TMI Tax Updates - e-Newsletter
November 3, 2014

Case Laws in this Newsletter:

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

TMI SMS

• Whether appellant is eligible to take CENVAT credit for the entire duty paid by a 100% EOU under proviso to Section 3(1) of the Central Excise - Held Yes - Tri

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Articles

1. NON ELIGIBLE SERVICE TAX CREDIT BY JUDICIAL DECISIONS

   By: DR.MARIAPPAN GOVINDARAJAN

2. SURRENDER OF REGISTRATION CERTIFICATE

   By: Dr. Sanjiv Agarwal

News

1. Term of the Fourteenth Finance Commission Extended by Two Months up to 31st December, 2014

2. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

3. Auction for Sale (Re-Issue) of Government Stocks

4. Major Focus of the Government is to Bring Back the Growth Momentum: Finance Minister

5. Auction for Sale (Re-Issue ) of ‘8.30 per cent Government Stock, 2040’

6. Auction for Sale of a new Government Stock of 19 Years

7. Auction for Sale (Re-Issue ) of ‘8.60 per cent Government Stock, 2028’

8. Auction for Sale (Re-Issue) of ‘8.27 per cent Government Stock, 2020’

Notifications

Customs

1. 100/2014 - dated 31-10-2014 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

Circulars / Instructions / Orders

Income Tax

1. ORDER NO. 12/FT&TR/2014 - dated 30-10-2014

U/S 144C Income Tax Act 1961 - Jurisdiction of DRP for cases and class of cases amended by CBDT.

2. ORDER NO. 11/FT&TR/2014 - dated 30-10-2014

Constitution of Dispute Resolution Panel-IV at Mumbai by CBDT.

Highlights / Catch Notes

Income Tax

• Court Rejects 12AA Registration: Pension Payments to GCDA Employees Not Charitable u/s 2(15) Income Tax Act.

  Case-Laws - HC : Rejection of application of registration u/s 12AA - whether paying pension to the employees of the GCDA comes under the scope of charitable purpose or not u/s 2(15) - Held no - HC
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• Chit Funds: Deduction on Bad Debts Allowed for Defaulted Installments in Both Running and Terminated Groups.

  Case-Laws - AT : Chit funds - Claim of deduction on bad debts on running and terminated groups – bad debts can be allowed to the extent of instalments defaulted by the prized subscribers and written off as bad debt in the books of the assessee - AT
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• Assessee Must Deduct TDS on Stock Exchange Transaction Charges Under Income Tax Act Section 194J.

  Case-Laws - AT : TDS liability on transaction charges paid to stock exchange - transaction charges are concerned, the assessee was liable to deduct TDS u/s 194J - AT
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• Reassessment Validity u/s 147: Section 292BB Inapplicable for Notices Issued by Assessing Officer u/s 148.

  Case-Laws - AT : Reopening of assessment u/s 147 – provisions of section 292BB of the Act is not applicable as the issue in dispute is with regard to the validity of jurisdiction assumed by the AO for issuing notice u/s 148 of the Act - AT
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• Penalties u/s 221 for Tax Default: Assessed Tax Non-Payment or Self-Assessment Tax Default.

  Case-Laws - AT : The provisions of s. 221 providing for penalty payable when tax is in default applies to both the situations, i.e., when assessee is in default in respect of the assessed tax or is deemed to be in default in making the payment of tax under “self-assessment tax“ as per the return of income filed by the assessee - AT
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Customs

• Refund Claim Granted: Appellant Can Recover Interest Paid Under Protest Without Addressing Unjust Enrichment Bar.

  Case-Laws - AT : Refund of interest - Unjust enrichment - Payment of interest under protest - appellant is not required to pass bar of unjust enrichment and is entitled for refund claim of interest. - AT
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• Department Unable to Justify Additional Charges Due to Lack of Connection Between Royalties and Imported Goods Sale Conditions.

  Case-Laws - AT : Valuation of goods - The department could not show that the royalty and other charges were for the to the imported goods and they were as a condition of sale of such imported goods - no demand - AT
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Service Tax

• No Intent to Evade Duty: CENVAT Credit Show-Cause Notice Not Required, Extended Limitation Period Unnecessary.

  Case-Laws - AT : CENVAT Credit - Extended period of limitation - assessee company was in continuous correspondence with the Superintendent of Central Excise - there was no intention to avail wrong credit or evade duty and there was no need for issue of show-cause notice - AT
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• Sugar Factory Lease Classified as Renting of Immovable Property for Tax Purposes: Implications for Assessee.

  Case-Laws - AT : Classification - assessee leased out their sugar factory - As the whole factory has been leased out therefore we find that this will more appropriately covered under Renting of Immovable Property service - AT
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Central Excise

• ISD Credit Distribution Upheld: No Evidence of Fraud or Misstatement Found in Compliance with Regulations.

  Case-Laws - AT : Distribution of credit by the Input service distributor (ISD) - distribution of proportionate credit - the allegation of suppression, fraud, collusion, wilful misstatement or intent to evade payment of duty does not sustain - AT
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• Appellant Eligible for Full CENVAT Credit from 100% EOU Duty u/r 3(1) and Section 3(1) Proviso.

  Case-Laws - AT : Whether appellant is eligible to take CENVAT credit under Rule 3(1) of the Cenvat Credit Rules, 2004 for the entire duty paid by a 100% EOU under proviso to Section 3(1) of the Central Excise Act, 1944 - Held yes - AT
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• Transfer of CENVAT Credit Approved After Asset and Liability Acquisition from M/s ARCIL, Ownership Change Confirmed.

  Case-Laws - AT : Transfer of CENVAT Credit - change in ownership - appellant herein had procured the assets and liabilities from M/s ARCIL, which would include the credit balance - credit allowed - AT
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• Assessee Avoids Penalties for Overpaying Beyond Duty Liability on Processed Goods Not Constituting Manufacturing.

  Case-Laws - AT : Cenvat Credit - removal of goods after processing not amounting to manufacture - There is no dispute that the amount paid by the appellant is more than the cenvat credit availed. In my view, therefore the assessee should not be penalized for paying more amount than their actual duty liability. - AT
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VAT

• Interest Charged from Return Filing Date if C Forms Missing; From Assessment Order Date if Form Rejected on Technical Grounds.

  Case-Laws - HC : Levy of Interest from the date of filing of return or from the date of assessment - Where C form are not submitted, interest to be paid from the date of filing of return - where Form is rejected by the AO on technical ground, interest to be paid from the date of assessment order - HC
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Case Laws:

• Income Tax

• 2014 (11) TMI 43
  Disallowance u/s 40(a)(ia) – TDS amount deposited before before the due date of filing of return – Effect of amendment – Held that:- Following the decision in ITO vs Nem Chand Jain [2014 (1) TMI 1263 - ITAT JODHPUR] - the assessee deducted TDS which was not paid to the account of Central Govt. within the prescribed time, however it was paid before the due date of filing the return specified in Section 139(1) of the Act - addition u/s 40(a)(ia) of the Act cannot be made if the payment of tax deducted at source has been made before the due date of filing the return of income for the year - payment of TDS has been made before the due date of filing of the return u/s 139(1) of the Act, therefore, the CIT(A) was fully justified in deleting the addition made by the AO – Decided against revenue.

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• 2014 (11) TMI 20
  Deletion of penalty u/s 271(1)(c) - Capitalization of interest – Held that:- The Tribunal was rightly of the view that the changes in capitalization or de- capitalization of interest were effected by the assessee consequent to well controlled and regulated statutory regime under the aegis of Central Government - The assessee's book results after statutory audit are subjected to audit and correction of CVC and CAG - The changes carried out by the assessee are in consonance to the recommendations of CVC and CAG - these details were filed along with the return of income - Penalty imposed under section 271(1)(c) is a civil liability - The section is enacted as a provision to assist and to vigorously check and prevent loss of revenue, but penalty for concealment can be imposed after noticing and applying the provisions of Section 271 (1)(c) of the Act including Explanation 1 - This is the primary and the basic flaw in the penalty orders passed by the AO - the Tribunal take due notice of the factual matrix and examine the question of bonafides - It stands recorded that the returns filed and income declared was as per the statutory audit report and the interest paid had been capitalized. Subsequently, audit objections that excessive interest had been capitalized, were raised by CVC and CAG - a part of interest so capitalized should have been treated as revenue expenditure - In order to comply with the said objections, excess interest was decapitalised - The assessee had given truthful and cogent explanation without concealing or hiding facts why interest relating to earlier years, which was capitalized, had been accounted for as a liability in the current years - It cannot be doubted or even questioned that the assessee had disclosed all facts relating to the explanation offered - The Tribunal after examining the factual matrix and the explanation given by the assessee, have come to the conclusion that the explanation of the assessee was bona fide – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (11) TMI 19
  Revision u/s 263 – Inquiry conducted or not - Whether or not the AO before passing the order u/s 143(3) of the Act had conducted enquiries which were “necessitated and required” considering the substantial increase in the capital account of the partners as well as investments made by the assessee firm in the form of capital assets – Held that:- The finding recorded by the Tribunal on the basis of documents and papers filed before them, was that the enquiry was duly made - The Tribunal has accepted that the assessee had filed letter dated 26.05.2010 and had also filed copies of income tax returns, computation of income, copy of statement of respective bank accounts of the partners to show that the said additions to the capital account were genuine - Similarly bills etc. for purchase of assets and relevant details were filed during the course of the assessment proceedings - no attempt was made by the CIT to ascertain from the then AO, who had passed original assessment order u/s 143(3) of the Act to assure the correct factual position - nothing prevented or obstructed the Commissioner from ascertaining the truth and verifying the correctness of the contents of the documents – absence or failure to properly maintain records cannot per se and by itself, would be a ground to invoke Section 263 of the Act i.e. the assessment order was erroneous and prejudicial to the interest of the revenue – revenue was not able to ensure the trustworthiness of their records and has, therefore, proceeded on the basis that no enquiry or investigation was conducted by the AO – The Tribunal has accepted the stand of the assessee that confirmation, documents, details were filed and ascertained by the AO – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (11) TMI 18
  Rejection of application of claim of exemption u/s 10(23C)(vii) – Delay in filing application beyond stipulated date of 30th September 2013 – Held that:- There is no basis or foundation in the submission that the delay in filing the application for an exemption u/s 10(23C)(vi) of the Act beyond the statutory date of 30 September 2013 should have been condoned – assessee has already filed an application u/s 10(23C)(vi), though for AY 2014-15 – thus, the order of the Principal Chief Commissioner does not suffer from any error – Decided against assessee.

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• 2014 (11) TMI 17
  Taxability of administrative expenses - Whether the Tribunal was right in holding that in terms of minutes of meeting held on 7th September, 1995 administrative expenses of 1.5% had accrued in respect of residential quarters at Andrews Ganj and were taxable as income – Held that:- There was merit in the submission made as the recorded minutes specifically refer to the position with reference to development of community centre complex at Andrews Ganj, New Delhi and not to the residential quarters under construction at Andrews Ganj - overhead charges were leviable by the assessee only in respect of Andrews Ganj community centre and not on the development of residential flats at the Andrews Ganj project - The letter has been kept on record - assessee had never received 1.5% administrative expenses in respect of the residential quarters in Andrews Ganj project - the stand of the assessee that the notes of the meeting held on 7th September, 1995 related to the development of community centre complex at Andrews Ganj, New Delhi and not to residential quarters is correct - There was no accrual of income in case the Government of India had not agreed to pay any overhead expenses or administrative charges @ 1.5% in respect of residential quarters at Andrews Ganj Complex, New Delhi – thus, the addition is to be set aside – Decided in favour of assessee.

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• 2014 (11) TMI 16
  Rejection of application of registration u/s 12AA - whether paying pension to the employees of the GCDA comes under the scope of charitable purpose or not u/s 2(15) – Held that:- The object of the Trust is to pay pension to the employees of the GCDA or their dependents from out of the corpus collected from the beneficiaries - the employees of the GCDA are contributing and from out of that contribution, they or their dependents are getting pension - Such an object implemented by the appellant-Trust cannot be said to be an object of general public utility attracting Section 2 (15) of the Act - The eligibility for registration depends upon the object of each of those Trusts - Such objects are not present in the case of the present Trust – thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (11) TMI 15
  Scope of undisclosed income u/s 158BA and 158BB Transactions not recorded in the books of accounts - Whether the Tribunal was correct in holding that the additions of unexplained investment in shares, bullion etc., do not constitute undisclosed income and it was not liable to be brought to tax as per section 158BB or not Held that:- The undisclosed income of the block period shall be the undisclosed income as defined u/s 158BA, BB and other documents and such other materials or information as are available with the AO and relatable to such evidence - the computation of undisclosed income of the block period is to be determined - The Tribunal has not looked into Section 158 BB (1) of the Act in coming to its conclusion thus, the matter is to be remitted back to the Tribunal for consideration in respect of the investments made in those four items Decided in favour of revenue.

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• 2014 (11) TMI 14
  Determination of status of assessee - Residential or not - Held that:- Following the decision in Shri Suresh Nanda Versus ACIT, Central Circle-13, New Delhi [2014 (4) TMI 739 - ITAT DELHI] - although, the assessee has, in the preceding 4 years been in India for a period in excess of 365 days in India, in none of years has he been in India for a period in excess of 182 days - assessee was not a resident of India - This is a pure question of fact based on a plain reading of the provisions of section 6 - All that has to be seen is the number of days that the respondent/assessee has spent in India in the year in question as also in the preceding 4 years – thus, the order of the CIT(A) is upheld – Decided against revenue. Addition of commission income earned in defence deals - Held that:- No addition can be made based on the document - Dr.MV Rao has not been questioned on these documents - The document does not indicate that services have been rendered by the assessee or that any commission was received - Thus, no addition can be made based on the document - no mention or a reference was made to the assessee Mr.Suresh Nanda, much less any suggestion being made that Mr. Suresh Nanda was involved in defence deals or that he had earned any commission - the statement does not support the contentions of the Revenue that the assessee has earned commission - Dr.MV Rao has not admitted the ownership of the document found in his premises though the presumption is against him - In any event the documents have not been demonstrated as those which belong to the assessee by the Revenue - no addition can be made without further evidence being brought on record, that the documents in question actually did not belong to Dr.MV Rao, but in fact belong to the assessee - Addition cannot be made based on presumption – thus, the order of the CIT(A) is upheld – Decided against revenue. Unexplained investments made in M/s Claridges Hotels Pvt.Ltd. and in M/s Claridges SEZ Pvt. Ltd. – Held that:- As the assessee being a non-resident, there is evidence of dividend having been received by him outside India from a company incorporated outside India which is the source of investment in UBS Mauritius to the extent of 20% - Hence that income cannot be subjected to tax - There is also finding of fact that the remaining 80% of the shareholding belong to Mr. Hamilton Andrews and the same has been confirmed by him - as decided in assessee’s own case for the earlier assessment year, it has been rightly held that the assessee was not a resident in India, it is axiomatic that the addition u/s 68 would have to be deleted because it was a transfer from the respondent/assessee’s foreign account to the domestic account - the burden to prove that a particular income has either accrued or received in India is on the Revenue, if it chooses to bring to tax a particular receipt as income - In cases where exemptions or deductions are claimed from taxable income, then the burden of proof is on the assessee. The statement given by the assessee to the DIT Investigation, does not better the case of the Revenue, as the assessee has claimed that his interest in M/s Claridges Hotels P.Ltd. is only by way of investments made through M/s UBS, Mauritius, in which company he has only 20% stake. Simply because the assessee is the Chairman of M/s Clardges Hotels P.Ltd. and because his son was Managing Director of the company, it does not support the addition, the investment in the hotel is made by M/s UBS Ltd., Mauritius in while the company which the assessee controls it is a minority share holder - The assessee has demonstrated that he controls only 20% stake holder in M/s UBS Ltd., Mauritius - The dividend earned by the assessee from a company controlled by him i.e. M/s UBS Trading FZC was invested in M/s UBS Ltd. Mauritius, through Infotech Services Ltd. – Decided against revenue. Unexplained deposits in Deutsche Bank, Singapore – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the decision with regard to it would depend on whether the assessee is regarded as a resident or a non-resident - In case he is regarded as a resident then, obviously, this addition would have to be made - But, if he is regarded as a non-resident then this addition will have to be deleted - This is exactly what the Tribunal has done - assessee was not a resident in India in the years, it is axiomatic that the addition u/s 68 would have to be deleted because it was a transfer from the assessee’s foreign account to the domestic account – Decided against revenue. Payment made to assessee’s wife – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the addition cannot be upheld inasmuch as both were separated by way of deed of settlement dated 4-4-1998 and the payments based thereon on were already made - The addition has been made not based on any evidence or incriminating material, indicating that any payment was made out of books - The sole basis of addition is an assumption that there was some unwritten understanding between the assessee and his estranged wife Smt. Renu Nanda - lesser amount for support was paid by the assessee as compared to earlier years - the basis of addition being only on presumptions, there being no material what so ever, the addition is deleted – Decided against revenue.

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• 2014 (11) TMI 13
  Chit funds - Claim of deduction on bad debts on running and terminated groups – Bad debts allowable u/s 37(1) or business loss u/s 28 - Held that:- Following the decision in M/s. Shriram Chits (P) Ltd. Versus The Joint CIT (OSD), Hyderabad [2013 (5) TMI 227 - ITAT HYDERABAD] - The amount of loss incurred by the assessee has to be allowed on both running and terminated chits if irrecoverable if the prized chit amount has gone out of the hands of the assessee - bad debts can be allowed to the extent of instalments defaulted by the prized subscribers and written off as bad debt in the books of the assessee – thus, the order of CIT(A) is upheld in allowing the claim of the assessee for deduction on account of bad debts relating to running chits and terminated groups – Decided against revenue. Taxability of foreman’s dividend – Held that:- Following the decision in M/s. Shriram Chits (P) Ltd. Versus The Joint CIT (OSD), Hyderabad [2013 (5) TMI 227 - ITAT HYDERABAD] -in case of chit fund business, principle of mutuality will not apply. Accordingly, the claim of exemption of Foreman's dividend was rejected and addition under reference was made - there is no applicability of "mutuality" on this income – the order of the CIT(A) confirming the taxability of foreman’s dividend in the hands of the assessee upheld – Decided against assessee. Commission on cancelled chit funds – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that from out of the amount that is payable to the defaulting subscriber consequent to his replacement by another person the company is entitled to deduct 5% as commission - This has nothing to do with the regular commission Income of the assessee - the commission Income accrues when the accounts have been finally settled to the defaulting non subscriber to our mind appears to be the correct position - The commission/ remuneration to the foreman in that case was sought to be recognised on the completion of chit method and had nothing to do with the type of additional commission receivable in case of substitution of a subscriber - The natures of Income In both these cases are different - The further commission of 5% receivable from a defaulting subscriber consequent to his removal and substitution on a full and final settlement of a defaulting subscriber account is recognised as Income on the finalisation of the issues - the order of the CIT(A) is upheld in deleting the addition – Decided against revenue. Addition on payment of royalty – Held that:- As decided in assessee’s own case for thea earlier assessment year, it has been held that when the assessee commenced its operation, ails its employees were from holding company who had prior experience in this line - even the assessee looks for managerial support, from its holding company which is again provided - The holding company is also stated to have conducted periodical meetings with the executives of the assessee in order to monitor its meetings - the payment Is for, legitimate benefit taken in the course of business and from any standard, it cannot be said that payment of Rs. 1 lakh as royalty is sufficient to produce the business of the magnitude procured by the assessee over the years – the order of the CIT(A) is upheld in deleting the disallowance on payment of royalty – Decided against revenue.

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• 2014 (11) TMI 12
  Reversal of provision for revaluation of liability – Held that:- The assessee has revalued its liability to M/s. Ambalal Sarabhai Enterprises Ltd. (ASE Ltd.) and increased the same by Rs. 28,23,735 - in normal parlance such increase in liability is not an expense incurred wholly and exclusively for the purposes of business and is therefore not allowable as deduction to the assessee - on similar revaluation made during the year when a debit has arisen in the profit and loss account because of write back of the liability which was written down in earlier year, such debit amount in the profit and loss account to the extent to which it was assessed as taxable income in the AY 1996-97 ought to be allowed as deduction as business loss to the assessee - when no cessation or increase in real liability takes places then the taxable income of the assessee is not effected merely because of passing entry of revaluation of liability in the books of the assessee - when no cessation of liability took place in the AY 1996-97 when the assessee by a book entry reduced its liability on revaluating the amount of reduction was treated by the Department as taxable income of the assessee and therefore when to that extent when liability is again enhanced by the assessee in its books of account, the enhanced amount is to be allowed as deduction from taxable income on the very same analogy - Rs. 28,23,735/- enhanced as liability during the year being part of Rs. 82,47,082/- which was reduced as liability during the AY 1996- 97 and assessed as taxable income of the assessee for that AY – thus, the order of the CIT(A) is modified – Decided against revenue. Disallowance u/s 14A – Held that:- No material was brought on record by the assessee to show that the investments in shares of M/s. Paras Petrofills Ltd. were not made out of interest bearing funds of the assessee and that the assessee had sufficient interest free funds for making such investments in shares – there was no reason to interfere with the order of CIT(A) – Decided against assessee. Confirmation of adhoc disallowance out of staff welfare expenses – Held that:- CIT(A) confirmed the action of the AO - assessee contended that the disallowance was made without pointing out the items of the expenses in respect of which the assessee had not maintained the vouchers and therefore, the AO is not justified in making disallowance of expenses on ad-hoc basis - AO has not pointed out for which items of the expenditure the assessee has not maintained the vouchers – Decided in favour of assessee. Payment made to employees contribution to the Provident Fund and ESI – Held that:- Following the decision in CIT v. Gujarat State Road Transport Corporation, [2014 (1) TMI 502 - GUJARAT HIGH COURT] - if the assessee has not credit the employees' contribution to the employees' account in the relevant fund or funds on or before the due date mentioned in the Explanation to section 36(1)(va), the assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO – Decided in favour of revenue. Disallowance out of vehicle expenses – Held that:- The tax is payable to the RTO for plying of vehicle on the road - Till immediately preceding year, the RTO was collecting tax every year and only in this year the RTO decided to levy life time tax on the vehicle of the assessee which was already used by the assessee and was not a case of acquisition of any new vehicle - By making this payment the assessee has not acquired any new asset - By making this payment to the RTO, the assessee is entitled to ply vehicle on road without which the assessee would not be able to ply the vehicle on road - the collection of road tax by RTO as one time payment was revenue expenditure – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (11) TMI 11
  Depreciation on assets disallowed – Assets put to use during the year for business purpose or not – Held that:- As it has been held in COMMISSIONER OF INCOME TAX-IV, NEW DELHI Versus INSILCO LIMITED [2009 (2) TMI 31 - DELHI HIGH COURT] – the assessee has followed the prescribed accounting standards - the expression ‘used for the purposes of business’ appearing in Section 32 of the Act also takes into account emergency spares which even though ready for use are not as a matter of fact consumed or used during the relevant period, as these are spares specific to a fixed asset and will in all probability be useless once the asset is discarded - the expression used for the purpose of business appearing in section 32 of the Act also takes into account emergency spares which even though ready for use are not as a matter of fact are not as a matter of fact consumed or used during the relevant period as these are spares specific to a fixed assets and will in all probability be useless once the asset is discarded - first the nature of the spare has to be established and then the case law has to be applied - Since the nature of spares has not been established nor the same were examined, the matter is to be remitted back to the AO fresh examination – Decided in favour of assessee. Set off of interest expenses disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the interest expenditure incurred by the assessee cannot be adjusted against interest income earned by the assessee upto the date of commencement of business - interest expenditure incurred by the assessee during the pre-operative period upto the date of the commencement of the business cannot be adjusted against the interest income earned. Provision of network and repair expenses – Held that:- The authorities below have totally erred in treating the provision of expenses not allowable - It is only those provisions which are contingent liability which are not allowable - the provision was made for the repairs in this regard as the relevant bills were not received and payment thereof was not made upto the close of the assessment year - in accordance with accrual system of accounting, the provision in this regard was created - Hence, the provision for network repair and maintenance expenses cannot be said to be a provision made for contingent expenses - There is no contingency in the expenditure to be incurred in this regard - The expenditure has to be incurred though the exact amount was not ascertained – thus, the order of the CIT(A) is set aside – Decided in favour of assessee. Rent expenses disallowed - Held that:- AO had made the disallowance in this regard, as some of the details were not available before the AO - assessee also agreed that the matter may be remitted to the file of the AO – thus, the matter is remitted back to the AO for examination of the details as furnished by the assessee in this regard – Decided in favour of assessee. Disallowance of expenses – Held that:- The provisions made by the assessee cannot be treated as contingent liability when nothing has been brought by the Revenue on record that expenditure in this regard was contingent in nature - The provision was made as the payment in this regard could not be made upto the close of the year as the bills in this regard were received late - Hence, there is no contingency in the expenditure to be incurred - Only the exact amount has not been ascertained - following the mercantile system of accounting such provision cannot be disallowed - thus, the order of the CIT(A) is set aside – Decided in favour of assessee. Disallowance out of brand launch expenses – Held that:- The assessee has incurred expenditure which are in the nature of brand launch expenses - the expenditure incurred upto the pre- operative period has been capitalised and expenditure incurred after the operation has started have been debited to revenue - there is no concept of deferred revenue expenditure in taxation laws - The amount has actually been incurred by the assessee as such the same is allowable in the entirely – thus, the order of the CIT(A) is set aside – Decided in favour of assessee. Allowability of set off of interest expenses against interest income – Held that:- Assessee’s business had not commenced during the previous year - It commenced only in the subsequent year in June, 2002 - In December, 2001 assessee has taken loan from the bank and assessee gave the same to its holding company - Assessee has adjusted the interest expenditure incurred in this regard with the interest income earned and offered the balance for taxation under the head ‘income from other sources’ - The interest expenditure incurred by the assessee are liable to be considered under the head ‘income from other business’ - The interest income earned is liable to be assessed under the income from other sources - assessee’s claim that interest expenditure incurred should be netted off against the interest income is not sustainable. Following the decision in Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT 1997 (7) TMI 4 - SUPREME Court] - any income from non-business sources could not be set off against the liability to pay interest on funds borrowed for the purpose of plant and machinery, etc. even before the commencement of the business of the assessee – thus, the interest expenditure incurred for setting up of the business before the commencement of the business are to be computed under the preoperative expenses and are to be considered under income from business - Hence, the interest income earned, which is from the nonbusiness source cannot be adjusted against the liability to pay interest on funds borrowed of setting up of its business for purchase of plant and machinery etc. before the commencement of the business of the assessee – the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (11) TMI 10
  Amount paid covered u/s 194J or not - Compliance of TDS provisions - Business of rendering various telecommunication services including landline and internet services - Whether the payment made by the assessee company to M/s. Records and Data Warehousing Pvt. Ltd. for the services rendered in pursuance of the Master Services Agreement is in the nature of payment to contractor as envisaged in S.194C or fee for technical services as covered by S.194J or not - Held that:- The amount was paid by the assessee company to M/s. Records and Data Warehousing Pvt. Ltd. for the services rendered in pursuance of a Master Services Agreement executed on 8th September, 2009 - services provider M/s. Records and Data Warehousing Pvt. Ltd. has necessary infrastructure, manpower and experience in providing world class record management services and it has base financial capabilities to perform the record management and related services. Following the decision in Commissioner of Income-tax Versus Bharti Cellular Ltd. & Hutchison Essar Telecom Ltd. [2010 (8) TMI 332 - Supreme Court of India] the expression appearing in S.194J has the same meaning as given in Explanation (2) to S.9(1)(vii), which means any consideration for rendering of any ‘managerial, technical or consultancy services’ - the rule of noscitur a sociis is clearly applicable and this would mean that the word ‘technical’ would take colour from the words ‘managerial’ and ‘consultancy’ in between which it is sandwiched - Elaborating further, Hon'ble Delhi High Court observed that it is obvious that the expression ‘manager’ and consequently ‘managerial service’ has a definite human element attached to it and similarly, the services ‘consultancy’ also necessarily intends human intervention - the expression ‘fee for technical services’, as appearing in S.194J, they found that the question of human intervention was never raised even upto the level of the Tribunal – thus, the order is remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• 2014 (11) TMI 9
  Selection of comparables – Abnormal profit making concerns – Determination of ALP – International transaction of software services to Associate Enterprises - Held that:- Following the decision in Maersk Global Centres (India) Private Ltd. Vs. ACIT [2014 (3) TMI 891 - ITAT MUMBAI] - concerns which earn abnormally high profit margins cannot be excluded straight away but it would require further investigations to ascertain the reasons for their high profits - assessee is justified in asserting that the margins of 64.48% of the concern considered for the year under consideration is not a normal business trend - the inclusion of the concern in the final set of comparables would not lend credibility to the comparability analysis and therefore, the same deserves to be excluded. The plea of the assessee for exclusion of Bodhtree Consulting Ltd. from the final list of comparables cannot be shut out merely because the said comparable has been adopted by the assessee in its Transfer Pricing Study - it would be imperative for the assessee to justify exclusion of a concern from the list of comparables if in the initial Transfer Pricing Study undertaken by it, such a concern has been adopted as a comparable - the profit margins of the concern are fluctuating widely and are abnormally high for the period under consideration - assessee has justifiably demonstrated that the concern M/s. Bodhtree Consulting Ltd. is liable to be excluded from the final set of comparables, even though the said concern was considered as a comparable initially in its Transfer Pricing Study - the concern, M/s. Bodhtree Consulting Ltd. be excluded from the final list of comparables for carrying out the comparability analysis – thus, the AO is directed to re-work the arm’s length price of international transactions of software services rendered by the assessee to its Associate Enterprise – Decided in favour of assessee.

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• 2014 (11) TMI 8
  Non deduction of TDS - VSAT charges and transaction charges paid to stock exchange disallowed u/s 40(a)(ia) - Whether the charges were composite charges for professional and technical services rendered by the stock exchange to its members and the assessee has failed to deduct TDS – Held that:- Insofar as the transaction charges are concerned, the assessee was liable to deduct TDS u/s 194J as held in Commissioner of Income-tax - 4(3) Versus Kotak Securities Ltd. [2011 (10) TMI 24 - Bombay High Court] - the disallowance under section 40(a)(ia), has rightly been made by the AO As regards V-SAT charges are concerned for sum amounting to Rs. 1.10 lakhs, following the decision in The Income Tax Commissioner Mumbai City-4 Versus Angel Capital & Debit Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT] - these are not in the nature of technical services, no TDS was required and consequently, no disallowance under section 40(a)(ia) is called for. Dividend income disallowed u/s 14A r/w Rule 8D – Held that:- CIT(A) rightly held that rule 8D is not applicable for the AY 2007-08 as it is applicable from the AY 2008-09 as decided in Godrej & Boyce Mfg. Co. Ltd. v/s DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - disallowance cannot be made on the basis of formula laid down by the rule 8D in the AY 2007-08 and some reasonable basis has to be adopted – Decided against revenue.

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• 2014 (11) TMI 7
  Reopening of assessment u/s 147 – Jurisdiction of AO - Held that:- Assessment was reopened after four years from the end of the relevant assessment year - before issuing notice u/s 148 of the Act, the AO was required to obtain sanction/approval from the competent authority prescribed under section 151 of the Act - section 292BB of the Act is presumptive section and on the basis of it, it can be presumed that notice required to be served was served upon the assessee if the assessee joins the assessment proceedings - provisions of section 292BB of the Act is not applicable as the issue in dispute is with regard to the validity of jurisdiction assumed by the AO for issuing notice u/s 148 of the Act – following the decision in Shri. Ghanshyam K. Khabrani. Versus Assistant Commissioner of Income Tax [2012 (3) TMI 266 - BOMBAY HIGH COURT] – u/s 151 of the Act, it was only the Jt. Commissioner or Addl. Commissioner who could grant the approval for issuuance of notice u/s 148 of the Act and if the approval is not granted by the Jt. Commissioner or Addl. Commissioner and instead it was granted by the ld. Commissioner of Income-tax, then the same was not an irregularity curable under section 292B of the Act and notice under section 148 of the Act would be invalid and void ab initio - sanction accorded by the CIT to the AO for issuance of notice u/s 148 of the Act was not proper, therefore, the AO did not assume proper jurisdiction to issue notice u/s 148 of the Act - notice issued u/s 148 of the Act is invalid and assessment framed consequent thereto is invalid and void ab initio – Decided in favour of assessee.

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• 2014 (11) TMI 6
  Levy of penalty u/s 221 r.w. Section 140A(3) – Held that:- The assessee is liable to pay the admitted tax for AY 2012-13 as per the return filed by the assessee - The assessee failed to pay this amount even after giving notice to the assessee vide notice dated 01-11-2012 served upon the assessee on 02-11-2012 wherein the AO asked the assessee to pay the admitted tax with three days from the receipt of the notice - assessee is not able to point out any reasonable cause for not depositing the admitted tax with the Government - in the case of the assessee, the tax and interest is payable not in consonance with any order or assessment order or any other order under this Act by the Assessing officer - the amount of tax and interest is payable on the basis of the return filed by the assessee itself under the provisions of the Act which is payable by virtue of precedence of "self assessment" u/s. 140A(3) of the Act - The assessee having failed to pay the amount of tax on the basis of the return furnished by it for the relevant assessment year in accordance with the provisions of s. 140A(1) is "deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid" as per the statutory provision of s. 140A(3). The provision of s. 140A(3) further provides that in case the assessee is deemed to be in default, all the provisions of this Act shall apply to the case of the assessee. The provisions of s. 221 providing for penalty payable when tax is in default applies to both the situations, i.e., when assessee is in default in respect of the assessed tax or is deemed to be in default in making the payment of tax under "self-assessment tax" as per the return of income filed by the assessee - "Self-assessment tax" has to be calculated on the basis of the return filed by the assessee for the relevant assessment year and paid to the credit of the Government suo moto before furnishing the return of income and the return of income shall be accompanied by proof of payment of such tax and interest as per the statutory provisions of s. 140A(1) and there is no requirement of issue of notice of demand u/s. 156 by the Assessing officer for making such payment of tax and interest of the "self-assessment tax" before furnishing the return of income by the assessee - the penalty u/s. 221 was rightly levied on the assessee. Assessee argues that he cannot be considered as deemed to be in default and being so, the assessee cannot be fastened with the liability of penalty on the ground that there is provisions of sections 234A, 234B and 234C to take care of the loss to the Revenue - The argument of the assessee is devoid of merits as sec. 140A(3) is to be read with sec. 221 which empowers the AO to levy penalty when there is a failure on the part of the assessee to make the payment of self-assessment tax and interest as stipulated in section 140A(1) - The provision of section 221 is penal in nature - on the other hand provision of section 23A, 23B and 234C are compensatory in nature – the order of the CIT(A) is upheld and the order of levy of penalty u/s. 221 r.w.s. 140A(3) is upheld – Decided against assessee.

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• 2014 (11) TMI 4
  Benefit of indexation not given – Computation of capital gain for sale of two plots – No evidence for ascertainment of date - Held that:- As decided in ARUN SHUNGLOO TRUST Versus CIT [2012 (2) TMI 259 - DELHI HIGH COURT] - the cost of acquisition as envisaged in Explanation III to S.48 would be the same which was in the hands of the previous owner. The next question which posed before us is when the mother of the assessee Smt. Sita Devi had acquired these plots, if she had acquired prior to 1.4.1981 then indexation benefit as on 1.4.1981 would be admissible for the assessee, otherwise from the date on which she had acquired the flats - On the record there was no evidence for ascertaining this date - Some rough reference is available in the will - assessee is directed to produce some document indicating the cost of acquisition in the hands of his mother – thus, the matter is required to be remitted back to the AO with the direction that the AO shall determine the date on which assessee’s mother had acquired these plots and thereafter give the benefit of indexation accordingly - If she acquired the plots in question before 1.4.1981 then benefit of indexation would be from 1.4.1981 otherwise from the date on which she acquired the plots - AO is directed to recomputed capital gain on sale of two plots, after determining the date of acquisition in the hands of previous owner i.e. Smt. Sita Devi. Expenses on consultancy services disallowed - Held that:- During the course of assessment proceedings, the assessee had filed confirmation from the recipients - He has submitted the schedule of payment - According to the assessee payments on each day were not exceeding Rs. 20,000/- prescribed u/s 40A(3) - There is no course to verify the claim except cross examining the recipients - AO did not carry out that exercise – thus, the matter is also required to be remitted back to the AO for re-examination of issue – Decided in favour of assessee. LTCG deleted – Held that:- S.45 of the I.T.Act contemplates that any profits or gains arising from the transfer of a capital asset effected in the P.Y. shall save as otherwise provided in S.54, 54B, 83C be chargeable to income tax under the head capital gains’ and shall be deemed to be the income of the P.Y. in which the transfer took place - the transfer had never taken place - It was a fraudulent attempt at the end of the vendee - The assessee had never received sale consideration - He has never given possession to the vendee - The moment he came to know about the alleged sale deed, he challenged it in the Civil Court and ultimately the sale deed was declared as null and void - where is the right to receive sale consideration, which can authorise the AO to say that capital gain had arisen to the assessee – CIT(A) rightly deleted the addition – Decided against revenue. Unexplained investment u/s 69 – Held that:- AO has overlapped the facts – CIT(A) has observed that the Revenue is concerned with the source of deposit and not with regard to difference in the denomination of notes - AO has an expectation that same notes ought to be possessed by any individual which were withdrawn from the bank for redeposit - the amount withdrawn should not be used for any other purpose and the same notes should be redeposited - such an expectation in the ordinary course of life is little improbable – CIT(A) was rightly of the view that the assessee has explained the facts and source and therefore no addition should be made – Decided against revenue.

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• 2014 (11) TMI 3
  Enhancement of disallowance of repairs and maintenance of non-factory building – Held that:- There was a substantial damage to the non-factory building i.e. godowns of the assessee which were constructed during earlier financial years and assessee had to incur substantial amount for repair and maintenance of roof of these godowns - Neither the AO nor the CIT(A) have doubted the quantum of the expenditure so incurred by the assessee and the authorities below have also not considered the fact that the assessee adjusted the amount of claim which was received from the insurance company as compensation for the damages caused due to storm - the explanation, details, bills and vouchers of the assessee and adjustment of insurance claim require examination and verification at the end of the AO for proper quantification of the revenue expenditure on the basis of relevant principles for allowability of the claim of the assessee – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Amount added back out of interest account payable to Haryana Govt. u/s 43(B) – Held that:- The CIT(A) has noted that the assessee’s case apparently does not fall under any of the clauses mentioned u/s 43B of the Act which is not a proper and judicious approach - the authorities below have not adjudicated the issue as per letter and spirit of the provisions of section 43B of the Act - The AO ought to have verified and examined the claim of the assessee mainly on two counts, i.e. whether the claimed sum was actually paid and the amount was actually paid by the assessee on or before the due date applicable in its case for furnishing the return u/s 139(1) of the Act – thus, the matter is to be remitted back to the AO for proper verification and examination of claim of the assessee as per section 43B – Decided in favour of assessee. Payment of auditors fees – Held that:- The auditor’s fees is a necessary business expenditure which is allowable u/s 37(1) of the Act and additions made in this regard are not sustainable – the AO is directed to allow the expenditure incurred by the assessee towards payment of auditors fees – Decided in favour of assessee.

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• 2014 (11) TMI 2
  Unexplained credit u/s 68 - Facts remained unrebutted on record - Service of notice – Held that:- The assessee was the sole proprietor of M/s New Age Overseas and filed the return for the year under consideration on 05.07.2001 declaring an income of Rs,2,78,410/- has not been disputed by the Revenue – the income included the income of Rs. 2,31,187/- from the proprietary firm M/s New Age Overseas has also not been rebutted - against this return filed on 05.07.2001, no notice u/s 143(2) has been issued to the assessee - The evidence in regard to the shifting of the firm M/s New Age Overseas 130-131-D, Kamla Nagar, Delhi to 96-D, Kamla Nagar, Delhi w.e.f 07.07.2004 and ultimately the proprietorship was closed on 31.03.2007 by surrendering the sales tax number also has been confronted by the AO by way of a Remand Report and has not been rebutted as per the finding on fact available on record and has also not been rebutted before us in the present proceedings. The fact that the assessee specifically shifted to B-7, Green park Extension, New Delhi and submitted his return in Ward-24(1), New Delhi is the finding of the fact recorded in the order which also has been confronted to the AO and not denied by him and also not rebutted before us by the Revenue in the present proceedings - the service of notice by way of affixtures from 31.03.2008 to 28.11.2008 on the premises i.e. 130D, Kamla Nagar has been taken cognizance by the CIT(A) to hold that the notices were not served at the correct address - the CIT(A) also proceeds to consider the fact that the AO could have obtained the correct address from the bank account of Vijaya Bank as the complete address was available there - This fact also stands unrebutted on record - the CIT(A) ought to have quashed the proceedings and there was no need to proceed to adjudicate upon the additions on merit - the reasoning taken by the CIT(A) on merits also has not been assailed by the Revenue either by referring to any fact or evidence – Decided against revenue.

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• 2014 (11) TMI 1
  Liability to deduct TDS - Disallowance u/s 40(a)(ia) – Held that:- There are conflicting judicial opinions amongst the Calcutta High Court and Gujarat High Court on one side and the Allahabad High Court on the other side - when there are conflicting judicial opinions, it is a practice to follow the view which is favourable to the assessee – as decided in COMMISSIONER OF INCOME TAX-IV Versus SIKANDARKHAN N TUNVAR [2013 (5) TMI 457 - GUJARAT HIGH COURT] - in case of omission to deduct tax even the genuine and admissible expenses are to be disallowed - But they sought to remove the rigour of the law by holding that the disallowance shall be restricted to the money which is yet to be paid – section 40(a)(ia) would cover not only to the amounts which are payable as on 31st March of a particular year but also which are payable at any time during the year. Dismissal of SLP by Supreme Court – Held that:- It is well settled principles of law that dismissal of Special Leave Petition is not the law laid down by the Apex Court - What is binding is the law laid down by the Apex Court under Article 141 of the Constitution of India - A mere dismissal by one word, the Apex Court does not lay down any law – thus, the order of the CIT(A) is upheld – Decided against assessee.

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• Customs

• 2014 (11) TMI 24
  Release of confiscated vessel - redemption fine - Held that:- As the stay order was granted by this Tribunal on 25.06.2013 on the understanding that the vessel shall be remained in Indian water or the same can be redeemed on payment of redemption fine of Rs. 7 crore but relaxation was given to the applicant on execution of bank guarantee of Rs. 60,00,000/- for repair purpose only. Now the applicant wants to take the vessel outside Indian Territory for the commercial purpose. Considering the fact that the differential duty is around Rs. 6 crore which is in dispute therefore, for fair consideration of the request of the applicant and to safeguard the interest of the Revenue, we direct the applicant to execute a bank guarantee of Rs. 3 crore in favour of the Commissioner of Customs (Imports), New Customs House, Mumbai. On such execution of bank guarantee of Rs. 3 crore, the learner Commissioner shall allow the vessel to take outside territory of India for six months from the date of export. - Decided partly in favour of Assessee.

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• 2014 (11) TMI 23
  Refund of interest - Unjust enrichment - Payment of interest under protest - Held that:- appellant has paid the interest for the period of the goods warehoused as per Section 61(2) of the Customs Act, 1962. Therefore, as per Circular No. 475/39/90-Cus VII dated 08.08.1990, provisions of Section 27 is not applicable to the facts of the case and consequently bar of unjust enrichment is not applicable. The same view was taken by this Tribunal in the case of Amtrex Hitachi App. Ltd. (2008 (1) TMI 81 - CESTAT, MUMBAI). Therefore, following the decision in the case of Hitachi App. Ltd. (2008 (1) TMI 81 - CESTAT, MUMBAI) I hold that the appellant is not required to pass bar of unjust enrichment and is entitled for refund claim of interest. Therefore, the impugned order is set aside - Decided in favour of assessee.

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• 2014 (11) TMI 22
  Valuation of goods - Inclusion of technical know how fees and royalty - Held that:- The department has sought to load royalty relating to the technical know-how as per Rule 10(l)(c). Undisputedly the appellants have imported components for the manufacture of Dis Brake Systems for two wheelers - explanation only added that such royalty would be includable’ in the case even if the imported goods have undergone the said process after importation of such goods. The department could not show that the royalty and other charges were for the to the imported goods and they were as a condition of sale of such imported goods. Undisputedly the royalty on technical know-how was paid only for the manufacture sub-assembly of Dis Brake Systems. Therefore the royalty and other charges are not includible and the impugned order is not sustainable and is set aside - Decided in favour of assessee.

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• 2014 (11) TMI 21
  Amendment of four Shipping Bills for consideration of a portion of FOB value as DEPB item - Held that:- There is not even a word on the provisions of Section 149 of the Customs Act, 1962 in the rejection letter issued by the Deputy Commissioner of Customs. The said request should have been examined in the light of the provisions of Section 149 of the Act. If the software has blocked the Shipping Bills and the Shipping Bills are not available for amendment, the situation is contrary to the provisions of the Act. The department cannot take a ground that software does not permit and the amendment cannot be carried out. It was for the Revenue to ensure that the software developed is in line with the provisions of the Act which the department is implementing and it is the duty of the concerned officer to ensure that proper steps are taken. In any case, the amendment could have been carried out in the copy of the Shipping Bill which was made available to the appellant and there would be a copy available with the Customs which also can be used and in my opinion, the same should have been used. In view of this position, the matter is required to be remanded to the Commissioner who should consider the matter afresh in the light of the statutory provisions of law and pass an appropriate order - Decided in favour of assessee.

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• Service Tax

• 2014 (11) TMI 42
  Penalty u/s 77 & 78 - maintenance or repair service - Held that:- Appellants are only challenging the penalties under Sections 77 and 78 of the Finance Act and the issue involved is in respect of interpretation of law and there were conflicting views on the subject matter, therefore we find merit in the contention of the appellant. The penalties imposed under Sections 77 and 78 of the Finance Act are set aside, otherwise the impugned order is upheld - Decided in favour of assessee.

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• 2014 (11) TMI 41
  Waiver of penalty - GTA services - reverse charge mechanism - Cargo Handling services - Held that:- Applicant has paid approximately 50% of the service tax demand and the issue of levy of service tax on transportation of raw materials along with other incidental services like loading, unloading, stocking within the factory premises is debatable one, in view of various judgments delivered by the Tribunal and Hon’ble High Courts from time to time. For the purpose of stay, we find the amount already paid by the applicants is sufficient to hear their appeals. Consequently, pre-deposit of balance dues adjudged against applicant No. 1 and penalty against applicant No. 2 are waived and its recovery stayed during the pendency of the appeals - Stay granted.

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• 2014 (11) TMI 40
  CENVAT Credit - Extended period of limitation - Malafide intention - Suppression of facts - Held that:- The assessee company was in continuous correspondence with the Superintendent of Central Excise - Facts of the case would clearly show that there was no intention to avail wrong credit or evade duty and there was no need for issue of show-cause notice and imposition of penalty in this case at all. We do not want to waste further time since we consider that sufficient time has already been wasted by the authorities in the Revenue department on this issue in view of the decision of the Hon’ble High Court in the case of Commissioner of Central Excise and Service Tax, Bangalore Vs. Adecco Flexione Workforce Solutions Ltd. [2011 (9) TMI 114 - KARNATAKA HIGH COURT] - Accordingly penalty is set aside - Decided in favour of assessee.

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• 2014 (11) TMI 39
  Classification - assessee leased out their sugar factory - Business Support Service or renting of immovable property - Held that:- Respondent leased out their sugar factory to M/s Purna SSK Ltd. The case of the Revenue is that as the factory is leased out alongwith machine and machinery therefore the respondents are providing Business Support Service (Providing Infrastructure). It is not the case of the Revenue that only machinery with infrastructure has been used by M/s Purna SSK Ltd. As the whole factory has been leased out therefore we find that this will more appropriately covered under Renting of Immovable Property service - Decided against Revenue.

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• 2014 (11) TMI 38
  Denial of Abatement Notification No. 1/2006-S.T., dated 1-3-2006 - inclusion of value of free supply - Held that:- while the value of goods transferred or deemed to have been transferred during the course of execution of composite works contract involving supply/rendition of goods and services, must exclude the value of goods for levy of service tax; reiterated the principle that since the exemption/abatement Notifications provide an alternative facility to assessees to have their tax liability computed by approximation formulae instead of being subjected to detailed assessment and evaluation of the value of the goods, for exclusion of this component for levy of service tax; the exemption/abatement Notifications cannot be challenged as ultra vires the charging provisions of service tax legislation. The Notification however was the specific subject matter of Bhayana Builders (P) Ltd. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] - Decided in favour of assessee.

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• 2014 (11) TMI 37
  Activity of construction of sub-stations and re-conductering works and sub-contract work undertaken for APEPDCL - Exemption under Notification No. 45/2010, dated 20-7-2010 - Erection, Commissioning and Installation Service and Works Contract Service - Held that:- Notification exempts all taxable services rendered in relation to transmission and distribution and in our opinion all services rendered are in relation to transmission and distribution and therefore appellant had made a prima facie case in respect of these items. The appellants have also claimed that they are not liable to pay Service Tax on the work undertaken for CPWD and for this purpose they are relying upon the Circular issued by the Board No. 80/10/2004-S.T., dated 17-9-2004. We find that prima facie this claim is also admissible. If these exemptions and exclusions are allowed, the amount paid by the appellant is more than the amount which is due to be paid by them. It is also noticed that Service Tax has been paid in 2007-08 onwards and in our opinion the amount deposited by the appellant is sufficient for hearing the appeal. - Stay granted.

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• 2014 (11) TMI 36
  Activities in relation to transmission and distribution of electricity - activity of preparation of spot bills on hand held computers by taking the meter readings of electricity consumption, distributing the bills, verifying whether there is any tampering of bill - Exemption under Notification No. 45/2010-S.T., dated 20-7-2010 - Business Auxiliary Service - Held that:- It cannot be said that the items of work undertaken by the appellants discussed above are not in relation to distribution of electricity and we do not find ourselves in agreement with the findings of the Commissioner. Therefore, we hold that the appellant is eligible for the benefit of this Notification. Further, we notice that portion of the demand relates to the period subsequent to 21-6-2010 and therefore this portion may be liable to service tax. Since this aspect has not been considered by the learned Commissioner and the finding has been limited to applicability of Notification and once it was held that Notification is not applicable there was no need to consider the period subsequent to 21-6-2010, therefore we consider that the matter is required to be remanded for requantifying the demand if it is sustainable in accordance with statutory provisions for levy of service tax. - matter remanded back.

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• 2014 (11) TMI 35
  Waiver of pre deposit - Club Association Service - Held that:- prima facie, the demand of service tax on penal interest is not sustainable. Having regard to the total amount payable on other aspects, we consider that the amount deposited by the appellant is sufficient for the purpose of hearing the appeal. Accordingly, the requirement of pre-deposit of the balance dues is waived and stay against recovery is granted during pendency of the appeal - Stay granted.

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• Central Excise

• 2014 (11) TMI 33
  Distribution of credit by the Input service distributor (ISD) - distribution of proportionate credit - Held that:- The combined reading of the Rule 7 and the clarificatory circular dt.23/8/2007 hereby shows that there are only two restrictions regarding the distribution of the credit. The first restriction is that the credit should not exceed the amount of Service Tax paid. The second restriction is that the credit should not be attributable to services used in manufacture of exempted goods or providing of exempted services. There are no other restrictions under the rules, the restriction sought to be applied by the Department in this case in limiting the distribution of the Service Tax credit made in respect of the Malur Unit on the ground that the services were used in respect of the Cuttack Unit finds no mention in the relevant rules. As such, restricting the distribution of Service Tax credit in a manner as has been done by the impugned order by the lower appellate authority (original authority had approved of such distribution) cannot be upheld - appellant is entitled to take Cenvat credit during the impugned period as distributed by their head office - Therefore, the allegation of suppression, fraud, collusion, wilful misstatement or intent to evade payment of duty does not sustain. It is also supported by the Notification 18/12-CE dated 17.03.2012 wherein the Rule has been amended in the light of the decision of Ecof Industries (2009 (10) TMI 171 - CESTAT, BANGALORE) - Decided in favour of assessee.

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• 2014 (11) TMI 32
  CENVAT Credit - Limitation period for taking credit - whether the time limit of taking the credit would be applicable in respect of the triplicate copy of bill of entry specified in clause (c) of sub-rule (3) of Rule 57G - Held that:- time limit of six months would be applicable from the date of issue of the bill of entry and even in respect of the goods imported prior to the amendment of Rule 57G(5) introducing the time limit. Rule 57G(3) very specifically provides that no credit under sub-rule (3) shall be taken by the manufacturer unless the inputs are received in the factory under the cover of specified documents. Further, sub-rule (5) specifically provides that credit shall not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3). The said sub-rule is very clear and prohibits the manufacturer to take credit after six months from the date of issue of the specified document. In the present case, there is no dispute that the credit has been taken after six months from the date of issue of the specified document and even the goods have been received in the factory on 21.03.1996, which is again more than six months as specified in the said sub-rule - Following decision of MRP Ltd. vs. CCE, Mangalore [2006 (11) TMI 231 - CESTAT, BANGALORE] - while confirming the demand, penalty waived - Decided partly in favour of assessee.

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• 2014 (11) TMI 31
  Valuation of goods - Inclusion of various charges in transaction value of goods - Revenue entertained a view that the noticee was receiving additional consideration over and above the price of their finished goods from the dealers toards:- Dealers staff training - Passport Programme - Birthday and Marriage Anniversary Cards - Held that:- Dealers staff training programme is a scheme innovated and executed from the head office of the company and not from the factory located at Gurgaon. The same is aimed at providing better technical knowledge about the goods and the soft training to the various field staff, for the purpose of understanding the product and further extending the same to their customers. The appellant is bearing the main expenses and it is only a part of the expenses towards training hall charges, cost of hiring of training equipment which is being recovered from the dealers as a contributory expenses. The said activity of training the staff of the dealers by no stretch of imagination can be held to be a consideration for the sale of the motor cycle to the dealers. Observing again, at the cost of repetition, such training of the staff is absolutely optional for the dealers and it is seen that only a small percentage of the total staff of the dealers have undertaken such training during the relevant period in question. The same being in-connected with the sale of the motor cycle, we find that no favour with the Revenue's stand that the same is a consideration towards the sale of the motor cycle. If the same is a part of the sale value of the vehicle, the same would have been collected from each and every dealer, who would have further collected it from the customers. Based upon the information of Members registered under the passport scheme, the appellants were sending birthday and marriage anniversary cards to the said persons, for which purpose they have a central agency. A part of the said expenses were being recovered by the appellants from their dealers by issuing debit notes to them. - Consideration amount stands already paid by the dealer at the time of clearance of the motor cycle from their factory gate and the said activity of sending of birthday/marriage anniversary card to their customers is an activity unconnected with the sale of the excisable goods - expenses are not connected with the sale of the goods and as such cannot be held to be part of the transaction value. Demand is squarely barred by limitation having been raised by invoking the longer period of limitation. The appellants have brought on record the correspondence exchanged between them and their Jurisdictional Superintendent in February 2003 itself wherein the entire information was disclosed. Apart from that the audit has taken place for each financial year and all the papers/documents were scrutinized and no objection was raised. From the above, it is the contention of the appellant that no malafide can be attributed to them. we set aside the impugned orders confirming demands and imposing penalties and allow the appeals on merits as also on limitation - Decided in favour of assessee.

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• 2014 (11) TMI 30
  CENVAT Credit - Whether appellant is eligible to take CENVAT credit under Rule 3(1) of the Cenvat Credit Rules, 2004 for the entire duty paid by a 100% EOU under proviso to Section 3(1) of the Central Excise Act, 1944 - Held that:- If the view put forth by the Revenue is accepted than under proviso to Section 3(1) no duty more than the duty of excise leviable under the First Schedule to Central Excise Act can be recovered from a 100% EOU. Revenue can take not one stand while recovering duties and take another stand once it comes to taking of CENVAT credit. It is, therefore, a logical conclusion that the sum total of duties paid by a 100% EOU represents Central Excise duty chargeable as per Section 3(1) of the Central Excise Act, 1944. In the invoices the entire duty has been shown as excise duty paid under proviso to Section 3(1) of the Central Excise Act, 1944. This proviso is existing in Section 3 right from 01.3.1982. Duty indicated on the invoices show the same to be Central Excise duty though the method used for calculating the ‘measure’ of such excise duty also include elements of customs duties. Therefore, the entire duty paid on the invoices will have to be considered as Central Excise duty paid under Section 3(1) of the Central Excise Act, 1944. It is not the case of the Revenue in these proceedings that CENVAT credit of the excise duty paid by the 100% EOU was required to be reduced under any other provisions of the Cenvat Credit Rules, 2004 - Decided in favour of assessee.

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• 2014 (11) TMI 29
  Transfer of CENVAT Credit - change in ownership - No transferring of the inputs and capital goods to the appellant - Rule 10 of CENVAT Credit Rules, 2004 - Held that:- It can be seen from the reproduced sale certificate issued by M/s Arcil (Assets Reconstruction company which is formed under the provisions of RBI Act), it transpires that the entire property of M/s Santogen Spinning Mills was handed over to the appellant with all the encumbrances and liabilities which are known and unknown. It would be correct to record that the appellant herein had procured the assets and liabilities from M/s ARCIL, which would include the credit balance lying in books of account of M/s Santogen Spinning Mills. In our considered view, having accepted the entire assets and liabilities together, the appellant cannot be denied the CENVAT Credit which is lying in balance as unutilized credit in the books of account of M/s Santogen Spinning Mills. Tribunal had clearly recorded that the assessee, even after surrender of registration certificate, chose to retain Central Excise record which made it clear that they wanted to make a debit entry even after surrender of licence. In the case in hand, it is on record that the Central Excise registration certificate issued to M/s Santogen Spinning Mills was surrendered after granting of Central Excise registration to the appellant herein. impugned order is incorrect, unsustainable and liable to be set aside. - credit allowed - Decided in favour of Assessee.

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• 2014 (11) TMI 28
  Clandestine removal of goods - Whether the appellant M/s Colius has clandestinely removed the goods with intent to evade duty or otherwise - Held that:- through the parallel invoices, the appellant M/s Colius had cleared illicitly manufactured goods clandestinely, without entering the same into the Central Excise records and without payment of Central Excise duty which is not the case only for the 4 parallel invoices but for all the parallel invoices. appellant M/s Colius accepted that they had illicitly manufactured the goods and cleared the same in respect of 4 parallel invoices, cannot run away from the fact that they were undertaking clandestine activity of illicit manufacturing and clandestine removal of the goods. Since these facts remain un-controverted, we find that the main appellant’s appeal fails and we uphold the impugned order to that extent. - Decided against the assessee. As regards the penalty imposed on Shri Somesh R. Mehra, we find that he being a power of attorney holder of M/s Colius and on his instructions entire activity was conducted, he needs to be visited with penalty and the adjudicating authority has rightly done so. At the same time, we find that since the main appellant M/s Colius is a proprietary concern and has already been visited with penalty, taking a lenient view, we reduce the penalty imposed on Shri Somesh R. Mehra - As regards the penalty imposed on M/s Maple is justified and does not require any interference.

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• 2014 (11) TMI 27
  Denial of MODVAT Credit - Capital goods - Notification No. 14/1996-CE (NT) dated 23/07/96 - Held that:- definition of capital goods given in Rule 57Q of the Central Excise Rules, 1944 during the period prior to 16/03/95 was examined once again by Larger Bench of the Tribunal in the case of Jawahar Mills Ltd. vs. CCE, Coimbatore reported in [1999 (4) TMI 153 - CEGAT, NEW DELHI]. In this case, the Tribunal, among other items, considered the eligibility for Modvat credit of the wires and cables, control panels, welding electrodes etc. The Tribunal in this judgment relying upon the Apex court’s judgment in the cases of J.K. Cotton Spinning & Weaving Mills Co. Ltd. vs. Sales Tax Officer reported in [1964 (10) TMI 2 - SUPREME COURT OF INDIA] and Indian Copper Corporation Ltd. - 1965 (61) STC 259 held that the items like wires and cables, control panels, welding electrodes etc. would be covered by the definition of capital goods in Rule 57Q as it stood during the period prior to 16/03/95 - Decided in favour of assessee.

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• 2014 (11) TMI 26
  Cenvat Credit - removal of goods after processing - exempted goods or not - Process of slitting and pickling by the appellant and are converted into HR slitted and pickled coils - Whether process amounts to manufacture or not - whether when activities of cutting or slitting of steel sheet in coil is considered as not amounting to manufacture is these any justification to allow Cenvat credit on inputs to pass the same ultimately to the buyers - Difference of opinion - Majority order - Held that:- appellant's main raw material is duty paid H.R. Coils, which are used by them for manufacture of C. R. Coils/strips, G.P. coil/sheet, PPGI Coated Coils, G.C. Sheets etc,. Some quantity of H.R.Coils in respect of cenvat credit has been taken, are subjected to the process of slitting and pickling and such slitted and pickled sheets are sold - when the Department's case is that the process undertaken by the appellant does not amount to manufacture, it amounts to saying that the appellant have cleared the cenvat credit availed inputs as such and this is something which is not prohibited, if at the time of removal of cenvat credit availed inputs, in terms of the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, an amount equal to the cenvat credit availed is paid under an invoice issued under Rule 9 of the Central Excise Rules, 2002. There is no dispute that the amount paid by the appellant is more than the cenvat credit availed. In my view, therefore the assessee should not be penalized for paying more amount than their actual duty liability. Since Rule 3(5) itself requires that removal of cenvated inputs as such on payment of an amount equal to the cenvat credit availed has to be under an invoice issued under Rule 9 of the Central Excise Rules, 2002 and since in terms of the Rule 9(1) of the Cenvat Credit Rules, 2004, an invoice issued by a manufacturer under Rule 9 even for removal of cenvated inputs/capital goods as such is a valid document for availing cenvat credit, the Appellant s customer could avail cenvat credit on the basis of the invoices for pickled sheets issued by the appellant and as such, there is no illegality in the appellant’s passing on the cenvat credit. Since the amount paid on the clearance of pickled H.R. sheets is more than the cenvat credit availed, the cenvat credit availed stands more than reversed and there is no need to recover the same again - Following decision of The Commissioner of Central Excise, Pune Versus Ajinkya Enterprises [2012 (7) TMI 141 - BOMBAY HIGH COURT] - Decided in favour of assessee.

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• 2014 (11) TMI 25
  Writ petition for stay of recovery proceedings - coercive action against assessee - Held that:- appeal has been filed by the petitioner for the years 2010-11 and 2011-12 along with petitions for stay of realization of the demand raised towards interest and the same are pending before the Commissioner (Appeals) and that the petitioner has made certain payments against the demanded amount, besides payment towards pre-deposit, this writ petition is disposed of with the direction to the opposite parties not to take any coercive action against the petitioner till disposal of the stay petition or appeal by the Commissioner (Appeals) whichever is earlier subject to petitioner paying the balance sum in two equal installments - Decided partly in favour of assessee.

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• CST, VAT & Sales Tax

• 2014 (11) TMI 34
  Levy of Interest from the date of filing of return or from the date of assessment - Tax liability for Non production of C form before AO - Denial of benefit of Declaration - whether the appellate authority should entertain the declaration under the circumstances when the dealer could not produce the same before the assessing authority will have to be considered in the light of the powers of the appellate authority - Held that:- If the appellate power is a limited power then entertainment of the documents filed by the assessee will depend upon the scope of the said limited power. However, if the appellate power is not restricted in any manner, the said power will be as wide as the power that could be exercised by the assessing authority. Generally stated, the appellate power is co-extensive with the power of the original authority. Section 20 provides for the first appeal. The scope of the appellate power is found in section 20(5). The appellate-authority may confirm, reduce, enhance or annul the assessment, or direct the assessing authority to make further enquiry, or pass such order as it may think fit. The power necessarily includes the power of setting aside the assessment and remand the matter. The power is quite wide. There is absolutely no limitation as to exercise of the power by the appellate authority and if so, there is no reason to deny him the power to entertain an application of the assessee to consider the prayer to produce 'C' form (declaration) provided the assessee is able to satisfy the authority that due to reasons beyond his control he could not produce them before the assessing authority. It is true that the assessee cannot, as a matter of course, produce these documents before the appellate authority. He will have to show sufficient cause as to why he could not produce them earlier. It is clear, provision for charging interest is introduced in order to compensate for the loss occasioned to the revenue due to delay in payment of tax. The provision for charging of interest can only be on the basis of a statutory provision. It is a substantive law. The object is to compensate the revenue for delay in payment of tax. Therefore, effect has to be given to the said provision strictly in accordance with law. So long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under the Act. Therefore, it cannot be said that the assessee has not paid the tax which is payable. It is only after the determination of the questions of fact the assessing officer passes the order holding that the assessee is liable to pay tax which he has not paid. Then an opportunity has to be given to the assessee to pay such tax determined after adjudication within the time by raising a demand. If the assessee commits a default in payment of tax within that time, then he would become a defaulter. It is thereafter his liability to pay interest would arise. The reason being the assessee cannot project the final assessment and he cannot be expected to pay the tax on that basis to avoid the liability to pay interest. It would be asking him to do it near impossible. Therefore, the Apex Court held in those circumstances the liability to pay tax arises only after such adjudication and not earlier to it. There cannot be any quarrel with the said proposition. On the date the assessee filed the return he knew what is the tax payable under the State Act as well as under the Central Act. In order to get concessional rate of tax payable under the Central Act he knew he has to furnish a declaration in Form-C. He also knew that if he fails to furnish a declaration in Form-C, he is liable to pay tax under the said Act. Therefore, it is not a case where the assessee was not aware of his liability to pay tax. He was conscious of the tax liability. He sought for concessional payment of tax on the assumption that he would be able to produce the declaration in Form-C and avail the said benefit. He also knew that if he fails to produce the said declaration in Form-C, he has to pay the tax. That is why after the assessment order, on his default in producing the declaration in Form-C, when he was called upon to pay the tax under the VAT Act, he has paid the tax. He has accepted the said order. The payment of interest being compensative in nature, the tax which he paid in pursuance of the assessment order in respect of which there was no dispute, should have been paid along with the return as prescribed under law. He failed to pay the tax along with the return. He had the benefit of that amount and it deprived the State of the benefit of that amount and therefore, when the liability to pay tax is not disputed, not only he is liable to pay tax, he is liable to pay interest from the date he was liable to pay tax to compensate the delay in payment of tax. Therefore, the finding recorded by the Tribunal by misreading the judgment of the Apex Court referred to supra requires to be set aside and accordingly we hereby set aside the said finding. After examining those declarations, after hearing the assessees, the Assessing Authority has determined that the assessee cannot have the benefit of such declarations. After rejecting the claim made on the basis of declarations, orders are passed levying tax under the VAT Act. Now the question is interest on such tax is payable from what date. In our view, the aforesaid circumstances are covered by the judgment of the Apex Court in the aforesaid Constitution Bench decision. In cases where declaration in Form-C is furnished, the Assessing Authority at the time of assessment determines after hearing the assessee that they cannot be acted upon, they are defective and the assessee is not entitled to the benefit of such declaration and then holds the assessee as liable to pay tax. Then the liability to pay interest on that tax would flow after determination of the said disputed fact and not from the date on which the return was filed either enclosing those defective forms or the date those defective forms are furnished in support of the claim made in the said returns - Decided partly in favour of Revenue.

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