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM). By respectfully following the decision cited supra, we delete the additions made by the assessing officer and accordingly ground raised by the revenue is dismissed.- Decided in favour of assessee. Notional interest on investment in firms - Held that:- There was no provision in the Income-Tax Act empowering the Income-Tax authorities to include the interest income which was not due or not collected, See3F Industries Ltd. Versus Joint Commissioner of Income-tax, Rajamundry Range [2014 (9) TMI 311 - ITAT VISAKHAPATNAM ] - Decided in favour of assessee. Notional Interest of Investments in Company - Held that:- A.O. cannot estimate notional interest without establishing that either interest is received or accrued to the assessee. Unless, there is contractual obligation to charge interest, the question of income accrue or arise does not arise. The A.O., cannot sit in the place of a businessman and decide how to conduct business. Every prudent businessman makes investment with the intention to earn income. But, the fact is that all investments may not yield income. The A.O. has not given any cogent reason to establish that such legal right to receive the income has arisen to the assessee. There is no evidence with the A.O., to show that the assessee has received any interest income. Therefore, the A.O., is not correct in estimating the income. The CIT(A), rightly deleted the addition after considering the facts.- Decided in favour of assessee.

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• 2015 (11) TMI 533
  Revision u/s 263 - Held that:- The A.O. examined the issues on which the CIT assumed jurisdiction. The CIT assumes jurisdiction and revised the assessment order u/s 263 of the Act without pointing out any mistakes in the A.O’s order with a different opinion, which itself is not a ground for assuming jurisdiction u/s 263 of the Act. Therefore, we quash the CIT’s order u/s 263 and restore the assessment order passed by the assessing officer. - Decided in favour of assessee.

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• 2015 (11) TMI 532
  Penalty under section 271(1)(c) on addition of rental income - assessment orders for the above assessment years were completed under 153C r.w.s. 153A - Held that:- In the instant case, the assessee has furnished inaccurate particulars with regard to rental income and the claim of the assessee was not supported by any evidence for all the assessment years under consideration. Another contention of the assessee is that the assessee has paid huge tax, but, that is not at all a valid ground to delete the penalty. Under these facts and circumstances and respectfully following the decision in the case of Mak Data P. Ltd., vs. CIT (2013 (11) TMI 14 - SUPREME COURT), the penalty levied under section 271(1)(c) of the Act by the Assessing Officer and confirmed by the ld. CIT(A) on this issue stands sustained for all the assessment years - Decided against assessee. Unexplained sundry loan creditors - Held that:- On perusal of the penalty order, the Assessing Officer has simply levied the penalty by clubbing all the additions. The penalty proceedings are different from assessment proceedings. The Assessing Officer has initiated penalty proceedings on estimated basis. There is no wilful concealment of income and the assessee has also offered huge amount of income for taxation in the assessment year under consideration. The assessee has also relied on the decision in the case of CIT v. S. Sankaran 241 ITR 825, wherein the Hon’ble Jurisdictional High Court has observed that mere addition to income at the instance of assessee would not warrant a finding of concealment of income or the levy of penalty. Mere addition of income agreed to by it itself is not the proof of concealment. The lower authorities are not correct in initiating penalty proceedings. After considering the above facts and circumstances, the well settled principles namely that the assessment proceedings and penalty proceedings are quite distinct and the findings given in the assessment order are not conclusive. Accordingly, mere addition of amount as income is not the criteria to levy penalty. - Decided in favour of assessee. Unexplained silver articles - Held that:- Since receipt of silver articles received by the assessee as Sreedhanam and gift has been accepted by the Tribunal during quantum appeal proceedings, and confirming the addition to the extent of 50% of the total value of silver articles as undisclosed investment, mere confirmation of any addition agreed to by itself is not the proof of concealment. The authorities are not correct in invoking section 271(1)(c) of the Act and levying penalty on this issue - Decided in favour of assessee. Revision u/s 263 - unexplained payment of advance to vendors - Held that:- The present appeal preferred by the assessee is with regard to the assessment order passed in pursuance to the order passed under section 263 of the Act by the ld. CIT. Since the assessee has not able to explain the sources for the advance of Rs. .25 lakhs paid to Shri K.P. Karupusamy and Shri S. Dhanushkodi on 23.01.2001, the Assessing Officer added the said amount to the returned income. After considering the different submissions made by the AR of the assessee, the ld. CIT(A) passed a detailed speaking order, which is reproduced hereinabove, wherein the ld. CIT(A) has observed that the assessee has not able to explain the source of advance for Thiruvanmiyur property, the ld. CIT(A) has confirmed the addition made by the Assessing Officer. Even before us, the ld. Counsel for the assessee has not placed any material evidence for the source of payment of advance to the vendors for Thiruvanmiyur property. Accordingly, we find no infirmity in the order passed by the ld. CIT(A).- Decided against assessee.

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• 2015 (11) TMI 531
  Reopening of assessment - non deducted TDS on discount payments u/s 194H - Held that:- The formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. Further, the intimation sent by the Department u/s.143(1) of the Act, cannot be treated to be an assessment order and he is within power conferred u/s.147 to issue notice u/s.148 of the Act. Further, failure to take steps u/s.143(3) will not render the AO powerless to initiate reassessment proceedings u/s.147 r.w.sec.148 of the Act, though the intimation was sent u/s.143(1) of the Act. In our opinion, the AO is justified in reopening the assessment in this case. For the discount offered to the parties liable to be deducted TDS u/s.194H of the Act as held by the Tribunal in the case of M/s. Vodafone Essar Cellular Ltd. (2011 (4) TMI 882 - ITAT, Chennai ). However, in view of the order of the Special Bench of the Tribunal in the case of Merylin Shipping & Transport vs. Addl. CIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM), if the discount is already offered to the parties and it is not an outstanding entry in the books of account of the assessee, then the claim of the assessee cannot be disallowed on account of non-deduction of TDS. Accordingly, on merit, we remit this issue to the file of the AO for fresh consideration in the light of the above order of the Special Bench.

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• 2015 (11) TMI 530
  Denial of exemption u/s.10A/10B in respect of provisions no longer required written back - Held that:- Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] has held that whenever any disallowance made while computing the income that disallowance should be part and parcel of the business profit of the assessee and the same should be considered for the purpose of deduction u/s.10A of the Act. In view of this, we are inclined to hold that the disallowance made with regard to provision is to be considered as part of business profit for the purpose of determining deduction u/s.10A/10B of the Act. - Decided in favour of assessee. Claim with respect to liabilities written back in AY 2003-04 - Held that:-Since, the claim of the assessee was allowed in the assessment year 2003-04, when it was actually written off, this is only academic. Hence, this ground is dismissed as infructuous. Denial of exemption u/s.10A/10B in respect of profits arising from fluctuation in Foreign Exchange (net) - Held that:- The assessee is permitted by RBI to keep a part of its foreign exchange earnings in foreign currency account abroad so that it can be used by the assessee for purchasing raw materials and availing other services and if not required can remit back the money to India alongwith interest. Interest is accrued as part of export turnover. It has nexus only with the export turnover and therefore it is also in the nature of export profits. This issue has been decided by the Hon’ble Delhi High Court in favour of the assessee in the case of CIT vs. Indian Toners and Developers Ltd., [2008 (12) TMI 375 - DELHI HIGH COURT] - Decoded in favour of assessee. Interest under Section 234D - Held that:- This issue is covered against the assessee by the decision of the Tribunal in the case of DDIT vs. Oracle Corporation [2012 (11) TMI 1097 - ITAT DELHI] as held Explanation 2 was added by Finance Act, 2012 with retrospective effect from 01.06.2003. By that amendment, it was clearly brought on the statute that the Section shall also apply to an Assessment Year commencing before the first date of June, 2003 if the proceedings in respect of such Assessment Year is completed after the said date. - Decided against assessee. Exclusion of foreign currency expenditure and telecommunication expenditure while computing deduction u/s.10A - Held that:- The Special Bench of the Tribunal, Chennai in the case of ITO vs. Sak Soft Ltd. reported [2009 (3) TMI 243 - ITAT MADRAS-D] was also considered this issue, wherein it was observed that for the purpose of applying the formula prescribed by sub-sec.(4) of sec.10B of the Act, expenses on freight, communication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses if any, incurred in foreign exchange in providing technical services outside India, are required to be excluded from the export turnover and from the total turnover. Being so, in our opinion, this issue is squarely covered in favour of the assessee Disallowance of set-off of current year losses of the units located in Pune, Chennai Unit I and Kolkatta Unit II, while computing the taxable income - Held that:- There is a judgment from the Delhi High Court in the case of CIT vs. KEI Industries Ltd. (2015 (3) TMI 618 - DELHI HIGH COURT), wherein after considering the judgment of CIT v. Yokogawa India Ltd. (2011 (8) TMI 845 - Karnataka High Court) it was held that loss suffered by the assessee in a unit entitled to exemption under sec.10B of the Act, cannot be set off against income from any other unit not eligible for such exemption. In view of the above, as these units are claiming exemption u/s.10B of the Act, the loss suffered in these units cannot be set off with income of other units - Decided against assessee. Disallowance under section 40(a)- non deduction of TDS on the payments made to Sprint (a nonresident) - Held that:- even if the payments were treated as non-relating to the use of equipment, they should be considered as payment for the use of the process provided by the assessee, whereby through the assured bandwidth, the customer is guaranteed the transmission of data and the voice. The fact that the bandwidth is shared with others, however, has to be seen in the light of the technology governing the operation of the process and this by itself does not take the assessee out of the scope of royalty. Thus, the consideration being for the use and right to use of the process, it is ‘Royalty’, within the meaning of Clause-(iii) of Explanation-2 to section 9(1)(vi) of the Act. - Decided against assessee.

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• Customs

• 2015 (11) TMI 552
  Seizure of gold - Rightful owner - Possession of gold with other person whose goods along with petitioner's gold was seized - Held that:- In view of the nature of evidences existing as early as 1975 it cannot be said, as held by adjudicating authority, that claim of Late Shri A. Raja Rao was an after thought. The case of the Revenue will not get any support from the argument; that what A. Raja Rao gave was 39 Tolas, 8 Annas and 6 grams of old ornaments and what is mentioned at Sr. No. 41 because it can also be viewed that appellant could have also claimed some more gold ornaments out of what are listed in Panchnama dated 19/4/75. It is not the case of the Revenue that the present applicant is not the legal heir of the late appellant Shri A. Raja Rao. Accordingly, Order No. CCE/GOLD/BBSR-I/21/2014 dated 13/.1/2014 passed by the Adjudicating authority is required to be set aside because appellant has some statements to rely upon where as department has only presumptions and assumptions to rely upon. - Decided in favour of Appellant.

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• 2015 (11) TMI 551
  Confiscation of goods - whether 500 bags of betel nuts seized from vehicle Nos. WB-73/2544, AS-011AC/6672 and DL/GB-2226 are of foreign origin and smuggled into India and whether Shri Nirmal Baid is the rightful claimant of these 500 bags - Held that:- none of the occupants of the vehicle had the prior intimation that they have to go to the site for loading betel nuts of foreign origin. All of the occupants of the vehicles were contacted by a person, who later fled. None of the drivers and the khalasis of the vehicles ever stated that they have either transferred the seized betel nuts across the border from Nepal or have witnessed such transportation across the border. A perusal of the statements of these drivers/khalasis only convey that from the manner of loading betel nuts from tractors/tempos they thought that the same are of Nepal origin. There are no markings on the 500 bags that the same indicate bear any markings of Nepal origin. In view of the observations revenue has failed to establish that seized betel nuts are of Nepal origin and are smuggled into India. - there are no markings of foreign origin on the bags of the betel nuts. The information received by department and the statements of occupants of vehicles carrying betel nuts is only hearsay evidences and are not corroborated by any other positive evidence. In the absence of any positive evidence regarding foreign origin of betel nuts in these appeals, it cannot be held that the same are of smuggled nature. Claimant has made out a case for ownership of the 500 bags seized and also there is no other claimant for these goods. Order passed by the adjudicating authority, regarding confiscation of the 500 bags of betel nuts, is required to be set aside for handing over to the claimant of the same. As on merit the confiscation of betel nuts has been set aside penalties imposed upon the appellants in the present appeals are also set aside. - Decided in favour of appellant.

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• 2015 (11) TMI 550
  SEEPZ - allegation of Clandestine clearance of duty free goods, a large quantity of diamonds, gold etc. in the domestic market instead of exporting - Contravention of the provisions of Notification 177/94-Cus. - Penalty u/s 112(a) - Held that:- the clandestine clearance and purchase of the diamonds was happening even before August 1999 and Ms. Bengali in her statement has indicated how this was being done and the fact that the diamonds would be taken out from the safe, weighed and thereafter the details of the diamond, weighment etc. will be communicated to the present appellant on fax and the diamonds will be handed over to Shri Bhupendra Kapadia who would take further action to ensure that these are clandestinely taken out of the SEEPZ area and thereafter transported to the present appellant s office. In my view, it is very important to note that these 18 printouts for whatever worth these may be, were shown to the present appellant while recording his statement and even that time he gave vague answer to that and simply stated that these printouts indicate the detail of the export, consignee etc. From the various evidences which have been discussed in detail by the adjudicating authority in para 3.11, I have absolutely no doubt whatsoever in my mind that the appellant was actively involved in almost throughout two years and a very substantial quantity of diamonds which have been clandestinely cleared by the unit located in SEEPZ were purchased by him. He was aware of the fact that these diamonds have been imported by a SEEPZ unit and as per the law vide Notification No.177/94-Cus. as also EXIM Policy, these are not permitted to be sold in the domestic market and if sold in violation of the Notification and the provisions of EXIM Policy which would make such goods liable to confiscation and hence penalty on the appellant besides the main importer. Under the circumstances, I do not find any reason to interfere with the impugned order. I also find that the then value of the diamonds covered by the 18 printouts itself is more than Rs. 7 crores. Similar purchase of clandestinely cleared diamonds was being done by the present appellant even for the earlier period for which the quantity and value details could not be found out in the investigation. Keeping in view the over all facts, the penalty of Rs. 10 lakhs cannot be considered on the higher side. - impugned order is upheld - Decided against assessee.

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• 2015 (11) TMI 549
  Misdeclaration of goods - Penalty u/s 114AA - Confiscation of goods - Imposition of redemption fine - whether the case of the appellants that declaration in the B/E of a lesser quantity than the actual quantity imported, has happened only due to an inadvertent error, is believable or not - Held that:- the quantity of the goods was wrongly stated. Mis-declaration involves an element of mens rea or intention to evade payment of duty by the party. Mis-declaration can occur due to human error also. In the instance case, the appellants have been able to explain the mis-declaration which reveals the nature of a wrong declaration, which was not deliberate. On coming to know the mistake they were able to explain the mistake. If the shipper made a mistake, the importer/CHA cannot be penalized for it. In the light of the above decision and the facts presented by this case, I hold that there was no wilful mis-statement on the part of M/s Bosch Chassis Ltd. The representatives of the CHA have merely relied on the invoice handed over by M/s Bosch Chassis Ltd./ Importer. The Commissioner (Appeals) have imposed penalty upon the representatives of CHA observing that they omitted to compare the invoices with purchase order and B/L. As there is no deliberate act or omission established, the imposition of penalty is unjustified. For these reasons penalty under Section 114A cannot be imposed. - penalty of Rs. 2,00,000/- imposed on M/s Bosch Chassis System India Ltd. under 114AA is therefore set aside as unsustainable. However, I uphold the order of confiscation of the goods as the quantity declared was different in the B/E and reduce the redemption fine - Decided partly in favour of assessee.

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• 2015 (11) TMI 548
  Availment of fraudulent duty drawback claim - Fabrication and forging of documents - Imposition of penalties - Held that:- Initially Shri B S Chauhan admitted that the signatures on the shipping bills bearing examination reports were his. He also stated that he had given the examination report on the basis of goods shown to him by the CHA but denied having received any money. It is indeed strange that although the Customs investigating agency had specimens of handwriting when the statements of Shri Chauhan were recorded in March April 96 there is no evidence that the handwriting expert s opinion was taken at that stage. If it was taken the same was not made available to Shri Chauhan who requested for it vide his letter dated 05.03.07. The case of the department is based on the statement of Shri GS Kohli. He deposed that Shri R S Singh (the employer of Shri Balbir Singh) had told to Shri GS Kohli that according to Balbir Singh, Appraise Shri B S Chauhan would give examination reports as desired by them . At the same time the fact is that Shri GS Kohli and Shri R S Singh themselves never discussed any issue with Shri Chauhan. Therefore as held by the adjudicating authority, the next logical step for investigation shoul have been to examine Shri R.S. Singh and Shri Balbir Singh. But this was not done. More so when the Department did not examine Balbir Singh who is supposed to have met B S Chauhan. Therefore the statement of Shri GS Kohli is beyond secondary evidence and cannot be relied upon in the face of judicial pronouncements discussed in paras above. In the facts and circumstances the allegation against Shri BS Chauhan is based merely on hearsay evidence in the form of a statement dated 08.08 1995 of Shri GS Kohli. - case established by Revenue does not even meet the standards of proof in a civil case. The case is full of flaws. It is not explained why for many years Revenue did not get the handwriting of the accused verified by the handwriting expert. This is especially so when Shri GS Kohli admittedly forged the signatures of all other agencies such as banks, steamer agents, RBI, DGFT etc. In such circumstances the preponderance of probability is that Shri GS Kohli had forged the signatures of Shri Chauhan too. Further department is taking a contradictory stand as far as the statement of Shri Chauhan is concerned. When Shri G S Kohli and Shri R S Singh (employee of Shri Balbir Singh) themselves had never discussed any issue with Shri BS Chauhan. Therefore we hold that Revenue has not been able to counter the logical reasoning and analysis by the Commissioner in absolving Shri B.S. Chauhan of the charges. - once it was found by an investigating agency that the statement of Sh. G.S. Kohli was not a good enough evidence to allege some of the officers implicated by him, the same could not have been made basis for others to establish charges against them, more so when no reasoning have been given for such different treatment for different officers. - no good reason to differ with the Order and uphold the same in dropping penalty against Shri. Pamnani. - department has not proved the case with any degree of certaint. We hold that penalty cannot be imposed on Shri. Balbir Singh. As regards Shipping Bills showing the CHA as Pal India Shipping Agency, he categorically stated that the signatures were not that of Manohar Badheka. Both Shri. Quereshi and Badheka have denied that the relevant S/Bills bear their signature. The department should have taken the help of handwriting experts, more so when so many documents and signatures were found to have been forged by the Shri. G.S. Kohli. We do not appreciate that department proposes to fix responsibility on these persons without caring to verify whether the signatures on the S/B’s were theirs. Shri. Quereshi stated that when Shri. G.S. Kohli and Shri. R.S. Singh had forged signatures of so many officers of Customs, Banks and Steamer Agents they could have forged his(Quereshi’s) signatures as a CHA on these fabricated S/bills. The absence of any evidence to prove that Shri. Quereshi and Shri. Badhekar had indeed filed the S/Bills, the penalty on them is clearly not sustainable. - Decided against Revenue.

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• Corporate Laws

• 2015 (11) TMI 547
  Winding up petition - petitioner contending that the petitioner-Company has been defunct for long - Held that:- Registrar of Companies had declined the consideration under the Fast Track Exit Scheme, since the petitioner-Company's assets are said to have been encumbered and charged to the 3rd respondent, which was recorded by the Registrar of Companies as provided under the Companies Act. The petitioner asserted that there is no such due to the 3rd respondent and it is only for the reason of the Company being defunct that the charge was not lifted, after clearing the dues to the 3rd respondent. The 3rd respondent has also filed a counter affidavit, clearly indicating that there is no amount outstanding in the name of the petitioner herein and that no recovery proceedings are also pending. The charge noticed in favour of 3rd respondent, in the above circumstance, shall stand lifted. Thus it is only proper that the application under the Fast Track Exit Scheme be considered by the 1st respondent. Till such time, the proceedings at Exhibit P1 shall stand stayed.

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• Service Tax

• 2015 (11) TMI 568
  Waiver of pre deposit - Maintenance or repair service/ Works Contract Services/ Commercial or Industrial Constriction Service (CICS) - Held that:- As the services were rendered under works contracts, they were not liable to service tax upto 31.05.2006 as works contract service came into existence w.e.f. 01.06.2007. Further, we notice that benefit of composition scheme for works contract service has not been extended although the rendition of service involved supply of goods and so prima-facie the appellant was entitled to the said benefits which by itself would bring down the demand to less than 33% of the amount confirmed. The appellant has also raised the issue of time bar although a decision thereon will require detailed discussion which can be taken up only at the time of final hearing. The appellant has deposited Rs. 4.17 lakhs and some part of the demand is claimed to be in respect of sale of goods which is not sustainable. - pre-deposit of Rs. 17.5 lakhs alongwith proportionate interest would meet the requirement of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 - Partial stay granted.

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• 2015 (11) TMI 567
  Denial of refund claim - Export of services to parent company in Neatherlands - For export of services, Assessee utilized input services on which service tax was paid - Held that:- Commissioner(Appeals) has not examined and actually considered the evidences produced to establish the fact of export of services made to the parent company of the appellant, the case is remanded back to the original adjudicating authority to examine all the evidences which are to be produced again by the appellant, if not produced earlier before him and he will decide the refund applications fresh. The appellant has to be given full opportunity as personal hearing to produce all the evidences to prove their case. - Matter remanded back - Decided in favour of assessee.

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• 2015 (11) TMI 566
  Waiver of pre deposit - Mining service - appellant transported the mineral (coal) from pithead area to the Railway siding within the Coalfield premises - Held that:- Prima facie, the conclusion by the Commissioner that the appellant had provided mining service is wholly inconsistent with the Scheme of Finance Act, 1994, in particular, in the context of the Transport of Goods by Road and mining services enumerated as distinct services. We also notice that in an identical fact situation, the Tribunal by the interim order dated 30.6.2015 granted waiver in full and stayed all further proceedings for recovery of the assessed liability pursuant to the order impugned - we grant waiver in full and stay all further proceedings for recovery of the assessed, pending disposal of the appeal. - Stay granted.

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• 2015 (11) TMI 565
  Demand of service tax - Club or Association Service - Held that:- The consideration on which levy is confirmed is membership fee and other receipts from members and non-members who utilised services provided by the appellant. In respect of services provided to non-members, the same became taxable only w.e.f. 01.05.2011 in view of the amendment to Section 65(25a) of the Act. In the amended definition service provided to non-members was brought within the scope of the taxable service. - In respect of services provided to the appellant’s members, the issue is fully covered by the decision of this Tribunal in Federation of Indian Chambers of Commerce & Industry vs. CST, Delhi - [2014 (5) TMI 183 - CESTAT NEW DELHI]. Since the period in issue is prior to the amendment of Section 65 (25a), the consideration received by the appellant in respect of services provided to non-members is not taxable during the relevant period in issue. - Decided in favour of assessee.

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• 2015 (11) TMI 564
  Waiver of pre deposit - erection, commissioning or installation service - benefit of 67% abatement - Held that:- In view of the judgment of the Hon’ble Supreme Court in the case of Larsen & Toubro Limited holding that works contracts were not liable to service tax prior to 01.07.2006, the demand pertaining to the period upto 31.05.2007 is prima-facie not sustainable. We also observe that rendition of service involved supply of goods and therefore prima-facie the appellant was entitled to the benefit of Notification No. 1/2006-ST or 12/2003-ST. Having regard to these facts and also keeping in view the contention of the appellant about non-invocability of extended period, we are of the view that pre-deposit ordered by Commissioner (Appeals) was on the higher side. - Matter remanded back - Decided partly in favour of assessee.

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• 2015 (11) TMI 563
  Commercial or industrial construction service - Refund claim - Unjust enrichment - Held that:- Board has clarified as early as on 1.8.2006 that no service ax is chargeable under the circumstances. The appellant was aware of the said circular. In 2007, the said circular was only reiterated. Further, it is noticed that majority of the service tax has been collected by the appellant from their customer and only few customers have disputed. This would also indicate that the appellant was also aware from their customer that service tax is not leviable. Under the circumstances, it cannot be said that the appellant was not aware of the fact that no service tax was chargeable - Tribunal is the creature of Customs, Excise and Service Tax Acts and has to work within the boundaries of the sections provided therein. Section 11B is the section relating to refund which prescribes the time limit and hence that time limit has to be computed. The appellant has also quoted the Hon’ble Madras High Courts decision in the case of Saralee Household & Bodycare India (P) Ltd [2007 (6) TMI 55 - HIGH COURT, MADRAS ]. In the present case barring an amount of Rs. 3 lakhs, the appellant themselves were admitting that the remaining amount has been recovered from their customers. Even the amount of Rs. 3 lakhs which according to them has been paid by from their own resources cannot be considered for refund as the doctrine of unjust enrichment would be applicable at this stage. - Decided against assessee.

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• 2015 (11) TMI 562
  Condonation of delay - Inordinate delay of 3years - Held that:- There is no evidence on record indicating the developments as projected by the assessee, except an affidavit to that effect. No details stand given by the appellant as to when was the earlier advocate, Shri Hamza was appointed by them and when was the appeal papers said to have been prepared by him, were signed and by whom. There is no affidavit of the General Manager of the company, who is said to have signed the papers. Further, it is not coming on record as to whether the demand draft, which is required to be annexed to the appeal, was actually prepared by the appellant and was handed over to the earlier advocate. However, as per the appellant, the earlier advocate, Shri Hamza closed down his office and shifted to Dubai. In this circumstance, it is not coming on record as to which person in the office of the earlier advocate handed over to the appeal papers subsequently to the appellant - delay in filing the appeal has occurred on account of the appellant not being vigilant enough to ensure the filing of the appeal and not making any enquires from the advocate’s office within a reasonable period. The delay is huge delay of 3 years and cannot condone for the mere asking for the same. As such, we find no reasonable and genuine reason for condoning the said delay and accordingly, COD application is rejected. - Condonation denied.

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• 2015 (11) TMI 561
  Waiver of pre deposit - Management, Maintenance or Repair Service - benefit of Notification No.12/2003-ST - Held that:- Primary adjudicating authority taking recourse to Section 65A of the Act has come to a finding that the service rendered did not fall under the scope of CICS but under MMR. The appellant did not submit ST-3 returns and in spite of repeated reminders, it did not submit the required documents either. Consequently, the Commissioner resorted to the best judgement assessment. We, however, notice that the Commissioner has not given any basis for arriving at 25% mark up for the purpose of best judgement. On the other hand, the appellant has contended that the actual figures during the period 2010-11 relating to rendition of service were lower than in the preceding financial year. It is also contended that several components of the service rendered were not taxable. However, we notice that the appellant has not given any evidence to that effect in the form of various contracts under which the service was rendered in support of its contention regarding non-taxability of its service. However, there is force in the contention of the appellant that it was entitled to the benefit of Notification No.12/2003-ST. - pre-deposit of 50% of the adjudicated service tax liability along with proportionate interest would meet the requirement of Section 35F of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 and we accordingly order. - Partial stay granted.

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• 2015 (11) TMI 560
  Waiver of pre deposit - Advertisement Agency service or Sale of Space or Time for Advertisement service - Held that:- Advertising Agency means any [person] engaged in providing any service connected with the making, preparation, display or exhibition of advertisement and includes an advertising consultant; Prima facie, the appellant was not engaged in providing any service connected with making, preparation, display or exhibition of advertisement and it was not an advertisement consultant either. Indeed, the service seems to be more appropriately covered under the scope of Sale of Space or Time for Advertisement Service - prima facie find that the appellant is not covered under the scope of advertising agency service and therefore has a good case warranting complete waiver of pre-deposit. Accordingly, we waive the requirement of pre-deposit and stay recovery of the impugned liability during pendency of the appeal - Stay granted.

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• Central Excise

• 2015 (11) TMI 559
  Excess utilization of cenvat credit - Penalty imposed on the main appellant under Rule 13 and Rule 26 of the Cenvat Credit Rules - Held that:- Issue has arisen during the period 2002 when the scheme of fortnightly payment was introduced. Further, we find that the present case is only a case of excess withdrawal for few days. The appellant has been paying regularly the duty even in the subsequent fortnight. Even if they would have paid duty in a particular fortnight by PLA, i.e. without excess withdrawal, the so called as withdrawal would be available to them for payment in the next fortnight. - this is a fit case for waiver of penalty - Decided in favour of assessee.

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• 2015 (11) TMI 558
  Demand under Rule 6(3) of Cenvat Credit Rules, 2004 - Held that:- as per the order dated 28.10.2013 passed by Allahabad High Court in the case of Commissioner of Central Excise, Lucknow vs. Kisan Sahakari Chini Mills Limited [2013 (10) TMI 1197 - ALLAHABAD HIGH COURT], Bagasse and other wastes cleared by the appellant are not covered within the definition of Goods and no amount is required to be paid by the appellant under Rule 6(3) of the Cenvat Credit Rules. - Decided in favour of assessee.

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• 2015 (11) TMI 557
  Duty demand - Imposition of penalty - Held that:- First appellate authority, in the impugned order was not sitting an appeal on merits of Mohanlal Silk Mills. The impugned order is passed by the first appellate authority on an appeal filed by the revenue in respect of Maharashtra Dying the appeal filed by the appellant before the Tribunal is not maintainable and is dismissed as such as the findings of the first appellate authority are in respect of assessee Maharashtra Dying & Printing Works. As regards another appeal, First appellate authority did not issue any show cause notice to the appellant Shri Arvind Mohanlal Jain for imposition of penalty. In the absence of any show cause notice to the appellant, visiting him with penalty under Rule 26 of the Central Excise Rules, 2002 is incorrect and not in accordance with the law. - appeal filed by Shri Arvind Mohanlal Jain, needs to be accepted and the impugned order to that extent needs to be set aside. - Appeal disposed of.

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• 2015 (11) TMI 556
  Procurement of inputs free of duty for use in manufacturing of export goods - export procedure not followed - Duty demand in terms of Notification No.43/2001 CE (NT) dt.26.6.2001 - Held that:- L.A.A in the impugned order at para-25 admitted the fact that terry toweling fabrics supplied to the EOU have been exported after undertaking further processing into garments and also they have submitted proof of export. In the present case, appellant has supplied terry towel fabrics to another EOU for further processing. The only condition in the notification is that appellant has to produce proof of export of the final product. In the present case, as the LAA has clearly brought out that there is no dispute that the goods have been cleared to EOU and appellants have produced proof of export through EOU - Decision in the case of Jansons Clothing Vs CCE Salem [2015 (10) TMI 1120 - CESTAT CHENNAI] followed - Decided in favour of assessee.

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• 2015 (11) TMI 555
  Admissibility of cenvat Credit - MS Grating, TMT Bar Channels, Angle, Plate, Beams, HR Coil, MS Sheets etc. - Invocation of extended period of limitation - held that:- The same issue [2015 (10) TMI 1116 - CESTAT AHMEDABAD], in the case of the appellant has been remanded back to the Adjudicating Authority to ascertain the quantum of Cenvat Credit pertaining to items used in making support structures. I have no reason to take a different view. Accordingly, the order passed by the First Appellate Authority is set aside and this case also is remanded back to the Adjudicating authority to decide this case also in the light of the order dated 22.8.2014 passed in the case of appellant on the same issue. - Decided in favour of assessee.

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• 2015 (11) TMI 554
  Levy of Penalty u/r 25 - held that:- Since the duty demand on the main appellant has been set aside by this Tribunal [2014 (9) TMI 741 - CESTAT MUMBAI], penalty on the present appellant will also not survive. In view of this position, the penalty imposed on the present appellant is set aside. - Decided in favour of appellant.

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• 2015 (11) TMI 553
  Denial of CENVAT Credit - whether, the locomotive should be considered as an eligible item for the purpose of taking cenvat credit - Held that:- As per the definition, goods falling under chapter 82, 84, 85, 90 and the components, spares and accessories of the goods of the said chapters are considered as capital goods, on which the assessee is permitted to take cenvat credit. Since locomotive is classified under chapter 86, and the same is not fitted to any machine(s) of the above specified chapters, as component, spares or accessories, in my opinion, locomotive is not confirming to the definition of capital goods. Thus, cenvat credit on locomotive as capital will not be available to the appellant. - disputed goods are also used for movement finished goods upto the destination point for sale. Thus, the activities carried out in the factory of the appellant with the help of locomotive, has a nexus with the manufacturing process, and as such, as per the clear and unambiguous definition of input, the locomotive cannot be denied the cenvat benefit. The case of the appellant gets support from the decision of larger bench of this Tribunal in the case of Banco Products (India) Ltd, wherein it has been held that Plastic crates used for transporting/ storing of goods in the factory will be considered as input for the purpose of Modvat credit, because in absence of proper storage and efficient movement of gods under the cover of plastic crates, the manufacturing activity will be affected. In view of the principles decided by the Larger Bench of the Tribunal, use of locomotive by the appellant for the intended purpose within the factory, will qualify for availment of cenvat credit under the head input. - Decided in favour of assessee.

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