TMI Tax Updates - e-Newsletter
December 18, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

TMI SMS

• Percentage of Government Grant for considering university, hospital as substantially financed by the Government u/s 10(23C) -IT Notification

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Articles

1. Cenvat credit on Outdoor Catering services used in relation to business activities continues to be an eligible Input service even after amendment in the definition of ‘Input services’ w.e.f April 1, 2011

   By: Bimal jain

2. Companies (Amendment) Bill introduced…..

   By: DR.MARIAPPAN GOVINDARAJAN

3. INTEGRATED ENERGY POLICY TOWARDS ENERGY DEVELOPMENT

   By: priyanka bhutani

News

1. Lok Sabha passes the Companies (Amendment) Bill, 2014

2. Agreement with China for Setting up of Industrial Parks

3. Make in India Scheme

4. Import of Gold

5. Trade between India and Bangladesh

6. RBI Reference Rate for US $

7. Eight Presiding Officers in Debts Recovery Tribunals (DRTS) Appointed

8. Ministry of Finance Issues Clarifications with Regard to Different Aspects of the Pradhan Mantri Jan Dhan Yojana (PMJDY) Including about Availing of Benefits Under the Yojana

Notifications

Customs

1. 115/2014 - dated 17-12-2014 - Cus (NT)

Amends Exchange Rate Notification No. 113/2014-Customs (NT) effective from 18th December, 2014

FEMA

2. 327/RB-2014 - dated 24-11-2014 - FEMA

Foreign Exchange Management (Deposit) (Amendment) Regulations, 2014

Income Tax

3. 79/2014 - dated 12-12-2014 - IT

Income-tax (13th Amendment) Rules, 2014 - Percentage of Government Grant for considering university, hospital etc. as substantially financed by the Government for the purposes of Section 10(23C)

4. 78/2014 - dated 12-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government constituted "Karnataka Electricity Regulatory Commission" for dealing with specified income.

Circulars / Instructions / Orders

FEMA

1. 51 - dated 17-12-2014

Foreign Exchange Management (Deposit) Regulations, 2000 - Exemption thereof

2. 49 - dated 16-12-2014

Money Transfer Service Scheme– Delegation of work to Regional Offices-Submission of Statements / Returns

3. 50 - dated 16-12-2014

Rupee Drawing Arrangement – Delegation of work to Regional Offices-Submission of Statements / Returns

Central Excise

4. 991/15/2014-CX - dated 17-12-2014

Amendment to CESTAT Appeal Forms – reg.

Highlights / Catch Notes

Income Tax

• Assessing Officer's Flawed Process in Hindu Family Partition Case: No Detailed Inquiry or Member Notices per Section 171.

  Case-Laws - HC : Assessment after partition of a Hindu undivided family u/s 171 –AO has failed to comply with the statutory provision inasmuch as a detailed inquiry as contemplated u/s 171(2) after notice to the family members has not been done - HC
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• Court Rules Technical Charges as Revenue Expenses Due to Lack of Evidence for Future Benefits by Assessee.

  Case-Laws - AT : Treatment of technical charges – Capital or revenue expenses - assessee could not bring any material to show that the assessee had incurred this expenditure and the benefit of which will not be derived by it in future - AT
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• Change in Beneficial Ownership Affects Loss Carry Forward u/s 79 of Income Tax Act Despite Common Holding Company.

  Case-Laws - AT : Carry forward and set off of brought forward losses - Section 79 - there is a change of the beneficial ownership of shares because the predecessor and successor companies are distinct from each other, and the factum of they being subsidiaries of the ultimate holding company, does not mean that there is no change in the beneficial interest - AT
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• Land Tax Criteria: Must Be Within 8 km of Municipality for LTCG, Not Village Limits.

  Case-Laws - AT : LTCG - Agricultural land or not - the land should be within the distance of 8 Kms. from the local limit of the municipality and not from the outer limit of the village in which such land falls. - AT
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• New Criteria for Tax Exemption: Institutions Must Meet Government Funding Threshold u/s 10(23C) of Income Tax Act.

  Notifications : Percentage of Government Grant for considering university, hospital etc. as substantially financed by the Government for the purposes of Section 10(23C) - Notification
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Customs

• Confiscation of Vessel Not Applicable: No Duty on Goods, No Oil Tanker Import Ban in India (Section 111(f.

  Case-Laws - AT : Confiscation of vessel - If the goods are not dutiable, and there is no prohibition in importing oil tankers to India, the provisions of Section 111(f) are not at all attracted. - AT
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• Tribunal's Authority u/s 129B Includes Remanding Cases Back to Adjudicating Authority for Further Action.

  Case-Laws - HC : Competent adjudicating authority - Power of Tribunal - Section 129B does not restrict the power of the Tribunal to remand the matter back to the competent authority having given a ruling thereon. - HC
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• High Court Confirms Demand for Remaining Balance After Auction Proceeds Fall Short of Government Dues.

  Case-Laws - HC : Expiry of warehousing period - amount realized through auction could not meet the dues of the Government, demand raised for recovery of balance demand - demand confirmed - HC
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Service Tax

• Court Remands Case to Determine Pending Actions Against Petitioner Under VCES Scheme as of March 1, 2013.

  Case-Laws - HC : VCES Scheme - Whether any enquiry / audit objection, or any action whatsoever was pending against the petitioner, as on 01.03.2013 - Matter remanded back for ascertaining facts - HC
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• Court Favors Assessee: Fly Ash Processing for Cement Factory May Not Be Taxed as Management or Auxiliary Services.

  Case-Laws - AT : Management, maintenance and repair services or Business Auxiliary Service - Processing of fly ash for cement factory - prima facie case is in favor of assessee - AT
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• Verizon's Telecommunication Services Examined u/s 65(57a) for Reverse Charge Mechanism Applicability in Service Tax Case.

  Case-Laws - AT : Telecommunication service - reverse charge - M/s. Verizon provides telecommunication services to the petitioner facilitating fax, telephony and audio/video conferencing including over the internet, an activity clearly falling within the ambit of Section 65(57a) and clearly outside the ambit of Section 65(109a) - prima facie case is against the assessee - AT
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• Tax Classification Dispute: Are Services Management Consultancy or Business Support? Extended Limitation Period Invoked for Tax Demand.

  Case-Laws - AT : Management Consultancy service or Business support services - nature of services are executionery or management consultancy - various activities like assisting the client in various field - taxable as MCS - demand confirmed invoking extended period of limitation - AT
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• ATM Services to Banks Not Taxed Under BOF Before May 1, 2006.

  Case-Laws - AT : Banking and other Financial services’(BOF) - Providing ATM facilities and other allied activities related to ATM services to various nationalized banks and to other banks - not taxable prior to 01.05.2006 - AT
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• CENVAT Credit Allowed for Outdoor Catering Services as Input, Company Bears Cost, Not Employees.

  Case-Laws - AT : CENVAT Credit - scope of Input services - Outdoor Catering Service - personal use - the cost of such services, are admittedly borne by the company and not by the employee - credit allowed - AT
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Central Excise

• Rebate Claims Rejection for Exports Based on Retrospective Board Circular Before June 24, 2010, May Be Overturned.

  Case-Laws - CGOVT : Export of goods - rejection of the rebate claims by the original authority on the sole ground of issue of ‘amounts to manufacture by applying the Boards circular-retrospectively-i.e. prior to 24.6.10 cannot be held sustainable and hence, liable to be set aside - CGOVT
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• Export Rebate Claim: Testing and Repacking Are Processing, Not Manufacturing, u/s 2(f) of Central Excise Act. Refund Granted.

  Case-Laws - CGOVT : Export Rebate claim - Rule 18 - The process of processing of the goods may not amount to manufacture in terms of Section 2(f) of the Central Excise Act, 1944. The process of testing/re-packing etc. definitely amounts to processing of the goods. - refund allowed - CGOVT
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Case Laws:

• Income Tax

• 2014 (12) TMI 613
  Deletion made u/s 40(a)(ia) – Failure to deduct TDS u/s 194C(2) – Effect of amendment to section 40(a)(ia) w.e.f. 1.4.2005 – Retrospective or prospective – Whether the Amendment by the Finance Act, 2010 as aforesaid is prospective or retrospective from 1.4.2005 - Held that:-Income from business stood enhanced by the amount disallowed by the AO and confirmed by the CIT(A) - the word "amounts credited or paid" with the word "payable" in the final enactment - only outstanding amounts are the provisions for expenses liable for TDS under Chapter XVII-B of the Act is sought to be disallowed in the event there is a default in following the obligations casted upon the assessee under Chapter XVII-B of the Act - While interpreting the word "payable" in section 40(a)(ia), the meaning of the word statute must be understood in its natural, ordinary or popular sense and constitute according to the grammatical meaning. The word "payable" used in Section 40(a)(ia) of the Act is to be assigned strict interpretation in view of the object of legislation which is intended from the replacement of the words in the proposed and enacted provision from the word "amount credited or paid" to "payable” – thus, the CIT(A) rightly relied upon Merilyn Shipping Transport v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] and held that the provisions of Section 40(a)(ia) of the Act are applicable only to the amount of expenditure which are payable as on 31st March, of every year and it cannot be invoked to disallow which had been actually paid during the previous year without deduction of TDS. In Bharati Shipyard Ltd. v. Dy. CIT [2011 (9) TMI 258 - ITAT MUMBAI] it has been held that the amendment carried out by the Finance Act, 2010 with retrospective effect from assessment year 2010-2011 cannot be held to be retrospective from AY 2005-2006 - the amendment brought out by the Finance Act, 2010 to section 40(a)(ia) w.e.f. 01.04.2010, is not remedial and curative in nature - the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year - To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. The use of word "Payable", in Section 40(a)(ia) of the Act has created controversy as to whether payable includes amounts paid during the year - there are two views on the issue, one in favour of the assessee expressed by the Hon'ble Allahabad High Court and the other against the assessee expressed by the Hon'ble Gujarat & Calcutta High Courts - there is no decision rendered by the jurisdictional High Court on this issue – thus, following the decision of the Commissioner of Income-Tax, West Bengal I Versus Vegetable Products Limited [1973 (1) TMI 1 - SUPREME Court] – decided against revenue.

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• 2014 (12) TMI 612
  Transfer pricing adjustment - Export of software development services – Selection of comparables – Functionally dissimilar company - Avani Cincom Technologies Ltd. – Persistent Systems Ltd. - Softsol India Ltd. - Held that:- As decided in assessee’s own case for the earlier assessment year, decided in Delmia Solutions Pvt. Versus Deputy Commissioner of Income Tax, Circle-11(1), Bangalore [2013 (11) TMI 189 - ITAT BANGALORE] - It was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables - Non-furnishing the information obtained u/s 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable - even in the earlier year, this company was not selected on the basis on any search process carried out by the TPO but only on the basis of information collected u/s 133(6) - the assessee has brought on record evidence that this company is functionally dissimilar and different from the assessee and hence is not comparable - the finding excluding it from the list of comparables rendered in the immediately preceding year is applicable in this year also – thus, this company cannot be considered as a comparable to the assessee – Decided in favour of assessee. Bodhtree Consulting Ltd. – Held that:- The assessee had never objected to the inclusion of this company in the set of comparbales in earlier proceedings before the TPO and the DRP - the assessee has only pointed out fluctuating margins in the results of this company over the years - This, in itself, cannot be reason enough to establish differences in functional profile or any clinching factual reason warranting the exclusion of this company from the list of comparables - the contentions of the assessee are rejected and this company is held to be comparable to the assessee and its inclusion in the list of comparable companies is upheld. Functionally dissimilar company – Celestial Biolabs Ltd. - KALS Information Systems Ltd. - Held that:- As decided in assessee’s own case for the earlier assessment year, decided in Delmia Solutions Pvt. Versus Deputy Commissioner of Income Tax, Circle-11(1), Bangalore [2013 (11) TMI 189 - ITAT BANGALORE] - this company is held to be functionally dissimilar and different from a software service provider informatics as it is into bio software products and is not comparable to a mere software service provider - the TPO has not carried out any independent FAR analysis for this company for this year viz. Assessment Year 2008-09 – thus, this company is functionally different and cannot be considered as a comparable to the assessee who is a software service provider and AO is directed to omit this company from the final list of comparables. Functionally dissimilar company – Infosys Technologies Ltd. – Held that:- This company be omitted from the final set of comparables for the reason that this company is functionally different as it has its own intangibles, IPR, brand and has huge revenues from software products, whereas the assessee is a mere software services provider - assessee has brought on record sufficient evidence to establish that this company is functionally dis-similar and different from the assessee and hence is not comparable - this company owns its own intangibles, has huge software product revenues, brand, etc. and therefore cannot be considered as a comparable to the assessee who is a mere software service provider – Decided in favour of assessee. Functionally dissimilar company – Wipro Ltd. – Tata Elxsi Ltd. - Lucid Software Ltd. - Held that:- this company be omitted from the final set of comparables for the reason that it is not functionally comparable to software service providers as it is into development of software products, etc. - this company is engaged both in software development and product development services - There is no information on the segmental bifurcation of revenue from sale of product and software service - this company being into software development, etc is functionally different and cannot be considered as a comparable to the assessee who is a software service provider. E-Zest Solutions Ltd. – Held that:- The TPO has not examined the services rendered by the company to give a finding whether the services performed by this company are similar to the software development services performed by the assessee - while the assessee is into software development services, this company i.e. e-Zest Solutions Ltd., is rendering product development services and high end technical services which come under the category of KPO services – in Capital IQ Information Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax (International Taxation) [2014 (3) TMI 626 - ITAT HYDERABAD] it has been held that KPO services are not comparable to software development services and are therefore not comparable. Thirdware Solutions Ltd. (Segment) – Held that:- This company is to be excluded from the final list of comparables as it is engaged in product development and its income is also from trading in software licences and is, therefore, not comparable to a software development service provider like the assessee – thus, this company cannot be considered as a comparable to the assessee. Quintegra Solutions Ltd. – Held that:- Quintegra Solutions Ltd. is engaged in product engineering services and is not purely a software development service provider - this company is also engaged in proprietary software products and has substantial R&D activity which has resulted in creation of its IPRs – in 24/7 Customer. Com (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle 11(2), Bangalore [2013 (1) TMI 45 - ITAT BANGALORE] it has been held that if a company possesses or owns intangibles or IPRs, then it cannot be considered as a comparable company to one that does not own intangibles and requires to be omitted from the list of comparables. Risk Adjustment – Held that:- The TPO has not allowed any adjustment by observing that this has been considered and discussed in detail in the order for earlier years – as held in Intellinet Technologies India (P.) Ltd. v. ITO [2012 (6) TMI 237 - ITAT BANGALORE] - the TPO ought to have given risk adjustment to the margins of the comparables for bringing them on par with the assessee and remanded the issue back to the file of the TPO – thus, the matter is remitted back to the AO/TPO for market risk adjustment.

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• 2014 (12) TMI 607
  Validity of notice for reopening of assessment u/s 148 – Held that:- The assessment is sought to be re-opened beyond a period of 4 years of the relevant AY - the material which was impounded during the course of the survey operation u/s 133-A was after the order of assessment was passed - This furnished a valid basis to reopen the assessment u/s 148 - it cannot be said that the reasons, on the basis of which re-assessment is sought, constitute a mere change of opinion - There was, indeed, a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment – thus, the jurisdictional requirement for reopening the assessment has been duly fulfilled – the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (12) TMI 606
  Entitlement to claim deduction u/s 54E – Assessee covered under the scope of section 50 or not – Deduction u/s 54E available only w.r.t. LTCG - Held that:- The Tribunal was rightly of the view that the concept of block of assets has been introduced from AY 1988-89 onwards and since Nagdevi property was no longer a business asset as on 1.4.1988, there was no occasion for the asset to enter the block of asset of the purposes of computing depreciation u/s. 32 as well as capital gain u/s. 50 – hence, section 50 would not be applicable for the purpose of computation of capital gains - The Nagdevi property is obviously a long term capital asset – assessee rightly relied upon Commissioner of Income Tax V. Aditya Medisales Ltd. [2013 (11) TMI 576 - GUJARAT HIGH COURT] - wherein it has been held that “where capital gains arising on the transfer of a long term capital asset are invested in a specified asset, the assessee is not to be charged tax on the capital gains and the exemption provided u/s 54EC, cannot be denied to the assessee only on account of the fact that a deeming fiction is created u/s 50 - the legal fiction created u/s 50 of the Act is restricted to computation of capital gains and such deeming fiction cannot restrict application of section 54EC which allow exemption of capital gains, if the assessee makes investment in the specified assets – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 605
  Assessment after partition of a Hindu undivided family u/s 171 – mandatory requirement to conduct inquiry fulfilled or not – Held that:- Section 171 states that at the time of making an assessment u/s 143 or section 144, if it is claimed on behalf of the assessee that the property is a joint family property subject to partial or total partition, the AO shall make an inquiry thereto after giving notice of the inquiry to the members of the family - in the assessment order, the AO discloses the fact of family partition, filing of the application u/s 171 thereafter he takes note of the material available on record and then records a finding with regard to the partition, to say that assessee has not adduced any evidence in this regard and proceed to decide the matter but did not conduct any inquiry as contemplated under sub-section (2) of section 171 inasmuch as no notices to other members of the family were issued nor a detailed inquiry has been conducted – relying upon Kapurchand Shrimal Versus Commissioner of Income-Tax, AP [1981 (8) TMI 2 - SUPREME Court] - the AO has failed to comply with the statutory provision inasmuch as a detailed inquiry as contemplated u/s 171(2) after notice to the family members has not been done – thus, the matter is to be remitted back to the AO for re-consideration – Decided in favour of assessee.

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• 2014 (12) TMI 604
  Deletion of penalty us 271(1)(c) - inaccurate particulars furnished by assessee or not – Held that:- The Tribunal has rightly held that all the relevant material facts have been duly disclosed and, therefore, attraction of the provisions of section 271(1)(c) was not justifiable - on the basis of the advice given by the chartered accountant, such claim had been made by the assessee – in Btx Chemical P. Limited Versus Commissioner of Income-Tax [2006 (7) TMI 155 - GUJARAT High Court] it has been held that it could not be said that the assessee knew or had reason to believe that the claim made as revenue loss was untrue - assessee filed its return of income claiming deduction on the basis of its claim, lodged with the insurance company on account of loss and damage to its plant and machinery at replacement cost basis, and since the assessee had a bonafide belief on the basis of the advice received from it chartered accountant that loss occurred on the destruction of its plant and machinery, buildings, electric installments etc. was of revenue in nature and claim was made of total deduction of such amount – it could not said to be a case of concealment within the ambit and scope of section 271(1)(c) - assessee in respect of the reconstruction of the old Makarpura Unit, had made a claim u/s 80IB - The Tribunal has rightly held that there is no concealment nor any furnishing of inaccurate particulars – thus, the order of the Tribunal for not levying the penalty is upheld – Decided against revenue.

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• 2014 (12) TMI 603
  Validity of adoption of valuation report – facts relating to the valuer not furnished any instance of sale to justify the estimation of the cost verified or not – value and indexation of property as on 01/04/1981 to be taken or not - Held that:- CIT(A) rightly held that the revised return has been filed within the limitation period and, therefore, is a valid return - AO has also not given any reason as to why the valuation adopted as on 01.4.1981 by the registered valuer is not acceptable – the AO is rightly directed to take the value of the property as on 01.4.1981, which option has been exercised by the assessee, at the value taken by the registered valuer and to also take the indexation of the value of the property as on 01.4.1981, as determined in the registered valuer’s report and to re-compute the capital gains on the property as well as appellant’s share in the property as per the registered valuer’s report – Decided against revenue. Validity of assessment u/s 143(3) – bar of limitation – Held that:- The original return of income became no-est - The period of limitation of issuance of notice has therefore to be calculated from the date of filing of the revised return of income - the CIT(A) has taken as if the original return was filed u/s.139(1) of the Act but the contention of the assessee is that the original return was filed u/s. 139(4) of the Act and such return cannot be revised u/s.139(5) of the Act – assessee rightly relied upon CIT vs. Panorama Builders (P.) Ltd. [2005 (4) TMI 50 - GUJARAT High Court] wherein it has been held that the section 292BB does not apply to issuance of notice, neither it cures the defect or enlarges statutory period where a mandatory notice under section 143(2) is required to be issued within limitation fixed under the Act - assessee contended that the return was filed u/s.139(4) of the Act as the same neither was furnished during the period prescribed u/s.139(1) nor was furnished in pursuance of the notice issued u/s.142(1) of the Act - It is also not coming out from the record whether any notice u/s.142(1) of the Act was issued in pursuance thereof the assessee furnished the return which was later on revised vide revised return dated 24/10/2008 – thus, the matter is remitted back to the CIT(A) for fresh adjudication – Decided in favour of assessee. Claim of investment made in residential house on 25/08/2006 u/s 54 – Held that:- CIT(A) has not given any finding with regard to the investment made in flat - For deciding the issue regarding entitlement for deduction u/s.54/54F of the Act, the CIT(A) has given finding only on the investment made in the REC bonds – the matter is remitted back to the CIT(A). Disallowance of claim made u/s.54EC of the Act on the ground that the investment was made belatedly – Held that:- As decided in Commissioner of Income Tax, Central III Versus M/s. Cello Plast [2012 (8) TMI 527 - BOMBAY HIGH COURT] – a person is entitled to invest in the bonds upto the last available date - If that be so, it must follow that the extension ought to be granted at least for the period prior to the expiry of six months when the bonds were not available and upto the date on which they were ultimately made available - an assessee would be entitled to a reasonable extension which must then be decided, depending upon the facts of each case – thus, the order of the CIT(A) is set aside and the matter is remitted back for adjudication – Decided in favour of assessee.

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• 2014 (12) TMI 602
  Allowability of claim of deduction u/s 10A - SEZ Unit – Held that:- The assessee in its return of income has not claimed any deduction/exemption u/s 10A of the Act on the ground that there was net loss from the business of the eligible undertaking - CIT(A) was not justified in rejecting the claim of the assessee – assessee claimed that it could not claim exemption u/s 10A as according to its return there was loss from the eligible unit and consequently for the first time opportunity to claim exemption u/s 10A arose only when certain disallowances/additions were made by the AO which resulted in positive income of the eligible undertaking - the AO has not allowed any opportunity to the assessee for claiming exemption u/s 10A after computing the business income of the alleged eligible undertaking at a positive figure for the first time - while making the assessment u/s 143(3) of the Act, the AO is duty bound to compute the total income as per the provisions of Income tax Act and in allowing deductions/exemptions also to the assessee which is statutorily allowable to the assessee – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for verification of claim of the assessee for deductions u/s 10A – Decided in favour of assessee. Treatment of technical charges – Capital or revenue expenses – Held that:- CIT(A) rightly was of the view that except for giving the bill of technical charges the assessee was not able to give any evidence regarding the nature of the technical charges - the technical charge was only in respect of particular machinery which has not been produced in future but the technical consultancy as it appears from the assessee’s submission is in respect of manufacturing machine. The technical knowledge provided can be used by the assessee in future to produce more such machinery - The assessee claimed deduction for technical consultancy charges paid to a Korean company for manufacturing of machine which was exported to China - assessee contended that earlier it was not making export to China and to make export to China and to overcome the competition, it had to incur such expenditure to improve the quality of machine so that the assessee could make export to China - assessee could not bring any material to show that the assessee had incurred this expenditure and the benefit of which will not be derived by it in future - the technical consultancy charges are capital in nature as know-how on which the assessee will derive benefit of enduring nature and the order of the CIT(A) is upheld – Decided against assessee. Travelling expenses partially allowed @ 50% – Expenses incurred wholly and exclusively for business purpose or not - Held that:- The foreign traveling expense was relating to foreign travel to Korea and Japan - the assessee exported machineries to these countries - the assessee could not support these expenses by producing the relevant bills and vouchers - the disallowance reduced to 20% - Decided partly in favour of assessee. Rejection of books of accounts – Estimation of GP – Held that:- Assessee placed a working of the gross profit rate of the year under consideration along with copy of the Tax Audit Report - The working shows that the gross profit rate disclosed during the year was 17.26% and not 9.05% as assumed by the AO - the AO proceeded in the case on a wrong assumption that the gross profit rate disclosed by the assessee during the year was 9.05% - as observed by the CIT(A) the market in which the assessee sold its goods in earlier years was different from the market in which the assessee sold its goods during the year under consideration and this change in the market caused change in the gross profit rate – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 601
  Deletion of 10% of total manufacturing, trading and other expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee had furnished item wise details of the trading division along with vouchers for purchase - The details furnished by the assessee as per the CIT (A) direction was forwarded to the AO for his comments - the AO did not raise any objection to the assessee’s case on merits but technical objections were raised by placing reliance on Rule 46A of the I.T. Rules, 1962 - the books of account were accepted by the AO and no adverse inference in maintenance was pointed out - the gross margin was worked out on the basis of books of account which were duly audited and accepted as correct and complete - The gross profit with regard to sale and purchase of goods in the trading division was at rate of 31.57% and there were various in direct expenses in the nature of high rental for retail outlets in prominent location - This had pushed down the net profit rate - CIT (A) rightly held that gross profit earned from the trading division of the assessee is reasonable and has also examined the vouchers of purchase and sale of goods made by the assessee on a sample basis and has found it to be correct – Decided against revenue. Deletion made u/s 14A r.w. Rule 8D – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee had acquired the land at Ballabgarh in the year 1979 on which factory building was constructed and, accordingly, capitalized in the books on the year ending 31.3.1981 - repair expenses at the factory building only facilitated smooth functioning of the existing operations carried out at the factory – the expenditure cannot be to be capital in nature - an expenditure incurred on repair of building for the purposes of business, which is not capital in nature is allowable deduction under section 30 or 37(1) of the Act – as decided in CIT v. Sarvana Spinning Mills P. Ltd. [2007 (8) TMI 16 - SUPREME COURT OF INDIA] has held that if a repair expenditure does not fall within the meaning of ‘current repair’ u/s 30, but does not result in acquisition of any new capital asset, can be allowed as revenue expenditure under the residuary provision of section 37(1) – Decided against revenue. Notional administrative expenses u/s 14A disallowed – Held that:- The total administrative expenses was to the tune of Rs. 21.53 crores, in which, the disallowance was restricted by the CIT (A) was only to the extent of Rs. 3.58 lakhs being salary paid to Sri Sunil Harsh - no portion of the administrative and interest expenses can be disallowed - since the expenditure incurred had no direct relation with the earning of exempt income, it is only salary paid to the aforesaid persons which can be disallowed, if at all, on some reasonable basis’ - since the assessee itself had admitted that Sri Sunil Harsh was responsible for looking after the financial matter, such as raising of funds, investment in share, bond and mutual fund and that when a person was directly responsible to looking after and taking care of investment, it was only natural that the salary of Sri Sunil Harsh was part of administrative expenses which had direct bearing to the earning of exempt income, namely, dividend income - CIT (A) was justified in disallowing the sum of Rs. 3.58 lakhs being salary paid to Sri Sunil Harsh under rule 8D(2)(iii) – Decided against assessee. Consultancy expenses disallowed – Held that:- The assessee being a promoter of Eicher Limited and with a view to acquire full control over of the company, decided to acquire the shares of Eicher Limited from public shareholders and to delist the same from Stock Exchanges - the acquisition of shares in its subsidiary company [Eicher Limited] was to strengthen its controlling interest in that company in furtherance of its business only - interest expenditure incurred on borrowed funds utilized for acquiring controlling interest in companies would be allowable business deduction since the acquisition of controlling interest in a company is in furtherance of the business purposes of the assessee - the consultancy expenses incurred by the assessee with a view to acquire the shares of Eicher Limited from the public shareholders to establish its holding in that company has to be regarded as being incurred for the purpose of its business only which is allowable deduction u/s 37(1) of the Act – Decided in favour of assessee.

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• 2014 (12) TMI 600
  Transfer pricing adjustment - Disallowance of excessive AMP expenses - Advertisement Marketing and Sales Promotion - assessee has a license arrangement with YRAPL for operation of various KFC and PH outlets in India – Held that:- In LG. Electronics India P. Ltd. Versus Assistant Commissioner of Income-tax [2013 (6) TMI 217 - ITAT DELHI] it has been held that incurring of AMP expenses towards promotion of brand, legally owned by the foreign AE, constitutes a ‘transaction’ - the TPO did not have the benefit of the Special Bench order in the case of LG Electronics and the DRP failed to apply it correctly to the facts of the case, by making sweeping observations generally without considering the effect of relevant factors laid down by the special bench – thus, the matter is to be remitted back to the AO/TPO for a fresh determination of disallowance, if any, on account of Transfer pricing adjustment for AMP – the issue related to the disallowance u/s 40A(2) of the Act shall be decided by the AO after having found out the amount of TP adjustment on account of AMP expenses – Decided in favour of assessee. Selection of comparbles - Exclusion of Ma Foi Management Consultant Ltd. – Different nature of services - Held that: The Company is a HR Services Company - as against this, the assessee under this segment is engaged in providing Liaison services, Market development and Ongoing support to the licensees outside India - the nature of services provided by the assessee to its AEs is no match with those provided by Ma Foi Management Consultant Ltd. - unless a company passes the test of functional comparability in the first instance, it cannot be taken up for further comparison - the authorities below were justified in not including this company in the list of comparables, though on a different reason. Saket Projects Ltd. (Segment) – Held that:- The assessee treated Saket Project Ltd.(Seg.) as comparable in its TP study, as was also done for the preceding year - assessee assailed before the Tribunal, the non-exclusion of this company by the authorities below for the preceding year - in assessee’s own case for the preceding year it has been held that Saket Projects Ltd is not functionally comparable as it was engaged in the business of organizing events and was also earning revenue in this division from selling of events by offering space for rent, which had no comparison with the assessee’s nature of business under this international transaction – thus, the order is set aside and the matter is remitted back to the TPO/AO for fresh determination of ALP – Decided partly in favour of assessee. Allowability of carry forward and set off of brought forward losses of past years against the income for the current year u/s 79 - Change in the shareholding of the assessee-company - Held that:- 100% shareholding of the assessee company underwent a change, by which another company came to hold 100% shares of the assessee company - the first condition for magnetizing section 79 is satisfied - there is no change of the beneficial ownership of shares because both the predecessor and successor companies are subsidiaries of the same holding company and in that sense of the matter, the beneficial interest remains the same, that is, of the ultimate holding company - the Revenue has made out a case that there is a change of the beneficial ownership of shares because the predecessor and successor companies are distinct from each other, and the factum of they being subsidiaries of the ultimate holding company, does not mean that there is no change in the beneficial interest - the provisions of section 79 are attracted – Decided partly in favor revenue and partly in favor of assessee.

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• 2014 (12) TMI 599
  Addition made by AO on LTCG – Distance of land more than 8 Kms. From the Muincipality so as to be treated it as agricultural land or not - Whether distance of the land is to be considered from Sohna Municipal Corporation or Gurgaon Municipal Corporation - assessee claimed that the capital gain from the sale of land is not taxable because the land is agricultural land which does not fall within the definition of capital asset u/s 2(14) – Held that:- The land does not fall in any area which is comprised within the jurisdiction of a municipality or a cantonment board which has a population of not less than ten thousand - the provisions of clause (b) of Section 2(14)(iii) are unambiguous, plain and simple i.e. distance of the land can be considered from the local limits of any of the municipalities – relying upon Commissioner of Income-Tax, Chandigarh Versus Smt. Anjana Sehgal [2011 (3) TMI 695 - PUNJAB AND HARYANA HIGH COURT] – thus, the land is capital asset which was within the distance of 8 Kms. from a municipality in Haryana while the land was situated in the State of Punjab - distance of the land under consideration can be measured from Gurgaon Municipal Corporation for the purpose of Section 2(14)(iii)(b). Whether aerial distance is to be considered or as per road distance – Held that:- CIT(A) rightly held that the distance is to be measured as per road distance and not as per aerial distance – following the decision in CIT v. Satinder Pal Singh [2010 (1) TMI 752 - Punjab and Haryana High Court] - ‘capital asset’ would not include any agricultural land which is not situated in any area within such distance as may be specified in this behalf by a notification in the Official Gazette which may be issued by the Central Government – thus, the distance of the land is to be measured as per road distance and not aerial distance as per crow’s flight. Whether distance up to the land should be considered or up to the village within which such land is situated – Held that:- The view taken by the CIT(A) cannot be accepted - the land should be within the area whose distance is not more than 8 Kms. - There is no mention that if the land is in any particular village, then the distance of 8 Kms. is to be considered from the outer limit of the village. “Area” word has not been defined in the Income-tax Act - the ‘area’ only means any open space or portion of earth’s surface - the correct interpretation of the word ‘in any area within such distance not being more than 8 Kms. from the local limits of any municipality’ would mean the land should be within such area which is not more than 8 Kms. from the local limit of the municipality – thus, the land should be within the distance of 8 Kms. from the local limit of the municipality and not from the outer limit of the village in which such land falls. Final determination of distance of the land from Gurgaon Municipality – Held that:- Assessee had also produced the certificates from Shri I.D. Rustogi, former Additional Director General, CPWD who had certified the distance of the land from Gurgaon Municipality as 10.4 Kms. in which he has given point to point route distance - No valid reason has been given by the Revenue authorities for rejecting this certificate - Considering the certificate of the Tehsildar coupled with his statement before the Assessing Officer, certificate of the Assistant Engineer, Gurgaon Municipal Corporation and the certificate from Shri I.D. Rustogi, former Additional Director General, CPWD, the distance of the land from Gurgaon Municipal Corporation is established to be beyond 8 Kms - the land sold by the assessee does not fall within the ambit of either clause (a) or (b) of Section 2(14)(iii) - the land sold by the assessee was agricultural land and therefore, out of the purview of capital asset, hence, not chargeable to capital gain tax – Decided in favour of assessee. Forfeited (balance) out of advance money received under forfeiture clause deleted – Held that:- As per Section 51, any advance received and forfeited by the assessee in respect of any negotiations for transfer of capital asset is to be deducted from the cost of the asset - at the relevant time i.e. during AY 2006-07, there was no provision under the Income-tax Act for treating the forfeiture of advance received during the course of negotiations of a transfer of a capital asset as income from other sources - The provision has come into effect with effect from 1.4.2015 only – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• Customs

• 2014 (12) TMI 617
  Confiscation of vessel - Redemtion fine u/s 125 - Fine and penalty - Held that:- It is evident that the charge against the appellant is that they did not file IGM or Bill of Entry when the vessel first arrived at Sikka Port on 14/11/2010. Sikka port is situated in Gujarat and, therefore, offence, if any, has taken place in Gujarat. The Customs Commissioner at Bombay does not have jurisdiction over the Sikka port and, therefore, he could not have issued any show cause notice proposing confiscation and imposition of penalty in respect of an act which was committed beyond his jurisdiction. On this ground alone, the impugned order is liable to be set aside. Vessel, even if treated as 'goods' were not liable to any Customs duty as the same was exempt from payment of duty under Notification No. 21/2002-Cus. Thus, the total duty implication was nil. Therefore, the vessel could not be considered as 'dutiable goods', in the light of the apex Court's decision in the case of Associated Cement Companies, cited [2001 (1) TMI 248 - Supreme court of India], and the Tribunal's decision in the case of Jay AR Enterprises (2006 (12) TMI 292 - CESTAT, CHENNAI). If the goods are not dutiable, and there is no prohibition in importing oil tankers to India, the provisions of Section 111(f) are not at all attracted. Consequently, the appellant is not liable to any penalty under Section 112(a)(b) of the Customs Act, 1962 either. - Decided in favour of assessee.

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• 2014 (12) TMI 616
  Refund of excess amount after reduction of penalty from Rs. 5,00,000/- to Rs. 1,00,000/- - 3 years passed but balance amount not refunded - Held that:- It is indeed most unfortunate that the department has not even cared to reply to any letter of the appellant seeking refund consequent to the order of this Tribunal. Therefore, I am constrained to order that the refund be sanctioned within 45 days of the receipt of this order failing which the Tribunal may have to consider contempt proceedings against the sanctioning authority. - Decided in favour of assessee.

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• 2014 (12) TMI 615
  Competent adjudicating authority - Power of Tribunal - Remanding back matter - Section 129B of the Customs Act - cenvat credit utilised for payment of duty on removal of goods from 100% EOU to DTA - Held that:- The power of the Tribunal to remand the case back to the Authority would mean the Authority prescribed under Section 2(1), ie., the competent authority. In this case, it is not disputed by either side that the competent Authority is Commissioner of Central Excise. The primary objection before the Tribunal by the appellant on jurisdiction issue is that the competent authority is not the Commissioner of Customs, but Commissioner of Central Excise. - A conjoint reading of Section 129B with Section 2(1) of the Customs Act makes it clear that the order should be passed only by a competent authority who has jurisdiction to pass an order and therefore, the Tribunal, if it found an error in the order passed by an authority, is justified to remand the case back to the competent authority. Section 129B does not restrict the power of the Tribunal to remand the matter back to the competent authority having given a ruling thereon. We find no error in the order of the Tribunal. Yet another factor which we find in favour of the Department is that the show cause notice was issued by the Superintendent of Central Excise, which Department had jurisdiction to initiate proceedings and the order of adjudication on being set aside by the Tribunal for lack of jurisdiction, the original show cause notice survives and therefore, that has to be adjudicated only by a competent authority in terms of Section 2(1) of the Customs Act. When such being the case, the competent adjudicating authority alone has jurisdiction to adjudicate the issue on the subsisting show cause notice. We find no error in the order of the Tribunal. - Decided against assessee.

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• 2014 (12) TMI 611
  Denial of refund claim - Exemption under Customs Notification No. 21/2002 - Re-export of left over items of goods had to be done before 30 April, 2004 in terms of the Essentiality Certificate issued by Director General of Hydrocarbons - Held that:- The refusal to grant refund in the absence of duty being paid under protest is wholly irrelevant. This is for the reason that the refund claim has been filed within the period of six months from the date of payment of duty. Therefore, the refund claim is in time and protest is irrelevant for grant of refund. Further, the export having taken place almost 10 years also, it is almost impossible to find the original documents. It appears that after filing of the petition, the petitioner had been able to obtain from the C.H.A. a photocopies of the customs attested invoice and the customs attested packing list accompanied by Annexure-II, of the export of the left over spares and consumables exported. Annexure-II sets out the balance quantity of goods not consumed and re-exported in December, 2004. The petitioner submits that the Deputy Commissioner of Customs (Import) passed an order after following the principle of natural justice and in view of the long delay of almost 12 years from the date of import and 10 years from the date of export, the petitioner be allowed to produce the photocopies of the documents under which the left over spares and consumables were exported in December, 2004. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 610
  Quantum of penalty & redemption fine - Tribunal reduced both penalty & fine - whether there is discretion vested with the Tribunal to reduce the penalty imposed by the Original Authority under Section 114A of the Customs Act - Import licence issued by the Directorate General of Foreign Trade dated 20-6-1994 was re-validated up to 31-5-1998. During the course of investigation by the Department, clarification was sought for from the Additional Inspector General (Wild Life) in the Ministry of Environment and Forest. In pursuance to such request, the said Authority, by communication dated 21-7-1998, clarified that the respondent/importer was a “Zoo” and the certificate issued by the Deputy Director Wild Life (Protection) was valid. Once again the Department addressed the Member Secretary, Central Zoo Authority on 24-8-1998 to re-examine and clarify whether the importers have been accorded recognition as “zoo” in terms of provisions of Wild Life (Protection) Act, 1972 and the Recognition of Zoo Rules, 1992. It is only thereafter, the Ministry of Environment and Forest, during October, 1998, informed the appellant - Department that after examining the matter in detail, it was decided that the importer was not officially accorded “Zoo Operation Status” and directed that the .import may be treated as “Other Live Animals”. In order to attract penalty equal to the duty determined, there should be a clear finding that the importer had colluded or made a wilful mis-statement or suppressed the facts. Thus, in the absence of any such specific finding rendered by the Original Authority nor any such proposal in the show cause notice, we are inclined to confirm the order passed by the Tribunal reducing the penalty of Rs. 10.00 lakhs - Decided against Revenue. Entire importation has been handled by the Managing Director of the company and all the correspondences between various Authorities were personally handled by the Managing Director and therefore, he was fully aware that the firm had imported the subject goods. Therefore, he cannot plead ignorance of the facts. Further more, the respondent had not questioned the order of confiscation or the imposition of duty. Thus, the order of confiscation has attained finality and there is no discretion vested under Section 112(a) of the Customs Act and there is no requirement to record a finding that there has been any wilful mis-statement or concealment or suppression of facts, as is found under Section 114A of the Customs Act. Tribunal was not right in setting aside the penalty imposed on the Managing Director under Section 112(a) of the Customs Act. Further, it has to be pointed out that under Section 112(a), any person, who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act, shall be liable to pay penalty not exceeding the duty sought, to be evaded on such goods or five thousand rupees, whichever is greater. Thus, considering the facts, the Managing Director is liable to pay penalty, which is fixed at Rs. 5,000 - Decded in favour of Revenue.

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• 2014 (12) TMI 609
  Application for settlement - Failure to make full and true disclosure and non-cooperation on the part of the petitioners - Held that:- It cannot be disputed that an applicant before the Settlement Commission is obliged to make a full and true disclosure in its application and also cooperate with the Commission. This is so as the basis of Chapter XIVA of the Act is meant for an assessee suffering from contriteness. Therefore, the proceeding before the Settlement Commission is not adverserial. However, in this case the petitioners proceeded on the basis that in law they were not required to produce the original purchase invoice of the lessor of the barge as the issue to be settled is a dispute between the Customs Department and the petitioners as formulated in the show cause notice. The petitioners having accepted the valuation made in the show cause notice and the report of the Commissioner of Customs made before the Settlement Commission, no interference in respect of valuation of the barge is called for. When the entire duty liability and interest as demanded in the show cause notice has been paid by the assessee, it is not possible for the Settlement Commission to conclude that the petitioners have not cooperated or not disclosed full and true facts in their application for settlement. However, it must be pointed out that in the facts existing in the above case, the Court held that the revenue was unable to point out what cooperation has not been extended. - applicant is required to make a full and true disclosure and also cooperate with the Commission. However, as the petitioners have now provided the purchase invoice dated 16 August 2006, it would be appropriate for the Commission to consider the same and pass an order - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 608
  Expiry of warehousing period - amount realized through auction could not meet the dues of the Government, demand raised for recovery of balance demand - Held that:- appellant was aware that the permission of the warehousing of the goods was for a period of one year and the same had already been expired, however, neither cleared the cargo nor sought extension of warehousing period in the prescribed manner in spite of the Department sending more than one communication. In such circumstances the order passed by the CESTAT is perfectly justified. Section 28 of the Act will have relevance only when there is no levy or short levied as has been stated in Section 28 of the Customs Act. On the admitted fact position that there was provisional levy already made in respect of the goods and the same were brought under double duty bond, we have no hesitation in holding that the proceedings now initiated under Section 72 read with 142 of the Customs Act as by way of recovery of the amount, payable by the importer is well in accordance with the provisions of the Act. The contention of the assessee that there was no notice issued prior to the sale of the bonded goods has nothing to do with the recovery of the amount due and payable by the importer. - Decided against assessee.

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• Service Tax

• 2014 (12) TMI 629
  VCES Scheme - Whether any enquiry / audit objection, or any action whatsoever was pending against the petitioner, as on 01.03.2013 - construction of residential houses on contract basis - show cause notice was on 31.07.2013 - Registration problem with ACES - Rejection of application under VCES since audit initiated - Held that:- It has to be pointed out that there was no audit initiated/conducted against the petitioner or in the business premises of the petitioner. This has not been disputed by the Department. However, the petitioner would state that an audit was conducted in M/s.Shobika Impex Private Limited and the petitioner had done certain construction activities in the said company and a communication was sent by the Range Officer to the petitioner on 07.03.2013. It has to be further pointed out that the cut-off date is 01.03.2013 and as on the said date, there was no audit objection. Even assuming that M/s.Shobika Impex Private Limited was the subject matter of audit from 01.03.2013, the petitioner was not put on notice, prior to 01.03.2013. The petitioner was intimated by the Range Officer, Tiruppur Range, on 07.03.2013. The petitioner's consistent case is that the Range Officer is not the competent authority to initiate any audit. Nevertheless, a reading of the impugned order shows that the communication, dated 07.03.2013 is only an intimation, probably, with a view to intimate the petitioner that they have to register themselves under the Service Tax regime and pay taxes. The petitioner did not ignore the communication of the Range Officer, but accepted the same with utmost seriousness. This is manifest by the petitioner's representation dated 08.03.2013, addressed to the competent authority, namely, the Superintendent of Central Excise, and the contents of the same have been elaborately set-out in the preceding paragraphs of this order, which clearly show the bona fides of the petitioner. Therefore, this Court has no hesitation to hold that as on the date when the application was filed by the petitioner, there was no audit as against the petitioner. - Even assuming that there was an audit with M/s.Shobika Impex Private Limited, such audit was not put on notice to the petitioner, by the competent authority, till the show cause notice was issued. The communication of the Range Officer was not an intimation of audit objection. Even assuming if it is considered as an intimation of audit objection, yet the communication on 07.03.2013 was much after the cut off date. Thus the issue that has to be considered by the Authority is, as to whether the petitioner could be considered to be ineligible under the scheme, for which the authority should not be solely guided by the Range Officer's communication, dated 07.03.2013, which appears to be an advice or notice and the petitioner has taken the advice well and proceeded in accordance with law. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 628
  Waiver of pre deposit - Classification of service - Management, maintenance and repair services or Business Auxiliary Service - Processing of fly ash for cement factory - Held that:- There is no consideration provided by KPCL for the service of maintenance and repair by the appellant - KPCL is not receiving any consideration for fly ash supplied. Fly ash has no value and KPCL has a responsibility of disposal at cost. Therefore stand taken by the Revenue that free supply of fly ash is consideration for management, maintenance and repair, is not sustainable - Actual expense incurred on management, maintenance and repair of the leased facility is already covered by consideration received by the Society from the cement units which is collected as service charges. This is the revenue for the society which is utilized for their activities including management, maintenance and repair of the facility - That being the position, consideration for management, maintenance and repair service can be said to have been covered by service charge received by the appellants from their customers. Since the entire service charge collected is subjected to levy under Business Auxiliary Service and such consideration includes maintenance and repair also, it cannot be said that service tax is leviable under this category separately. In any case, it cannot be said that the appellants are providing management, maintenance and repair service to the cement units - Under these circumstances, it has to be held that the appellants have made out a prima facie case in their favour for complete waiver of pre-deposit of the dues - Stay granted.

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• 2014 (12) TMI 627
  Waiver of pre deposit - Penalty u/s 78 - Commercial training or coaching service - imparting training, licensing and conducting examination for candicates intending to fly Helicopter. - Held that:- An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. Immediate instance can be given of the qualification in the field of law. Though by amendment of the recent years, the right to practice law on the basis of the said qualification has been made subject to clearing/passing a Bar Exam to be held by the Bar Council of India, the same does not make the qualification of law not recognized by law. The recognition accorded by the Act, Rules and CAR supra to the Course Completion Certificate issued by the Institutes as the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed/cleared. Decision of the Hon’ble High Court of Delhi is clearly applicable to the facts of this case. - Following decision of Indian Institute of Aircraft Engineering [2013 (5) TMI 592 - DELHI HIGH COURT] - Stay granted.

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• 2014 (12) TMI 626
  Waiver of pre deposit - Mining of Mineral Oil or Gas Service - GTA services - whether such an activity undertaken by these appellants is to be considered as part of mining service or the service tax is leviable under the GTA service - Held that:- when transportation activity is undertaken within the mine or from the mine outside the mine are to be classified under cargo handling service or goods transport by road pending upon the method adopted. However the Commissioner has interpreted it differently. He has observed in the order-in-original in paragraph 19.1.6 that the activities are undertaken from mine head to pit head and after 01.06.2007 the same is covered under mining activities. The only ground taken seems to be that the transportation is within the mining area. However learned counsel vehemently contested this and stated that the appellants were engaged in transportation of iron ore from mine head/pit head to the Railway sidings and the activity undertaken by them cannot be said to be within the mines. In any case the circular issued by the Board can lead to understanding and an interpretation that even for transportation within the mine or transportation from the mine to the railway sidings, mining service may not be the correct classification. It is well settled that if an assessee chooses to interpret a circular or a circular in his favour when two interpretations are possible, he cannot be found fault with. In any case in such a case extended period may not be invokable. Appellants were paying service tax under the category of GTA service and such tax was paid till 2011 without any failure. When the service receiver became a partnership firm, the appellants promptly informed that the receiver started paying the tax and intimated the fact to the department. The actions of the service providers as well as the service receivers in this case in our opinion reflects the fact that they had a bona fide belief that they were implementing the statute correctly. On this ground, appellants can be said to have made out a prima facie case on limitation. - Stay granted.

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• 2014 (12) TMI 625
  Waiver of pre-deposit - Receipt of internet telecommunication service - reverse charge mechanism - Internet Telecommunication Service - Held that:- Service provided to the petitioner by M/s. Verizon falls within ITS. We notice that sub-clause (iii) of Section 65(57a) enumerates provisions of telecommunication services including fax, telephony, audio conferencing and video conferencing, over the internet as included within the defined taxable service ITS, by way of an inclusionary clause, explicating the ambit of the ITS. From the terms of the contract/agreement entered into between the global headquarter of the petitioner, incorporated at San Diego and M/s. Verizon, a copy of which is placed for our perusal by way of additional material papers filed along with the stay application, we are prima facie compelled to infer that M/s. Verizon provides telecommunication services to the petitioner facilitating fax, telephony and audio/video conferencing including over the internet, an activity clearly falling within the ambit of Section 65(57a) and clearly outside the ambit of Section 65(109a). We are not persuaded to the view that the impugned adjudication order suffers from any infirmity warranting eventual appellate interference or grant of full waiver of pre-deposit at this stage. - whole of service tax demand directed to be deposited - interest and penalty stayed - Partial stay granted.

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• 2014 (12) TMI 614
  Invocation of extended period of limitation - Repairs and Maintenance Services - Small scale exemption under Notification 6/2005-ST with effect from 16.06.2005 - Held that:- Adjudicating authority has clearly stated that there was interpretation of law involved and he extended the benefit of Section 80 of Finance Act, 1994 for not imposing any penalty. It clearly shows that the ingredients required for invoking extended period are not present in this case. Indeed in the entire adjudication order there is no word as to how the extended period is invocable. As such we find that the extended period is not invocable in this case - It is also seen that the adjudicating authority categorically stated that it was not possible to check each and every entry running into thousands and then summarily went ahead and confirmed the impugned demand. It is to mention that once the appellant contended that the demand raised was untenable because the difference between the figures of their ledger and in their ST-3 return was for the reason mentioned earlier, a clear finding was required to be given by the adjudicating authority instead of brushing it aside on the ground that it was not possible to verify their claim. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 598
  Classification of services - Management Consultancy service or Business support services - nature of services are executionery or management consultancy - various activities like assisting the client in various field, advising the client on various aspects including liaising with various government departments, advising and assisting to solve various problems - Bring to the attention of the Company any improper or wrongful use of the Companys name, patents, trademarks, emblems, designs, models etc. - providing legal assistance - Held that:- A careful perusal of the appellants services to M/s. Transocean and M/s. Tide Water makes it clear that the appellants were advising the clients about various aspects relating to Management. The services are not executionery in nature and are clearly advisory in nature. The definition of ‘Management Consultant’ is so worded that the services performed by the appellants clearly fall within its scope and for that one only has to read the definition of ‘Management Consultant’. - Decided against the assessee. The appellants’ attempt to elucidate the meaning of Management Consultancy by reference to meaning of the word ‘Management’ is not really germane because the expression ‘Management Consultant’ and ‘Management Consultancy Service’ are clearly defined in the Finance Act 1994 itself and therefore one doesn’t have to, indeed one cannot, look beyond the statutory definition for the purpose of classification in this case. Regarding the appellants contention that the said services would be appropriately covered in the category of support services of business or commerce, or Business Consultancy Service, the same is not tenable because as per the definition of support service for business or commerce, the activities covered thereunder are essentially executionery in nature. - Decided against the assessee. Export of services or not - amounts paid by the ONGC to be treated as receipt in foreign currency or not - Held that:- The ratio of the judgment of Supreme Court in the case of JB Boda [1996 (10) TMI 70 - SUPREME Court] is that for treating such payments as payments received in foreign exchange, RBI’s nod should be there which is absent in the present case. It is pertinent to mention that once the RBI is taken in the loop, such transactions will not go unnoticed for the purpose of the relevant data bases of Indias international trade and foreign exchange transactions and will also not remain under the radar of the laws relating thereto. Thus, the impugned payments made by ONGC to the appellants do not merit to be treated as payments received in foreign exchange. - However benefit of export extended where actual foreign exchange received by the assessee. - Decided partly in favor of the assessee. Nature of services provided under the sales representative agreements to Helicopter Asia(PTE) - Held that:- As is evident from the ‘sales representative agreements’ the appellants role includes promotion of the services recipients’ goods/services and is thus clearly different from that of a commission agent. - Their claim for exemption under Notification No. 13/2003-ST on the ground of being commission agent is obviously untenable. - Decided against the assessee. Extended period of limitation - Held that:- Mere presumption of non-taxability can never be equated to ‘reasonable belief’ in that regard. Thus, the conclusion is inescapable that they deliberately did not take registration and pay the impugned service tax with a view to escaping the liability and when caught, pretended to be having reasonable belief about the non-taxability. Thus invocability of extended period and mandatory penalty is unexceptionable. - Decided against the assessee.

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• 2014 (12) TMI 597
  Banking and other Financial services’(BOF) - Providing ATM facilities and other allied activities related to ATM services to various nationalized banks and to other banks - Scope of Section 65(11)(i) - w.e.f. 1.5.2006 ATM Service a separate service was introduced under Section 65(96) and Section 65(105)(zzzk) of Finance Act and the appellants are duly discharging service tax under the ATM Services. The entire dispute is pertaining to the period prior to 01.05.2006 and in the present case, the Revenue sought to classify the service under BOF service. Held that:- it is evident that in the case of finance lease the lesser transfer all the risks and rewards incidental to the ownership to the lessee. In the present case, the ATMs are owned by the appellants and no rights or risk and rewards are transferred to the Banks. The appellant collects charges for proving ATM Services as facility charges per ATM per day basis. Therefore, by respectfully following the Apex Court decision in the case of Association of Leasing & Financial Services Companies Vs. UOI [2010 (10) TMI 4 - SUPREME COURT OF INDIA], we hold that the appellants providing ATMs and other ATM related activities do not fall under BOF as Financial leasing including equipment leasing and transfer of information or data processing. - Decided against the revenue.

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• 2014 (12) TMI 596
  CENVAT Credit - scope of Input services - Outdoor Catering Service - input service used for personal use or consumption by any employee - Held that:- What is excluded is only the services 'primarily for personal use or consumption of any employee' under clause (C) of Rule 2(1) of the definition of input service. When the Government has specifically used the words such as "used primarily for personal use or consumption of any employee", the same has to be given due effect to. In the present case the outdoor catering service is used in relation to business activities of the Appellant and the service is used by all employees in general. Also, the Revenue has not rebutted the contention of the Appellant, that the costs of these input services form part of the cost of final product. I also find that the services covered in clause (B) of the definition are excluded from the ambit of cenvat credit without any such qualification of use of service for personal or official purpose. - even the Government while issuing the budget clarification or subsequent circular has clarified that what is not eligible is that service which is meant for personal use or consumption by an employee or the cost of which is included as part of salary of the employee as a cost to company basis. In the present case, the cost of such services, are admittedly borne by the company and not by the employee. Therefore, I hold that the Appellant has correctly claimed the cenvat credit on outdoor catering services. Accordingly, the impugned orders are set aside - Decided in favour of assessee.

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• Central Excise

• 2014 (12) TMI 624
  Denial of input credit - Activity does not to manufacture - Held that:- As the issue is no longer res integra in the light of this Tribunal in the case of Ajinkya Enterprises (2013 (6) TMI 610 - CESTAT MUMBAI) which has been affirmed by the Hon'ble Bombay High Court therefore, we hold that the appellant is entitled for CENVAT credit. Accordingly, the impugned order is set aside - Decided in favour of assessee.

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• 2014 (12) TMI 623
  Restoration of appeal - Committee of Disputes rejected application - Held that:- When COD permission was not given on an application filed, as per the decision of the Hon’ble Supreme Court in the case of Electronics Corporation of India Ltd., Vs UOI [2011 (2) TMI 3 - Supreme Court], no such permission is required. The appeal filed by the appellant will have to be restored Accordingly, the application for restoration of appeal is allowed and appeal and stay application if any are restored to their original numbers and will come up for hearing in due course. - Appeal restored.

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• 2014 (12) TMI 622
  Availment of ineligible Cenvat Credit - Shortage of physical stock - Imposition of equivalent penalty - Held that:- In view of the decisions of the Hon'ble Bombay High Court in the case of Greaves Cotton Ltd. [2007 (8) TMI 254 - HIGH COURT BOMBAY] which is the jurisdictional High Court, we are duty bound to follow this decision. As per the decision, if there is a shortage of inputs and the assessee fails to account for utilization of inputs which were found short on which the credit was claimed, then the department was right in denying the Cenvat Credit on such inputs found short. However, the Hon'ble High Court observed that the demand cannot be confirmed for the extended period as there cannot be any mis-statement on the part of the appellant in such cases as the shortage was with reference to stock recorded in the books of accounts. Following the ratio of this decision assessee directed to make pre deposit - Partial stay granted.

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• 2014 (12) TMI 621
  Clandestine manufacture and clearance of plywood - Appellant though claimed to have carried out the job work of 'core veneer drying' & 'tapping of face Veneer', but neither informed the department about the said activity in their statutory RT-12 Returns or Classification declaration filed under relevant Rules, nor followed the laid down procedure for undertaking job-work in its factory premises - whether the Appellant during the period April, 1997 to March, 2001, manufactured and cleared clandestinely excisable goods viz. 24mm thickness plywood against cash memos/challans in the guise of job work of "Core Veneer drying and tapping of face Veneer - Held that:- Names of these persons are always available on the records seized, i.e. on the job-work cash memos/challans issued by the Appellant, for carrying out job work. There is no need to elucidate that these persons had been examined by the department to ascertain whether in fact job work had been undertaken by the Appellant, in their factory, on the raw materials supplied by these persons as job workers. All these departmental witnesses had declined of having sent the core veneer for job work and one of the witness assigning reason stated that if the veneer is transported for around 500 km for job work of drying, then, it would turn black and become waste. Needless to repeat, the case against the Appellant is clandestine manufacture and clearance of 24 mm thickness plywood in the guise of undertaking job work and not for violation of job-work provisions. There is no other substantive evidence adduced by the Department so as to establish the case of clandestine removal by the appellant. In these circumstances, we're of the opinion that unless the circumstances referred to in paragraph 25 of the aforesaid judgement of the Hon'ble Delhi High Court exist, it would be incorrect to accept the statements as relevant evidence. From, the records, we do not find that any attempt has been made by the department to produce these witnesses for cross-examination. - Adjudicating Authority has neither accepted the affidavits of the defence witnesses nor allowed the examination of the said witnesses sought to be produced by the Appellant to establish their case on the ground that the affidavits filed by the Appellant, were not in order and the same had been filed much later during the de novoproceeding. We do not find merit in the said observation of the Ld. Commissioner. The case was remanded for fresh adjudication on the ground of non-supply of documents and the Appellant had not filed their reply to the demand Notice. Thus, filing the affidavits along with the reply cannot thus be considered as belated action and liable for rejection. On the contrary, we are of the view that the Ld. Adjudicating authority ought to have considered the affidavits and allowed the production of these witnesses by the appellant for examination and in the event Department deems it necessary, could have cross-examined the witnesses. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 620
  Demand of differential duty - Finalization of Provisional assessment - Principle of natural justice - Matter earlier remanded back by Tribunal - Commissioner passed the re-assessment order - Held that:- After considering all the relevant aspects, namely, the product's functions and its usage, technical literature, HSN Explanatory Notes, various Tribunal and Apex Court decisions relevant to the classification the product, the Tribunal has recorded a detailed finding and has classified the product. Therefore, it cannot be the case that the appellant were never afforded an opportunity to canvass their views. In this factual position, we do not any merit in the appellant's contention that they should have been given one more opportunity by the assessing officer as regards the proposed classification. In any case, the assessing officer was neither directed to give such an opportunity nor could he have come to a different view, in view of the decision this Tribunal with respect to classification which is binding on the lower authorities. The lower authorities have merely carried out the directions of this Tribunal to re-calculate the duty and in the absence of any challenge to such re-calculation by the appellant, the present appeal is liable to rejected and we hold accordingly. Tribunal set aside the final assessment done by the lower authorities and directed the assessing officer to undertake re-assessment as per the classification decided by the Tribunal and to re-compute the differential duty liability. Thus the remand order passed by the Tribunal restored the provisional assessment resorted to earlier by setting aside the final assessment order and it is in pursuance of the said remand order, the jurisdictional Dy. Commissioner passed the re-assessment order and confirmed the differential duty liability. - amount of duty demand confirmed is much less than the amount specified in the show cause notice issued for finalization of provisional assessment. In the notice dated 1-3-98 which was issued for finalization of provisional assessment, the differential duty sought to be recovered was Rs. 37.05 Crore approx whereas in the final assessment order, the demand confirmed is only Rs. 5,30,86,840/- which is much less than that proposed in the notice. Thus there is no infirmity in the assessment order passed by the Deputy Commissioner as the enhancement of rate of duty has not resulted in confirmation of any amount more than that proposed in the show cause notice. - Decided against assessee.

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• 2014 (12) TMI 619
  Denial of rebate claim - original authority rejected the entire rebate claim on the ground that process undertaken by the applicant does not amount to manufacture - CBEC Circular No.927/12/2010-Cx dated 24.6.10 - Retrospective application - Held that:- demand of cenvat credit availed cannot sustain for period prior to 24.6.10 i.e. before issuance of the said circular dated 24.6.10. He also confirmed-the demand of cenvat credit availed for period subsequent to date 24.6.10. There is nothing on record nor in the written submission dated 2.9.14 of the department that said-order dated 31.8.12 has been stayed by any higher appellate forum. As such, the legal position as on date is that the process undertaken by the applicant prior to 24.6.10 amounts to manufacture and as such cenvat credit availed by them prior to 24.6.10 was proper and the circular is not applicable retrospectively. Apex Court in H.M.BagsManufacturer Vs Collector of Central Excise [1997 (7) TMI 119 - SUPREME COURT OF INDIA] and various subsequent judgements has clearly stipulated that Board's circular can have only prospective effect which is evidently the law of the land. Hence, Government finds that rejection of the rebate claims by the original authority on the sole ground of issue of ‘amounts to manufacture by applying the Boards circular-retrospectively-i.e. prior to 24.6.10 cannot be held sustainable and hence, liable to be set aside. - Decided in favour of assessee.

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• 2014 (12) TMI 618
  Export Rebate claim - Rule 18 - Under Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004 - Assessee did not carry out any process of manufacture of the inputs received and exported - Held that:- Original authority has rejected the applicant’s claim by holding that the process of. packing/repacking and labeling, re-labelling of goods meant for export, under taken by the applicant, doesn t amount to manufacture and is, thus not eligible for claim of rebate as per Notification No. 21/2004(N.T.) dated 06.09.2004 Commissioner (Appeals) upheld the impugned Order-in-Original. Terms used is material not input. Moreover, the material is to be used in the manufacture of processing of the goods. The process of processing of the goods may not amount to manufacture in terms of Section 2(f) of the Central Excise Act, 1944. The process of testing/re-packing etc. definitely amounts to processing of the goods. Respondents have used the materials in the processing of export goods and complied with all the conditions/procedures of the Notification No. 21/2004-C.E.N. T.), dated 6-9-04 which was valid during the period of export and there is no dispute about the actual export of the goods Therefore, respondents were eligible for input stage rebate claim subject to fulfilment of condition mentioned - Following decision of IN RE: AV INDUSTRIES [2010 (9) TMI 762 - GOVERNMENT OF INDIA, MINISTRY OF FINANCE] - Decided in favour of assessee.

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