TMI Tax Updates - e-Newsletter
November 22, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. SECURITIES EXCHANGE BOARD OF INDIA (INFRASTRUCTURE INVESTMENT TRUSTS) REGULATIONS, 2014 – AN OVERVIEW – PART II

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Japan’s Official Development Loan Assistance to India for an Amount of YEN 15.620 Billion for the Guwahati Sewerage Project

2. RBI Reference Rate for US $

Circulars / Instructions / Orders

FEMA

1. 39 - dated 21-11-2014

External Commercial Borrowings (ECB) Policy – Parking of ECB proceeds

2. 40 - dated 21-11-2014

Release of Foreign Exchange for Haj/ Umrah pilgrimage

Highlights / Catch Notes

Income Tax

• Interest on Tax Refunds Excluded for Taxpayer-Caused Delays Under Income Tax Act Section 244A.

  Case-Laws - HC : Interest on the delayed refund u/s 244A(2) - Section 244A of the Act itself mandates that, if the delay in refund is attributable to the assessee, wholly or in part, it shall be excluded from the period for which, the interest is payable - HC
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• Assessing Officer Cannot Change Stock Valuation Method Without Proving It Incorrect or Inconsistent with Accounting Principles.

  Case-Laws - AT : Addition of valuation of closing stock – The method of accounting cannot be substituted by the AO merely because it is unsatisfactory. - AT
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• Assessing Officer Must Specify Assessee's Disclosure Failures to Justify Jurisdiction u/s 147 Proviso.

  Case-Laws - AT : Merely mentioning that the assessee has failed to disclose fully and truly all material facts is not sufficient to acquire jurisdiction within the ambit of proviso to section 147, but the Assessing Officer has to ascribe specifically, what is the failure on the part of the assessee. - AT
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• Finance Act 2003: No Impact on Employer Obligations for Timely PF and ESIC Contributions u/s 36(1)(va.

  Case-Laws - HC : Failure to deposit PF & ESIC contribution of employees – By deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees' contribution - HC
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• No TDS u/s 194LA for voluntary land surrender involving development rights; no monetary payment made.

  Case-Laws - AT : TDS liability u/s 194LA on the value development rights – surrender of land by owners was voluntary - provisions of Sec. 194LA of the Act applies only when the person making payment should make payment of a “sum of money” - AT
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• TDS Not Deducted on SIM Discounts: Revenue Loss Needed to Invoke Section 201(1) Recovery Provisions of Income Tax Act.

  Case-Laws - AT : Discount of recharge vouchers and prepaid SIM cards allowed to the franchisees – TDS not deducted u/s 194H – recovery provisions u/s 201(1) can be invoked only when loss to revenue is established, and that can only be established when it is demonstrated that the recipient of income has not paid due. - AT
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• Court Upholds 100% Depreciation for Vapour Absorption System; Cannot Be Reduced to 25% as Air Conditioner Component.

  Case-Laws - HC : When there is a specific provision in the Income Tax Rules allowing depreciation at 100% to Vapour Absorption System, the same cannot be denied merely stating that Vapour Absorption Heat Pump is a part of the Centralized Air Conditioner and liable for depreciation at 25% - HC
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• High Court Rules Property Lease Income Should Be Assessed as "Income from House Property," Not "Business Income.

  Case-Laws - HC : Where the owner of the property exploited the property by leasing out the same and realised income by way of rent, the same was to be assessed under the head "Income from house property" and not as "business income" - HC
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Case Laws:

• Income Tax

• 2014 (11) TMI 655
  Refusal to allow deduction of expenses – Business not commenced during the previous year relevant to the assessment year – Held that:- The assesee formally signed contract with the NDMC on 08.03.2006, which falls in the preceding year - On 30.3.2006, the assessee entered into manufacturing agreement with Uttam Sucrotech International Pvt. Ltd. for manufacture and installation of BQSs and also made advance payment - In the preceding year itself, the assessee arranged for credit facility and obtained overdraft limit as well as term loan - A security deposit of Rs. 1 crore was paid to NDMC under the contract - All these activities took place in the preceding year - there is a basic fallacy in the appreciation of the concept of setting up of business - the business of a building contractor is set up on his having all the necessary tools and equipments ready to take up the construction activity - the project of NDMC for construction of BQSs was not set up, but insofar as the assessee is concerned, it had certainly commenced its business with the execution of contract awarded by NDMC - The authorities below have tagged the setting up of business with the provision of space for advertisement by NDMC. This is certainly a post commencement business stage of the assessee. Such an event would mark the generation of actual income on commencement of business and cannot be construed as the setting up of business - the assessee’s business was set up when it prepared itself for undertaking the activity of building BQSs on receipt of contract from NDMC - not only the business of the assessee was set up but had also commenced in the instant year - As section 3 read with section 4 refers to the starting of previous year from the date of setting up of a new business, the business stood already set up in the preceding year and as such there can be no question of canvassing a view that the business would be set up in a subsequent year when BQSs would be ready for providing space to the assessee for advertisement - relying upon CIT vs. ESPN Software India Pvt. Ltd. 2008 (3) TMI 90 - DELHI HIGH COURT] – thus, the business was set up in the preceding year. Claim for deduction – Held that:- The AO also held such expenditure to be of revenue nature, but, still disallowed as, it was incurred before the commencement of the business and, hence, was in the nature of pre-operative expenses – as it has been decided that the business set up in the preceding year, all the revenue expenses incurred during the year become eligible for deduction – the order is set aside – Decided in favour of assessee.

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• 2014 (11) TMI 654
  Deletion made u/s 40(a)(ia) – JCB disallowed because of failure to deduct TDS at the time of payment /credit of the expenses – Held that:- No TDS was outstanding and payable at the time of the due date of filing the return u/s. 139(1) of the Act – Following the decision in Shri Piyush C. Mehta Versus The ACIT Mumbai [2012 (4) TMI 349 - ITAT MUMBAI] It has been held that the amendment to the provisions of section 40(a)(ia) of the Act is retrospective w.e.f. 01/04/2005 - CIT(A) was also of the same view while deleting the disallowance made by the AO – the order of the CIT(A) is upheld – Decided against revenue. Commission expenses disallowed – expenses debited through internally prepaid vouchers and supporting evidences not furnished – Held that:- CIT(A) rightly was of the view that the expenses cannot be said as excessive or unreasonable – it is comparable from the preceding years - AO made the disallowance without providing opportunity of hearing to the assessee and it was not the case of the AO that the commission payment made in the preceding assessment years were also disallowed – the order of the CIT(A) is upheld – Decided against revenue. Unexplained cash credits u/s 68 - creditworthiness of the creditors and genuineness of transactions not proved – Held that:- CIT(A) was rightly of the view that the assessee had filed the confirmation and affidavits of the creditors in which they have confirmed of having given the amount to the assessee and the credit claimed in the names of four creditors had already been squared up and no amount was outstanding - merely on this basis that the assessee did not produce the creditors before the AO, the creditors could not be treated as unexplained and undisclosed income of the assessee particularly when there was no corroborating evidence to support findings -CIT(A) rightly deleted the addition when the creditors disclosed their particulars and confirmed that they have given loan to the assessee in their duly sworned affidavits – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 653
  Validity of order u/s 263 – erroneous and prejudicial to the interest of revenue or not - Assessee contended that the revisional jurisdiction has been invoked merely on the basis of audit objection - Held that:- The AO during the course of assessment proceedings, examined the claim of assessee with respect to expenditure on advertisement - the contents of show cause notice and audit report show that the Commissioner of Income Tax solely on the basis of audit objection has invoked his revisional powers u/s.263 - From the order or the show cause notice it is not made out as to how the advertisement expenditure allowed as 'Revenue Expenditure' is erroneous - The Commissioner of Income Tax has gone beyond his jurisdiction in invoking the provisions of section 263 to super-impose his view, on one of the possible views taken by the Assessing Officer in allowing the expenditure claimed by the assessee - the AO has considered the expenditure claimed by the assessee and after seeking explanation, accepted the claim of the assessee – AO has taken fairly possible view for treating the advertisement expenditure as 'Revenue Expenditure' - the order of the AO cannot be termed as 'erroneous'. Rather, CIT without independent application of mind has replicated audit objections in the show cause notice issued u/s.263 - In SHRI JASWINDER SINGH Versus COMMISSIONER OF INCOME TAX-II [2012 (6) TMI 543 - ITAT CHANDIGARH] it has been held that exercise of revisional power on the basis of audit objection is not tenable in law – thus, the CIT without examining the records and proper application of mind has invoked the provisions of section 263 in disallowing the advertisement expenditure claimed by the assessee - There is nothing on record to suggest that the order of AO is not sustainable in law – the order of the CIT is set aside – Decided in favour of assessee.

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• 2014 (11) TMI 652
  Scope of Explanation 1 to Section 147 – scope of term “amounts to disclosure” – Change of opinion – Principle of consistency - Whether the CIT(A) erred in ignoring Explanation 1 to Section 147 wherein production before the AO of account books or other evidence from which material evidence could, with due diligence, have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso – Held that:- The AO has reopened the assessment u/s. 147 of the Act by issuing notice u/s. 148 on 27.3.2012, which is after expiry of four years from the end of the AY - the assessment had been reopened by the AO for the reason that the business expenditure claimed by assessee is not allowable as according to him income derived by assessee from interest is to be assessed as income from other sources and not as business income. So far as the other reason viz., discrepancy between the interest income shown by assessee and as appearing in the TDS certificate, as per the AO’s own observation there is no such discrepancy - it needs to be examined whether there is failure on the part of assessee to disclose fully and truly all material facts which could have enabled the Assessing Officer to reopen the assessment beyond four years - assessee in the return of income as well as statement of accounts has not only disclosed the sources of income earned by it but has also shown the expenditure claimed - there are no other additional information or fresh materials on record on the basis of which the AO has formed his belief that income has escaped assessment - Only on the basis of information and materials furnished by assessee himself which was considered at the time of original assessment, the AO has reopened the assessment by coming to a different opinion that interest earned by assessee has to be assessed under the head income from other sources and not as business income. This is only a change of opinion by the AO on re-appreciation of same set of facts and materials considered at the time of original assessment - reopening of assessment on a mere change of opinion would amount to review of earlier order passed by the AO which is not permissible under the Act - the AO cannot treat the income in a different manner contrary to the system of accounting followed by assessee consistently over the years - assessee has disclosed all material facts in the return of income filed by it as well as during the scrutiny assessment proceedings - there being no failure on the part of assessee to disclose fully and truly all material facts, reopening of assessment beyond the period of four years, is without jurisdiction and legally invalid –the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 651
  Disallowance u/s 40(a)(ia) – Held that:- The assessee is only an agent, who would arrange trucks and freight in directly paid by the consignees to the transporter - There is no sub contract while can attract the provisions of Section 194C of the Act - The building is on ‘to pay’ basis – in CIT vs. United Rice Land Ltd. [2008 (5) TMI 142 - PUNJAB AND HARYANA HIGH COURT] the same has been decided - the provisions of Section 194C and 40(a)(ia) are not attracted – the order of the CIT(A) is upheld – Decided against revenue. Addition u/s 69A - cash payments to M/s. Shekhawati Filling Station – Held that:- CIT(A) was rightly of the view that the AO has made the addition purely on the basis of ledger account of the appellant as appearing in the books of account of M/s. Shekhawati Filling station account of purchase of diesel / petrol - there is no such entries in the books of account of the appellant - It is also not a case of the AO that he has obtained copy of some of the bills of purchase of diesel/petrol by the appellant and he has made payments to such bill out of his undisclosed income and the same has not been reflected in the books of account - As per the books of account of the assessee, there is no violation of section 40A(3) of the Act, as payment were by different vehicles to the filling station - All the payments are fully verifiable and all the expenses are held as genuine – the order of the CIT(A) is upheld – Decided against revenue. Unexplained cash credits u/s 68 – Held that:- CIT(A) rightly recorded that there is difference on the dates of withdrawal from the bank account of the appellant and in the cash book of the appellant - The AO treated the entry of cash u/s 68 of the Act as the appellant could not give evidence for the source of such deposits - there is sufficient cash balance before all the dates on which the appellant shown cash deposits - the accountant of the appellant as inadvertently has shown the cash deposits before the date of withdrawal from the bank cannot be ruled out - there is also no evidence that the cash withdrawn from the bank has been expended for some other purposes – the order of the CIT(A) is upheld – Decided against revenue. Addition u/s 68 - Cash receipts on sale of trucks – Held that:- The party from whom the assessee has received Rs. 5 lakhs against sale of the Truck has confirmed the date of payment - The sale of truck is not in dispute - The AO has not brought any evidence on record to prove that the amount received by assessee was utilized same where else – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 650
  Interest on the delayed refund u/s 244A(2) - Held that:- The Act provides for refund of any amount received by the department, in excess of what was due from an assessee, in a particular AY - Section 244-A also provides for payment of interest, in case the refund is delayed - from the payments, that were due, its customers have deducted TDS, being Rs. 3,52,721/- in the financial years 1991-92 and 1992-93 – assessee was entitled for refund or adjustment of the same, only on production of the TDS certificate - The Rules framed under the Act mandate that the adjustment of TDS from the tax payable by an assessee can be made only on production of the certificate, issued by the person or agency, which effected the TDS - In the absence of the same, the department cannot be expected to refund or adjust the amount - The record does not disclose the nature of steps taken by the petitioner for obtaining the TDS certificates, either from the concerned agencies, or even from the department - the occasion to pay interest would have arisen, if only the delay was on the part of the department - Section 244A of the Act itself mandates that, if the delay in refund is attributable to the assessee, wholly or in part, it shall be excluded from the period for which, the interest is payable – it is not the case of the assessee that even after it has submitted the TDS certificates, or the indemnity bond, there was any delay on the part of the department in making the refund –the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (11) TMI 649
  Tax effect less than prescribed monetary limit of Rs. 10 lakhs – effect of Instruction No.3/2011, dated 9th February, 2011 – Purpose of Instruction - Held that:- Because the tax effect being negligible, that this Court is reluctant to examine the matter on merits and in details - That is to deter filing of frivolous Appeals - When the tax effect is negligible, the outlook should be to save expenses and valuable time of everybody concerned - If that is what is intended to be achieved, then this Circular achieves the same - Such Appeals are dismissed without any adjudication does not mean that the Court has approved the order, the reasoning or the conclusion therein - If any question of law, which is termed as substantial, does arise from the reasoning and the conclusion of the Tribunal, that can be examined by the Court in an appropriate case – the appeal is liable to dismissed relying on the Circular – Decided against revenue.

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• 2014 (11) TMI 648
  Various credits made – Held that:- Assessee has discharged his responsibility in proving Rs. 7,00,000 - assessee has received amount by way of cheques and the creditor Mr. V. Gopinath has confirmed that it was given out of his business income from M/s. Sify Broadband and Internet Connection Services - Assessee has demonstrated the identity, creditworthiness and genuineness of the transaction - What the AO and CIT(A) wanted is the source of the source which is not in the domain of assessee- Since identity of the creditor is established with PAN ADZPD2013Q, there is nothing to disbelieve this transaction – the credit is to be treated as explained credit and deleted. As per the confirmations given by assessee placed in paper book, the amounts have been received by way of cheque drawn on Syndicate Bank, Habsiguda Branch- It was explained that the source of funds are from the retirement benefits from her husband Mr. T.Venkata Sai Ramana Rao, retired Dy. Superintendent of Police, Intelligence Department, Hyderabad - assessee has discharged his duty of not only providing the bank account of the said creditor in Syndicate Bank but also his bank account in Axis Bank, Banjara Hills with reference to evidence of both receipt and payment of the amount on 09.03.2011 - not only the identity of the creditor but also genuineness of the transaction stands established – the order of the CIT(A) is modified and the credit is treated to be explained – Decided in favour of assessee. Cost of acquisition and improvement disallowed – Development of land resulted in STCG - Held that:- After seeing the documents and the amounts, there is evidence to the extent of Rs. 49,870 + Rs. 2725 being the registration charges and therefore, these amounts are to be allowed to assessee as cost of acquisition, apart from cost of purchase - AO is directed to consider these above two amounts also - there are already roads adjacent to the plots when assessee has purchased - All these plots are adjacent to each other and does not require any road internally - Since there is no evidence of any improvement other than the rough notings in a note book, the claim of assessee cannot be accepted - The entries in note book do not establish that expenditure was genuinely incurred - The cost of improvement claimed by assessee cannot be allowed while computing short term capital gain – Decided against assessee. Treatment of agricultural income as income from other sources – Held that:- Assessee contended that there was earning the incomes regularly in earlier years also and on record, placed the statements of income of earlier years admitting the agricultural incomes - assessee has disclosed income of Rs. 1,95,500 in A.Y. 2006-07 and Rs. 1,98,000 in A.Y. 2005-06 and Rs. 1,92,000 in A.Y. 2004-05 - Since assessee is disclosing consistently agricultural income in earlier years and also placed on record the lease deeds which are not controverted, the order of the CIT(A) is modified and the AO is directed to accept the income from agriculture as declared by the assessee – Decided partly in favour of assessee.

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• 2014 (11) TMI 647
  Addition of valuation of closing stock – Held that:- The AO observed that as per the tax audit report filed by the assessee under clause 12(a), the basis for valuation of closing stock was "market price" - for the purposes of valuation of closing stock, the assessee is at liberty to choose a method of valuation of closing stock but the assessee is required to follow the chosen method regularly – revenue is bound by the assessee’s choice of the method regularly employed unless by this method the true income or profits cannot be arrived at - The assessee’s regular method should not be rejected as improper merely because it gives him the benefit in certain years because as per the AO the other method would have been more preferable - The method of accounting cannot be substituted by the AO merely because it is unsatisfactory. What is material for the purposes of section 145 of the Income Tax Act, 1961 is, the method should be such that the real income, profits and gains can be properly deduced - No material has been brought on record by the Revenue to show that the assessee has not adopted the average market rate of last month of the year for the purposes of valuation of closing stock of cotton, cotton seeds and oil consistently and regularly for the purposes of its account - the lower authorities were not justified in valuing the closing stock of the assessee on the basis of the sale bills at the fag-end of the year in place of the method adopted by the assessee of valuing its closing stock on the basis of average market price of the last month of the year – the order of the CIT(A) is set aside – Decided in favour of asseessee. Addition of 20% of gunny bags – Held that:- AO observed that the assessee has paid Rs. 24,13,728/- for ginning and pressing charges to Vishal Industries – CIT(A) rightly held that the AO has made an estimated disallowance of 25% of the expenses on the gunny bags and that the assessee contended that the no show cause notice was given by the AO before making the disallowance and hence restored the matter back to the file of the AO, directing him to verify the working regarding consumption of gunny bags furnished by the assessee in the written submissions and modify the assessment order accordingly – the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (11) TMI 646
  Disallowance of loss – Losses incurred – evidences for suppression of profit present or not - Held that:- AO has noted that assessee was asked to justify the claim of loss, which assessee had failed to do - assessee did not produce the books of accounts for examination by AO - even before CIT(A) no material has been placed on record by the assessee to substantiate its claim of loss - It is a fact that in the absence of details the entire gross profit has been disallowed by AO is unjustified – thus, the matter is remitted back to the AO for verification – Decided in favour of assessee. Addition u/s 68 – Assessee furnished full details of loans – Held that:- CIT(A) rightly found that even the audit report of the assessee does not given any details regarding the amount borrowed the Column regarding amount of loan/deposit taken/accepted the words "Our Account" are mentioned but there is no mention about the amount accepted apparent that this is only a paper report, otherwise, the figure should have been mentioned - auditor has not at all verified this fact in the circumstances merely on the basis of tax audit report it cannot be accepted that deposits are genuine – the order of the CIT(A) is upheld – Decided against assessee. Claim of revenue expenses disallowed – Held that:- Assessee has not produced any material before A.O. or CIT(A) in support of his claim – assessee submitted that it had already made the disallowance - Since the submission has not been examined by AO, this factual aspect needs re-examination – thus, the matter is remitted back to the AO for ascertaining the factual position – Decided in favour of assessee. Claim of claims, rebate & reversal of claim disallowed – Claim of writing off disallowed – Held that:- AO while disallowing the claim has noted that assessee has failed to submit any details or justification about expenditure - CIT(A) has also noted that no details were submitted and whether amounts were ever offered as income or not – since the submission related to the precedence was not made before lower authorities by the assessee, the issue needs re-examination – thus, the matter is remitted back to the AO – Decided in favour of assessee. Disallowance out of interest expenses – Held that:- Assessee contended that the investments were made out of interest free funds and not borrowed funds - CIT(A) has given finding that assessee does not have any surplus funds - In view of the contrary facts, the factual position needs to be re-examined – the matter is remitted back to the AO for verification – Decided in favour of assessee. Disallowance on hire charges – Held that:- the AO held the transaction entered by the Assessee with Blue Bell Finance Co. Ltd. to be non genuine – the matter is remitted back to the AO for consideration – Decided in favour of assessee.

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• 2014 (11) TMI 645
  Disallowance out of interest – Held that:- AO was of the view that memorandum and article of association of the assessee did not authorize the assessee to become a partner in a firm, so this capital could have been used by the assessee in a routine business and if the assessee had not been introduced the capital into the partnership for running M/s. Lizard Lounge then the interest liability of the assessee would have been lower - no new investment was made by the assessee in the partnership business to run restaurant during the year under consideration because the partnership was entered into on 22/02/2007 i.e the period relevant to the A.Y. 2007-08 and the investment was at Rs. 1,29.53 Lac as on 31/03/2007 which came down to Rs. 82.95 Lac during the year under consideration, so, there was a reduction in the capital during the year under consideration - the assessee was having sufficient interest free funds available which were at Rs. 4,341 Lac as on 31/03/2007 and the AO had not established the nexus between the borrowed funds and the amount used for non-business purpose - there was no prohibition for the assessee to enter into any partnership business, therefore, disallowance on account of notional interest was arbitrary and the CIT(A) rightly deleted the same – Decided against revenue. Disallowance out of Rebate & Discount account – Facts not properly appreciated or not – Held that:- CIT(A) rightly noted that the assessee had allowed discount as per the credit note - the trading discount /rebate was being allowed by the assessee in the earlier years to various purchasers and this consistent practice being followed - it had not been shown that the discount was non-genuine, excessive or unreasonable - the discount was to the customers of the assessee for the commercial expediency to increase the sales - the similar type of trading discount was allowed in the earlier years and there is no deviation in the facts of the years under consideration vis-à-vis facts involved in the earlier years - the commission and trade discount was given by the assessee to the customers for the commercial expediency to increase the sales and nothing is brought on record to substantiate that the payment was non-genuine, excessive or unreasonable – the order of the CIT(A) is upheld – Decided against revenue. Disallowance out of sales promotion expenses – Held that:- CIT(A) rightly was of the view that the sales promotion expenses had decreased to Rs. 16.68 Lac as compared to the earlier year's expenses of Rs. 19.18 Lac, in spite of increase in turnover - turnover of the assessee increased in comparison to the earlier year, but there was decrease in the sales promotion expenses – the order of the CIT(A) is upheld – Decided against revenue. Deletion of freight and forwarding expenses – Held that:- The adhoc addition made by the AO was without any basis - He did not point out any specific instance where the expenses incurred on account of transportation and forwarding were not related to the business of the assessee - the assessee furnished the complete details relating to the expenses incurred on account of freight and forwarding - the freight and forwarding expenses had been incurred in the transportation of the goods sold by the assessee on F.O.R. basis and those expenses had not been proved to be non-genuine, bogus or unreasonable – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 644
  Transaction with AE towards receipt/payment of freight - Determination of ALP Application of CUP method Held that:- In ACIT Vs DHL Danzas Lemuir Pvt Ltd [2014 (2) TMI 991 - ITAT MUMBAI] it has been held that the assessee paid certain sum to its AEs abroad for doing the work similar to which it did for which it received freight revenue from its AEs - in both the situations, the total receipts are taken on one hand, from which all the expenses incurred in connection with the transportation of cargo in both the countries are excluded - even in a situation in which the comparables were the formulas on the basis of which exact quantification for price of services was done, the same could be accepted as a price for the purposes of application of CUP method of ascertaining arm s length price - The approach so adopted, even if somewhat serendipitous, was quite remarkable, pragmatic and in due deference to the realities of businesses - under any method of determining the arm s length price, that price paid for the controlled transactions is the same as it would have been, under similar circumstances and considering all the relevant factors, for an uncontrolled transaction, the price so paid can be said to be arm s length price. Rule 10BA as also the corresponding enabling rule 10B(1)(f) are inserted by the Income Tax (Sixth Amendment) Rules 2012 and are specifically stated to be effective from 1st April 2012, i.e. assessment year 2012-13 onwards - when a legislation confers a benefit on the taxpayer by relaxing the rigour of pre-amendment law, and when such a benefit appears to have been the objective pursued by the legislature, it would a purposive interpretation giving it a retrospective effect but when a tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective - the operation of rule 10BA, which confers the benefit of an additional method of ascertaining arm s length price and, inter alia, relaxes the rigour of CUP method, can only be retrospective in effect - Rule 10BA is to be held as effective from 1st April 2002, i.e. the time when transfer pricing provisions were introduced in India - the assessee s contention to the effect that the arm s length price of services rendered to, or received from, the associated enterprises, which was computed on the basis of the same 50:50 model as is the industry norm and as has been employed by the assessee for computing similar services to the independent enterprises, was at arm s length the order is set aside Decided in favour of assessee.

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• 2014 (11) TMI 643
  Transfer pricing adjustment - Segregation of trading functions pertaining to the CPD and SPD divisions – segregation vs aggregation of the CPD and SPD divisions - Held that:- In Panasonic India Pvt. Ltd. Versus ITO [2010 (9) TMI 682 - ITAT, DELHI] the same matter had been decided wherein it has been held that the test for finding whether segregation is required is provided in the Rules themselves and as is borne out from the facts of the case, Rule 10B(2(b) clearly is in favour of the proposition that segregation should not be done - In addition, the comparables used are also the same for both the Divisions - It also lends weight to returning the finding that segregation was not called for. The segment-wise details of sales and purchase at GP level were also made available - no discrepancy is found in the figures as reported by the assessee - The segregation was totally artificial and uncalled for and the authorities below were not justified in segregating them - The trading functions having the same FAR and having closely linked transactions were to be taken as a whole and not separately, thereby creating artificial loss in one segment and profit in the other - the trading functions having the same FAR and having closely linked transactions were to be taken as a whole and not separately, therefore, creation of artificial loss in one segment and creation of artificial profit in the other segment is not permissible - both segments have to be taken as a whole and additions confirmed by the CIT(A) on the basis of segregation deserve to be set aside – Decided in favour of assessee. Reliance on Special Valuation Cell of the custom's department – Held that:- In Panasonic India Pvt. Ltd. Versus ITO [2010 (9) TMI 682 - ITAT, DELHI] the same matter had been decided wherein it has been held that where specific rules of law exist in the Statute on a particular subject, then they would hold the field - Chapter X and Rules made thereunder are a self- contained code and answers to all questions must be found in the written law contained in the Act and Statute - the Customs valuation is for different purposes and Chapter X of the Income Tax Act is for different purposes and different criteria are being used – Decided against assessee. Treatment of reimbursement of advertisement expenses – Non-operating revenue receipt or not – Held that:- In Panasonic India Pvt. Ltd. Versus ITO [2010 (9) TMI 682 - ITAT, DELHI] the same matter had been decided wherein it has been held that Rule 10B(2)(c) states that “the contractual terms (whether or not such terms are formal or in writing) of the transaction which lay down explicitly or implicitly how the responsibility, risks and benefits are to be divided between the respective parties to the transactions ” - the assessee has demonstrated by substantiating the fact that it was in reasonable expectation of reimbursement of expenditure by the past conduct of its mother companies i.e. AEs of receiving at least 2/3rd of its expenditure in reimbursement - the receipt of advertisement expenditure would form a part of operating profit either by way of adding to income or otherwise expenditure has to be reduced from total advertisement expenditure to the extent of reimbursement; either way we look at it, the result will be the same - it is having the same effect on operating profits up to this extent, the TPO and the CIT(A) were not justified in excluding the advertisement expenditure while calculating the PLI of the assessee. Huge advertisement cost incurred by the assessee – Held that:- If the TPO and the CIT(A) were of the opinion that these two divisions viz. CPD and SPD were separate divisions and required a different criteria for determining the ALP, then they could not have compared both the divisions results, as has been done by them, with the same set of comparable; there is obviously a contradiction between the two - it is accepted that the two divisions have separate characteristics, then obviously, different comparables should have been used - If in the situation where two divisions are to be treated separately, the department ought not to be used the same set of comparables which were used by the TPO and the CIT(A) for both the divisions, then the PLI of comparables for the CPD Division would have to be adjusted as per provisions of Rule 10B(1)(e)(iii) of the Income Tax Rules, 1962 - as the PLI of the assessee is higher of the two (here it is 8.43% which is more than 3.58%), international trading transactions entered into by the assessee are held to be ALP as per transfer pricing regulations in India – Decided in favour of assessee. Validity of unallocated expenses and income to the ISD division of the assessee – Held that:- In Panasonic India Pvt. Ltd. Versus ITO [2010 (9) TMI 682 - ITAT, DELHI] the same matter had been decided wherein it has been held that there is substance in the submissions of the assessee that out of a total business of Rs. 361 cores, the ISD service and commission income is only Rs. 12,28,831/-. It is unreasonable to allocate Rs. 20,59,669/- as expenditure on such a meager gross receipt - three years average is being taken on the ISD Division on the basic facts of the case following the Proviso to Rule 10B(a) even if it is taken to the basis of ISD Division, it will not make any difference - the addition cannot be made in the overall facts and circumstances on the issue of allocation of unallocated expenses and income to the ISD Division following the proviso to Rule 10B(a) of Income Tax Rules 1962 – Decided in favour of assessee. Computation of the Arm’s Length Price – Held that:- In Panasonic India Pvt. Ltd. Versus ITO [2010 (9) TMI 682 - ITAT, DELHI] the same matter had been decided wherein it has been held that the CIT(A) is right in holding that the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be, the data relating to the relevant year in which the international transaction has been entered into - only the current year data for the relevant financial year pertaining to respective assessment year deserve to be used for computation of ALP an international transaction with the uncontrolled transaction of the assessee – Decided against revenue. Levy of penalty u/s 271(1)(c) – Held that:- The AO has imposed penalty on the issue of addition to the extent of Rs. 1,15,03,254 on account of ALP and on the addition to the extent of Rs. 8,15,01,718 - the additions made by the TPO and confirmed by the CIT(A) by segregating the CPD and SPD divisions are not sustainable - once addition has been deleted, the act of imposition of penalty is rudimentary because there cannot be any tax sought to be evaded on which penalty could be computed and levied, therefore, no penalty on the assessee is imposable in both the assessment years on account of additions made by the AO to the extent of Rs. 1,15,03,265/- in AY 2003-04 and to the extent of Rs. 8,15,01,718/- in AY 2004-05 – Decided in favour of assessee.

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• 2014 (11) TMI 642
  Reopening of assessment u/s 147 – Full and true disclosure made by assessee - Once the information was already there in the record, then receiving of information on the same point cannot be held to be new information or any tangible material coming into record – Held that:- The assessee had filed copy of sale agreement to the AO – the sale agreement clearly provides details of sale consideration of the flat which was at Rs. 1.17 crores and apart from that there was a working done by the stamp valuation authorities at the last page whereby they have valued the flat for the purpose of stamp duty at Rs. 1,44,55,400 - All these information were there before the Assessing Officer - The AO has duly taken note of the sale agreement in the assessment order - assessee has fully and truly disclosed all the material facts necessary for its assessment - for acquiring the jurisdiction u/s 147, the AO has taken note of some information received from the Income Tax Officer that the market value of flat is higher than the sale consideration and, thereafter, he has ascribed failure on the part of the assessee - the information about the market value of the property was at Rs. 1,44,55,000, was already there in the record during the course of the assessment proceedings - Once the information was already there in the record, then receiving of information on the same point cannot be held to be new information or any tangible material coming into record. Merely mentioning that the assessee has failed to disclose fully and truly all material facts is not sufficient to acquire jurisdiction within the ambit of proviso to section 147, but the Assessing Officer has to ascribe specifically, what is the failure on the part of the assessee. Once the entire facts has been disclosed during the course of assessment proceedings, then it cannot be held that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - The assessee is only required to disclose the entire facts and material and then it is upon the Assessing Officer to draw the legal inference for the purpose of assessment - in case where the assessment has been completed u/s 143(3), then no action can be taken for re–opening the case u/s 147, after the expiry of four years from the end of the relevant assessment year, unless twin conditions are fulfilled - there is no failure on the part of the assessee - Thus, under first proviso to section 147, the re–opening of the assessment u/s 147 is bad in law and the entire proceedings initiated vide notice issued u/s 148 is void–ab–initio being without jurisdiction – thus, the reopening of assessment is set aside – Decided against revenue.

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• 2014 (11) TMI 641
  Deduction made for PF & ESIC contribution of employees – Failure to deposit in relevant fund within prescribed time – Held that:- The AO had disallowed the sum u/s 2(24)(x) r.w.s.e 36(1)(va) - following the decision in COMMISSIONER OF INCOME TAX II Versus GUJARAT STATE ROAD TRANSPORT CORPORATION [2014 (1) TMI 502 - GUJARAT HIGH COURT] wherein it has been held that there is no amendment in Section 36(1)(va) as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act - By deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees' contribution – in favour of revenue.

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• 2014 (11) TMI 640
  Disallowance of interest made u/s 14A r.w. Rule 8(2)(iii) - investments in the form of shares in various companies and in a partnership firm – Held that:- The assessee had no exempt income during both the years involved – in CIT Versus M/s. Delite Enterprises [2009 (2) TMI 498 - BOMBAY HIGH COURT] it has been held that the AO was not correct in applying section 14A of the IT Act in disallowing the expenditure on account of interest - It was incumbent on the AO to establish a nexus between the expenditure incurred and the income which was exempt under the Act - unless and until, there is receipt of exempted income for the concerned assessment years, Section 14A of the Act cannot be invoked - the revenue has not dispelled the contention of the assessee before AO that it was not in receipt of any exempt income - the AO has erred in invoking Section 14A of the Act – Decided in favour of assessee.

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• 2014 (11) TMI 639
  Additions towards unexplained cash credit - Additions on the basis of loose sheets found during Search and seizure u/s 132 – income belong to individual or firm - Held that:- The Tribunal held in that case that in income from coal business is to be considered in the hands of M/s. Balaji Trading Agency only - However, AO took the credits in the documents as that of individual - This stand of the AO cannot be approved - Since the seized documents are stated to be that of the firm, M/s. Balaji Trading Agency, the additions cannot be made in individual hands - from the same set of documents seized during the search and seizure operations, it was considered by the AO that an amount of Rs. 40,00,000 is to be protectively assessed in the hands of the assessee also - The AO has made both the additions as income from coal business and addition of unexplained cash credits on the basis of loose sheets containing rough notings - The CIT(A) while deleting the addition of Rs. 40 lakhs has upheld the addition of Rs. 1,04,73,034, which is not justified – the order of the CIT(A) is set aside and the additions for the AY 2008-09 and 2009-10, allowing the main grounds of the assessee in these appeals – Decided in favour of assessee.

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• 2014 (11) TMI 638
  TDS liability u/s 194LA - voluntary surrender of land - value of development rights – There was no compulsory acquisition and was no payment of any monetary consideration – Accourding to AO The transfer of land to BBMP though is stated to be free of cost but in reality the owner gets DRCs. The question of determining consideration for transfer can be resolved by valuing the DRCs and for this purpose the best way to determine the value is to rely on the provisions of Sec.50-C of the Act and value the land surrendered as per the guideline values fixed by subregistration for stamp duty valuation and registration. Held that:- Assessee rightly contended that the application of Sec.194LA is purely a legal issue which can be decided on the basis of facts on record - the process of surrender of land for public purpose by owners of land and issue of CDRs has no element of “Compulsory Acquisition” which is necessary to attract application of the provisions of Sec. 194LA of the Act - The meaning of the term “compulsory acquisition” is that land should be taken under statutory powers without the agreement of the owner - the surrender of land by owners was voluntary and in exercise of option under a notification laying down conditions for grant of TDR in exercise of powers u/s.14-B of KTCP. BBMP wherever owners did not respond to offer of CDRs, BBMP has resorted to compulsory acquisition proceedings in accordance with the provisions of the Land Acquisition Act, 1894 - the provisions for deducting tax at source and paying it over to the Government on behalf of the recipient of the payment is in the nature of vicarious liability - But where neither there is quantification of the sum payable in terms of money nor actual payment in monetary terms, it would be unfair to burden a person with the obligation of deducting tax at source and exposing him the consequences of such default - the liability to pay tax is that of a third person and not that of BBMP and the spirit behind the provisions of Sec.190 of the Act has been totally lost sight of by the Revenue - the provisions of Sec.194LA of the Act were not applicable because there was no compensation paid towards compulsory acquisition under any law in force and therefore the order u/s.201(1) & 201(1A) of the Act is set aside. The provisions of Sec. 194LA of the Act would apply only when there is monetary payment - provisions of Sec. 194LA of the Act applies only when the person making payment should make payment of a “sum of money” which clearly indicates that the provisions of Sec.194LA of the Act are applicable only when payment is made in terms of money - The expression “any sum” used in Sec.194LA of the Act is a clear indication that those provisions are applicable only when payment is of consideration in terms of money - the general word in Sec.194LA of the Act is “payment of such sum” and the mode of payment qualified is cash, issue of cheque or draft or by any other mode - The expression any other mode has therefore to be confined only to payment of “any sum” in a mode other than cash, cheque or draft and not to a case where DRCs are issued - Even on this ground the order u/s.201(1) & 201(1A) of the Act is to be set aside – thus, the provisions of Sec.194LA of the Act are not applicable and the orders u/s.201(1) & 201(1A) of the Act as upheld by the CIT(A) are held to be bad in law – Decided in favour of assessee.

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• 2014 (11) TMI 637
  Discount of recharge vouchers and prepaid SIM cards allowed to the franchisees – TDS not deducted u/s 194H – order u/s 201/201(1A) - Held that:- A short deduction of tax at source, by itself does not result in a legally sustainable demand u/s 201(1) and u/s 201(1A) – in Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] it has been held that the taxes cannot be recovered once again from the assessee in a situation in which the recipient of income has paid due taxes on income embedded in the payments from which tax withholding requirements were not fully or partly, complied with - the onus is on the revenue to demonstrate that the taxes have not been recovered from the person who had the primarily liability to pay tax, and it is only when the primary liability is not discharged that vicarious recovery liability can be invoked - recovery provisions u/s 201(1) can be invoked only when loss to revenue is established, and that can only be established when it is demonstrated that the recipient of income has not paid due. In the absence of the statutory powers to requisition any information from the recipient of income, the assessee is indeed not always able to obtain the same - The provisions to make good the short fall in collection of taxes may thus end up being invoked even when there is no shortfall in fact - once assessee furnishes the requisite basic information, the AO can very well ascertain the related facts about payment of taxes on income of the recipient directly from the recipients of income - the proviso is clarificatory in nature though it was inserted by the Finance Act, 2007 w.e.f. 01.06.2007 - The nature of the amendment and the purpose which it seeks to achieve make it abundantly clear that it is a clarificatory amendment and would be applicable even in respect of assessment years prior to insertion of the amendment – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• 2014 (11) TMI 636
  Imposition of penalty u/s 271(1)(c) – Search operation conducted in premises - no explanation offered by assessee - Held that:- The Tribunal rightly held that no explanation was offered and is not disputed - since there is no explanation offered by the assessee, the provisions of Explanation-1 to Section 271(1) of the Act will not enure to the case of the appellant – in Shri S. Sathyanarayanan Versus The Assistant Commissioner of Income Tax [2014 (9) TMI 169 - MADRAS HIGH COURT] the same issue has been decided - the assessee had not offered any explanation either during the assessment proceedings or during the penalty proceedings regarding the unexplained cash deposits - The assessee had also not disclosed the said income in the return filed in response to the notice issued u/s 153C - there was no proper explanation given by the assessee with regard to the undisclosed income and the assessee had not given any details as to how he would fall within Explanation 1 to Section 271(1)(c) of the Income Tax Act - without any material, the assessee had merely stated that the source of income was from the business run by his father and the assessee will be no avail - the assessee and his father are Directors of the entity, namely, S&S Foundations P. Ltd. - the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (11) TMI 635
  Eligibility for 100% depreciation on vapour absorption heat machine – Validity of rectification order u/s 154 – Held that:- The Tribunal rightly was of the view that the AO lacked jurisdiction to exercise the power u/s 154 of the Act - Vapour Absorption System is included in Energy Saving Devices specified in Para-III, 3(iii) D(b) of Appendix-I to the Income Tax Rules, 1962 and is eligible for 100% depreciation - When there is a specific provision in the Income Tax Rules allowing depreciation at 100% to Vapour Absorption System and the same was granted by the Assessing Officer at the first instance, the subsequent proceedings for rectification under Section 154 of the Act by merely stating that Vapour Absorption Heat Pump is a part of the Centralized Air Conditioner and liable for depreciation at 25%, without giving any reasons, runs counter to Para-III, 3(iii) D(b) of Appendix-I to the Income Tax Rules, 1962 – the order of the Tribunal is upheld and as such no substantial question of law arises – Decided against revenue.

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• 2014 (11) TMI 634
  Eligibility for deduction on contribution to the Bata Workers’ Sickness Benefit Society – Effect of provisions of section 40A(9) – Allowability of deduction u/s 37(1) – Held that:- The Tribunal was rightly of the view that the assessee debited a sum as payment to Bata Workers Sickness Benefit Society (BWSBS) – in Bata India Ltd. Versus Deputy Commissioner Of Income-Tax [2002 (9) TMI 254 - ITAT CALCUTTA-A] the same issue has been decided - the contributions made by the assessee in performing the terms of the agreement was also compliance with the statutory requirements - The agreement does come within the meaning of settlement giving it binding force, levy of penalty for breach and recovery of non-payment in terms thereof as statutorily enforceable under the Industrial Disputes Act, 1947 - the contributions were made complying with the statutory requirement for providing medical benefits to the workers of the assessee under Standing Orders and Rules duly certified under the provisions of the Industrial Employment (Standing Orders) Act, 1946 is undisputed - by reason of the facilities provided by the assessee, the provisions of the Employees’ State Insurance Act does not apply to its Batanagar factory premises – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (11) TMI 633
  Income derived from commercial properties – Business income or income from house property - The assessee company is deriving rental income from letting out a commercial complex apart from income from other sources – Held that:- The assessee had given its premises for rent and did not engage in any business activity at all – the AO computed the income under the head 'income from house property' - in East India Housing and Land Development Trust Ltd Vs. CIT [1960 (11) TMI 7 - SUPREME Court] the similar matter has been decided - If the income from a source falls within a specific head set out in S.6 the fact that it may indirectly be covered by another head will not make the income taxable under the latter head - The income derived by the company from shops and stalls is income received from property and falls under the specific head described in S.9 - even if the assessee's business was in real estate, the income on letting out of the property was to be assessed as "income from house property - the rental income would not have been realised, but for the letting out of the machinery, plant or furniture along with such building and therefore, the rental received for the building had to be assessed under the head "Income from other sources" - where the owner of the property exploited the property by leasing out the same and realised income by way of rent, the same was to be assessed under the head "Income from house property" and not as "business income" – the order of the Tribunal is upheld – decided against assessee.

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• 2014 (11) TMI 632
  Assessment u/s 153A - unexplained investment in purchase of land - principles of natural justice - Held that:- The Tribunal was rightly of the view that details were never given by the assessee either before the AO or before the CIT(A) - the assessee has not been very clear on his stand on the investment, on the contrary, it has been recorded by the AO that the assessee in his letter dated 19.11.2004 has accepted the investment as unexplained investment - the assessee has assailed the addition confirmed by the CIT(A) with regard to the investment made in SIDCO land - no reason whatsoever is given as to what prevented the assessee to furnish the details before lower authorities - the assessee had submitted that he would admit the whole amount of 35.00 Lakhs for purchasing land from SIDCO as un-explained investment as the loan taken for the above investment is un-explainable - the assessee had not produced any additional evidence to show that the assessee had borrowed any funds from M/s. New Ashok Finance, Ellampillai, or Ellampillai Ashok Corporation for utilizing the same for investment in SIDCO – the order of the Tribunal is upheld – Decided against assessee. Investments made in land at Ariyanoor – Held that:- The Tribunal was rightly of the view that the subsequent sale in favour of the assessee vide registered document dated 17.3.2004 was for Rs. 2.00 lakhs only and it is not a case of distress sale by C. Balan in favour of the assessee - there was no decline in the real estate prices during the relevant period and on the contrary the value of another piece of land purchased by Devabala Group showed appreciation in price - even as per the translated copy of the agreement, he did not show that it is in respect of developed residential plots - The assessee tried to explain the difference in value between February, 2001 agreement and the present one as a distress sale, but that was found to be not correct - mere statement of the Vanaja saying that she did not pay money or receive money will be of no avail, when she herself admits that she signed on the back of the agreement having received the money on the cancellation of the sale agreement - Her statement throws more light that is was not a clear transaction - The entire transaction was shrouded in mystery and the AO has correctly made addition – as such no substantial question of law arises for consideration – Decided against assessee.

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• Customs

• 2014 (11) TMI 662
  Revocation of License - Forfeiture of security deposit - whether the appellant and the Customs broker M/s J.M. Baxi & Co. have colluded for evasion of Customs duty and if so whether the CB is liable for penal action under Regulation 20 of CBLR 2013 or otherwise - Held that:- appellant, who is a CB, cannot be faulted with or cannot be charged with negligence or carelessness and failure to discharge the obligation cast upon him when he filed all the documents that indicate the imported vessel being ‘Seismographic Research Vessel’. Filing of such documents with the authorities has been admitted by the adjudicating authority in Para 24 of the impugned order wherein the adjudicating authority records ‘I find on record that the said CB has filed Bill of Entry No.931901, dt.25.01.2010 with the documents for the clearance of the subject vessel with related documents.’ When on such categorical acceptance of the fact that the appellant herein has discharged his duty liability as a Customs Broker by filing all the related documents, declaring the vessel as ‘Seismographic Research Vessel’, the change in classification after investigation, in our view, cannot be attributed to malafide or mens-rea of the Customs Broker. Declaration filed by the appellant for the clearance of the vessel as being supported by the documents in his custody and were filed with the Customs authorities, the action of CB cannot be faulted with, more so that it is an act that attracts stringent action of revelation of licence as a CB. We find that the impugned order of the adjudicating authority revoking the CB licence of the appellant is absolutely unwarranted and the said order is unsustainable from any angle. impugned order is set aside - Decided in favour of appellant.

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• 2014 (11) TMI 661
  Delay in refund claim - Refund of pre deposit directed by this Tribunal - Order not complied with - Held that:- Revenue was present in the Court when the order was dictated. It was, therefore, his duty to intimate the same to the concerned authorities of the decision of this Tribunal. In any case, the said order dated 09/09/2014 was given as "Dasti". The learned AR also confirms that he had collected a copy of the order and had communicated the same to the respondent Commissioner of Customs, Nhava Sheva and therefore, the present letter dated 21/10/2014 is only a lame excuse for not implementing the directions of this Tribunal contained in the orders mentioned above. In any case, the order dated 05/03/2013 directing the refund was already available with the department for implementation. Commissioner of Customs (Import), Nhava Sheva is directed to show cause as to why contempt proceedings should not be initiated against him in accordance with the law for non-implementation of this Tribunal's orders - Decided in favour of assessee.

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• 2014 (11) TMI 660
  Fraudulent claims of duty drawbacks - Mis declaration of goods - Imposition of penalty u/s 114 - Held that:- Following decision in M/s Contessa Commercial Co. (P) Limited Versus Commissioner of Customs (Preventive) Customs House, Central Revenue Building, the Mall, Amritsar [2014 (11) TMI 298 - PUNJAB AND HARYANA HIGH COURT] - where it was held that charges levelled in the show cause notice stood established against the appellants - Since facts of the case was similar - Therefore, decided against assessee.

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• Service Tax

• 2014 (11) TMI 673
  Waiver of service tax, interest and penalty - ineligible cenvat credit - advertisement service and broadcasting services - Held that:- Appellant has availed input service credit on broadcasting services for advertising their products in the media through their advertising agencies. The advertising agency raised two sets of invoices, one for the services rendered by the agency for development of design and content and another is billed for the reimbursements of the broadcasting charges. I find that the copy of the invoice dt. 15.10.2009 raised by Zee News Ltd. is in the name of Jyothy Laboratories Ltd. and the agency name is mentioned as Lintas Media Group, Mumbai. Following decision of IOCL [2014 (11) TMI 659 - CESTAT MUMBAI] - appellant has prima facie made out a case for waiver of predeposit. Accordingly, the predeposit of amount of tax, interest and penalty is waived and its recovery is stayed till disposal of the appeal - Stay granted.

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• 2014 (11) TMI 664
  Delay in sanctioning of refund - Numerous reasons for non sanction of refund - Held that:- sanctioning authority is only gaining time to sanction the refund claim - Commissioner of the Service Tax, Pune in other proceedings against the applicant on the same issue has already sanctioned the refund claim to the applicants as per the decision of this Tribunal vide order dated 12.03.2013 and the Commissioner of the Service Tax, Mumbai is not following the same procedure in this case despite the appeal having been dismissed by this Tribunal, filed by the revenue. Therefore, it is observed by this Tribunal that there is no consistency in the view taken by the departmental officers. Moreover, in this case, there is clear direction to the concerned officer to dispose of the refund/rebate claim within one month. We also find that after the receipt of the order of this Tribunal on 16.09.2014, no steps were taken to implement the order of this Tribunal till 28.10.2014 and no explanation is given for that. In these circumstances, the conduct of the concerned official is not appreciated but in the interest of justice, the time of 15 days is granted to the learned Commissioner of Service Tax-III, Mumbai to dispose of the refund claim - Decided in favour of assessee.

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• 2014 (11) TMI 659
  CENVAT Credit - input services - Advertisement and broadcasting agency service - assessee born the incidence of service tax or not - Held that:- Broadcasting of advertisement has been done on behalf of the appellant and the bills have also been raised on the appellant and the appellant has borne the incidence of Service Tax on the broadcasting service. Further, while passing the order dated 30.9.2013, the adjudicating authority has caused verification of the transactions undertaken by the appellant in respect of broadcasting services and advertising agency services. After verifying that the appellant had availed both the services and has also borne the incidence of Service Tax, he came to the conclusion that the appellant is rightly eligible for the benefit of the CENVAT Credit of the Service Tax paid on broadcasting service. The same ratio shall apply for the previous period also. Therefore, we do not find any merit in the impugned order. Accordingly, we set aside the same - Decided in favour of assessee.

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• 2014 (11) TMI 658
  Waiver of pre deposit - Classification of service - Business Support service or Commercial training and coaching service - retention of amount out of the examination fee paid by the students - Held that:- In the case of commercial training or coaching centre where the student undergoes the training, it is considered that appellants have provided the service to M/s. Quint Red Wood India Consulting Pvt. Ltd., therefore, the service rendered comes under the category of business support service. In our view, the issue is debatable and contentious and therefore the amount deposited is sufficient for the purpose of hearing the appeal. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

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• 2014 (11) TMI 657
  CENVAT Credit - Imposition of interest on unutilized credit - Rule 14 - whether a mere taken of CENVAT credit facilities without actually using it, would carry interest as well as penalty - Held that:- Following decision of Strategic Engineering (P) Ltd. [2014 (11) TMI 89 - MADRAS HIGH COURT] - mere taking itself would not compel the assessee to pay interest as well as penalty - the only aspect that requires verification is whether the appellant had credit of more than the amount taken on capital goods during the relevant period or not. Since this requires factual verification and the details are not available, we consider that this issue also has to be remanded for consideration. - Decided in favour of assessee.

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• Central Excise

• 2014 (11) TMI 672
  Denial of refund claim - CENVAT Credit - appellant had taken the credit of BCD wrongly at the time of receipt of the machine and reversed it when it was pointed out - Unjust enrichment - Held that:- Goods were cleared to their own unit once again the credit was reversed. The question of unjust enrichment does not arise as submitted by the learned counsel. Because the appellant s action amounted passing of burden to one self. Therefore it cannot be said that the duty liability has been passed on to someone else. Therefore the denial of refund on the ground of unjust enrichment cannot be sustained. There is also no dispute that the goods were cleared to their own unit. Surprisingly in the findings of the Commissioner (A), another ground has been taken that the appellants have cleared the goods under the scheme of area-based exemption which is also totally wrong. Appellant’s unit which cleared the capital goods was not availing in area based exemption and in fact it was the receiver who was availing the area based exemption and therefore could not have taken the credit of duty paid on the capital goods. This is another ground submitted by the learned consultant in support of the refund claim. Even though the capital goods were transferred to their own unit even that unit could not take the credit - appellant is eligible for the refund claim - Decided in favour of assessee.

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• 2014 (11) TMI 671
  CENVAT Credit - Membership Fee of Club or Association Services - Held that:- They have clearly given the details of services where credit availed for which they are eligible. As seen from the appeal memorandum, the amount of credit involved in Club or Membership Fee and Annual fee paid is Rs. 30,190/- and all other amounts relates to programme fees/subscription paid for training and development programs, subscription paid for Recruitment Firm, subscription paid for availing legal services in respect of business requirements. I find from the SCN that appellants have filed regular monthly returns and also submitted details of cenvat availed and utilized along with ARE-1 returns. When the SCN refers the appellant availed credit on various subscription fees paid, Corporate Risk Solutions, FOREX Membership subscription etc. and the appellant contested the same before Lower Authorities, but the demand has been confirmed on irregular availment of credit under Club or Association Service. The appellate authority has not given any finding on the eligibility or otherwise of the input services relating to the above services. - Matter remanded back - Decided in favour of assessee.

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• 2014 (11) TMI 670
  Waiver of pre deposit - Denial of CENVAT Credit - Capital goods - Whether the Hon’ble Tribunal was correct in directing the appellant to pre-deposit Rs. 40 lakhs for hearing the appeal and to stay the operation of the impugned order - Held that:- Tribunal has not foreclosed the issues raised by the appellant on the prima facie view of the earlier order passed by the Tribunal dated 8-5-2013, which is said to have been passed following the earlier decision of this Court in C.M.A. No. 3101 of 2005, dated 13-12-2012, which is distinguishable on facts. In any event, the Tribunal has exercised its discretion and directed the appellant to deposit a sum of Rs. 40 lakhs - taking note of the earlier order passed by this Court and the case of the appellant herein, this Court is of the view that the pre-deposit amount shall be reduced to Rs. 25 lakhs. Upon such deposit, the balance adjudged dues shall remain waived and recovery thereof stayed till the pendency of the appeal before the Tribunal - Partial stay granted.

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• 2014 (11) TMI 669
  Cenvat credit on Low Sulphur Heavy Stock – Use of fuel in generation of electricity further used - Relied upon judgment of Supreme Court [2009 (8) TMI 14 - SUPREME COURT] referred to Larger Bench - Held that:- In the case of State of Rajasthan v. M/s. R.S. Sharma and Co., reported in [1988 (8) TMI 412 - SUPREME COURT OF INDIA], a question arose, whether question pending decision of Larger Bench of Supreme Court meanwhile particular case to be decided on the basis of present position of law or not. In the case before the Hon’ble Supreme Court the question whether on the ground of absence of reasons Award under Arbitration Act was bad per se, was pending consideration by Constitution Bench of the Hon’ble Supreme Court and therefore, it was averred that courts should wait adjudication on the aforesaid point by the Constitution Bench. The Hon’ble Supreme Court did not accept the said contention and opined that pendency of the aforesaid question would not postpone all the decisions by the Court. The Hon’ble Supreme Court observed that one of the cardinal principles of administration of justice is to ensure quick disposal of the disputes in accordance with law, justice and equity. The Hon’ble Supreme Court further observed that the justice between the parties in a particular case should not be in a suspended animation. - No substantial question of law arises - Decided against assessee.

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• 2014 (11) TMI 668
  Denial of refund claim - Whether the respondent is entitled to get the amounts mentioned in the refund orders passed by the Assistant Commissioner - Held that:- On the side of the respondent, a letter addressed to the Department has been submitted wherein, it has been clearly stated that as per the orders passed by the Commissioner (Appeals), the entire refunded amount has been paid to the Department. Since the entire refunded amount has been paid to the Department by the respondent, the reliefs sought for in the present Civil Miscellaneous Appeals have become infructuous. Since the reliefs claimed in the present Civil Miscellaneous Appeals have become infructuous, the question involved in the present Civil Miscellaneous Appeals need not be decided - Appeals disposed of.

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• 2014 (11) TMI 667
  Application for extension of time - Failure of making pre deposit - Failure to furnish bank gurantee - Held that:- Application for extension of time to furnish the Bank Guarantee was made on 1st August, 2013. During the pendency of that application, the appeal came up before the Tribunal and was dismissed by an order dated 19th August, 2013. After the appeal was dismissed by the Tribunal, the application for extension of time to furnish the Bank Guarantee was dismissed by an order dated 29th August, 2013 on the ground that there was no longer any requirement to furnish any Bank Guarantee because the appeal itself had been dismissed. Aggrieved by the order dated 29th August, 2013 dismissing the application for extension of time to furnish the Bank Guarantee as also aggrieved by the order dated 19th August, 2013 passed by the Tribunal dismissing the appeal, two separate appeals have been preferred. In the event, a sum of Rs. 1 crore is deposited by the appellant with the Commissioner within a month from date of receipt of order, the Appeal shall be heard by the Tribunal on merit - Decided partly in favour of assessee.

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• 2014 (11) TMI 666
  Exemption under Notification No. 34/2003-C.E., dated 30-4-2003 - claiming simplified procedure for exempted units in respect of clearance of textile goods for export through merchant exporters - revenue observed that goods were not exported - Violation of principle of natural justice - Opportunity of personal hearing not granted - Held that:- Revisionary Authority ought to have granted a personal hearing to the petitioner and more particularly when letters for such request were written by partner of the petitioner-firm seeking indulgence on the ground that he being cancer patient, the Revisionary Authority ought not to have proceeded to pass an ex parte order. We are therefore of the opinion that it is in the interest of justice that the impugned orders which are passed by the Revisionary Authority without granting an opportunity to the petitioner to represent his case, cannot be sustained. - Decided in favour of assessee.

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• 2014 (11) TMI 665
  Denial of CENVAT Credit - tribunal disposed of the appeal while deciding the stay application - Held that:- Appeal could not have been disposed of by such a short order. The matter concerns interpretation of some rule. If that interpretation accords with the view taken by this Court and sought to be cited by the Tribunal, then, that is something which has to be gone into and decided in depth. By merely referring to that judgment of this Court, the issue cannot be said to be covered. This is one more case where we have an occasion to comment and adversely on unsatisfactory disposal of the appeal by the Customs Excise and Service Tax Appellate Tribunal. The Judicial Tribunal has been set up in order to decide not only the appeals against the Order-in-Original but even against the first Appellate Authority. Such a Tribunal is expected to apply its mind Judiciously, independently and impartially. Once the appeal has been disposed of in the manner noted above and without the consent of both sides, then, we are proceed to admit this appeal. Since we have found that the Appellant-Revenue has suffered serious prejudice on account of such dismissal of the appeal by a Judicial Tribunal then interest of justice would be served if we set aside the impugned order to the extent it disposes of the appeal finally. - waiver of pre-deposit will continue - Appeal restored before tribunal - Decided in favor of revenue.

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• 2014 (11) TMI 663
  CENVAT Credit - input services - Held that:- Insofar as the Medial Group Insurance is concerned, this is governed by two decisions of the Karnataka High Court in Commr. of C. Ex., Bangalore Vs Stanzen Toyotetsu India (P) Ltd [2011 (4) TMI 201 - KARNATAKA HIGH COURT] and in Commissioner of C. Ex., Bangalore Vs Millipore India Pvt. Ltd. [2011 (4) TMI 1122 - KARNATAKA HIGH COURT]. The service has been held to fulfill the description of the expression "input service". As regards Consultancy Services, these were comprised of the payment of invoices of the charges involved in relation to the filing of the tax return in the US. The Commissioner held that the service was governed by the definition of "input service". The second related to Legal Consultancy Services which have also been held to fulfill the definition of the expression "input service". Both are admissible. The next category is Outdoor Catering Services. The Commissioner furnished a cogent justification for allowing the Cenvat Credit save and except for a partial disallowance in respect of the consumption of alcoholic beverages. In this regard, reference may be made to the decision of the Gujarat High Court in Commr. of C. Ex., Ahmedabad Vs Ferromatik Milacron India Ltd. [2010 (4) TMI 649 - GUJARAT HIGH COURT]. The next category was Subscription for International Taxation. This was an amount paid to a service provider of Rs. 38,759/- for providing information and knowledge pertaining to International Taxation for tax compliance. This fulfills the description of the expression "input service" in the Rules. As regards 'Advertising and Sponsorship Services', the Tribunal has restored the proceedings to the adjudicating authority for being dealt with in accordance with the relevant judgements on the subject. no substantial question of law would arise - Decided against Revenue.

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• 2014 (11) TMI 656
  Denial of refund claim - Submission of photocopy of relevant documents - refund claim was with respect to Cenvat Credit in respect of input used in the manufacture of final product and in regard to which, a show cause notice for recovery of wrongly availed Cenvat Credit had been issued by the Commissioner - Held that:- From the communication dated 26/5/2008, it can safely be communicated that it is a communication by the Deputy Commissioner, Central Excise, Division-III, Silvassa to the petitioner rejecting the refund applications on the ground that only photocopies of the documents mentioned in the said communication have been produced along with the application and also on the ground that with respect to the very same Cenvat Credit, show cause notice for recovery of wrongful availment of the Cenvat Credit amounting to Rs. 5,88,24,949/- has been issued by the Commissioner, Central Excise & Customs, Vapi dated 17/7/2007 mainly on the ground that the product viz. “123 Brand Mouth Freshners” does not amount to manufacture. In the said communication it is specifically mentioned that “Under the circumstances, you are not eligible for the refund of the Cenvat Credit under notification No.5/2006 CE (NT) dtd.14.03.2006 issued under Rule 5 of Cenvat Credit Rules, 2004. Therefore, the application along with photo copies of relevant documents is returned herewith.” Under the circumstances, in view of the aforesaid communication dated 26/5/2008, no further order is required to be passed, as it can be said that the refund applications of the petitioner are as such decided. Under the circumstances, when it can be said that by communication dated 26/5/2008, the refund applications of the petitioner for Cenvat Credit have been rejected, there is no question of again directing the respondents to decide the refund applications. - Decided against assessee.

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