TMI Tax Updates - e-Newsletter
December 24, 2014

Case Laws in this Newsletter:

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

TMI SMS

• VAT on cell phone battery charger - It cannot be held that charger is an integral part of the mobile phone making it a composite good - SC

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Articles

1. CENVAT Credit – Capital Goods IV

   By: CA Akash Phophalia

2. FIXED DEPOSITS IN NAME OF REGISTRAR GENERAL OF HIGH COURT UNDER DIRECTIONS OF COURT – WHETHER TDS APPLICABLE ON THE INTEREST ACCRUED?

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Steps Taken to Encourage Investment

2. Employing Differently Abled Persons as Part of CSR Activity

3. Complaints Against Online Trading Companies

4. Identity of Blacklisted Companies

5. RBI Reference Rate for US $

Notifications

Income Tax

1. 83/2014 - dated 19-12-2014 - IT

U/S 120 of Income Tax Act 1961 - Amendment in Notification No. S.O. 1615 (E), dated the 26th September, 2006.

2. 82/2014 - dated 19-12-2014 - IT

U/s 120 of Income Tax Act - Amendment in Notification No. S.O.876(E), dated the 22nd June, 2005.

Highlights / Catch Notes

Income Tax

• Section 73: Offset Speculative Business Losses Against Profits; Single Transaction as Speculative Business u/s 28.

  Case-Laws - HC : Scope of section 73 for setting off - A single transaction may constitute a speculative business so as to be treated differently from other business under section 28 - HC
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• Tax Authorities Must Justify Sales Rejection Under Accounting Standard AS-7 for Accurate Tax Assessment.

  Case-Laws - AT : Addition of difference in sales – there was no justification in not accepting the sales recorded by the assessee in its books of accounts as per Accounting Standard AS-7 - AT
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• Court Remands Royalty ALP Case to AO/TPO for TNMM Reassessment on Intangible Transfers.

  Case-Laws - AT : Most appropriate method for determining the ALP of the royalty - Transfer of intangibles - matter remitted back to the AO/TPO for determination of ALP of royalty by adopting TNMM - AT
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• Deemed Dividends: Section 2(22)(e) Applies Only When Shareholder Exclusively Benefits, Not When Company Gains Too.

  Case-Laws - AT : Deemed Dividend - section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction - AT
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• Unaccounted Expenditures and On-Money Receipts to Be Considered for Taxable Income Calculation.

  Case-Laws - AT : Assessee was receiving on-money in the ordinary course of its business - even the unaccounted expenditures are also reflected in the seized papers - a reasonable profit should be taxed which is embedded in the total unaccounted gross receipts - AT
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• Mushroom Sales Income Not Classified as Agricultural; Cultivation Shed Located Within Municipal Limits of Jagadhari.

  Case-Laws - AT : Income from growing of sale of mushroom – AO has given a clear-cut finding that the shed in which mushrooms were grown by the assessee, is located within the residential area of Jagadhari which is situated within Municipal limits - Not an agriculture income - AT
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• Denial u/s 10(23C)(via) doesn't automatically affect exemption claims u/s 10(23C)(iiib) of the Income Tax Act.

  Case-Laws - AT : Mere rejection of application 10(23C)(via) of the Act cannot be reason to reject the claim of exemption u/s. 10(23C)(iiib) of the Act - AT
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• Serampore College's Four Units Recognized as Single Taxable Entity; Same Taxation for College and Senate Names.

  Case-Laws - AT : The Serampore College, although this consists of 4 units but a single taxable entity, whether under the name of “The Serampore College” or “The Senate of Serampore”, both are one and the same - AT
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Customs

• Appellant Challenges Duty Liability Requirement for Pre-Deposit; Adjudicating Authority to Quantify Demand and Set 10% Deposit Obligation.

  Case-Laws - AT : Waiver of pre-deposit - appellant submits that there is no quantification of any duty liability in the impugned order and, therefore, the appellant is not required to make any pre-deposit - adjudicating authority to quantify the demand and assessee to deposit 10% of the demand - AT
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• Court Rules Against Exporters for Inflating Porcelain Mug Values; Misrepresentations Lead to No Benefit for Appellants.

  Case-Laws - AT : Export of Porcelain Mugs - Inflated value of goods - The fact that earlier, based upon the market enquiry, the declared value was accepted is of no consequence - appellants cannot be allowed to take benefit of their wrong deeds. - AT
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• Entity Violates Advance Authorisation: Exports Sugar Without Release Order, Faces Confirmed Demand for Non-Compliance with Actual User Conditions.

  Case-Laws - AT : Advance Authorisation - import raw sugar under actual user condition - ton-to-ton or grain-to-grain basis - Export of sugar without release order from appropriate authority - demand confirmed - AT
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• Trademark Royalty Excluded from Customs Valuation for Imported Goods Due to Lack of Payment Condition.

  Case-Laws - AT : Valuation of goods - licence fee is being paid by the appellant for use of the trade-mark for manufactured goods. There was no condition of sale that the appellant is required to pay this royalty on the imported goods - royalty not to be included - AT
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Service Tax

• Tribunal Denies Waiver of Pre-Deposit Due to Lack of Prima Facie Case; Hardship Not Considered.

  Case-Laws - HC : Waiver of pre-deposit - tribunal refused to waive the pre-deposit - Once the appellant did not have any prima facie case, there was no reason or occasion for the Tribunal to consider the issue of any hardship to the appellant in making the deposit. - HC
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• APSRTC Services for Weddings, Excursions, and Employee Transport Not Classified as Tour Operator Services.

  Case-Laws - AT : Services provided by APSRTC a State Owned organization - Service of tours of marriage parties, excursions, party meetings etc. - services of transporting of company employees - cannot be termed as tour operators - AT
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• Service Tax Imposed on Transportation of Levy Sugar by Goods Transport Agencies Confirmed.

  Case-Laws - AT : Levy of service tax for transporting levy sugar - service of transportation from the GTAs service tax - demand confirmed - AT
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• CENVAT Credit Classification: Beneficial Circulars Applied Retrospectively, Oppressive Circulars Prospectively Impacting Credit Processing for Services.

  Case-Laws - AT : CENVAT Credit - Export of services or exempted services during the relevant period - Circular dated 9-5-2008 - beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospective. - AT
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Central Excise

• MRP Valuation Incorrect for Biscuits Supplied to Delhi Schools, Central Excise Act Sections 4 vs. 4A Explored.

  Case-Laws - AT : Valuation of goods u/s 4 or 4A - Biscuits cleared to Municipal Corporation of Delhi under the National Programme of Nutritional Support of Primary Education - MRP based valuation is not correct - AT
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• No Duty Remission for Fire Accidents If Appellant's Negligence Proven Under Central Excise Regulations.

  Case-Laws - AT : Remission of duty - Fire accident - Negligence on the part of the appellant could be attributed if they were required to take certain actions/ precautions as per laws of the land but they failed to take such precaution/ action. - AT
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• Rebate Denied: Applicant Lacked Pre-Export Approval for Input-Output Ratios on Duty-Paid Materials, Despite Post-Export Approval.

  Case-Laws - CGOVT : Denial of rebate claim - applicant failed to get input output ratio approved in r/o duty paid materials used in the manufacture of final product before its export but got approval post export - benefit of export extended - CGOVT
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VAT

• Court Rules Cell Phone Chargers Not Integral to Phones, Different VAT Rates Apply Under Tax Law.

  Case-Laws - SC : Rate of Vat on cell phone battery charger - It cannot be held that charger is an integral part of the mobile phone making it a composite good - SC
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Case Laws:

• Income Tax

• 2014 (12) TMI 808
  Scope of section 73 for setting off - Whether a single transaction of purchase of shares of TISCO carried forward from settlement to settlement can be said to be series of transactions so as to constitute a speculation business within the scope of Section 73 of the Act depriving the assessee to set off of loss against other business profits – Held that:- The Tribunal was rightly of the view that in the case of Pankaj Oil Mills Versus Commissioner Of Income-Tax, Gujarat [1976 (5) TMI 3 - GUJARAT High Court] has explained the subtle and significant distinction between speculative transaction and hedging transaction – the AO was justified in treating the loss suffered by the assessee as business loss since it was a loss sustained in speculation business – also in Commissioner of Income Tax vs. Shree Textiles [1993 (5) TMI 14 - RAJASTHAN High Court] it has been held that it was a speculation transaction and as such could not be adjusted against the business income. In a case where a trader carries on a business part of which (even one transaction) is in the category of "speculative transaction" as defined under section 43(5) and part of which falls in the category of business, then the object of Explanation 2 is to treat them separately. A single transaction may constitute a speculative business so as to be treated differently from other business under section 28. – Decided against assessee.

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• 2014 (12) TMI 807
  Allowability of entire expenses on issue of partly convertible debentures into equity shares – Revenue expenses or not – Held that:- Following the order in INCOME TAX OFFICER Versus VXL INDIA LIMITED [2009 (7) TMI 1205 - GUJARAT HIGH COURT] wherein it has been held that when the debentures are converted into equity shares, the assessing company has already got enduring benefit and the expenditure incurred by the conversion of equity shares has to be treated as capital expenditure - portion of the convertible debenture was converted into equity shares and assessee company had got enduring benefits and therefore, the expenditure incurred by the assessee on conversion of convertible debentures into equity shares has to be treated as capital expenditure - the Assessing Authority disallowed expenditure only to the extent pertaining to the convertible portion of the expenditure which formed part of the capital – Decided against revenue.

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• 2014 (12) TMI 806
  Deduction u/s 80HHC - Exchange rate difference pertaining to exports made in earlier years was 'profits of business' or not – Held that:- Following the decision in Commissioner of Income-tax v. Priyanka Gems [2014 (3) TMI 938 - GUJARAT HIGH COURT] wherein it has been held that the source of the income of the assessee was the export - on the basis of accrual, income was already reflected in the assessee's account on the date of the export at the prevailing rate of exchange - the income was earned merely on account of foreign exchange fluctuation - such income was directly related to the assessee's export business and could not be said to have been removed beyond the first degree – thus, the assessee was entitled to deduction u/s 80HHC – Decided against revenue. Computation of deduction u/s 80HHC - interest received on fixed deposits should be netted or not – Held that:- Following the decision in ACG Associated Capsules Pvt. Ltd. v. Commissioner of Income-tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA] wherein it has been held that ninety per cent of not the gross rent or gross interest but only the net interest or net rent, which had been included in the profits of business of the assessee as computed under the head "profits and gains of business or profession", was to be deducted under clause (1) of Explanation (baa) to section 80HHC for determining the profits of the business – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 805
  Addition of difference in sales – Application of AS-7 issued by ICAI - Held that:- The assessee has been following AS-7 right from its inception - no adverse inference has been drawn in earlier AYs in so far as the method of recording sales in the books is concerned - section 145 provides is that the Accounting Standards which have been notified by the Central Government have to be mandatorily followed by the assessee - but this does not mean that the assessee cannot follow the other Accounting standards issued by ICAI - The ICAI is the highest accounting body of the country created by an Act of parliament therefore accounting standards issued by it cannot be brushed aside lightly - the Central Government has notified only two accounting standards - if the method of accounting followed by the assessee is in contravention to the notified accounting standards, the provisions of Sec. 145 will prevail - This does not mean that if the assessee is following a particular accounting standard issued by ICAI which is not notified by the Central Government, the method of accounting of the assessee would be out-rightly rejected - As there is no doubt that the assessee has been consistently following accounting standard-7, the method followed by the assessee has to be accepted – there was no justification in not accepting the sales recorded by the assessee in its books of accounts as per Accounting Standard AS-7 – thus, the order of the CIT(A) is set aside – Decided in favour of assessee. Amortization of cost of specific equipment disallowed – Held that:- Assessee has followed a particular method of claiming depreciation/amortization - However, the Income tax Act u/s. 32 specifically provides the method of computing the depreciation and the Income Tax Rules provide the relevant rates - All assessees are bound to follow the rates prescribed under the rules and compute the depreciation as per the procedure laid down u/s. 32 of the Act - The assessee has followed none – thus, the order of the CIT(A) is upheld – Decided against assessee. Transfer pricing adjustment - International transaction with AE - The TPO has arrived at the ALP of this international transaction at Nil on the basis that the assessee was awarded a single contract work in the earlier years and more than 85% of the contract had already been assigned to various sub-contractors including AEs on back to back basis – Held that:- The assessee JV came into existence with 5 independent enterprises coming together for executing the contract for DMRC - as per the agreement between the assessee and its JV partners, overhead office expenses of the respective JV partners were to be allocated to the assessee with a cap of 8.5% of the turnover of the assessee - the TPO has not brought out any fact to indicate that the extents of overhead expenses are in excess of any overhead expenses debited in any of the comparable or the set of comparable – there was no defect has been pointed out by the TPO on the documentation maintained by the assessee as required under the relevant rules – the charge of overhead cost had been examined in the earlier years also - considering the facts in totality and keeping in mind that such allocation of overhead expenses has been right from the inception of JV, there was no reason to accept the conclusion reached by the TPO. Determination of ALP of Tunnel ventilation charges paid to AE Samsung Corpn. – Held that:- The assessee has retained a gross profit margin of 12.5% of the VAC works - assessee has done no portion of the work and the entire job was sub-contracted on back to back basis - there can be no allocation of the cost of the VAC work - the assessee has awarded this sub-contract to Samsung Corpn., based on the lowest bidding by the AE - The TPO has also not brought on record any comparable or set of comparable in support of the adjustment on account of excess cost claimed – thus, the order of the TPO is set aside and directed to delete the adjustments made on account of arm’s length price in relation to these international transactions entered into by the assessee with its AE – Decided in favour of assessee.

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• 2014 (12) TMI 804
  Computation of deduction u/s 10A - Exclusion of expenses on travel exenses in foreign currency – expenses towards telecommunication expenses form export turnover – Held that:- following the decision in CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] the AO is directed to exclude expenses incurred in foreign currency towards travelling and expenses incurred towards telecommunication both from export turnover and total turnover – Decided in favour of assessee. Transfer pricing adjustment – Selection of comparables - Turnover Filter - addition to total income on ALP to international transaction as per u/s 92CA – Held that:- Following the decision in Trilogy E-Business Software India (P.) Ltd. Versus Deputy Commissioner of Income-tax. Circle 12(4). Bangalore [2013 (1) TMI 672 - ITAT BANGALORE] wherein it has been held that the TNMM is the most appropriate method for determining the ALP of the international transaction - the provisions of law clearly lay down the principle that the turnover filter is an important criteria in choosing the comparables - assessee’s turnover is 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores - thus, companies having turnover of more than 200 crores have to be eliminated from the list of comparables. Improper selection of comparables – KALS Information Systems Ltd. - Held that:- Following the decision in Trilogy E-Business Software India (P.) Ltd. Versus Deputy Commissioner of Income-tax. Circle 12(4). Bangalore [2013 (1) TMI 672 - ITAT BANGALORE] wherein it has been held that the TPO has drawn conclusions on the basis of information obtained by issue of notice u/s.133(6) of the Act – The information which was not available in public domain could not have been used by the TPO, when the same is contrary to the annual report of this company as highlighted by the Assessee in its letter dated 21.6.2010 to the TPO - this company was developing software products and not purely or mainly software development service provider. Accel Transmatic Ltd. – Held that:- The company should not be treated as comparables was considered by the Tribunal in Capgemini India (P.) Ltd. Versus Additional Commissioner of Income-tax, Range-10(2), Mumbai [2011 (5) TMI 509 - ITAT, MUMBAI] where the assessee was software developer - this company was not comparable in the case of the assessees engaged in software development services business. Tata Elxsi Limited. – Functionally not comparable - Held that:- This company is predominantly engaged in product designing services and not purely software development services - The references made to the Annual Report by the learned Authorised Representative show that the segment “software development and services” relates to design services and are not similar to software support services performed by the assessee - this company is not to be considered for inclusion in the set of comparable in the case on hand for the period under consideration and therefore direct the TPO to exclude this company from the final set of comparables for the period under consideration – the company should also be excluded for the purpose of comparison while determining the ALP of the international transaction. Megasoft Ltd. – Held that:- Following the decision in Trilogy E-Business Software India (P.) Ltd. Versus Deputy Commissioner of Income-tax. Circle 12(4). Bangalore [2013 (1) TMI 672 - ITAT BANGALORE] wherein it has been held that only segmental data of the said company should be taken for the purpose of comparison - neither the TPO nor the DRP have noticed that there is bound to be a difference between the Assessee and Megasoft and the profit arising to the Megasoft as a result of the existence of the software product segment and no finding has been given that reasonably accurate adjustments can be made to eliminate the material effects of such differences - the profit margin of 23.11% which is the margin of the software service segment be taken for comparability - segmental margins in so far as it relates to providing software services by Megasoft alone should be taken for the purpose of comparison – Decided partly in favour of assessee.

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• 2014 (12) TMI 803
  Transfer pricing adjustment – Selection of Comparables - M/s. Atual Ltd. – Held that:- They are comparable because as decided in Sony India (P) Limited. Versus Deputy Commissioner Of Income-tax, Circle - 9(1)[2008 (9) TMI 420 - ITAT DELHI-H ] wherein the CIT (A) has given detailed reasoning for holding that both these companies are comparable – the view taken by the CIT(A) is correct and there is no unreasonableness in the findings of CIT (A). M/s. Indian Toners and Developers Ltd. – Held that:- The claim of the assessee was that the company manufactures toners and developers for photocopies, laser printers and digital printers – it cannot be considered as comparable to the printing inks manufactured by assessee - TPO noted that the company M/s. Indian Toners and Developers Ltd. and assessee has same NIC Code i.e. 24222 hence this company was held as comparable - CIT(A) found that M/s. Atul Ltd. is a comparable as decided in Sony India (P) Limited. Versus Deputy Commissioner Of Income-tax, Circle - 9(1)[2008 (9) TMI 420 - ITAT DELHI-H ] and in respect of M/s. Indian Toners 40 lacs has to be sustained which is on account of opening stock and by rectifying order u/s 154 has reduced the deletion by 40 lacs or odd -The issue in respect to deletion reduced by 40 lacs or odd has been restored to the CIT (A) to decide the same afresh after affording reasonable opportunity of being heard to the assessee as, as per order of CIT (A), no opportunity was provided to the assessee - the order of CIT(A) in deleting the addition of 1 crore or odd was correct and upheld – Decided partly in favour of assessee.

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• 2014 (12) TMI 802
  Transfer pricing adjustment - Payment of royalty is for the use of technical know-how by the assessee which is owned by the AEs - Whether the transfer pricing analysis is required to be carried out with respect to tax-payer’s individual international controlled transaction or a group of international controlled transaction having close economic nexus – Held that:- The assessee has aggregated all the international transactions entered into by the assessee with its AE to compute the ALP - assessee contended that all the transactions are interlinked and therefore the same are aggregated under TNMM - the assessee has entered into various transactions which include purchase of raw-material, components and consumables, capital assets and payment towards royalty, technical assistance, IT support fee, payment of warranty claims, training fee, reimbursement of expenses etc. - the payment of royalty is not part of a composite contract/agreement but is on account of a separate Technical Assistance Agreement entered into by the assessee with its AE - The assessee is required to pay the royalty under the Technical Assistance Agreement for use of certain Technical and manufacturing know-how proprietary to Toyota Motor Corporation/Aisin Takaoka Company which is developed by them by virtue of their investment in research and development. The payment of royalty is independent of the purchase of raw materials, components, tools, packing materials, fixed assets etc. - The royalty is exclusively towards the use of know-how in the manufacturing process undertaken by the assessee and is therefore not in any way interlinked or inter-connected with other transactions and it would not lead to inaccurate result if it is analyzed separately - the contract of payment of royalty can be analyzed separately and the ALP of such a payment can be determined independently – in The ‘L’ bench of the Tribunal at Mumbai, in the case of UCB India(P) Ltd. vs. Ass. CIT [2009 (2) TMI 237 - ITAT BOMBAY-L] it has been held that when in an enterprise, only similar transactions are undertaken, i.e. all the transactions are of the same type, same class and of similar variety, and the enterprise does not have any other transaction which is not similar, in such a situation, the operating margins of the enterprise would be the TNMM of a class of transactions. Most appropriate method for determining the ALP of the royalty - Transfer of intangibles - Held that:- The assessee was engaged in the activity of manufacture itself proves the use of technical know-how by the assessee and following the decision in CIT Versus EKL APPLIANCES LTD [2012 (4) TMI 346 - DELHI HIGH COURT] wherein it has been held that it is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity and also that it is not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years - the only condition is that the expenditure should have been incurred wholly and exclusively for the purpose of business and nothing more and the quantum of expenditure can no doubt be examined by the TPO as per law in allowing as business expenditure but he has no authority to disallow the entire expenditure or part thereof on the ground that the assessee has suffered continuous losses - so long as expenditure payment has been demonstrated to have been incurred or laid out for the purpose of business, it is no concern of the TPO to disallow the same on any extraneous reasoning and as provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but wholesale disallowance of the expenditure is not contemplated or authorized – the order of the TPO is set aside and the matter is remitted back to the AO/TPO for determination of ALP of royalty by adopting TNMM – Decided in favour of assessee. Provision for slow/non-moving inventories disallowed – Held that:- Assessee contended that the inventory consists of not the spare parts but the items which are used to manufacture the spare parts of Qualis – assessee rightly pointed that if the vehicle itself is not being manufactured then there would not be any requirement to manufacture the spare parts of such a vehicle and in such an event, stock would be redundant or obsolete – assessee contended that the stock does not relate to the spare parts, but relates to various components of spare parts - This fact needs verification – thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of assessee.

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• 2014 (12) TMI 801
  Addition of deemed dividend u/s 2(22)(e) - loans taken by assessee – Held that:- Both the parties are beneficiary of the transaction being current account of the above transactions i.e. shifting balances – the same matter has been decided in Pradip Kumar Malhotra v. CIT [2011 (8) TMI 16 - CALCUTTA HIGH COURT] wherein it has been held that section 2(22)(e) of the Act was inserted to bring within the purview of taxation those amounts which are actually a distribution of profits but are disbursed as a loan so that tax thereon can be avoided - when dividends are declared by a company, it is solely the shareholders who benefit from the transaction - No benefits accrue to the company by way of dividend distribution - Thus, section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend - by giving and taking financial assistance from each other, both the assessee and the company were benefited and such transactions between them were nothing but commercial transactions and dividend attributable to the shareholder is nothing to do with such business transaction - it can be said that sec. 2(22)(e) of the Act covers only those transactions which benefit the shareholder alone and results in no benefit to the company - the loan account differs from current account and the provisions of section 2(22)(e) of the Act, being a deeming section, cannot be applied to current account – thus, the addition is to be set aside – Decided in favour of assessee. Interest payment made on utilization of borrowed fund by giving interest free advances to the relatives of the assessee and other group companies disallowed – Held that:- The AO has simply disallowed the interest by observing that, “the assessee deducted 1,34,988/- on account of payment of interest against interest from other sources consisting of Royalty and Interest of 1182/- from bank - borrowed fund was not utilized for earning the income - borrowed fund on which interest of 1,34,988/- was paid, was used mainly for giving interest free advance to the relatives of the assessee and to the concerns of the Group - hence, the borrowed fund cannot be said to have been used for purpose of earning income - interest paid on borrowed fund which was not used for earning income is disallowed and added to the total income of the assessee - for making disallowance the AO should have found out the nexus, first of all, and it is also a fact that the assessee is having substantial capital in the form of shares and other reserves and surpluses to meet out these loans - once this is the position, the interest on borrowed funds cannot be disallowed – Decided in favour of assessee. Unexplained investment in jewellery disallowed – Held that:- During the course of search on the residence of assessee on 04.10.2007 jewellery consists of 39 items valuing 24,51,316/- was found out of which jewellery valuing 17,26,660/- was seized - assessee was required to explain the jewellery found - details are described in the assessment order but the AO has not believed the explanation of the assessee and made addition but CIT(A) deleted the addition after considering the explanation of the assessee - CIT(A) only sustained the addition made by AO of jewellery valuing at 3,95,859/- Hence out of total addition of 10,36,187/- on account of undisclosed investment in jewellery, addition of 6,40,328/- is deleted and balance addition of 3,95,895/- is confirmed – from the records it was found that the assessee has filed evidences of remodeling of jewellery that these jewellery to the extent of 3,95,895/- was made out of old jewellery, which was acquired prior to the date of search – Decided in favour of assessee. Assessment in pursuance of research u/s 153A - claim of deduction which were not claimed earlier – Demat Charges - deleting the addition under the head Capital Gain - Held that:- There is no seized incriminating materials found during the course of search and without any evidence the AO has made addition of deemed dividend – following the decision in All Cargo Global Logistics Ltd., v. DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] as well as in Jai Steel (India) Versus Assistant Commissioner of Income Tax(Alongwith other 16 similar matters) [2013 (6) TMI 161 - RAJASTHAN HIGH COURT] – Decided against revenue.

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• 2014 (12) TMI 800
  Condonation of delay of 465 days – inadvertent mistake by CA - Held that:- Assessee has explained a reasonable cause for not filing the appeal within the period of limitation as there was an inadvertent mistake at the office of the Chartered Accountant - by not filing the appeal within the period of limitation, the assessee cannot have any ulterior purpose - No prudent person would act in such a manner that his action can be detrimental to his own interest - By not filing the appeal on time, the assessee could not have derived any benefit - whenever substantial justice and technical considerations are opposed to each other, case of substantial justice has to be preferred and justice oriented approach has to be taken while deciding the matter on condonation of delay - the reasons explained by the assessee are not malafide and there is nothing on record to infer that by filing a belated appeal, the assessee could have achieved an ulterior purpose - the assessee was having sufficient cause for not filing the appeal within the period of limitation – the delay condoned with cost. Addition of unaccounted income – Held that:- During the course of the search proceedings, Shri Mahesh Nanji Patel admitted undisclosed income of 5 crores in the hands of the assessee based on the papers found and seized - assessee was making entries of the on-money received by it during the course of its business - u/s. 153A, the AO has the power to assess or reassess the total income in respect of each AY falling within such assessment year in case of person where a search is initiated u/s. 132 - the AO has the power to assess or reassess the total income of the assessee - what can be taxed is the undisclosed income and not the undisclosed receipts, this means that only a reasonable amount of profit which the assessee could have earned can be added - seized paper indicates assessee was receiving on-money in the ordinary course of its business - even the unaccounted expenditures are also reflected in the seized papers - a reasonable profit should be taxed which is embedded in the total unaccounted gross receipts and therefore 8% is allowed – Decided in favour of assessee.

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• 2014 (12) TMI 799
  Income from growing of sale of mushroom – Income from agriculture or income from other sources – Held that:- The Notification relied upon by the assessee clearly shows that it pertains to butter mushrooms (Dhingri), Milky mushroom, oyster mushroom and any other edible mushroom - these are different products than from normal mushrooms - In any case Govt of Himachal Pradesh has no authority to issue Notification in respect of central legislation i.e. income tax which is a central subject – in Commissioner Of Income-Tax, West Bengal, Calcutta Versus Raja Benoy Kumar Sahas Roy [1957 (5) TMI 6 - SUPREME Court] it has been made clear that agriculture can be performed only on land and which involve basic operations like tilling of land, sowing of the seeds, planting and similar operations on the land - there is no land on which tilling operations etc. is carried out. AO stated that the entire activity is carried on as a business in residential area and mushrooms are grown under controlled conditions - The basic operations which are required by an agriculturist on the land are missing in the assessee's case - Even if, growing of mushroom necessarily involve use of some soil, it could not by itself amount to carrying on a primary agricultural operation in the sense of cultivation of the soil - The assessee has failed to explain as to how it can be claimed that basic agricultural operations were carried out in mushroom production and how expenditure is incurred on primary operations i.e. planting of mushroom etc. and in the secondary operations for preserving it and making it marketable – the AO has rightly treated the income from growing of mushroom as non-agricultural income. There is a further condition that such land should be assessed to land revenue which has also not been fulfilled by the assessee and such land should not be situated within Municipal limits whereas the AO has given a clear-cut finding that the shed in which mushrooms were grown by the assessee, is located within the residential area of Jagadhari which is situated within Municipal limits – thus, the income earned by the assessee from growing of mushrooms cannot be treated as agricultural income – thus, the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (12) TMI 798
  Nature of entity - ‘Senate of Serampore College’ is a taxable entity or not – Held that:- The Serampore College Act, 1918 was passed by Government of India as Bengal Act IV of 1918 to supplement and supersede the Royal Charter of Incorporation and the statutes and regulations of Serampore College for better governance and management - Its legal assessable entity is ‘The Serampore College’ and Senate of Serampore College is only a subordinate body under the Council with specified functions - the Serampore College is the assessable entity for the purpose of income tax and Senate of Serampore College is a constituent unit of the college whose accounts must be consolidated along with other units in the The Serampore College account - ‘The Serampore College’ – the entity, as per Serampore College Act 1918, exists for nearly two centuries as an educational institution catering to theological and general education - The college imparts formal education on different streams and subjects for public at large. Even religions or philosophical educations through formal systems of course, curricula, examination and awarding degrees is also education for the purpose of section 2(15) or 10(23C) - each unit maintains separate accounts of its receipts and payments and Income-Expenditure and is duly audited by Chartered Accountant - The Arts, Science and Commerce departments of the Serampore College is approved by the UGC and funded by Govt. like all other colleges under the University of Calcutta - accounts of these 4 units of “The Serampore College” are separately audited, and a consolidated financial statement is prepared and looked into for the purpose of taxation under the provisions of the Act considering ‘The Serampore College’ as one and sole taxable entity - “The Serampore College”, although this consists of 4 units but a single taxable entity, whether under the name of “The Serampore College” or “The Senate of Serampore”, both are one and the same - the AO is directed to treat the assessee as sole taxable unit/entity. Entitlement for exemption u/s 10(23C)(iiiab) – Held that:- Assessee contended that the Serampore College exists solely for the purpose of Education and not for the purpose of profit - Even if running of an institution leads to some surplus but the profit is accumulated or ploughed back for the purpose and objects of the institution, it is deemed as existing not for the purpose of profit - “The Serampore College” will fall under the category of ‘other educational institution’ u/s 10(23C) and will be exempt under clause (iiiab), since it exists solely for educational purpose and not for the purpose of profit, as no part of the profit or surplus is diverted for private gain. Whether the Serampore College is substantially financed by the Government or not – Held that:- In case the finding comes that the college is financed substantially, then it is covered by the section 10(23C) (iiiab) of Act and is eligible for exemption - CIT (A) as well as the AO has not examined the claim of the assessee as regards to the source of finance i.e. substantially financing by the Government or not, so as to eligibility of the claim of exemption u/s 10(23C)(iiiab) of the Act - mere rejection of application 10(23C)(via) of the Act cannot be reason to reject the claim of exemption u/s. 10(23C)(iiib) of the Act - assessee relied upon CIT V Parle Plastics Ltd. And Another [2010 (9) TMI 726 - BOMBAY HIGH COURT] - the AO is directed to consider the case laws relied upon by assessee and decide the issue, whether the assessee’s case falls in the category of ‘wholly or substantially financed by the Government’ – Decided in favour of assessee.

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• 2014 (12) TMI 797
  Various cash credits - Onus discharged by assessee or not – CIT(A) appreciated the complete facts and various papers like confirmation etc. in his proper perception or not – Held that:- Regarding deposit on sale of gold ornaments of the mother of the assessee, Smt. Bhavridevi Agarwal, the assessee was able to file copy of the sale bills issued by Samarth Marketing, jewelers, Ahmedabad, and these evidences could not be controverted by the Revenue – the mother of the assessee, Smt. Bhavridevi Agarwal is an aged lady and extent of gold ornaments claimed to have been sold by her could not be said to be excessive - the credit entry of 7 lakhs on sale of gold ornaments belonging to the mother of assessee, Smt. Bhavridevi Agarwal has been explained. Regarding credit entries on receipt of loans from various persons – Held that:- They are all close relatives of the assessee and have filed confirmation along with their copy of return and also their PANs. before the AO and the CIT(A) - no case of addition on account of receipt of loans from these three persons could be made out by the Revenue, and the addition is deleted - credit entry of 10,000/- claimed to have been on account of amount received from Shri Pavan Singhal also stands explained, as confirmation from the creditor along with his complete address and PAN card copy was filed before the AO and the CIT(A) - none of the persons are income tax assessee, and no corroborative evidence in support of the case of the assessee was filed by the assessee - the addition made to the extent of 55,000/- is upheld – Decided partly in favour of assessee. Validity of reopening of assessment u/s 147 - Unexplained deposit cash credit has already been added in the name of Shri Sunil kumar Agrawal or not - Held that:- There was no mistake in the order of the CIT(A) in holding that section 68 applies to the case of Shri Sunil kumar Agrawal since the bank account in which the credit entries were found belonged to him and moreover, the amount of cash credit has already been added in the name of Shri Sunil kumar Agrawal, and it could not be added in the hands of the assessee - merely on the basis of some statement given by Shri Sunilkumar Agrawal, it could not be said that Shri Sunilkumar Agrawal was absolved of the responsibility of explaining the source of credit entries in his bank account - no other evidence could be produced by the department to suggest that the amount in the bank account of Shri Sunilkumar Agrawal belongs to the assessee – thus, the order of the CIT(A) is upheld in cancelling the order of reassessment made – Decided against revenue.

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• 2014 (12) TMI 796
  Deduction of addition of NSC maturity – Held that:- CIT(A) while granting partial relief to the assessee has given a finding that the amount was invested by cheque from the bank account maintained with Federal Bank and thus the source of investment has been established - with respect to taxing of interest of 54,072/- he has noted that such interest was not reflected in assessee’s return of income of earlier years - the interest is considered to have been rightly taxed - revenue has not brought any material to controvert the finding of CIT(A) – the order of the CIT(A) is upheld – Decided against revenue. Interest income from various saving bank accounts deleted – Held that:- CIT(A) has noted that the interest from bank aggregating to 5,89,197/- has already been offered to tax and the shortfall was to the extent of 64,304/- as against the difference of 4,07,238/- worked by the AO - the addition to the extent by 64,304/- is upheld - revenue has not placed any material on record to controvert the findings of CIT(A) – thus, the order of the CIT(A) is upheld – Decided against revenue. Deletion of addition on interest of HDFC bonds – Held that:- CIT(A) while granting relief to the assessee has noted that assessee had offered for taxation interest on HDFC bonds on the basis of calculation of simple interest at 8% amounting to 10,40,000/- whereas as per terms and conditions of the bonds, the interest was on cumulative basis - CIT(A) has further given a finding that as against the interest of 12,81,981/- worked out by the AO, assessee had offered for taxation interest on HDFC bonds of 10,40,000/- and therefore addition of only differential amount of 1,78,981/- was upheld - revenue has not placed any material on record to controvert the findings of CIT(A) – thus, the order of the CIT(A) is upheld – Decided against revenue. Deletion of addition accrued interest u/s. 64(2) – Held that:- CIT(A) while deleting the addition rightly noted that provision of section 64 were not applicable - no material has been placed on record by the Revenue to controvert the findings of CIT(A) and there is no reason to interfere with the order of CIT(A) – Decided against revenue. Deletion of addition of 19,22,500/- on account of received from family members – Held that:- CIT(A) has given a finding that the interest of 19,22,500/- accrued on loans given by the assessee was formed part of the income of 85.05 lacs that was offered by Assessee to tax and thus the amount was already offered to tax - revenue has not brought any material on record to controvert the findings of CIT(A) - there is no reason to interfere with the order of CIT(A) – Decided against revenue.

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• 2014 (12) TMI 795
  Determination of ALP – AMP expenses to be treated as international transaction or not - Assessee is a wholly owned subsidiary company of Haier Electrical Appliances Corp. Ltd., China engaged in the business of distribution of consumer durables – Held that:- Following the decision in LG. Electronics India P. Ltd. Versus Assistant Commissioner of Income-tax [2013 (6) TMI 217 - ITAT DELHI] – the matter is to be remitted back to the TPO for fresh consideration – Decided in favour of assessee. Allowability of provision for warranty – Expenses to be treated as contingent expenses or not -Held that:- Assessee rightly relied upon M/s. Rotork Controls India (P) Ltd. Versus Commissioner of Income Tax, Chennai [2009 (5) TMI 16 - SUPREME COURT OF INDIA] - it shows that in case the assessee is able to demonstrate that the provision has been made on a scientific basis it has to be treated as an ascertained liability and not a contingent liability - The AO to examine the issue afresh. Validity of penalty imposed u/s 271AA – Held that:- The fact that the arguments are not found recorded in the order is not a shortcoming as far as the assessee is concerned and the issue may require an internal administrative redressal if so warranted at the end of the FAA - the order under challenge was passed on 29.11.2010 - the assessee has canvassed that part of the expenses were reimbursed which fact has been found to be acceptable on considering the material available on record by the FAA in quantum proceedings - bright line as a concept was introduced for the first time as far as the assessee is concerned in the year under consideration and even otherwise as would be demonstrated from the arguments advanced before the Special Bench – assessee rightly contended that there was a reasonable cause on account of which the specific transaction was not disclosed as an international transaction in its Form 3CEB – the belief od the assessee was bonafide that the documentation placed on record is correct and as per the requirement of the law at the relevant point of time, thus, penalty u/s 271AA was not attracted – Decided in favour of assessee.

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• 2014 (12) TMI 794
  Treatment of rental income as income from house property – assessee into the business of letting out/renting out of business centre – Deduction u/s 24(1) disallowed – Held that:- The asset which is let out is held as investment and not as stock in trade - In all the preceding years, rental income is shown as income from house property and which has been accepted by the Revenue as such - the rule of res-judicata does not apply to income tax proceedings but, at the same time, the rule of consistency does apply - when the facts are similar and rental income from the same property is accepted as income from house property in the preceding years, there cannot be any justification to treat the rental income as business income in the year under consideration without there being any change in the facts or in law - assessee is not carrying on any activity which can be said to be in the nature of business activity. It is simply receiving the rent of the building owned by it – the similar issue has already been decided in Asstt. Commissioner of Income Tax Versus M/s Atria Partners, DLF Centre [2014 (3) TMI 500 - ITAT DELHI] - the partnership deed has mentioned not only the setting up of the commercial complex for sale but also mentioned for letting out and earning rental income - That it is a common practice that the partnership deed or a memorandum of association of the company are drafted covering large number of activities but which of several activities mentioned in the partnership deed or memorandum of association is carried on by the assessee will be relevant for the purpose of assessment under the Income Tax Act - the assessee owns a commercial complex for letting out and earning rental income than merely because the partnership also permits the assessee to sale the commercial complex will not change the nature of rental income - the rental income from a building is to be assessed under the head income from house property – thus, the order of the CIT(A) is upheld – Decided against revenue. Allowance of expenditure from income from other sources u/s 57(iii) – Whether the assessee could not prove that such expenditure was expended wholly 60 lacs from other sources - assessee has income from other sources, out of which, the total expenses allowed by the CIT(A) were only 1,20,000/- which is approximately 2% of the income from other sources and remaining 98% has been taxed - Incurring of 2% of the expenses on office maintenance, salary, conveyance, legal and professional fee etc. cannot be said to be excessive or unreasonable – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• Customs

• 2014 (12) TMI 814
  Waiver of pre-deposit - appellant submits that there is no quantification of any duty liability in the impugned order and, therefore, the appellant is not required to make any pre-deposit - Held that:- As per the amended provisions, the appellant is required to deposit 10% of the duty, in case where duty or duty and penalty are in dispute or penalty where such penalty is in dispute, in pursuance of the decision or order appealed against. The meaning of the expression “in pursuance” is “that which follows” or “in consequent upon a thing”, “a consequence”. Therefore, if as a consequence of the order, duty liability arises, pre-deposit of 10% of the duty liability has to be made before an appeal against the order can be considered. In pursuance of the order of the appellate authority dated 03/06/2014, the value has to be re-determined taking into account the difference in the commercial levels between imports made by the appellant and identical imports made by others. On account of such re-determination, there may be liability to pay additional duty which has not been quantified and discharged. It is not the case of the appellant that in pursuance of the above order there would not be any differential duty liability. From a plain reading of the amended Section 129E of the Customs Act, 1962 to consider an appeal at the second appellate stage against an order of the lower appellate authority, 10% of the duty or penalty arising in pursuance thereof has to be pre-deposited. In other words, the law envisages that the pre-deposit has to be made. This mandate of law cannot be wished away. Therefore, the applicant is directed to approach the adjudicating authority for re-quantification of the duty liability in terms of the lower appellate authority's order and if they are still aggrieved, to come before this Tribunal, after making pre-deposit of the difference of duty so determined. - Decided in favour of assessee.

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• 2014 (12) TMI 813
  Import of marble slab - claim of exemption from Basic Excise Duty and SAD under Notification 85/98-Cus dated 05.11.98 as amended by Notification No.41/2002-Cus dated 12.04.2002 and Notification No.40/2002-Cus dated 12.04.2002 - Demand of differential duty - Undervaluation of goods - Confiscation of goods - whether the imported goods were ‘polished marbles’, arising out of manufacturing process undertaken in the factory premises of the exporter in Nepal or the ‘ rough marbles’ - Held that:- Commissioner has not given his findings on the various issues raised and discussed and therefore, the same is non-speaking order and accordingly, we are of the opinion that the matter should be remitted back to the ld.Adjudicating Authority for fresh adjudication after giving his categorical findings on each of the issues raised above. It is made clear that an adequate opportunity of hearing should be granted to the Appellants and copy of the test memo/trade opinion, the seizure memo and any other relied upon documents should be furnished to the Appellants before deciding their case. All issues are kept open and both sides are at liberty to produce evidences in their support. - Decided in favour of assessee.

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• 2014 (12) TMI 812
  Valuation of goods - Export of Porcelain Mugs - Inflated value of goods - claim of higher export incentives - main contention of the appellants is that the goods exported by them are branded and tailor-made as per the requirement of the buyer in U.K. and obviously such goods would fetch higher price - Held that:-If the goods are tailor-made the value may be higher but the question is which value. In our opinion, the ARE-1 value itself will become higher. This reasoning will not increase the FOB value to 400 - 500 per cent of ARE-1 value. This factor is irrelevant to explain increase in FOB value from ARE-1 value. As far as the branded goods are concerned, it may not increase the ARE-1 value. By branding, the retail price of the goods may increase but would not affect the purchase price of the buyer from the manufacturer as the brand is that of buyer and not that of manufacture. We also note that no evidence whatsoever has been produced by the appellants to support their contention that the goods were tailor-made and were made of special designs and no such correspondence was produced to support their contention. The fact that earlier, based upon the market enquiry, the declared value was accepted is of no consequence. In fact, the appellants should have produced these documents to the customs authorities before finalization of those 14 shipping bills. It is a case of concealment of vital documents from Customs authorities and producing some other documents that the value was accepted, the appellants cannot be allowed to take benefit of their wrong deeds. We, therefore, reject the appellants’ contention. In view of the overwhelming evidence found during the search of the appellants’ premises, we have no doubt that the FOB value declared was not the actual transaction value/FOB value but were highly inflated for claiming DEPB benefits or for bringing in illegally obtained foreign exchange. - Decided against the assessee.

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• 2014 (12) TMI 811
  Advance Authorisation - import raw sugar under actual user condition - ton-to-ton or grain-to-grain basis - Export of sugar without release order from appropriate authority - According to Revenue such failure resulted in violation of law - plea of appellant was that it was an actual user of imported goods and the export being done on “grain-to-grain” basis, there was no violation of law - Held that:- When the advance authorisation was issued that was subject to the condition as has been quoted herein before. There was no indication therein that the authorisation was subject to the condition of “grain-to-grain” basis. But the Appellant misconceived such proposition while it was allowed to operate under actual user scheme and under “ton-to-ton” basis only. The JDGFT in terms of a Policy Circular No. 1 (RE-2010)/2009-14, dated 7-9-2010 addressed to all regional authorities informed that export of sugar on ton-to-ton basis should not be allowed without release order from Directorate of Sugar against authorisation issued from 17-2-2009 to 30th September, 2009 for import of sugar. The appellant misconceived the intent of this circular to submit that it has operated under “grain-to-grain” basis and not under “ton to ton” basis. Further the appellant misconceived that its advance authorisation being issued in 2005, there is no embargo on the appellant to export sugar without release order. No licence was given to it to operate under grain-to-grain basis as is clear from the letter of DGFT. Appellant also misconceived that signing of the bond, etc. exonerated it from operating under “ton-to-ton” basis. There was further misconception by it that the bond executed by the appellant required recovery of the duty element in terms of Notification No. 93/2004-Cus., dated 10-9-2004 in case of non-fulfilment of export obligation. It was also pleaded that the appellant operated under actual user scheme. All such pleas are irrelevant and appellant was not an innocent but deliberately violated condition of advance authorisation. It may be stated that when the appellant was categorically found to have violated the export norm as has been stated by the Directorate of Sugar in its letter dated 23rd June, 2011, the inescapable conclusion that may be drawn is that 2,496 MT of sugar exported by the appellant was without release order and in contravention of the law. - Penalty u/s 114 and 114 AA imposed on assessee - However, penalty upon General Manager is reduced - Decided against the assessee.

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• 2014 (12) TMI 810
  Waiver of pre deposit - Import of measuring tapes imported - levy of anti-dumping duty - misdeclaring the country of origin and undervaluation of goods - Held that:- There is no direct evidence available in the record showing that the goods under import are of Chinese origin. No enquiry has been made by the Customs authorities through the Consulate at Hong Kong to ascertain whether ZOOM brand measuring tapes are manufactured in China. Though the appellant’s claim of Malaysian origin of M/s. Adikem Petangor SDN BHD stands disproved, it is to be noted that there are imports of the same brand by the appellant himself from M/s. Honwills Holdings (M) SDN BHD and the Malaysian Chamber of Commerce has certified that measuring tapes of ZOOM brands is a product of Malaysian origin. Further, the container track record also shows that the container which was detained, in which the appellant imported the goods, were loaded at a Port in Malaysia and not elsewhere. The traders who stated before the Customs authorities that the goods were of Chinese origin have admitted that the transactions were only paper transactions and they were not the actual purchasers of any goods from the appellant. Further they have also, during the cross-examination, gone back on their statements and have confirmed that the statements were recorded as per the dictations of the investigating agencies. Appellant has also made a pre-deposit of 2.09 crore as against the demand of 4.8 crore. - Prima facie case is in favor of assessee - Stay granted.

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• 2014 (12) TMI 809
  Valuation of goods - Enhancement of value of goods - Inclusion of royalty amount - Held that:- As no royalty or value of any amount over and above the invoice price has been paid by the appellant for finished goods and capital goods to the related supplier, and there is no finding of the Adjudicating Authority that the price of the said goods have been influenced being a related person. Therefore, we hold that the loading of 12% on capital goods and finished goods is incorrect. - As per the agreement, the appellant are required to pay the licence fee @ 12% on the net invoice amount of all products manufactured and sold with the trade-mark which clearly means that the licence fee is being paid by the appellant for use of the trade-mark for manufactured goods. There was no condition of sale that the appellant is required to pay this royalty on the imported goods. Inclusion of royalty paid on import of raw material - Held that:- As per the agreement, the appellant are required to pay the licence fee @ 12% on the net invoice amount of all products manufactured and sold with the trade-mark which clearly means that the licence fee is being paid by the appellant for use of the trade-mark for manufactured goods. There was no condition of sale that the appellant is required to pay this royalty on the imported goods. Royalty paid by the appellant @ 12% on the sale value of the manufactured goods is not required to be loaded on the invoice price of the raw material.- Decided in favour of assessee.

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• Service Tax

• 2014 (12) TMI 835
  Waiver of pre-deposit - tribunal refused to waive the pre-deposit - prima facie case is in favor of assessee or not - undue hardship - construct the Petrol Pump, Canopies, Bunks at retail outlet - It was admitted that the service provided by them are covered in the Service Tax net but due to lack of knowledge, they did not charge the service tax against the works done during the year 2004-05, 2005-06 and 2006-07 - Held that:- Power of commissioner (Appeals) to condone the delay beyond 3 months - Held that:- In view of the settled law on the issue that Commissioner (Appeals) has no power to condone the delay in filing the appeal beyond three months after prescribed period of limitation, which is also of three months, no exception can be taken to dismissal of the appeal by the Commissioner (Appeals), as barred by limitation. In view of settled legal proposition, the appellate Tribunal was not left with any authority or jurisdiction to interfere in the matter. In such view of the matter, it cannot be said that the appellant has any prima facie case, much less a strong, prima facie, case for waiver so as to dispense with the pre-deposit of the outstanding demand. Once the appellant did not have any prima facie case, there was no reason or occasion for the Tribunal to consider the issue of any hardship to the appellant in making the deposit. - Decided against the assessee.

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• 2014 (12) TMI 834
  Whether the Custom Excise Service Tax Appellate Tribunal was right in dismissing the appeal of the Revenue on the ground that the Committee of the Chief Commissioners had mechanically granted permission for filing of appeal without due application of mind; and whether the said aspect can be examined and made subject matter before the aforesaid Tribunal in an appeal under Section 86 (2) of the Finance Act, 1994? Matter referred to larger bench.

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• 2014 (12) TMI 833
  Services provided by APSRTC a State Owned organization - Service of tours of marriage parties, excursions, party meetings etc. - services of transporting of company employees - Held that:- From the records we find that the assessees are only renting their vehicles. We also find that the department could not bring out on record that the assessees are engaged in the business of planning, scheduling, organizing or arranging tours. In these circumstances, the assessees cannot be termed as tour operators. Therefore, the demands of Service Tax against them are not sustainable in law. - Decided in favor of assessee.

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• 2014 (12) TMI 832
  Disallowance of Cenvat Credit - availment of goods transport service - Held that:- Perusal of the tender document dated 16.07.2009 shows that the property over the goods passes at the point of delivery, since the assessee supplier was liable to replace any broken or damaged goods that occurred in the course of transit or during the testing and trial at site. This indicates that the buyer of the goods i.e. Madhya Gujarat Vij Company Ltd. did not own the goods at the factory gate. This leads to a conclusion that when the appellant assessee was obliged under the contractual obligation to deliver the goods at its own risk and cost at the buyer’s point incurring separate cost of transport charge for which service tax was paid, there is no scope to hold that the contract value was inclusive of delivery cost. Further, Revenue has also not made any effort to include the cost of transport in assessable value. This further establishes that to discharge contractual obligation in respect of delivery of the goods at buyers point, it was liability of the assessee to make delivery FOR. Therefore, appeal of the assessee is allowed and there shall be no disallowance of Cenvat Credit. - Decided against Revenue.

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• 2014 (12) TMI 831
  Levy of service tax for transporting levy sugar - service of transportation from the GTAs service tax - Held that:- Prima facie, the appellant does not have a case since the appellant is a Limited Company and they are liable to pay service tax on GTA services and no valid ground other than stating that it is statutory function has been specified. Transportation of sugar by a Limited Company cannot be considered as statutory function. Moreover, the appellant has paid entire amount of tax plus interest and only an amount of 1,16,670/- is to be paid. This amount was not paid on the ground that this was related to prior to 1.1.2005. It was pointed out by learned counsel that this amount was received only after 1.1.2005 and the claim of the appellant was that this was in respect of services rendered prior to 1.1.2005 and therefore, no liability arises is not acceptable. Prima face, the appellant does not have a case in their favour. Moreover, there is nothing left in the matter to decide at final stage. Learned counsel fairly agreed that the appellant is liable to pay service tax and will pay. As far as service tax and interest are concerned, is upheld. Penalties imposed have already been set aside - Decided partly in favour of assessee.

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• 2014 (12) TMI 830
  Waiver of predeposit of tax, interest and penalty - Management Consultancy Service and Commercial Training or Coaching Service - Held that:- demand of tax on management consultancy is based on the balance sheet figure. It is seen that the adjudicating authority had given detailed finding that the applicant had not placed any evidence in support of their contention that no amount was collected and no service was rendered by them. It is seen that the applicant had not placed any evidence to substantiate their claim either from the service recipient or any contra or reverse accounting entries or explained the circumstances as to how the business transactions collapsed in both the cases. Hence, we find that the applicant failed to make out a prima facie for waiver of predeposit of entire amount of dues in this issue. - Partial stay granted.

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• 2014 (12) TMI 828
  Denial of refund claim - Bar of limitation - Section 11B - Held that:- appellants were not required to pay service tax but the appellants have paid the service tax erroneously and the same has not been disputed by the department. In that circumstances, as per the Circular 108/2/2009-S.T., dated 29-1-2009, the department is not legally allowed to calculate the service tax and if they do so, the same is unconstitutional. Merely a payment made by the appellant erroneously, does not authorize the department to retain the same. Therefore, the provisions of Section 11B of the Central Excise Act, 1944 are not applicable as held by the Hon’ble High Court of Karnataka in the case of KVR Construction (2012 (7) TMI 22 - KARNATAKA HIGH COURT). Provisions of Section 11B of Central Excise Act, 1944 are not applicable. Therefore, the impugned orders are set aside - Decided in favour of assessee.

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• 2014 (12) TMI 827
  Cenvat credit of Service Tax paid - Sales Commission - documents did not contain all the particulars as prescribed under Rule 4A of the Service Tax Rules, 1994 - Held that:- First appellate authority specifically records that the debit notes on which Cenvat credit was availed contains the details as required under Rule 4A of the Service Tax Rules, 1994 and also contains essential details required as per the provisions of Cenvat Credit Rules, 2004. After recording such a clear findings, the first appellate authority seems to have ventured into directing the lower authorities for verification regarding payment of Service Tax by the service provider to the exchequer. In my view and on perusal of the records, I find that this was never an allegation in the show cause notice. If there is no such allegation, verification as ordered by the first appellate authority, definitely traverses beyond the show cause notice which cannot be permitted. In my view, the appeal of the appellant is only to the extent that such an observation or verification was uncalled for seems to be correct and needs to be allowed. - Decided in favour of assessee.

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• 2014 (12) TMI 826
  Abatement Notification No. 15/2007-S.T., dated 4-4-2007 - tour operator service - Remission of service tax - Refund claim - Unjust enrichment - Bonafide belief that assessee not bound to pay service tax - Passing of incidence duty to consumers - Held that:- Appellate Commissioner concluded that analysis of the invoices issued by the appellant clearly disclosed that no Service Tax component was included in and collected from the customers by the assessees; that the assessees had remitted Service Tax by treating the gross amount received as inclusive of Service Tax; that in an agreement with Oil India Ltd., the recitals disclose that the agreed rates were inclusive of all the taxes leviable; but however there was no specific collection of Service Tax. Contract price is inclusive of duty, there cannot be unjust enrichment. there is no error vitiating the order of the learned appellate Commissioner, warranting appellate interference. On the aforesaid analysis we find no merits in Revenue’s appeals, which are accordingly rejected - Decided against Revenue.

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• 2014 (12) TMI 825
  Benefit of abatement in terms of Notification No. 15/2004-S.T., dated 10-9-2004 and 1/2006-S.T., dated 1-3-2006 - construction service - Held that:- Appellant is required to undertake the activity of plinth leveling, slab casting, plaster work (inner & outer), flooring and tiles terracing. Revenues’ contention that inasmuch as flooring, tiles terracing etc. relate to the finishing and completion activities stand specifically covered under the said activity, it has to be held that the appellant was providing only finishing services in which he will not be entitled to the benefit of abatement in terms of the Notification. However we find that it is not only flooring and tile activities which the appellant has undertaken. Reading of the entire contract shows complete construction activity which include flooring and tile activity. As such we find no infirmity in the views adopted by the Commissioner (Appeals) - Decided against Revenue.

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• 2014 (12) TMI 824
  CENVAT Credit - Export of services or exempted services during the relevant period - Whether the Cenvat credit is required to be utilized up to 20% under Rule 6(3)(ii) of Cenvat Credit Rules, 2004 when the appellant is providing services both under the categories of exempted and taxable services - Held that:- Cenvat credit is required to be restricted only up to 20% of the credit taken by the appellant. Only dispute is whether C.B.E. & C. circular will have retrospective effect or not. Vide C.B.E. & C. Circular dated 9-5-2008, it has been clarified that export of services without payment of Service Tax should not be treated as an exempted services and accordingly, full credit would be admissible to the appellant. However, first appellate authority has held that circular issued on 9-5-2008 will have only prospective effect. In this regard, Hon’ble Supreme Court in the case of M/s. Suchitra Components Ltd. v. CCE, Guntur (2007 (1) TMI 4 - SUPREME COURT OF INDIA) has held that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospective. In view of the above law laid down by Supreme Court, it has to be held that the Circular dated 9-5-2008 will be applicable to the past period also, and appellant was rightly entitled to the Cenvat credit - Decided in favour of assessee.

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• Central Excise

• 2014 (12) TMI 829
  Valuation of goods - Cancellation of contract - Receipt of compensation/damages from M/s WBPDCL, which the Department proposed to include in the assessable value of the goods lying in the factory, considering the same as additional consideration, under Rule 6 of the Central Excise Valuation Rules, 2000 - Held that:- Contract for supply of goods, viz, boiler and boiler parts had been cancelled by M/s WBPDCL. As a result, the Applicant had cleared the finished goods, work in progress goods and raw material from the factory after determining its cost/value in accordance with the provision of Central Excise Valuation Rules,2000. - The arguments advanced from both sides, needs to be analysized in detail on the basis of evidences brought on record including the plea whether the demand is barred by limitation. At this stage, it would be difficult to ascertain, whether the amount received by the Applicant is purely on account of liquidated damages or compensation for various losses incurred in relating to the goods on cancellation of contract ; consequently, its includibility as additional consideration in the value of goods cleared. Prima-facie, keeping in view that the matter has been remanded by the Honble High Court for re-consideration, the offer made by the ld.Advocate for the Applicant at this stage, seems to be reasonable. Accordingly, we direct the Applicant to deposit 10% of the duty confirmed within a period of eight weeks - Partial stay granted.

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• 2014 (12) TMI 823
  Valuation of goods - related party transaction or not - supply to group company - Applicability of Rule 8 - Appellant selling parts of pistons to their group companies - Held that:- As the appellants are not related persons as discussed here-in-above, the appropriate Rule for valuation is Rule 10 of the Central Excise Valuation Rules. As per the said Rule and relying on the CBEC Circular dated 30.06.2000 it should be established that both the parties are having mutual interest in business and inter-connected with each other. As per Rule 10 of the Central Excise Valuation Rules, it should be inter-connected and as per the Monopolies and Restrictive Trade Practices Act, 1969 it has been defined "Inter-connected undertakings". On perusal of the definition of the "inter-connected undertakings", we observe that the appellants are not covered under the definition. We further find that the issue of mutual interest has also not been alleged against the appellants. In these circumstances, we hold that Rule 8 of the Valuation Rules is not applicable in the facts of this case. Accordingly, we set aside the impugned order - Decided in favour of assessee.

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• 2014 (12) TMI 822
  Valuation of goods u/s 4 or 4A - Biscuits cleared to Municipal Corporation of Delhi under the National Programme of Nutritional Support of Primary Education - adjudicating authority held that the supplies of biscuits to MCD did not qualify to be called retail sale, MRP was not required to be printed thereon, the price printed on packages was not (true) MRP and the impugned goods were required to be assessed not under Section 4A but under Section 4 - suppression of facts - Held that:- packages of 61gms. and 71gms. are not in accordance with the requirements of the SWM (PC) Rules and the contract price itself was fixed keeping in view that MCD supplied wheat (for making biscuits) free of cost. This obviously means that the so called MRP was legally not ‘MRP’ in terms of SWM (PC) Rules; it was just a figure mentioned on the packages in the name of MRP. Further supplies to MCD were not even a sale at arms length because as per the contract under which the goods were supplied the MCD provided them free wheat. It is thus evident from the definition of retail sale price quoted earlier that the price at which MCD bought the impugned goods cannot be called MRP because that price was negotiated taking into account the fact that the appellants were given free supply of wheat. So, it is beyond doubt that what was mentioned on those packages was not MRP. Thus ground on which the appellants attempted to distinguish their case from the cases of Australian Foods Ltd. (2010 (3) TMI 18 - MADRAS HIGH COURT) and Nestle India Ltd. [2009 (5) TMI 766 - CESTAT, BANGALORE] is not sustainable. From the foregoing there remains no doubt that the biscuits supplied to MCD are not eligible for assessment in terms of Section 4A and consequently the demand of differential duty is clearly sustainable. As regards the allegation of suppression of facts, it is evident that they had nowhere declared that they were getting free supply of wheat from MCD and in spite of being fully aware of this fact, they deliberately and misleadingly claimed that 2 printed on each of the packages was the correct MRP and that too for all packages ranging in weight from 61 gms. to 71 gms to 100 gms each. This shows that they were just printing a price in the name of MRP for the sake of making a claim for assessment under Section 4A and thereby evade duty by hoodwinking Revenue. Thus the suppression of facts and intent to evade duty are more than evident in this case. Both Shri Bajaj and Shri Maheshwari by virtue of their position knew of and allowed this modus operandi and thus abetted the evasion of duty which made the impugned goods liable to confiscation. In the circumstances mens rea on the part of the appellants is clearly evident making them liable to penalties adjudged by the adjudicating authority. - Decided against assessee.

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• 2014 (12) TMI 821
  Remission of duty - Fire accident - remission application of the appellant is denied only on the grounds that the accident was avoidable and that appellant has claimed the incidence of duty from the insurance Company - Held that:- police authorities has filed the fire case as an ‘accident’ after due investigation. Even Insurance Company has also settled the claim of the appellant and has not raised the objection that fire accident was avoidable or that there was any negligence on the part of the appellant. Negligence on the part of the appellant could be attributed if they were required to take certain actions/ precautions as per laws of the land but they failed to take such precaution/ action. Therefore, we do not agree with the view of the department from the facts and circumstances of the case that the fire accident was ‘avoidable’. So far as the second issue of payment of excise duty from the Insurance Company is concerned, it has been clearly spelt out by the Insurance Company that the excise duty element and VAT was not paid to the appellant. Learned AR during argument stressed that appellant has not reversed the Cenvat credit taken on the inputs, which were contained in the finished goods, as per Rule 3(5C) of the Cenvat Credit Rules, 2004. Appellant has fairly conceded reversal/ payment of cenvat credit under Rule 3(5C) if their prayer for remission of duty is allowed under Rule 21 of the Central Excise Rules, 2002. - Decided in favour of assessee.

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• 2014 (12) TMI 820
  Interest on belated rebate claim - expiry of three months from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made - Held that:- Commissioner (Appeals) has rightly held that rebate claims were sanctioned belatedly and interest is payable under section 11BB from the date of expiry of three months from the date of filling said claims. Government finds no infirmity in the orders of Commissioner (Appeals) and therefore upholds the same. - Following decision of Ranbaxy Laboratories Ltd. Versus Union Of India and Ors. [2011 (10) TMI 16 - Supreme Court of India] - Decided against Revenue.

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• 2014 (12) TMI 819
  Denial of rebate claim - applicant failed to get input output ratio approved in r/o duty paid materials used in the manufacture of final product before its export - violation of the provisions of the Notification No. 21/2004-CE(MT) dated 06-09-2004 - Held that:- Government notes that as provision of para 3.2 of part V of Chapter 8 of CBEC Excise Manual of supplementary instructions the input-output norms notified under Export Import policy may be accepted by department unless there are specific reasons for variation. Government also observes that the substantial benefit of rebate of duty paid on inputs cannot be denied due to procedural infirmities-, as long as the goods in question are exported and other parameters are fulfilled. Under such circumstances, Government finds that input-output ratio allowed by jurisdictional Assistant Commissioner subsequent to export may be taken into account and rebate may be allowed accordingly. - Decided in favour of assessee.

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• 2014 (12) TMI 818
  Denial of rebate claim - non-submission of original/duplicate copies of ARE-1 - Held that:- Rebate sanctioning authority shall not reject the rebate claim on the ground of non-submission of original and duplicate copies of ARE-1 forms if it is otherwise satisfied that conditions for grant of rebate have been fulfilled. Government, therefore, applying the ratio of above said judgement of Hon'ble High Court of Bombay in [2013 (5) TMI 459 - BOMBAY HIGH COURT], is of the view that the proof of export may be examined on the basis of collateral evidences where original and duplicate ARE-1 form is not submitted. In the light of above, Government proceeds to examine the aspect of proof of export on the basis of collateral evidences available on records or submitted by the applicants. There is cross reference of impugned ARE-1 No.59/07-08 dated 8th May 2007 in impugned shipping bill No.5235228 dated 8.5.2007 and vice-versa. Further, the quantity/weight, description of AREs-1 tallies with quantity/weight and description mentioned in the export invoice/shipping bill. There is endorsement on ARE-1 of custom officer to the effect that the goods covered vide impugned shipping bill have actually been exported On the basis of collateral evidences, the correlation stands established between export documents and excise documents and hence, export of duty paid goods may be treated as completed. Hence, the applicants are eligible for rebate claims in this case. - Decided in favour of assessee.

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• 2014 (12) TMI 817
  Quashment of order dated 14.02.2014 - Appeal not preferred by Revenue in similar matter in previous case - Held that:- Merely because in some cases, the revenue has not questioned the correctness of an order passed by the Tribunal or the High Court on the same issue, it would not operate as a bar for the revenue to challenge the order in another case - petitioner is having statutory remedy against the order of Adjudicating Authority under Section 35-B of the Central Excise Act, 1944 - writ petition is dismissed on the ground of availability of statutory alternative remedy with liberty to the petitioner to file an appeal before the CESTAT, New Delhi to challenge the impugned order - Decided against assessee.

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• 2014 (12) TMI 816
  Intrepretation of exemption Notification No. 41/99-CE - Imposition of penalty - Held that:- in the appeal preferred directly to the Apex Court by one of the assessees, in the decision in the case of Golden Dew Tea Factory v. Commissioner of Central Excise, Coimbatore, reported in [2006 (11) TMI 530 - CESTAT, CHENNAI], the Apex Court confirmed the order of the Customs, Excise and Service Tax Appellate Tribunal that Notification No. 41/99-Central Excise is mandatory in its character and that the conditions A & B are to be read together for availing the exemption [2007 (4) TMI 668 - Supreme Court of India]. Thus, the Apex Court confirmed the order of the Tribunal and dismissed the assessee’s case. - Following that decision Decided against assessee.

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• 2014 (12) TMI 815
  Validity of dismissal order - Suspension from service - Held that:- impugned order is only a suspension order and not dismissal order and the petitioner shall be paid subsistence allowance - The second respondent is at liberty to initiate disciplinary proceedings against the petitioner and if any such disciplinary proceedings is initiated, the same shall be concluded within a period of four months from the date of receipt of a copy of this order - Appeal disposed of.

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• CST, VAT & Sales Tax

• 2014 (12) TMI 836
  Rate of VAT on cell phone battery charger - Charger is sold as composite package along with cell phone - High Court observed that said charger cannot be excluded from the Entry for concessional rate of tax which applies to cell phones and parts thereof - Punjab Value Added Tax Act, 2005 (PVAT) - Held that:- It cannot be held that charger is an integral part of the mobile phone making it a composite good. - Merely, making a composite package of cell phone charger will not make it composite good for the purpose of interpretation of the provisions. The word 'accessory' as defined in the Webster's Comprehensive Dictionary (International) Volume-I. Assessing Authority, Appellate Authority and the Tribunal rightly held that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone. We further hold that the battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger is a part of the cell phone. - Decided in favor of Revenue.

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