TMI Tax Updates - e-Newsletter
November 26, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Any facility like air-conditioner, television provided to the patient or his attendant in a hospital is luxury - liable for luxury tax - HC

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• Products obtained in the course of ship breaking activity are usable as such, not in the nature of scrap - TCS u/s 206C is not required - HC

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Articles

1. Refund under GST

   By: Subhash Modi

2. REVISION UNDER INCOME TAX - SOME ISSUES

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Government formulates strategy to address price rise of raw jute Government decides to take de-hoarding measures to tackle rising raw jute prices Matter of ban on export of raw jute by Bangladesh to be taken up Declining trend in jute cultivation to be checked

2. Issue Date of the Sovereign Gold Bonds, 2015-16 shifted from November 26, 2015 to November 30, 2015

Notifications

Central Excise

1. 45/2015 - dated 24-11-2015 - CE

Seeks to further amend notification No. 22/2003-CE dated 31-03-2003 so as to enable EOUs to become eligible for duty exemption on raw materials/parts consumed in manufacture of certain specified ships/vessels and cleared to DTA, even if such ships/vessels are exempt from basic customs duty and central excise/CV duty.

2. 44/2015 - dated 24-11-2015 - CE

Seeks to further amend notification No. 12/2012-CE dated 17.3.2012 so as to provide exemption from excise duty on all raw material and parts for use in manufacture of certain specified ships/vessels subject to actual user condition and also removing the requirement of manufacturing of ships/vessels in a custom bonded warehouse under the provisions of Section 65 of the Customs Act, 1962 for availing duty benefits.

Customs

3. 55/2015 - dated 24-11-2015 - Cus

Seeks to further amend notification No. 52/2003-Customs dated 31-03-2003 so as to enable EOUs to become eligible for duty exemption on raw materials/parts consumed in manufacture of certain specified ships/vessels and cleared to DTA, even if such ships/vessels are exempt from basic customs duty and central excise/CV duty

4. 54/2015 - dated 24-11-2015 - Cus

Seeks to further amend notification No. 12/2012-Customs dated 17.3.2012 so as to provide exemption from custom duties on all raw material and parts for use in manufacture of certain specified ships/vessels subject to actual user condition and also removing the requirement of manufacturing of ships/vessels in a custom bonded warehouse under the provisions of Section 65 of the Customs Act, 1962 for availing duty benefits

Highlights / Catch Notes

Income Tax

• Taxpayer's Share Sale Income Classified as Business Income, Not Capital Gains, by Assessing Officer.

  Case-Laws - HC : Loss in respect of renunciation of rights to subscribe to partly convertible debentures (hereafter ‘PCD’) - the income received by the Assessee from sale of shares of JSL and the renunciation of rights to subscribe to the PCDs of JISCO was rightly held by the AO as business income and not income under the head capital gains. - HC
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• ITAT Confirms Goodwill Valuation Method; Rejects Claims of Deceptive Slump Sale Agreement and Intangible Asset Separation.

  Case-Laws - HC : Question whether the valuation of goodwill is appropriate - calculation of the intangible and deprecation thereon - ITAT has rejected the view that the slump sale agreement was a colourable device. Once having held so, the agreement between the parties must be accepted in its totality. The Agreement itself does not provide for splitting up of the intangibles into separate components. - HC
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• High Court Upholds Assessee's Project Completion Method, Overturns ITAT's Rejection of Books and Methodology Decision.

  Case-Laws - HC : Rejection of books of accounts - The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee. - project completion method was certainly one of the recognized methods and has been consistently followed by it - No addition - HC
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• TCS u/s 206C not needed for tax collection on used items, non-excisable goods, and ship-breaking products.

  Case-Laws - HC : TCS u/s 206C - Not collection of tax at source on Old and used plates, Non-excisable (exempted) like furniture, wood, etc., Trading of scrap (melting) and High seas sale - the products obtained by the assessee in the course of ship breaking activity are usable as such, and, therefore, do not fall within the definition of scrap - TCS u/s 206C is not required - HC
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• No TDS on Free Inter-Airline Tickets for Employees: Revenue Fails to Prove Perquisites by Assessee.

  Case-Laws - HC : Short deduction of TDS - TDS on perquisite / Salary - Revenue has been unable to explain how the free inter-airline tickets provided to the employees of the Assessee by some other airlines can be a perquisite provided by the Assessee - No addition - HC
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• Interest Payments to Related Individuals u/s 40A(2)(b): Assessing Officer Fails to Establish Fair Market Rate.

  Case-Laws - AT : Addition u/s. 40A(2)(b) - the interest paid by the assessee @ 15% to four related persons was excessive or not - AO has not given any finding in respect of fair market rate of interest paid by the assessee - AT
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• Interest Conversion to Loan Not Recognized as Payment u/s 43B of Income Tax Act.

  Case-Laws - AT : Disallowance of payment u/s 43B - Explanation 3C only prohibits an assessee for recognizing the actual payment of interest by converting its interest into loan or borrowings. - if an assessee has interest liability, and he converts that interest liability in further loan, then that will not amount to payment of u/s 43B as per Explanation-3C - AT
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• Offshore Service Income Exempt from Taxation Under DTAA, Despite Section 9(1)(vii) Income Tax Act Chargeability.

  Case-Laws - AT : Income from offshore services - taxability - the income from offshore services, though chargeable u/s 9(1)(vii) but exempt under the DTAA, cannot be charged to tax in the light of section 90(2) - AT
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Customs

• Board's Circular on Export Bill Conversion Exceeds Rules; Section 149 Allows Amendments Anytime, Even Post-Export.

  Case-Laws - AT : Conversion of Bill of Exports from DFIA to Drawback - The circular issued by the Board goes beyond the Rules as section 149 of the Customs Act clearly permits amendment of shipping bills without any such time limit even after export of goods. - AT
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• SVB Order Confirms Transaction Value Stands: Price Unaffected by Buyer-Seller Relationship.

  Case-Laws - AT : Valuation - determination of transaction value - related person - even though buyer and seller are related it is established by the SVB order that the price has not influenced the relationship. Therefore, the transaction value cannot be rejected - AT
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Service Tax

• Debate on Service Tax Payment Timing for Associate Enterprises: Accrual vs. Receipt Basis u/s 67(4) & Rule 6(1.

  Case-Laws - AT : Relevant date for payment of service tax where services are provided to Associate Enterprises - accrual basis or receipt basis - Scope of ection 67(4) - If Revenue's view is taken as correct, the provision of law which states that Service Tax payment is linked to the receipt of payment of service, would render Rule 6(1) meaningless - AT
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• Refund Claim for Unutilized Cenvat Credit Upheld: Commissioner (Appeals) Method Deemed Just and Legal u/r 5.

  Case-Laws - AT : Determination of refund claim of unutilized cenvat credit - Rule 5 of Cenvat Credit Rules, 2004 - calculation as per the formula taken by Commissioner(Appeals) is just, proper and legal which does not require any interference - AT
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• Service Provider Exemption: No Clubbing with Son's Firm Without Inquiry or Evidence u/s [Insert Section Number.

  Case-Laws - AT : Small service provider exemption upto 10 lakhs - clubbing of clearance - another proprietorship firm run by the son of the assessee - clubbing cannot be made without making inquiry and in the absence of evidence - AT
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• CENVAT Credit: Leasing Costs Not Borne by Company Excluded from Output Service Costs Under Credit Rules.

  Case-Laws - AT : CENVAT Credit - One of the principles followed for allowing the benefit of cenvat credit is that it should form the cost of manufacture of input, output and final product or it should form cost of output service. When the cost of leasing is not borne by the company, it cannot be said that it forms pat of the output service. - AT
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• Court Rules Intellectual Property Transfer Not Temporary; Stay Granted on Service Tax Implications.

  Case-Laws - AT : IPR service - Transfer of rights - Since we have found a prima facie case on the ground that the transfer in this case cannot be considered as a temporary one, stay granted - AT
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• Service Tax Demand Confirmed for Deputed Employees' Role in Management Consultancy Services Related to NSE Systems.

  Case-Laws - AT : The persons deputed for compliance review and strengthening of computer, customers work relating to NSE, front office systems and processes etc. As the services which are raised by the appellant indicate that their employees on deputation were infact doing Management Consultancy Services - Demand of service tax confirmed - AT
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Central Excise

• Court Rules Unequal Penalties for Delayed Duty Payments Violate Article 14's Equality Mandate; Upholds High Court Decision.

  Case-Laws - SC : The High Court is correct in saying that an assessee who pays the delayed amount of duty after 100 days is to be on the same footing as an assessee who pays the duty only after one day’s delay and that therefore such rule treats unequals as equals and would, therefore, violate Article 14 of the Constitution of India - SC
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• Supreme Court Confirms Rule 8 Application for Excise Duty on Goods Used Internally by 100% Export Oriented Units.

  Case-Laws - SC : 100% EOU - Valuation - it is clear that in the absence of actual sales in the wholesale market, when goods are captively consumed and not sold, Rule 8 of the Central Excise Rules would have to be followed to determine what would be the amount equal to the duty of excise leviable on like goods - SC
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• Printed PVC Sheets Not a New Product: Tribunal Overruled, Commissioner's Decision Upheld Under Chapter 39, Heading 39.20.

  Case-Laws - SC : Classification - printed PVC sheets - no new product emerges after printing and consequently, therefore, that cannot be said to be any manufacture - On this ground alone, we set aside the Tribunal's judgment and restore that of the Commissioner, making it clear that the classification of the product remains under Chapter 39 Heading No. 39.20 - SC
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• CENVAT Credit Validity Maintained Despite Penalties; Tribunal Upholds Decision on Revenue Neutrality, No Legal Error Found.

  Case-Laws - HC : Availment of CENVAT Credit - merely because the penalty has been notionally imposed on all the assessees, does not mean that the Tribunal's earlier conclusion, and by applicability of the principle of revenue neutrality, is perverse or vitiated by any error of law apparent on the face of record - HC
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• Show Cause Notice Required for SSI Exemption, Dummy Units, and Clearance Valuation Issues: Reassessment on Merits.

  Case-Laws - HC : SSI Exemption - Valuation - clubbing of clearances - inclusion of value of clearances - Dummy units - Non Speaking order - The authority concerned is directed to issue show cause notice to allthe parties, afford them an opportunity of hearing and pass appropriate orders afresh, on merits and in accordance with law - Tri
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VAT

• Court Upholds Luxury Tax on Hospital Amenities Like Air-Conditioning and TVs, Declares Them as Luxuries in Private Hospitals.

  Case-Laws - HC : Challenge to the luxury tax is levied on the hospitals - any facility like the air-conditioner and television provided to the patient or his attendant in a private hospital should definitely be construed as a luxury and liable for luxury tax. - HC
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Case Laws:

• Income Tax

• 2015 (11) TMI 1219
  Loss in respect of renunciation of rights to subscribe to partly convertible debentures (hereafter ‘PCD’) - according to the Revenue, the transaction was entered into solely for the purpose of contriving a loss - whether the transaction of renunciation of rights for subscribing to PCDs of JISCO was a colourable device to contrive an artificial loss? - Held that:- In the present case, the facts clearly indicative the transaction to be a part of a scheme, the sole purpose of which is to evade tax payable on the gains made on sale of certain shares of JSL. Several companies within the group have adopted a similar stratagem to avoid tax on the gains made by them. In our view, this stratagem cannot be considered as legitimate and the ITAT erred in not holding so - AO had rightly found the transaction of sale of rights as a transaction for purchasing taxable losses for the purposes of evading tax. It has been argued that the Assessee had in fact relinquished its rights to subscribe to PCDs and the transaction had been implemented by JSL subscribing to the PCDs and in the circumstances, it could not be disputed that the transaction was genuine. It was contended that such transaction were permissible in law and, therefore, the tax effect of such transactions would necessarily follow. It was further contended on behalf of the Assessee that it is permissible for an Assessee to part with its asset with a view to book a loss. In our view, it cannot be disputed that in a case where an Assessee transfers its income producing asset, there could be no objection by the Revenue on the ground that the same had resulted in reducing the tax liability of an Assessee. However, this would not hold good if it is found that the Assessee alongwith its inter-related parties that implemented transactions for no commercial purpose but to create a tax loss while at the same time ensuring that the benefits of the assets remain within the group. This would be an abuse of the corporate form and such transactions, even though implemented, cannot be considered to be other than a colourable device for avoidance of tax. In case the Assessee had actually paid the cum rights price of Rs. 625/- for purchase of the shares, the reduction in value of the shares on an ex-right basis would be duly reflected in the value of the closing stock. The Assessee not having paid the price of Rs. 625/- cannot claim a loss on account of a drop in its price. Surely, a trader cannot claim that he has lost more than the cost incurred. If the Assessee felt it was necessary to reduce the value of its shares of JISCO held by it on account of alienation of the rights entitlement, an appropriate proportionate amount could be reduced from the cost of closing stock. The CIT(A) has examined the issue in some detail and had concluded that if the Assessee did desire to record a diminution in the value of its holding on account of rights issued, it could do so by proportionally reducing the value of its shareholding in the same proportion as the drop in price of quoted shares. In other words, it could reduce the cost of shares of JISCO in the same proportion as the diminution in the value of the price of its shares on account of the shares being traded on an ex rights basis, that is, the cost of shares of JISCO could be reduced by applying a factor of 425/625 – ex-right price divided by cum-right price. - Decided against assessee. Sale consideration received by transfer of shares and sale of right entitlement of Partly Convertible Debentures (PCD) - income from capital gains OR income from business - whether the Assessee intended to retain the shares in question as investments for the previous year 1991-92 relevant to the AY 1992-93 or was the resolution dated 4th April, 1991 only a self serving document to enable the Assessee to claim the profits from sale of shares as Capital Gains - Held that:- The Assessee appears to have claimed a change in the nature of his holdings depending on the tax incidence in the year in question; in AY 1988-89 the Assessee reflected to shares of JISCO purchased in that year at below cost – treating them to be stock-in-trade and in AY 1992-93 sought to treat them as investments to avoid tax on the gains. None of the Assessee’s actions in the previous year 1991-92 indicated any change in the Assessee’s intention regarding its holding in shares and debentures. The ITAT observed that there were hardly any transactions in the past and on that basis concluded that the Assessee was in substance an investment company. However, the ITAT failed to appreciate that the Assessee had consciously held itself out as a company engaged in sale and purchase of shares; it was also assessed on the income earned from business and also claimed deduction on account of business expenses incurred by the Assessee. The shares in question were, concededly, held as stock-in-trade. All that happened in the year in question is that the Assessee sold substantial shares and renounced rights to subscribe to PCDs contrary to its stated intention of holding the same on a long term basis. In view of the above, the income received by the Assessee from sale of shares of JSL and the renunciation of rights to subscribe to the PCDs of JISCO was rightly held by the AO as business income and not income under the head capital gains. As discussed later, the Assessee could not have claimed any business income on account of renunciation of rights to subscribe to the PCDs. - Decided against the Assessee.

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• 2015 (11) TMI 1218
  Valuation of Goodwill - Matter remitted to AO - question whether the valuation of goodwill is appropriate - calculation of the intangible and deprecation thereon - Held that:- The issue whether depreciation is allowable on goodwill is no longer res integra. In Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT), the Supreme Court had answered the question “Whether goodwill is an asset within the meaning of section 32 of the Income-tax Act, 1961, and whether depreciation on 'goodwill' is allowable under the said section” in favour of the Assessee. From an accounting perspective, it is well established that ‘goodwill’ is an intangible asset, which is required to be accounted for when a purchaser acquires a business as a going concern by paying more than the fair market value of the net tangible assets, that is, assets less liabilities. The difference in the purchase consideration and the net value of assets and liabilities is attributable to the commercial benefit that is acquired by the purchaser. Such goodwill is also commonly understood as the value of the whole undertaking less the sum total of its parts. Thus we are inclined to accept the contention advanced on behalf of the Assessee that the consideration paid by the Assessee in excess of its value of tangible assets was rightly classified as goodwill In the facts of the present case, the ITAT has rejected the view that the slump sale agreement was a colourable device. Once having held so, the agreement between the parties must be accepted in its totality. The Agreement itself does not provide for splitting up of the intangibles into separate components. Indisputably, the transaction in question is a slump sale which does not contemplate separate values to be ascribed to various assets (tangible and intangible) that constitute the business undertaking, which is sold and purchased. The Agreement itself indicates that slump sale included sale of goodwill and the balance sheet drawn up on 22nd September, 2006 specifically recorded goodwill at Rs. 40,58,75,529.40/-. As indicated hereinbefore Goodwill includes a host of intangible assets, which a person acquires, on acquiring a business as a going concern and valuing the same at the excess consideration paid over and above the value of net tangible assets is an acceptable accounting practice. Thus, a further exercise to value the goodwill is not warranted. The question framed is answered in the negative, that is, in favour of the Assessee and against the Revenue

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• 2015 (11) TMI 1217
  Rejection of books of accounts - AO held that AS-7 is applicable to the Assessee confirmed by ITAT - ITAT setting aside the order of the CIT (A) deleting the addition of the sum received by the Assessee on account of advance from bookings and restoring the case to the file of the AO for a fresh decision - Held that:- The settled legal position as far as Section 145 of the Act is concerned is that it is not open to an AO to reject the accounts of an Assessee unless he comes to a determination that notified accounting standards have not been regularly followed by the Assessee. As pointed out by the CIT (A) in the order dated 2nd July, 2010, the AS of the ICAI did not have any statutory recognition under the Act although it was binding under the Companies Act, 1956. The method of accounting followed by the Assessee in the present case i.e. project completion method was certainly one of the recognized methods and has been consistently followed by it. In the present case, there was therefore no good reason for the ITAT to have reversed the finding of the CIT (A). The only reason given in the impugned order of the ITAT is that ‘risks and rewards' of ownership were transferred to the buyers who had paid the booking advance amounts and in some cases these rights were transferred to third parties. However, this does not in any manner affect the treatment of the said amounts in the books of the Assessee. As noted hereinbefore, the expenses of construction were not debited to the P & L account of the Assessee. It was shown as cost of construction or block of buildings. It is only as and when a conveyance deed was executed or possession delivered that the receipt was shown as income. The explanation added by way of Notes to the Accounts was not taken note of by the ITAT when it came to the conclusion that the percentage completion method should apply to the Assessee. The other aspect that appears to have escaped the attention of the ITAT is that the Assessee offered to tax in the subsequent FY the amounts received and therefore there was no actual loss to the revenue. - Decided in favour of assessee. As far as AY 2006-07 is concerned, it is apparent that the ITAT in the impugned order lost sight of the fact that the advances received by the Assessee were in respect of a project that never took off. A part of the advance amount was returned in the following FY since the transaction itself fell through. In the circumstances the question of treating the amounts as income in the hands of the Assessee did not arise. No purpose was going to be served in remanding the matter to the AO for a fresh determination - Decided in favour of assessee.

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• 2015 (11) TMI 1216
  TCS u/s 206C - Not collection of tax at source on Old and used plates, Non-excisable (exempted) like furniture, wood, etc., Trading of scrap (melting) and High seas sale - ITAT held that such products may be commercially known as “scrap” they are not “waste and scrap”, as such items are usable as such, and, therefore, do not fall within the definition of scrap as envisaged in the Explanation to section 206C(1) - Held that:- The Tribunal, in the impugned order, has recorded that the items/products in question obtained from the activity of ship breaking are usable as such and, therefore, do not fall within the definition of scrap. However, since the assessee had not collected tax at source on items other than items obtained out of the manufacturing activity in the course of ship breaking, the Tribunal has remitted the matter to the Assessing Officer for the purpose granting relief to the assessee under the provisions of section 206C (1) of the Act with regard to only sale of scrap arising out of manufacturing activity in the course of ship breaking after providing due opportunity of hearing to the assessee. Thus, the Tribunal after recording a finding of fact to the effect that the products obtained by the assessee in the course of ship breaking activity are usable as such, and, therefore, do not fall within the definition of scrap has remitted the matter to the Assessing Officer to grant relief accordingly. Essentially, therefore, the impugned order of the Tribunal is based upon a finding of fact which does not give rise to any question of law. - Decided against revenue.

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• 2015 (11) TMI 1215
  Sale consideration received by transfer of shares and sale of rights entitlement of partly convertible of partly convertible Debentures (PCDs) - ITAT held as income from capital gains and not income from business - Loss on sale of entitlement to acquire partly convertible debentures - ITAT held assessee is entitled to set off the alleged loss from the capital gains/income earned by the assessee - Held that:- The Assessee had held the shares of JISCO and JSL as stock-in-trade in its final accounts as on 31st March, 1991 and had valued the same at cost or market price whichever was lower. According to the Assessee, its board of directors decided to retain the said shares on long term basis and consequently passed a resolution on 4th April, 1991 that the shares held by it be treated as investment/capital. The AO held that the funds received from sale of shares had been transferred to related companies within the group. The AO further held that the transaction of renunciation of rights were a sham transactions and a device to purchase notional losses. At the outset, the learned counsel for the parties submitted that the material facts and issues in the present appeal were similar to the issues involved in Commissioner of Income Tax Delhi-I v. M/s Abhinandan Investment Ltd. - Decided in favour of the Revenue and against the Assessee.

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• 2015 (11) TMI 1214
  Addition on account of difference in contract receipts shown by the Assessee and accounted for by its customer Uniproducts India Ltd. ('UIL') - ITAT deleted the addition - Held that:- With the ITAT having returned a definite finding about the Assessee following the percentage completion method and with the Revenue not contending that differential amount was not offered to tax in subsequent FY, the Court is not persuaded to hold that the impugned order of the ITAT suffers any perversity or gives rise to any substantial question of law. - Decided against revenue Addition on account of the purchase made from M/s. Amit Steel on the ground that the said party is not traceable - ITAT deleted the addition - Held that:- ITAT has accepted the explanation offered by the Assessee that the purchase was in fact made from M/s. Amit Steel but was wrongly shown as having been made from M/s. Dharm Steel. This was perhaps on account of the fact that both proprietary concerns had the same proprietor. It appears that the Assessee also was able to produce the delivery challan for purchases made from M/s. Amit Steel and this was accepted by the ITAT. This finding of the ITAT having purely turned on facts, the Court is not persuaded to frame any question.- Decided against revenue Disallowance of service tax under Section 43B - ITAT deleted the addition - Held that:- ITAT has noted that the service tax payable was not in fact shown as a deduction in the P&L account. Although a statement was made before the AO that the service tax was paid late, the fact remains that for the AY in question the Assessee had not claimed it as a deduction in the P&L Account. Consequently, the question of complying with Section 43B for the AY in question did not arise.- Decided against revenue

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• 2015 (11) TMI 1213
  Income from sale of flats - ITAT assessed it as business profits and not as long term capital gains - Held that:- Merely, because the Assessee sold two plots that fell to her share pursuant to collaboration agreement in respect of the property owned by her since 1956, it would not render the transaction as an 'adventure in the nature of trade' leading to the resultant receipt as business income in her hand. Further the Assessee offered the long term capital gains arising out from the same flats to tax and filed her return on that basis. See G. Venkataswami Naidu and Co. v. CIT [1958 (11) TMI 5 - SUPREME Court] Consequently, the question is answered in the negative i.e. in favour of the Assessee and against the Revenue

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• 2015 (11) TMI 1212
  Short deduction of TDS - TDS on perquisite - free Inter Airline tickets provided to the employees of the Assessee airline by other airlines in view of arrangements between the airlines - ITAT deleted the addition - Held that:- The Revenue has been unable to explain how the free inter-airline tickets provided to the employees of the Assessee by some other airlines can be a perquisite provided by the Assessee. In the circumstances, the Court finds that no error has been committed by the ITAT in deciding the issue in favour of the Assessee, thereby deleting the addition made by the AO. - Decided in favour of assessee.

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• 2015 (11) TMI 1211
  Disallowance made u/s.40(a)(ia) - non deduction of tax at source towards sub-contracting of work of the joint venture? - ITAT deleted the disallowance holding that the insertion of second proviso to Section 40(a)(ia) by Finance Act, 2012 with effect from 01.04.2013 is retrospective in operation - Held that:- The Tribunal, as a matter of fact, found that a sum was not received by the assessee from the Department and that payment was made over directly to one M/s.Kranti Constructions, who are sub-contractors and who had in fact executed the work in terms of Memorandum of Understanding that was entered into by the assessee. The Tribunal also found that the Department made T.D.S. on payments made to M/s.Kranti Constructions and the same is reflected in the returns. In other words, the Tribunal, as a matter of fact, found that these amounts paid to M/s.Kranti Constructions could not be made as forming part of the assessment of the assessee. In that view of the matter, invocation of Section 40(a)(ia) itself would not arise. This finding of fact is not challenged before us. Hence, the appeal is liable to be dismissed on this ground alone. However, the Tribunal, having rendered a finding that the facts of the case under Section 40(a)(ia) could not be invoked, went on to discuss the retrospective effect given to Section 40(a)(ia) by Finance Act, 2012 with effect from 01.04.2013 while relying on the order of Antony D. Mundackal v. A.C.I.T. [2013 (12) TMI 67 - ITAT COCHIN]. Inasmuch as there was no necessity for the Tribunal to enter into this arena since the order of the Tribunal is erroneous to the extent of rendering the finding with regard to the retrospective aspect of the Finance Act, 2012, the issue is left open to the respective parties to canvass the matter in appropriate forum. - Decided against revenue

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• 2015 (11) TMI 1210
  Addition u/s. 40A(2)(b) - whether in view of the specific instances pointed out by the AO in the assessment order, the interest paid by the assessee @ 15% to four related persons was excessive - Held that:- We are unable to accept the contention of the ld.counsel for the assessee that on short-term deposits, the assessee had paid at a lower rate of interest. The ld.CIT(A) deleted the addition on the basis that the Tribunal has allowed the interest even @18% and @ 24% respectively. We are of the view that the AO has to point out not merely on the basis of inter se payment of interest, but the prevalent market rate. As per provisions of section 40A(2)(a) of the Act, the disallowance can be made where the assessee incurs any expenditure in respect of payment has been or is to be made to any person referred to in clause (b) of this subsection, and the AO is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction. In the given case, the AO has not given any finding in respect of fair market rate of interest paid by the assessee. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue. Valuation of opening stock and closing stock of V- 6 Type SB/12-5 Water Pump and V-6 Type SB/12-6 Water Pump - contention of the assessee is that the difference in the opening and closing stock was due to change in the material utilized for manufacturing of the pump and, therefore, naturally cost of manufacture would decrease - Held that:- The Assessing Officer has simply compared the valuation of items in the opening stock and closing stock without appreciating the difference in the quality of raw material used in the manufacture of submersible pumps which was changed from gun metal to stainless steel. It shows that the Assessing Officer has not taken into consideration the full facts with regard to valuation of stock. Under the circumstances, the addition made by the AO towards under-valuation of two items of water pumps is hereby deleted. - Decided against revenue. Development agreement addition - Held that:- The appellant was entitled to development charges only on the construction cost as per the resolution of the society from time to time, it has no relevance with the collections from the members. AO was not justified in holding the development charges at 10% of the total receipts from the Members as well as making addition of the entire difference to the total income of the appellant in this year and hence, both the additions are hereby deleted. - Decided against revenue.

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• 2015 (11) TMI 1209
  Reopening of assessment - non serving of notice - assessee submitted that the order u/s 143(1) was passed by the AO on 21.12.2004 and the notice u/s 148 was claimed to be issued on 29.03.2011 at a wrong address which remained unserved, was beyond a period of six years - disallowance of expenditure on account of site expenses - Held that:- In the present case, it is an admitted fact that the notice u/s 143(2) of the Act was not issued before framing the assessment u/s 147 r.w.s 143(3) of the Act. This fact has also been admitted by the AO in his remand report dated 10.12.2012. AO was required to serve the notice u/s 143(2) of the Act before passing the assessment order u/s 147 of the Act within stipulated time limit but no such notice has been issued to the assessee. Therefore, the reassessment framed vide order dated 29.12.2011 was not valid. Moreover, from the reasons recorded, it is clear that the AO himself admitted that the assessee had claimed and was allowed an expenditure on account of site expenses in the profit and loss account which were of capital in nature. So, no new material came in possession of the AO for issuing the notice u/s 148 of the Act. There was nothing in the reason recorded to show that any tangible material had come into his possession subsequent to the issue of the intimation u/s 143(1) of the Act. - Decided in favour of assessee

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• 2015 (11) TMI 1208
  Eligibility for deduction u/s 80IB(10) - profit from housing projects constructed by the assessee - Held that:- assessee is entitled to deduction under section 80IB(10) because the activity of the development has been carried on by the assessee contractor-cum- developer as per the agreement entered into with the land owners. Therefore, since the facts and circumstances of the case remain identical and distinguishing facts have not been brought on record by the Revenue of previous AY, we respectfully following the orders of coordinate Bench, allow the appeal of assessee. - Decided in favour of assessee.

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• 2015 (11) TMI 1207
  Disallowance u/s 14A - Held that:- In the case of assessee no bank borrowings, no bank over-draft/deposits and nor any interest expenditure has been claimed by the assessee in the computation of total income and the port-folio management was looked after by the Director. There was sufficient source of funds which was required to make fresh investment in shares and mutual funds during the year and nothing contrary to the above facts have been brought on record by the Revenue, and in these circumstances, we find it justified to delete the addition made by the AO in regard to disallowance made u/s 14A - Decided in favour of assessee. Disallowance from rental income on estimated ad hoc basis - Held that:- Assessee has earned rental income and has shown the same under the head income from house property, claimed 30% deduction for repairs allowable under section 24. Assessee s books are audited and it is a limited company and working since 94 years. AO in his assessment order has not been able to bring any specific material on record to prove that expenses shown in the profit and loss a/c were in any way attributable specifically for earning rental income. But has made ad hoc disallowance of Rs. 1,50,000/- deeming that there has been some nexus of some portion of the expenses incurred by the assessee company during the year to earn rental income. Therefore, in view of the above and for the lack of proper working to show that expenses specifically for earning rental income having claimed as expenditure under the head business or profession, we are of the view that AO was not justified in making such ad hoc disallowance. - Decided in favour of assessee.

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• 2015 (11) TMI 1206
  Revision u/s 263 - Held that:- It is apparent that CIT(Appeals) cannot invoke the jurisdiction u/s 263 of the Act, merely on the ground that no adequate enquiry has been made by the Assessing Officer. In the instant case, the learned Assessing Officer has not only recorded the statement of the father of the assessee, but also satisfied himself that the source of money was duly explained, as he was running a ‘Kirana Shop’ and money was earned out of his activity of running of that shop. The learned Commissioner of Income-tax in para 6.2 of his order has himself admitted that the learned Assessing Officer had hardly asked 2 to 3 questions from the assessee and assessee’s father explained in his statement on the face value and no enquiry was made or the called for recording of the basic details like size, location, Khasra No. of agricultural land, nature of agricultural produce, when the shop was started etc. AO has also examined cash deposit of Rs. 4.70 lakhs from the cash flow statement and after satisfying thereon, has admitted the explanation of the assessee. In our considered opinion, this may be a case of inadequate inquiry, but certainly, it is not a case of lack of enquiry. The learned Assessing Officer has made certain opinion on the basis of enquiry conducted and satisfied himself. Commissioner of Income-tax cannot revise the assessment merely due to the reason that he holds a different opinion on that issue. Respectfully, following the judgement of Hon’ble jurisdictional High Court in case of CIT Vs. Sunbeam Auto Ltd. (2009 (9) TMI 633 - Delhi High Court), we hold that the findings of the learned Commissioner of Income-tax (Appeals) in holding the order of the learned Assessing Officer passed under section 143(3) of the Act as erroneous and prejudicial to interest of the Revenue are not correct and bad in law and therefore, we set aside the impugned order of the learned Commissioner of Income-tax (Appeals) passed under section 263 of the Act. - Decided in favour of assessee.

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• 2015 (11) TMI 1205
  Addition under section 40A(2)(b) - CIT(A) deleted addition - Held that:- The assessee has failed to substantiate the work performed by Mr. Preetpal Singh. The ld. AR also could not controvert the argument of the ld. SR DR that the salary paid by the assessee company to Mr. Preetpal Singh for the post of Vice President Marketing was much higher than the salary paid by the sister concern of the assessee to him for the role of Director of that company. Thus, we find that payment of remuneration to Mr. Preetpal Singh was excessive having regard to the fair market value of services rendered by him. We also agree with the contention of the ld. Sr DR that the assessee failed to explain and substantiate the needs of the business of the assessee for hiring services of Mr. Peetpal Singh and the benefit accrued to the business of the assessee by inducting Mr. Peetpal Singh. The offer price in letter of ‘Swastik Outsourcing’, submitted by the assessee before the learned Commissioner of Income-tax is only an imaginary figure which never materialized. In our view, the assessee has failed in all tests laid down in decision of Spark Hotels (P) Ltd (2012 (6) TMI 689 - ITAT DELHI ) with regard to remuneration paid to Mr. Preetpal Singh. In view of the facts and circumstances of the case and we are of the opinion that allowance of salary/ remuneration to Mr. Preetpal Singh restricted by the Assessing officer to 50% of the amount paid is justified and therefore, the order that of passed by the learned Commissioner of Income-tax (Appeals) on this issue is reversed. Accordingly, the first ground of the Revenue is allowed. Addition under section 40(a)(ia) - commission paid of foreign agents - absence of deduction of tax at source - Held that:- AR has successfully demonstrated that the selling agents were located outside India and service of procuring orders and following payment from buyers etc was performed by them outside India. Once it is established that services are performed outside India, the provision of section 9 are not applicable in the case of foreign residents. The learned Commissioner of Income-tax (Appeals) has discussed the applicability of the circular of the CBDT and we are in agreement with the conclusion of the learned Commissioner of Income-tax (Appeals) on this issue as the assessee was not required to deduct tax at source on the payment made to foreign selling agents - Decided against revenue

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• 2015 (11) TMI 1204
  Estimation of rate of net profit from business - CIT(A)estimated @ 4% as against 8% adopted by AO after rejecting the books of accounts - Held that:- We find that the assessee had not disclosed one savings bank account with Allahabad Bank Gariahat Branch in his books and hence the Learned AO was justified in rejecting the books of accounts and determining the profits on an estimated basis u/s 145(3) of the Act. We find that the Learned CITA had considered the average net profits declared by the assessee in the earlier years and accordingly had determined the net profit at 4% of gross receipts which in our opinion is reasonable in the facts and circumstances of the case. Hence we are not inclined to interfere with the order of the Learned CITA in this regard. - Decided against revenue Increase the turnover - undisclosed bank account of the assessee - CITA increasing the turnover by the amount credited in the undisclosed bank account and directing the Learned AO to compute net profit @ 6% as business income - Held that:- CIT(A) found that the assessee was not able to prove the credits in the said bank account to the extent of Rs. 22,25,000/- and held that the same has to be construed as turnover of the assessee and net profit to be determined at the rate of 6% thereon as he found that profits from undisclosed business would normally be higher than the regular business profits as the assessee need not incur certain expenditure thereon. We also find that the finding given by the Learned CITA that the only source of income of the assessee is his income from contract / sub contract business has not been refuted by the revenue. Hence we are in agreement with the findings given by the Learned CITA in this regard. - Decided against revenue Addition on undisclosed sundry debtor - CIT(A) deleted the addition - Held that:- CITA had given a categorical finding of the manner in which the security deposit was created in the earlier years and these findings have not been refuted by the revenue . Moreover, we hold that since the security deposits were made in the earlier years, the same cannot be the subject matter of addition as undisclosed income u/s 69 of the Act in the assessment year under appeal. Hence we are not inclined to interfere with the findings of the Learned CITA in this regard. - Decided against revenue Addition towards interest on fixed deposits - business income OR income from other sources - CIT(A) deleted the addition - Held that:- We are not in agreement with the arguments of the Learned AR that the fixed deposits were used as a security for availing overdraft facility by the assessee for the purpose of his business and hence the interest income derived thereon has got direct business nexus and has to be construed only as business income. It is seen that the entire books of accounts of the assessee has been rejected by the Learned AO which is also accepted by the assessee due to certain defects. We find that the Learned CITA had only accepted to the contentions stated by the assessee during first appellate proceedings and proceeded to accept the claim of the assessee. No evidences were produced to support the contentions of the assessee in this regard either before the Learned CIT(A) or before us. In the absence of clear evidences to prove the business nexus of investing the fixed deposits, the resultant interest income had to be taxed only as income from other sources. - Decided in favour revenue

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• 2015 (11) TMI 1203
  Addition towards advance given to Mr. R.K Jalan was for purchase of jute - miscellaneous expenses written off - CIT(A) deleted the addition - Held that:- As could be evident from the paper book filed by the Learned AR before us, it is not in dispute that the advance was made for purchase of Jute during the course of business of the assessee. Since the supplies could not materialize, the assessee to protect its money started charging interest and was able to recover a sum of Rs. 23 lacs towards principal portion. The interest income on such advances from Asst Years 1991-92 to 1997-98 have been duly offered to tax by the assessee as business income and assessed as such . Hence it will be factually incorrect to say that the nature of advance was not established by the assessee before the lower authorities. The scrutiny assessment orders of earlier years itself would stand testimony to the contentions of the assessee. Even otherwise, we find that since the trade advance was made during the course of its business by the assessee, any loss on account of recoverability would automatically fall under the category of trade debt and hence is allowable as business loss. We find that the assessee had duly offered the interest income on advance receivable from Shri.R.K.Jalan as business income in the earlier years and the same has been accepted as such by the revenue and hence the ground raised by the revenue is dismissed. Similarly we also hold that no additional evidences were filed by the assessee before the Learned CITA with regard to this issue as the fact of trade advance paid to Shri.R.K.Jalan stands clearly established in the earlier years scrutiny orders placed on record by the Learned AO. Hence the ground raised by the revenue that there is violation of Rule 46A of Income Tax Rules by the Learned CITA is dismissed. It is not in dispute that the assessee had indeed written off the balance principal portion of Rs. 47,02,013/- and interest receivable portion of Rs. 66,46,543/- in its books by treating the same as irrecoverable and due to the death of the concerned party. It is also not in dispute that the corresponding credit is given to the concerned party account in the books of accounts. We are in agreement with the arguments of the Learned AR that even otherwise the entire write off if not allowable in terms of section 36(1)(vii) read with section 36(2) of the Act is allowable as deduction as a regular trading loss u/s 28 of the Act. Interest payable by the assessee to ICICI Bank Ltd - whether ICICI Bank would fall under the category of a Scheduled Bank so as to fall within the ambit of section 43B? - Held that:- We set aside this issue to the file of the Learned AO with a specific direction to give a finding as to whether ICICI Bank Ltd was a scheduled Bank during the relevant assessment year under appeal and if so, the provisions of section 43B of the Act would automatically apply to the assessee

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• 2015 (11) TMI 1202
  Rectification of mistake - First mistake is that the amount of Rs. 60.20 lakh noted by the Tribunal in Para 6 of the Tribunal order is in fact not an investment for earning tax free income and therefore, this should not be considered as a basis for deciding the disallowance u/s 14A of the Act and in the same manner, the amount of investment of Rs. 340.80 lakh as on 31.03.2009 is also not an investment for earning tax free income and therefore, this should also not be considered for deciding the disallowance u/s 14A of the Act - Third mistake pointed out is about the amount of Rs. 709.93 lacs which should be Rs. 790.93 lacs. - Held that:- Regarding both the aspects, we find force in the submissions of the Ld. AR of the assessee to the extent that these two investment amounts should not be taken into consideration for deciding the issue about disallowance u/s 14A. We agree about third mistake. It is seen that merely because some wrong figures as on 31.03.2008 and as on 31.03.2009 are noted by the Tribunal in Para 6 of the impugned tribunal order, it cannot be said that there is an apparent mistake in the Tribunal order which will result in the change in ultimate conclusion. We have seen that even after omitting these two figures of closing stock and adoption of a correct figure in place of wrong figure of income, the result and ultimate conclusion remain the same because these figures were not at all considered as a basis for coming to this conclusion that assessee is not dealer in shares. Hence, we have already rectified Para 6 of the Tribunal order by excluding the reference to these two figures of closing stock as on 31.03.2008 Rs. 60.20 lakh and as on 31.03.2009 Rs. 340.80 lakh and we have also rectified the mistake in income, which was noted at Rs. 709.93 lakh and the correct figure of Rs. 790.93 lakh is noted in the amended Para – 6. Hence these two mistakes have been rectified. Regarding third alleged mistake that balance sheet as on 31.03.2008 and 31.03.2009 showing closing stock of shares at Rs. 2431 lakh and Rs. 795.36 lakh is not considered by tribunal is factually incorrect because both these figures are duly considered in Para 6.1 of the Tribunal order as reproduced above. Hence, the ultimate conclusion remains the same. Even if there is a mistake in the tribunal order in coming to this conclusion that the assessee is not a dealer in shares, such mistake, if any, is not an apparent mistake rectifiable u/s 254 (2). Accordingly, both the MAs of the assessee stand disposed of in the terms indicated above.

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• 2015 (11) TMI 1201
  Unexplained investment - Held that:- As now the Ld. AR has produced the statement of the FD A/c for our consideration and request to delete the addition confirmed by the A.O. Therefore, in the interest of justice and fair play, we are inclined to give one more opportunity to the assessee for justification of the source of investment in KVPs to the AO. We also disregard the contention of the assessee to limit the finding of investment in KVPs to extent of Rs. 80,000/-. In our opinion, the assessee should not be deprived from the benefit given in the law and should not unnecessary be penalized. Hence we restore this ground of appeal to the AO to adjudicate afresh as per law. - Decided in favour of assessee for the statistical purpose. Treating the deposit as income from undisclosed source - Held that:- A careful analysis to the order of the AO reveals that the AO has recorded the cash deposit entries as business receipt. At the same time the AO treats the entire cash deposit as income without considering any further expenses whatsoever. Here we are of the view that the business receipt can be treated income only after deducting the relevant expenses in relation to business receipt. Besides it is important to note that all the cash was deposited in the business bank of the assessee and the same was duly disclosed in the balance sheet. On this basis we are inclined to apply the effective rate of income on the undisclosed receipts of the assessee. Hence we allow this ground of appeal to the file of AO with the direction to adjudicate this ground afresh as per law. - Decided in favour of assessee for the statistical purpose. Addition as unexplained money - Held that:- Assessee prayed not to treat the entire sum of Rs. 2,98,520/- to the income of assessee and offered to apply the gross profit rate on the sum deposited with the banks. However, the assessee could not explain the source of money deposited in the bank. It was also found that the same bank account was also not disclosed in the income of return. Therefore, in the absence of any documentary evidence from the side of assessee we are of the view that the addition made by AO and confirmed by Ld. CIT(A) has been correctly done. Therefore we do not interfere into the orders of Authorities below - Decided against assessee. Disallowance of agricultural income - Held that:- A careful analysis of the Ld. AR submission clearly shows that the assessee has been showing the income from agricultural activities in the return of income for the last many years. The balance sheet also contains the inherited agriculture land. The assessee also pleaded that the agricultural income shown and claimed exemption from the tax is not from broiler business and the AO has wrongly treated the same from broiler business. The relevant detail of agricultural business has not been provided. However in the interest of justice and fair play, we are inclined to give one more opportunity to the assessee to justify his claim before the lower authorities. Hence, this ground of appeal is restored to the file of the AO for fresh adjudication as per law - Decided in favour of assessee for the statistical purpose.

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• 2015 (11) TMI 1200
  Addition made on account of mark to market loss - CIT(A) deleted the addition - Held that:- The assessee is consistently following the cost or Mark to Market value, whichever is lower for valuation of outstanding interest rate swap on each balance sheet date. Furthermore, a liability is said to have crystalised when a pending obligation on the balance sheet date is determinable with reasonable certainty. The detailed findings recorded by CIT(A) in this regard have not been controverted by ld. DR. Accordingly, we do not find any infirmity in the order of CIT(A) for allowing Mark to Market loss. - Decided against revenue.

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• 2015 (11) TMI 1199
  Levy of fee under Section 234E - processing the TDS statement furnished by the assessee u/s 200A - Fee for default in furnishing statements - Held that:- Prior to 01.06.2015, there was no enabling provision in Section 200A of the Act for making adjustment in respect of the statement filed by the assessee with regard to tax deducted at source by levying fee under Section 234E of the Act. The Parliament for the first time enabled the Assessing Officer to make adjustment by levying fee under Section 234E of the Act with effect from 01.06.2015. Therefore, as rightly submitted by the assessee, while processing statement under Section 200A of the Act, the Assessing Officer cannot make any adjustment by levying fee under Section 234E prior to 01.06.2015. See M/s Neelagiris Textiles v. DCIT [2015 (7) TMI 639 - ITAT CHENNAI] In the case before us, the Assessing Officer levied fee under Section 234E of the Act while processing the statement of tax deducted at source under Section 200A of the Act. Therefore, this Tribunal is of the considered opinion that the fee levied by the Assessing Officer under Section 234E of the Act while processing the statement of tax deducted at source is beyond the scope of adjustment provided under Section 200A of the Act. Therefore, such adjustment cannot stand in the eye of law. - Decided in favour of assessee.

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• 2015 (11) TMI 1198
  Reopening of assessment - invalid notice - whether for the year under consideration notice u/s 143(2) was served upon the assessee? - Held that:- Apart from the photocopy of the notice now placed before us, there is no evidence that any such notice was actually issued to the assessee. The notice claimed to have been served by affixture on the ground that on 18.11.2011 the assessee’s premises was closed and therefore, notice could not be served by notice server. However, on perusal of the chronological events of the issuance and service of notice as mentioned by the CIT(A), it is evident that one notice u/s 142(1) was issued on 17.11.2011 which was duly served upon the assessee on 18.11.2011. When the notice u/s 142(1) can be served upon the assessee on 18.11.2011 through notice server, how the premises of the assessee is claimed to be closed for the service of notice u/s 143(2). From the chronology of date-wise events, we find that several notices and orders were issued from time to time and each and every notice/order have been duly served at the same premises. From the totality of these facts, we only say that the purported notice dated 18.11.2011 (photocopy of same is placed before us and claimed its service through affixture) lacks credence and cannot be relied upon. There is no contemporious evidence in support of this claim of the Revenue. On the other hand, all contemporious evidence supports the order of the CIT(A) that no notice u/s 143(2) was ever issued and served upon the assessee. In view of above, we do not find any infirmity in the order of the CIT(A) wherein he held the assessment order to be invalid for want of issuance of notice u/s 143(2) and the same is upheld. - Decided in favour of assessee.

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• 2015 (11) TMI 1197
  Adjustment in respect of Advertisement/Marketing Promotional (AMP) and selling expenses - TPA - TPO concludeD that the assessee had incurred non-routine AMP expenses contributed in the brand development of the assessee’s parent company - Held that:- The assessee has a prima facie good case on merit in the appeals for both the years under consideration. The contention put forth by the ld. Counsel for the assessee that in view of the decision in the case of ‘Sony Ericsson Mobile Communications India Private Limited and others’ (2015 (3) TMI 580 - DELHI HIGH COURT), the adjustment made on AMP expenses by the authorities below, needs to be deleted as have not been successfully replied by the department. Also since the recipient would have already discharged their tax liability on the amounts, the assessee cannot be treated as an assessee in default and that tax payment by the recipient ought to be regarded as sufficient compliance for the purposes of the provisions of section 40(a)(ia) of the Act and no disallowance is warranted in the hands of the assessee. The existence of a prima facie good case in its favour leads to the balance of convenience tilting in favour of the assessee. Therefore, finding that the assessee is likely to suffer substantial mischief, damage and injury otherwise the assessee’s request for stay for both the years i.e. the years under consideration is accepted. The recovery for both the years shall remain stayed for six months from today, or till the disposal of the appeals, whichever is earlier.

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• 2015 (11) TMI 1196
  Eligibility to deduction under sec. 80P(2)(a)(i) - CIT(A) allowed the claim - Held that:- Commissioner of Income Tax (Appeals) has allowed the claim for deduction under sec. 80P(2)(a)(i) of the Act by following the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot [2015 (1) TMI 821 - KARNATAKA HIGH COURT ] wherein held that when the status of the assessee is a Co-operative society and is not a Co- operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under Section 80P(2)(a)(i) of the Act is correct. - Decided in favour of assessee.

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• 2015 (11) TMI 1195
  Revision u/s 263 - deduction u/s 54B claimed by assessee qua sale of Sohna land was wrongly allowed as one half of the new agriculture land was purchased in the name of the assessee's wife Smt. Anita Rajni - Held that:- While examining the record under sec. 263, CIT has to see whether the subordinate authority has considered relevant issues and enquired into the relevant aspect of the claims in the year in question. Since the agricultural income in this year was not shown, the AO before partly accepting the assessee's claim u/s 54B ought to have enquired whether the land in question was used for agricultural purposes in the last two years or not, There is no finding to this effect in the assessment order. From the second page onwards till the end of impugned assessment order, there is only reference to claim of Section 54B of the Act. Thus in our view, this crucial aspect of land in question agriculture or residential plots, it’s being sold by way of plots in sq. yards become necessary for allowability of claim. Record does not reveal that these were considered or inquired. Thus there is a total lack of enquiry on these aspects besides whether the agricultural income was earned or not from this very land. In our considered view, the assessment order suffers from lack of enquiry on these crucial aspects and it is not a case of partial inquiry as pleaded to be covered by the judgement of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2009 (9) TMI 633 - Delhi High Court) and other citations. Thus the order passed by the AO was erroneous and prejudicial to the interest of the Revenue. The ld. CIT has rightly passed the order u/s 263 with the direction that the AO should properly frame the assessment order afresh after making proper enquiries and by affording adequate opportunity of being heard to the assessee. - Decided against assessee.

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• 2015 (11) TMI 1194
  Disallowance of prior period expenses” and “prior period salary" - Held that:- The rate of tax applicable upon the assessee in this assessment year remains the same. It has been reporting loss in the earlier years and in subsequent years. As far as taxability part is concerned, there is no substantial effect upon the assessee in this year because it show losses. Only effect is that the assessee can be exposed to penalty on account of reduction of loss than the one returned in the income. The assessee could not demonstrate as to how loss has also been incurred in this year. The expenses do not pertain to this year, therefore, they are not allowable. We do not find any error in the findings of the Revenue authorities- - Decided in favour of revenue. Disallowance of payment as per section 43B - whether the issuance of equity shares of the assessee-company to the financial institutions amounts to actual payment of interest liability or not? - Held that:- The conversion of interest into loan, and issuance of equity shares in lieu of interest payment being very basic similarity, therefore, does not amount to actual payment. in our opinion, Explanation 3C only prohibits an assessee for recognizing the actual payment of interest by converting its interest into loan or borrowings. In other words, if an assessee has interest liability, and he converts that interest liability in further loan, then that will not amount to payment of interest under section 43B as per Explanation-3C. If an assessee has issued equity shares, which anyone can acquire, and it has a trading value, it would not construe that the interest liability has been converted into loan. The financial institutions can independently trade those equity. Therefore, the assessee has made payment of interest liability in money’s worth. It has not re-negotiated in such a way that its interest liability has been ceased. We allow this ground of appeal and delete the disallowance.- Decided in favour of assessee. Disallowance of expenses amortized under section 35D - Held that:- When in the first year no disallowance was made, and thereafter, in subsequent two years this 1/5th has been allowed, the AO is not justified to ask the assessee to establish its genuineness. Therefore, taking into consideration past history, we delete the disallowance. - Decided in favour of assessee.

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• 2015 (11) TMI 1193
  Addition made on account of advertisement expenses - revenue v/s capital expenditure - CIT(A) deleted the addition - Held that:- Facts in the instant case are identical to the facts in the case of assessee itself for the preceding year i.e. Assessment Year 2008-09 and for the reasons given therein, he concluded that even balance 25% of expenditure is also allowable as revenue in nature in the year under consideration. Since the impugned expenditure was treated as revenue in nature, the alternative condition does not survive and accordingly, the claim of depreciation thereon was rejected. Addition made on account of recruitment and training expense - revenue v/s capital expenditure - CIT(A) delted the addition - Held that:- The expenditure incurred by the assessee on advertisement having been treated partly as revenue in nature balance 25% should not have been treated as deferred revenue expenditure and it is allowable in the year in which it was incurred. In the light of decision of ITAT in assessee’s own case we have no alternative except to hold that the order passed by Ld. CIT(A) is in accordance with law being in consonance with the view taken by ITAT in assessee’s own case for the earlier year. We, therefore, dismiss the appeal filed by revenue.

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• 2015 (11) TMI 1192
  Penalty imposed u/s 271D - violation of the provisions of section 269SS - CIT(A) deleted penalty - Held that:- The account of the associate concern M/s Mahagun Developers Ltd. was credited by the assessee by passing a journal entry and it did not involve acceptance of any loan or deposit or money. Therefore, the provisions of Section 269SS of the Act were not applicable and the penalty levied by the AO u/s 271D of the Act was rightly deleted by the ld. CIT(A). - Decided in favour of assessee.

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• 2015 (11) TMI 1191
  Income from offshore services - taxability - Benefit of Article 7 of India-Japan Double Taxation Avoidance Agreement ('DTAA') - Held that:- As decided in assessee's own case [2007 (1) TMI 91 - SUPREME COURT] & [2013 (1) TMI 214 - BOMBAY HIGH COURT] provision of the Act or of the DTA, whichever is more beneficial to the assessee, shall apply. non-applicability of section 9(1) in the present case, Article 7 of the DTAA is also applicable and hence the income arising on account of offshore services would not be taxable Considering the above factual matrix of the case we are of the view that the income from offshore services, though chargeable u/s 9(1)(vii) but exempt under the DTAA, cannot be charged to tax in the light of section 90(2) as discussed. Accordingly, we allow the appeal of the assessee with regard to income from offshore services and set aside the order of the DRP. - Decided in favour of assessee.

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• 2015 (11) TMI 1190
  Eligibility for exemption u/s 10B - Deemed Export Draw Back included in the profits and gains of the 100% EOU unit - Held that:- This issue has already been adjudicated and decided in favor of the assessee by the decision in the case of Maral Overseas Ltd. vs. ACIT [2012 (4) TMI 345 - ITAT INDORE] wherein held once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act. As per the computation made by the Assessing Officer himself, there is no dispute that both these incomes have been treated by the Assessing Officer as business income. - the undertaking is eligible for deduction on export incentive received by it in terms of provisions of Section 10B(1) read with Section 10B(4) of the Act - Decided in favor of assessee. Benefit of exemption u/s. 10B on account of interest - Held that:- Interest income earned by the assesee in the asstt. years in dispute is not derived from export business and is an income from other sources. Our view is supported by the decision of the Hon’ble Supreme court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT [1997 (7) TMI 4 - SUPREME Court]; CIT vs. Pandian Chemicals Ltd. [1997 (4) TMI 38 - MADRAS High Court] and Pandian Chemicals Ltd. vs. CIT [2003 (4) TMI 3 - SUPREME Court]. Keeping in view of the facts and circumstances of the present case, we are of the view that interest income on FDR, earned as income from other sources, on the basis of facts and judicial pronouncements, cannot be held to be admissible for deduction u/s. 10B - Decided against assessee. Benefit of exemption u/s. 10B on account of Customer Claim - Held that:- In this case, the assessee has received a sum as a result of compensation for cancellation of order, to compensate for the cost of raw material and other inputs incurred by him. These receipts may be in foreign exchange but is not on account of export of articles or things and the amount received by the assessee is only to cover the expense already incurred by it. The receipt cannot be said to be such profit and gains derived by the undertaking from export of article or thing and on the basis of facts and judicial pronouncement of the ITAT, Delhi Bench in the case of Sony India Pvt. Ltd. vs. DCIT (2008 (9) TMI 420 - ITAT DELHI-H), cannot be held to be admissible for deduction u/s. 10B. Therefore, Ld. CIT(A) has rightly confirmed the addition - Decided against assessee. Benefit of exemption u/s. 10B on freight subsidy - Held that:- The receipt of freight subsidy thus cannot be said to be such profit and gains derived by the undertaking, cannot be held to be admissible for deduction u/s 10B. Hence, Ld. CIT(A) has rightly confirmed the addition. In view of the above, we do not find any infirmity in the well reasoned order passed by the Ld. CIT(A) on this issue, hence, we uphold the impugned order on this issue. - Decided against assessee. Disallowance u/s 14A read with Rule 8D - expenses relating to investments - Held that:- We find that the assessment order as well as the appellate order, is not clear on the quantification of the expenditure incurred by the assessee on the exempt income. Keeping in view of the facts and circumstances of the case, we are of the view that the matter requires re-consideration at the level of the AO with the direction to quantify the expenditure on the basis of exempt income, after giving adequate opportunity of being heard to the assessee and pass a fresh order on the issue. Accordingly, the Ground is remitted back to the file of the AO with the above directions. - Decided in favour of assessee for statistical purposes.

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• Customs

• 2015 (11) TMI 1158
  Prohibition of Custom Brokers - Held that:- Commissioner had prohibited the appellant from working as Customs Broker on the ground that the Importer had not correctly classified the goods imported by them and the appellant had not properly advised in this regard. This is the only allegation against the appellant. - The root cause for the said allegation is import of a vessel for which Bill of Entry No. 698 of 2009-10 dated 09.03.2010 was filed. It is observed that the said Bill of Entry was provisionally assessed at the time of importation. The goods were also examined by the Customs Officers before the same was cleared out of customs charge. The examination report signed by Customs Officers including Deputy Commissioner of Customs, at the reverse on the said Bill of Entry - there is no justification for the Commissioner to prohibit the appellant from their work under the provisions of Regulation 23 of the Customs Brokers Licensing Regulations, 2013. We therefore, set-aside the impugned order of the Commissioner. - Decided in favour of appellant.

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• 2015 (11) TMI 1157
  Waiver of pre-deposit - Seizure of goods - Confiscation of gold biscuit - Attempt to smuggle gold - Held that:- Adjudicating authority passed a detailed order containing 29 pages and given detailed findings wherein he has brought out the modus operandi in the smuggling of gold by Shri J. Anand in carrying foreign marked gold biscuits. We find that there is no dispute on the fact of smuggling of gold by appellant Shri J. Anand. We find that statements were recorded and investigation was carried out, mahazars were drawn and panchnama filed. The goods were physically concealed in the arm rest of the vehicle. Both mahazar of seizure of gold and statement recorded under Section 108 of Customs Act are valid evidence under the Customs Act as officers of Customs are not police officers. We have perused the citations relied by the appellant including the citation of Hon'ble High Court in the case of Ved Parkash Sikiri Vedi Vs UOI (1990 (8) TMI 395 - DELHI HIGH COURT) relied by the advocate relates to COEPOSA detention and not pertaining to seizure and confiscation of gold under the Customs Act. Therefore, the citations are not relevant to the facts of this case. Further, in the case of T.B. Lakshminarayanan (2011 (1) TMI 1341 - MADRAS HIGH COURT), the Hon'ble High Court on an identical case of smuggling gold biscuits ordered for predeposit of 50% of the penalty imposed on them. As far as the second appellant is concerned, we find that adjudicating authority issued a show cause notice alleging that he played a role in abetting, harbouring and dealing with smuggled gold biscuits based on recorded statements and no other evidence has been brought out against him. The only evidence brought out that he mediated, contacted and made calls and was in constant touch with Shri Anand. We find merit in the plea that he has not played a conscious and active role in the entire smuggling activity. Therefore, taking into facts and circumstances of the case, we grant waiver of predeposit of penalty imposed on Shri K. Sivamani.

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• 2015 (11) TMI 1156
  Refund claim - At the time of filing of Bills of Entry, the appellant did not claim the benefit of nil rate of duty - Notification No. 21/2002 [serial No. 399 (iv)] - The appellant filed a refund claim for refund of the customs duty paid on the construction materials and spare parts used in setting up of Mega Power Project on the ground that it was eligible for nil rate of duty applicable to the said project - Held that:- it is obvious that contrary to what has been claimed by the appellant, at the time of assessment of Bills of Entry, it was entitled to the benefit of the said Notification pertaining to serial No. 399 (iv) which it claimed and was not entitled to the benefit of serial No. 400 of Notification No. 21/2002 which it did not claim (nor could it have claimed) as it did not possess the requisite certificates/ documents. The judgements of Bombay High Court in the case of Hero Cycles Ltd. Vs. Union of India (2009 (6) TMI 4 - BOMBAY HIGH COURT) and Delhi High Court in the case of Aman Medical Products Ltd. Vs. CC, Delhi (2009 (9) TMI 41 - DELHI HIGH COURT) are clearly not applicable to the present case, because in those cases duty was paid due to ignorance. Indeed, in the circumstances of this case, the judgements of Supreme Court in the cases of C.C. Vs. M/s. Flock (India) Pvt. Ltd. [2000 (8) TMI 88 - SUPREME COURT OF INDIA] and Priya Blue Vs. CC (Prev.) (2004 (9) TMI 105 - SUPREME COURT OF INDIA) are squarely applicable and the appellant cannot be granted refund as it did not seek re-assessment of Bills of Entry which were finally assessed at the time of clearance of goods. - No infirmity in impugned order - Decided in favour of Revenue.

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• 2015 (11) TMI 1155
  Revocation of CHA license - Forfeiture of security deposit - Misdeclaration of goods - violation of Regulation 13(a), (d), (e) and (o) of the CHALR, 2004 - appellant had not obtained authorisation from the exporter who was not in existence - Held that:- It is evident from the facts and evidence on record and is not contested by the appellant that the appellant did not take any authorisation from the exporter and had never met it (i.e. exporter) or got in touch with it (i.e. the exporter) even on telephone. In such a scenario, it was obviously not possible for the appellant to claim that the documents were signed by the exporter. [In the case of P.P. Dutta (supra) it was recorded as a fact that the documents were signed by the exporter.] Thus, the violation of Regulation 13(a) is established. When the appellant never met the exporter and was never even in touch with it, it was obviously not in a position to advise it (i.e. the exporter) to comply with the provisions of the Customs Act and thus it failed to fulfil its obligation under Regulation 13(d) ibid and thereby stood in violation thereof. For the same reason, the appellant was not in position to impart any information to its client and hence the violation of Regulation 113(e). We however agree with the appellant that Regulation 113(o) came into existence 08.04.2010 and therefore it cannot be held guilty of violation thereof as the shipping bills were filed in July 2009. As against the time limit of 90 days prescribed under Regulation 22(5), the report was submitted after more than three years which renders the proceedings in such gross and blatant violation of Regulation 22 that to sustain them would not merely mean showing disrespect to or ignoring the said provision; it would mean insult to the said provision. Therefore, the said proceedings have to be held to be unsustainable. - Decided in favour of appellant.

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• 2015 (11) TMI 1154
  Conversion of Bill of Exports from DFIA to Drawback - request for conversion was rejected on the basis of Circular No.13/10 of Customs dated 23/9/2010 wherein it is stated that the request has to be made within three months from the date of Let Export Order - Held that:- Commissioner is empowered to allow drawback on shipping bills which may not contain any of these details. The provisions of Rule 12 (1) of custom and Central Excise Duties Drawback Rule, 1995 empowers the Commissioner to condone non-observance of provisions of Rule 12 and allow Drawback. This is nothing but an amendment or conversion of shipping bill filed. The circular issued by the Board goes beyond the Rules as section 149 of the Customs Act clearly permits amendment of shipping bills without any such time limit even after export of goods. All these submissions have been considered in detail by the CESTAT in the above said case. In these circumstances, I do not think that Commissioner is justified in not following the decision rendered in the appellant s own case [2014 (8) TMI 772 - CESTAT AHMEDABAD] - Decided in favour of assessee.

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• 2015 (11) TMI 1153
  Restoration of appeal - Non compliance with pre deposit order - Held that:- Restoration of appeals will not costs any prejudice to either side. The Hon’ble High Court of Madras in the case of STC Technologies Pvt. Ltd. Vs. Cestat, Chennai (2015 (7) TMI 820 - MADRAS HIGH COURT) was pursuing the matter before the High Court and subsequently complied the pre-deposit and the appeal was allowed. The Hon’ble High Court of Bombay in the case of Quality Apparel Exporters Pvt. Ltd. Vs. CC (Exports) (2015 (9) TMI 398 - BOMBAY HIGH COURT) restored the appeal when the Tribunal dismissed the appeal for non-compliance, subject to payment of pre-deposit and ordered payment of 50,000/- as cost to the Department. However, purely on the facts of this case and without creating any precedence for any future case, and in the event of the applicants compliance to pay costs quantified @ Rs. 10,000/- (Rupees Ten thousand only) within 4 weeks to the Assistant Registrar, CESTAT, Chennai, the appeals shall be restored to its original position - Conditional restoration done.

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• 2015 (11) TMI 1152
  Contempt proceedings - Non adherence to court's order - Non release of goods inspite of court's order - Held that:- Respondent has already filed an appeal along with stay petition before the Hon’ble High Court on 21st August 2015 immediately after receiving the certified copy of the Tribunal’s order on 13th August 2015. Since the stay petition along with the appeal is pending before the Hon’ble Bombay High Court, insisting on release of the goods at this juncture will make the stay petition infructuous. In my view, the applicant may await the decision of the Hon’ble Bombay High Court. I also note that the applicant has also filed a writ petition for the release of the goods which is also scheduled to come up on 21st September 2015. - Appeal disposed of.

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• 2015 (11) TMI 1151
  Valuation - determination of transaction value - related person - Held that:- when import of identical cars have been made at lower values which are comparable to the value declared at the time of filing Bill of Entry for sale of the cars imported under Carnet, there is no justification to take the higher value mentioned in the Carnet. The appellant gave specific Bills of Entry Nos. 543752, 544155, 510318 under which contemporaneous imports were made. Even though the contemporaneous imports were assessed to duty on provisional basis as the valuation of the cars was being examined by Special Valuation Branch (SVB), Mumbai, the lower authorities ignored this aspect and did not allow the provisional assessment on similar basis in the case of the cars imported under Carnet. In any case it is shown by the Ld. Advocate that the SVB order did not establish that the value between appellant and their Principal had influenced the price and had consequently accepted the declared prices. Therefore, we find no reason to differentiate between the cars imported under Carnet and the cars imported otherwise. - Valuation under Section 14 clearly provides that the value shall be the transaction value where the buyer and seller are not related. In the present case even though buyer and seller are related it is established by the SVB order that the price has not influenced the relationship. Therefore, the transaction value cannot be rejected - Decided in favour of assessee.

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• 2015 (11) TMI 1150
  Refund claim - unjust enrichment - Held that:- the mere fact that the order of the appellate authorities is not "acceptable" to the department-in itself an objectionable phrase - and is the subject-matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. It this healthy rule is not followed, the result will only be undue harassment to assesses and chaos in administration of tax laws Refund application was duly submitted by the appellant on 23.6.2014. A certificate regarding unjust enrichment from the Chartered Accountant was also submitted. The original/duplicate copies of Bills of Entries were stated to have been submitted with the appraiser vide letter dt. 15.9.2005. The Original TR-6 Challans evidencing payment of Rs. 2 Crores were also submitted along with the communication from the Department regarding attachment and subsequent encashment by them of the mutual fund units possessed by the appellant. All the documents having been submitted, the authorities are required to follow the CBEC instructions referred to above. We do not know if they have obtained CBEC instructions not to implement the Tribunal Order of 10.4.2013 granting consequential relief. More than two years have passed but relief has not been given to the appellant in defiance of CBEC Order and Supreme Court decision - Therefore in terms of Rule 40 & 41 of the CESTAT (Procedure) Rules, 1982, we direct the Assistant Commissioner to comply with the Tribunal Order within 60 days of the receipt of this order, to secure the ends of justice. - Appeal disposed of.

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• 2015 (11) TMI 1149
  Restoration of appeal - non compliance with pre deposit order - Held that:- stay order passed by the Tribunal was allowed to attain finality by the assessee inasmuch as the same was not challenged. As such, it becomes clear that the stay order of the Tribunal, in reference to the amount to be deposited and the period within which the same should be deposited had attained finality. If such period is allowed to be extended by the assessee himself at his own whims & fancies, the sanctity of the order passed by the Tribunal would get lost. As regards the reasons for non-deposit of such a small amount of Rs. 10 lakhs, we have gone through the reason given by the assessee in their ROA application. Most of the facts and developments are prior to passing of the stay order, which already stand taken note of by the Tribunal. The period to deposit expired in November 2007 and nothing on record to show as to what happened between the date of passing the stay order and date of reporting compliance leading to dismissal of the appeal so as not to enable the appellant to deposit the amount in question. - Restoration denied.

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• 2015 (11) TMI 1148
  Demand of differential duty - Undervaluation of goods - Confiscation of goods - Penalty u/s 117 - Misdeclaration of goods - Held that:- Appellant had provided contemporary prices of goods imported from the same supplier. This fact has not been considered by the authorities below before arriving at their decision. In these circumstances resorting to Rule 8 of the Valuation Rules without considering contemporaneous prices is not correct legally in terms of the Customs Valuation Rules. Under these Rules the process of re-determining value has to be followed sequentially Rule by Rule. On the other hand, we find that the adjudicating authority has referred to contemporaneous prices extracted from certain Bill of Entry. It is seen that the evidence in the form of Bills of Entry was not provided to the appellant thus, violating the principles of natural justice. The evidence of market enquiries was also not produced before the appellant in the case of watch cells nor were the market enquiries conducted in the presence of the appellant. In this view of the matter, we find that the matter requires fresh consideration after observing principles of natural justice in terms of the observations made - Matter remanded back - Decided in favour of assessee.

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• Corporate Laws

• 2015 (11) TMI 1144
  Amalgamation - with a view to offset the losses being suffered by the transferee company, the profit making transferor companies are proposed to be amalgamated - Held that:- From the background of the case pleaded by the petitioners, it is clearly evident that after the collapse of the eminent company, Satyam, which appeared to be promoter of the transferee company, a new management in which as many as nine public sector undertakings are holding shares has taken over MAYTAS company. The main purpose of the proposed amalgamation is to streamline the affairs of the companies by ensuring that all the 14 transferor companies which have stopped their activities are wound up. Therefore, ex facie this Court has no reason to doubt the bona fide nature of the scheme. If one of the reasons for the proposed amalgamation is tax planning, applying the settled legal position emanating from the above mentioned legal authorities, the scheme cannot be invalidated only on that ground. The intention of a party to reduce tax liability cannot be said to be contrary to public interest or against public policy. On the contrary, such planning by a tax payer is permissible in law. As regards the investigation stated to be pending against the transferee company, as the transferee company will continue to exist after amalgamation, the pendency of investigation would not affect public interest as it will continue to be liable for all legal actions that may be taken against it. In the light of the above, and as no objections/claims have been received in pursuance of the advertisement got published by the petitioners in the newspapers, this Court is of the opinion that the proposed scheme of amalgamation is in conformity with the provisions of the Act and that the same does not in any manner affect the interest of any of the stake holders, including the public. Therefore, the proposed scheme of amalgamation is sanctioned with effect from the appointed date, i.e., 01.4.2014. The petitioners shall cause a certified copy of this order to be delivered to the Registrar of Companies for the State of Telangana and the State of Andhra Pradesh, Hyderabad, within 30 days of its receipt and take all other consequential steps in pursuance of the approval of the scheme of amalgamation.

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• Service Tax

• 2015 (11) TMI 1188
  Challenge to stay modification order - construction services - Power of Commissioner (Appeals) to review his own order - Maintainability of appeal - Held that:- an appeal against a modification of pre-deposit order would fall under the generality of the appellate jurisdiction and an appeal would lie to the Tribunal. Following the principle laid in M/s.Girnar Transformers Ltd. case [2014 (2) TMI 1132 - CESTAT NEW DELHI], I hold that this appeal filed by Revenue is maintainable. - an application for modification of the order is maintainable. Moreover, the Commissioner (Appeals) while directing to deposit the entire amount, distinguished the judgement laid in Macro Marvel [2008 (9) TMI 80 - CESTAT, CHENNAI] and A.S.Sikarwar cases [2012 (11) TMI 1000 - CESTAT, NEW DELHI] basing upon this conclusion arrived that there are common facilities. In the application for modification, the respondents have also pointed out yet another judgement rendered in the case of Inderjeet Singh Jadon in [2015 (11) TMI 1143 - CESTAT NEW DELHI]. Therefore, by the impugned order, in my opinion, the Commissioner (Appeals) has not exercised power of review, but has merely rectified a mistake apparent from the record, which was within his power as laid in the case of M/s.Girnar Transformers Ltd. - Decided against Revenue.

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• 2015 (11) TMI 1187
  Relevant date for payment of service tax where services are provided to Associate Enterprises - accrual basis or receipt basis - Scope of ection 67(4) - Business Auxiliary Service - Receipt of commission - Held that:- the explanation regarding transaction of taxable service with an associate enterprises only refers to value of taxable service which shall include any amount credited or debited in the Books of Account. But the date on which payment of Service Tax is due to be made is the 5th/6th of the month following the calendar month in which payments are received towards the value of taxable services in terms of Rule 6(1) as it stood during the relevant period (before 01.04.2011). There is no confusion on this. Appellant have clearly shown the dates on which the payments are received through the banking channels. There is no book adjustment outside the scope of the invoices raised to the Associate Enterprises. The lower authorities have completely mis-interpreted the provisions of the Rules and the Act. The amount has not been credited to the appellant's account. Simple recording of invoice amount as receivable in the Books of Account does not mean that there is a book adjustment in every case. If Revenue's view is taken as correct, the provision of law which states that Service Tax payment is linked to the receipt of payment of service, would render Rule 6(1) meaningless. The view of lower authorities does not stand to reason and must be rejected. I hold that the demand of interest does not sustain. - Decided in favour of assessee.

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• 2015 (11) TMI 1186
  Levy of penalty - Appellant have deposited the payment of service tax and interest and intimated to the department on 23/2/2010 i.e. which is before the issuance of show cause notice which was issued on 29/2/2012. - Transportation charges - Reverse charge mechanism - Held that:- when the service tax alongwith interest admittedly paid immediately after pointed out by the officers, show cause notice should not have been issued in terms of Section 73(3) of Finance Act, 1994 - no show cause notice should have been issued and consequently no penalty should have been imposed - Levy of penalty set aside. - Decided in favor of assessee.

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• 2015 (11) TMI 1185
  Determination of refund claim of unutilized cenvat credit - Rule 5 of Cenvat Credit Rules, 2004 - Export of Information Technology Software Services - Held that:- While taking total turnover the Ld. Commissioner has considered Rs. 11,60,96,813/-which was disputed by the Revenue on the ground that the value of Rs. 2,64,94,460/- and 7,91,404/- though same was correctly deducted from export turnover, the same should not have been deducted from total turnover. I find that in clause (B) of Clause (E) of Sub rule(1), it is provided that while taking total turnover of export, turnover of service determined and clause (B) of Sub rule (1) as to be considered. If the export turnover in terms of clause (D) is taken then the amount comes to Rs. 11,39,06,643/-and value of other services i.e. Rs. 21,90,170/- is added then total turnover comes to Rs. 11,60,96,813/- which in my considered view was taken correctly by Ld. Commissioner(Appeals), therefore calculation as per the formula which resulted into further refund of Rs. 6,44,714/- is correct and in terms of provision of Rule 5 of Cenvat Credit Rules, 2000. In view of unambiguous findings of Ld. Commissioner(Appeals) and on my above discussion, I am of the considered view that the order passed by the Ld. Commissioner(Appeals) is just, proper and legal which does not require any interference - Decided against Revenue.

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• 2015 (11) TMI 1184
  Small service provider exemption upto 10 lakhs - clubbing of clearance - another proprietorship firm run by the son of the assessee - work of civil construction and site formation service - appellant had neither registered with the Service Tax Department nor was paying tax nor had charged service tax in its invoices - Held that:- Clubbing of the service provided by Balaji Construction is evidently wrong. The appellant had produced the copy of Income Tax records of the proprietor of “Balaji Construction” along with the PAN number. But without making further inquiry the same was rejected. Further the Revenue has relied upon the statement of an uneducated person, who is not aware of the provisions of law and does not understand the impact of the statements he had given. In such circumstances, I hold that the clubbing of service provided by Balaji Construction (Prop. Balraj Malayyapa Besta) is vitiated and the same is set aside. The next ground urged is that threshold exemption have not been allowed to the appellant, as the appellant is a small contractor. So far this issue is concerned the matter is remanded back to the adjudicating authority to examine the allowability of the threshold limit as provided under the relevant notification and allow the same. So far the penalties are concerned, I find that there is reasonable cause for not making compliance with the provisions of the Act and the Rules. The contention of the appellant have not been found wrong that he was not aware being uneducated and engaged in labourer oriented job. Accordingly, I set aside the penalty imposed under Section 77 and 78 of the Finance Act. - Decided partly in favour of assessee.

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• 2015 (11) TMI 1183
  Denial of rebate claim - Export of Output service - Option to export under claim of rebate or without payment of service tax under Export of Service Rules - Business Auxiliary Service - Held that:- Export of Service Rules facilitates the service provider with intention to avoid tax burden to be exported. Rule 4 of Service Rule only stipulates that any service which is taxable may be exported without payment of service tax. This cannot be construed as exemption from payment of service tax. The words used “exported without payment of duty” is different from “exempted from service tax”. Rule 4 is not exemption from service tax. It is only a provision that where the exporter may export services without payment of duty. Rule 5 of the Export of Services Rules clearly stipulates that where the taxable service is exported, the company can claim rebate of service tax paid on such taxable service by issue of specific notification. Therefore, notification No. 11/2005 was specifically issued for this purpose which clearly says that exporter of service who discharges service tax is allowed to claim rebate under Rule 5 of Export of Services Rules . There is no restriction for exporter that he should avail only Rule 4 and not Rule 5 of Export of Service Rules when there are two options available in the statute / rules, it is the right of the respondent to choose any of the provisions of the rules. Therefore, since in the present case payment of tax on the export of service is not disputed, the respondents are rightly eligible for rebate under Rule 5 of Export of Service Rules. - No infirmity in the impugned order in allowing the rebate of service tax paid on export services under Rule 5 of Export of Service Rules. Accordingly, the impugned order is upheld - Decided against Revenue.

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• 2015 (11) TMI 1182
  Denial of CENVAT Credit - eligible input services - Nexus with output services - assessee are providing the facility of lease financing to their employees to purchase cars through lease finance company - Held that:- cost of EMI payable towards leased vehicle is recovered from the employees would show that this is only a ploy adopted to ensure that the benefit of depreciation of the vehicle can be availed by the company and benefit of service tax also can be availed by the company. Both these benefits would have been lost if the individuals were to purchase a vehicle or lease a vehicle. When the cost is recovered from the employee, it cannot be said that it forms part of the final cost of output service. One of the principles followed for allowing the benefit of cenvat credit is that it should form the cost of manufacture of input, output and final product or it should form cost of output service. When the cost of leasing is not borne by the company, it cannot be said that it forms pat of the output service. In such a scenario it would not be appropriate to allow the assessee to avail the benefit of cenvat credit without incurring any cost and availing only the benefits which may offer to be passed on to the employee or may not be, with which I am not concerned. Therefore I do not find any reason to interfere with the decision of the lower authorities that assessee is not eligible for cenvat credit and the credit availed should be paid back with interest. - Penalty u/s 78 is waived - Decided partly in favour of assessee.

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• 2015 (11) TMI 1181
  Demand of service tax - Short payment of service tax - erection, commissioning or installation service - Service rendered through sub-contractors - Held that:- Commissioner has not analysed the evidences e.g. the work order issued by the Assam State Electricity Board, the conditions of payment and the scope of the work undertaken by the appellant and the work executed through its sardars etc., the Ld. Advocate categorically claims that there have been no sub-contractors and the sardars appointed by them are virtually the employees of the appellant. Therefore, the amount paid/re-imbursed to the sardars need not suffer service tax even though it relates to erectioning, commissioning or installation services. It is also claimed that while discharging service tax on the gross taxable value received from Assam Electricity Board, they have also included the amount paid to the sardars/sub-contractors. This aspect needs to be scrutinized and verified through evidences. - Matter remanded back - Decided in favour of Revenue.

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• 2015 (11) TMI 1180
  Waiver of pre deposit - IPR service - Transfer of rights - Held that:- additional rights will not be granted to any third party for a period of two years and the appellant gets time of one more year to achieve the turnover for a particular product. In our opinion when a right is transferred temporarily, there will be a cost to be paid on the basis of specific parameters periodically. In the case of permanent transfer, consideration is paid once for all and therefore no payment would be required. In this case, the consideration paid would become worthless for BL if they are not able to achieve the milestones and they will not be able to enjoy their rights at all. On the other hand, if they achieve the milestones, there is no indication that they have to make payments periodically. Prima facie, in our opinion, it cannot be said that the transfer is a temporary one. - Since we have found a prima facie case on the ground that the transfer in this case cannot be considered as a temporary one, we consider that appellant has made out a prima facie case for complete waiver only on that basis - Stay granted.

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• 2015 (11) TMI 1179
  Imposition of penalty - Power of Commissioner to review - Held that:- As per Section 84 though Commissioner has power of revision he/she did not have any revision power in respect of an issue, if appeal against such an issue was pending before Commissioner (A) during the relevant period. - revision order of the Commissioner in respect of demand of interest on the service tax and penalties imposed under Section 77 by the lower authority is not sustainable and is hereby declared contravening the provisions of law i.e., the then provisions of Section 84 of the Finance Act, 1994. However, the revision order of the Commissioner in respect of penalty under Section 76 of the Finance Act, 1994 is sustainable as this issue was not challenged by the appellant before Commissioner (A).

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• 2015 (11) TMI 1178
  Denial of refund of CENVAT Credit - Unutilized CENVAT Credit - Export of service - Held that:- So far as the ineligible Cenvat credit is concerned, as recorded by learned Commissioner (Appeals), the appellant has no material to suggest reversing that part of the order. So far as service tax paid prior to registration is concerned, law is well settled by Hon'ble Karnataka High Court and similar ratio followed by Tribunal in E-Care India Pvt. Ltd . (2011 (1) TMI 654 - CESTAT, CHENNAI).The appellant is entitled to the Cenvat credit of the service tax paid prior to registration on the ground that the registration being prescribed only for the purpose of maintenance of accounts and for following procedure of law, it cannot be said that registration is mandatory to grant refund. Accordingly, only to the extent of refund claim pertaining to the service tax paid prior to registration is to be allowed - Decided partly in favour of assessee.

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• 2015 (11) TMI 1177
  Demand of service tax - whether service tax liability arises on the appellant under the category of ‘Banking and other Financial Services’ for the commission received by them on new issues & other commission - whether the appellant is liable to pay the service tax on an amount received for deputation of persons to some other assessees - Held that:- Amount received by the appellant as commission for initial public offer and other activities that they are engaged only for their clients in respect of new issues. Revenue wants to tax this amount under the category of Banking and other Financial Services holding that the appellant would fall under the category of Financial Institutions. We do not agree with the contentions raised by the learned D.R. for the Revenue nor do we accept the findings by the first appellate authority on this issue. Basically, the definition of financial institutions which sought to be relied upon by the lower authorities and the representative is misplaced in as much this Bench in the case of Parag Parikh Financial Advisory Services Ltd. [2015 (2) TMI 351 - CESTAT MUMBAI] has considered identical issue Activity of the appellant would fall under the category of ‘Management Consultancy Services’. We have reached this view after perusing the invoices raised by the appellant in the name of M/s. Equity Masters India Ltd., wherein it is very clearly states that the persons deputed for compliance review and strengthening of computer, customers work relating to NSE, front office systems and processes etc. As the services which are raised by the appellant indicate that their employees on deputation were infact doing Management Consultancy Services. To that extent we find that the impugned order is correct and legal and does not suffer from any infirmity. We hold that the appeal of the appellant on this point fails and the service tax liability with interest needs to be upheld - Decided partly in favour of assessee.

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• 2015 (11) TMI 1176
  Demand of service tax - Reverse charge mechanism - Overseas Commission Agent - Held that:- Since the issue has already been dealt in detail in [2015 (8) TMI 794 - CESTAT CHENNAI]. In the present appeals, the issues being identical in nature as that was involved in the above final order, and the appellants claimed benefit of exemption Notification 14/2004 dt.10.9.2004 which was denied by the lower authorities, the demand of service tax under reverse charge confirmed against the appellants is set aside - Decided against Revenue.

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• 2015 (11) TMI 1175
  Waiver of pre deposit - Penalty u/s 77 & 78 - “Commercial & industrial and construction services”, “Residential complex services” - Held that:- Applicant had admitted their liability of Rs. 40,81,704/- for rendering taxable services during the relevant period against the total demand of Rs. 74.47 Lakhs and disputed the balance amount claiming that it is relatable to construction of bridges, roads, Charitable institutions etc. Since the applicant had deposited an amount of Rs. 5.00 Lakhs, at this stage, keeping in view the interest of Revenue, we direct the applicant to deposit an amount of Rs. 35,81,074 within a period of eight weeks - Partial stay granted.

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• 2015 (11) TMI 1174
  Demand of service tax - Fraud - Held that:- assessee had entrusted money with Consultant for depositing the TR-6 challan. But the consultant forged the Bank's seal and signature, pocketed the amount, and gave the forged challan in token of having deposited the money with the exchequer. On investigation by Revenue, it was found that Mr. Amol Adhav, the Consultant only committed fraud, there was no complicity on part of assessee. Thus, findings of learned Commissioner (Appeals) are correct and upheld - Decided against Revenue.

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• 2015 (11) TMI 1173
  Waiver of pre deposit - Held that:- Vide Note Order dated 9.1.2014 and 5.2.2014, after considering the various orders of the Honble High Courts, directed the appellant to produce a stay order against the Tribunals order. On a query from the Bench, the learned counsel neither produced any stay order from the higher forum nor has complied with the stay order dated 26.8.2013 of the Tribunal. In view of that the appeal is dismissed for non-compliance of the stay order under Section 35F of the Central Excise Act, 1944. - Decided against assessee.

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• 2015 (11) TMI 1165
  Waiver of pre deposit - Activity of retreading of tyres of motor vehicles - Manufacture or not - Held that:- Appellant had produced four demand drafts bearing Nos. 210382 and 210384 to 210386, all dated 2.5.2014, totalling Rs. 19,00,000/- which were ordered to be kept with the Registrar (Judicial) of this Court vide order dated May 6, 2014. It was also submitted that a sum of Rs. 1,00,000/- was deposited on 28.1.2013 - The original drafts be handed over to learned counsel for respondent No.3 who shall forward the same to the Assistant Commissioner, Central Excise and Service Tax Division, The Mall, Amritsar (respondent No.3) who shall be entitled to encash the same - appeals be heard without insisting for pre-deposit of penalty amount - Partial stay granted.

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• Central Excise

• 2015 (11) TMI 1172
  Delayed payment of central excise duty under Section 3A of the Central Excise Act, 1944 - Demand of Interest and penalty - Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994 - violative of Articles 14 and 19(1)(g) of the Constitution - Held that:- When Section 6 speaks of the repeal of any enactment, it refers not merely to the enactment as a whole but also to any provision contained in any Act. Thus, it is clear that if a part of a statute is deleted, Section 6 would nonetheless apply. Secondly, it is clear, as has been stated by referring to a passage in Halsbury’s Laws of England in the Fibre Board’s judgment, that the expression “omission” is nothing but a particular form of words evincing an intention to abrogate an enactment or portion thereof. A delay of even one day would straightaway, without more, attract a penalty of an equivalent amount of duty, which may be in crores of rupees. It is clear that as has been held by this Court, penalty imposable under the aforesaid three Rules is inflexible and mandatory in nature. The High Court is, therefore, correct in saying that an assessee who pays the delayed amount of duty after 100 days is to be on the same footing as an assessee who pays the duty only after one day’s delay and that therefore such rule treats unequals as equals and would, therefore, violate Article 14 of the Constitution of India. It is also correct in saying that there may be circumstances of force majeure which may prevent a bonafide assessee from paying the duty in time, and on certain given factual circumstances, despite there being no fault on the part of the assessee in making the deposit of duty in time, a mandatory penalty of an equivalent amount of duty would be compulsorily leviable and recoverable from such assessee. This would be extremely arbitrary and violative of Article 14 for this reason as well. Even where clandestine removal and intent to evade duty are present, yet the authorities are given a discretion to levy a penalty higher than Rs. 10,000/- but not exceeding the duty leviable. In a given case, therefore, even where there is willful intent to evade duty and the duty amount comes to say a crore of rupees, the authorities can in the facts and circumstances of a given case, levy a penalty of say Rs. 25,00,000/- or Rs. 50,00,000/-. This being the position, it is clear that when contrasted with the provisions of the Central Excise Act itself, the penalty provisions contained in Rules 96ZO, 96 ZP and 96 ZQ are both arbitrary and excessive. - A penalty can only be levied by authority of statutory law, and Section 37 of the Act, as has been extracted above does not expressly authorize the Government to levy penalty higher than Rs. 5,000/-. This further shows that imposition of a mandatory penalty equal to the amount of duty not being by statute would itself make rules 96ZO, 96 ZP and 96 ZQ without authority of law. We, therefore, uphold the contention of the assessees in all these cases and strike down rules 96ZO, 96 ZP and 96 ZQ insofar as they impose a mandatory penalty equivalent to the amount of duty on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act. Load capacity of an induction furnace unit is certainly relevant material referred to in Rule 3(2) to determine the capacity of the furnace installed. It is obvious that it is not necessary to state such load capacity in terms for it to be included in Rule 3(2). - interest and penalty provisions under the Rules 96ZO, ZP, and ZQ of the Central Excise Rules, 1994 are invalid for the reasons assigned in the judgment. - Appeal disposed of.

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• 2015 (11) TMI 1171
  100% EOU - Valuation - clearances of product to two sister units on payment of duty in terms of Notification No.8/97 CE dated 1.3.1997 and Notification No.23/2003 CE dated 31.3.2003 - Captive consumption - Department contended that appellant an EOU determine the assessable value of manufactured good was not correct and accordingly demand were made along with penalty - Held that:- There is specific provision for exemption of certain goods produced in a 100% EOU wholly from raw materials produced or manufactured in India. It is not disputed by the revenue that the instant tea manufactured by the respondent would be covered being a finished product specified in the schedule to the Central Excise Tariff Act. Further, the notification goes on to state that the said tea should be “allowed to be sold” in India in accordance with the relevant EXIM policy. It further goes on to state that the exemption from payment of the duty of excise that is leviable thereunder under Section 3 is what is payable in excess of an amount equal to the duty of excise leviable on like goods produced or manufactured in India produced in an undertaking other than in a 100% Export Oriented Undertaking, if sold in India. - notification states that duty calculated on the said basis would only be payable to the extent of like goods manufactured in India by persons other than 100% EOUs. This being the case, it is clear that in the absence of actual sales in the wholesale market, when goods are captively consumed and not sold, Rule 8 of the Central Excise Rules would have to be followed to determine what would be the amount equal to the duty of excise leviable on like goods. Duty of excise arrived at based on Section 3(1) Proviso (ii) is more than the duty determinable for like goods produced or manufactured in India in other than 100% EOUs. Since the notification exempts anything that is in excess of what is determined as excise duty on such like goods, and considering that for the entire period under question the duty arrived at under Section 3(1) proviso (ii) is in excess of the duty arrived at on like goods manufactured in India by non 100% EOUs, it is clear that the whole basis of the show cause notice is indeed flawed. Further, the show cause notice is based on one solitary circumstance – the fact that goods captively consumed by the two sister units of the unit in question are not “sold”. - notification has been framed by the Central Government, in its wisdom, to levy only what is levied by way of excise duty on similar goods manufactured in India, on goods produced and sold by 100% EOUs in the domestic tariff area if they are produced from indigenous raw materials. If the revenue were right, logically they ought to have contended that the notification does not apply, in which event the test laid down under Section 3(1) proviso (ii) would then apply. This not being the case, we are of the view that the Tribunal’s judgment [2007 (5) TMI 98 - CESTAT, CHENNAI] is correct and requires no interference - Decided against Revenue.

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• 2015 (11) TMI 1170
  Classification - printed PVC sheets - Classification under Chapter 39 or chapter 49 - Order beyond the scope of SCN - Held that:- Even the Assistant Commissioner in his order dated November 19, 1997 correctly proceeds on the footing that by mere printing, the fabric does not lose its original identity. However, despite this finding of the Assistant Commissioner, the Assistant Commissioner went on to levy excise duty twice over in respect of the same product, both times under Chapter 39 Heading No. 39.20. - findings in these paragraphs by the Tribunal have to be set aside on the simple ground that they are beyond the show cause notice of the Revenue, which accepts the fact that at least in the present case, no new product emerges after printing and consequently, therefore, that cannot be said to be any manufacture. On this ground alone, we set aside the Tribunal's judgment and restore that of the Commissioner, making it clear that the classification of the product remains under Chapter 39 Heading No. 39.20 - Decided in favour of assessee.

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• 2015 (11) TMI 1169
  Classification of goods - Held that:- issue involved is purely a question of fact on the basis of which classification of the goods in question is arrived at. In fact, the CESTAT followed its earlier final order [2005 (2) TMI 177 - CESTAT, NEW DELHI] and the appeals thereagainst, viz., [2011 (9) TMI 995 - SUPREME COURT], have already been dismissed by this Court. - Following the same, Decided against Revenue.

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• 2015 (11) TMI 1168
  Availment of CENVAT Credit - Whether the cenvated inputs were actually exchanged between the three units without reversal of equivalent credit or the same were sold out to some other persons - allegation of clandestine removal - Revenue neutrality - Held that:- Tribunal found that once the inputs have been delivered only at the factories of the assessees from the associate companies, then no loss occurs to revenue. The assessees would derive no benefit by not reversing CENVAT credit on the inputs, when sister concerns are also eligible to take CENVAT credit. Therefore, in the absence of cogent and reliable evidence particularly on the diversion of these inputs, the Tribunal applied the doctrine or principle of revenue neutrality. - Tribunal has taken this factual position from order-in-original itself. The only procedure that was required to be complied with was clearance of the raw materials after reversing the credit availed on it. Thus, the duty amount should have been paid and thereafter when these inputs or raw materials were utilized in the manufacture of the final product, the CENVAT credit could have been claimed but this procedure was not followed. - merely because the penalty has been notionally imposed on all the assessees, does not mean that the Tribunal's earlier conclusion, and by applicability of the principle of revenue neutrality, is perverse or vitiated by any error of law apparent on the face of record. Imposition of the notional penalty is for infraction of some procedural rule - No substantial question of law arises - Decided against Revenue.

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• 2015 (11) TMI 1167
  Benefit of serial number 91 of table annexed to Notification No.6/2006 dated 1 March 2006 - supply is not against international competitive bidding - applicant did not produce the essentiality certificate from DGHC - Held that:- Condition no.29 is only relied upon but a bare perusal thereof would indicate that the Tribunal has held that Condition no.29(c)(iv) is inapplicable to the assessee before it. As far as Condition nos.29(c)(i) to (iii) are concerned, the Tribunal found that all such stipulations, as are referred, have to be fulfilled by the importers of goods. These are not applicable to the domestic importers. Upon perusal of Condition no.29, we are satisfied that the Tribunal's factual conclusion does not raise any substantial question of law. Once the Revenue does not dispute that the assessee is a domestic manufacturer and has to satisfy only one of those conditions, particularly that the supply must be of goods in relation to contracts awarded under international competitive bidding procedure, then that condition is squarely satisfied. The condition such as Condition no.29 which pertains to an importer of the goods need not be, in the given facts, satisfied by the domestic importer and that is the conclusion reached by the Tribunal - conclusion of the Tribunal cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. The appeal, therefore, does not raise any substantial question of law - Decided against Revenue.

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• 2015 (11) TMI 1166
  Duty demand - Clandestine removal of goods - Misdeclaration - Held that:- Adjudicating authority had mentioned that the production was recorded by weight but in the sale invoices, the goods were sold by numbers without indicating the weight of the finished goods but nothing was proved that how the stock position was verified regarding sale invoices which only showed numbers without giving their weight. Accordingly, the Commissioner (Appeals) extending the benefit of doubt to the assessee had set aside the order passed by the adjudicating authority. The aforesaid findings of the Commissioner (Appeals) were affirmed by the Tribunal by observing that there was no other evidence on record to prove the clandestine activities of the assessee as the revenue has not conducted further investigations to establish the identity of the buyers or the suppliers of the raw-materials or the transporters. Further, it was held by the Tribunal that mere shortages detected at the time of visit of the officers cannot ipso facto lead to the allegations and findings of clandestine removal. - No illegality or perversity could be pointed out in the aforesaid findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal which may warrant interference by this Court. Accordingly, no substantial question of law arises in this appeal - Decided against Revenue.

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• 2015 (11) TMI 1164
  Maintainability of appeal before HC - Applicability of Notification No.14/2002-CE dated 01.03.2002 - determination of the rate of duty - Held that:- A perusal of the impugned order of the Tribunal clearly shows that the dispute involved in the present case relates to the applicability of Notification No.14/2002-CE dated 01.03.2002 which has a direct bearing on the determination of the rate of duty for the purposes of assessment. Under the circumstances, in the light of the provisions of section 35G read with section 35L of the Central Excise Act, 1944 these appeals are not maintainable before this court - Decided against Revenue.

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• 2015 (11) TMI 1163
  Imposition of penalty - Concealment of particulars - Held that:- If there is any concealment in that application and a penalty has been imposed by the Settlement Commission on the ground of such concealment, then a second application before the Settlement Commission is barred, in my interpretation of Section 32-O(i) of the said Act - The order of the Settlement Commission does not specify whether this kind of a penalty was imposed on the writ petitioner. Just because a penalty is imposed on a show-cause notice the writ petitioner’s application before the Commission was not entertained. - Matter remanded back - Decided in favour of assessee.

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• 2015 (11) TMI 1162
  SSI Exemption - Valuation - clubbing of clearances - inclusion of value of clearances - Dummy units - Non Speaking order - Held that:- If there is an element of independent existence of a unit, the Department has to issue Show Cause Notice to such unit to sustain the plea for the purpose of clubbing the clearances. In the instant case, though there is material to that effect, no notice has been issued and the Tribunal remanded the matter for issuance of notices and that has been accepted by the assessee and not by the Department. - department should have issued notice to all the units. However, learned counsel appearing for the respondent / assessee states that in respect of the other matter for which no appeal has been filed, they are not aggrieved and that the order of the Tribunal need not be set aside only on the ground that it has called upon the department to issue notice to the two units namely CTGC and GCC. According to him, the issue is only regarding the clubbing of clearances which could be agitated on merits before the authority as and when Show Cause Notice is issued in terms of the orders of the Tribunal. The authority concerned is directed to issue show cause notice to allthe parties, afford them an opportunity of hearing and pass appropriate orders afresh, on merits and in accordance with law. - Matter remanded back.

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• 2015 (11) TMI 1161
  Valuation of goods - section 4 - Related person - Held that:- When, the assessee, in addition to sale of the goods produced by him to related person on regular basis, also sells the same goods on regular basis to independent buyers, the third proviso to section 4 (1) (a) would not apply and in that case the normal price at which the assessee was selling the goods to independent buyers which would be the assessable value even in respect of the sales to related persons. The reason for this is that in terms of provisions of section 4 (1) (a), as the same stood during the period of dispute, when the goods manufactured by an assessee attracted duty at an ad-valorem rate, the value of the goods for the assessment of duty was deemed to be the normal price which was defined as the price at which such goods are ordinarily sold by the assessee to the buyer in course of the wholesale trade for delivery at the time of place of removal, where the buyer is not related person and price is the sole consideration for sale. It is assumed that PALI and Philips India Limited were related persons within the meaning of this term as defined in the section 4 (4) (c), the assessable value of the goods sold by PALI to Philips India Limited would be the price at which the similar goods were being sold by PALI to Bajaj Electricals Limited and in this regard, the department has not refuted the plea of PALI that the sale price of the goods manufactured by them to PIL was more or less same as the sale price of similar goods to Bajaj Electricals Limited. In view of this, it cannot be said that the PALI, in respect of their sales to Philips India Limited have not paid duty on the normal price. When undisputedly 2 to 3 per cent of the sales of PALI were to Bajaj Electricals Limited and neither the genuineness of these transactions is disputed by the department nor the department has alleged that PALI and Bajaj Electricals Limited were related person within the meaning of this term as defined in section 4 (4) (c), the department cannot invoke 3rd proviso to section 4 (1) (a) and charge duty in respect of the sales of PALI to Philips India Limited at the sale price of Philips India Limited to its dealers. Therefore, irrespective of whether PALI and Philips India Limited were related persons or not, the impugned duty demand against PALI and imposition of penalty on them and Philips India Limited and Philips, Netherlands is not sustainable. - Decided in favour of assessee.

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• 2015 (11) TMI 1160
  Denial of CENVAT Credit - Capital goods - whether the appellant was eligible for cenvat credit of duty paid on MS sheets, angles, plates, beams etc - Held that:- As per directions of the Hon'ble High Court does not require to go beyond the observations therein. Since the matter has been remanded for a limited consideration of the decisions applicable to the facts in this case and also to consider the decision in the case of Sree Rayalaseema Hi-strength Hypo Ltd. [2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT] and apply the same to the facts in this case, going beyond that would not be appropriate. Therefore even though I have reproduced several other decisions hereinabove, I consider that the issue has been dealt with adequately as per the directions of the High Court - High Court of Andhra Pradesh decision in the case of Rashtriya Ispat Nigam Ltd. (2011 (4) TMI 1098 - ANDHRA PRADESH HIGH COURT ) is applicable to the facts of this case and further there is another decision of Hon’ble High Court of Rajasthan in the case of Hindustan Zinc (2006 (5) TMI 44 - HIGH COURT RAJASTHAN ) which has been affirmed by the Hon’ble Supreme Court which also considers similar set of facts and therefore is applicable to the issue - Decided against Revenue.

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• 2015 (11) TMI 1159
  Denial of interest claim - Interest on delayed refund - Scope of Section 11BB - Held that:- Appellant are entitled to the claim of interest on delayed refund of CENVAT Credit on the four applications filed between 25.07.1994 and 28.04.1995. From the table mentioned as above it seems that the interest amount against the delayed refund claims were calculated taking the date of filing of such claims as the relevant date. However, for pending refund claims as on 26.05.1995, the date of enactment of Sec.11BB, the payment of interest shall be computed in accordance with proviso to Sec. 11BB i.e from 26.08.1995 and not from the date of application of refund in view of the judgment of Hon’ble Rajastan High Court in J.K.Cement Works Case(2004 (2) TMI 78 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR). Thus, the case is remanded to adjudicating authority only for the limited purpose of verification/computation of interest amount claimed/to be paid, as the case may be, taking the relevant date as 26.08.1995. - Appeal disposed of.

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• CST, VAT & Sales Tax

• 2015 (11) TMI 1147
  Levy of tax under MVAT Act - Petitioner engaged in providing network connectivity services to its closed group of customers - Held that:- The first appellate authority would have to decide as to whether the Petitioner could be subjected to the levy under the MVAT Act. In other words, the applicability of the Act to the business of the Petitioner would have to be determined first. If the Petitioner contends there is absolutely no transfer of any goods or even any right to use the goods during the course of rendering of the services, then, that argument will have to be considered seriously and dealt with. That would have to be dealt with in the backdrop of the scheme of the Act and the object and purpose sought to be achieved by it. - imposition of a condition of pre-deposit would denote as to how the authorities have prima facie prejudged the issue raised for their consideration. If there is an arguable point and a strong prima facie case, then, other aspects come into play and namely how the rights and equities have to be balanced. They could have been balanced in the given circumstances by not imposing a condition of cash deposit but to provide security and to the satisfaction of the authority. That would ensure, in the event the Petitioner is held liable to pay the tax that, that amount can be recovered by adjusting the security and also by initiating every means of payment. At least some amount then is available for recovery. - Petitioner will furnish a bank guarantee - Petition disposed of.

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• 2015 (11) TMI 1146
  Challenge to the luxury tax is levied on the hospitals in view of the amended definition of the “luxury provided in a hospital” by virtue of the amendment to clause (7A) to section 2 of the Assam Tax on Luxuries (Hotels and Lodging Houses and Hospitals) Act, 1989 - Held that:- It is pertinent to note that in judgment in Godfrey(supra) the Supreme Court has laid down the test to determine whether the facility is a luxury or otherwise, “the requirements of the common man is a determinative factor to find out whether any facility is a luxury or otherwise. It is further observed that the facility so provided should be costly and generally recognised as beyond the necessary requirement of an average member of the society” - If this test is considered, any facility like the air-conditioner and television provided to the patient or his attendant in a private hospital should definitely be construed as a luxury and liable for luxury tax. Besides, the Assam legislature has brought about an amendment to the Assam Tax on Luxuries (Hotels and Lodging Houses and Hospitals) Act, 1989, specifically to define the “luxuries provided in a hospital” with a determinate connotation. The said definition includes the facilities like air-conditioner and television provided to the patient or his attendant is within the ambit of a luxury. - The dissection of the definition of “luxury provided in the hospital” consists of multiple components: a residence provided to a patient or his attendant in the hospital with the facility of air-conditioner and television or radio or any other services provided thereto in connection with the residence. - The rate of tax is variable as per the luxury provided in a hospital. If only a room is provided without having the facility of air-conditioner and television, such a situation would not come within the definition of “luxury provided in the hospital” - Decided against assessee.

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• 2015 (11) TMI 1145
  Levy of higher rate of tax on purchase turnover - Section 3 (5) of the Tamil Nadu General Sales Tax Act - benefit of concession rate of duty - Held that:- To appreciate the case of the appellant, it is essential to look into Section 3 (5) of the Act on which heavy reliance is placed by the learned counsel for the appellant. A reading of Section 3 (5) of the Act makes it clear that the tax payable by a dealer in respect of sale of goods mentioned in the Eighth Schedule to any other dealer for installation and use in his factory site situate in the State for the manufacture of any goods shall be @ 3% on the turnover relating to such sales. - As seen from the documents available on record, when the original authority and the appellate authority accepts that those air driers are installed in the factory site situate in the State for the manufacture of any goods, it only means that the goods in question should be installed in the factory site in the course of manufacture of any goods. There is no intentment of actual use of the goods in the manufacture. The words “installation of in his factory” or “use in his factory” cannot be misread as to be used as inputs in the manufacture of goods. They are machinery used by the factory at site for manufacture of goods. - requirement as envisaged under Section 3 (5) of the Act is fully satisfied in this case. The goods are installed and used in the factory site. Therefore, the assessee's contention that he is entitled to concession rate of tax at 3% is justified and is liable to be allowed. The Tribunal has erred in rejecting the contention of the assessee that it is entitled to the concessional rate of tax. - Decided against Revenue.

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• Wealth tax

• 2015 (11) TMI 1189
  Violation of the provision of the Rule 46A of IT Rule, 1962 - Non confrontation of contract notes evidencing sale of shares by the Assessee through a broker at Mumbai - Held that:- conclusions of the CWT(A) are not based only on the evidence regarding share transactions carried out by the Assessee at Mumbai. The payment of salary to Mr.Mukherjee and his correspondence and reports on various business information obtained from Mumbai and sent to Kolkata have not been disputed by the WTO. The payment of conveyance expenses and salary to Mr.Mukherjee showed that he rendered services to the Assessee at Mumbai. Mr.Mukherjee was using the Mumbai property both for his residence as well as for business purpose of the Assessee. These facts were not disputed by the WTO. The absence of trade license considering the nature of services rendered by Mr.Mukherjee in our view will not be very material. - The fact that the land is described as “Sali land” in the sale deed which was already available on record is not disputed by the Revenue. The evidence of payment of land revenue only supports the document already on record. Besides the above, the WTO did not agree with the stand of the Assessee mainly on the basis that in the past the land in question was considered as “Asset”. In our view therefore the conclusions of the CWT(A) therefore cannot be said to be erroneous or based only on the evidence of payment of land revenue to the Government. - Decided against Revenue.

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