TMI Tax Updates - e-Newsletter
November 21, 2015

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

TMI SMS

• CENVAT Credit of Air Travel Agent services allowed even if invoice raised by the service provider in the name of employees of the assessee

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• In the absence of any exemption under VAT, sales effected from DTA to a unit in the SEZ would not qualify to be export (deemed) sales - HC

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Articles

1. ADJUDICATION UNDER CUSTOMS ACT, 1962

   By: DR.MARIAPPAN GOVINDARAJAN

2. Benefit of composition scheme cannot be denied on post-sale construction by dealers who are engaged in both construction and sale

   By: Bimal jain

News

1. Government Calls for Comments on Proposed Plan of Phasing-Out Exemptions and Deductions under the Income-Tax Act in Order to Bring Down Rate of Corporate Tax from 30% to 25%

2. RBI Reference Rate for US $

3. Highlights of Recommendations of Seventh Central Pay Commission

4. Report of the Kelkar Committee on Revisiting & Revitalizing the PPP Model of Infrastructure Development Submitted to the Finance Minister

5. States Need to Bring about Ease of Business to Prosper: Shri Arun Jaitley

Notifications

Income Tax

1. S.O. 3067(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Udayan Care, New Delhi

2. S.O. 3066(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Plan International (India Chapter), New Delhi

3. S.O. 3065(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Shri Bhagini Mitra Mandal, New Sarvoday Society – Gujarat

4. S.O. 3064(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Mata Amritanandamayi Charitable Trust , Kerala

5. S.O. 3063(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Kacheria Mojilal Gordhandas General Hospital Trust, Gujarat

6. S.O. 3062(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Lions Club of Karnavati Foundation, Ahmedabad

7. S.O. 3061(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Swami Vivekananda Rural Development Society, Chennai

8. S.O. 3060(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Shri Apang Abhyudaya Mandal, Ahmdeabad

9. S.O. 3059(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Sai Shraddha Foundation, Saieesh College of Engineering & Polytechnic, Raigad, Maharashtra

10. S.O. 3058(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Sahara Health & Education Society, Kolkata

11. S.O. 3057(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Naandi Foundation, Hyderabad

12. S.O. 3056(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Dr. Sheela Sharma Memorial charitable Trust sub unit, Shanker Institute of Cancer therapy and Research, Mathura

13. S.O. 3055(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – The Poona Blind Men’s Association, Pune

14. S.O. 3054(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – A Shama Rao Foundation, Mangalore, Karnataka

15. S.O. 3053(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Sishu Kalyana Swadhikar Kendra, Odisha

16. S.O. 3052(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Population & Social Development, Durgapur, West Bengal

17. S.O. 3051(E) - dated 10-11-2015 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On – Arpan Trust, 2, Bombay

Circulars / Instructions / Orders

Income Tax

1. PRESS RELEASE - dated 20-11-2015

Finance Minister’s Budget announcement- phasing out plan of deductions under the Income-tax Act

Highlights / Catch Notes

Income Tax

• Court Rules Prosecution Valid Despite Ongoing Penalty Proceedings in Income Concealment Case; Not Automatically Nullified.

  Case-Laws - HC : Prosecution proceedings - Concealment of income or postponement of the tax due - it is not the case of the accused/petitioner that penalty proceedings are quashed or set aside and thereby automatically the prosecution is liable to be quashed. - HC
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• Taxpayer Claims Must Be Filed in Original or Revised Returns for Section 43B Interest Relief Consideration by AO.

  Case-Laws - AT : Disallowance of relief u/s 43B - interest on term loan paid to ICICI - AO cannot consider a claim made by an Assessee before him, in the absence of such claim being made in the return of income or a revised return of income. - AT
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• Nagrijuli Tea Estate Sale Classified as Split, Not Slump Sale; No Capital Gains Tax u/s 2(42C) & 50B.

  Case-Laws - AT : The instant case was one of split sale and not a case of slump sale. Sale of Nagrijuli Tea Estate was not a slump sale within the meaning of sec. 2(42C) of the Act read with section 50B of the Act and, therefore, not even assessable to capital gains - AT
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• Shrink-wrap software payments classified as royalties u/s 9(1)(vi) and Article 12 of Indo-Ireland DTAA; tax deduction required.

  Case-Laws - AT : TDS u/s 195 - the payment in question was consideration for the right to use copy right shrink-wrap software amounts to royalty within the meaning of sec. 9(1)(vi) of the Act and also Art 12 of the Indo- Ireland DTAA - it is clear that there is obligation to deduct tax at source u/s 195 - AT
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• Assessment Deemed Illegal: Section 143(2) Notice Dispatched Too Late for Same-Day Service on Last Permissible Day.

  Case-Laws - AT : Non-service of notice under section 143(2) - As apparent, the notice was issued by speed post on the last day of limitation, i.e., September 30, 2011 at 15.19 hours, as such there is no possibility of its service on the same day. - assessment is illegal and void ab initio - AT
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• Section 40(a)(i) does not bar depreciation claims u/s 32 for non-deduction of tax at source.

  Case-Laws - AT : Depreciation cannot be disallowed on the ground that at the time of remittance no tax was deducted at source - Provisions of section 40(a)(i) are not applicable for claim for deduction u/s 32 - AT
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Customs

• Case Remanded: Appellate Authority Must Evaluate Unjust Enrichment in Refund Transfer to Consumer Welfare Fund.

  Case-Laws - AT : Refund - When the adjudicating authority has transferred the refund to the consumer welfare fund, the appellate authority has not even bothered to examine whether there was really unjust enrichment. - Matter remanded back - AT
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• Refund Denied for Supervision Charges When Not Due; No Liability Without Justification for Collection.

  Case-Laws - AT : Refund of supervision charges - it cannot be collected if it is not due. It is not like an ordinary services where as a liability arise as the result of availment of service - refund allowed - AT
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Wealth-tax

• Wealth Tax Exemption Upheld: Plot Under Construction Qualifies as House u/s 5(1)(vi) of Wealth-tax Act.

  Case-Laws - AT : Exemption u/s 5(1)(vi) - Whether CWT(A)has erred in allowing the exemption u/s 5(1)(vi) for the plot under construction as the same does not come under the purview of house, or part of a house - Held NO - AT
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Service Tax

• Refund Allowed for Double Payment of Service Tax; Period of Limitation Not Applicable in This Case.

  Case-Laws - AT : Refund of the service tax - Double payment of service tax - appellant have made first payment when there was no liability for them to pay - Period of limitation not applicable - Refund allowed - AT
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• Board Circular on CENVAT Credit Conflicts with Input Service Definition, Sparking Interpretation Issues in Service Tax Laws.

  Case-Laws - AT : Availment of CENVAT Credit - Board Circular appears to have travelled absolutely contrary to the clear and plain language of the definition of the input service - AT
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• CENVAT Credit Allowed for Input Services in Stadium Construction Used for Rental Output Services.

  Case-Laws - AT : Availment of CENVAT Credit - input services used to provide output services of Renting - appellant has clearly entitled for Cenvat Credit in respect of all the services used for construction/setting up the stadium which is admittedly used for providing the output services - AT
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• Partial Stay Granted on Service Tax Demand in Works Contract Case; Appellant May Have Preliminary Case on Several Issues.

  Case-Laws - AT : Demand of service tax under various categories, by vivisecting the works contract -appellant may have a prima facie case in respect of various issues raised by the learned advocate, but it cannot be said at this stage that no tax liability would be fastened on them - stay granted partly - AT
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• CENVAT Credit Valid for Air Travel Agent's Personnel Expenses, Despite Revenue's Argument on Company's Ability to Travel.

  Case-Laws - AT : CENVAT Credit - input services - Air Travel Agent - revenue contended that invoice raised by the service provider pertain to tickets issued in the name of personnel of the assessee - company being an artificial judicial person, cannot travel itself as it exists only on paper in the eyes of law - credit allowed - AT
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• Auction Proceeds from Abandoned Imported Goods Exempt from Service Tax; Not Considered Storage Charges.

  Case-Laws - AT : Storage or warehouse service - whether proceed of auction of warehoused imported goods in case of importer abandoned the goods, shall be considered as service charges towards storage or warehouse and is liable for service tax - Held No - AT
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Central Excise

• Legal Interpretation: "Primary Gold" Classification Affects Duty Exemption for Gold Bars Production Using Power.

  Case-Laws - SC : Claim of exemption from duty on production of gold bars - What is significant to note that the “primary gold” is the end product which is manufactured. The entry clearly describes that when the said “primary gold” is converted from any form of gold with the aid of power into bars as well, the same would be treated as “primary gold” - SC
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• Extension Granted for Storing Finished Goods Outside Factory u/r 4(4) of Central Excise Rules, 2002.

  Case-Laws - AT : Extension of the permission for storing the finished goods outside the factory premises as per the provisions of Rule 4(4) of Central Excise Rules, 2002 - Revenue’s plea that there is deferment of collection of duty in cases of outside storage of the goods under Rule 4(4) without payment of duty, is not correct - AT
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• Court: Job Work Goods Sent to Principal Aren't "Exempted Final Products" u/r 6(4) of Cenvat Credit Rules.

  Case-Laws - HC : CENVAT Credit - Job Work - wiring harness was removed without payment of duty under job work procedure to the principal manufacturer and that semi-finished goods removed by the job worker from its unit to the principal, without payment of duty, would not come within the scope of expression "exempted final product" under Rule 6 (4) of the Cenvat Credit Rules, 2004. - HC
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• Refund Approved After Price Adjustment Due to Delayed Goods Delivery; Liquidated Damages Imposed by MTNL/BSNL/DoT.

  Case-Laws - AT : Denial of refund claim - reduction in price / transaction value due to delay in delivery of manufactured goods - liquidated damage charges imposed by MTNL/BSNL/DoT on delayed supplies by the assessee - the resultant price would be the transaction value - refund allowed - AT
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VAT

• DTA to SEZ supplies are not export sales under CST Act Section 5(1); VAT applies without specific exemption.

  Case-Laws - HC : Levy of VAT on supply to SEZ units - Deemed export or not - In the absence of any exemption under VAT, such sales effected from the DTA to a unit in the SEZ would not qualify to be export sales for the purposes of S. 5 (1) of the CST Act or for the purposes of Art. 286 of the Constitution of India. - HC
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• Goods to SEZ Not Deemed Export Under CST Act Section 5(1), Subject to VAT, Rules High Court.

  Case-Laws - HC : Levy of VAT on supply to SEZ units - Deemed export or not - Movement of the goods from Kerala to the unit of the petitioner in the SEZ would not qualify as an export for the purposes of Section 5(1) of the CST Act or for the purposes of Article 286 of the Constitution - HC
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• Court Rules Against Automatic Penalty for Duty Evasion in Genuine Dispute under Rajasthan Value Added Tax.

  Case-Laws - HC : Evasion of duty - Imposition of penalty - whether levy of penalty is automatic under RVAT - Held no - The dispute was a bona fide one as to the interpretation/ classification of the products sold by the assessee for the purpose of levy of tax - HC
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• High Court rules check post officers can't assess transaction nature u/s 14-B(6)(i); reserved for regular proceedings.

  Case-Laws - HC : Detention of goods alongwith documents under Section 14-B(6)(i) - Check post officer was not competent to go into the nature of transaction which could only be decided in regular assessment proceedings - HC
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Case Laws:

• Income Tax

• 2015 (11) TMI 936
  Penalty u/s 271(1)(c) - addition sustained on account of GP addition of 2% of the alleged cash purchases and peak investment in the grey market purchases - Held that:- So far as the assessment year 2002-03 is concerned, the penalty has been levied on the ground of surrender of peak investment made by the assessee on cash purchases in the return of income filed in response to notice u/s 153C. From the facts as discussed above, it is quite clear that the assessee was found to be engaged in making cash purchases of chemicals and materials from the grey market and to regularize the same, he was involved in getting the accommodation bills from Jitendra Doshi Group. It is also true that such modus operandi of regularizing cash purchase, would not have surfaced, had there not been any search or survey action. But it is equally borne out from the record, that nothing was found that assessee was making the purchases from the sources outside the books of account. Here the penalty has been levied mainly on the ground that assessee has not offered the peak investment voluntarily albeit only when he was cornered. This factum may have great probative value for initiation of penalty proceedings or arriving at a satisfaction, but that alone is not a conclusive fact to levy the penalty. Presumption as cast upon the assessee under Explanation 1 is a rebuttable presumption and if such a onus upon the assessee has been rebutted with proper explanation and facts, then no penalty can be levied, without any material evidence to controvert the assessee’s explanation or facts. Such material facts which raises the presumption in favour of the assessee are that, firstly, the books of account and trading result for AY 2002- 03 has been accepted by the AO inasmuch as no defect whatsoever has been found either in the quantitative tally of the purchases made and the value of purchases; Secondly, the source of purchases have been explained from the books of accounts and there is no other material to show that assessee has made purchases outside the book other than rotating the cheque purchases to cash purchases; Lastly, one of the most crucial explanation which stands unrebutted is that, assessee had stated that all these purchases were made by various concerns belonging to the assessee and his family members / group, from which these trading of chemicals were carried out. If at all any peak investment was to be added then the same should have been examined in the hands of the firm. Be that as it may, all these material facts points out that preponderance of probability is in favour of the assessee, because all the probable factors given by the assessee has neither been disbelieved nor has been rebutted by any enquiry or evidence gathered by the AO. Thus, we are of the opinion that no penalty leviable on such peak investment made for the assessment year 2002-03. So far as levy of penalty on the gross profit additions made for the AYs 2003-04 to 2008-09, we agree with the contention of the assessee that no penalty can be levied; firstly, for the reason that addition on account of peak investment stands deleted in so far as it has been subsumed in the GP addition, which ultimately has been made on estimate basis and secondly, application of 2% of gross profit on cash purchases is purely on ad-hoc basis without there being any material on record to suggest that assessee has earned profit over and above what has been disclosed in the books of account. The Ld. CIT(A) in the course of the quantum proceedings, have given a very categorical finding of fact which stands unrebutted, assumes quite significance so far as penalty proceedings are concerned that, firstly, books of account have not been rejected; secondly, all the details of purchases including cash purchases and quantity as recorded in the books of accounts have not been disturbed; and lastly, no material or evidence whatsoever have been found suggesting that assessee was suppressing the gross profit on cash purchases. Another very important fact, which is borne out from the finding given in the quantum proceedings and also from the material on record is that, the assessee had disclosed all the purchases in the books i.e. instead of actual purchases made from party “A” in cash, the assessee has shown the purchases from party “B” in cheque. The amount encashed out of cheque has been utilized for making the payment of purchase. No variation in the quantity of purchase or the value has been pointed out by the AO. This inter alia means that, the gross profit shown in the book results too have been accepted. Thus, on these facts of the case no penalty can be levied for concealment of income on the addition made on ad-hoc basis/estimate basis by applying of 2% of the GP rates on cash purchases. Accordingly, penalty levied for the assessment year 2003-04 to 2008-09 stands deleted. - Decided in favour of assessee.

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• 2015 (11) TMI 935
  Additions of unaccounted investment u/s.69B - unaccounted and undisclosed capital gains - CIT(A) deleted the addition - Held that:- There is no dispute about the factual position that the Assessing Officer revised purchase and sale prices of assessee’s lands in respect to his transactions executed in the relevant previous year by treating SUDA auction prices of developed land and State Government’s revised jantri prices applicable from 01.04.2008. There is no quarrel that these jantri prices are not retrospectively applicable. Nor there is any case made out at Revenue’s behest disputing that assessee’s purchase price @ Rs. 473/- is almost 4.5 times more than the jantri rate and sale price is almost 10 times thereto (supra). It has come on record that the assessee has produced 16 sale instances from December 2004 to March 2008 wherein open agricultural plots in Vesu area itself had been sold in the range of Rs. 46 to 202/- per sq. mtr. Similar position appears in case of 34 sale instances including four transactions from January to March 2008 stating prices less than Rs. 1100/- per sq. mtr. The Revenue fails to rebut correctness thereof. Therefore, we infer in these facts that neither the assessee understated his purchase price nor sale rate of the respective lands situated in the Vesu locality at Surat. The Revenue’s endeavor seeks reliance upon auction prices of SUDA’s developed plots. Apples are sought to be compared with oranges in other words. We do not agree to this argument as it is an admitted fact that neither the land purchased nor sold happens to be a developed property. The Revenue’s arguments accordingly fail. Once we have rejected its twin arguments on the basis of SUDA rate and appropriate adjustment in revised jantri prices in applying the same with retrospective effect, assessee’s other arguments in the nature of legal pleas qua application of Section 69B, Section 50C and Section 55A have been rendered infructuous. Decided against revenue

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• 2015 (11) TMI 934
  Reopening of assessment - bogus purchases - material received from an external source viz., the DGIT (Inv.) - Held that:- On a plain reading of the reasons recorded, what emerges is that the Assessing Officer, on verification of the details available on record, has noticed that there were bogus purchases. However, there is no assertion as regards on the basis of which material on record he has come to such conclusion. A perusal of the order rejecting the objections raised by the petitioner, shows that the reopening is based, not upon the material on record, but on the basis of material received from an external source viz., the DGIT (Inv.), Mumbai, pursuant to inquiries made by him (the DGIT). Therefore, the material on the basis of which the Assessing Officer seeks to assume jurisdiction under section 147 of the Act, is the information received from an external source viz., from the DGIT and not the material on record as reflected in the reasons recorded. Under the circumstances, on the basis of the material on record, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment, inasmuch as, the formation of belief of the Assessing Officer is not based upon the details available on record, but on the material made available by the DGIT (Inv.), Mumbai which is an external source. Under the circumstances, it cannot be said that the requirements of section 147 of the Act are satisfied, inasmuch as, the belief of the Assessing Officer is not based upon the material on record, but on some other material from an external source which does not find reference in the reasons. As is clear on a plain reading of the reasons recorded, except for the assertion that there were bogus purchases, the Assessing Officer has not referred to any material on the basis of which he proceeded to invoke the provisions of section 147 of the Act. The assertion made by the Assessing Officer is a bare one, without any reference to the material on the basis of which he made such assertion. - Decided in favour of assessee.

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• 2015 (11) TMI 933
  Prosecution proceedings - Concealment of income or postponement of the tax due - penalties levied under Section 271(1)(c) - assessee willfully evaded the payment of the tax as per the provisions of the Act and committed offence punishable under Section 276(C)(2) of the Act, with deliberate default in not clearing tax dues that too, even after received of notice under Section 221(1) of the Act - petition filed under Section 482 of the Code of Criminal Procedure by the Petitioner-Accused to quash the proceedings in C.C.No.103 of 2014 on the file of the learned Special Judge for Economic offences, Hyderabad, taken cognizance for the offences punishable under Sections under Section 276(c) (2) of the Income Tax Act, 1961 - Held that:- It is ultimately held that the penalty proceedings and prosecution proceedings are clearly independent and that the result of proceedings does not bind and Criminal Court has to independently judge on the evidence placed before it. It further held that it is the settled law that levy of penalties and prosecution under Section 276C are simultaneous and once penalties are cancelled on that ground there is no concealment, the prosecution for concealment is liable to be quashed automatically and thereby held the prosecution will not survive and is liable to be quashed thereby the High Court held committed an error. Here, it is not the case of the accused/petitioner that penalty proceedings are quashed or set aside and thereby automatically the prosecution is liable to be quashed. It is not even his case that even there is any finding by any Tribunal of no willful default on the part of him despite presumption against him with a burden on him under reverse onus clause to say consequently that finding is binding on the criminal Court with the analogy of law laid down in R.K. Builders (2004 (1) TMI 7 - SUPREME Court)to quash the prosecution thereby the decision relied has no application for the factual matrix referred (supra). In fact, it is though not mentioned in the original quash petition about the trial Court's order, after hearing both sides as a private warrant procedure framed charges against the accused and the accused was examined, in the course of hearing it is filed as additional material. On perusal of the charges framed by the trial Court also it nowhere requires any interference from what is referred supra. Having regard to the above there are no grounds to quash the prosecution proceedings in C.C.No.103 of 2014 on the file of the learned Special Judge for Economic offences, Hyderabad which reached stage for commencement of trial before the learned Special Judge. But for to say the observation herein no way much less, the charges framed by the trial Court, influence the trial Judge in deciding the criminal cases on its own merits from the ultimate appreciation of the evidence oral and documentary on record.

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• 2015 (11) TMI 932
  TDS under Section 194H - fee for services rendered - disallowance under Section 40(a)(ia) - Held that:- ITAT examined the nature of the MoU between Finian and VEEPL with particular reference to the clauses therein and concluded that Finian was transacting with VEEPL "on a principal to principal basis" and that it could not be said that the payment to VEEPL was for rendering services. Consequently, it was held that Section 194H of the Act was "not at all applicable". The ITAT noted that in terms of Clause 3.2 of the MoU no sum was due to be paid to VEEPL for the services rendered by it till it procured 27 acres of land. The amount paid to VEEPL was duly reflected by Finian in its purchases and the closing stock and no sales had been made during the year in question. The payment of 2% of the sale amount to VEEPL as consideration for transferring VEEPL's rights in the land was in terms of Clause 3.2 of the MoU and it had not been shown that such payment was not a fair compensation. Payment made to VEEPL which was corrected as Rs. 1,24,33,326. It was held that "this amount is related to payment of service charge for effecting consolidation of land and is a revenue expense to (be) separately debited to the Profit & Loss account." With the Revenue having accepted the decision of the ITAT in the case of Finian, and with the Revenue being unable to bring out any distinguishing feature as far as the case of PBDPL, the Court sees no reason why it should interfere with the impugned order of the ITAT.

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• 2015 (11) TMI 931
  Reopening of assessment - undisclosed share transaction - Held that:- A perusal of the first proviso indicates that the reasons to believe also indicate that there was failure on the part of the assessee to make a return under Section 139 of the Act or in response to a notice under sub-section (1) of Section 142 or Section 148 of the Act has failed to disclose fully and truly all material facts necessary for his assessment. The foundational requirement for initiating reassessment proceedings after four years is, that the assessee had failed to disclose fully and truly all material facts. In the instant case, the reasons recorded is that the petitioner had purchased shares amounting to Rs. 54,22,500/- and the same was sold in the same year for Rs. 39,48,500/- and, therefore, incurred a loss of Rs. 14,74,000/- which has escaped assessment. From this, it is apparently clear that the assessee had disclosed all material facts. There is nothing to indicate failure on the part of the petitioner disclosing fully and truly all material facts. In the absence of this foundational requirement, the initiation of proceedings was patently erroneous and cannot be sustained. The notice is, accordingly, quashed - Decided against revenue

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• 2015 (11) TMI 930
  Penalty under section 271(1)(c) - disparity between the original return and the assessed income on revised return - ITAT deleted the addition - Held that:- Admittedly, in the year 1959 the books of accounts of the assessee were seized. Having no other option the assessee filed income tax returns on estimation without enclosing the audit report, profit and loss account and balance sheet. After the books of accounts were returned, revised returns were filed. As the Assessing Officer found that there was disparity between the original return and the assessed income on revised return, penalty proceedings under section 271(1)(c) were initiated. The Assessing Officer had levied penalty at the rate of 20% which was set aside by the Tribunal. Since the assessee had filed revised return after books of account were returned and as on appreciation of facts the Tribunal found that there was no material on record to show the original return was not bonafide or there was no fraud or wilful neglect on the part of the assessee while filing the original returns and the Tribunal in appeal found that admission cannot give jurisdiction to the Assessing Officer to levy penalty, in our view, no substantial question of law arises from the order passed by the Income Tax Appellate Tribunal.- Decided in favour of assessee.

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• 2015 (11) TMI 929
  Addition on undisclosed income on basis of a statement made by the assessee - Held that:- The assessee filed an appeal before the Commissioner, Income Tax (Appeals), with specific assertion that the statement made by him would have not been accepted to make any addition and therefore, his denial is apparent. In view of it, the orders passed by the Commissioner, Income Tax (Appeals) and the Income Tax Appellate Tribunal do not suffer from any wrong who accepted the assessee appeal relying upon the judgment of Hon'ble Supreme Court in CIT Vs. S. Khader Khan Son reported at (2013 (6) TMI 305 - SUPREME COURT). The appeal is having no substantial question of law.

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• 2015 (11) TMI 928
  Grant an order of stay refused - Held that:- This court directs that the stay petition pending before the Commissioner of Income Tax (Appeals), the 3rd respondent herein, be taken and disposed of on merits and in accordance with law within a period of two weeks from the date of receipt of a copy of this order and until then there shall not be any recovery proceedings.

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• 2015 (11) TMI 927
  Depreciation on energy meters - 25% OR 80% - Held that:- In the depreciation schedule for the assessment year 2006-07 and onwards specifically/separately covers feature of “Time of Day” under Item III(8)(ix)-E(i). Under the above facts and circumstances especially in view of above referred schedule read with sec. 32 of the Income-tax Act, we find that the assessee has been successfully able to demonstrate that it was very much entitled to claim depreciation on energy meters @ 80% and without appreciating the above schedule, the authorities below were not justified in disallowing the claimed depreciation on these assets on the ground that the energy meters did not facilitate in conservation of energy. The Assessing Officer had, however, pointed out that more than 60% of the meters are mechanically advanced meters which did not have any special feature. To meet out this objection and its submissions before the Learned CIT(Appeals)that most of the meters are energy saving meters, the Learned AR has referred page No.75 of the supplementary paper book i.e. copy of the relevant extracts of the tax audit report of the assessee for the assessment year under consideration reflecting statement of particulars including bifurcation of expenses between normal meter and electronic meters. We thus set aside the matter to the file of the Assessing Officer to verify and allow the claimed depreciation at the rate of 80% on electronic meters/energy meters only after affording opportunity of being heard to the assessee. Regarding the claimed higher depreciation on the “bus bar chamber”, the Learned AR submitted that these are devices through which connection from overhead line/underground cable is provided to the meters and the said device forms integral/inextricable part of the meters without which the meter cannot function. The authorities below have denied the claimed higher depreciation on this instrument on the basis that these are not energy saving device. We set aside this matter to the file of the Assessing Officer to verify the above claim of the assessee that ‘bus bar chamber’ forms integral/inextricable part of the meters without which a meter cannot function and allow the depreciation thereupon accordingly after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Service Line Deposits received from the Consumers - Capital or revenue nature - Held that:- We find substance in the contention of the Learned AR that merely because the assessee was following erroneous principles of recognizing the amount received from the cost of assets as income over a period of three years, the Learned CIT(Appeals) was not justified in not directing the Assessing Officer to reduce the amount received from the cost of assets. There is no dispute that as per the settled proposition of law, no tax can be levied or recovered without authority of law and thus the mandate of Explanation 10 to section 43(1) of the Act cannot be ignored only because the method of accounting was erroneously followed by the assessee of recognizing service line deposits as income over a period of three years. Of course, there is no estoppels in law and we fully concur with this contention of the Learned AR. The very purpose of the assessment is to compute income in accordance with the provisions of the Act. We thus while setting aside the orders of the authorities below on the issue raised by the assessee in the additional ground No.1 direct the Assessing Officer to reduce the service line deposits from the cost of assets falling under the ‘plant and machinery’ in accordance with the mandate of Explanation-10 to section 43(1) of the Income-tax Act, 1961. Decided in favour of assessee. Both the receipts, namely, energy charges and service line receipts have different characteristic and therefore, could not be measured with the same yard-stick. We find substance in the submission of the assessee as there is no dispute on the facts of the case. Discussing these submissions of the assessee and meeting out the observations of the Assessing Officer, we are of the view that the Learned CIT(Appeals) rightly come to the conclusion that the amounts received for installation of service lines are to be treated as capital receipts in the hands of the assessee. In result, the Learned CIT(Appeals) was justified in deleting the addition of Rs. 73,75,590 made on account of service line deposits from customers. - Decided against revenue. Addition on account of valuation of closing stock - CIT(A) deleted the addition - Held that:- It is also an undisputed fact that in the Income-tax Act, 1961, it has not been prescribed that for arriving at the cost of closing stock inventory which method is to be taken into consideration, whether FIFO, weighted average, LIFO or any other method. But under AS2, it has been made clear that the cost of inventory should be arrived at by using the first in first out (FIFO), or weighted average cost formula. After making the change in the method of valuation of closing of inventory from FIFO method to the weight average method in the assessment year 2005-06, the same has been consistently followed by the assessee from the assessment year 2005-06 onward. We also concur with the view of the Learned CIT(Appeals) that it is for the assessee to decide which method is more correct and hence more appropriate for the valuation of the stores/spares and not for the Assessing Officer to decide as long as the change is bona fide and the assessee is consistently following the same in the subsequent years. We thus do not find infirmity in the First Appellate Order on the issue as there was no any casual departure in regard to the method adopted by the assessee. The same is upheld. - Decided against revenue. MAT applicability - whether provisions of section 115JB of the Income-tax Act, 1961 were not applicable during the relevant assessment year and thus the Assessing Officer was not justified in assessing the income of the assessee under sec. 115JB of the Act and not under normal provisions of the Act? - Held that:- Even though the assessee, under a misconception of law, had declared income under the deeming provisions of sec. 115JB of the Act, still the Assessing Officer was under its duty bound to make correct assessment of income of the assessee in accordance with the provisions of the Act. As per above discussion and the ratios laid down in the cited decisions, we hold that the provisions of sec. 115JB of the Act were not at all applicable to companies governed by special Acts which also includes power companies, in respect of assessment years falling prior to 01.04.2013 and thereby the assessee was not liable to pay tax under the provisions of the said sections for the assessment years under consideration. - Decided in favour of assessee. Disallowance u/s 40A(2) - price paid to REL for purchase of energy meters was unreasonable and excessive - Held that:- For invoking the provisions of sec. 40A(2) of the Act, the onus lies upon the Assessing Officer to prove that payment is excessive or unreasonable having regard to the fair market value of the goods or legitimate need of the business. In the present case, the Assessing Officer has failed to bring on record any corroborative evidence to establish that the price paid to REL for purchase of energy meters was unreasonable and excessive. And above all the said DERC order on the basis of which the Assessing Officer came to the conclusion that excessive price has been paid to REL has already been set aside by the ATE and operation of that order giving relief to the assessee has not been stayed by any appellate authority as per the Learned AR. We also concur with the submissions of the assessee that capital expenditure payments eligible for depreciation are not covered under sec. 40A(2) of the Act by virtue of the fact that deprecation is not a deduction but only an allowance. Considering all these material aspects of the issue, we are of the view that the Learned CIT(Appeals) has rightly deleted the addition made on account of disallowance of depreciation on energy meters purchased from REL. - Decided in favour of assessee. Disallowance of legal claims - CIT(Appeals) deleted the addition - Held that:- We find that the Assessing Officer has made the disallowance on estimate basis at 25% of the expenditure claimed. No basis has been assigned for making such ad hoc disallowance. Noting these material aspects, we are of the view that the Learned CIT(Appeals) has rightly deleted the disallowance in absence of any instance that there was any penalty which would fall under the Explanation to Sec. 37 of the Income-tax Act, 1961. - Decided in favour of assessee. Deemed dividend under sec. 2(22)(e) relating to loans advanced to the company by BSES Rajdhani Power Ltd. - CIT(A) deleted the addition - Held that:- By virtue of the provisions laid down under sec. 2(18)(b)(B)(c) of the Act, we principally agree with the contention of the assessee that provisions of sec. 2(22)(e) of the Act are not attracted, where the company, who provides loan/advance to the assessee, is a company in which public has substantial interest. In support, the assessee has also cited hereinabove the two conditions i.e. (a) (b) claimed to have been fulfilled in the present case, which our view need verification to decide the issue raised in ground NO.3 of the assessee. Since the Learned CIT(Appeals) has left the issue undecided, we in the interest of justice set aside the matter to the file of the Learned CIT(Appeals) to decide the issue after affording opportunity of being heard to the parties. - Decided in favour of assessee for statistical purposes.

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• 2015 (11) TMI 926
  Disallowance of relief u/s 43B - interest on term loan paid to ICICI during the previous year relevant to the assessment year 2001-02 - Held that:- It is clear that the AO does not dispute the fact that an amount was interest on term loan which was paid to ICICI during the previous year relevant to A.Y.2001-02. It is also not in dispute that the provision of section 43B of the Act will apply to such interest payment and therefore the interest expenditure in question cannot be claimed by the assessee as deduction in any other assessment year in view of the specific bar contained in section 43B(d) of the Act. In other words irrespective of the method of accounting following by the assessee, interest, expenses of the nature referred to section 43B(d) of the Act can be allowed as a deduction only in the year in which such interest are actually paid. The debit to the profit and loss account of an amount which is claimed as deduction u/s 43B of the Act is not a requirement and the decision of the Hon'ble Calcutta High Court in the case of Associated Pigments Ltd. Vs CIT (1998 (9) TMI 78 - CALCUTTA High Court) supports the plea of the assessee in this regard. The only objection which remains for consideration is as to whether in the absence of a revised return of income filed by the assessee making claim for deduction on account of interest expenses the deduction can be allowed. The reliance placed by the revenue in this regard is on the decision of the Hon'ble Supreme Court in the case of Goetze India Ltd. (2006 (3) TMI 75 - SUPREME Court ) wherein it has laid down that the AO cannot consider a claim made by an Assessee before him, in the absence of such claim being made in the return of income or a revised return of income. As rightly contended by the ld. Counsel for the assessee, such a bar does not extend to the appellate authorities under the Act. The decisions referred to by the ld. Counsel for the assessee squarely support the stand of the assessee in this regard. We, therefore, hold that a sum should be allowed as deduction. - Decided in favour of assessee. Addition of interest on account of non-provision of interest on Non-performing Asset (NPA) - CIT(A) deleted the addition - Held that:- In the instant case due to uncertainty in collection there was no accrual of income having regard to the real income theory which is engrained in the RBI's prudential norms for recognition of revenue as held by the Hon'ble Delhi High Court in Vasisth Chay Vyapar Ltd.[2010 (11) TMI 88 - Delhi High Court]. As such, the assessee did not account for such interest. The judgment of the Hon'ble Supreme Court in State Bank of Travancore's case (1986 (1) TMI 1 - SUPREME Court) actually supports the assessee. In that case, it was held that the concept of real income was certainly applicable in judging whether there had been income or not. Thus hold that the concept of real income cannot be employed so as to defeat the provisions of the Act and the Rules. Further there can be no dispute with regard to the proposition laid down in Tuticorin Alkali's case (1997 (7) TMI 4 - SUPREME Court) but the fact is that there is no accrual of income in so far as the assessee is concerned. CIT(A) was justified in coming to the conclusion that interest on NPA need not be recognized as income by the Assessee. - Decided in favour of assessee. Addition on account of interest on Recurring Deposits made on accrual basis - CIT(A) deleted the addition - Held that:- Accrual of interest is only upon maturity and there is no question of any income escaping assessment on accrual basis. On behalf of the revenue, it was also submitted that the three decisions relied upon in connection with non- provision of interest on NP A were also relevant for deciding the ground relating to interest on recurring deposits. We are of the view that none of the said decisions is of any assistance to the revenue since there is no accrual of interest prior to maturity. - Decided in favour of assessee. Write off under section 36(1)(vii) on interest income - Held that:- The facts show that there was a debit to the profit and loss account of a sum of Rs. 26,43,24,776 because the credit side of interest income shown in the profit and loss account was reduced to this extent and this has the effect of a debit to the profit and loss account. However as to whether the debtors account was reduced to the extent of Rs. 26,43,24,776 by way of write off of interest to that extent is a matter which requires verification by the AO and if factually it is found that there was such a write off than the deduction claimed by the Assessee had to be allowed as deduction as the conditions for allowability of such deduction laid down u/s.36(1)(vii) of the Act are satisfied. The decision referred to by the CIT(A) in the case of State Bank of Hyderabad (2005 (3) TMI 403 - ITAT HYDERABAD-B ) is a case where factually there was no write off as bad debts in the books of accounts. The said decision will not apply to the facts of the present case. We therefore allow ground of assessee subject to verification of the write off in the debtors account as stated above. Computation of interest under section 234C - Held that:- The plea of the Assessee that the charging of interest u/s.234C of the Act should be with reference to the tax on total income declared in a revised computation of income filed and not on the tax payable on the total income declared in the original return of income is contrary to the provisions of explanation to Sec.234C(1) of the Act. Charging of interest is mandatory and if there are good ground waive interest than it is for the Assessee to seek appropriate remedies open to it in law. The CIT(A)'s order in our view is contrary to the provisions of law and cannot be sustained. Accordingly, the appeal of the revenue is allowed. - Decided against assessee Disallowance u/s 14A r.w.r. 8D - Held that:- We are however of the view that the disallowance under Sec.14A of the Act cannot be in excess of the tax free income earned by the Assessee during the previous year. We therefore hold that the disallowance u/s.14A of the Act be restricted to the tax free income earned by the Assessee. The direction given above will result in relief to the Assessee than what was given by the CIT(A). - Decided against revenue Disallowance u/s.35D - Registration Fees for change in object clause - same was debited under the head "Miscellaneous Expenditure" and 1/10th of the said amount as amortised every year - Held that:- In Gujarat Narmada Valley Fertilizers Ltd. (2013 (8) TMI 300 - GUJARAT HIGH COURT) held on identical facts that the disallowance of expenses u/s.35D of the Act which is to be allowed over a period of 10 years cannot be disallowed in the 7th year. In that case, Preliminary expenses were amortized claimed as deduction u/s. 35D. The same was allowed in the first year and thereafter for the following 6 AYs. In the 7th AY, the AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to eligible projects were admissibl. However, Tribunal, noted that in last seven years, no such disallowances were made and directed such benefit to be granted. On appeal by the Revenue, the Hon'ble Gujarat High Court held, since last several years, AO had granted such claim on same consideration. The Hon'ble High Court held that following rule of consistency, Tribunal therefore, correctly held that such claim could not have been suddenly disallowed and the Revenues' appeal was dismissed. In the present case also the allowance of expenses has been made in the past and it was sought to be disturbed for the first time in AY 07-08. Such action cannot be sustained. Respectfully following the decision of the Hon'ble Gujarat High Court we hold that the disallowance u/s.,35D of the Act be deleted. - Decided in favour of assessee.

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• 2015 (11) TMI 925
  Addition under the head capital gains in term of section 50B treating the sale of unit as slump sale - CIT(A) deleted the addition - Held that:- Section 50B of the Act provides that any profit or gain arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gain arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place. The admitted facts of the case are that the assessee company carried on business of growing and manufacture of tea, which owned two tea gardens by the names - Tongani Tea Estate and Nagrijuli Tea Estate. According to AO, out of these two tea estates, the assessee by an agreement dated 14.09.1999 sold Nagrijuli Tea Estate, to Russel Tea Ltd. for a total value of Rs. 18 cr. Ld. Counsel for the assessee Sh. Agarwalla first of all narrated the facts that according to agreement dated 14.09.1999 between the assessee and Russel Tea Ltd. sale consideration paid by vendee was for specific assets mentioned in the agreement and which were purchased/acquired for specific consideration. We find that this estate had been sold on the basis of detailed agreement executed between the vendor and the vendee. The total consideration stipulated for the transfer of the estate had been split over different assets, both movable and immovable enumerated in different schedules and annexures. The assessee had assigned specific consideration/value for the tea estate as such along with the standing trees. The consideration for the extent of land had been specifically mentioned. Thereafter, the assessee had listed out every item of movable property transferred to the buyer and value had been assigned to those movable assets. The assessee had not transferred the estate with all the assets and liabilities. All the financial assets available to the assessee up to the date of the transaction were not transferred as per the agreement but had been retained by the assessee. The assessee had assumed all the liabilities including the statutory liabilities till the date of transfer. Therefore, it could not be said that the transfer was a slump sale only for the reason that the rubber estate was transferred to the buyer as a 'going concern. In the instant case, the items sold did not include liabilities. The sale agreement did not include investments and deposits. Accordingly, all the investments, deposits, receivables, stock and such other current assets in the form of financial and other assets remained with the assessee-company along with the liabilities. Only those assets which were enumerated in the Schedules and Annexures were sold to the vendee. Therefore, the instant case was one of split sale and not a case of slump sale. Sale of Nagrijuli Tea Estate was not a slump sale within the meaning of sec. 2(42C) of the Act read with section 50B of the Act and, therefore, not even assessable to capital gains. - Decided against revenue.

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• 2015 (11) TMI 924
  Eligible deduction under Section 10A - Held that:- In the light of the above facts and respectfully following the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. & Others (2011 (8) TMI 782 - KARNATAKA HIGH COURT), we direct the Assessing Officer to exclude the expenses incurred in foreign currency both from export turnover as well as from the total turnover while calculating the eligible deduction under section 10A of the Act. - Decided in favour of assessee. Determining the ‘book profits’ u/s.115JB - MAT - carry forward business loss excluded - Held that:- In the reassessment order, the Assessing Officer has only considered the business loss which is the carry forward business loss of Assessment Year 2002-03 for computing the book profits under Section 115JB of the Act. The Assessing Officer, however, has not assigned any reasons or explained as to why the carry forward business loss for Assessment Year 2003-04 was not considered. Further, as pointed out by the learned Authorised Representative of the assessee in the computation, there appears to be a mistake in the computation made by the Assessing Officer. Be that as it may, we also observe that the assessee has not properly explained the contradictions in the claims made by the assessee both in the earlier years and in the year under consideration in respect of the issue of determination of book profits under Section 115JB of the Act. We also find that the reconciliation statement filed by the assessee before us was not filed before the authorities below. In view of the above factual matrix of the case on this issue, we are of the considered opinion that it would only be appropriate to remand the issue back to the file of the Assessing Officer for fresh consideration and adjudication thereon as per law after affording the assessee adequate opportunity of being heard and to file details/submissions required which shall be duly considered. - Decided in favour of assessee for statistical purposes.

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• 2015 (11) TMI 923
  TDS u/s 195 - payments made for acquiring the copy righted shrink wrapped software amount to ‘Royalty’ under Section 9(1)(vi) - Held that:- Respectfully following the decision of the Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd., (2011 (10) TMI 195 - KARNATAKA HIGH COURT ) and Synopsis International Ltd. [2012 (10) TMI 980 - ITAT BANGALORE] we are of the opinion that the contentions raised by the assessee are not acceptable for the reason that the payment in question was consideration for the right to use copy right shrink-wrap software amounts to royalty within the meaning of sec. 9(1)(vi) of the Act and also Art 12 of the Indo- Ireland DTAA, therefore, grounds raised by the assessee are dismissed. In any view of the matter, in view of the provisions of section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents to the nonresident companies would amount to "royalty" within the meaning of article 12 of the DTAA with the respective country, it is clear that the payment made by the respondents to the non-resident supplier would amount to royalty. In view of the said finding, it is clear that there is obligation on the part of the respondents to deduct tax at source under section 195 of the Act and consequences would follow - Decided against assessee.

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• 2015 (11) TMI 922
  Depreciation on the Wind mill on pro-rata basis - Held that:- In sum and substance the Tribunal in A.Ys. 2007-08 and 2008-09 upheld the action of the Assessing Officer to restrict the depreciation @ 10% on some items but allowed the depreciation @ 80% on the cost of foundation as well as cost incurred on erection and commissioning of the Wind Mill. The Tribunal also held that cost incurred on installation of Wind Mill is an integral part of the Wind Mill and the assessee should be allowed depreciation @ 80% on the cost of foundation as well as on erection and commissioning. As the issue is consequential in this year vis-à-vis the allocation made by the Ld. CIT(A), we find no reason to take different view. Accordingly, confirm the order of the Ld. CIT(A) to the extent of allocation of the expenditure and rate of depreciation on foundation, erection and commissioning expenditure. - Decided against revenue computing the deduction u/s 80IA - Held that:- The term “business” used in sub- sec.(5) section 80IA in our humble opinion is confined to the independent undertaking and cannot get merged with the other businesses. In Sec. 80IA(2), for claiming deduction “undertaking” or “Enterprise” as such is to be considered. Sec.80IA(2) is charging sections for determining basic eligibility and there is no mention of word “business”. Sub-sec.(5) of Sec.80IA speaks of business but same is to be construed as business of “undertaking” or “Enterprise” as referred to in Sub-sec.(2) of Sec.80IA. It is well settled principle of interpretation of statutory provision that they are to be interpreted harmoniously to make workable to give intended results. Hence, as rightly held by Ld. CIT(A) term “business” used in sec.80IA(5) is to be construed and understood to mean “business” or “undertaking or enterprise”. In our opinion, the Ld. CIT(A) in his well reasoned order has rightly held that every unit constitute a separate undertaking engaged in the eligible business and losses from one unit cannot be set off against the profits. Another unit engaged in the same business for the purpose of computing the deduction u/s 80IA. We find no reason to interfere with the findings of the Ld. CIT(A) on this issue. Accordingly, the same are confirmed and grounds taken by the revenue are dismissed. - Decided against revenue

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• 2015 (11) TMI 921
  Revision u/s 263 - Held that:- As before enhancing or annulling or modifying or cancelling the assessment while exercising his powers under section 263 of the Act, the Commissioner must record a finding of fact or of law that the order of the AO is erroneous and is also prejudicial to the interest. In the case in hand, this prerequisite condition has not been satisfied as the Commissioner after calling for the explanation from the assessee has failed to make necessary exercise in examining or cause to examine the explanation/details submitted by the assessee for the justification of its claim. Hence, the order of the Commissioner exercising jurisdiction under section 263 of the Act cannot be held to be sustainable in law and the same is accordingly set aside. - Decided in favour of assessee.

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• 2015 (11) TMI 920
  Deduction u/s 80IB(10) - no compliance of the requirement of the provision of the Act in some flats, the built up area was more than the stipulated condition of 1,000 sq. ft. - Held that:- Whether the assessee can be held liable for extension of area in the alleged flats after the sale to the respective purchasers. The obvious reply is ‘NO’ because the project of the assessee was completed on 28/03/2008 after examining the area of each flat of the project by the competent authority and only then the completion certificate was issued to the assessee. The case of the assessee is fortified by the fact that the assessee started construction on 15/04/2002 and during second survey carried out in 2006, everything was found in order. It can be said the basic structure of the flats must have been completed or at least the base should have been completed above plinth area, on which the further construction would have been made. There is no allegation by the survey team (during first survey in 2006) that the assessee was not constructing as per the approved plan. The completion certificate was issued by the competent authority after examining whether the assessee has fulfilled the conditions stipulated in the Act and also whether construction has been completed as per the sanctioned plan dated 15/04/2002. If, at the later stage, the allottees/occupants of the flats makes any addition, the assessee cannot be held liable for their omissions/acts, if any. - Decided in favour of assessee.

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• 2015 (11) TMI 919
  Non-service of notice under section 143(2) - Held that:- Undisputedly notice of hearing under section 143(2) of the Act was issued on the last day of limitation/prescribed period for issuance of notice under section 143(2) of the Act, i.e., on September 30, 2011 at 15.19 hours by speed post. Therefore, the learned Commissioner of Income-tax (Appeals) has rightly held that probability of service of the said notice by midnight on the same day is very remote. However, onus is upon the Revenue to place evidence on record with regard to the service of notice under section 143(2) of the Act within the period of limitation. By issuing a notice by affixture, the assessment cannot be made to be valid on account of issuance of notice under section 143(2) of the Act in time. Undisputedly there is no evidence on record with regard to the service of notice under section 143(2) of the Act on the assessee within the prescribed period. As apparent, the notice was issued by speed post on the last day of limitation, i.e., September 30, 2011 at 15.19 hours, as such there is no possibility of its service on the same day. We accordingly find ourselves in agreement with the order of the learned Commissioner of Income-tax (Appeals) who has rightly held the assessment to be illegal and void ab initio. - Decided in favour of assessee.

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• 2015 (11) TMI 918
  Penalty under section 271D - CIT(A) deleted the penalty - Held that:- It is observed that although there are some case-law including the decision of Bhalotia Engineering Works P. Ltd. v. CIT [2004 (8) TMI 66 - JHARKHAND High Court] which are in favour of the Revenue, taking a view that the share application money partakes the character of loan or deposit, there are various other case law as cited by the assessee before the learned Commissioner of Income-tax (Appeals), wherein a view in favour of the assessee has been taken, holding that the provisions of section 269SS are not applicable in the case of share application money being not in the nature of loan or deposit. In these circumstances, the learned Commissioner of Income-tax (Appeals) has rightly followed the decision of CIT v. Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME Court] and accordingly cancelled the penalty imposed by the Assessing Officer under section 271D by following the view which is in favour of the assessee. Her impugned order cancelling the penalty imposed under section 271D is, therefore, upheld and this appeal filed by the Revenue is dismissed. - Decided in favour of assessee.

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• 2015 (11) TMI 917
  Telecommunication expenses for delivery of software out side India - whether 10 per cent. of the total telecommunications expenses are to be allowed or 50 per cent - Held that:- As per the agreement between the assessee and its customers overseas, communication expenses were to be borne by the customer. In such circumstances, there could be no expenses incurred by the assessee for delivery of computer software outside India. Nevertheless, the assessee has on his own, on a conservative approach, disallowed 10 per cent. of the telephone expenses as incurred by the STPI unit as attributable to delivery of software outside India. In the given circumstances, we do not find any merit in ground raised by the Revenue. - Decided in favour of assessee. Exclusion of reimbursement of certain expenses from both export turnover and total turnover for the purpose of computing deduction under section 10A - Held that:- Whatever is excluded from the export turnover has also to be excluded from the total turnover as laid down by the hon'ble High Court of Karnataka in CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - whether the assessee had purchased software which is in nature of a licence paid for usage of the software and the consideration for such licences would fall within the definition of the royalty defined in Explanation to section 9(1)(vi) and hence deduction of tax at source under section 194J should have been done by the assessee? - Held that:- Mere purchase of software, a copyrighted article, for utilisation of computers cannot be considered as purchase of copy right and royalty. The assessee did not acquire any rights for making copies, selling or acquiring which generally could be considered within the definition of 'royalty'. Explanation 2 to section 9(1)(vi) cannot be applied to purchase of a copyrighted software, which does not involve any commercial exploitation thereof. The assessee simply purchased software delivered along with computer hardware for utilisation in the day-to-day business. See SMS Demag Pvt. Ltd. Versus DCIT [2010 (1) TMI 624 - ITAT, DELHI ] - depreciation cannot be disallowed on the ground that at the time of remittance no tax was deducted at source - Provisions of section 40(a)(i) are not applicable for claim for deduction u/s 32 of the Act - Decided in favour of assessee.

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• 2015 (11) TMI 916
  Penalty levied under section 271(1)(c) - disallowance under section 14A - CIT(A) deleted penalty - Held that:- Admittedly the assessee on its own had disallowed a sum of Rs. 2,43,670 under section 14A but the Assessing Officer computed the disallowance as per rule 8D at Rs. 35,71,608. The provision of rule 8D comes into play only when the Assessing Officer records a finding that having regard to the accounts of the assessee he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income, which does not form part of the total income under this Act. There are decisions as per which unless the necessary satisfaction is recorded by the Assessing Officer rule 8D cannot be invoked. Therefore, once the assessee has advanced its claim, the Assessing Officer may reject the same but that does not lead to the conclusion that the claim advanced by the assessee was a false claim. The Assessing Officer in the assessment order or in the penalty order nowhere states that the assessee's claim was false and he has invoked rule 8D for computing the disallowance under section 14A. Therefore, this was merely a difference of opinion between the assessee and the Department on the computation of disallowance under section 14A. The decision of the hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) is squarely applicable to the facts of the case, wherein it has been held that where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting penalty under section 271(1)(c). Mere making of a claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Also see Union of India v. Dharamendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT ] - Decided in favour of assessee.

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• 2015 (11) TMI 915
  Disallowance under section 40(a)(ia) - professional charge paid to non-resident in foreign currency outside India - DTAA - Held that:- The learned authorised representative could not controvert that the aforesaid individuals had not rendered technical service to the assessee, however he pleaded that the Revenue authorities have not looked into the direct tax avoidance agreement for making the disallowance under provisions of the Act by which the disallowance would be considerably reduced and therefore, requested the matter may be remitted back to the file of the learned Assessing Officer for consideration of the same. The learned Departmental representative though opposed to the submissions of the learned authorised representative, could not rebut to the claim of the learned authorised representative After hearing both sides, we are of the considered view that in the interest of justice the matter has to be remitted back to the file of the learned Assessing Officer to look into the Double Taxation Avoidance Agreement in order to compute the disallowance as per the provisions of the Act. Accordingly, we remit the case to the file of the learned Assessing Officer for fresh consideration in the light of the observations made hereinabove and the prayer of the learned authorised representative. - Decided in favour of assessee for statistical purposes.

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• 2015 (11) TMI 914
  Disallowance under section 40(a)(ia) of the Act - non deduction of TDS u/s 194C on payments made to the so called transporters - Held that:- Assessing Officer failed to appreciate that there is no privity of contract between the assessee and the truck owners. He simply hired the vehicles from the owners and the entire risk of carrying the goods lies with him only and therefore privity of the contract does not lie with the assessee and the truck owners. Therefore there is no liability to deduct tax at source in respect of such payments - Decided in favour of assessee.

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• 2015 (11) TMI 913
  Registration under section 12AA denied - there cannot be twin objects, i.e., religious and charitable in nature - Held that:- An identical issue was considered by the hon'ble Madras High Court in the case of DIT (Exemptions) v. Seervi Samaj Tambaram Trust [2014 (2) TMI 32 - MADRAS HIGH COURT] and found that the trust can have twin objects. Thus there is no justification in rejecting the application of the assessee. - Decided in favour of assessee.

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• Customs

• 2015 (11) TMI 891
  Validity of order of the Commissioner (appeals) - It was submitted that, the law says that appellate authority should first determine the issue, next, examine the pleadings of the parties and both the things to be tested by law on the touchstone of evidence to reach to a conclusion. If such a procedure is followed then the decision is said to be rational and shall serve interest of justice. But that is not carried out in the present case. - Section 128A - Held that:- It is strange to read the order of the appellate Commissioner in the present case. While in the case decided as above he says that the appeal of the Revenue is frivolous, in the present case he remands the matter on the ground that Chartered Accountant s certificate is not acceptable to him. This clearly shows much emphasis was on only Chartered Accountant s certificate but not on law. It is high time that the authority should be aware of the provisions of law and the judicial pronouncement as well as the safeguard measures granted to the parties to the proceeding by sub-section (4) of section 128A and protest interest of justice thereby. Strangely in the present appeal, appellate authority has not at all examined whether there was eligibility of the appellant to the refund. When the adjudicating authority has transferred the refund to the consumer welfare fund, the appellate authority has not even bothered to examine whether there was really unjust enrichment. - Matter remanded back to the adjudicating authority - Decided in favour of Revenue.

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• 2015 (11) TMI 890
  Refund of supervision charges - The appellant paid the said supervision charges. However, on realizing that such ships are exempted by virtue of Notification No. 43/97, they applied for refund of the supervision charges. - Held that:- It is an admitted position that supervision charges are not required to be paid, however, the refund has been rejected solely on the ground that the appellants had asked for the supervision and the same was provided, therefore, refund cannot be granted. We find that the supervision charges are statutory in nature and prescribed by law. Being statutory charges, it cannot be collected if it is not due. It is not like an ordinary services where as a liability arise as the result of availment of service. Furthermore, this ground was not a ground for which the original adjudicating authority had rejected the refund. - Impugned order is set aside - Decided in favour of assessee.

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• 2015 (11) TMI 889
  Refund claim - Notification No. 102-2007-Cus. dated 14.09.2007 - Refund of SAD - Held that:- subject refund claim was initially filed on 11.07.2012, which was within the time limit of one year, as specified in Notification No. 102/2007-Cus dated 14.09.2007. It is the claim of the Respondent that the said refund claim was taken back by them at the request of Customs officer. However, this fact is not coming out from the records. The claim was resubmitted on 27.05.2013, by which time, the time limit of one year prescribed in the notification had clearly expired. It is observed that the time limit for filing refund claim has not been extended under any law, rules or notification. Therefore, the time limit prescribed under Notification No. 102/2007-Cus dated 14.09.2007 will be squarely applicable in the instant case. It is well settled law that the provisions of the notification has to be construed strictly. Further, the 9 Member Bench of the Hon ble Supreme Court in the case of Mafatlal Industries Limited vs. UOI [1996 (12) TMI 50 - SUPREME COURT OF INDIA], held that all claims for refund has to be preferred and adjudicated upon as per the provisions of Section 11B of the Central Excise Act, 1944 or Section 27 of the Customs Act, 1962. Therefore, time limit of one year prescribed under Section 27 of the Customs Act, 1962 will also be applicable in the instant case. The case law relied upon by the Respondent is not applicable to this case as the facts of this case are different. The issue in the said case was sanction of provisionally assessed Bills of Entry which is not the case herein. - Decided in favour of Revenue.

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• 2015 (11) TMI 888
  Revocation of CHA license - Quantum of security - Held that:- An assessee is entitled to his own view point and is within his rights to challenge the view of the Revenue. This is what exactly the appellant did. He challenged the earlier order of the Commissioner being Order No.30/2013 before the Tribunal, in exercise of his right of appeal granted to every citizen. In fact the earlier order passed by the Commissioner itself, in its preamble, observed that an appeal can be filed before the Tribunal. When the appellant lost before the Tribunal, he furnished the requisite amount of security in terms of the new Regulations. The question is as to whether such conduct of the appellant in not accepting the Revenue's direction and challenging the same before the higher appellate forum can be considered to be a misconduct on his part as Custom Broker License holder so as to revoke his license. The answer to such a question, by any reasonable prudent man would be emphatic "NO". Appellant's license which has already been renewed by Commissioner himself till 2021 cannot be revoked on this sole ground that instead of accepting the directions of the Commissioner, the appellant has chosen to file an appeal before the Tribunal. As such, we find no merits in the impugned order of the Commissioner revoking the appellant's license and imposing penalty on him. The order is set aside - Decided in favour of appellant.

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• 2015 (11) TMI 887
  Levy of anti dumping duty - clearance of Mulberry Raw Silk and declared the Grade as 4A - Provisional release of goods - Held that:- In terms of Notification No.106/2003 dt. 10.7.2003 anti-dumping duty is leviable on raw silk of any Grade 2A and below whereas the appellants imported and declared the goods as Raw Silk Goods Grade 4A. On receipt of the test report, the adjudicating authority after following the principles of natural justice rightly adjudicated the case and personal hearing was attended by the importer himself and he was aware of the test report and only pleaded for leniency. Therefore, we do not find any merit in the appellants contention that that they had not been provided with test report. Further appellants contention that quarantine certificate issued by Peoples of Republic of China should be accepted is not tenable as it is confirmed by the test report that the goods imported were found to be Grade-2A. Therefore the copy of bonafide of inspection certificate and quarantine certificate relied by the appellant is not valid. The adjudicating authority has rightly held that Anti dumping duty is chargeable and the appellants have misdeclared the goods as Grade 4A instead of 2A. The citations relied by the appellant are not applicable to the issue. Therefore, we do not find any infirmity in the adjudication order and the impugned order in so far as demand of ADD. As regards appellants' pleading for non-imposition of fine and penalty, we find that this Tribunal in a recent decision in the case of Silkone International Vs CC Chennai (2006 (6) TMI 406 - CESTAT, BANGALORE) clearly upheld anti dumping duty, however, set aside the fine and penalty as there is no provision for fine and penalty on ADD by following apex court judgement in the case of CCE Ahmedabad Vs Orient Fabrics Pvt. Ltd. -[2003 (11) TMI 75 - SUPREME COURT OF INDIA]. Accordingly, we waive fine and penalty. - Decided partly in favour of assessee.

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• 2015 (11) TMI 886
  Valuation - inclusion of demurrage charges in the assessable value - Held that:- Larger Bench [2013 (10) TMI 246 - CESTAT AHMEDABAD] was examining the excludability of demurrage charges in the assessable value between two CBEC circulars 14/2001-cus dated 02/2/2001 and 26/2006-cus at 26/9/2006, therefore, the period got mentioned in Para 14 of this order was 02/3/2001 to 26/9/2006. However, the law laid down on excludability of demurrage charges by the Larger Bench was as per Para 12 of the Larger Bench order. It has been clearly held in Para 12 of the Larger Bench judgment in the case of CC Jamnagar vs. Grasim Industries Limited (Supra) that ship demurrage charges need to be included in the assessable value from the date when provisions of Customs Valuation Rules 2007 came into force. It is also evident from Rule 1(2) of the Customs Valuation (Determination of Value of imported goods) Rules 2007, issued under Notification No. 94/2007-cus (NT) dated 13/9/2007, that these Rules came into force with effect from 10/10/2007. The period involved in the present appeals is prior to 10/10/2007 as evident from Para 1 of the order dated 18/8/2009 passed by the first appellate authority. In view of the Larger Bench decision of Ahmedabad Bench in the case of CC Jamnagar vs. Grasim Industries Limited (Supra) ship demurrage charges paid by the appellant for the period prior to 10/10/2007 are not includable in the assessable value. - Decided against Revenue.

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• 2015 (11) TMI 885
  Waiver of pre deposit - Duty demand - appellants have not commenced production and not fulfilled the EPCG obligation - Held that:- appellants have claimed before the assessing authorities that they have completed the export obligation to the extent of 50% out of the total obligation and sought local report from Chennai office for considering their request. Considering the above facts, and also considering the claim of 50% fulfilment of export obligation before DGFT, we direct the appellants to predeposit a sum of Rs. 50,00,000/- (Rupees Fifty lakhs only) within 8 weeks in two equalments, the first instalment shall be payable by 22.12.2015 and the second instalment shall be payable by 22.2.2016 and the file the compliance report before Commissioner (Appeals). Since the Commissioner (Appeals) has not decided the appeal on merits, on deposit of the above amount within the period prescribed, the LAA shall decide the issue on merits. Appeal is remanded to Commissioner (Appeals) - Decided partly in favour of assessee.

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• 2015 (11) TMI 884
  Denial of refund claim - SEZ unit - claim of refund due to reduction of Basic Customs duty (BCD) from 5% to 2.5% vide Notification No. 54/2010-Cus. dated 29.04.2010 - whether the Customs Officer posted in the Special Economic Zone unit has the power to sanction refund of customs duty or not. - Held that:- issue is no more res-integra in view of the decision of the Hon'ble High Court of Gujarat. In the case of Anita Exports vs. UOI (2014 (12) TMI 361 - GUJARAT HIGH COURT), the issue involved was examined by the Hon'ble High Court - impugned orders of the lower authorities can not be sustained. The refund applications filed by the appellant have to be examined by the Customs Officer under the provisions of Customs Act and have to be disposed of on merits in accordance with the law. Therefore, these matters are required to be remanded to the proper officer of Customs at the SEZ for examining the refund claims filed by the appellant and take action as per law - Decided in favour of assessee.

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• 2015 (11) TMI 883
  Mis-declaration of goods - Enhancement in value of goods - Demand of differential duty - Confiscation of goods - Imposition of redemption fine - Held that:- appellant has mis-declared the quantity and certain goods was not declared by the appellant nor in the invoice. We also find that the appellants were fully aware of the quantity and also description and the proposed value which they have initially clearly admitted in their statement before the investigating authority and waived the show cause notice and personal hearing. The adjudicating authority has dealt the issue both on the value as well as on mis-declaration in detail and clearly rejected the transaction value and sequentially proceeded to re-determine the value sequentially for Rule 4 to Rule 8 of Customs Valuation Rules. - present case is not only mis-declaration of value but the appellants have also mis-declared the quantity and also description and also certain goods were not even declared. The lower appellate authority has also rightly examined their plea and gave clear finding on the appellant s contention for variation in quantities. Accordingly, rejection of transaction value, demand of differential duty and the confiscation are liable to be upheld. - However, redemption fine is reduced - Decided partly in favour of assessee.

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• Service Tax

• 2015 (11) TMI 911
  Refund of the service tax - Double payment of service tax - appellant have made first payment when there was no liability for them to pay - Period of limitation to be computed with the first payment or subsequent payment - Section 11B - Held that:- Appellant had paid the amount twice to the department. The first payment was made in 2007 when there was no liability for them to pay the said amount since they had not received retention/ withheld amount. They paid appropriate service tax in March/ April 2010 when the retention/ withheld amount received by them. The adjudicating authority has held that second payment was in fact correctly paid service tax against the payment received by them in March and April 2010 and therefore there has been no excess payment during the said period, and was in order. When once there was no compulsion or duty cast to pay the service tax, the amount paid by assessee under mistaken notion, would not be a duty or “service tax” payable in law. Therefore, once it is not payable in law there was no authority for the department to retain such amount. By any stretch of imagination, it will not amount to duty of excise to attract Section 11B. Therefore, it is outside the purview of Section 11B of the Act Appellant is eligible for the refund of the amount deposited as it is double payment and it does not relate to tax, and also principle of unjust enrichment are not applicable in the instant case. Therefore, we hold that the appellant is eligible for the said refund. Therefore, the impugned orders cannot be sustained - Decided in favour of assessee.

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• 2015 (11) TMI 910
  Availment of CENVAT Credit - whether the services such as Architect Services, Consulting Engineers Services, Management Consultancy Services etc. used for construction of sports stadium are admissible input services for taking Cenvat Credit as against the output service of the appellant i.e. renting of the said stadium and other services on which services, service tax was discharged - Held that:- Input service specifically includes amongst others services used in relation to setting up, premises of provider of output service or an office relating to such premises. On the analysis of the definition, it becomes clear that the 'input service' is not limited to the services for providing output service, but it also includes the service for setting up the premises of provider of output service. In the present case the input services are Architect Services, Consulting Engineers Services, Management Consultancy Services etc. used for setting up the premises i.e. stadium of provider of output service i.e. the appellant. Board Circular appears to have travelled absolutely contrary to the clear and plain language of the definition of the input service. It is very pertinent that legislators knowing fully that there is no tax or excise duty on the constructing premises of the output service provider, included services used for setting up of the premises of provider of output services, for the simple reason that if the premises are used for providing the output service, the credit of input services used for setting up the premises of service provider must be allowed. - appellant has clearly entitled for Cenvat Credit in respect of all the services used for construction/setting up the stadium which is admittedly used for providing the output services. - Impugned order is set aside - Decided in favour of assessee.

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• 2015 (11) TMI 909
  Demand of service tax - Credit card services - Mark up charges - Held that:- The term ‘Credit Card Services’ was not defined during the impugned period. A new tax entry was introduced in 2006 under Section 65(12) as ‘Credit Card Services’ with much wider scope as defined under Section 65 (33a). The period relevant for the present appeal is prior to this new entry - when card is issued with international credit facility, service charges collected at that time or on periodical basis are subjected to service tax under credit card service. When such card is used to pay in foreign exchange outside India there will necessarily be a charge for conversion of currency. The card holder is settling his dues with appellant only in rupees. The card is used for payment in foreign exchange. As such the mark up charge is directly attributable to the conversion of currency. This much is clear from the terms of usage and the card holder is also aware of the nature of mark up. The case of Revenue is that since card is an instrument which only enables such conversion of currency, hence any mark up collected on this account is leviable to tax as credit card service. - mark up charges accruing to the appellant when card holder uses card to pay in foreign exchange abroad is not liable to service tax under ‘Credit Card Services’ during the impugned period. This conclusion is based both on merit of scope of ‘Credit Card Services’ during relevant period and lack of territorial jurisdiction of charge. - appellant is not liable to service tax on ‘interchange charges’ in view of the findings of the larger Bench of the Tribunal in Standard Chartered Bank (2015 (8) TMI 686 - CESTAT DELHI (LB)) - Decided in favour of asessee.

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• 2015 (11) TMI 908
  Demand of service tax - whether the activity undertaken by the appellant would get covered as taxable service provided under “tour operator service” - Held that:- Appellant is offering Jet Escapes Package to their various passengers who visit their website for booking air travel service offered by them. It is also undisputed that the appellant has entered into a contract with Hotels Chains for accommodating their passengers who have opted for “Jet Escapes” Package. On the factual matrix as stated above we require to look into the definition of “tour operator service” as given under Section 65(115) of the Finance Act, 1994. - definition also mandates for the services to be rendered by persons engaged in business of operating tours in a tourist vehicle or a contract carriage. It is on record that the passengers when they wants to opt for “Jet Escapes Package”, organize own travel dates and appellant is not helping them in planning or organizing or scheduling of tours. We find that though not on the very same issue, this Bench in the case of Divisional Controller (2013 (12) TMI 915 - CESTAT MUMBAI) was considering the services rendered by the appellant therein as to whether this service would fall under the category of “tour operator services”. The appellant in that case was providing contract carriage and stage carriage to various individuals/customers and it was considered as the said service would fall under the category of “tour operator service”. Tour operator service means the person should be engaged in the business of planning, scheduling or arranging the tours. In the absence of any such activity undertaken, the services cannot be considered as tour operator service and liable to be taxed. - appellant herein has not planned, scheduled or organized tours for their passengers. In our considered view the ratio of this Tribunal s judgement in the case of T.N. State Trans. Corpn. Kumbakonam Ltd. (2009 (2) TMI 90 - CESTAT CHENNAI) will be applicable in the case in hand and we have to hold that the appellant is not covered under the category of tours operator service - impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.

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• 2015 (11) TMI 907
  Demand of service tax under various categories, by vivisecting the works contract - port services - benefit of abatement to the extent of 60% - benefit of CENVAT credit - Held that:- Whereas the appellant may have a prima facie case in respect of various issues raised by the learned advocate, but it cannot be said at this stage that no tax liability would be fastened on them, whether under the category on which the Commissioner has adjudicated or under any other category of services. - services were required to be assessed to the tax under the works contract after 01/06/2007 as also by appreciating the fact that the works contract has been held to be vivisectable prior to 01/06/2007 as per the Tribunal s Larger Bench decision, as also by appreciating the fact that the services in the two show-cause notices falling within the limitation period may not be strictly port services and if the same are held to be works contract services, the same would be entitled to exemption notification as also by appreciating the fact that the appellant has not pleaded any financial hardship and taking into account the decision of the Hon’ble Rajasthan High Court in the case of Arjun Industries referred [2015 (6) TMI 110 - RAJASTHAN HIGH COURT], we deem it to accept the offer made by the learned advocate as fair and just and accordingly we direct them to deposit an amount of Rs. 10 crores - stay granted partly.

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• 2015 (11) TMI 906
  Valuation - CHA service or C & F Agent service - inclusion of reimbursement of expenses - Held that:- in Circular No.119/13/2009-ST dated 21.12.2009, CBEC had clarified the position. In fact the Trade Note is based on the circulars. In paragraph 3 of the said Circular, it was observed and reported that Board had clarified on 6.6.1997 that service tax would be charged on the service charges only and statutory levy and other reimbursable charges would not be included in the taxable value. The Board also observed that in case where there is lump sum payment towards reimbursible as well as service charges, service tax would be charged on 15% of the gross value only. In the clarification, it was stated that with the introduction of Valuation Rules for service tax, the previous circulars become invalid. The period covered by the orders before us is prior to April 2006. Therefore the guidelines issued by CBEC would be squarely applicable to the facts of this case. Appellant has taken registration as a CHA has been discharging service tax liability on that basis and the activities undertaken by the appellant are the ones which have been taken note of by the CBEC. Even in the case of clearing and forwarding agent also, the Tribunal had taken a view that reimbursement on account of loading and unloading, packing/unpacking, freight, etc., cannot be included (Apco Agencies vs. Commissioner, Calicut as reported in [2008 (1) TMI 71 - CESTAT, BANGALORE]. In the case of Gudwin Logistics vs. CCE, Vadodara: [2011 (12) TMI 262 - CESTAT, AHMEDABAD ], it was clearly held that stand taken by the Revenue that the activities similar to the one under consideration before us amounts to rendering of C & F Agent service is not correct and it was held that the services has to be classified as CHA service only - stand taken by the Revenue that services rendered by the appellant in the capacity of CHA service need reclassification as C & F agent service cannot be sustained - Decided in favour of assessee.

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• 2015 (11) TMI 905
  Refund of CENVAT Credit - determination of amount to be refunded for export of services for the relevant period - amount of CENVAT credit restricted as per service tax return for the quarter - input invoices were not available for verification - Notification No. 5/2006C.E. (N.T.) dated 14/3/2006 - Held that:- CENVAT credit cannot be restricted to the amount availed & as shown in the ST-3 returns for a quarter. It is refundable to the extent of accumulated credit lying at the end of the period for which the refund relates. This will include the amount of brought forward credit as well from the earlier quarter(s). So far the issue of address on the invoices being not that of the registered premises, I hold that the claim rejected on this ground is bad. I direct to verify to the extent, if the services have been received in any of the offices of the appellant and duly accounted for in the books of accounts, the credit is allowable. So far issue of missing invoices is concerned, the appellant is given opportunity to produce the invoices which shall be considered, as per Rules, at the time of hearing in the remand proceedings. The appellant during the course of hearing have also produced a copy of ST-3 return, filed on 23.07.09 relating to the period under consideration. - adjudicating authority shall peruse his records as well as the documents produced in support of the balance refund claim - Matter remanded back - Decided in favour of assessee.

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• 2015 (11) TMI 904
  Benefit of Section 80 - Imposition of penalty - Validity of review order - whether the Reviewing authority could have reviewed the order of the adjudicating authority for use of discretionary power under Section 80 of the Finance Act, 1994 for dropping the proceedings initiated for imposition of penalties - Held that:- Adjudicating authority has exercised his discretionary power under Section 80 for dropping the proceedings to impose the penalty with a reasoned order. The reasoning given by the adjudicating authority are acceptable justification for non-imposition of penalties. - order of Reviewing authority is unsustainable and needs to be set aside - Decided in favour of assessee.

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• 2015 (11) TMI 903
  CENVAT Credit - input services - Air Travel Agent - revenue contended that invoice raised by the service provider pertain to tickets issued in the name of personnel of the assessee - Held that:- In view of the nature of the business of the assessee being mainly works contract, wherein the works are situated at different places, the personnel of the assessee are required to travel for business purposes between various works site from Head Office to work site and from work site to Head Office and also have various other means including resolution of dispute tax balance etc. The adjudicating authority has erred in holding that although the bills are raised in the name of the company, the traveling tickets are in the name of the personnel as the company being an artificial judicial person, cannot travel itself as it exists only on paper in the eyes of law. It is only the personnel of the company, who travel for the business of the company and the CENVAT Credit in respect of Air Travel Agent service is rightly allowed by the impugned order - Decided in favour of assessee.

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• 2015 (11) TMI 902
  Storage or warehouse service - whether proceed of auction of warehoused imported goods in case of importer abandoned the goods, shall be considered as service charges towards storage or warehouse and is liable for service tax - Held that:- Service tax was proposed to be demanded on the sale proceed of the auction of the abandoned imported goods. In the whole transaction no service recipient is existing; therefore there is no question of providing any service to any person. Merely for the reason that Section 150 provides for distribution of the amount of proceed of auction that will not empowered the government to recover service tax on the auction proceeds. - Commissioner with proper application of mind given detailed finding not only on the facts but also on the law point of Section 48, 150 of Customs Act, 1962 and also discussed in detail the service tax provision and referred Master Circular dated 23/8/2007 and Board Circular dated 1/8/2002. - there is absolutely no infirmity in the order of the Ld. Commissioner (Appeals), therefore the same has to be sustained. We are therefore upheld the impugned order - Decided against Revenue.

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• Central Excise

• 2015 (11) TMI 901
  Claim of exemption from duty on production of gold bars - whether the product produced by the assessee is the “primary gold” which is exempted from payment of excise duty - Denial of exemption Notification No. 6/02-CE dated 01.03.2002 - Held that:- It is clear from the reading of relevant entry in the exemption Notification that it exempts “primary gold” when the same is converted with the aid of power from ‘any form of gold’. Explanation appended thereto defines the “primary gold” to mean gold in any unfinished or semi-finished form and includes among others, gold bars. From the process of manufacture that is explained above, it becomes clear that the gold bars are produced from gold mud. Gold mud would be qualified as “any form of gold” and the product in question viz. gold bars, therefore has to be treated as “primary gold”. What is relevant and important is that silver was recovered from anode slime and thereafter gold mud was recovered from silver. Insofar as the product in question viz. gold bars are concerned, these are produced from the gold mud. Thus, gold is converted in the form of bars from gold mud with the aid of power. It is undisputed that gold mud is a form of gold. What is significant to note that the “primary gold” is the end product which is manufactured. The entry clearly describes that when the said “primary gold” is converted from any form of gold with the aid of power into bars as well, the same would be treated as “primary gold”. - Decided against Revenue.

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• 2015 (11) TMI 900
  Extension of the permission for storing the finished goods outside the factory premises as per the provisions of Rule 4(4) of Central Excise Rules, 2002 - whether the learned Commissioner was correct in rejecting the request for extension of permission to store the goods outside the factory premises - Held that:- if both the field formations i.e. Range Superintendent as well as Jurisdictional Division Office recommend the case of the appellant as has been genuine one, it should have been considered in correct perspective by the office of the Commissioner of Central Excise. On perusal of the letter dated 26.12.2014 vide which the Commissioner has not granted extension of permission to store the goods without payment of duty, is a very casually worded and does not given any reason for rejection of the request. I find strong force in the contentions raised by the learned Counsel that in an identical set of facts in the case of Balkrishna Industries Ltd. (2011 (11) TMI 555 - CESTAT NEW DELHI) this Tribunal was considering the provisions of Rule 4(4) of the Central Excise Rules, 2002. The permission under sub-rule cannot be refused just because an assessee has been enjoying the same continuously for certain number of years. - the Revenue’s plea that there is deferment of collection of duty in cases of outside storage of the goods under Rule 4(4) without payment of duty, is not correct. - letter dated 26.12.2014 issued from the office of the Commissioner of Central Excise, Customs & Service Tax, Wardha is unsustainable and liable to be set aside - Decided in favour of assessee.

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• 2015 (11) TMI 899
  CENVAT Credit - Job Work - Whether the CESTAT is correct in law to hold that finished goods cleared without payment of duty under job work procedure to the principal manufacturer would not come within the scope of expression 'exempted final products' used under Rule 57-R (1) and Rule 57-C of the Central Excise Rules, 1944 or under Rule 6 (4) of the CENVAT Credit Rules, 2002 - Held that:- Manufacture of wiring harness is done at Unit-I. The inputs are sent by Unit-I to Unit-II, viz., the principal manufacturer to the respondent/assessee for manufacture semi-finished wiring harness and the job-worked goods are cleared under delivery challans and not on payment of duty. The respondent/assessee is availing the exemption under Notification No.214/86-CE for the job work done by the assessee. Tribunal was correct in holding that wiring harness was removed without payment of duty under job work procedure to the principal manufacturer and that semi-finished goods removed by the job worker from its unit to the principal, without payment of duty, would not come within the scope of expression "exempted final product" used in Rule 57-R (1) equivalent to Rule 6 (4) of the Cenvat Credit Rules, 2004. The Tribunal has rightly held that availment of Modvat Credit on capital goods to be job work is in order. For the reasons aforesaid, the substantial question of law is answered in favour of the assessee and against the Revenue. - Decided in favour of Assessee.

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• 2015 (11) TMI 898
  Reversal of cenvat credit - duty debit was made in DEPB in respect of CVD paid by the appellant - adjustment of CVD paid in DEPB scrips under EXIM Policy 2002-07 - held that:- period involved in the present appeal is July 2004 to September 2004 and during the relevant period of EXIM Policy 2002-2007 relevant para 4.35 of the policy was amended vide Notification No.28[RE-2004)/2002-2007 dt. 28.1.2004 where the restriction of DEPB as mentioned in last sentence of the paragraph has been deleted. Identical issue has already been settled by Hon'ble High Court of Punjab & Haryana in the case of CCE Ludhiana Vs Neel Kanth Rubber Mills - [2010 (4) TMI 281 - PUNJAB & HARYANA HIGH COURT] and the Hon'ble High Court of Madras in the case of CCE Vs SPIC Ltd. - [2013 (9) TMI 93 - MADRAS HIGH COURT. wherein the Hon'ble High Courts dismissed the Revenue's appeals. - during the relevant period of dispute para 4.3.5 of EXIM Policy was already amended w.e.f. 28.1.2004 and there was no restriction in availing cenvat credit on CVD paid by debit of DEPB. - appellants are eligible to avail credit on the CVD made in DEPB. Impugned order is set aside. - Decided in favour of assessee.

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• 2015 (11) TMI 897
  Restoration of appeal - Ex-parte order passed - Held that:- It is seen that on 22.01.2014, these matters were listed at Sl.No.37, 38 and 39 and on the same date, there were some other matters also listed at Sl.Nos.10 to 15, in respect of which, Shri Bipin Garg was the Counsel and he had argued those matters. According to the appellant's Counsel, the matter was called at around 4 P.M. in the afternoon and at that time, since he had to go somewhere for some personal work, he had instructed his clerk to seek adjournment, as the brief of this matter had been received by him only a day before and he was not prepared to argue this matter. In this factual background, we are of the view that that there are genuine reasons for non-appearance of the appellant. On going through this order [2015 (10) TMI 1631 - CESTAT NEW DELHI], it is clear that not only the order is ex parte order passed without hearing the appellant - Since this is a non-speaking order passed ex parte and since from the facts on record, it appears that there were genuine reasons for inability of the Counsel for the appellant to argue this matter at that time, we deem it fit to recall this order. - Appeal restored.

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• 2015 (11) TMI 896
  Valuation - Determination of assessable value - Inclusion of ground rent collected - appellant contended that it was collected as storage charges for the scrap from the customers and it is in the nature of penalty for over due retaining of the material in the factory premises of the appellant - Held that:- In the case of SAIL (2013 (12) TMI 452 - CESTAT NEW DELHI), the customers were required to make the payment within 28 days from the date of sale and if they failed to make the payment they were required to pay ground rent at the specified rates. The Tribunal took a view that the ground rent is payable as per the terms and conditions of sale which provided for delay in payments and the amount collected is in the nature of interest on receivables and was not includable in the assessable value. In the present case, it is not the case that payment for the scrap has not been made by the customer. Even if he makes the payment, if the scrap is left without taking delivery, the appellants charged the so called ground rent. In this case, there is no evidence to show that goods have been removed from the factory gate. The date of removal of the goods from the factory gate by the customer is the date for finding the transaction value of the goods. No invoice has been produced before us. In the absence of any evidence to show that the amount charged is for delayed payment as per the conditions of the sale and is in the nature of interest, the price charged by the appellant at the time of removal of the goods would be liable to excise duty. In the situation, we do not find any merit in the appeal filed by the appellant - Decided against Revenue.

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• 2015 (11) TMI 895
  Waiver of pre deposit - Clandestine removal of goods - Held that:- Finding of clandestine removal and consequent confirmation of demand and imposition of penalties is solely based upon the disclosure of income made by the appellant before the Income Tax Authorities. The appellate authority has observed that such disclosure leads to presumption that such income was generated through illegal activities of manufacture. It is well settled law that clandestine removal has to be established by production of positive evidence. In the absence of any other evidence on record, some disclosure and surrender of income before the Income Tax authorities especially when the appellant had taken a ground that they were also doing other activities for generation of income, cannot held to be sufficient evidence so as to uphold the finding of clandestine activities in the absence of procurement of raw materials, actual manufacture of the goods and non-identity of the transporter and customer etc. - Decided in favour of assessee.

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• 2015 (11) TMI 894
  CENVAT Credit - Availment of credit on raw materials by the Job Worker - Held that:- Issue is no longer res integra as the matter is settled by the larger Bench of this Tribunal in the case of Sterlite Industries Ltd. vs. Commissioner of Central Excise, Pune - [2004 (12) TMI 108 - CESTAT, MUMBAI] affirmed by the Hon'ble Bombay High Court reported in [2008 (8) TMI 783 - BOMBAY HIGH COURT], wherein it was held that job worker, who received goods from manufacturer under Rule 57E of erstwhile Central Excise Rules, 1944 is entitled to take credit of duty in respect of other inputs received directly and used by him in manufacture of said goods on job work basis, Rule 57C, ibid is not attracted in such a situation. Accordingly, following the ratio of the Larger Bench's decision in the case of Sterlite Industries Ltd. (supra), I set aside the impugned order - Decided in favour of assessee.

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• 2015 (11) TMI 893
  Denial of refund claim - reduction in price / transaction value due to delay in delivery of manufactured goods as per agreed contract terms - liquidated damage charges imposed by MTNL/BSNL/DoT on delayed supplies by the assessee - Held that:- Wherever the assessee, as per terms of the contract between the parties and on account of delay in delivery of manufactured goods, is liable to pay a lesser amount than the generically agreed price as a result of a clause stipulating variation in the price, on account of liability to ‘‘liquidated damages’’, irrespective of whether the clause is titled ‘‘penalty’’ or ‘‘liquidated damages’’, the resultant price would be the ‘‘transaction value’’; and such value shall be alone liable to levy of excise duty, at the applicable rate. - In the light of the judgment of the Larger Bench [2013 (12) TMI 81 - CESTAT CHENNAI ], the assessee is entitled to succeed. - Decided against Revenue.

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• 2015 (11) TMI 892
  Denial of refund claim - Excess duty paid - Reduction in rate of duty - unjust enrichment - Held that:- Letter of M/s. Glaxo Smith Kline Consumer Healthcare Ltd., clearly states that duty re-imbursement to the appellants was to the tune of 8.24% only. The reconciliation statement also stands produced on record. Further there is a clear certificate given by the buyer that they have not availed the Cenvat credit of duty paid by the appellants. As per the appellants, their buyers are only a marketing company and as such there is no occasion for them to avail the Cenvat credit inasmuch as the biscuits, in fully manufactured condition are supplied to their buyers, who in turn market the same, in the same condition. Similar is the position in respect of Boost and sachets. If the Commissioner (Appeals) was having any doubt about the said letter, he was in a position to get the same verified from the jurisdictional Central Excise authorities of the appellants’ buyers. To reject the said letter given by a renowned company, without any basis is neither just nor fair. - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (11) TMI 882
  Levy of VAT on supply to SEZ units - Deemed export or not - Liability of the petitioner to pay tax under the Kerala Value Added Tax Act - purchases of sandalwood at the auction - Assessee contends that goods so purchased are taken by her directly to the unit in the Madras Export Processing Zone - case of the respondents that the transaction of sale would attract tax under the KVAT Act since the sale was concluded in the State of Kerala - Whether the movement of the goods from Kerala to the unit of the petitioner in the Madras Export Processing Zone, pursuant to the sale effected by the respondents, could be considered an "export" of the goods outside the territory of India - Held that:- It will be seen from a reading of Section 53 of the SEZ Act that an SEZ is deemed to be a territory outside the customs territory of India only for the purposes of undertaking authorised operations. The term "authorised operations" is defined in Section 2(c) of the Act as meaning operations which may be authorised under Section 4(2) and Section 15(9) of the Act. Section 4(2) and Section 15(9) speak of such operations, which are authorised by the Central Government, and in respect of which the Developer of a unit has the authorisation of the Board of Approval. Further, an overview of the provisions of the SEZ Act indicates that it is a special law enacted with the specific object of providing an internationally competitive environment for exports and there are specific provisions therein that are tailored to provide tax exemptions and other benefits to the units situated in the SEZ's. The overriding effect given to provisions of the Act is only with a view to further the objects of the Act and cannot confer on the units in the SEZ a status other than what is contemplated for the purposes of their functioning under the Act. It is apparent, therefore, that while enacting the SEZ Act, the Parliament did not intend to treat a supply from the DTA to a unit in the SEZ as an export for the purposes of the CST Act or Article 286 of the Constitution. Had the Parliament any such intention, then it would not have been necessary to provide for an exemption from State taxes, levies and duties, at the discretion of State Legislatures for, any sale of goods to an SEZ unit, would have qualified as an export sale for the purpose of the CST Act, and there would have been no necessity for an exemption provision. As a matter of fact, even under the CST Act, through an amendment that was brought in with effect from 10.09.2004, Section 8(6) of the Act was amended to provide an exemption from CST in cases where there is an inter-state sale effected to registered dealers who are permitted to set up units in SEZ's. - legislative intention under the SEZ Act was to treat sales to units in the SEZ as taxable sales, subject to specific exemptions that were provided for, either under the CST Act or under the respective State legislations. In the absence of any exemption, therefore, such sales effected from the DTA to a unit in the SEZ would not qualify to be export sales for the purposes of S. 5 (1) of the CST Act or for the purposes of Art. 286 of the Constitution of India. Movement of the goods from Kerala to the unit of the petitioner in the SEZ would not qualify as an export for the purposes of Section 5(1) of the CST Act or for the purposes of Article 286 of the Constitution. It is also relevant to note that the express terms of Ext.P6 - "Special Terms and Conditions of the e-auction of sandalwood at Marayoor Sandal Depot of Kerala Forest department", and in particular clauses 11 and 14(v) thereof, clearly contemplated that prevalent rates of KVAT would be applicable to all successful bidders irrespective of destination of transportation of materials and purpose. - Decided against assessee.

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• 2015 (11) TMI 881
  Evasion of duty - Imposition of penalty - whether levy of penalty is automatic under RVAT - Held that:- There is no substance in the argument of the officer in-charge that penalty under section 61 of the 2003 is automatic on short-payment of tax due being found. Section 61(1) of the 2003 Act delineates the situations in which avoidance/evasion of tax through acts of concealing and misleading or "in any other manner" (underlining1 mine) can be visited with penalty. The language of section 11AC(1)(a) of Central Excise Act, 1944 is in someways similar to that of section 61 of the 2003 Act, inasmuch as while first specifically detailing the occasions for levy of penalty, it also later provides a general ground for the levy of penalty, i.e., "contravention of any of the provision of this Act or Rules made thereunder" - Penalty for non-payment or short-payment of excise duty can be levied under section 11AC of the Central Excise Act, 1944. Section 11AC(1)(a) of the 1944 Act provides that penalty for shortlevy or non levy of duty in certain cases. It, inter alia, provides that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or other rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under section 11A shall also be liable to pay a penalty equal to the duty so determined. All sale transactions conducted by the assessee in the year relevant to levy of tax in the State of Rajasthan were indicated in its books of accounts and also duly invoiced. There was no attempt to defraud the revenue by any concealment or misinformation. No finding of reckless/mala fide classification sought with regard to the goods sold has been arrived at. The dispute between the assessee and the Revenue was bona fide and related merely to the issue of classification and consequent rate of tax under the 2003 Act leviable on the sale of goods by the assessee, i.e., "Priyagold TM Toffito Mango Cream Toffee". The dispute was therefore a bona fide one as to the interpretation/ classification of the products sold by the assessee for the purpose of levy of tax. Such a dispute did not supply any of the pre conditions for levy of penalty under section 61 of the 2003 Act. - Decided against Revenue.

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• 2015 (11) TMI 880
  Detention of goods alongwith documents under Section 14-B(6)(i) - Goods detained to verify the correctness of documents - Imposition of penalty - Held that:- On 9.7.1991, the check barrier officer had intercepted one consignment of mustard oil packed in several tins. After scrutinizing the documents accompanying the consignment, interception note was issued. The petitioner appeared before the officer and apprised the detaining officer of the entire situation and circumstances. Despite explanation furnished by the trader, penalty under Section 14-B(7) was imposed and then was recovered in cash. The basis for imposing penalty was that the goods were sold in the course of inter-State sales and there was an attempt to evade tax. - allegations are that the goods were being transferred as branch transfer but were actually moving in the course of inter State sale and thus there was evasion of tax. Check post officer was not competent to go into the nature of transaction which could only be decided in regular assessment proceedings. It was held that he over-stepped his jurisdiction to impose penalty by holding that it was evasion of payment of tax. - there is nothing illegal or impermissible for a party in so arranging its affairs that the liability to pay tax would not be attracted or that the brunt of taxation would be reduced to the minimum. In the cited authority, version of the appellant was accepted and transfers made by the company were taken to be genuine by the Sales Tax authorities. - State Counsel has not been able to demonstrate any flaw in the approach of the Tribunal which may warrant interference - no factual or legal infirmity in the impugned order of the Tribunal - Decided against Revenue.

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• Wealth tax

• 2015 (11) TMI 912
  Exemption u/s 5(1)(vi) - Whether on the facts and in the circumstances of the case, the CWT(A)has erred in allowing the exemption u/s 5(1)(vi) for the plot under construction as the same does not come under the purview of house, or part of a house - Held that:- CIT(A) categorically stated that the assessee was having a plot no. 6 in Mandakini Residential Scheme, Alaknanda, New Delhi, the said plot was measuring 260.10 sqm and was under construction during the year under consideration and that the construction had been done during the year 2010, therefore, the said house which was under construction was not liable to wealth tax - assessee was having a plot measuring 260.10 sqm allotted by DDA on 05.12.2002 situated at plot no. 6 Mandakini Residential Scheme, Alaknanda, New Delhi. The said plot was under construction for the years under consideration as construction had been done during the year 2010. Therefore, the assessee was entitled for exemption u/s 5(1)(vi) of the Wealth Tax Act as per the ratio laid down in the aforesaid referred to case of CIT Vs Neena Jain [2010 (2) TMI 635 - Punjab and Haryana High Court ]. We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A). - Decided in favour of assessee.

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