TMI Tax Updates - e-Newsletter
December 13, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Wealth tax

Articles

1. Service Tax Dept can also conduct Service Tax Audit along with CA or CMA – CBEC clarifies

   By: Bimal jain

2. UNJUST ENRICHMENT STALLS REFUND

   By: Dr. Sanjiv Agarwal

News

1. Relevant Portions of the Second Report of the Special Investigation Team (SIT) on Black Money Released; On the Directions of SIT, CBDT Directs Various Assessing Officers to Finalize the Assessments for all Actionable Cases (427), whose names are appearing in the HSBC List Received by the Department

2. RBI Reference Rate for US $

3. India Signs Guarantee Agreement with the World Bank for IBRD Direct Lending of US $ 1100 Million to the Dedicated Freight Corridor Corporation India Ltd (DFCCIL) for Eastern Dedicated Freight Corridor-II Project

Notifications

Central Excise

1. 25/2014 - dated 11-12-2014 - CE

Grants exemption from Basic Excise Duty to goods donated or purchased out of cash donations for the relief and rehabilitation of people affected by the floods in the State of Jammu and Kashmir

Customs

2. 48/2014 - dated 11-12-2014 - ADD

Seeks to impose definitive anti-dumping duty on imports of Clear Float Glass originating in or exported from Pakistan, Saudi Arabia and United Arab Emirates (UAE).

3. 33/2014 - dated 11-12-2014 - Cus

Grants exemption from the duties of Customs to goods imported for donation for the relief and rehabilitation of people affected by the floods in the State of Jammu and Kashmir.

Circulars / Instructions / Orders

VAT - Delhi

1. 20/2014-15 - dated 9-12-2014

Modification in the Circular No.18 dated 24/11/2014

Highlights / Catch Notes

Income Tax

• Court Rules Gas Cylinder Sales Must Be Included in Turnover for Tax Purposes, Affecting Taxable Income Calculations.

  Case-Laws - HC : Sale of gas cylinders to be included in the turnover or not - business of supply of gas cylinders to the consumers - sale of gas cylinders was liable to be included on the turnover - HC
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• High Court Rules Appeals Against Tribunal Interim Orders Not Maintainable u/s 260A of Income Tax Act.

  Case-Laws - HC : Maintainability of appeal against the interim order of the Tribunal u/s 260A – the present appeal against an interim order of the Tribunal is not maintainable u/s 260-A of the Act - HC
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• Registration u/s 12A(a) can't be canceled without proving new objects compromise initial registration.

  Case-Laws - AT : Cancellation of registration u/s 12A(a) – additions in object clause - in the absence of any finding that how the additional objects vitiate the registration earlier granted u/s 12A of the Act, the cancellation cannot be effectuated - AT
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• Surplus from Asset Compensation Not Taxed as Capital Gain; No New Asset Acquired by Taxpayer.

  Case-Laws - AT : STCG - extinguishment would normally connote a situation where an asset goes out of existence – thus, surplus arising on account of compensation received by the assessee cannot be assessed under the head “capital gain“ because no asset came into existence with the assessee. - AT
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• Primary Co-operative Bank Status Denies Assessee Deduction u/s 80P(2)(a)(i) Due to Section 80P(4) Provisions.

  Case-Laws - AT : Assessee has to be regarded to be a primary co-operative bank as all the three basic conditions are complied with, therefore, it is a primary co-operative bank and the provisions of Sec. 80P(4) are applicable - deduction u/s 80P(2)(a)(i) not allowed - AT
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• Tax Deduction Required on Software Licenses as Royalties u/s 195 of Income Tax Act.

  Case-Laws - AT : TDS on software license as royalty - there is obligation on the part of the respondents to deduct tax at source u/s 195 of the Act - the nature of software technology availed, invoice raised specifically quoting only licence and right of usage embedded supports the case of the revenue. - AT
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• Share Application Money as Capital Investment Not Subject to Arm's Length Price Adjustment if Nature Undisputed by Officer.

  Case-Laws - AT : Where the character of payment is towards share application money, thereby reflecting a capital investment, and the same not having been disputed by the TPO, such a transaction cannot be subject to an arm's length price adjustment under the plea of it being a transaction of lending or borrowing - AT
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• Assessment Invalid: Notice u/s 143(2) Not Served Timely, Lacks Evidence of Delivery Confirmation.

  Case-Laws - AT : When there is nothing available on record to suggest that notice issued u/s 143(2) sent through speed post on 19.9.2008 was actually served upon the assessee within the time prescribed under proviso to Section 143(2)(ii), assessment u/s 143(3) is not valid - AT
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• Income from Customer-Used Equipment Not Considered Technical Services for a Fee.

  Case-Laws - AT : Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the use of such equipment does not result in the provision of technical service to the customer for a fee - AT
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Customs

• Higher Court Overturns Tribunal's Decision on Duty Demand; Original Order Did Not Require Duty Payment.

  Case-Laws - HC : Was the Hon'ble Tribunal correct in holding in the appeal preferred by the appellant that the duty demanded is upheld when actually the duty was not demanded even in the order in original - Held no, order of tribunal set aside - HC
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• Importer Granted Duty Remission for Lost Goods After Authorities Do Not Contest Transactions.

  Case-Laws - HC : Remission of duty - Lost goods - When the importer made a request to the department claiming remission, the authorities did not dispute the transactions - remission allowed - HC
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• Applicants Entitled to Interest on Duty Refunds Delayed Beyond Three Months After Filing Application.

  Case-Laws - HC : Every application for refund of excess duty has to be considered within a period of three months and the refund should be made within that period and if no such refund is made, the applicant/assessee is entitled to get interest from the date of filing application - HC
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Service Tax

• Extended Limitation Period Applies Despite Waiver from Section 78 Penalty u/s 80 of Finance Act, 1994.

  Case-Laws - AT : Invocation of extended period of limitation - Extended period is applicable in the present appeal even if waiver from Section 78 penalty has been extended to the appellant under Section 80 of the Finance Act, 1994. - AT
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• Imported Packaged Software Deemed Goods, Not Service; Service Tax Inapplicable; Stay Granted.

  Case-Laws - AT : Sale of software - packaged software were imported from the replicator or the foreign supplier - the sale of software is only a sale of goods and the service tax cannot be levied - stay granted - AT
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• Court Rules Airport Development Fees Not Subject to Immediate Service Tax; Supports Assessee's Position on Future Use Funds.

  Case-Laws - AT : Levy of service tax on collection of development fees for development of the airport in future - airport services - Prima facie case is in favor of assessee - AT
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• Court Denies Predeposit Waiver for E-Publishing Services; Prima Facie Assessment Unfavorable to Assessee in Service Tax Case.

  Case-Laws - AT : Waiver of predeposit - E-publishing services - contrary stand taken by the assessee - prima facie case is not in favor of assessee - AT
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• CENVAT Credit Reversal Required for Trading Activities Proportionate to Total Turnover Under Dispute.

  Case-Laws - AT : Reversal of cenvat credit towards trading activity - Appellant was liable to reverse proportionate credit on the total trading turnover - AT
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Central Excise

• Court to Decide if Packing, Labeling Auto Parts is Manufacturing for Excise Duty; Demand Beyond Limit Dismissed.

  Case-Laws - AT : Whether the activity undertaken by the appellant of packing/re-packing, labelling/re-labelling and fixing of MRP on automobile parts amounts to manufacture and consequently they are liable to pay duty - demand beyond normal period of limitation dropped - AT
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• Pre-deposit waiver not justified solely by pending BIFR case.

  Case-Laws - AT : Waiver of pre deposit - it may not be appropriate to grant stay on the ground that the matter is before BIFR. - AT
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Case Laws:

• Income Tax

• 2014 (12) TMI 1161
  Disallowance of advertisement and marketing expenditure - reopening of assessment - CIT(A) deleted the addition whether by acceptng additional evidence in contravention of Rule 46A without giving opportunity to the AO - transfer pricing adjustment - Held that:- As from the record that the documents highlighted by Ld. DR in support of his contention that there was violation of Rule 46A, it is found that these documents comprises of copies of agreement with distributor, statement of advertisement and marketing expenses showing details of bills, name of the distributors, amount and date of payment which were submitted by the assessee in the course of original assessment, wherein the assessment was framed u/s 143(3). Before AO during reassessment proceedings assessee vide his letter informed that all these documents were furnished before AO and TPO during original assessment proceedings and by considering the same vide order dated 25th January, 2005 passed u/s 92CA(3) has examined all materials relating to claim of expenditure of advertisement. Similarly AO vide his order dated 23rd February, 2005 advanced assessee s claim after examining all these documents. Thus all these documents, as pin pointed by DR was not additional documents so as to invoke the provisions of section 46A. - Decided against revenue. As found that claim of such advertisement expenses were made on reimbursement basis, details of which were placed before the original assessment proceedings, completed u/s 143(3) on 28th February, 2005 as well as before Transfer Pricing Officer, who has allowed the assessee s claim vide his order dated 25.01.2005 passed u/s 93A(3). The CIT(A) has also recorded the finding to the effect that the AO has not placed any material or evidence as mentioned in impugned assessment order to support that the expenses were bogus. The CIT(A) observed that a mere intimation from Investigation Wing cannot be basis for any addition. The finding recorded by CIT(A) has not been controverted, by department by brining any positive materials on record. Accordingly, we do not find any reason to interfere with the finding of CIT(A) resulting into deletion of addition on account of advertisement expenses. - Decided in favour of assessee.

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• 2014 (12) TMI 1160
  Penalty u/s 271(1)(c) - assessee has concealed its income by not showing the same u/s 45(1A) in spite of its known facts - CIT(A) deleted the penalty - Held that:- In the present case we find there was no furnishing of inaccurate particulars and concealment of income. The assessee has suffered loss on fire. It was duly disclosed in the Profit and loss account and in the audit report. AO did not allow loss as business loss by referring to provision of section 45(1A) of the Act. On appeal the ld. CIT(A) allowed the loss as business loss. In further appeal ITAT held that the same was not allowable as business loss. From the above we note that the issue was debatable and it cannot be said that the assessee had any malafide intention. It is a settled law that penalty cannot be imposed unless the conduct of the assessee is contumacious. It is also not the case that assessee’s case was a bogus claim which was prima facie liable to be disallowed. The assessee was under bona fide belief that the loss on fire will be allowed as business loss. If the AO does not agree with the assessee and hold that loss cannot be allowed as business loss it cannot lead to a conclusion that the assessee has furnished inaccurate particulars of income or has concealed any income. See CIT vs Reliance Petro products (P) Ltd (2010 (3) TMI 80 - SUPREME COURT) and Hindustan Steel Ltd vs State of Orissa(1969 (8) TMI 31 - SUPREME Court) - Decided in favour of assessee.

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• 2014 (12) TMI 442
  Addition made to total income – Addition treated as dividend income u/s 2(22)(e) - Whether the Tribunal was justified in drawing an adverse conclusion against the appellant by overlooking the specific finding of the CIT (A) that both the lending companies have advanced 69% and 38% of their total capital/assets to the appellant as interest bearing loan, which forms substantial part of the business of the lending company - Held that:- The Tribunal was rightly of the view that the AO had correctly treated the advance or loan given to the assessee by two private limited companies as deemed dividend – assessee held more than 10% of the shareholding of two private limited companies, namely Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd. - The assessee had received loans and advances from the two companies during the assessment year - neither of the companies lent any money to any entity, save and except to the assessee - The lending of money was not a part of the business of the Company, nor for that matter, could it constitute a substantial part of the business - there was no organized course of activity involving dealings with anyone else, save and except for the assessee - The assessee was unable to establish that the exclusion was attracted – thus, the order of the Tribunal is upheld, as such no substantial question of law arises for consideration – Decided against assessee.

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• 2014 (12) TMI 441
  Tribunal proceeded and disposed of the Appeal filed by the Revenue in proper manner or not – Tribunal simply accepted the "categorical observation" and "finding" of the CIT(A) without going into the details - Held that:- The Tribunal unnecessary wasted its precious judicial time in finding out as to whether there was indeed an additional evidence before the Commissioner and whether the Departmental Representative was justified in making complaint of the above nature - The manner in which the revenue conducted himself may have offended the Tribunal, but it was its duty as a last fact finding authority to decide the matter judiciously and on merits - The Appeal has not been decided on merits at all - since the last fact finding authority has not gone into merits of the grounds raised by the Revenue in this Appeal, Mr. Chhotaray, learned Counsel put to appear on behalf of the Revenue, as to whether on the available material namely before the Assessing Officer and the Commissioner and the Paper Book compiled by the Assessee and tendered before the Tribunal is the Revenue willing to have the matter reconsidered by the Tribunal on merits – thus, the order of the Tribunal is set aside and the matter is remitted back for adjudication – Decided in favour of revenue.

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• 2014 (12) TMI 440
  Sale of gas cylinders to be included in the turnover or not - Whether the sale of gas cylinders by the appellant was liable to be included in the turnover and was required to be audited u/s 44AB – Held that:- The agreement clearly indicated that the assessee was appointed as a distributor on principal to principal basis for sale of gas cylinders to consumers - assessee was carrying on business of supply of gas cylinders to the consumers and that the assessee was carrying on the business of purchase and sale of gas cylinders and not on a commission basis - the sale of gas cylinders was liable to be included on the turnover - Since the turnover exceeded 40 lacs for the relevant year the books of accounts was liable to be audited u/s 44AB. Books of accounts not audited – Validity of initiation of penalty proceedings u/s 271B – Held that:- It has not come on record that the assessee had not maintained any books of account - in view of Section 237B of the Act if a reasonable explanation is given, the penalty proceedings initiated u/s 271B being discretionary could be dropped or a lesser penalty could be imposed - assessee was carrying on the business of sale of gas cylinders and since his turnover was more than 40 lacs the appellant was under an obligation to get his books of account audited under Section 44AB - since the books of account was not audited, penalty proceedings were rightly initiated - explanation given by the assessee for non-compliance of the provision of Section 44AB was neither sound not justifiable - The imposition of penalty was justified - thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (12) TMI 439
  Maintainability of appeal against the interim order of the Tribunal u/s 260A – Interpretation of Term ‘every order’ provided u/s 260A - Held that:- The Court pointed out to the assessee that the appeal against an interim order is not maintainable u/s 260-A - the word “every order” appearing u/s 260-A(1) does not mean an interim order or an order passed on a Miscellaneous Application - It means a final order disposing of the appeal of the Act – also, in Chem Amit vs. Assistant Commissioner of Income Tax [2004 (11) TMI 24 - BOMBAY High Court] it has been held that the legislature has not provided an appeal to the High Court from every order passed u/s 254, but has confined it to the order passed in an appeal by the Appellate Tribunal - the words “an appeal shall lie to the High Court from every order passed in appeal” has to be given purposeful meaning - The words “passed in appeal” means an order finally deciding an appeal – thus, the present appeal against an interim order of the Tribunal is not maintainable u/s 260-A of the Act - it would be open to the assessee to question the interim order of the Tribunal in an appeal after final orders are passed by the Tribunal – Decided against assessee.

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• 2014 (12) TMI 438
  Validity of reopening of assessment u/s 147 r.w. section 148 – Reason to believe - Whether the information based on which the A.O had reopened the assessment was wholly vague, indefinite, farfetched and remote - Held that:- Section 147 empowers the AO to assess or re-assess income chargeable to tax if he has ‘reason to believe’ that income for any assessment year has escaped assessment - This section authorizes the AO not only to re-assess but also to assess the Assessee in respect of an income which escaped assessment. For initiating the proceedings under this section, no doubt there must be ‘reason to believe’. ‘Reason to believe’ would mean cause or justification - If the AO has cause or justification to know or suppose that income has escaped assessment, it can be said that assessing officer has ‘reason to believe’ that the income has escaped assessment. In Assistant Commissioner of Income-Tax Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME Court] it has been held that the expression “reason to believe” means cause or justification and that if the AO had a cause or justification to know that income had escaped assessment it could be said that the AO had reason to believe that the income had escaped assessment - the proceedings u/s 147 cannot be initiated - requirement of fresh material or facts has been interpreted by the court because Sec. 34(1)(b) states that the AO has in consequence of information in his possession ‘reason to believe’ - ‘Reason to believe’ should have arisen in consequence of the information and as the information cannot be based without material or facts, therefore, it has been interpreted by the Court that there must be fresh facts or tangible material with the AO - in Sec. 147, as was in existence prior to 1.4.1989, under sub-clause (b) similar language has been used as had been used in Sec. 34(1)(b). The reasons recorded cannot be regarded to be arbitrary, irrational - The reasons refer to the material i.e. the statement of the partner of the firm recorded u/s 132(4) during the course of the search - It clearly states that during the course of search conducted on Polar group of cases which included the Assessee, two laptop computers were found and seized from the possession of the Partner of the firm, Shri Sunil Kumar Agarwal - Shri Sunil Kumar Agarwal is a key person of Polar group. Subsequently, the Department took out printout LP-1 to LP-10 - These printouts contained entries in respect of business transactions and loan transactions of the Assessee group which were not entered in the regular books of accounts maintained by the Assessee - This is also a fact that all these transactions were cash transactions and the transactions appearing at LP-1, LP-2, LP-9 & LP-10 relate to loan transactions relating to the Assessee - The AO clearly mentioned in the reasons that Shri Sunil Kumar Agarwal has stated in his statement before the DDIT that he has taken cash loan from market which were not entered in the books and introduced this money into various businesses belonging to different concerns of Polar group as loan or share capital/capital – thus, the order of the CIT(A) is set aside and the AO has ‘reason to believe’ to initiate the re-assessment proceedings - CIT(A) has not given any finding on the ground of the assessee that initiation of the proceedings are barred by limitations, this issue will automatically get survived before CIT(A) – Decided in favour of revenue.

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• 2014 (12) TMI 437
  Transfer pricing adjustment - advertisement, marketing and sales promotion expenses – Held that:- As decided in LG. Electronics India P. Ltd. Versus Assistant Commissioner of Income-tax [2013 (6) TMI 217 - ITAT DELHI] - the transfer pricing adjustment in relation to the AMP expenses incurred by the assessee for creating or improving the marketing intangibles for and on behalf of its foreign associated enterprises, is permissible – the question as to whether the assessee should have earned a mark-up from its AE in respect of such AMP expenses incurred for and on behalf of the AE, has also been answered by eventually restoring the matter to the file of TPO for de novo adjudication in the light of certain guidelines outlined in the order – thus, the matter is remitted back to the AO for fresh decision – Decided in favour of assessee. Computation of ALP - International transaction of payment of ‘Royalty’ - Whether TNMM can be used on entity level for benchmarking several international transactions including Royalty on a combined basis – Held that:- The authorities below were justified in rejecting the assessee’s point of view of combining several transactions under the TNMM - the CUP is the most appropriate method to determine the ALP of an international transaction provided the appropriate comparable uncontrolled data is available - The CUP is considered as a most preferred method because it seeks to compare the price charged or paid for property transferred or services provided - It is under this method alone that the price charged or paid is directly compared with the price charged or paid in an uncontrolled comparable transaction - Rest of the four specific methods seek to make comparison of the price charged or paid indirectly through the medium of normal profit accruing or arising in a comparable uncontrolled transaction - the appropriate comparable uncontrolled data of the international transaction of royalty payment is available, which was furnished by the assessee and considered by the TPO as well as the DRP - the CUP is the most appropriate method for determining the ALP of Royalty transaction under the present circumstances. Whether rate of Royalty approved by the RBI is binding – Held that:- Certain benches of the Tribunal have held that the rate of royalty as approved by the Government of India/Reserve Bank of India should be considered at arm’s length price, whereas other benches have not affirmed such a view - on the contrary, some of the decisions which have not approved this line of thinking that the rate of royalty as allowed by the Government of India/Reserve Bank of India should be construed as an arm’s length rate – assessee initially argued and also submitted Synopsis in support of the contention, that if the payment of royalty has been made as per the rate approved by the RBI, then no further benchmarking is required and the question of determination of ALP should be deemed as set to rest. Selection of some companies as comparable – Functionally dissimilar company - Held that:- The assessee’s contention cannot be accepted for including this company in the list of comparables because this company is using technical know-how for manufacture of a component of an air conditioner, whereas the assessee is using technical know-how for the manufacture of air conditioners as such - There can be no comparison of know-how for manufacturing a component of an air conditioner with the manufacturing of AC as such. Since this company is functionally dissimilar, its exclusion from the list of comparables is directed. There can be no hindrance in the assessee urging for the inclusion of new companies in the list of comparables for the first time before the DRP - The only condition is that such companies should actually conform to the comparability criterion with the assessee - the assessee used Royalty stat (not an Indian data base) with certain filters for selecting new comparable companies - The Indian legislation does not admit such interquartile range, which is prevalent in some other countries - The Indian law talks of arithmetic mean of all the potential comparable companies - the DRP was justified in directing the AO to include only three companies in the list of comparables to the exclusion of other companies. Deduction for perpetual agreement – Held that:- The assessee entered into the Agreement with LG Electronics for supply of technical assistance on perpetual basis - the three companies shortlisted as comparables, entered into agreement for a limited period of time - the assessee entered into a perpetual agreement for getting technical knowhow, to be upgraded from time to time, with the re-negotiable royalty clause and thus paid royalty during the year at the maximum permissible domestic rate of 5% coupled with the payment of Design and Drawing Fees and also undertaking to pay Additional Model(s) fee - It is but natural to factor the effect of such temporary lull in the rate of royalty to be charged as per the commercial realities, so as to set off the possible loss due to temporary non-user of technical information after the termination of the agreement - This tends to increase the rate of royalty in a case of fixed term license - as there can be no such possibility of non-user of technical know-how in the case of an agreement with perpetuity, other things being equal, the rate of royalty in a perpetual agreement is bound to be low. The international transaction is for payment of royalty under a perpetual agreement and the comparable uncontrolled transactions have a fixed term agreements commanding higher rate of royalty, there is a need to adjust the price of such uncontrolled transactions in conformity with subclause (ii) of rule 10B(1)(a) so to bring it at par with the international transaction under consideration - This can be done by suitably reducing the rate of royalty paid by the comparable companies to equalize it with the condition of perpetual agreement commanding relatively low rate of royalty - the authorities below were justified in reducing the average rate of royalty of comparable uncontrolled transactions. Determination of reduction in the rate of royalty – Held that:- The assessee had a perpetual license, he discounted the uncontrolled royalty rate by 2%, thereby calculating the arm’s length royalty rate at 1.5% - the DRP rightly considered three companies as comparable, whose average rate of unadjusted royalty comes at 4.5% within the meaning of subclause (i) of rule 10B(1)(a) - When rate is discounted with 10% under sub-clause (ii), resulting into a deduction of 0.45% (10% of 4.5), the arm’s length rate of royalty as per sub-clause (iii) of rule 10B(1)(a) comes to 4.05% (4.5-0.45). It is this rate, which is directed to be applied as arm’s length rate of royalty payment. Rule of Consistency – Held that:- The rule of consistency cannot be stretched so far as to come in the way of the applying the correct provisions of law, if in the earlier year the authorities proceeded on a wrong notion - along with the rule of consistency, there is another equally significant rule of no estoppel against the law - the assessee benchmarked the international transaction of royalty by clubbing it along with the other international transactions, such as, import of raw material and components, service spares, export of finished goods along with commission, training fee, import of software services, etc. - All the international transactions were benchmarked in a combined manner under TNMM on an entity level - royalty is not closely linked with other international transactions and hence should be benchmarked separately – in assesse’s own case it has been held that each international transaction should be separately benchmarked and not in a consolidated manner, unless these are closely linked transactions. Evidently transaction of royalty cannot be considered as closely linked with the other international transactions as were clubbed by the assessee - the ALP of Royalty payment was required to be determined separately, as has been rightly done by the TPO for the instant year, justifying departure from the contrary view taken in the preceding year – thus, the arm’s length rate of royalty be taken at 4.05% and the addition on account of transfer pricing adjustment of royalty payment at 5% be made accordingly. International transaction of payment of ‘Export commission’ – Held that:- Assessee claimed that LG Korea rendered numerous services for which commission was paid at the rate of 4.5% - in the absence of any positive and speaking evidence of services, there can be no question of allowing any deduction - apart from theoretically listing several activities allegedly performed by LG Korea, the assessee failed to file any evidence worth the name, either before the TPO or the DRP to show that such services were actually rendered - the assessee failed to adduce any positive evidence about the rendering of services by LG Korea - the assessee made a claim made before the DRP about LG Korea having rendered several services to promote the export of Colour TVs in Middle East and South Asian countries - the TPO proposed transfer pricing adjustment with the Nil ALP of the Commission transaction on the ground that no evidence of any services rendered by the foreign AE, was furnished – thus, the very factum of the assessee having availed any services from its AE has not been proved with any positive evidence whatsoever, the deduction is held to be rightly denied by the AO – Decided against assessee. Royalty to be treated as capital expenses or not – Held that:- The license was given on non-transferable basis, there is a confidentiality clause prohibiting the assessee from divulging the relevant information during continuation of the agreement or any time thereafter; on the termination of the agreement, respective rights or obligations under the agreement shall cease; and there is no power with the assessee to sub-license - royalty payment is to be treated as revenue nature – thus, the total royalty payment, as reduced by the transfer pricing adjustment on this score, be treated as a revenue expenditure – Decided in favour of assessee.

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• 2014 (12) TMI 436
  Sales tax incentive allowed by State Govt. – Capital receipts or not – Reduction from cost of fixed assets for computation of depreciation as per Explanation-10 to Sec. 43(1) - Held that:- The assessee’s issue of Sales Tax Incentive is capital in nature for the reason that the very scheme under which the expansion of the unit and subsidy under Rajasthan Sales Tax Scheme, 1998 was received explains the purpose of the scheme as incurring capital expenditure for installation of plant and machinery and for eligible for fixed capital investment - CIT(A) has rightly treated the sales tax subsidy receipt as ‘capital in nature’ - assessee has rightly not reduced the amount of subsidy received from the actual cost/WDV of the fixed assets while claiming depreciation – in Commissioner of Income-Tax Versus PJ Chemicals Limited (And Other Appeals) [1994 (9) TMI 1 - SUPREME Court] it has been held that where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the actual cost – the, amount of subsidy cannot be deducted from the actual cost u/s 43(1) for the purpose allowing depreciation - if Government subsidy is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as a percentage of such cost, it does not partake the character of payment intended either directly or indirectly to meet the “actual cost” – thus, the subsidy receipt should not be reduced from the actual cost of fixed assets for computing depreciation under the provisions of the Act – decided in favour of assessee. Allowance of balance 50% additional depreciation u/s 32(1)(iia) – Whether the assessee is entitled for the balance 50% additional depreciation in view of sec. 32(1)(iia) of the Act in the next assessment year for remaining unutilized additional depreciation - Held that:- The assessee has purchased and installed new plant and machinery for its manufacturing unit and put to use for a period of less than i.e. 180 days, during the FY 2005-06 relevant to AY 2006-07 and claimed 50% additional depreciation u/s. 32(1)(iia) of the Act in view of the second proviso to section 32(1)(ii) - the balance 50% of additional depreciation on such plant and machinery has been claimed by the assessee company during the year under consideration i.e. the FY 2006-07 relevant to this AY 2007-08 - the assessee is eligible for additional depreciation in case the new machinery and plant was acquired and installed after 31-03-2005 - benefits conferred on the assessee by way of incentive provision cannot be taken away by adopting an implied meaning to second proviso to section 32(1)(ii) - since the second proviso to section 32(1)(ii) does not expressly prohibit the allowance of the balance 50% depreciation in the subsequent year, second proviso to section 32(1)(ii) shall not be interpreted to mean that it impliedly restrict the additional depreciation to be allowed in the subsequent AY - the assessee is entitled for 50% additional depreciation, because in the year in which the machinery was first put to use the assessee claimed only 50% of additional depreciation for the reason that the same was put to use for less than 180 days, in this assessment year for the balance of depreciation - the assessee is entitled for additional depreciation u/s. 32(1)(iia) of the Act in this assessment year also. Treatment of interest subsidy from the state government – Revenue receipt or not - Held that:- The subsidy includes interest subsidy as well as wage/employment subsidy for investment made in modernization/expansion/diversification of the unit eligible for subsidy under the scheme from the date of payment of sales tax - the subsidy was to be granted only if the specified minimum funds were borrowed on long term basis for creation of fixed assets and was to be paid only if such loans were repaid along with interest in time - the scheme ensured timely repayment of the loans with interest taken for creating fixed assets for the purpose of expansion – relying upon CIT v Ponni Sugars and Chemicals Limited [2008 (9) TMI 14 - SUPREME COURT] wherein it has been held that the subsidy received by the assessee was a capital receipt - even admitted by assessee, that in the event the contention of the assessee for treatment of the subsidy as a capital receipt is accepted, in view of the provisions of Explanation 10 to section 43(1) of the Act, the AO may be directed to reduce the amount of subsidy in determining the actual cost of the fixed assets for depreciation allowance – the AO is directed to reduce the amount of subsidy in determining the actual cost of the fixed assets for depreciation allowance – Decided in favour of assessee. Estimation of disallowance u/s.14A – Held that:- The AO during assessment proceedings noted the fact that assessee earned dividend of 1,34,79,846/- claimed as exempt u/s.10(34) of the Act and dividend of 10,86,28,149/- claimed as exempt u/s. 10(35) of the Act - in respect of these exempt incomes the assessee did not make any disallowance u/s14A – in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] it has been held that Rule 8D is prospective and not retrospective, the same cannot be applied to the year under consideration i.e. AY 2007-08 - Even otherwise the AO has not given any finding with respect to the nexus of this expenditure with that of the exempted income and has not pointed out to any expenditure, whatsoever, which is relatable to the exempted income - no disallowance at all should be made – Decided in favour of assessee. Treatment of industrial promotion assistance received – Revenue in nature or not – Held that:- The issue was raised before CIT(A) by way of additional ground but he has not adjudicated for the reason that the assessee has not filed revised return for making the claim but he has made claim by way of computation of income- this issue requires adjudication because the facts are already available in the assessment records – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• 2014 (12) TMI 435
  Cancellation of registration u/s 12A(a) – Validity of exercise of jurisdiction by the Commissioner u/s 12AA(3) – Conditions precedent for invocating the power of cancellation contained in section 12AA(3) of the Act are fulfilled or not – Held that:- The significance of the registration granted to the assessee u/s 12A of the Act lies in the fact that it entitles the assessee to claim exemptions under section 11 of the Act, of course subject to the fulfillment of other conditions prescribed - in order to cancel the registration already granted, the Commissioner ought to be satisfied on two counts – firstly, that the activities of the trust or institution are not genuine; and, secondly, that the activities are not being carried out in accordance with the objects of the trust or the institution - power of the Commissioner to cancel the registration u/s 12AA(3) of the Act is not without fetters, and is rather circumscribed by the conditions prescribed - a statutory authority has no power, jurisdiction or discretion to go beyond the statutory provisions - no power can be assumed in the absence of any specific provision – relying upon The Commissioner of Income Tax-I, Madurai. Versus Sarvodaya Ilakkiya Pannai [2012 (2) TMI 160 - Madras High Court] - It is only on 07.08.2009 that a notice was issued by the Commissioner u/s 12AA(3) of the Act pointing out that assessee was promoting sport activity on a commercial basis by holding various tournaments of BCCI viz. Ranji Trophy Matches, World Cup Trial Matches, Twenty-Twenty Tournaments, etc. for which BCCI was making payments to assessee. According to the Commissioner, the aforesaid was a commercial activity so as to be hit by the proviso to section 2(15) of the Act as inserted by the Finance Act, 2008. As per the Commissioner, the activities of the assessee do not qualify to fall within the meaning of charitable purpose as per proviso to section 2(15) inserted with effect from 1.4.2009 - such an objection cannot be the basis of invoke section 12AA(3) so as to cancel the registration already granted to the assessee u/s 12A - registration already granted to the assessee could not have been re-visited by the Commissioner on the basis of the reasoning aforesaid, since his power to cancel registration u/s 12AA(3) was confined to the examination as to whether the activities of the assessee society/association are genuine or that the same are not being carried out in accordance with the stated objects - action taken by the Commissioner does not fall within the parameters of section 12AA(3) of the Act and the order is bad in law. The Commissioner has merely noted that there is an addition in objects clause, which has not been intimated to the Department and therefore the registration is required to be cancelled - in the absence of any finding that how the additional objects vitiate the registration earlier granted u/s 12A of the Act, the cancellation cannot be effectuated – thus, the order of the Commissioner is set aside and the registration granted to the assessee u/s 12A is to be restored – Decided in favour of assessee. Validity of order of CIT u/s 263 – Commissioner directed AO to make fresh assessment – Held that:- The AO specifically required the assessee to explain the subsidy received from BCCI of 21 crores along with its purpose and the assessee was also required to explain as to why the same may not by taxed in view of the amended section 2(15) of the Act - the AO made an active and conscious examination of the facts relating to subsidy by way of share in T.V. rights received from BCCI even in terms of the amended provisions of section 2(15) of the Act - the charge made by the Commissioner that the AO accepted the claim of the assessee for exemption u/s 11 of the Act with respect to the subsidy by way of share in T.V. rights received from BCCI without making enquiries cannot be upheld. It is difficult to uphold the charge made by the Commissioner of non application of mind by the AO – AO examined the case of the assessee for grant of exemption u/s 11 of the Act in the context of the advent of new cricketing tournament, namely, T-20 tournament, etc. - no such tournaments have been conducted by the assessee during the year under consideration - it would have been appropriate for him to put such discussion in the body of the assessment order itself - on the preliminary issue itself, the order of the Commissioner is set aside – Decided in favour of assessee.

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• 2014 (12) TMI 434
  Invocation of section 263 by CIT – Revision of order – Erroneous and prejudicial to the interests of the Revenue or not - Held that:- In order to invoking the provisions of Section 263, both the conditions that order passed by AO is erroneous and it is prejudice to the interest of revenue must be satisfied - If one of them is absent, it may be held that provisions of Section 263 were not lawfully invoked - the AO has given clear findings that the assessee has produced books of account consisting of cash book, ledger etc. which were test checked - The information/evidence regarding the various cash credits introduced by the assessee as well as the details of expenditure debited in P&L a/c furnished by the assessee have been examined - The AO did not reject the books of account of the assessee but made addition merely by relying on the Departmental valuation report which only gives the estimated cost of construction and not the actual cost of construction incurred by the assessee - in absence of rejection of books of account, the AO is not authorised to reject the cost of construction shown by the assessee in his books of account - in the absence of rejection of books of account by the AO, allow the appeal of the assessee and delete the addition made by the AO on the basis of departmental valuation report. Relying upon DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION [2013 (7) TMI 483 - DELHI HIGH COURT] wherein it has been held that an order cannot be termed as erroneous unless it is not in accordance with law - in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue - It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste - an order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realized - when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. The Income-tax Officer had made enquiries in regard to the nature of the expenditure incurred by the assessee - The assessee had given detailed explanation in that regard by a letter in writing - the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature - inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue - Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order - the course adopted by the AO of not resorting to or attempting estimate, after first accepting the books as correct and complete, is the mandate of law - Thus the course adopted by the AO was fully justified in the facts and circumstances of the case - the AO would have been in error, if he had resorted to estimate, while the books were found correct - the view adopted by the AO was the only view sustainable in law – thus, the order passed by the AO was not erroneous or prejudicial to the interest of revenue in any way – hence, the CIT had no jurisdiction to take action u/s 263 – Decided in favour of assessee.

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• 2014 (12) TMI 433
  Prior paid expenses deleted – Expenses set off by prior paid income - Mercantile system of accounting followed – Held that:- CIT(A) rightly was of the view that as per the details furnished by the assessee, the assessee has claimed deduction on account of prior period expenses of 15.38 lakhs and at the same time, the assessee has offered previous year income to the extent of 18.78 lakhs - income offered on account of previous years is more than the claim of the assessee relating to previous year expenses - Since the AO has already assessed previous year income in the present year, there is no reason to disallow the claim of the assessee regarding previous year expenses since there expenses are lesser than such incomes, but at the same time, this has to be seen as to whether such previous year expenses are otherwise allowable or not because we have noted that some of the expenses are on account of penalty and some of the expenses are infrastructure expenses which may not to be found otherwise allowable - normally prior period expenses cannot be allowed but if there is some income in the prior period then definitely the expenses can be set off against such income – Decided against revenue. Deletion of STCG – Held that:- The assessee has originally purchased an industrial plot bearing NO. B-77, Ph VII, IA, Mohali through auction - The auction was conducted by sale committee appointed by Court on winding upon of Punwire - The sale was challenged before the Company judge by Sun Group - what has happened is that by setting aside the same the Hon ble Supreme Court has cancelled the original sale made to the assessee-company - sale in favour of WINSOME in respect of item No. 17, 19 ble Supreme Court and therefore it cannot be said that the assessee ever acquired any interest in the property - No doubt extinguishment is also covered in the definition of transfer u/s 2(47)(II) - extinguishment would normally connote a situation where an asset goes out of existence – thus, surplus arising on account of compensation received by the assessee cannot be assessed under the head "capital gain" because no asset came into existence with the assessee. Taxability of the amount as compensation – Held that:- In Kettlewell Bullen And Company Limited Versus Commissioner Of Income-Tax, Calcutta [1964 (5) TMI 4 - SUPREME Court]it has been held that if amount is received as compensation in relation to surrender of profit making structure then such compensation is to be treated as capital receipt - the assessee has acquired an industrial shed for running a manufacturing business and sale was set aside by the Hon ble Supreme Court and therefore the assessee is clearly deprived of making future profits by surrendering this profit making structure or capital asset and therefore compensation received against such surrender is to be treated as capital receipt - the compensation cannot be brought to tax as revenue receipt – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 432
  Claim of disallowance of deduction u/s 80P(2)(a)(i) – Assessee is a co-operative society registered under the Karnataka State Co-operative Societies Act,1959 - whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- - If the co-operative society is engaged in carrying of business of banking or providing credit facilities to its members, the co-operative society is entitled for deduction on whole of the income relating to any one or more of such business - the provisions of Sec. 80P(4) mandates that the provisions of Sec. 80P will not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank but as per the provisions of Sec. 80P(2)(a)(i), a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled for deduction. Nature of assessee - Cooperative bank or cooperative credit society – Whether the Assessee co-operative society complies with all the three conditions - Held that:- The types of the deposits which the assessee has accepted as per bye-laws are the same as are being accepted during the course of the carrying out the banking activities - the paid up share capital and reserves in the case of the Assessee is more than 1 lac - the Assessee satisfies the second condition - Sec. 16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member - the third condition for becoming primary co-operative bank is also complied with - Since the assessee society does comply with all the three conditions, therefore, the assessee society does become a primary co-operative bank and in view of explanation (a) of section 80P(4) it has to be regarded as a co-operative bank and is hit by section 80P(4) - the Assessee has to be regarded to be a primary co-operative bank as all the three basic conditions are complied with, therefore, it is a primary co-operative bank and the provisions of Sec. 80P(4) are applicable in the case of the Assessee and Assessee is not entitled for deduction u/s 80P(2)(a)(i) – thus, the order of the CIT(A) is upheld in not allowing deduction u/s 80P(2)(a)(i) to the assessee for both the years – Decided against assessee.

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• 2014 (12) TMI 431
  Addition u/s 69 – Allowability of expenses as cost of acquisition development – Held that:- Following the decision in M/s. Manas Greenland Pvt. Ltd., Hyderabad Versus Income Tax Officer (OSD) [2014 (12) TMI 399 - ITAT HYDERABAD] the CIT(A) rightly of the view that assessees have made investments in fixed assets and the source of such investments was the inflow available on the Liability Side of the Balance Sheet - since the AO has not properly appreciated the facts, before the CIT(A), the source was explained, and the same was accepted by the CIT(A) - there cannot be any addition made in this year and even in the subsequent year, i.e. in the year of sale, the source of investment cannot be disputed - CIT(A) is not justified in giving direction to the AO to consider the source of investment in the year of sale - it is not a fit case for making the addition u/s 69 – Decided in favour of assessee. Treatment of agricultural income – Income from other sources or not – Held that:- Assessee’s claim of agricultural income has been rejected only on the ground of lack of supporting evidence - it is the claim of assessee that assessee is having substantial agricultural land holding which it has leased out and agricultural operations is being carried on such land. It is also to be noted that assessee has claimed that similar income shown in the preceding AY has been accepted by AO in scrutiny assessment proceeding - the matter requires re-examination - If the assessee has been showing agricultural income from lease rentals from the same land in the preceding AY, which has been accepted by the department, then, there is no reason why it should be disallowed in the impugned AY - AO is directed to verify this aspect and decided the issue accordingly – decided in favour of assessee. Opportunity for verification of fresh evidences provided to AO or not – Held that:- Only on the basis of materials available on record, which also formed part of assessment record, viz., return of income, balance sheet, P&L a/c, confirmation letters etc., CIT(A) has concluded that neither the development expenses can be treated as unexplained investment nor the increase in unsecured loans can be treated as unexplained credit - as there is nothing on record to suggest that CIT(A) has entertained additional/fresh evidence while deleting the addition, the claim of the revenue cannot be accepted – Decided against revenue. Imposition of penalty u/s 221(1) r.w.s. 140A(3) – Held that:- Assessee have failed to pay self-assessment tax u/s 140A of the Act while submitting its return of income for the impugned AY - Therefore, assessees are to be treated as assessees in default u/s 140A(3) of the Act thereby making them amenable to imposition of penalty u/s 221(1) of the Act. Section 221(1) makes it clear that AO can impose penalty in a case where assessee has defaulted in making payment of the tax liability as a result of which he is to be treated as an assessee deemed to be in default - imposition of penalty u/s 221(1) is not automatic or mandatory - AO has been given discretion to impose penalty in an appropriate case whereas assessee has also been given an opportunity to satisfy AO that there is good and sufficient reasons for default in making payment - assessee has discharged the tax liability along with interest, liberal approach needs to be taken - imposition of penalty at such a high figure at the first instance is not justified - penalty @ 5% of the admitted tax liability would be reasonable – Decided partly in favour of assessee.

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• 2014 (12) TMI 430
  Deletion of demand u/s 201(1) and 201(1A) - Liability to Deduct tax on remittance made to its Denish group concern – Remittance made attract Provisions u/s 9(1)(vi) relating to Royalty or not - whether the assessee’s act of acquiring ‘2003 Microsoft licensing for 270 sets of MS Office, Windows and Cals’ amounts to payment of ‘royalty’ or not – Held that:- The assessee has paid a ‘royalty’ sum to its Denish group concern in lieu of acquiring software licence for ‘2003 Microsoft licensing for 270 sets of MS Office, Windows & Cals’ - the granting of licence is already included as a right in Explanation 2 clause (i) and (v) - These clauses form part of the ‘royalty’ provision since its coming into being - This licence would also enable the assessee to make use of the ‘shrink wrap software’ availed. Following the decision in Commissioner of Income-tax Versus Samsung Electronics Co. Ltd. & Others [2011 (10) TMI 195 - KARNATAKA HIGH COURT] - right to make a copy of the software and use it for internal business by making copy of the same and storing the same in the hard disk of the designated computer and taking back up copy would itself amount to copyright work under Section 14(1) of the Copyright Act and licence is granted to use the software by making copies, which work, but for the licence granted would have constituted infringement of copyright and licencee is in possession of the legal copy of the software under the licence and payment made in that regard would constitute 'royalty' for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as per clause (iv) of Explanation 2 to Section 9(1)(vi) of the Act - agreements with foreign countries DTAA would override the provisions of the Act - there is obligation on the part of the respondents to deduct tax at source u/s 195 of the Act - the nature of software technology availed, invoice raised specifically quoting only licence and right of usage embedded supports the case of the revenue. Transactions relating to sale of goods – Held that:- The present case involves only a licence pertaining to ‘shrink wrap software’ - There is no material to prove any ‘goods’ element in the ‘2003 Microsoft licensing for 270 sets of MS Office, Windows and Cals’ - The CIT(A)’s view does not refer neither to any statutory provision nor evidence on record - cost sharing formula or any other method is only an internal arrangement - In determining ‘royalty’ payment, we have to refer to facts of the case vis-à-vis the statutory provision - Since the conditions are satisfied, this formula in itself cannot defeat applicability of the TDS provision - whatsoever may be the medium or mode of acquiring the licenced right, the fact remains that the assessee has acquired a licence to use the Microsoft Office software - Its claim that it is merely a copy of the copyrighted article does not make any difference - the assessee ought to have deducted TDS for acquiring ‘2003 Microsoft licensing for 270 sets of MS office, Windows and Cals’ - Thus, the assessing authority has rightly raised demand u/s 201(1) and interest u/s 201(1A) of the Act – Decided in favour of revenue.

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• 2014 (12) TMI 429
  Selection of comparables – Held that:- The discussion made by the TPO on the issue shows that he has considered a filter 25% of the RPTs for the purpose of excluding a concern from the list of comparables – in Compucon Software Ltd. he has aggregated the receipts for services rendered and the payments made for services received and thereafter he has divided the total figure by the total turnover of the assessee - if total expenses incurred by the assessee by way of payments to associated enterprises is divided by the total expenses incurred, the ratio of RPTs to the total transactions exceed 25%, as per the working made by the assessee - assessee rightly referred to Bindview India (P.) Ltd. vs. DCIT [2013 (6) TMI 113 - ITAT PUNE] - the RPTs in the case of Compucon Software Ltd. have been accepted as being in excess of 25% of the total transactions - the plea of the assessee to exclude Compucon Software Ltd. from the list of comparables has been wrongly negated by the lower authorities. Inclusion of Avani Cincom Technologies Ltd. as a comparable – Held that:- The assessee is justified in seeking exclusion of Avani Cincom Technologies Ltd. from the final list of comparables - the order of the TPO brings out that the concern is engaged in providing State of Art Technology solution and services to organizations in different verticals like Travel, Insurance, Financial services, Healthcare, Law, Transportation and others - The factum of the concern being engaged in development of products and sale thereof apart from being engaged in software development services is not denied - in such a situation, only the segment relating to development of software services, which can be said to be similar to the assessee, can only be considered for the purposes of comparability analysis - The segmental data is not available and it would be inappropriate to consider the financial results of the concern as a whole for the purposes of carrying out comparability analysis vis-à-vis the tested transactions – the company is liable to be excluded from the list of comparables. Inclusion of SIP Technologies and Export Ltd. - Financial data of the concern which has been considered does not correspond to the financial year of the assessee – Held that:- The financial year of the assessee is from 01.04.2005 to 31.03.2006 whereas the financial year of SIP Technologies and Export Ltd. ending on 31st March, 2006 is comprised of a period of 18 months starting from 01.10.2004 – as per rule 10B(4) of the Rules, the data to be used in analyzing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into - the financial data of SIP Technologies and Export Ltd. adopted by the TPO for the period ended 31.03.2006 does not relate to the FY in which the international transaction has been carried out by the assessee because of the variation in the financial year of the two concerns – the AO is directed to exclude SIP Technologies and Export Ltd. from the list of comparables. The plea setup by the assessee for exclusion of Synetairos Technologies Ltd. from the list of comparables is quite justified - assessee had included the concern as a comparable in its Transfer Pricing Study – in principle assessee cannot be denied an opportunity to seek exclusion of the concern from the list of comparables if the same is founded on justifiable grounds. M/s Synetairos Technologies Ltd. – Held that:- The company is engaged in not only providing software development services but is also engaged in providing software professionals to other software companies, an activity which is not being carried out by the assessee at all - in absence of adequate credible information relating to the said concern, it would be inappropriate to consider it as a comparable concern for the purposes of carrying out the comparability analysis - M/s Synetairos Technologies Ltd. be excluded from the final set of comparables – Decided partly in favour of assessee.

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• 2014 (12) TMI 428
  Determination of ALP - Adjustment of stated value of international transaction with AE - determination of income arising from an ‘international transaction’ – Held that:- As per the assessee, all the advances made to the associated enterprises are not in the nature of loans and it is canvassed that even if an adjustment for non-charging of interest is to be made the same ought to be made with reference to the LIBOR rate and not in the manner made by the TPO – the amount of share application money is outstanding as the investee company has not issued shares to the assessee till the close of the previous year under consideration - the action of the TPO in changing the characteristic of the transaction of payment of share application money as an interest-free loan is unwarranted and beyond his jurisdiction which carrying out the transfer pricing proceedings - There is no provision of law which enables the TPO to change the character of a transaction while subjecting it to the process of determination of arm's length price - The TPO was required to benchmark such transactions against a similarly placed transaction and not deem the transaction to be a lending or borrowing transaction - a transaction of advancing loans is within the purview of transfer pricing mechanism and the arm's length price computed thereof is includible in the assessable income of the assessee. Where the character of payment is towards share application money, thereby reflecting a capital investment, and the same not having been disputed by the TPO, such a transaction cannot be subject to an arm's length price adjustment under the plea of it being a transaction of lending or borrowing - the TPO was not justified in treating the aforesaid transaction as being an interest-free lending transaction entered with the associated enterprise - the transaction would have entailed charging of interest for the period between payment of share application and the date of allotment of shares - the approach of the authorities below in the context of the aforesaid amount of 9,91,39,000/- by treating it to be a transaction in the nature of interest-free lending transaction per se, and subjecting it to an arm's length price adjustment is erroneous and unwarranted. Amount converted into interest free loan – Unrealized consideration of sales – Held that:- A transaction of interest free lending is liable to be subject to arm's length price adjustment, so however, where the lending has occurred on the last day of the previous year, no adjustment would be necessary for the relevant year – there was no determination by the TPO or the AO regarding assessee’s plea that outstanding debtor’s balance has been converted into loan on the last day of previous year – thus, the matter is to be remitted back to the AO. Loan advanced to TTD which is the opening balance – Held that:- The plea of the assessee is quite justified because the transaction is not a lending or borrowing between two domestic entities - The transaction is between two cross-border entities and is in foreign currency and therefore such a transaction is bound to be examined in the context of the prevailing lending practices in the international market - the domestic bank rate is not a sound basis and instead internationally accepted rate of LIBOR is certainly a better benchmark in order to compute the arm's length price interest rate in respect of the impugned transactions – the AO is directed to cull out the average of the LIBOR rate and thereafter compute appropriate arm's length price adjustment with respect to interest component of the transactions of advancing interest-free loans to associated enterprises – Decided in favour of assessee. Disallowance of interest expenses – Held that:- Interest expenditure is allowable u/s 36(1)(iii) of the Act so long as the corresponding funds have been utilized for the purposes of business - the addition has been made in disregard to the plea of the assessee that the Finance costs are relatable to funds used for the purposes of business - there is nothing to suggest that the same is for non-business purposes, and the addition has been made by the AO mechanically - the action of the AO cannot be sustained in disallowing the expenditure – thus, the matter is remitted bak to the AO for fresh disposal – Decided in favour of assessee.

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• 2014 (12) TMI 427
  Maintainability of appeal – Tax effect less than prescribed monetary limit for filing appeal –Tax effect less than 4 lacs – Revision of monetary limits through circular - Held that:- Following the decision in CIT Vs M/s. P. S. Jain 4 Lacs - no appeals would be filed in the cases involving tax effect less than 4 Lacs notwithstanding the issue being of recurring nature - the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases – revenue could not point out any of the exceptions - this being a low tax effect case, the appeal cannot be admitted – Decided against revenue.

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• 2014 (12) TMI 426
  Revision of order u/s 263 by CIT – Grant of relief u/s 80P - Assessee company is Co-op Bank registered under Karnataka State Co-operative Society Act 1956 – Held that:- The Commissioner has exercised his power u/s. 263 in respect of order passed by AO u/s. 143(3) – The Commissioner was of the view that there was a lack of examination and lack of application of mind by the AO as per provisions of Section 80P(2)(d) in case of specified Co-operative Society - assessee is not entitled for exemption of dividend income u/s. 80P(2)(d) as the assessee is a Co-operative Bank -as per the provisions the assessee is not entitled for such exemption - The Commissioner of Income Tax in his jurisdiction u/s. 263 makes it clear that pre-requisite for exercise of jurisdiction by Commissioner Suo Motu under it, is that the order of Income Tax Officer is erroneous in so far as it is prejudicial to the interest of revenue - action U/s. 263 would be valid though he has not indicated the extent of understatement of income tax act – in CIT vs. Assam Tee House [2012 (6) TMI 617 - Punjab and Haryana High Court] it has been held that the AO did not undertake verification of closing stock and purchase and did not check the books of accounts - where the assessee is following the mercantile system of accounting took the interest as liability, when there was no evidence that such liability has accrued during the year, but such liability had been allowed by the AO it is a case where the deduction has been wrongly allow the jurisdiction u/s. 263 was justified - the similar issue has been decided in Malabar Industrial Co. Ltd v. CIT [2000 (2) TMI 10 - SUPREME Court] - the AO has not made enquiry and he has not applied his mind - Section 22A is similarly to Section 263 of the Income Tax Act - on the ground that the AO has jurisdiction to include the turn over by revising the assessment or reopening the assessment order – Decided against assessee.

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• 2014 (12) TMI 425
  Maintainability of appeal – Tax effect less than prescribed monetary limit for filing appeal –Tax effect less than 4 lacs – Revision of monetary limits through circular - Held that:- Following the decision in CIT Vs M/s. P. S. Jain 4 Lacs - no appeals would be filed in the cases involving tax effect less than 4 Lacs notwithstanding the issue being of recurring nature - the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases – revenue could not point out any of the exceptions - this being a low tax effect case, the appeal cannot be admitted – Decided against revenue.

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• 2014 (12) TMI 424
  Validity of proceedings u/s 143(3) – validity of service of notice u/s 282 – Held that:- As per section 282 any notice under the Income Tax Act has to be served on the person named therein either by post or as if it were a summons issued by Court under the Code of Civil Procedure - Section 282 of the IT Act as effective on the date of issue of notice as on 17.9.2009 deals with the service of notice in general - nothing has been brought to notice by the department that the Board even as per sub section (2) hereinabove has made any rules providing for the addresses to which the communication referred to in sub-section (1) may be delivered or transmitted to the person therein named - any notice under the Income Tax Act has to be served on the person named therein either by post or as if it were a summons issued by the Court under the Code of Civil Procedure. In absence of mentioning of a specific actual date on which the assessee was served upon with the notice sent on 19.9.2008 it cannot be arrived at a conclusion that the notice was served well within the prescribed time limit - nothing is coming from record as to when this notice was served upon the assessee - The another notice issued u/s 143(2) dated 17.9.2010 which was served upon the assessee was admittedly beyond the prescribed time limit provided under the proviso to Section 143(2) of the Act - service of notice issued u/s 143(2) within the prescribed time limit is mandatory and condition precedent to proceed for framing of assessment u/s 143(3) - there is nothing on record to show as to on which date this notice was received at the given address of the assessee and on which date the same was re-directed. In CIT Vs. Vardhaman Estates (P) Ltd. [2006 (9) TMI 128 - DELHI High Court] it was held that in a case of service of notice u/s 143(2), the date of dispatch of notice is not deemed date of service and that where there was no material to suggest that the notice sent by speed post was served on any earlier date than that contended by the assessee, the assessment was not valid on the ground of limitation - the provisions laid down u/s 292BB of the Act regarding deeming of validity of a notice in certain circumstances are not helpful to the revenue as the proviso thereto extends shelter to the assessee in the present case who had raised objection about the validity of notice issued u/s 143(2) of the Act to the AO before the completion of the assessment - when there is nothing available on record to suggest that notice issued u/s 143(2) of the Act on the address that is FG- 67-C, Vikashpuri, New Delhi sent through speed post on 19.9.2008 was actually served upon the assessee within the time prescribed under proviso to Section 143(2)(ii) of the Act nor is there any scope of presumption of servicein absence of Rule 19A order V of CPC, no notice u/s 143(2) was served upon the assessee within the time limit prescribed under the proviso to Section 143(2)(ii) of the Act – Decided against revenue.

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• 2014 (12) TMI 423
  Payments received to be treated as royalty or not u/s 9(1)(vi)&(vii) as well as Article 13(4) of DTAA – Whether the receipt can be said to be FTS - Held that:- Following the decision in DAMPSKIBSSELSKABET AF 1912 A/S AKTIESELSKABET, MUMBAI Versus. ADIT(IT) [2010 (6) TMI 462 - ITAT, MUMBAI] - The definition of FTS both under the DTAA as well as under Expln.-2 to Sec.9(1)(vii) of the Act has already been referred to earlier - it refers to a payment in consideration for the services of managerial, technical or consultancy nature - The payments received by the Assessee are for providing a facility to its agents - The payment received is nothing but a payment by way of reimbursement of the cost for providing a particular facility - The Assessee is in the business of shipping and not in the business of providing any technical service – There is no finding by the AO or CIT(A) that there was a profit element embedded in the payments received from the Assessee from its agents in India - Installation and operation of sophisticated equipments with a view to earn income by allowing customers to avail of the benefit of the use of such equipment does not result in the provision of technical service to the customer for a fee – the order of the CIT(A) is upheld in deleting the addition made by the AO on account of amount received by the assessee towards shared IT Global Portfolio Tracking System by treating the same as fees for technical services – Decided against revenue.

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• Customs

• 2014 (12) TMI 446
  Confiscation of the goods - Imposition of redemption fine 2,77,284/- and penalty of 10,000/-. It is also pertinent to note that the department did not file appeal against the order of adjudication passed by the original authority to the Commissioner (Appeals). Therefore, there is no claim before the Tribunal on the question of demand of duty. The question of the Tribunal upholding the demand of duty does not arise. Since the Department has not chosen to file any appeal before the Tribunal as well as before this Court, to that extent, the appellant appeal deserves to be given the benefit of no duty liability by modification of the order of the Tribunal, in the absence of a demand for duty by the original authority. In such view of the matter, the impugned order passed by the Tribunal deserves to be set aside. Accordingly, substantial questions of law 3 and 4 are answered in favour of the appellant/importer and against the Revenue. - Decidedin favour of assessee.

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• 2014 (12) TMI 445
  Condonation of delay - Whether the dismissal order passed by the Appellate Tribunal in the miscellaneous petition filed for condoning the delay of 30 days in filing an appeal against the order dated 28-6-2005 passed in Appeal No. 119-2005-TTN(CUS)(ADK)) is correct or not - Held that:- there is no inhibition in the concerned section for constituting a fresh Review Committee for taking decision afresh which has already been decided and since the petition in question is only for condoning the delay of 30 days, this Court is of the view that the order passed by the Appellate Tribunal is liable to be set aside and the substantial questions of law settled in the present Civil Miscellaneous Appeal are really having substance - Decided in favour of Revenue.

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• 2014 (12) TMI 444
  Remission of duty - Lost goods - Denial on the ground that many transactions, viz. sale, transfer from tank to tank and re-export, have taken place on different dates and therefore, it was difficult for the supervising officers to exactly pin point the exact quantity involved in such transactions and further, it was stated that there was always a possibility of oil remaining in the pipeline during the Preventive officer’s inspection which could have been brought to the notice subsequently - Tribunal allowed remission of duty - Whether the Tribunal had committed an error of law in holding that the Tribunal has also examined the provisions of Section 23 of Customs Act that it is against the provisions embedded in Customs Act - Held that:- In that process, there appears to have been a loss of 51.971 M.Ts. which works out to 0.58% of the total quantity imported. When the importer made a request to the department claiming remission, the authorities did not dispute the transactions narrated above. In fact, in their reply dated 14-8-2002, they have admitted all the transactions and had also stated that it is difficult for the supervising officer to exactly pin point the quantity precisely as there is always a possibility of oil remaining in the pipeline during the Preventive Officer’s inspection. Tribunal, after considering the factual situation, was satisfied that the explanation given by the importer was reasonable and appropriate. Thus, taking note of the factual findings recorded by the Tribunal, we find no ground to interfere with the said order - Decided against Revenue.

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• 2014 (12) TMI 443
  Interest on delayed refund - Refund of CVD paid despite exemption notification – unjust enrichment - whether the first respondent/assessee is entitled to claim interest from the date of application with regard to the amount which is refundable - Held that:- Even from a mere reading of the said Section, it is easily discernible that refund of excess duty should be paid within a period of three months from the date of receipt of an application and if no such refund is made within the stipulated period of three months, the applicant/assessee is entitled to get interest from the date of filing of such application - every application for refund of excess duty has to be considered within a period of three months and the refund should be made within that period and if no such refund is made, the applicant/assessee is entitled to get interest from the date of filing application. Under the said circumstances, in Section 27(A) of the said Act, the words “from the date of receipt of such application” have been used. Therefore, it is quite clear that the residual contention put forth on the side of the appellant cannot be accepted. It has already been pointed out that the Appellate Tribunal, as per the provision of the said Section, has rightly awarded interest and in view of the discussions made earlier, this Court has not found any error in the order passed by the Appellate Tribunal and further the substantial question of law settled on the side of the appellant is not having substance at all and altogether the present civil Miscellaneous Appeal deserves to be dismissed. - Decided against Revenue.

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• Service Tax

• 2014 (12) TMI 462
  Waiver of pre deposit - Cenvat credit - input services - construction of a technology park for renting out for various firms and service - Held that:- services are definitely relatable services and have been used for construction of the premises. We have also find reliance placed on the decisions in the case of Navratan SG Highway Properties Pvt. Ltd. Vs. CST, Ahmedabad - [2012 (7) TMI 316 - CESTAT, AHMEDABAD] and C.C.E, Visakhapatnam-II vs. Sai Samhita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] is applicable to the facts of this case. - issue relates to liability of various services for the period before construction was completed and even in that case, exemption for construction service and other services were held to be eligible - appellant has made out a prima facie case for complete waiver of pre-deposit of the adjudged dues. Accordingly, requirement of pre-deposit of waived and stay against recovery is granted during pendency of the appeal. - Stay granted.

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• 2014 (12) TMI 461
  Invocation of extended period of limitation - Whether extended period can be invoked in a case where penalty imposition under Section 78 has been waived as per Section 80 of the Finance Act, 1994 - Held that:- Even in the case of where Section 78 is invokable and established the penalty imposed upon an assessee can be set-aside under Section 80 of the Finance Act, 1994 in case it can be proved by an assessee that there was a reasonable cause for failure. Therefore, it can be independently examined whether extended period can be invoked, where waiver of Section 78 penalty upon the appellant is allowed as per the provisions of Section 80 of Finance Act, 1994. The case of Gujarat High Court in the case of Ankleshwar Taluka ONGC Land Loosers Travellers Co.Op vs. CCE, Surat (2012 (4) TMI 326 - GUJARAT HIGH COURT) relied upon by appellant was different on facts. There was a written contract between M/s. ONGC and that appellant having no service tax clause. M/s. ONGC refused to pay tax to the appellant in that case. It was specifically brought to the notice of High Court that in those circumstances the service tax could not be deposited in time. In the present case before this bench, no written contract is produced to indicate that service tax clause was not there. There is also no indication that M/s. Gujarat Borosil Limited refused to pay service tax to the appellant. There is also no evidence that appellant had any confusion that service tax payment on Rent-a-Cab services was disputable. In the present case the entire demand is not time barred and appellant has not shown his bonafides by paying the service tax along with interest for the period within limitation period. Appellant is not able to convince the Bench, with any documentary evidence that there was any confusion in his mind regarding non payment of service tax. Extended period is applicable in the present appeal even if waiver from Section 78 penalty has been extended to the appellant under Section 80 of the Finance Act, 1994. - Decided against assessee.

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• 2014 (12) TMI 460
  Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - Held that:- It is noticed from the records that Stay/Partial Stay was granted to the appellant on 30.03.2012. After granting of stay to the appellant this appeal has never been listed for final hearing. The appeal could not be listed for final hearing by the Registry due to heavy work load as the appeals filed for the earlier period are being listed. Hon’ble Gujarat High Court has held that extension can be allowed by the Bench looking to the facts and circumstances of this case. We find that there is no fault of the appellant in seeking extension of the stay already granted. The request made by the appellant is genuine and extension of stay is granted till the disposal of appeal. - Following decision of Commissioner of Customs & Central Excise, Ahmedabad vs. Kumar Cotton Mills Pvt. Limited [2005 (1) TMI 114 - SUPREME COURT OF INDIA] and Commissioner Versus Small Industries Development Bank of India [2014 (7) TMI 738 - GUJARAT HIGH COURT] - Stay extended.

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• 2014 (12) TMI 459
  Sale of software - packaged software were imported from the replicator or the foreign supplier - Intellectual Property Right Services - Payment made to Microsoft - Held that:- Commissioner has held that Microsoft has copyright of the software and only right to use the software by end user by way of license agreement with copyright protection for Intellectual Property Service copyright is exempted to levy of service tax. We, further, find that it is a computer software programme which is given on commercial rental to the applicants by M/s. Microsoft. In these circumstances, prima facie we are of the view that the applicant is covered as a copyright holder and not required to pay service tax under the category of Intellectual Property Right Services. Therefore, for the period prior to 16.5.2008 applicant is not required to pay service tax. For the period post 16.5.2008, we, find that as observation made by this Tribunal in the case of Infotech Software Dealers Association (2010 (8) TMI 13 - HIGH COURT OF MADRAS) and has held by the Hon'ble Apex Court in the case of Tata Consultancy Services reported in [2004 (11) TMI 11 - Supreme Court] the transaction of sale of computer software is a sale of goods. Further, in the case of Suzlon Energy Ltd. Vs. Commissioner of Central Excise Pune-III [2014 (8) TMI 96 - CESTAT MUMBAI] wherein this Tribunal observed that the transaction was treated as supply of goods for the purpose of Customs duty, therefore, transaction cannot be treated as supply of service and levy of service cannot be made on the entire value of transaction once again. In these circumstances, we are of the view that the sale of software is only a sale of goods and the service tax cannot be levied. Further, we find merit in the contention of the Ld. Counsel for the applicant that right to use software is given to the end user and the applicant is only an intermediary. Therefore, the applicant is not liable to pay service tax. - applicant has made out a case for complete waiver of pre-deposit of entire amount of service tax, interest and penalties. Accordingly, we waive the requirement of pre-deposit of entire amount of service tax, interest and penalties and stay recovery therefore during the pendency of the appeal - Stay granted.

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• 2014 (12) TMI 458
  Waiver of pre-deposit - levy of service tax on collection of development fees for development of the airport in future - airport services - Held that:- Levy of development fee has been struck down by the Hon'ble Supreme Court holding that the applicant is not entitled to collect the development fee from the passengers through airlines in the case of Consumer Online Foundation (2011 (4) TMI 1275 - SUPREME COURT OF INDIA). Therefore, it is not a service and the same view has been taken by this Tribunal in the case of Cochin International Airport Ltd. (2009 (7) TMI 120 - KERALA HIGH COURT) which has been affirmed by the Hon'ble Kerala High Court. Further, as argued by the learned Spl. Counsel that intention of the parties has to be seen as they have collected the development fee as service to be provided in future. We have seen the intention of the parties and gone through the records placed before us. On the basis of the records, we find that from May 2012 onwards the applicants have charged tax on these development fees from the airlines and whatever service tax collected by them has been paid to the department. In these circumstances, prima facie, the applicants have made out a case for complete waiver of pre-deposit of the entire amount of service tax, interest and penalties. Accordingly, we waive the requirement of pre-deposit of the entire amount adjudged and stay recovery thereof during the pendency of the appeals. - Stay granted.

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• 2014 (12) TMI 457
  Option to levy Simultaneous Penalty u/s 76, 77 & 78 - Power of adjudicating authority - Intention to suppression of facts - Held that:- During the relevant period penalty under Sections 76 and 78 of Finance Act, 1994 were not mutually exclusive and therefore the Commissioner (Appeals ) is not correct in holding that the two penalties (under Sections 76 & Section 78) could not be imposed simultaneously. However it is seen that the Punjab and Haryana High Court in the case CCE Vs. First Flight courier 2[2011 (1) TMI 52 - High Court of Punjab and Haryana] has observed that penalty under Section 76 may not be justified if penalty had already been imposed under Section 78. Even if it is not correct to say that penalty under Section 76 can never be imposed after penalty under Section 78 is imposed, the appellate authority was within its jurisdiction not levy penalty under Section 76 having regard to the fact that penalty equal to service tax has already been imposed under Section 78 of the Finance Act 1994. Following decision of CCE Vs. Pannu Property Dealers, Ludhiana [2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT]. - Decided in favour of assessee. It is not enough to merely claim that they had bona fide belief that their services were not liable to service tax. It is to be demonstrated that they had taken reasonable steps to ascertain about the taxability of their services which evidently in this case they had not taken. Bona fide belief is an informed belief and the appellants have not been able to show as to on what basis they could harbour the belief that the impugned services were not taxable when they were providing such services on such a large scale. Seen in this light non-payment of service tax for such a long period clearly leads to a sustainable conclusion that it was an act which was wilfull for evading service tax. Therefore penalty under Section 78 ibid is clearly imposable. There is however force in the contention of the appellants that neither the original adjudicating authority nor the appellate authority gave than an option to pay (reduced) penalty of 25% of the Service Tax in terms of the proviso under Section 78. Following decision of CCE, Chennai vs. Zen Systems and Maintenance Pvt. Ltd. 2013 (7) TMI 603-CESTAT (Chennai) appellants deserve to be given the benefit to pay 25% of the penalty under Section 78 ibid within a month of the receipt of this order. - Decided partly in favour of assessee.

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• 2014 (12) TMI 456
  Waiver of predeposit - E-publishing services - Held that:- There is no dispute on the fact that appellant is engaged in providing of E-publishing services to overseas customers. Part of the services like, copy editing, indexing, project management outsourced to the overseas customer which is squarely covered under "Import of Services". The remittance of foreign currency is not under dispute. The above activities particularly the project management outsourced relates to managing specified E-publishing project given by the customer efficiently. We find that appellant had initially contested before the adjudicating authority that their services were covered under IT services and the adjudicating authority held that their activity does not fall under "Information & Technology Services". However, the appellant in the present appeal advanced their contentions under "Business Auxiliary Service" under clause (vi) as provision of services on behalf of the client before the Tribunal for the first time. Considering the nature of services and also considering the fact that the appellant has initially contested that Information & Technology services before the adjudicating authority and now they are contesting under Business Auxiliary Service, the appellants have prima facie not made out a case for total waiver of predeposit. - Partial stay granted.

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• 2014 (12) TMI 455
  Reversal of cenvat credit towards trading activity - Rule 6 (3) of CENVAT Credit Rules 2004 - Held that:- Appellant was liable to reverse proportionate credit on the total trading turnover which has been worked out by the appellant as 31,89,728/- in our opinion has also to be deposited. Since amendments in the relevant rules and provisions were brought in 2011 to deem trading as a service and separate exemption notification was issued making it an exempted service. Prior to that, if a service was non-taxable or exempt, it was to be considered as an exempted service and if common services were used for exempted services and taxable services/dutiable manufactured items, separate accounts were required to be maintained in respect of inputs and input services failing which there were statutory requirements to be fulfilled. Once we hold that trading is not a service and cannot be considered as service prior to 01.04.2011, the provisions of Rule 6(3) of CCR 2004 which requires payment of a percentage of value of the goods traded, in case separate accounts are not maintained would not be applicable. However, since trading is an activity and certain amount of services would have been used in such activity, the appellants have to reverse proportionate credit attributable to trading activity. Appellant was liable to reverse proportionate credit on the total trading turnover which has been worked out by the appellant as 31,89,728/- in our opinion has also to be deposited - Partial stay granted.

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• Central Excise

• 2014 (12) TMI 454
  Confiscation of goods - Redemption fine - whether the activity undertaken by the appellant of packing/re-packing, labelling/re-labelling and fixing of MRP on automobile parts amounts to manufacture and consequently they are liable to pay duty - Held that:- although the appellants have no case on merit but on limitation they are having a case as the show-cause notice dated 09.08.2012 has been issued by invoking extended period of limitation. Hence, the proceedings under the said show-cause notice are set aside. However demand pertaining to other period is upheld as same are within the limitation period. As in this case, the extended period is not invokable therefore, the goods are not liable for confiscation. Accordingly, confiscation is set aside. Consequently, redemption fine is not imposable. Following decision of JCB India Ltd. [2014 (2) TMI 632 - CESTAT MUMBAI] - penalties in this case are not warranted - However, demand confirmed under other SCN is within limitation period hence confirmed - Decided partly in favour of assessee.

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• 2014 (12) TMI 453
  Waiver of pre deposit - Benefit of exemption Notification No. 06/2006-CE - Discharge of duty on imported inputs - DTA clearances - Held that:- There are conflicting decisions of the Court in M/s. Synergies-Doorway Automative Limited & Ors reported at [2008 (2) TMI 117 - CESTAT, BANGALORE] and Indira Printers [2010 (4) TMI 954 - CESTAT NEW DELHI] - on the very same issue - Therefore the matter is referred to Hon’ble President as to whether the issue needs to be resolved by a Larger Bench. However, we grant waiver of the amounts involved in these cases. Applications for the waiver of pre-deposit of the amounts involved are allowed and recovery thereof stayed till the disposal of the appeals - Stay granted.

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• 2014 (12) TMI 452
  Penalty under Section 11AC - Adjudication – Monetary limit under National Litigation Policy prescribed by Board Circulars viewed to be non restrictive in filing instant appeal on merit by Revenue - Held that:- Benefit to which the assessee is entitled to should not be dependent on the date of the decision, over which neither the assessee nor revenue has no control. In this context, the circular would be discriminatory, if it is held to be prospective only. even where appeals were filed prior to issue of the circular by the Board prescribing monetary limits for filing the appeals by the Revenue would be applicable, in the light of the decision of Hon'ble Karnataka High Court in CIT Vs Ranka & Ranka (2011 (11) TMI 449 - KARNATAKA HIGH COURT) - Decided against Revenue.

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• 2014 (12) TMI 451
  CENVAT Credit - Reversal of Credit on account of inputs contained in the waste - Held that:- appellant are manufacturer of biscuits and during the course of manufacture of biscuits, floor sweepings emerged which are sold by the appellant as animal feed, the same is not eligible to excise duty and it cannot be said that the appellants are manufacturing the said floor sweepings. It was further held that the appellant are not required to reverse CENVAT Credit attributable to generation of these floor sweepings or waste, as same has emerged during the course of manufacture of final products being biscuits - Following decision of Geltec Ltd. [2011 (4) TMI 212 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2014 (12) TMI 450
  Distribution of Cenvat Credit - ISD - Distribution of service tax credit to all units except the exempted unit - Held that:- Rule 7(b) restricts distribution of CENVAT credit to the unit exclusively engaged in the manufacture of exempted goods or providing exempted services. I find that there is no prohibition in the said rule for distribution of CENVAT credit among the units, where both dutiable and exempted goods are manufactured. Further, no clarification with regard to the issue in hand has been furnished by the CBEC. Thus I am of the prima-facie view that the issue involved in the present case is a debatable one. However, considering the fact that substantial part of the demand has been paid by the applicant, the requirement of pre-deposit of the balance dues is waived till disposal of the appeal or for a period of 180 days from the date of this order, whichever is earlier - Stay granted.

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• 2014 (12) TMI 449
  Waiver of Pre deposit - Manufacture of paper/paper board - Clearance of fly ash - Held that:- When the goods cannot be sold at all and there is difference between fly ash which is sold in the market and fly ash arising in the appellant’s factory, the charge of the department that the appellant sold the product for a consideration is improper. Taking note of the submission that the Commissioner for a different period has held that the goods are not excisable, we consider that the appellant has made out a case on merits for waiver of pre-deposit and stay against recovery. Accordingly, requirement of pre-deposit is waived and stay against recovery is granted for 180 days from the date of this order - Stay granted.

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• 2014 (12) TMI 448
  Denial of refund claim - SSI Exemption - Unjust enrichment - Held that:- Verification of the invoices issued by the appellants will show that they were collecting excise duty separately in the invoices during the period for which refund has been sanctioned. He also relies upon the decision of this Tribunal in the case of Philips Electronics India Ltd Vs Commissioner of Central Excise Pune [2010 (4) TMI 449 - CESTAT, MUMBAI] to submit that just because the list price remains the same, it cannot be said that incidence of duty has not been passed on. It was held that bar of unjust enrichment cannot be got over on the sole ground of uniformity of price and it has to be inferred that assessee was only altering their profit margin. We find this decision to be applicable to the facts of this case. Even where the invoices did not show service tax separately in the case of Multi Mantech International Pvt. Ltd. Vs CST Ahmedabad [2008 (7) TMI 103 - CESTAT AHMEDABAD], this Tribunal taken a view that even where the assessee did not show service tax separately in the invoices, it does not mean that tax was not collected from the buyers. In this case also, other than C.A’s certificate, there is no other evidence forthcoming to show that there was no unjust enrichment - Decided in favour of Revenue.

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• 2014 (12) TMI 447
  Waiver of pre deposit - company has become a sick company and has been referred to BIFR - Whether the appellant is eligible for deducting the secondary packing charges of about 20 paise per kg of yarn - Held that:- Appellant has been referred to BIFR, if we grant stay, even the BIFR will not take that amount into consideration while deciding the matter before them. Therefore in undeserving cases and in the case of a liability which has already crystallized and in the case where an assessee does not have a prima facie case at all, it may not be appropriate to grant stay on the ground that the matter is before BIFR. In any case assets cannot be disposed of by the Revenue also and they also have to go before BIFR (as per our understanding), no harm or damage would be caused or no undue hardship would be caused to the appellant if we do not grant stay. appellant is directed to deposit the duty amount in its entirety within eight weeks - stay denied.

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• Wealth tax

• 2014 (12) TMI 463
  Enhancement in net worth of Shah Rukh Khan-assessee - Addition on account of residential house and jewellery purchased by the wife Gauri Khan of the appellant from a loan given to her by the assessee - Transfer of asset - Escapement of assessment - Held that:- Even as per the provisions of the Wealth tax Act, extending cash loan, to the wife, by the assessee does not come within the definition od “asset”, therefore, it can be said that there is no “transfer of asset” as has been alleged by the Department. - The case of the Revenue is that interest free loan was given to his wife by the assessee to enable her to acquire the aforesaid asset, and thus, in view of section 4(1)(a)(i) such assets have been transferred by the assessee. - We are not agreeing with the Assessing Officer because there is no “transfer of asset” by the assessee rather, an asset has been purchased in the form of a residential house after taking an interest free cash loan from the assessee. Thus, in our view, there is no transfer of asset by the assessee, as has been canvassed by the ld. DR and also held by the ld. Assessing Officer, as well as by the ld. Commissioner of Income tax (Appeals). The assessee was not the owner of the asset which was transferred to the wife, as argued by the ld. DR, rather out of the interest free loan, the wife of the assessee purchased/acquired “new asset” in her own name from the third parties, thus, in our view, there is no justification for adding the amount as no ‘asset’ has been transferred. For application of section 64 (1)(iv) of the Income tax Act, it is imperative that an individual must have transferred the income yielding “asset” to his spouse. It is only then that in computing the total income of the individual the income arising from such asset can be included. Where an assessee has merely created a charge upon his half share in two properties in respect of his obligation to pay his wife an annual sum, section 64 (1)(iv) would not be attracted. - Following decision of CIT, Gujarat vs. Keshavlal Lallubhai Patel [1964 (11) TMI 9 - SUPREME Court] - Decided in favour of assessee.

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