TMI Tax Updates - e-Newsletter
November 2, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Mistake by mentioning wrong section in TDS challan - it is possible to retrieve & make any correction - Due credit of such TDS allowed - Tri

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Articles

• Credit of EC & SHEC can be used for payment of Service tax
• LTU'S MAY DIE NATURALLY

News

• Real Estate sector should survive on market economy and not on subsidies –Jaitley “Easy availability of land crucial for realising the dream of affordable housing”

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• Tolerance and Respect for Economic Progress (Convocation address by Dr. Raghuram Rajan, Governor, Reserve Bank of India at the IIT Delhi Convocation, October 31, 2015)

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Notifications

Central Excise

• 23/2015 - dated 30-10-2015 - CE (NT)
  Seeks to further amend Notification No.42/2001-Central Excise(N.T.) dated 26.06.2001

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Customs

• 53/2015 - dated 30-10-2015 - ADD
  Seeks to order provisional assessment on imports of Clear Float Glass of nominal thickness ranging from 4 mm to 12 mm (both inclusive), the nominal thickness being as per BIS 14900:2000, falling under the headings 7003, 7004, 7005, 7009, 7013, 7015, 7016, 7018, 7019, 7020 of the First Schedule to the Customs Tariff Act, originating in or exported from Pakistan, Saudi Arabia and UAE by M/s Tariq Glass Industries Limited, Pakistan (exporter) till the finalization of New Shipper Review initiated by DGAD, initiated vide notification No. 15/16/2015-DGAD, dated 23rd September, 2015

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Circulars / Instructions / Orders

VAT - Delhi

• 28/2015-16 - dated 30-10-2015
  Filing of reconciliation return for the year 2014-15

Central Excise

• 1011/18/2015-CX - dated 30-10-2015
  Clarification regarding Self-sealing and self-Examination of Bulk cargo

Highlights / Catch Notes

Income Tax

• Entitlement to carry forward and set-off of business loss - the control over the Company, with 51% voting power, remained with ABL and, as such the provisions of Section 79 would not be attracted - HC
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• Deduction u/s 80IB (10) (a) - If this condition is not fulfilled, the assessee who maintains work in progress accounting method and has claimed deduction under Section 80IB(10)(a) must suffer the consequence of disallowance or withdrawal of the benefit claimed by him on that count. - HC
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• Re-opening of assessment - interest expenses corresponding to the interest chargeable on the amount so diverted to the partners of the assessee firm for non business purposes has escaped assessment in the hands of the assessee firm within the meaning of Section 147 - HC
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• Expenditure on medical treatment of eyes for improving the vision - Eyes are essential not only for the purpose of business or profession but for purposes other than these which are so many. - the said expenditure as claimed by the applicant is not in the nature of the expenditure wholly and exclusively incurred for the purposes of the profession of the applicant - HC
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• Reopening of assessment - When a regular assessment is completed in terms of Section 143(3), a presumption can be raised that such an order has been passed upon a proper application of mind - what the AO is now seeking to do amounts to a clear change of opinion and that is not permissible - HC
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• The profits arising out of operations of ship in question in international water, by the appellant is not subject to taxation in India due to applicability of Article 8 read with Article 4 of India-UAE DTAA - AT
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• Issue of claim of ‘premium’ which was disallowed U/s. 40(a)(ia) - Even if the amount is credited to Suspense A/c, but is claimed in the Books of Accounts of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of payee and the provisions of this Section shall apply accordingly. - AT
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• The maintenance charges paid to the professionals for maintaining the medical equipments is a payment falling in the category of contract payments requiring deduction of tax at source u/s 194C and not u/s 194J - AT
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• Mistake by mentioning wrong section in TDS challan - once the challan is deposited with the bank, it would not be possible for assessee to retrieve the same and make any correction - Revenue directed to allow the due credit of such TDS - AT
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• Profits in lieu of salary - The employer, voluntarily at its discretion, agreed to pay the amount in question to the assessee with a view to bring an end to the litigation. There was no obligation cast upon the employer to make such payment and, therefore, the same would not take the colour of compensation as envisaged under section 17(3)(i) - HC
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• Reopening of assessment - CIT(A) was not justified in observing that Hon'ble High Court has not passed a detailed order, therefore, the same was not followed, in our view, whether the order of the Hon'ble High Court is, in detail or in short, that has to be followed. - AT
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• Addition on net profit on account of money receipts - sale of bogus tenancy flat - the addition was merely made on presumptive basis, which cannot stand on its legs, therefore, the addition was rightly deleted - AT
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• Trading addition U/s 68 - during the course of search, no incriminating documents were found and seized, therefore, lump sum addition made by the Assessing Officer and partly confirmed by the ld CIT(A) is not justified - AT
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• Disallowance of total contract expenses - required details of contract expense were not submitted before the AO - Therefore, we confirm the order of rejection U/s 145(3) - AT
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• Rejection of books of account - purchases made by the appellant are not genuine and are not verifiable - addition is restricted to 15% of unverifiable purchases which will be worked out by AO - AT
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• It has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. - AT
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Customs

• Late filing of EGM – Filing of EGM after the date of departure of vessel - If the main Section of the Customs Act, 1962 does not permit late filing of EGM then it cannot be held that its permissible under the regulation - AT
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• Confiscation of goods under Section 113 of Customs Act, 1962 – Such huge quantity purchased by appellant and he did not realise that goods were not basmati rice – Redemption fine and penalty cannot be said as unwarranted - AT
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• Failure to make pre-deposit of 7.5% to entertain appeal - what is to be seen is the date of filing of the appeal - Appellant deposited a sum of ₹ 4,95,532 on 8th May 2015 which was admittedly not 7.5% of the demanded duty as confirmed by Commissioner of Customs (Export) – Appeal dismissed - HC
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Service Tax

• Deputation of employees to group company - Manpower Supply Recruitment Agency Service - employees were and are kept informed that their services may be utilised for any of organisation in group companies and salary paid by them to deputed employees is only amount collected by them from group companies which is reimbursement of actual expenses - Demand set aside - AT
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• Classification of Services - BAS or BSS - if a services cannot be classified in any of the manner specified in clause (a) or clause (b) it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merits consideration, which in this case is the Business Auxiliary Services - AT
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• Whether Setting up MICR-CPC to attend cheque clearance of Financial Institutions is Banking and Other Financial Services or not? – Cheque clearance activity rendered to other member Banks and not to customers - Held Yes - Activity is taxable - AT
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Central Excise

• Classification of Resin Bonded Bamboo Mats with Veneer in between - Classification under Chapter 4410.90 or under Chapter 4408.90 - a clear finding stands given that in terms of Chapter Note 6 the goods would be classified properly under heading 4410 - AT
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• Waiver of pre deposit - Section 35F - Mandatory pre deposit - in view of the amendment of the Section 35F of the Act, the Stay application is not maintainable. - AT
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• Disallowance of CENVAT Credit - credit on the quantity of input/coal which was short due to washing of coal in Coal Washery - credit cannot be denied on the ground that part of inputs is contained in the slag and other invisible losses. - AT
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• CENVAT Credit - Whether appellant is required to debit an amount of Cenvat Credit proportional to the utilisation of steam in non-productive use in canteen and laundry or otherwise - canteen services and the laundry service is used within the factory and in a way related to manufacturing activity - credit allowed - AT
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• Constitutional validity of Rule 8(3A) of the 2002 Rules - the unamended Rule 8(3A) of 2002 Rules whereby the benefit of CENVAT Credit for all the period till the actual payment was made, stands disallowed in the event of a minor default also is arbitrary and unreasonable. - HC
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• Duty demand u/s 11AB - AED (GSI) pertaining to the period prior to 1.4.2000 had been utilized for payment of BED and SED - Though subsection (5) added to Section 88 of 2004 Act starts with non obstante clause and would have an overriding effect on sub-section (4) of Section 88 of 2004 Act, nonetheless it would apply only to those cases where the wrongly utilized AED (GSI) Credit still remains outstanding on the date of the coming into force of Finance Act, 2005 - HC
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VAT

• Challenge to legality and validity of attachment order - Petitioners had no knowledge or notice of the charge of the Sales Tax Authorities before they purchased the secured property from Respondent No.2 and therefore, the Sales Tax Authorities cannot enforce their charge against the secured property. - HC
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Case Laws:

• Income Tax

• 2015 (10) TMI 2439
  Mistake by mentioning wrong section in TDS challan - Held that:- In its grounds of appeal, department submitted that the assessee should have filed a correction statement to rectify the wrong section which has been quoted in the challan and in absence of that the credit has not been given to the assessee. It seems to us that once the challan is deposited with the bank, it would not be possible for assessee to retrieve the same and make any correction. However, as far as the TDS return is concerned, if there is any mistake, same can be rectified by filing the correction statement. It is not under dispute that assessee has deposited the TDS of ₹ 5,02,000/- under its own TAN. In the light of above discussion, we hereby direct the Revenue to allow the due credit of such TDS for ₹ 5,02,000/- to the assessee after verification of original challan.- Decided in favour of assessee.

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• 2015 (10) TMI 2438
  Replacement cost - submission that the Assessee had submitted that the said expenditure was incurred for increasing the efficiency of the said machinery - revenue v/s capital expenditure - Held that:- A perusal of the photographs of the MDSI controller shows that the said equipment is a computer terminal which controls the lathe. It is an admitted fact that the said controller has been replaced due to technological advancement and not on account of damage or irreparable position of the MDSI controller. Further, it is an admitted fact that the MDSI controller which was already available on the said machine was low memory variety which was replaced by a high memory variety. Thus, totally new equipment has been added under the guise of replacement. On a specific query it was admitted by the ld. AR on behalf of the Assessee that the actual cost of the total equipment including the lathe in 2001 was ₹ 53 lacs whereas the replacement of the controller alone in 2007-08 is at a cost of ₹ 35 lacs. The Assessee in its written submission has also categorically admitted that the said replacement was due to technological advancement and for increasing the efficiency. Thus, it becomes clear that the said lathe by this replacement has become more efficient thereby resulting in increase in the capacity and getting extended life. This is nothing but in the capital field. Thus, the said expenditure can be termed only as a capital expenditure and not as current repairs. This is because no repair has been done but replacement of an already running equipment with another higher efficiency equipment. - Decided in favour of revenue.

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• 2015 (10) TMI 2437
  Deduction under sec. 80P(2)(a)(i) - as per revenue the assessee is a cooperative society which carries on banking business, and hence a primary cooperative bank as per sec. 5(ccv) of the Banking Regulation Act, 1949 - CIT(A) allowed the claim - Held that:- The Departmental Representative has simply relied on the order of the Assessing Officer. He could not point out any specific error in the order of the Commissioner of Income Tax (Appeals). He also could not bring any material on record to show that the decision of the Hon'ble Karnataka High Court in the case of Shri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot (2015 (1) TMI 821 - KARNATAKA HIGH COURT) relied on by the Commissioner of Income Tax (Appeals) has been set aside by the Hon'ble Supreme Court. Further, we find that the Authorized Representative of the assessee has filed, before us, the order of the Hon'ble Bombay High Court at Goa in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. (2015 (6) TMI 573 - BOMBAY HIGH COURT) which is on the same lines as that of the Hon'ble Karnataka High Court in the case of Shri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot (supra). As the assessee is not a Cooperative bank earning on exclusively banking business and as it does not possess a licence from Reserve Bank of India to earn on business, it is not a Co-operative bank. It is a Cooperative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such - the above facts and circumstances of the case, we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) which is confirmed and the ground of appeal of the Revenue is dismissed. - Decided in favour of assessee.

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• 2015 (10) TMI 2436
  Addition u/s 68 - Held that:- It is clear and beyond any doubt that the unsecured cash creditors in respect of which the additions were made by the Assessing Officer u/s 68 of the Act has been examined in detail by the ld CIT(A) and he has given a clear finding that all the aforesaid cash credits were admittedly old and balances therein reflected only the brought forwarded balances. The Assessing Officer in his remand report has also not disputed this fact. In the light of these uncontroverted facts, these cash credits pertained to years prior to year under consideration. Further, in terms of section 68 and in the light to the decision of the Hon’ble Rajasthan High Court Lakshman Swaroop Gupta & Bros (1972 (11) TMI 20 - RAJASTHAN High Court), the additions made by the Assessing Officer cannot be sustained as the unsecured cash credits doesn’t pertain to the year under consideration.- Decided in favour of assessee. Disallowance of interest - CIT(A) deleted the addition - Held that:- We have gone through the order of the ld CIT(A) and we do not feel any infirmity in the said order. Neither the revenue has brought any further facts to prove that this payment of interest to the creditors were not genuine or bogus - Decided in favour of assessee.

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• 2015 (10) TMI 2435
  Penalty under S.271(1)(b) - non-compliance on the part of the assessee to the notices issued under section 153A, 142(1) and 143(2) - Held that:- Facts and circumstances of the case of Shri Upendra Kumar(HUF), Hyderabad, for the years under consideration being similar, and the order of the learned CIT(A) impugned in these appeals being common as the one considered as the one already considered by the Tribunal in the case of the connected assessee, viz. Shri Upendra Kumar(Ind)[2015 (10) TMI 1308 - ITAT HYDERABAD] following the above order of the Tribunal, the impugned order of the learned CIT(A) confirming the penalties imposed by the Assessing Officer under section 271(1)(b) for the years under consideration is set aside and the matter is remitted back to him for disposing of the appeals of the assessee on merits, after giving proper and sufficient opportunity of being heard. As directed in the above order of this Tribunal, assessee shall directed comply with the notices issued by the learned CIT(A) and extend full cooperation in order to enable the learned CIT(A) to dispose of the matter expeditiously. - Decided in favour of assessee for statistical purposes.

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• 2015 (10) TMI 2434
  Profits in lieu of salary - Taxability of amount received in accordance with the High Court Judgment under section 17(3) - Held that:- Assessee’s services came to be terminated by the order dated 6th May, 1984 under rule 44 of the relevant Service Rules after giving three months’ pay. Therefore, insofar as the obligation of the employer to pay any amount to the assessee in relation to the termination of his services, the same came to an end in view of the discharge of his services under rule 44. While the assessee succeeded in the writ petition filed by him, the letters patent appeal preferred by the employer came to be allowed. Therefore, the discharge of the assessee’s services by the employer attained finality. However, during the pendency of the letters patent appeal, the assessee and the employer arrived at a settlement, in terms whereof, the amount was to be computed in the manner stated therein and was to be paid to the assessee. Therefore, the services of the assessee came to be terminated in terms of the rules, and the amount in question was paid only in terms of the settlement, without there being any obligation on the part of the employer to pay any further amount to the assessee in terms of the service rules. The employer, voluntarily at its discretion, agreed to pay the amount in question to the assessee with a view to bring an end to the litigation. There was no obligation cast upon the employer to make such payment and, therefore, the same would not take the colour of compensation as envisaged under section 17(3)(i) of the Act. The amount in question would, therefore, not fall within the ambit of the expression “profits in lieu of salary” as contemplated under section 17(3)(i) of the Act. - Decided in favour of assessee.

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• 2015 (10) TMI 2433
  Reopening of assessment - disallowance of advertisement and sales promotion expenses - AO disallowed the aforesaid expenses on the ground that the expenditure is of the Channel principal - Held that:- While deciding the appeal for AY 2005-06 the Tribunal has discussed the issue as under after considering the submission and perusing the material on record, we find that the assessee deserves to succeed on the issue involved. We find that learned CIT(A) was not justified in observing that Hon'ble High Court in case of Star India [2009 (3) TMI 990 - BOMBAY HIGH COURT] has not passed a detailed order, therefore, the same was not followed, in our view, whether the order of the Hon'ble High Court is, in detail or in short, that has to be followed. We further noted that learned CIT(A) has tried to distinguish the facts in the case of Star India Private Limited and in the case of assessee. Distinguishing feature has been explained by the assessee while filing a chart. - Decided in favour of assessee.

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• 2015 (10) TMI 2432
  Fraudulent claim of drawback and DEPB credit by export of mis-declared goods - extension of the enquiry to the unexplained credit and the bogus purchases - reopening of assessment - Held that:- Though in the reasons, the issue of bogus purchases has not been specifically mentioned and the allegation is limited to the extent of fraudulent claim of drawback and DEPB, but in the facts and circumstances of the case, it cannot be said that Assessing Officer was not within its power to make addition in respect of unexplained credit and the bogus purchases. The Assessing Officer having reopened the assessment under section 148 on the basis of the fraudulent claim of drawback and DEPB credit, in our opinion, he was well within his right to extend the enquiry to the unexplained credit and the bogus purchases during the course of the reassessment proceedings. The case laws relied upon by the learned AR are distinguishable on facts. In those cases the additions were made which were completely different than the issue on which reopening was done. In this case the reopening has been done on the allegation of fraudulent claim of drawback and DEPB credit and this will include purchases and sales on which such claim was made. As such this contention of the assessee is rejected. As going through the documents filed by the assessee in support of the purchases made by it. The learned DR could not point out any error or defect in these documents so as to ignore these evidences. We are of the view that in such circumstances, it cannot be said that purchases are not genuine. The report received from the DRI by the Assessing Officer being a trigger point for carrying out further investigation, the report per se cannot be a conclusive evidence to hold and make addition on that basis. The assessee having led the evidences in support of its contention, it was incumbent upon the Assessing Officer to discredit such evidences and material so as to substantiate its allegation that the purchases are not genuine. We are of the view that in the facts and circumstance, the finding of the Assessing Officer cannot be sustained. On the issue whether sales are not genuine, from the assessment order we note that the Assessing Officer has not tinkered with the trading account. He has also not rejected the books of accounts. The assessee during the course of the assessment had produced complete books of account which included sales invoices, stock records, excise record and quantitative details. No observation has been made by the Assessing Officer regarding any of these evidences. In these circumstances and facts it cannot be said sales are not genuine. In fact this is not the case of the Assessing Officer also. Addition to the peak amount of the payments made against purchases - Held that:- s rightly contended by the learned AR that this chart has been prepared by the learned CIT(A) himself on the basis of the copy of account of the suppliers placed in the paper book which were before the Assessing Officer as well as learned CIT(A). This chart was not filed by the assessee and that is why the learned CIT(A) has enclosed this chart as part of its order. On enquiry from the Bench whether there is any factual inaccuracy in this chart prepared by the learned CIT(A), the learned DR was fair enough to admit that there does not appear to be any factual inaccuracy so far as the peak amount of the payments made against purchases as stated in the Annexure A. The learned CIT(A) has given detailed reasoning for not sustaining the entire addition and restricting the addition to the peak amount of the payments made against purchases and enhancing the gross profit rate to 3% as against 1.42% declared by the assessee which is justified. CIT(A) having held that purchases are not genuine, thereafter has done the right exercise by rejecting the trading results of the assessee and estimating the profit on sales. For this purpose the learned CIT(A) has worked out the comparative gross profit rate and on that basis he has estimated the income on the sales made by the assessee. The learned CIT(A) has gone a step further. He has also worked out the investments, the assessee would have made on account of the payments made for so called alleged purchases. Thus the methodology applied by the learned CIT (A) is correct approach once he has held that purchases are not genuine. However since we have held that the findings of the AO that the purchases are not genuine, on the facts and circumstances of the case as discussed hereinabove is untenable, the entire addition made on account of purchases is directed to be deleted Bogus export sale - allegation made by the AO on the basis of the DRI report where the allegation apparently is that the assessee has mis-declared the goods and the value of such goods was not of that level at which the same have been declared and accordingly Assessing Officer, after allowing deduction of cost of purchases at the rate of 6.35%, he has disallowed the balance amount brought in by way of export sale as an unexplained credit - Held that:- There is no material to hold that these purchases were not genuine. Further the fact that the export was made in the preceding year cannot be ignored. The allegation in the DRI report pertains to subsequent year when one of the shipments was examined. The subsequent shipment cannot be a basis for holding that the shipments made earlier were sub-standard. Each of the shipment is physically verified by the Custom people and as pointed out by the learned AR, the samples have been drawn in respect of each shipment and nothing adverse has been reported from the sample report issued by the Central Revenue Controlled Laboratory. The payment has also been realized in respect of such goods through banking channel. Bank has also issued the realization certificate of such export. There is no discussion or adverse comment by the Assessing Officer on this aspect also. In view of these facts we are of the view that the learned CIT(A) was not justified in sustaining this addition There is no discussion in the assessment order about the amount of the purchases which has been claimed as deduction against such export. The Assessing Officer, in case was having any doubt about the export sale, the right course of action would have been to disallow the purchases against such export as difference of amount of export sale and purchases against such export stand already included in the income. In the absence of any adverse finding in respect of purchases for such export the AO’s action of making the addition as unexplained credit is unsustainable - Decided in favour of assessee.

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• 2015 (10) TMI 2431
  Transfer pricing adjustment - selection of comparables - Held that:- CAT Technologies Ltd has earned Medical transcription receipts of ₹ 83.74 lac and Training income of ₹ 2.44 lac, both of which have been combined with the income from Software development and consulting services. One cannot ascertain with precision the contribution made by the income from Medical transcription and Training to the overall profitability of CAT Technologies Ltd., so that the other income may be segregated. As such, we fail to comprehend as to how the entity level comparison of this company with the assessee’s ‘Software development and maintenance services’ segment can be construed as valid. This company is, therefore, directed to be excluded from the list of comparables. Infosys Technologies Ltd. considering the giantness of Infosys Ltd., in terms of risk profile, nature of services, number of employees, ownership of branded products and brand related profits, etc. in comparison with the factors prevailing in the case of Agnity India Technologies Pvt. Ltd., being, a captive unit providing software development services without having any IP rights in the work done by it. Tata Elxsi company is also engaged in sale of software products/solutions and has its own intangibles. The revenues under ‘Systems integration and support’ segment of this company stand at ₹ 4008.75 crore, out of its total revenue of ₹ 41851.60. For comparison, the TPO has taken the figures of this company at entity level, starting with a revenue at ₹ 41851.60 crore. Since the overall profit of this company includes the effect of profit from sale/licensing of software products/solutions and there is no measure to isolate such profit from the overall profit of software development segment, we hold that this company at an entity level cannot be considered as comparable with the assessee’s ‘Software development and maintenance’ segment. This company is, therefore, directed to be excluded. TCS Ltd. - once acquisition and merger etc. has taken place, it is always likely to affect the profitability of such a company in the year of acquisition etc. There cannot be any standard yardstick to measure the impact of such a factor on the overall profitability of such a company. It is relevant to highlight that we are considering the exclusion of a company on this score. In our considered opinion, when other comparables are available, the exclusion of a probable comparable company cannot have much significance in contrast to a situation of inclusion of a probable incomparable. We hold that TCS Ltd. cannot be considered as comparable with the assessee’s software development and maintenance segment on this count as well. The same is directed to be excluded. Thirdware Solutions Ltd. - It is observed from the Annual report of this company that apart from revenue from ‘Software services’, this company has also earned revenue from ‘Sales.’ The TPO has considered entity level figures of this company for comparison. In view of the joining of the revenue from sales with the revenue from software services, this company ceases to be comparable with the assessee’s ‘Software development and maintenance services’ segment. Here, it is pertinent to mention that this company was considered by the TPO as comparable in the immediately preceding year as well. The Tribunal vide its aforenoted order, has held it to be incomparable. Since no distinguishing features of the functional profile of this company and the assessee for the current year vis-à-vis the preceding year have been brought to our notice, following the precedent, we order for the removal of this company from the list of comparables. Quintegra Solutions Ltd. - the Annual report of this company that it has ‘Copyrights’ included in its Schedule of fixed assets with the closing written down value at ₹ 2.17 crore. Apart from that, it is seen that this company is regularly incurring expenses on Research and development. This company is also earning revenue from sale of software products apart from rendering software services. Following the view taken for the exclusion of Thirdware Solutions Ltd. etc. above, we hold that this company has been rightly excluded from the list of comparables by the TPO because of the joining of its income from sale of products with the income from rendering of software development services. The TPO’s action is, therefore, approved. Zylog Systems Ltd. - Though the ld. AR initially argued for recognizing this company as comparable, but after noting the differences in the functional profile of this company with the ‘Software development and maintenance service segment’ of the assessee, it was fairly conceded that this company was not comparable. Under such circumstances, we approve the view taken by the TPO in excluding it from the list of comparables. Accentia Technologies Ltd. - It has been mentioned that this company: ‘Completed the acquisition of Oak Technologies Inc., USA and has rapidly increased its customer base from New Jersey and neighboring areas.’ This shows that extraordinary financial event happened during the year in this company by means of acquisition, thereby rendering it as unfit for comparison with the assessee’s profitability under this segment. Following the view taken hereinabove while discussing the exclusion of TCS Ltd. from the ‘Software Development and Maintenance’ segment of the assessee, we direct the elimination of this company also from the final list of comparables. Cosmic Global Ltd. - this company was subject matter of consideration by the Tribunal in its order for the immediately preceding assessment year as well. After making a detailed analysis, the Tribunal has approved the view taken by the TPO in considering this company as a fit comparable. Following such a view taken in the immediately preceding assessment year, we uphold the TPO’s order rejecting the assessee’s contention for exclusion. Coral Hub (Vishal Information Technology Ltd.) coming to the functional comparability of this company, we observe from its Annual report that it is outsourcing its major activities. Such outsourcing charges constitute around 90.57% of the total operating cost. As against this, the assessee is engaged in providing the services under this segment at its own without any outsourcing. This crucial difference between the manner of performing services has an important bearing on the ultimate profitability. The Delhi Bench of the Tribunal in the case of Mercer Consulting (India) Pvt. Ltd. Vs. DCIT [2014 (7) TMI 715 - ITAT DELHI ] has approved the exclusion of this company from the list of comparables E-Clerx Services Ltd. is engaged in KPO services which cannot be compared with a company providing low-end BPO services. Turning to the facts of the instant case, we find that the segment of the assessee under consideration is ‘Back office support plus F&A services’. By no standard, a KPO company like e-Clerx can be considered as comparable with the ‘Back office support plus F&A services’ segment of the assessee. We, therefore, order for the removal of this company from the list of comparables. Genesis International Corporation Ltd. company is totally incomparable with this segment of the assessee. At this stage, it is further pertinent to mention that the TPO has himself excluded this company from the list of comparables for the immediately succeeding year by noticing it to be a functionally different company. As such, we are not inclined to accept the comparability of this company with the assessee’s merged ‘Back office support and F&A support services’ segment. This company is directed to be taken away from the tally of comparables under this segment. Non reducing lease line charges from ‘total turnover’, after excluding it from ‘export turnover’ - Held that:- e find force in the contention advanced by the ld. AR, requiring the exclusion of this amount from ‘total turnover’ as well. The obvious reason is that when a particular item does not form part of export turnover, which, in turn, is a necessary ingredient of the total turnover, the same has to be necessarily excluded from the computation of latter. It has been brought to our notice that the Tribunal in assessee’s own case for the A.Ys. 2007-08 and 2008-09 has decided this issue in assessee’s favour.

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• 2015 (10) TMI 2430
  Addition on net profit on account of money receipts - sale of bogus tenancy flat - CIT(A) deleted the addition - Held that:- There is uncontroverted finding in the impugned order that the assessee sold the flats at the market rates and there was no proof that on money was received by the assessee on sale of flats/from tenants, thus, no presumption can be drawn, in the absence of any material, that any under hand money transacted between the assessee and the tenants. As mentioned earlier the tenants were certified by MHADA, which rather contains more tenants, therefore, the allegation of creation of bogus tenancy is not substantiated. Neither before the Assessing Officer nor before the ld. Commissioner of Income Tax (Appeals) and even before this Tribunal no material was produced at any stage that the assessee received on money/under hand money, thus, merely, on the basis of statement of one or two person, the addition made on presumptive basis cannot be sustained. Even otherwise, presumption cannot take the shape of evidence, however it strong may be. It is also noted that even the ld. Assessing Officer vide his remand report dated 11/01/2011 categorically stated that the impugned five parties were actually given possession of the property in lieu of the surrender of the tenancy rights. Even in the remand report, it has been concluded the by Assessing Officer that the noting on the seized paper and the agreement does not tally and rather the parties received the area as per the agreement, thus, the totality of facts, clearly indicates that the addition was merely made on presumptive basis, which cannot stand on its legs, therefore, the addition was rightly deleted, consequently, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue Net profit on sale of bogus tenancy of 22 flat in Siddesh apartment and shop in riddhi apartment - CIT(A) deleted the addition - Held that:- Because the addition was made merely on the basis of certain statements and without corroborating the same with the material whereas, as mentioned earlier, as per the MHADA the actual tenants were 101, whereas, as per the assessee, they were only 97, thus, there is no question of bogus tenancy, more specifically when alternate accommodation was provided to, claimed, 97 persons in lieu of surrender of their tenancy rights. So far as, seizure of incriminating material from the residence of Ms. Chola Joshi is concerned, we have already deliberated upon the same in preceding para of this order. It is also worth mentioning that while deliberating upon the issue, the ld. Commissioner of Income Tax (Appeals) has already placed reliance upon various judicial pronouncements, therefore, the same are not being repeated, being, matter of record and may be considered to be looked upon/considered by us. Thus, on this ground, we find no merit, in the appeal of the Revenue, consequently, we affirm the conclusion drawn by the ld. Commissioner of Income Tax (Appeals). - Decided against revenue

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• 2015 (10) TMI 2429
  Disallowance of additional depreciation u/s. 32(1)(iia) - Held that:- The claim of assessee in respect of additional depreciation has been denied by the AO on the ground that the assessee is not in the business of manufacture or production of goods or articles. Though the AO has recorded this fact that the assessee is in the activity of excavation, crushing and screening of iron ore, but such activity has been carried out by the assessee on behalf of the mine owners. Thus, the AO was of the view that assessee is not entitled for additional depreciation. Apart from this finding, the AO has not examined the source of revenue earned by the assessee from various activities and whether the assessee is doing this activity of excavation, crushing and screening of iron ore by purchasing the iron ore and then selling the same, or it was on contract basis on behalf of other parties. - this issue requires a proper verification and examination of relevant facts at the level of the Assessing Officer and then, adjudication as per law - Decided in favour of assessee by way of remand. Disallowance u/s. 40(a)(ia) - assessee has paid interest/financial charges without deduction of tax as required u/s. 194C - Held that:- This issue is decided in favour of the assessee. The disallowance made by the AO u/s. 40(a)(ia) of the Act is deleted. See case of Merilyn Shipping [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] concluding that provisions of Section 40(a)(ia) are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow expenditure which has been actually paid during the previous year, without deduction of TDS. - Decided in favour of assessee

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• 2015 (10) TMI 2428
  Exemption u/s 11A - Expenditure incurred on telecommunication charges and bandwidth & internet charges and travel expenditure incurred in foreign currency excluded by the AO from the export turnover for the purpose of computing deduction u/s 10A - Held that:- As decided in case of Tata Elxsi [2011 (8) TMI 782 - KARNATAKA HIGH COURT] there should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. - Decided in favour of assessee

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• 2015 (10) TMI 2427
  Rectification of mistake - rectification application before the Assessing Officer in respect of the quantum of interest charged under Section 234A - Held that:- CIT (Appeals) has specifically considered the contention of the assessee regarding the excessive charging of interest under Section 234A of the Act and also the applicability of the decision of the Hon'ble Apex Court in the case of CIT V Pranoy Roy & Another in [2008 (9) TMI 150 - SUPREME COURT] and rendered a finding against the assessee. It is also seen that the learned CIT (Appeals) has rendered a specific finding with reasons, as to why the computation of interest as adopted by the Assessing Officer is correct. Further, in the impugned order, the Tribunal has rendered a specific finding that the assessee has failed to controvert the findings of the learned CIT (Appeals), either on facts in respect of the calculation of interest under Section 234A of the Act or in law in respect of the judicial decisions cited by the assessee and has therefore upheld the decision of the learned CIT (Appeals). In the present M.P. also the assessee has not made out any case that the decision of the learned CIT (Appeals) and the impugned order of the Tribunal are on facts, which are wrongly considered. In view of the facts of the matter as discussed above and the clear findings recorded no merit in the contentions made by the assessee in the present M.P. In our view, a clear finding has been rendered on all issues under appeal, based on an evaluation of the facts emanating from the submissions made, before the learned CIT (Appeals) and the Tribunal and the material on record. Seeking re-evaluation of the facts or to make fresh submissions on the same set of issues and facts amount to seeking a review of the impugned order, which is beyond the scope of the M.P. The issue in the case on hand is whether the assessee has made out any case of mistake apparent from the records, to warrant interference under Section 254(2) of the Act. For the reasons discussed above, we are very clear that the assessee has not pointed out any mistake apparent from the record - Decided against assessee.

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• 2015 (10) TMI 2426
  Unexplained cash credits u/s 68 - Held that:- We are inclined to allow the assessee another opportunity only because the addition has been made by the Assessing Officer and upheld by the learned CIT(A) due to the lack of evidence put forth by the assessee. The purpose of assessment is to determine the correct income of the assessee and we are of the view that the assessee has realized his errors and has attempted to file additional evidence before us in an attempt to show that he had sufficient sources to explain the capital introduced in the year under consideration. In this view of the matter, we are of the opinion that the assessee must be afforded an opportunity to establish the same and not reject the said recourse on the ground that the assessee did not appear before the learned CIT(A) earlier. We, therefore, in the interest of equity and justice set aside the orders of the authorities below and restore the matter to the file of the Assessing Officer to consider afresh the matter relating to the addition of ₹ 31,00,000/- u/s 68 after affording the assessee adequate opportunity of being heard. We are not passing any order on the admission of additional evidence put forth by the assessee in terms of Rule 29. However, liberty is given to the assessee to produce before the Assessing Officer material/details/evidence in support of the claim of genuineness of the cash credit. The Assessing Officer shall also be at liberty to examine the matter afresh, gather such evidence, cause any enquiry to be made, etc. in order to verify the veracity of the assessee’s claim and to thereafter decide the matter in accordance with law. - Decided in favour of assessee for statistical purposes.

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• 2015 (10) TMI 2425
  Transfer pricing adjustment - selection of comparable - Held that:- Following the decision of the Mumbai Bench of the ITAT in the case of Tevapharma Pvt. Ltd. (2011 (12) TMI 284 - ITAT MUMBAI) and of the co-ordinate benches of this Tribunal in the case of Millipore India Pvt. Ltd. (2014 (10) TMI 505 - ITAT BANGALORE), Apotex Research Pvt. Ltd. (2012 (11) TMI 1094 - ITAT BANGALORE) and the assessee’s own case for Assessment Year 2007-08 we direct the Assessing Officer / TPO to exclude this company i.e. Oil Field Instrumentation India Ltd. and Celestial Biolabs Ltd. from the list of comparable to the assessee in the case on hand.

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• 2015 (10) TMI 2424
  Reopening of assessment - Held that:- From the reasons recorded, nothing is borne out as to whether the Assessing Officer has applied his own mind with regard to the escapement of income chargeable to tax. We have carefully examined the orders of the ld. CIT(A) and we find that the ld. CIT(A) has adjudicated the impugned issue in the light of various judicial pronouncements in which it has been held that wherever the assessment is reopened on the sole basis of information received from the ADI or any other agency and without application of mind by the Assessing Officer, the reopening itself is invalid. We are, therefore, of the view that in the instant case, when the assessment was reopened without application of mind of the Assessing Officer and simply on the basis of information received from the ADI, the reopening is not valid. - Decided in favour of assessee.

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• 2015 (10) TMI 2423
  Disallowance u/s 14A read with Rule 8D - Held that:- None of the contentions raised by the Ld. AR of the assessee is rendering any help to the assessee in the present case and none of the judgments cited by him is applicable in the facts of the present case and the disallowance made by the AO and confirmed by the Ld. CIT(A) is in accordance with Rule 8D and section 14A of the Act and therefore, we find no reason to interfere in the order of the Ld. CIT(A). - Decided in favour of assessee.

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• 2015 (10) TMI 2422
  Addition on account of “Interest paid to bank” - disallowance u/s 14A - Held that:- is undisputed fact that the assessee has more interest income than interest paid on OD. Besides this he has also disclosed short term capital gain at ₹ 9,07,828/- in the income of the assessee, it is also taxable. The ld Assessing Officer had not established the nexus between the interest bearing borrowings with utilizing the fund in interest free investment. When the assessee has shown income from the short term capital gain, it is evident that he has been in the business of share trading. Further the ld Assessing Officer has not brought on record the amount deployed in shares for investment purposes. The case laws cited by the assessee CIT Vs. Hero Cycles [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT] are squarely applicable, therefore, the addition confirmed by the ld CIT(A) is reversed and the assessee’s appeal is allowed on this ground Trading addition U/s 68 - credit appearing in the name of Shri Kanha Ram Agarwal - Held that:- It is revealed from the assessment order that Sh. Kanha Ram Agarwal, brother of the assessee has declared additional income U/s 132(4) of the Act on 27/08/2008. IN answer to question No. 22, he has disclosed ₹ 1.5 crores during the search under the various heads. It is also fact that the AR of the assessee submitted different confirmation before both the authorities. Now before us, he has filed different confirmations, therefore, the Assessing Officer is directed to verify the confirmation from the books of account of Shri Kanha Ram Agarwal. Accordingly, this issue is set aside to the Assessing Officer for limited purpose to verify and take decision as per law. - Decided on favour of assessee for statistical purposes only. Trading addition by applying GP rate of 15% as against 12.57% declared by the assessee and invoking the provisions of Section 145(3)- Held that:- The defects pointed out by the Assessing Officer are not specific in nature. He has not brought on record any discrepancy in the books of account produced by the assessee but the compared case with M/s Supreme Carpet and Carpet palace who are in the export business. The assessee was trading goods for local market. The case is audited U/s 44AB of the Act as claimed by the assessee. The case law referred the assessee are squarely applicable. Further during the course of search, no incriminating documents were found and seized, therefore, lump sum addition made by the Assessing Officer and partly confirmed by the ld CIT(A) is not justified. Accordingly we reverse the order of the ld CIT(A) and allow the assessee’s appeal on this ground. - Decided on favour of assessee Trading addition by applying GP rate of 35% as against 26% declared by the assessee and invoking the provisions of Section 145(3) - Held that:- It is admitted fact that the assessee has admitted the difference on the basis of stock found during the course of survey and stock prepared on the basis of books of account at ₹ 1,96,668/-. It is undisputed fact that the books were not complete at the time of survey. The assessee also had not prepared trading account at the time of survey to determine the exact stock as per books of account and any difference on physical verification when purchase and sale bills available with the assessee. The assessee’s argument was that the old stock was also included in the closing stock which has lesser value due to various reasons but in closing stock the ld Assessing Officer has valued the carpet at average rate which neutralize the higher rate of per sq.ft of carpet and lower rate of carpet, therefore, this argument is not acceptable. Further the assessee has not produced any evidence that old stock had been sold by the assessee at lower rate, therefore, keeping in view of the facts and circumstances of the case, we confirm the addition of ₹ 2 lacs in case of assessee. The assessee gets relief of ₹ 7,89,668/- - Decided partly in favour of assessee.

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• 2015 (10) TMI 2421
  Disallowance of total contract expenses - rejection of books of account of the assessee - CIT(A) allowed part relief - Held that:- The assessee has shown total turnover during the year at ₹ 14.71 crores on which net profit has been shown @ 5.02%, which was ₹ 27.98 crores and net profit rate @ 5.77% in immediate preceding year. The assessee claimed that he produced the books of account but the Assessing Officer was not available in the office but books were examined by the Inspector on behalf of the Assessing Officer. The ld Assessing Officer applied Section 145(3) and rejected the book result on the ground that required details of contract expense were not submitted before him. Therefore, we confirm the order of rejection U/s 145(3), which has not been challenged by the assessee. However, estimate made by the ld Assessing Officer and confirmed by the ld CIT(A) is higher side, which would give net profit rate of 12.84% before depreciation, which is not possible in contract business. It is also fact that required details of contract expenses were not submitted before the Assessing Officer and net profit has declined for which the assessee explained that price has gone up. He also referred the cost of inflation index for this purpose, which supports the assessee’s claim. The lower authorities also have not compared the case with other assessee’s for estimating the NP rate, therefore, in the interest of justice, we apply N.P. rate @ 5.1% on turnover of ₹ 14,71,70,861/- and remaining addition is deleted. The Assessing Officer is directed to calculate the income as per the above finding. - Decided in favour of assessee partly. Disallowance of interest and bank charges - Held that:- As decided in Ganesh Chawala Vs. Income Tax Officer [2008 (5) TMI 651 - ITAT JAIPUR] is squarely applicable wherein it has been held that the assessee having purchased properties in the preceding years out of interest-free funds, no disallowance of interest having been made in those years and there being no material on record to show that loans raised for business purposes were utilised in purchasing properties in personal name of the assessee and therefore, AO was not justified in disallowing interest The facts and circumstances of the case are identical to the case of Ganesh Chawala Vs. Income Tax Officer (supra). There was also fact that netting of interest is positive, therefore, no disallowance can be made by the Assessing Officer without establishing the direct nexus with interest bearing borrowings to immovable properties purchased. The assessee’s capital was ₹ 2,81,21,267/- is more than investment made in immovable property at ₹ 1,54,71,217/-, therefore, the ld CIT(A) was not right in confirming the addition on account of interest at ₹ 17,48,663/-. Accordingly, we reverse the order of the ld CIT(A) and allowed the assessee’s appeal on this ground. - Decided in favour of assessee.

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• 2015 (10) TMI 2420
  Unverifiable purchases - Rejection of books of account - purchases made by the appellant are not genuine and are not verifiable - trading addition - Held that:- In view of the decision of this Coordinate Bench in the case of Anuj Kumar Varshney vs. ITO and others Gems and Jewellery cases [2015 (4) TMI 533 - ITAT JAIPUR] addition is restricted to 15% of unverifiable purchases which will be worked out by AO accordingly. - Decided in favour of assessee in part.

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• 2015 (10) TMI 2419
  Transfer pricing adjustment - selection of comparable - Held that:- The issue relating to comparable nature of nine out of above eleven companies (companies in original grounds as well as additional grounds taken together), viz. other than Flextronics Software Systems Ltd. (Seg.) and Helios & Matheson Information Tech. Ltd. has come up for consideration before this Tribunal for assessment year 2007-08 itself and in the case of Sumtotal Systems India P. Ltd., Hyderabad [2014 (8) TMI 870 - ITAT HYDERABAD] has accepted the contentions for exclusion of these nine companies under consideration before it. Comparable nature of Flextronics Software Systems Ltd.(Seg) and Helio & Matheson Information Tech Ltd., has been rejected by coordinate bench of the Tribunal in the case of M/s. Axsys Heathcare Ltd. [2014 (6) TMI 371 - ITAT HYDERABAD] on the ground of High Turnover- functionally dissimilar. In the case of Sumtotal Systems India P. Ltd., Hyderabad [2014 (8) TMI 870 - ITAT HYDERABAD] wherein the Tribunal vide its order has rejected the contentions of Assessee for inclusion of all the six companies under consideration before it [Aztec Soft Ltd., Birla Technologies Ltd., Indium software India Ltd., Larsen & Toubro Infotech., PSI Data systems Ltd. (SEG) and VMF Softech Ltd.] Computation of deduction under S.10A - reducing the communication charges from the export turnover considering it as attributable to the delivery of computer software outside India, but not reducing the same from the total turnover - Held that:- this Tribunal in similar cases, including in assessee’s own case for the assessment year 2006-07 have directed the Assessing Officer to exclude the communication charges from export turnover as well as total turnover while computing deduction under S.10A of the Act. In this view of the matter and respectfully following the decision of the Bombay High Court in the case of Gemplus Jewellery (2010 (6) TMI 65 - BOMBAY HIGH COURT) and Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] we allow this ground of Assessee Penalty under S.271(1)(c) - difference in the value of Arm’s Length Price - CIT(A) deleted penalty levy - Held that:- The determination of the Arm’s Length Price is a result of an estimation on the basis of different variables by both Assessee and the Assessing Officer, and the difference in the value of Arm’s Length Price arrived at by the Assessing Officer was due to its re-working by using different filters and consequently different comparables. This difference is merely a difference of opinion, which cannot be termed as concealment of income on the part of Assessee. Further observing that there is no suggestion in the TPO’s analysis or the assessment or penalty orders that there was any inaccuracy or incorrect in the information submitted by Assessee, and relying on the decision of the Supreme Court in the case of CIT V/s. Reliance Petro-Products Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT), the CIT(A) cancelled the impugned penalty. - Decided in favour of assessee.

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• 2015 (10) TMI 2418
  Addition representing forefeiture of warrants u/s. 28(iv) - Held that:- An identical issue was considered in M/s. Graviss Hospitality Ltd. case [2014 (12) TMI 139 - ITAT MUMBAI] wherein on identical set of facts the Tribunal has held that the amount of forefeited share application money transferred to "warrant forefeiture account" in the capital reserve, is a capital receipt only and cannot be taxed as income of the assessee, either u/s. 28(iv) or u/s. 41(1) of the Act. We find that while deciding this issue, the Tribunal has considered the decision of T.V. Sundaram Iyengar & Sons [1996 (9) TMI 1 - SUPREME Court] - Decided in favour of assessee. Addition made u/s.14A - CIT(A) deleted the addition - Held that:- We find that the facts are identical to the facts considered in earlier assessment years. We, therefore, direct the AO to recompute the average investments in the line of A.Yrs. 2005-06 & 2006-07. We, therefore, do not find any error/infirmity in the findings of the Ld. CIT(A) - Decided in favour of assessee. Disallowance of depreciation in respect of portion of value shown in the books which represented over invoicing of assets as detected during the course of survey - Held that:- disallowance of depreciation made by the AO is not sustainable in law. This decision of the Tribunal was followed in A.Y. 2007-08 - Decided in favour of assessee.

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• 2015 (10) TMI 2417
  Registration u/s. 12A(1)(aa) rejected - applicant-company is incorporated u/s. 25 of the Companies Act - Held that:- The decision of the Tribunal, Mumbai Bench in the case of CEO Clubs India Vs DIT [2012 (10) TMI 895 - ITAT MUMBAI] is worth mentioning wherein the assessee was incorporated as a Pvt. Ltd. Company u/s. 25 of the Companies Act. The assessee submitted that it was a non-profit association registered as such u/s. 25 of the Companies Act for a charitable purpose. In that case also the DIT was not satisfied with the claim of the assessee holding that the objects as spelled out were clearly not for the benefit of public as a whole but rather are confined to specific members only and the Tribunal at para-9 of its order following the decision of the Hon’ble Supreme Court in the case of Surat Art Silk Cloth Manufacturers Association (1979 (11) TMI 1 - SUPREME Court) has held that object which seeks to promote or protect the interest of a particular trade or industry are object of public utility and finally held that the objection of the DIT for denying registration on this ground is therefore found to be without any basis. Considering the similarity in the facts of the case in hand with the facts of the judicial decisions referred to hereinabove, we are of the considered opinion that the DIT (Exem) have grossly erred in rejecting the application of registration. We, therefore, set aside the order of the DIT (Exem.) and direct him to grant registration to the applicant company. - Decided in favour of assessee.

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• 2015 (10) TMI 2416
  Carry forward of excess expenditure of earlier years against the current year income - Held that:- The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent Year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incurred, would not be liable to tax. The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. The High Court relied on the decision in the case of CIT Vs. Society of Sisters of ST. Anne (1983 (8) TMI 44 - KARNATAKA High Court). - Decided in favour of assessee.

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• Customs

• 2015 (10) TMI 2446
  Failure to make pre-deposit of 7.5% to entertain appeal - SCN issued for non-fulfilment of export obligation - Appellant contended that amendment to Section 129E would not be applicable to them since SCN was issued prior thereto on 10th June 2014 and CESTAT erred in dismissing the appeal on account of non-compliance of amended Section 129E – Held That:- CESAT had to apply the second proviso to the amended Section 129 E since appeal was filed after 6th August 2014 - Section 35 F indicated that on and after the date of its enforcement an Assessee in appeal was required to deposit the stipulated percentage of duty and if it failed to do so, CESTAT shall not entertain the appeal - Appellant deposited a sum of ₹ 4,95,532 on 8th May 2015 which was admittedly not 7.5% of the demanded duty as confirmed by Commissioner of Customs (Export) – Appeal dismissed – Decided in favour of Respondent.

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• 2015 (10) TMI 2444
  Confiscation of goods under Section 113 of Customs Act, 1962 – Contended by the Appellant that he did not have knowledge that rice supplied was not basmati – Sample reports are contradictory in reference to 933 bags and alleged that Redemption Fine and penalty are excessively charged. Held That:- Length of 7mm does not necessarily makes rice basmati - Report of Deputy Agricultural Marketing Adviser is not in disharmony with physical examination which merely stated that rice contained in 933 bags appeared to be of length 7mm - Such huge quantity purchased by appellant and he did not realise that goods were not basmati rice – Redemption fine and penalty cannot be said as unwarranted - Appellant held guilty– Decided in favour of the Revenue.

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• 2015 (10) TMI 2443
  Determination of value of imports made from overseas – Pre-condition of 5% of EDD – Appellant contended that directions of Commissioner (Appeals) can be limited to proceedings and cannot order 5% EDD – Revenue submits only 1% of extra duty deposit has been ordered till finalisation of provisional assessment. Held That:- Relying on the orders given by Hon’ble High Courts in cases of Terumo Penpol Ltd. Vs. CC [2015 (6) TMI 500 - MADRAS HIGH COURT] and National Oxygen Ltd., Vs. CC, Chennai [2008 (7) TMI 174 - HIGH COURT MADRAS], 5% EDD is set aside – Appeal allowed in favour of the Appellant.

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• 2015 (10) TMI 2442
  Late filing of EGM – Filing of EGM after the date of departure of vessel - Provision permitting filing of EGM within 7 days of departure of vessel got included in Regulation 3(3) and Section 41 was omitted by the Finance Act, 2004 – Held That:- If the main Section of the Customs Act, 1962 does not permit late filing of EGM then it cannot be held that its permissible under the said regulation – Appeal filed by the Revenue allowed in its favour.

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• 2015 (10) TMI 2441
  Valuation – Copper scrap of Birch and Dream variety – Appellant contends that value of goods is not based upon the contemporaneous import and no reason to suspect that one of country of origin is correct and other one is fake – Redemption fine not based on market inquiry but arbitrarily and same is on the higher side along with penalty – Revenue contends that goods were mis-declared - Clove variety described as scraps of Dream variety – Country of origin is fake and redemption fine and penalty are not on higher side. Held That:- Certificate relating to country of origin was found as fake as it was confirmed by Sri Lanka Authorities that it has not been issued by them – Confiscation of goods in order. Since matter is old and getting details of market inquiry is not possible, imposition of redemption fine is not interfered with – Decided in favour of Revenue. Imposition of penalty is found to be on higher side and same is reduced from ₹ 2 lakhs to Rs. ₹ 50,000/- - Decided in favour of assessee.

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• Corporate Laws

• 2015 (10) TMI 2440
  Construction to asset – Passed status quo order – Construction over building whereupon status quo granted is nothing but wilful disobedience of orders passed – Respondent contends that property impugned leased out in 2005 to a non-party and no order has been passed over this tenancy - It is not indicated anywhere in Observation Report that existing building has been demolished and new structure erected in place of old structure upon which status quo was granted - Held That:- Photographs filed by observer showed that it is an old building and 8 years have gone by after passing of order, if building is left without any upkeep, it is endangering to persons living in it – Tenant thus may attend not only to repair but he may proceed with as these orders cannot be said to be passed against tenant from attending to renovation and repair - Actions of tenant are not hit by any contempt as tenant is not a party and there is no creation of third party rights - Order is to read in context it is passed, not beyond context - Since renovation will add value to property, same cannot be considered as detriment to interest of anybody – Decided in favour of Respondent.

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• Service Tax

• 2015 (10) TMI 2465
  Utilisation of CENVAT Credit - GTA Service - Revenue contends that credit taken by assessee and reutilising it for payment of service tax is not tenable and as per Rule 3(4)(e) of Cenvat Credit Rules, 2004, Credit may be utilized for payment of service tax on any output services - Held That:- There is no ground to disagree with judgement and reasoning of Punjab and Haryana High Court in Nahar Industries Enterprises Ltd.[2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] - Appeal lacks merit and rejected - Decided in favour of assessee.

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• 2015 (10) TMI 2464
  Liability of Service Tax – Whether Setting up MICR-CPC to attend cheque clearance of Financial Institutions is Banking and Other Financial Services or not? – Appellant contended that as per definition Banking and Other Financial Services, there has to be a client or customer, which is absent herein - Cheque clearance activity rendered to other member Banks and not to customers – There was a bonafide conduct and no intention to evade tax – Revenue contends that liability of interest arises whether there is intention to evade tax or not. Held That:- CBEC vide letter dated 25.02.2005 will indicate that amount collected as charges for clearing cheques or clearing house, under Banking and Other Financial Services, to that extent appeal fails on merits - On limitation also appellant could have contested the matter - There was no intention on appellant's part of evading tax liability, which would mean that demand of service tax liability can be only within the limitation period of one year - Appellant is not liable to discharge any interest on amount of service tax liability paid, appeal to that extent is allowed – Decision made in case of Gujarat Narmada Fertilizers Co. Ltd [2012 (4) TMI 309 - GUJARAT HIGH COURT] followed – Decided partially in favour of assessee.

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• 2015 (10) TMI 2463
  Availment of CENVAT Credit - outdoor catering and guest house maintenance service - services are neither directly or indirectly used in or in relation to the manufacture or clearance of final products - Held that:- After amendment of the definition of input service with effect from 1.4.2011 the exclusion part of the definition takes in outdoor catering service also. But it is provided therein that the exclusion applies when such services are used primarily for personal use or consumption of any employees. The outdoor catering service/canteen services provided by the appellant is in compliance of mandatory requirement under section 46 of the Factories Act, 1948. The ground stated in the impugned order for disallowing the credit is that even though canteen facility is provided under the Factories Act, to the workers under statutory obligation, it does not have nexus either directly or indirectly to manufacture of final product. Prior to the amendment of input service with effect from 1.4.2011 the definition of input service was very wide so as to include all activities that would come under the activities of business of manufacture. Annexure B shows that all invoices except 2 pertain to the period prior to 1.4.2011. These two invoices are dated 18.4.2011 and 18.5.2011. In a number of judgements, the CESTAT has held that guest house maintenance service and outdoor catering service in the guest house are eligible for credit. - appellant is eligible for credit on guest house maintenance services for the period from January, 2008 to December, 2011 except for the two invoices. Appellants are entitled to credit on outdoor catering services and guest house maintenance services. - Decided partly in favour of assessee.

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• 2015 (10) TMI 2462
  Liability of Service Tax - Cargo Handling Services - Loading, unloading, packing and unpacking of cargo - Cargo handling involves loading and unloading from any ship or container is a principle that is etymologically established - Held That:- Appellant directed to remit the entire assessed tax liability along with the proportionate interest thereon (excluding the penalty component), within 4 weeks - Stay granted conditionally.

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• 2015 (10) TMI 2461
  Service Tax Liablity - Cargo handling, repairs and maintenance, storage and warehouse and technical inspection and certification - Whether adjudicating authority erred in not imposing penalty under Section 76 of Finance Act from 18/04/2006 i.e., ₹ 200/- per day or 2% of amount of tax payable? - Revenue contends that since issue has already been decided appeal for non-taxability by assessee should not be allowed - Respondent contends that Service tax on cargo handling is per se not taxable and technical inspection and certification is in respect of containers which was done as per request and not get covered under technical inspection and certification services - No service tax liability on part of assessee as same has been complied with interest - Held That:- Respondent cannot be allowed to re-argue entire case on merits and it was for him to put forth all his submission on merits of case when its appeal was being heard - Period from 18/04/2006, penalty as imposed under Section 76 has to be applied in letter and spirit of said section and provisions as it stood in the statute needs to be applied - Decided in favour of Revenue.

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• 2015 (10) TMI 2460
  Rejection of Refund Claim on input services – Classification of Services - Business Auxiliary Service or Business Support Service? – Services rendered in respect of legal requirements relating to the business and provide market data relating to the industry. - Appellant referred to CBEC Circular No. 59/8/2003 and stated that if provisions of Section 65A are followed services rendered by appellant would fall under category of Business Auxiliary Services – Revenue contended that agreement does not clarify services rendered by Appellant and services rendered are mostly in respect of legal requirements relating to business and provide market data relating to industry thus rightly classified as Business Support Service. Held That:- As per CBEC Circular No. 59/8/2003 services rendered by appellant would fall under Business Auxiliary Service - Services would be covered under Section 65A (2) (c) which indicates that if a services cannot be classified in any of the manner specified in clause (a) or clause (b) it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merits consideration, which in this case is the Business Auxiliary Services. – Decision made in case of of mPortal (India) Wireless Solutions Pvt. Ltd. vs. Commissioner of Service Tax, Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT] followed – Decided in favour of assessee.

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• 2015 (10) TMI 2459
  Deputation of employees to group company - Manpower Supply Recruitment Agency Service - Appellant contends that employees were and are kept informed that their services may be utilised for any of organisation in group companies and salary paid by them to deputed employees is only amount collected by them from group companies which is reimbursement of actual expenses - Held That:- Since, various group companies make salary payment to appellant on actual basis to deputed employees thus contention of the Revenue is incorrect as decided in case of Arvind Mills Ltd. [2014 (4) TMI 132 - GUJARAT HIGH COURT] The definition though provides that Manpower Recruitment Supply Agency means any commercial concern engaged in providing any services directly or indirectly in any manner for recruitment or supply of manpower temporarily or otherwise to a client, in the present case, the respondent cannot be said to be a commercial concern engaged in providing such specified services to a client. It is true that the definition is wide and would include any such activity where it is carried out either directly or indirectly supplying recruitment or manpower temporarily or otherwise. However, fundamentally recruitment of the agency being a commercial concern engaged in providing any such service to client would have to be satisfied - Decided in favour of assessee.

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• Central Excise

• 2015 (10) TMI 2456
  Duty demand u/s 11AB - Whether the appellant is liable to pay interest under Section 11AB of the Act or interest liability is to be determined in terms of clause (v) of Section 88(4) of the Finance Act, 2004 as incorporated by Section 124 of the Finance Act, 2005 - Held that:- Section 88(1) of the 2004 Act retrospectively amended Rule 3(6) of the 2002 Rules providing that AED (GSI) Credit accrued prior to 1.4.2000 could not be used for payment of BED and SED. However, sub-section (4) of Section 88 thereof provided for recovery of AED (GSI) Credit prior to 1.4.2000 which was availed for payment of BED and SED - Section 11A of the Act provides for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. Section 11AB of the Act as it existed at the relevant time mandates payment of interest on delayed payment of duty. The relevant date specified in the provision as 10.9.2004 is for the purpose of determining the period of limitation for issuing show cause notice for recovery under Section 11A of the Act and not for levy of interest under Section 11AB of the Act. The appellant had wrongly utilized AED (GSI) Credit pertaining to period prior to 1.4.2000 in 2003 immediately after amendment to Rule 3(6) of 2002 Rules. Thus, the interest liability under Section 11AB of the Act would commence from 1st day of the following month when wrong utilization had taken place till the payment of wrongly utilized credit. - The relevant clause (v) of sub-section (5) thereof stipulates that interest on the amount of credit utilized for paying CENVAT duty shall be @ 13% per annum for the period beginning on and from the day when each time the amount of credit was utilized and ending on 10.9.2004. Though subsection (5) added to Section 88 of 2004 Act starts with non obstante clause and would have an overriding effect on sub-section (4) of Section 88 of 2004 Act, nonetheless it would apply only to those cases where the wrongly utilized AED (GSI) Credit still remains outstanding on the date of the coming into force of Finance Act, 2005. - No substantial question of law arises - Decided against assessee.

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• 2015 (10) TMI 2455
  Constitutional validity of Rule 8(3A) of the 2002 Rules - Disallowance of the benefit of adjustment of CENVAT credit lying unutilised in its account by issuing show cause notices - Held that:- Rule 8(3A) of the 2002 Rules to the extent it contains the words 'without utilizing the CENVAT Credit' is held to be arbitrary and unreasonable and is struck down. In other words, the unamended Rule 8(3A) of 2002 Rules whereby the benefit of CENVAT Credit for all the period till the actual payment was made, stands disallowed in the event of a minor default also is arbitrary and unreasonable. It may further be noticed that the respondents had themselves realized the unreasonableness of the provisions of Rule 8 (3A) of 2002 Rules and had withdrawn the words 'without utilizing the benefit of CENVAT Credit' and had amended the same w.e.f 11.7.2014 by incorporation that now a penalty shall be imposed at the rate of 1% of the defaulted amount for each month or part thereof calculated from the due date. - Decision in the case of Indsur Global Limited & Precision Fasteners Limited's cases (2014 (12) TMI 585 - GUJARAT HIGH COURT) and Malladi Drugs and Pharmaceuticals Limited's case (2015 (5) TMI 603 - MADRAS HIGH COURT) followed - matter remanded back - Decided in favour of assessee.

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• 2015 (10) TMI 2454
  Denial of CENVAT Credit - Inappropriate documents - Held that:- Tribunal pointed out that the appellant has not shown any other challan, on the basis whereof that credit could be claimed and, in particular, before the amendment was made in Rule 9(1)(e) of the Cenvat Credit Rules, 2004. In the grounds of appeal, appellant has not indicated, which challan could be stated to be appropriate challan to obtain such credit. - Decided against Revenue.

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• 2015 (10) TMI 2453
  CENVAT Credit - Whether appellant is required to debit an amount of Cenvat Credit proportional to the utilisation of steam in non-productive use in canteen and laundry or otherwise - Held that:- Cenvat Credit on furnace oil is eligible to be availed by the appellant as they are utilising the steam produced by using furnace oil for manufacturing of final products in factory premises. It is also undisputed that some part of the steam is utilised in canteen and laundry. - Requirement of a canteen in the factory is statutorily mandated in the factories act, the cleaning of the utensils in the canteen for providing hygienic food cannot be disputed by any one. Again, using of clean uniform in the course of manufacturing of final products cannot also be disputed as unwanted expenses. On this factual matrix, we find that the steam which is used in the factory premises is in a way related to manufacturing of final products. - In the said case of Indo Rama(2007 (7) TMI 315 - HIGH COURT OF JUDICATURE AT BOMBAY) their Lordships were considering the use of electricity generated in the factory and the above observations were made while denying the proportionate Cenvat Credit on the fuel used in that portion of electricity which is used for lighting the residential quarters. We find that the said observations will apply in the case in hand as it is undisputed that the canteen services and the laundry service is used within the factory and in a way related to manufacturing activity - impugned orders are unsustainable and liable to be set aside and - Decided in favour of assessee.

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• 2015 (10) TMI 2452
  Disallowance of CENVAT Credit - credit on the quantity of input/coal which was short due to washing of coal in Coal Washery - Held that:- Washing of coal is an indispensable process for using the coal in the manufacture of Sponge Iron. The objection raised is that only lesser quantity of coal after wash is received in the factory and proportionate credit on such loss cannot be allowed to the appellant. The loss of coal during the process of washing is inevitable and the shortage caused is not in the hands of the appellant - Undeniably the quantity of 2,182,910 MT of coal was short due to washing loss which occurred at the job worker s end during the process of coal washing. The Board s Circular No. 267/136/87-CX-8, dated 15.1.1988 is with regard to somewhat similar loss of material as waste which occurs during the process of manufacture. The Board has clarified that credit cannot be denied on the ground that part of inputs is contained in the slag and other invisible losses. In Bharat Radiators Ltd case (2002 (3) TMI 685 - CEGAT, MUMBAI) it was held that denial of credit on burning loss was not sustainable. Since the issue stands settled by the above judgments, following the dictum laid in the above judgments I hold that the denial of credit is unjustified. - Decided in favour of assessee.

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• 2015 (10) TMI 2451
  Waiver of pre deposit - Section 35F - Mandatory pre deposit - Held that:- Appeal and stay application were not pending before the Tribunal prior to the amendment of Section 35F of the Act. It is also noted that in the present case, the impugned order was passed after amendment. The only stand of the Learned Counsel of the applicant is that the Show Cause Notice was issued prior to amendment and therefore, they are not covered by the amended section the 35F of the Act. - there is a clear direction of the legislature that the Tribunal shall not entertain any appeal unless the appellant has deposited the amount as specified therein in respect of appeal filed after amendment. In our considered view, the applicant is required to furnish the evidence of the mandatory deposit as required under amended section 35F of the Act. - merit in the application filed by the applicant. However, considering the facts and circumstances of the case, we direct the applicant to furnish proof of mandatory as required under Section 35F as amended by the Act, within two weeks from today to the Registry of this Tribunal. Otherwise, the Registry is directed to return the appeal as the Tribunal has no power to entertain the appeal. - in view of the amendment of the Section 35F of the Act, the Stay application is not maintainable. - Decided against assessee.

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• 2015 (10) TMI 2450
  Reversal of CENVAT Credit - Exemption of duty on such pipes in terms of Notification No.6/2002 - Appellant contended that notification does not require any reversal of Cenvat credit on the inputs or work-in-progress or finished goods lying in stock on the date on which exemption was granted. - Held that:- It has not availed any exemption either on value-based or quantity-based criteria for clearance in a financial year. Therefore, this rules out applicability of Rule 9 (2) of Cenvat Credit Rules, 2002. Once the applicability of Rule 9 (2) is ruled out, there is no further case of Revenue and if unutilised credit is on record under Rule 9 (1) prior to 04.04.2002 and remaining unutilised, there is a modality prescribed by law for utilisation. The modality prescribed by Rule 9 (2) only. Once Rule 9 (2) of Cenvat Credit Rules, 2002 is not applicable even Rule 9 (1) has no significance. Notification did not prescribe any value-based or quantity-based exemption. There is no case of Revenue to the contrary. Therefore, Rule (2) of Rule 9 of Cenvat Credit Rules, 2004 is not applicable - If Cenvat credit is taken validy, which is not disputed by the department, in absence of one-to-one relationship between input or output or output service, there cannot be exercise of power by executive to ask the assessee to revert such Cenvat credit. Following this ratio, the order of authority below is set aside - Decided in favour of assessee.

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• 2015 (10) TMI 2449
  Fraudulent Availment of CENVAT Credit - Bogus invoices - Held that:- Appellant M/s. Mansi Industries is also party in the case of M/s. Akik Dyechem & Others (2013 (9) TMI 415 - CESTAT AHMEDABAD). The present proceeding is related with investigation in the case of M/s. Akik Dyechem & Others (supra). In that case, the investigation taken up by the Revenue revealed that the premises registered for manufacture of Aluminium Ingots did not have any electricity connection, only one manually operated furnace which was also being operated by a different person during the period from 1997 onwards. The Tribunal upheld the adjudication order. In the present case, we find that the proprietor of M/s. Itisha Alu-Chem Industries had admitted that they have issued invoices to the appellant to facilitate for availment of CENVAT credit. It is clearly evident that the invoices were fake and therefore, the appellant is not eligible to avail credit on the fake invoices. - appellant is given option to pay penalty 25% of the duty alongwith entire amount of duty and interest within 30 days from the date of communication of the order - Decided partly in favour of assessee.

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• 2015 (10) TMI 2448
  Penalty u/s 11AC - Undervaluation of goods - Held that:- As the penalty was imposed under Section 11AC of the Act, we do not find that there is any requirement of impose penalty under Rule 173Q of the erstwhile Central Excise Rules. So, the contention of the learned Authorised Representative on this issue cannot be accepted. The assessee should be allowed to pay penalty 25% of the duty alongwith entire amount of duty and interest, within 30days from the communication of this order under Section 11AC. - appeals filed by the Revenue are allowed to the extent the penalty imposed under Section 11AC is enhanced to equal amount of duty. The assessees are entitled to pay the penalty 25% of the duty alongwith entire amount of duty and interest within 30 days from the date of communication of this order - Decided partly in favour of assessee.

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• 2015 (10) TMI 2447
  Classification of Resin Bonded Bamboo Mats with Veneer in between - Classification under Chapter 4410.90 or under Chapter 4408.90 - Held that:- On going through the earlier order of the Tribunal we note that a clear finding stands given that in terms of Chapter Note 6 the goods would be classified properly under heading 4410. The Revenues contention is that the Chapter Note 6 relied upon by the assessee was not in existence during the period 1986-87 i.e. the period involved in the present appeal. The same came into existence w.e.f. 1997. As such it is their contention that the Tribunal relied upon a wrong Chapter Note. - Since order of Tribunal is not challenged - it becomes binding for the lower authorities to follow the Tribunals order - Decided against Revenue.

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• CST, VAT & Sales Tax

• 2015 (10) TMI 2458
  Challenge to legality and validity of attachment order - Attached property purchased in auction without any notice of the alleged charge of the Sale Tax Authorities - Held that:- Petitioners attended the hearing in the Office of Respondent No.3 on 15th July, 2014 and submitted their written submissions inter alia stating that the notice issued was completely illegal and unsustainable in law. It was submitted that the purported new charge of ₹ 2,77,72,073/- was recorded in the 7/12 extract of the secured property only after 22nd May 2013, while the Petitioners had bonafide purchased the same by paying the full consideration to Respondent No.2 on 21st March 2013, without any knowledge of the alleged encumbrance of the Sales Tax Authorities. At that time, the only encumbrance recorded in the 7/12 extract was a sum of ₹ 4,34,601/- due to District Industries Centre, Raigad. It is important to note that in the written submissions filed by the Petitioners, they also intimated the Sales Tax Authorities that the said defaulter M/s Iccon Oil was already functioning at another address duly registered under the Maharashtra Value Added Tax Act, 2002. Even after the purchase of the secured property, the Petitioners once again obtained a 7/12 extract of the secured property dated 12th April, 2013. Even in this 7/12 extract, the charge of the Sales Tax Authorities (in the sum of ₹ 2,77,73,073/-) was not reflected. It is only for the first time on 7th January, 2014 that the charge of the Sales Tax Authorities was reflected in the 7/12 extract of the secured property. This was much after the sale of the secured property was confirmed in favour of the Petitioners. In these circumstances, we find that Mr Joshi is fully justified in contending that the Petitioners had no knowledge or notice of the charge of the Sales Tax Authorities before they purchased the secured property from Respondent No.2 and therefore, the Sales Tax Authorities cannot enforce their charge against the secured property. Iccon Oil was wound up by and under the orders of this Court and this Court by its order dated 18th March 2015, passed in Company Application (L) No.603 of 2014, has given liberty to the Sales Tax Authorities to file their claim before the Official Liquidator. We are informed that the claim of the Sales Tax Authorities has also been filed thereafter with the Official Liquidator of this Court and we are of the view that the Sales Tax Department is free to pursue its claim against Iccon Oil. - Appeal disposed of.

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• 2015 (10) TMI 2457
  Demand of outstanding tax from purchaser of auctioned property - Held that:- official liquidator in order to effect the sale of the assets of the company in liquidation had issued a tender notice. Pursuant to the notice so issued, the appellant had offered his highest bid which was inclusive of all the taxes payable under the Kerala General Sales Tax Act, 1963 and the Central Sales Tax Act, 1956 and also the dues payable under other statutory levies.The offer so made was accepted by the official liquidator. - there is a concluded contract between the official liquidator and the appellant-company herein. We reiterate that while making the offer, the appellant-company had specifically indicated to the official liquidator of the company in liquidation that the offer made by him is inclusive of all statutory levies. In view of that, the liability to pay taxes cannot be imposed the appellant-company herein. - appellant discharged from payment of any demands from either the official liquidator or from the sales tax department of the State in respect of the sale of Items 1-2 of the tender notice dated 26.11.2001. - Decided in favour of assessee.

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• Indian Laws

• 2015 (10) TMI 2445
  Challenging order under Section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Petitioner contends that Respondent defaulted in payment of instalments of loan and same was classified as NPA - Notice issued under section 13(2) of SARFAESI Act but neither borrowers nor guarantors replied to same nor repaid the amount - Affidavit filed made a false statement that neither is there any third party in possession nor is there any lease created in respect of premises and further incorrect fact is that there was no suit or legal proceeding pending in respect of secured assets – Overriding effect of SARFAESI Act would not enable Respondent No. 4 Bank to obtain assistance of learned Chief Metropolitan Magistrate in taking possession of secured assets and even if rent is paid annually, this is not a lease covered by first part of Section 107 of Transfer of Property Act, 1882 and lease of more than one year which is unregistered, is void. Respondent contends that petition is not a bonafide proceeding, is a collusive action, inasmuch as deed of mortgage executed would indicate as to how registered mortgage was created and by same signatories and same parties dealing with Petitioners – Petitioners have been put up by them in order to defeat rights of Bank and particularly order and protection under Section 14 – After promulgation of Maharashtra Rent Control Act by virtue of Section 55, an agreement for tenancy is to be registered and compulsorily - No false statement on oath was made by Respondent No. 4 Bank as it may be dealing with Petitioners as a client constituent, but it does not mean that Bank is aware of status of Petitioners in respect of premise. Held That:- If lease is not valid, possession is not lawful, then, there is no justification for interference in extra ordinary, discretionary and equitable jurisdiction of Court and merely because person in possession claims to be a lessee does not mean that he should be protected - Section 107 clearly states that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument - It is undisputed that agreement which is relied upon is unregistered, but rent is claimed to be payable yearly, then, this Act would clearly fall within the mischief - Omission in given facts and circumstances was not fatal and claim of tenancy is prima facie doubtful - Action of Bank in the present case determines the tenancy - Tenancy was not known to Bank, a third party in the absence of registration of the instrument thus cannot be held guilty of suppression – Decided in favour of Respondent.

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