TMI Tax Updates - e-Newsletter
December 29, 2014

Case Laws in this Newsletter:

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

Articles

1. Board’s Circulars have prospective effect only and not retrospective effect

   By: Bimal jain

2. ‘CESTAT’ CANNOT IMPLEMENT ITS OWN ODER

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. FM: Immediate Challenges Before the Government is to Increase the Growth Rate as it Will Boost Both the Economic Activities and the Revenue Collections FM Holds Pre Budget Consultation Meeting with Finance Ministers of States and Union Territories

2. Finance Minister Shri Arun Jaitley Asks the Indian Revenue Service (IRS-Customs & Central Excise) Officer Trainees to be Both Firm and Fair in Their Dealing with the Tax Assesses; Asks Them to Maintain High Level of Ethics, Morality and Credibility in Public Life

Notifications

Income Tax

1. 90/2014 - dated 23-12-2014 - IT

Notified Pension Fund under Section 80C(2)(xiv)

2. 89/2014 - dated 23-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies constituted Government of West Bengal to constitute “West Bengal Building and Other Construction Workers Welfare Board”

3. 88/2014 - dated 23-12-2014 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies constitution of Bureau of Indian Standards Act, 1986 (63 of 1986)

Highlights / Catch Notes

Income Tax

• High Court Rules Commissioners Must Correct Assessments to Reflect Retrospective Amendments u/s 264.

  Case-Laws - HC : Revision of order of AO u/s 264 in favor of assessee - Retrospective amendment to be considered or not - Commissioner is not only entitled but is duty bound to correct the assessment in revision - HC
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• Court Rules Share Transactions Genuine: Revenue Didn't Prove Bogus Claims u/s 68 of Income Tax Act.

  Case-Laws - HC : Addition u/s 68 – Genuineness of transaction in shares - genuine or sham and bogus – Revenue in failing to discharge the basic onus - inquiry was not carried forward - no additions - HC
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• Section 80IB Deduction Rate Reduced to 11%; Correct Interest Allocation Among Units Upheld by Tax Commissioner.

  Case-Laws - AT : Reduction on rate of deduction from 12% to 11% u/s 80IB - Inter unit investments - interest allocation on deemed basis - CIT(A) correctly allocated the interest to the three units - AT
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• Assessee Can Deduct Subsidies u/s 80IB and Set Off Expenses Against Subsidies for Tax Relief.

  Case-Laws - AT : Deduction on various subsidies u/s 80IB - assessee is also entitled for relief on alternate contention and would be entitled to set off of the expenses under the grant of subsidies - AT
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• A.P. Pollution Control Board's Funds Retained as Board's Income, Not State Government's, Clarified.

  Case-Laws - AT : Taxability of income of A.P. Pollution Control Board - when the income/receipts of the board remain with the board itself and not transferred to the state govt. such income/receipt has to be considered as income/receipt of the board and not of the state govt - AT
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• Waived Loan Amount Not Taxable Income u/ss 2(24), 28, and 41 of Income Tax Act.

  Case-Laws - AT : Addition u/s 28(iv) r.w. section 41 r.w. explanation 2(iv) – the amount waived by the lender bank is not an income u/s 2(24) of the Act and further Section 28 also does not include amount of loan waive by the lender u/s 41 of the Act cannot apply to this receipt in respect of this amount - AT
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• Assessee's Non-Charging of Interest on Delayed Sales to AE Found Consistent with Non-AE Practices: No Favoritism Established.

  Case-Laws - AT : TPA - Adjustment of interest for delayed realization of sale from AE - when the assessee is not charging any interest from non AE then there is no case made out by the revenue that the assessee is doing any favour or giving any benefit to the AE by extending the credit period of realization of sales which is less than the internal CUP being the assessee allowing the credit period to the non-AE - AT
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• Section 14A Disallowance Impacts Carry Forward and Set Off of Business Losses in Income Tax Act.

  Case-Laws - AT : Disallowance u/s 14A - Carry forward of business loss – setting off carry forward business losses now depends on the finality of the addition made by Assessing Officer u/s 14A - AT
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Customs

• High Court Upholds Regulation 13(h), Ensures Courier Companies Employ Qualified Staff Without Infringing Business Rights.

  Case-Laws - HC : Validity of Regulation 13(h) of the Courier Regulations 1998 - Requirement of qualified employees - the right of the Authorized Courier companies to carry on business has not been abrogated in any manner - HC
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• High Court Orders Ministry to Decide on Relocating Export Certificate Appraisal Counter Near Indira Gandhi Airport in 6 Months.

  Case-Laws - HC : Non availability of Appraisal Counter for issuance of Export Certificate at IGI airport - Ministry directed to within six months herefrom take a reasoned decision on shifting the existing Appraisal Counter to the airport / in the close vicinity of the airport - HC
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Corporate Law

• Supreme Court Rules BIFR Retains Jurisdiction Despite Company's Positive Balance Sheet; Further Examination Required.

  Case-Laws - SC : Whether BIFR ceased to have jurisdiction over the company and that all the proceedings in the BIFR after filing of the positive balance-sheet - Held No - BIFR to examine the facts - SC
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Service Tax

• Hiring Wagons Excludes SOTG Service Classification: Case Laws Cite Depreciation and Interest on Crane as Factors.

  Case-Laws - AT : Hiring of wagons - In fact it would be the additional consideration flowing from the receiver of service to the provider of service in the form of depreciation and interest element on the crane and it cannot be said that it amounts to SOTG Service - AT
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• Service Tax Implications on HAFED and Haryana Seeds Development Corp: Are Construction Activities Commercial or Industrial?

  Case-Laws - AT : Construction activity - primarily for commercial or industrial purposes or not - Prima facie, we are not inclined to the view that activities of HAFED or Haryana Seeds Development Corporation are non-commercial - AT
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Central Excise

• Rebate Claim Approved: Export Verified Without Excise Invoice Copies Through Collateral Documents.

  Case-Laws - CGOVT : Denial of rebate claim - Even if copy of excise invoices are not submitted, the export of duty paid goods may be ascertained on the basis of other collateral documents - rebate claim allowed - CGOVT
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VAT

• Bamboo Cut Bundles Not Taxable as "Sale" Under Contract; Severance Occurred Before Contract Finalized.

  Case-Laws - HC : Whether there is a “sale“ under the contract - purchase value of bamboo cut bundles - The “bamboos“ were not removable even after they were cut unless they were weighed and permits were granted. Severance of bamboo, even in the departmentally extracted coupes, was not under the contract of sale, but was prior thereto - not taxable - HC
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Case Laws:

• Income Tax

• 2014 (12) TMI 981
  Ground not raised before Tribunal - Disallowance on interest u/s 36(1)(iii) deleted - diversion of interest bearing funds to interest free advances or not – Held that:- No such ground was taken or argument was advanced before the Tribunal - the AO, who is the author of the assessment order, dated 29th March, 1994 represented the Department before the FAA and it is not possible to accept that attention of FAA was not drawn to this factual discrepancy – thus, as such no substantial question of arises for consideration – Decided against revenue. Receipt by way of gain on cancellation of foreign exchange contracts - revenue v/s capital - Held that:- Following the decision in As decided in The DY. CIT. Versus Gujarat Narmada Valley Fertilisers Co. Ltd. [2013 (5) TMI 760 - GUJARAT HIGH COURT] wherein the decision in DCIT(Assessment) vs. Garden Silk Mills Ltd. [2009 (2) TMI 95 - GUJARAT HIGH COURT] relied upon wherein it was held that the surplus received on cancellation of forward foreign exchange contract was a capital receipt not liable to tax and that it did not fall under section 28(iv) - Thus the Tribunal was right in holding that the receipt by way of gain on cancellation of foreign exchange contracts is a capital receipt not liable to tax and was accordingly justified in directing the AO to make necessary adjustment to the cost of the acquisition/WDV of the plant and machinery to which the receipt pertains and to make consequential adjustment to the depreciation granted – Decided against revenue.

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• 2014 (12) TMI 980
  Revision of order of AO u/s 264 - Retrospective amendment to be considered or not - Whether the Commissioner, while revising an order of the AO u/s 264, could take into account a retrospective amendment made after the order of the AO – Held that:- In Commissioner of Income-Tax vs. Kamla S. Asrani [1990 (8) TMI 53 - BOMBAY High Court] it has been held that when the law is amended with retrospective effect, the court, when it decides any proceeding, has to apply such retrospectively amended law as if it were in force at all material times - The application of the relevant law to the problem raised in the reference before the High Court normally is not excluded merely because at the date when the Tribunal decided the question, the relevant law was not or could not be brought to its notice – the discussion also applies to the powers of revision of the Commissioner u/s 264 - as in the case of Sections 256(1) and 256(2), the revenue is seeking to draw an artificial distinction between Sections 263 and 264, in relation to the applicability of the retrospectively amended law, which would not be permissible. If one has regard to the applicable law (applicable by virtue of a retrospective amendment), there is clearly an over-assessment of the assessee - assessee has been charged more tax than what is due and payable by him - The Commissioner is not only entitled but is duty bound to correct the assessment in revision – thus, the order is set aside and the revenue is directed to consider the assessee's claim of deduction u/s 80 HHC – Decided in favour of assessee.

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• 2014 (12) TMI 979
  Rejection of stay application on appeal pending before CIT(A) – Appeal filed for assessment order passed u/s 143(3) r.w. section 263 by Vodafone India Limited - Rs. 320.44 crores to be stayed till disposal or not – Held that:- Taking note of the fact that the assessee has already paid approximately 40% of the total amount of the dues for AY 2006-07 and the assessee has acted in right earnest in having the appeal disposed of and the last hearing was held as far back as on 25 June 2014, the delay thereafter in disposing of the appeal is entirely due to CIT (A) as the remand report was called for on 12 November 2014 - It is only now that the petitioner has learnt for the first time that the remand report has been called for by the CIT (A) by virtue of the affidavit dated 16 December 2014 filed by the AO in reply to the present petition – thus, it would only be fair that the balance demand of Rs. 320.45 crores is stayed till the disposal of the appeal by the CIT (A) – Stay granted. Also in UTI Mutual Fund vs. ITO [2012 (3) TMI 333 - BOMBAY HIGH COURT] it has been held that the orders passed by the Authorities under the Act would not be enforced till such time as the period to file an appeal before the Appellate Authority expires and where stay applications have been filed, the Revenue would not adopt coercive proceedings till the disposal of the stay application by the Appellate Authorities – Decided in favour of assessee.

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• 2014 (12) TMI 978
  Notice for reopening of assessment u/s 148 - Deduction u/s 80M claimed on the dividend received as a shareholder – Invocation of provisions of section 115-O - Held that:- During the subject AY 2003-04, Section 115O of the Act was not in the Act - It only came into force from the AY 2004-05 – in Godrej Agrovet Limited Versus The Deputy Commissioner of Income Tax [2010 (2) TMI 27 - BOMBAY HIGH COURT] it has been held that u/s 147 of the Act, the AO has a power to reopen the assessment by issuing a notice for the same provided that he has reason to believe that income escaped assessment - The reopening of an assessment cannot be on a mere change of opinion - the basis of reopening of the assessment was the payment of dividend u/s 115 O - Section 80M as it stood during the AY 2003-04 allowed an assessee to claim deduction u/s 80 M of the Act so long as the amount of dividend received is less than the amount of dividend distributed before the due date of filing the return of income - the AO seeking to deny the benefit of tax u/s 80 M on account of Section 115O, has proceeded on an extraneous ground - Section 115O of the Act could not have been invoked to disallow the deduction available u/s 80 M of the Act in the AY 2003-04. The date of filing of return was 31st October, 2003 and the assessee had distributed the dividend on 6th October, 2003 - all conditions necessary for claiming deduction on the dividend received u/s 80M of the Act including the monetary cap of being less than the dividend distributed was satisfied - Thus, AO could not have had any reason to believe that income chargeable to tax has escaped the assessment for AY 2003-04 - It was not open to the AO to invoke provisions of Section 115 O which were not in the Act for the AY 2003-04 to deny the benefit of deduction u/s 80M. The deduction being claimed by the assessee u/s 80 M is not on the amounts which have been distributed as dividend by the assessee to its shareholders and on which the tax is paid u/s 115 O of the Act - The deduction u/s 80M of the Act claimed is on the dividend received by the Petitioner as a shareholder – thus, Section 115 O (5) of the Act will have no application – thus, the notice issued u/s 148 is set aside – Decided in favour of assessee.

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• 2014 (12) TMI 977
  Addition u/s 68 – Genuineness of transaction in shares - genuine or sham and bogus – CIT concluded that certain operators and brokers devised a scheme to convert the unaccounted money of the Assessee to accounted income and the Assessee utilized this scheme. - Tribunal deleted the additions on the ground that onus was not discharged by the department. Held that:- The Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out, what was important and vital was whether the transactions in shares were genuine or sham and bogus - the Tribunal rightly concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies - the Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue - There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs. 25,93,150. The contract notes in Form-A with two brokers were available and which gave details of the transactions - The contract note is a system generated and prescribed by the Stock Exchange - this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment - The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to - that itself is not enough to prove that the transactions in the impugned shares were bogus/sham - The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus - inquiry was not carried forward and with a view to discharge the initial or basic onus, then the conclusion of the Tribunal cannot be termed as perverse – thus, no substantial question arises for consideration – Decided against revenue.

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• 2014 (12) TMI 976
  Benefit of section 10(23C)(via) – Applicability of 14th Proviso to Section10 (23-C)(via) to AYs 2005-2006 and 2006-2007 - Assessee contended that revenue could not take advantage of his own inaction, in not passing any orders on application that was pending before him – Held that:- Revenue was of the view that the assessee had not preferred the application in respect of the AYs during the financial year immediately preceding the AY for which the benefit was sought - the finding of the revenue cannot be legally sustained insofar as it stems from an erroneous interpretation of the applicability of the proviso - the Proviso is intended to ensure that any application preferred after 01.06.2006, for the purposes of grant of exemption or continuation thereof, has to be made during the financial year immediately preceding the AY from which the exemption is sought. The Proviso could not have been cited as a reason for holding the application preferred by the petitioner for the assessment years 2005-2006 and 2006-2007 to be belated - the findings relating to the AY 2007-2008 are also legally unsustainable since, even if the revenue was of the opinion that the benefit of Section 10 (23-C) (via) could not be continued for the AY, nothing prevented him from treating the application as a fresh application for the grant of the benefit u/s 10(23-C)(via) for the AY 2007-2008 - the law that governs the assessment of an assessee in any AY is the law prevailing as on 1st of April of the relevant AY - the amendment would govern only the exemption that was to be granted with effect from the AY 2007-2008 onwards – thus, the order of revenue is set aside and the revenue is directed to consider the application and grant the benefit u/s 10 (23-C) (via) for the period from 2002-2003 to 2007-2008 – Decided in favour of assessee.

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• 2014 (12) TMI 975
  Grant of deduction u/s 80IC – Whether assessee had failed to make a claim for the same in its return of income nor filed revised return of income – Held that:- The Tribunal was rightly of the view that the Revenue has not disputed the finding of the CIT(A) that the assessee was eligible for deduction u/s 80IC of the Act - No material was brought to show that the assessee was not eligible for deduction u/s 80IC - the assessee has filed a petition u/s 154 of the Act at the earliest point of time seeking revision of intimation u/s 143(1) of the Act and the matter was pursued by the assessee diligently even before the CIT(A) - when an appeal is a continuation of the original assessment proceedings, the Tribunal was justified in relying upon RAMLAL, MOTILAL AND CHHOTELAL Versus REWA COALFIELDS LTD.[1961 (5) TMI 54 - SUPREME COURT] - wherein it is held that the State authorities should not raise technical pleas if the citizens have a lawful right - the authorities under the Act are required to ensure that only legitimate taxes due are assessed and collected – Tribunal rightly upheld the findings of the CIT(A) that the assessee is eligible for deduction u/s 80IC – thus, the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (12) TMI 974
  Re-opening of the assessment u/s 147/148 – Held that:- In Commissioner of Income Tax Versus Kelvinator Of India Limited [2002 (4) TMI 37 - DELHI High Court] it has been held that on mere change of opinion of AO cannot be a ground for re-assessment and that amendment of sec. 147 w.e.f. 1.4.89 has not altered the position – assessee has been able to prove that assessee disclosed all primary fact before AO at the time of making original assessment order dated 26.11.2008 - the re-opening of the assessment for the year 2006-07 is thus, clearly bad in law and is to be set aside – Decided in favour of assessee. Assessment Year 2007-08 – Held that:- In Arun Kumar Goyal Vs CIT [2012 (12) TMI 870 - PUNJAB AND HARYANA HIGH COURT] it was held that it is explicit from the post amendment decisions cited above that once there are reasons for the AO to believe, whether such reasons originate out of the record already scrutinized or otherwise, he shall be within his competence to initiate the re-assessment proceedings - Since in the assessment year under appeal, the AO has processed the return u/s 143(1) and has not formed any opinion on the material available on record - therefore, it may not be a case of quashing of re-assessment proceedings in the year under consideration i.e. assessment year 2007-08 – Decided against assessee. Deduction on various subsidies u/s 80IB – Held that:- The assessee obtained subsidies in respect of unit No. I and II Samba which falls in territory of State of J&K and the dispute of disallowance of deduction u/s 80IB pertains to Samba unit only which is in the State of J&K - the same scheme of grant of subsidy have been considered by Hon'ble J&K High Court in the case of Shree Balaji alloys & Ors Vs CIT [2011 (1) TMI 394 - Jammu and Kashmir High Court] in which the assessee unit was also found to be situated in State of J&K and in the case of the assessee also, the units are situated at Samba (J&K), therefore, when the schemes of grant of subsidy have been considered by Hon'ble J&K High Court, the same view shall have to be adopted in the case of the present assessee for grant of deduction u/s 80IB on the identical facts in which the subsidies were held to be capital in nature – the authorities below are not justified in denying deduction u/s 80IB - assessee is also entitled for relief on alternate contention and would be entitled to set off of the expenses under the grant of subsidies – the order is set aside and the AO is directed to grant deduction to the assessee u/s 80IB – Decided in favour of assessee. Reduction on rate of deduction from 12% to 11% u/s 80IB - Inter unit investments - interest allocation on deemed basis – Held that:- The AO has specifically noted that interest expenditure on the investments made by the Ludhiana unit in the other units located at Samba had not been allocated to respective units - The AO, therefore, correctly referred to provisions of Section 80IA(8) (10) of the Act because the assessee company was transferring funds borrowed on interest from the non eligible unit at Ludhiana to the eligible units and the corresponding interest was not being allocated which had led to the inflation in the profits of eligible units - The finding of fact recorded by AO have not been assailed through any material on record - CIT(A), perused the balance sheet of Ludhiana unit which shows that funds have been raised from financial institution on interest apart from internal accrual/capital contributions - CIT(A), therefore, observed that this would mean that in order to transfer the appropriate interest debits to the eligible units, only way out was to find out the ratio of borrowed/non-borrowed funds and in this regard, data was furnished by the assessee - Since, the data produced by the assessee clearly support the finding of CIT(A) for allocation of the interest to the three units, therefore, there should not have any grievance left for the assessee to agitate the finding of fact recorded by the CIT(A) - CIT(A) correctly allocated the interest to the three units and correctly reduced the same addition in proportion/ratio of borrowed/non-borrowed funds – Decided against assessee. Disallowance u/s 14A – Held that:- The assessee's counsel has specifically pleaded that no investments have been made in the year under consideration and only part investments have been made in subsidiary companies - the AO has specifically observed that assessee company had made investments in shares and mutual funds on which exempt income accrued and no disallowance in respect of expenditure incurred to earn the exempt income have been made - The A.O. considering explanation of the assessee concluded that assessee had not been able to establish the claim that no expenditure had been incurred and therefore disallowance had to be worked out by applying Rule 8D of the Act - assessee earned dividend income in the year under consideration - disallowance u/s 14A has been worked out on the basis of Rule 8D which is as observed earlier applicable in case of the assessee – Decided against assessee. Addition of 2% on advances given by assessee to BPL – Held that:- The assessee has not diverted borrowed funds for any business purposes - The AO has not brought any evidence on record to prove any nexus between borrowed funds and the funds advanced to subsidiary companies - The assessee has not given funds to the subsidiary company without any interest rather it is a fact that assessee has charged interest @ 10% on the funds given to the subsidiary companies - since the assessee has business relation with the subsidiary company and funds have been given to the subsidiary company subject to interest, therefore, AO could not examine the reasonable interest charged by the assessee - The AO cannot step into the shoe of the businessman as to how much the businessman has to earn profit out of the same transaction – CIT(A) correctly deleted the addition – Decided against revenue.

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• 2014 (12) TMI 973
  Immunity from taxation under Article 289(1) of the Constitution of India – Assessee being A.P. Pollution Control Board separate legal/juristic entity or not from the State Govt. – Held that:- The assessee board was created with effect from 24/01/1976 as Andhra Pradesh State Board for the Prevention and Control of Water Pollution and subsequently rechristened as Andhra Pradesh Pollution Control Board after enactment of the AIR (prevention and control of pollution) Act, 1981, but, the assessee board never claimed immunity from payment of income-tax under article 289 of the Constitution of India - only after assessee lost the claim of exemption u/s 10(20) of the Act, by virtue of amendment to the definition of the expression local authority w.e.f. 01/04/2003 and it failed in its attempt, either in getting approval u/s 10(23C)(vi) or being registered u/s 12AA of the Act for the AY, as a last resort it staked its claim of immunity from payment of income-tax under article 289 of the Constitution of India, that too at the stage of proceeding before the FAA - during the assessment proceeding also for the AY, assessee never claimed that its income is exempt from taxation by virtue of article 289(1) of the Constitution of India - the income generated by the board which goes to constitute its own fund does not go to the consolidated fund of the state and is distinct and separate from the fund of the state govt. Section 62 of The Water (prevention and control of pollution) Act, 1974 empowers the state govt. to supersede the state pollution control board, if it is of the opinion that the state board has persistently made defaults in the performance of the functions imposed on it by or under the Act or circumstances exist which render it necessary in the public interest to do so - only upon supersession of the state board the state govt. takes over all the powers and functions and duties performed by the state board and also property owned or controlled by the board shall vest in the state govt. - therefore, it becomes clear that until supersession of the state board, not only it retains its distinct and independent identity but also the funds and property of the board also remains in its possession. The income/receipts of the board remain as its own funds and not transferred to the coffers of the state govt. - when the income/receipts of the board remain with the board itself and not transferred to the state govt. such income/receipt has to be considered as income/receipt of the board and not of the state govt. - Therefore, such income/receipt cannot be immune from taxation under article 289(1) of the Constitution of India - under no circumstances it can be held that the income/receipts of the assessee is that of the state govt. - not only assessee is a distinct and separate legal/juristic entity but funds of the assessee also belong to assessee - assessee by its own actions considers itself to be a separate legal entity distinct from the state govt. - That being the case, the income/receipts of the board has to be treated as its own income and not of the state govt. - CIT(A) rightly was of the view that assessee cannot get immunity from taxation under article 289 of the Constitution of India. Rejection of exemption claimed u/s 10(23C)(iv) – Held that:- Considering the fact that assessee’s writ application is pending before the Hon’ble Jurisdictional High Court, the directions of the CIT(A) are upheld – Decided against assessee.

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• 2014 (12) TMI 972
  Addition on surrender made by assessee deleted – Difference in physical stock found at the time of survey and stock as per books of accounts – Held that:- CIT(A) was rightly of the view that the assessee explained the variation in stock supported by its stock register, purchase bills, sale register and reconciliation in respect of each and every item of stock inventory drawn at the time of survey - Though assessee had surrendered for the difference in stock as per physical stock and stock as per books of account but later on while finalizing its accounts, the assessee noted certain mistakes in the recording of certain transactions, therefore, he prepared a reconciliation statement and submitted the reconciled statement along with the explanation and all documentary evidences to the AO - AO did not comment upon such explanations. Again during assessment proceedings, the assessee had submitted the same explanation to which also AO failed to offer any comments - it was the duty of AO to verify the explanations given by assessee and should have found fault in the reconciliation before making addition - there was no change in the quantitative stock as on date of survey and as per books of accounts on the date of survey - the difference in quantities had occurred only due to wrong recording of certain transactions and the reconciliation was supported by documentary evidences - The submission of correct calculation of stock on the basis of documentary evidence and explanation cannot be termed as retraction as it is in the common knowledge that during survey operations in a limited period of time, exact stock cannot be calculated specifically in a case like this where different qualities and different products were dealt by the assessee - the action of assessee in submitting rectified position of stock was justified and therefore, action of Ld. CIT(A) in giving relief to the assessee is justified specifically in view of the fact that AO instead of verifying the claim just ignored it – thus, the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (12) TMI 971
  Assessment u/s 153A - Various disallowance made - No material whatsoever was found relating to the routine disallowance - whether these disallowances can be made or confirmed sans any incriminating material found during the course of search – Held that:- In CIT Vs. M/s. Murali Agro Products Ltd. [2010 (10) TMI 1052 - BOMBAY HIGH COURT] it has been held that once it is held that the assessment finalized has attained finality, then the deduction allowed u/s 80HHC of the Income-tax Act as well as the loss computed under the assessment would attain finality - In such a case, the AO while passing the independent assessment order u/s 153A read with section 143(3) could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings u/s 153A to establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153 A proceedings - there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceeding which would show that the relief u/s 80HHC was erroneous – thus, the disallowances which has been confirmed by the CIT(A) cannot be uphold - Decided in favour of assessee. Addition of bogus bills/purchases made for construction – Held that:- The AO has not only relied upon the admission of the Director, Mr. Viren Ahuja at the time of statement u/s 132(4), but also has analyzed the nature of transaction and carried out inquiry to find out that the claim of purchases made for construction were bogus - once the evidences and materials are indicating the non-genuineness of the expenditure, the onus is heavily upon the assessee to prove the contrary on the basis of concrete material or evidence - onus has not been discharged by the assessee at all and not only, that it has been categorically admitted by the assessee when it was confronted during the course of search that, the payments relating to purchases are bogus – there was no merits in the contention raised by the assessee and the order of the CIT(A) is upheld – Decided against assessee.

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• 2014 (12) TMI 970
  Transfer pricing adjustment - Serviced provided to AE – Selection of Companies as comparables Accel Transmatic Ltd.– E-Zest Solutions - Held that:- Following the decision for all the comparables as decided in M/s. Motorola Solutions India Private Limited Versus ACIT, Circle-2, Udyog Vihar [2014 (10) TMI 358 - ITAT DELHI] - the Tribunal restored the issue to the file of the TPO to consider the inclusion/exclusion of this comparable depending upon the finding of RPT – with regard to E-Zest Solutions the TPO is directed to examine the reply of the assessee and adjudicate the matter afresh. Avani Cimcon Technologies Ltd. – Held that:- The Tribunal directed exclusion of the comparable for the reason that it owns certain softwares developed by it and the revenues earned are not merely on account of development of new software from scratch but because of utilisation of own software also - the asset base of the company could not be compared with that of the tested party. Celestial Labs – Held that:- The Tribunal observed that Celestial Labs is mainly into software development services, in as much as, R&D facilities have been used by it in relation to development of a software for discovery of new drugs - It was engaged in bioforma and biotech manufacturing of customised I.T. solutions, manufacturing of trucks, and contract research activities. KALS Information Systems – Held that:- The Tribunal directed the AO to exclude this comparable on the ground that there is a difference in the asset base of both the companies. Flextronic Software Systems Ltd.- Ishir Infotech Ltd.- Held that:- The Tribunal held that the company cannot include a comparable as there is a clear contradiction in the contents of the annual report and the information obtained u/s 133(6), hence this comparable has to be excluded for the same reason. Sasken Communication Technologies Ltd. – Held that:- The company has to be excluded as it owns IPRs and had branded products. Tata Elxis Ltd. – Held that:- The Tribunal directed the exclusion of this comparable for the reason that the software developed by this company were used as tools in development of new softwares – Decided partly in favour of assessee.

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• 2014 (12) TMI 969
  Addition u/s 28(iv) r.w. section 41 r.w. explanation 2(iv) – loan waived by the lenders - Deduction of amount from the amount of reduction of loans and liabilities - Held that:- Following the decision in Commissioner of Income-Tax Versus Chetan Chemicals Pvt. Ltd. [2001 (10) TMI 12 - GUJARAT High Court] wherein it has been held that before the section can be invoked, it is necessary that an allowance or a deduction has been granted during the course of assessment for any year in respect of loss, expenditure or trading liability which is incurred by the assessee, and subsequently during any-previous year the assessee obtains, whether in cash or in any other manner, any amount in respect of such trading liability by way of remission or cessation of such liability - In that case, either the amount obtained by the assessee or the value of the benefit accruing to the assessee can be deemed to be the profits and gains of business or profession and can be brought to tax as income of the previous year in which such amount or benefit is obtained - it cannot be said that the assessee-company was carrying on business of obtaining loans and that the remission of such loans by the creditors of the company was a benefit arising from such business – thus, the amount waived by the lender bank is not an income u/s 2(24) of the Act and further Section 28 also does not include amount of loan waive by the lender u/s 41 of the Act cannot apply to this receipt in respect of this amount – Decided against revenue.

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• 2014 (12) TMI 968
  Claim of deduction u/s 80IB - Income derived from operations and maintenance of SEZ - Deletion of adjustment in book profits calculation u/s 115JB – Held that:- CIT(A) rightly of the view that the adjustment not provided in explanation contained in section 115JB which provide for certain additions and subtractions from the profit shown in the profit & loss account - the income is from SEZ operations and it is not required to be included for working of book profit u/s 115JB – also in DCIT, Circle-10 (1), New Delhi Versus DLF Assets Pvt. Ltd. [2014 (1) TMI 1579 - ITAT DELHI] it has been held that the provisions of clause (g) to section 115JB refers to the amount of expenditure incurred for earning exempt income which has to be added back to the profit as per P&L A/c for the purpose of calculation of book profits u/s 115JB – the order of the FAA is upheld – Decided against revenue. Disallowance on deduction u/s 80IAB deleted – income from sale of business treated as capital gain – Held that:- As decided in assessee’s own case it has been held that deduction u/s 80IA of the Act cannot be denied after having been granted in the first year of claim, as the restraint of Section 80 IA(3) cannot be re-adjudicated in the subsequent AYs without withdrawing or disturbing the claim which was allowed in the initial AY – Decided against revenue.

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• 2014 (12) TMI 967
  Addition of interest on loan advanced to AE in AK – Directions made by Dispute Resolution Panel-II, Mumbai u/s. 144C(5) to do the same – Held that:- In various decisions it has been held that to bench mark the interest charged by the Indian assessee to the AE, LIBOR Plus is considered as arm’s length interest rate - the assessee is charging the interest from AE at the rate of 10% which is more than the interest rate paid by the assessee on the foreign currency loan from SBI at LIBOR + 205 BPS - even if the arm’s length interest adopted as 5.71% which is LIBOR + 2.5%, the assessee’s interest charged to the AE at the rate of 10% is more than the arm’s length interest rate and accordingly no adjustment on account of arm’s length of interest is warranted - the arm’s length rate of interest would be taken as the interest on deposit in Bank – thus, the interest charged by the assessee at the rate of 10% would be at arm’s length and no adjustment is called for on this account - the interest charged by the assessee at the rate of 10% from its AE is at arm’s length and the additions made is to be set aside – Decided in favour of assessee. Adjustment of interest for delayed realization of sale from AE – Held that:- The TPO has verified the documents produced by the assessee and confirmed the non-charging of interest on delayed export receipts either from AE or non AE - due to the delay in realization of sales, the assessee has earned foreign exchange gain which is much more than the interest adjustment - the uniform policy of not charging the interest both from AE and non AE debtors was recognized and no adjustment on account of notional interest on the outstanding amount on export proceeds can be made - 80% of the total sales of the assessee is from non AE customers, when the assessee is not charging any interest from non AE then there is no case made out by the revenue that the assessee is doing any favour or giving any benefit to the AE by extending the credit period of realization of sales which is less than the internal CUP being the assessee allowing the credit period to the non-AE – thus, the average collection period from AE is less than the average collection period from non AE – thus, the order of the DRP is upheld – Decided against revenue.

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• 2014 (12) TMI 966
  Disallowance u/s 14A - Carry forward of business loss – Held that:- The carry forward business loss was set off to the extent of available business income and thereby the total income was computed at Nil – the AO made certain disallowances u/s 14A and accordingly computed the total income of the assessee as against the Nil return of income - since the AO computed the total income by making the addition to the extent of Rs. 38,20,860/-, therefore, the carry forward business losses to the extent of Rs. 6,39,538/- should have been set off instead of Rs. 6,21,615 - the carry forward losses ought to have been set off to the extent of the available business income - when the AO has made the addition of more than 38 lakhs then to that extent the carry forward business losses of the assessee should have been set off - setting off carry forward business losses now depends on the finality of the addition made by Assessing Officer u/s 14A - the allowability of setting off the carry forward business losses depends upon the total income as per the outcome of the appeal. Whether section 14A is attracted in respect of the investment made in shares albeit no exempt income is earned by the assessee on such investment - Held that:- The assessee has not received/earned any exempt income during the year - there is no claim of exempt income by the assessee during the year – relying upon Commissioner of Income Tax-IV Versus Holcim India P. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] - the entire or whole expenditure has been disallowed as if there was no expenditure incurred by the assessee for conducting business - CIT(A) has positively held that the business was set up and had commenced - Expenditure had to be also incurred to protect the investment made - genuineness of the expenses and the fact that it was incurred for business activities was not doubted by the AO and has also not been doubted by the CIT(A) - Decided in favour of assessee.

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• Customs

• 2014 (12) TMI 988
  Conviction for offence under Section 21(c) of the Narcotic Drugs and Psychotropic Substances Act, 1985 - Variation in test results of first and second set of samples - Failure to examine the panch witness - Held that:- In a large number of cases involving the NCB, there is a failure to produce the panch witness named. There are cases where panch witnesses are not associated at all and it is sought to be explained by the prosecution that despite its request no person from the public came forward to join in the raid. The latter explanation has been accepted by some Courts by taking judicial notice of the fact that the members of the public are generally reluctant to be involved in criminal cases as witnesses. However, in a case where the NCB specifically names a public witness as being associated in the arrest and seizure, its failure to produce such person for cross-examination must be specifically explained by it. Failure to produce the public witness was attributable to a false address given for the witness. This raises serious doubts as to whether such a witness existed at all. It will amount to falsification of the trial Court record if the thumb impression on the arrest and seizure memo is attributed to a witness who is not able to be produced and it is shown that the address given for him, even in the first instance in the summons issued by NCB, was false. This casts serious doubts on the trustworthiness of the prosecution version and in that circumstance the benefit of doubt should certainly go to the accused. There is no independent corroboration of the arrest of the Appellant, the seizure from him of the contraband and the recording of his statement under Section 67 of the NDPS Act. Appellant did not write the statement himself. Although he appears to have written the first paragraph and the last line, in the one paragraph written by him he stated "I am not in a position to write my statement. So, I request Ajay Kumar to write my statement on my dictation." The MLC of the Appellant also showed that he had received an abrasion behind the right ear. He also mentioned his being tortured in the retraction statement at page 349 of the trial Court record. As regards the purity of the samples taken by the NCB from the seized contraband, it was noticed earlier in the trial Court proceedings itself that a second set of samples had been sent for testing and that there was a considerable difference in the purity percentage. While in the first set of samples the purity of DAM was 51.7% and 61.4%, the purity of DAM in the second testing of the samples was 7.2% and 7.4%. The learned trial Court held that this was due to change in atmospheric conditions "and other conditions." Witness Mahesh Kumar was presuming that there was no possibility of the second set of samples coming from a different source only because the records in the case available with the laboratory showed that on both the occasions the samples had come 'properly sealed.' It appears to the Court that the above answer was not a scientific one but a practical one which does not explain the considerable variation in the purity percentage of DAM and also the absence of two constituents in the second set of samples. The expert failed to explain how when the first set of samples showed seven constituents, even accounting for hydrolysis, there was a complete absence of two constituents in the second set of samples. The literature produced by both the parties points to the possibility of degradation of DAM to MAM and not the heroin when it is in crystallized form. Even in the same set of samples from the same source, there is possibility of differences in percentages on account of hydrolysis of DAM into MAM, they do not explain the possibility of total absence of constituents in the second set of samples. In the instant case, this raises a doubt to whether both the set of samples were from the same source. - The Court, on a careful perusal of the evidence of the expert evidence in the present case is not satisfied that the prosecution has been able to explain the considerable variation in the purity percentages of DAM in the two samples sent for testing. Even on this score, the Court is inclined to grant benefit of doubt to the Appellant. - Decided in favour of assesse.

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• 2014 (12) TMI 987
  Validity of Regulation 13(h) of the Courier Regulations 1998 - Requirement of qualified employees - Under Regulation 13(h), Authorized Couriers are required to file declarations for clearance of imported or export goods through a person who has passed the examination referred to in Regulation 8/19 of the CHALR, 2004 (now corresponding to Regulation 6/17 respectively of the CBLR, 2013) and who are duly authorized under section 146 of the Customs Act, 1962 - Held that:- rationale behind the requirement under the Courier Regulations, 1998, as amended, of making/filing declarations by a person who has qualified the examination referred to under Regulations 8/19 of CHALR, 2004 (corresponding to Regulation 6/17 of CBLR, 2013) is that the said persons have adequate knowledge of overall customs clearance process. The syllabus of the examination comprises of a set of subjects required for adequacy of knowledge of Customs clearance process. The clearance through the Courier mode is part of overall clearance process and the provisions of Customs Act, 1962 are applicable in similar manner as is applicable for clearance from other modes. The object underlying the requirement of passing the examination under Regulations 8/19 of CHALR, 2004 (now Regulation 6/17 of CBLR, 2013) is to ensure that such person has the basic level of competency and knowledge. Hence, when the Courier Regulations, 1998 as amended, stipulates that such persons filing declarations for clearance of imported and export goods under the Courier mode must have qualified at the examination as mandated under Regulation 8/19 of CHALR 2004 (now Regulation 6/17 of CBLR 2013), there is nothing arbitrary in imposing such a requirement. The requirement has a reasonable nexus with the object which is sought to be achieved viz. to ensure that the Authorized Couriers/ employees fulfill the requirement of competency, knowledge and skills. Even otherwise, the requirement under the amended Courier Regulations, 1998, that the Authorized Courier shall file declarations for clearance of imported or export goods through a person who has passed the said examination and who is duly authorized under section 146 of the Customs Act, is entirely a matter of policy and it would be impermissible for this Court in the exercise of its limited jurisdiction under Article 226 in interfering with such policy matters. It is required to be noted that the Petitioner has not challenged the amendment to the Courier Regulations, 1998 as being ultra-vires the Customs Act, 1962 or Article 14 and 19(1)(g) of the Constitution of India. Authorized Courier may utilize services of a person who has qualified the examination under Regulations 8/19 of the CHALR, 2004, in case he or his employee has not qualified the examination for filing declarations under the Courier Regulations, 1998. In the Reply, it has been also averred that there are about 52 Authorized Couriers companies at Courier Terminal Sahar, Mumbai and almost all of the above have hired the services of persons who have passed the examination referred to in Regulation 6/17 of the CBLR, 2013 (erstwhile Regulation 8/19 of the CHALR, 2004) and clearance of courier consignments is being handled smoothly and expeditiously by Courier companies in compliance with the Regulations. This position has not been disputed by the Petitioner in their Affidavit-in-Rejoinder, except to contend that that has been done under duress and under threat of stoppage of work. Thus, the right of the Authorized Courier companies to carry on business has not been abrogated in any manner. - Decided against Petitioner.

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• 2014 (12) TMI 986
  Application to have an Appraisal Counter for evaluation of declared items of the passengers at the IGI Airport, New Delhi - Non availability of an "Appraisal Counter for issuance of Export Certificate" at the Indira Gandhi International (IGI) Airport, New Delhi forced passengers to travelled to the Custom House, Jhandewalan which is about 30 kms. away from the airport and thereby causing undue hardship to the commuters - Held that:- Judicial powers do not extend to giving a direction as is sought, the same being largely an administrative / policy decision but at the same time, we cannot help but observe that the respondents do not appear to have approached the issue in the correct perspective. The counter affidavit is full of legalese, rather than addressing the important issue of public interest raised in the petition. The reason given, of paucity of space and infrastructure at the airport also does not inspire confidence. IGI Airport has recently undergone re-development by acquisition of land, displacing a large number of villagers. To our knowledge, large portions of such acquired lands have been used for building hotels and which are often found to be serving the need, instead of users of the airports / travelers, of the city residents. We wonder as to why the respondents, at the time when the re-development of the airport was being planned, if facing any paucity of space / infrastructure, could not have demanded additional space. Similarly, the argument given of having an Appraisal Counter at the airport / close to the airport posing a security hazard to the airport, cannot be accepted. Having used the said airport, it is to our knowledge that large portions of the re-developed airport are outside the secured arena. It is thus possible to have the said counter, in close vicinity of the airport and without posing any security hazard. - The respondents, in the counter affidavit though have said that no airport in the country has such an appraisal facility at the airport itself but the same in our opinion is again no reason. What the respondents have failed to address is the specific plea of the petitioner, of the other developed countries having Appraisal Counters at the airport only. Airports in all countries are situated generally far from the city and if such countries have felt the need for the Appraisal Counter at the airport, we can be reasonably sure that the same must have been done for the convenience of the passengers. Internationalization of the airports in the country has to be not only for looks but also in terms of convenience and amenities, facilities and following the practices in vogue at the airports of other countries. Respondents directed to within six months herefrom take a reasoned decision on shifting the existing Appraisal Counter to the airport / in the close vicinity of the airport, or having an additional counter at the airport/in the close vicinity of the airport, taking into consideration all possible aspects and may be even after holding surveys and including what we have observed - Decided in favour of appellant.

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• 2014 (12) TMI 985
  Imposition of penalty u/s 112 - Intention to defraud Revenue - Held that:- When the appellant had no access to know about the contents in the container, it cannot be said that he has violated the law to attract Section 112 of Customs Act, 1962. Sub-clause (a) of Rule 112 of Customs Act requires a conscious knowledge of the offender in relation to the commission or omission of an act rendering the goods liable to confiscation or if he abets the doing or omitting such an act, or acquires possession of offending goods, he cannot go out of purview of Section 112 of the Act and penalty is imposable. Similarly, sub-clause (b) of Section 112 of the Act also require conscious knowledge of an offender who is concerned in carrying or removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any offending goods which he knows or has reason to believe that the same is liable to confiscation under Section 111 to be liable to penalty. There is nothing conscious knowledge of the appellant came to record demonstrating his intention to cause fraud against Customs as apparent from para-27 of the adjudication order. Appellant had also no deliberate intention to misdeclare the content in the container. Therefore, there shall be no penalty against this appellant - Decided in favour of assessee.

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• 2014 (12) TMI 984
  Revocation of suspended CHA License - illegal import and misdeclaration of the value of the goods without obtaining necessary authorization from the importer - violation of Regulation 13(a), (d) and (n) of CHALR, 2004 - Held that:- On perusal of the impugned order, we find that the learned Commissioner has held that the importer has filed blank papers and give ICE to some other person to import and he was not having any knowledge of the importation of the goods. On the contrary, the learned Commissioner has not given any findings on the production of the original authorization issued by the real importer and he has not doubted the signatures on the documents. In these circumstances, we hold that the appellant was having proper authorization for clearance of the impugned consignments. As the charge under Regulation 13(a) is not proved consequently, the charges under Regulation 13(d) and 13(n) are also not proved. Therefore, we set aside the impugned order and allow the appeal by restoring the operation of CHA licence No. 11/617. - Decided in favour of appellant.

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• 2014 (12) TMI 983
  Refund claim of SAD - Notification No. 102/2007-Cus., dated 14-9-2007 - failure to show that burden of duty has not been passed on – Held that:- appellant produced necessary C.A. certificate along with cost sheet as required under Circular No. 16/2008-Cus., dated 13-10-2008. The appellant has also specifically written on the invoices under which the goods were sold, that the credit of additional duty of customs is not available. The C.A. certificate specifically shows that the amount of refund is shown in the account books as amount due as a refund of additional customs duty – Decided in favour of assesse.

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• Corporate Laws

• 2014 (12) TMI 982
  Sick company - Jurisdiction of BIFR - Jurisdiction of civil court to entertain recovery suit when the matter is pending before BIFR - Ambit and scope of section 22(1), 26 and 32(1) of Sick Industrial Companies (Special Provisions) Act 1985 - Though the scheme was initially sanctioned for reconstruction, the BIFR subsequently held the scheme to have failed and directed the company to be wound up. - Held that:- After a reference is registered by the Board, all throughout the subsequent stages, the BIFR has complete supervisory control over the affairs of such company till it is revived or the decision to wind up such company is taken. In our view, the ambit and extent of such control means and includes determination of such measures to achieve revival of the sick company and to check whether by such measures the revival is being achieved or not. This must cover the power to decide at any stage subsequent to the registration of reference under Section 16 whether such company has ceased to be sick company or not. Cessation of the status as a sick company can be under Section 17(1) or as a result of scheme for revival being implemented and determination of such issue, in our view, is in the exclusive domain of the BIFR. The Civil Court was not right and justified in issuing injunction as it did. The counsel who represented the company before the BIFR on 04.04.2013, correctly submitted that before discharging the company the BIFR can examine the audited balance sheet and satisfy itself whether the net worth had turned positive. Insofar as the recovery of money is concerned, the matter is completely covered by Section 22(1) - The language employed in Section 22(1) of the Act refers to the entirety of the period beginning from the inquiry under Section 16 till the implementation of sanctioned scheme for revival - the BIFR was considering Draft Rehabilitation Scheme which is a stage u/s 18(3) and is completely covered by the period u/s 22 of the Act - The suit as framed for recovery of money filed without the consent of the BIFR was not competent and maintainable – relying upon Managing Director, Bhoruka Textiles Limited Vs. Kashmiri Rice Industries [2009 (5) TMI 546 - SUPREME COURT OF INDIA] – the suit insofar as it relates to the claim for recovery of money, could lie or be proceeded with only after express consent of the BIFR. Whether BIFR ceased to have jurisdiction over the company and that all the proceedings in the BIFR after filing of the positive balance-sheet - Held that:- We leave it to the BIFR to satisfy itself and determine the issues whether the net worth of the company has turned positive or not. If the BIFR is so satisfied, it shall de-register the company and upon such declaration the company will be out of the supervisory jurisdiction of the BIFR under the Act. Needless to say that if the BIFR is not satisfied that the net worth of the company has turned positive, it shall go ahead and consider the scheme for revival of the company. Since in our view the company continues to be a sick company and it was not competent for anyone except the BIFR to determine whether the net worth of the company had turned positive, we hold the sale of Katihar property effected by the company without express leave or permission of the BIFR to be questionable. However, since the transferee of that property is not before this Court we relegate this matter for appropriate assessment by the BIFR after issuing due notice to the transferee. We also leave it to the BIFR to consider and assess whether there was any necessity or expediency to sell the property in question. - Decided in favor of petitioner.

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• Service Tax

• 2014 (12) TMI 1007
  Waiver of pre deposit - transportation of iron ore from top to bottom and from one plot to another plot in the mining area - Held that:- Prima facie appellant has made out a case for waiver and in our opinion, the activity cannot be considered as a mining service. When the activity is undertaken in the mining area and it has to be treated as mining work only and he relies on Mining Act as done by the adjudicating authority. It is appropriate that in this case the requirement of predeposit is waived and stay is granted for 180 days from the date of this order and we do so - Stay granted.

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• 2014 (12) TMI 1006
  Waiver of pre deposit - Supply of Tangible Goods service - Held that:- In this case, in the absence of any evidence to show that wagons were used for transportation of goods of other clients also, it cannot be said that there is an element of supply of wagons to the railways. The wagons are exclusively used for transporting the appellant’s goods and because the appellants have invested in the wagons they get a discount in the transportation. The transaction is similar to the case where a person may supply a crane to the service provider who mines ores for him and thereafter get some discount in the cost of mining. Can it be said that discount amount has to be treated as consideration for providing the crane. In fact it would be the additional consideration flowing from the receiver of service to the provider of service in the form of depreciation and interest element on the crane and it cannot be said that it amounts to SOTG Service. We are not convinced at this stage that revenue has been able to make out a case for levy of service tax under SOTG service against the appellant. Accordingly, the requirement of predeposit is waived and stay against recovery is granted for a period of 180 days from the date of this order - Stay granted.

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• 2014 (12) TMI 1005
  Construction activity - primarily for commercial or industrial purposes or not - Held that:- Prima facie, we are not inclined to the view that activities of HAFED or Haryana Seeds Development Corporation are non-commercial. Further there is neither any pleading or material on record nor any submission by the petitioner before us to identify any error in the adjudication order in so far as the valuation or classification recorded by the adjudicating authority in respect of site formation. - stay granted partly.

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• 2014 (12) TMI 1004
  Waiver of pre-deposit of service tax - renting of immovable property service - applicant contend that they had already paid the service tax under the renting of immovable property on the rent received by the applicant - However, Revenue wants to levy service tax even on the deposit received by the applicant in respect of shops under the rent of immovable property service - Held that:- prima facie as Revenue wants to levy service tax under the category of renting of Immovable property service on the deposit received by the applicant, hence the applicant had made out a strong case for waiver of pre-deposit. The pre-deposit of the remaining dues is waived and recovery thereof stayed for hearing of the appeal - Stay granted.

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• 2014 (12) TMI 1003
  Waiver of pre deposit - Self adjustment of excess service tax - whether the payment/adjustment of Service Tax for the period 2007-08 from the excess payment of Rs. 13,25,576/- made by the appellant during 2005-06 is permissible or not - Business Auxiliary Service - Held that:- Rule 6(4A) of the Service Tax Rules, 1994 contains the provisions allowing an assessee to adjust the excess/short payment of Service Tax suo motu. It does not contain any restriction or time limit for making such adjustments. Secondly, appellant has also relied upon favourable decisions of this Bench on this issue holding that such adjustments can be made by a Service Tax assessee. A prima facie case for complete waiver of the confirmed dues and penalties has thus been made out by the appellant. Accordingly, there will be stay on recoveries of confirmed dues and penalties imposed upon the appellant till the disposal of the appeal. - Stay granted.

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• 2014 (12) TMI 1002
  Waiver of pre deposit - Insurance service - whether the credit of Service Tax paid on insurance services is admissible to the appellant or not - Held that:- both the factory premises and the adjoining plot are owned by the appellant for which the insurance services have been availed. There is no evidence brought out on records that the vacant plot is owned by any other individual other than appellant. Insurance Services have also been availed by the appellant for which the premium is also paid by them. A case of complete waiver has prima facie been made by the appellant. Accordingly stay is granted to the appellant against recovery of confirmed dues and penalty imposed upon the appellant till the disposal of the appeal. - Stay granted.

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• 2014 (12) TMI 1001
  Denial of refund claim - non-fulfillment of the procedural requirements - Held that:- It is observed from Notification No. 9/2009-S.T. that refund of service tax under this notification is entirely on the basis of fulfilment of procedures and conditions. It has been observed by Commissioner (Appeals) in para 7 of the OIA dated 14-6-2012 that appellant was asked to submit certain documents within 3 days and till the decision taken by the first appellate authority such documents were not furnished. When such a casual approach is shown by the appellant then it is difficult to appreciate that substantial procedural requirements required under Notification Nos. 9/2009-S.T. and 17/2011-S.T. can be considered to have been complied. There is no justification in interfering with the order dated 14-6-2012 passed by the first appellate authority which is accordingly upheld - Decided against assessee.

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• 2014 (12) TMI 1000
  Waiver of pre deposit - activity of painting of residential premises and machinery - commercial and industrial construction services - Held that:- Show cause notice has been issued to the appellant herein demanding Service Tax on the ground that that he was engaged in painting of residential premises, copper slag work and painting of machinery in the factory and the Revenue authorities sought to classify these services under ‘commercial or industrial construction services’. We find from the definition of the ‘commercial or industrial construction services’ that the services that get covered under the said definition, would primarily be associated with the premises which are used for commerce or industry. In the case in hand, it is undisputed that the appellant has been engaged in the services of painting of residential premises, which, in our prima facie view, may not fall under the category of ‘commercial or industrial construction services’. We find that the appellant has made out a strong prima facie case for complete waiver of pre-deposit of the amounts involved. - Stay granted.

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• 2014 (12) TMI 999
  Restoration of appeal - Non complaince of pre deposit order - Technical Inspection and Certification Service - Held that:- Appellant herein is a nodal agency for the Government of Gujarat as regards Gujarat Energy Development, more specifically for wind-mills. The appellant herein charges some amount as transfer fee for transferring developed wind farm to the clients. Revenue’s contention is that, such transfer fee is liable to be taxed under the head ‘Technical Inspection and Certification Service’. At this juncture, we find that the services rendered by the appellant and charging transfer fee, prima facie, may not get covered under ‘Technical Inspection and Certification Service’, as the appellant herein has, in our view, rendering a statutory function. This is our prima facie view and we have not considered the entire issue in detail. Accordingly, since the first appellate authority has dismissed the appeal for non-compliance, we are unable to go into the merits of the case. In order to meet the ends of justice, it would be appropriate that first appellate authority is given a chance to decide the issue on merits. - Matter remanded back - Appeal restored.

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• Central Excise

• 2014 (12) TMI 997
  Denial of rebate claim - duty was paid on exported goods from fraudulently availed cenvat credit - Held that:- condition 2(a) of Notification No.19/04-CE(NT) dated 6.9.04 stipulates that all excisable goods shall be exported after payment of duty directly from factory. The said provisions stipulate that rebate shall be granted of duty paid on excisable goods exported. In this case, payment of duty is in dispute and case for recovery of Cenvat credit & erroneously sanctioned rebate claims is pending adjudication before Commissioner (Adj.) New Delhi. Though there is no finding in the impugned order-in-appeal regarding any violation of condition/procedure as laid down in Notification No.19/04-CE (NT) yet the fact remains that duty paid nature of the exported goods is still in dispute. The fundamental condition for granting rebate is that duty paid nature of exported goods is established. The proceeding have been initiated vide the impugned show cause notice dated 23.02.2010 for recovery of wrongly availed cenvat credit as well as erroneously sanctioned rebate claims and adjudication proceedings are pending before Commissioner of Central Excise. In view of this position, it is premature to decide the admissibility of rebate claim till the show cause notice dated 23.02.2010 pending adjudication before Commissioner of Central Excise (Adj), New Delhi is decided. The Government does not find force in argument of applicants that issue of demand of cenvat credit and rebate claims are two separate proceedings as the status of payment of duty will be decided in the said ongoing adjudication proceedings. As such, case is required to be remanded for denovo consideration in the light of outcome of adjudication proceedings in show cause notice dated 23.02.2010. - Matter remanded back - Decided in favour of assesse.

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• 2014 (12) TMI 996
  Denial of rebate claim - Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-Central Excise(NT) dated 06.09.2004 - area based exemption under Notification 56/2002 to March 2009. Commissioner (Appeals) has rejected the appeals of the applicant by holding the said order-in-original dated 31.3.2011, SCN dated 15.1.2010 has been adjudicated and the appeal filed by the applicant against order-in-original dated 31.3.2011 has been rejected by the Commissioner (Appeals) and as such, the order-in-original of Additional Commissioner confirming the demand of fraudulent availment of cenvat credit has been upheld. Now, since there has been substantial change in facts and circumstances of the case due to aforesaid factual infirmities, the orders of Commissioner (Appeals) the case due to aforesaid factual infirmities, the orders of Commissioner (Appeals) based on such factual infirmities become infructuous and hence, liable to be set aside on this count only, without going into further merits of these cases. Under such circumstances, the interest of justice demands that the cases may be remanded back to appellate authority to decide the same afresh on the basis of correct factual position. - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 995
  Denial of rebate claim - original authority sanctioned the rebate claims - Orders were reviewed by the Jurisdictional Commissioner, on the ground that the assessable value is higher than FOB value - appellate authority accepted the appeals of the department that extra amount paid by the assessee on freight and insurance (if any) being duty, has to be treated as extra payment - Place of removal - Held that:- place of removal may be factory / warehouse, a depot, premise of a consignment agent or any other place of removal from where the excisable goods are-to, be sold for delivery at place of removal The meaning of word "any other place" read with definition of "Sale", cannot be construed to have meaning of any place outside geographical limits of India. The reason of such conclusion is that as per Section 1 of Central Excise Act, 1944, the Act is applicable within the territorial jurisdiction of whole of India and the said transaction value deals with value of excisable goods produced/manufactured within this country. Government observes that once the place of removal is decided within the geographical limit of the country, it cannot be beyond the port of loading of the export goods. Under such circumstances, the place of removal is the port of export where sale takes place. `Place of removal is critical to decide the transaction value. In these cases, there is no categorical findings by lower authorities to mention place-of removal . Hence, Government finds it necessary that place of removal may be decided by original authority before reaching at conclusions on transaction value. As such, the cases need to be remanded back to decide afresh after deciding `place of removal - Matter remanded back - Decided in favour of assessee.

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• 2014 (12) TMI 994
  Denial of rebate claim - non submission of impugned excise invoices - Held that:- Applicant has contended that they have submitted original copies of impugned excise invoices along with rebate claim. During personal hearing also they have submitted copies of acknowledgement of rebate sanctioning office regarding receipt of such rebate claim. On perusal of such acknowledgement, Government finds that at Sr. (2) of such claim, it is clearly mentioned that the applicant submitted impugned excise invoices along with other relevant documents. However, subsequently, deficiency memo cum call for personal hearing cum show cause notice was issued for non submission of said central excise invoices. Government notes that when the applicant submitted proof of submission of impugned excise invoices in form of acknowledgement of rebate sanctioning office, it can not be categorically held against applicant that they have not submitted the same and rebate claims cannot be held inadmissible on this count only. As such, proof of evidence weigh in favour of the applicant and rebate claims can't be held inadmissible alleging non- submission of excise invoices. Even if copy of excise invoices are not submitted, the export of duty paid goods may be ascertained on the basis of other collateral documents. In this case there is no dispute of payment of duty per se, which is also evident from copies of impugned AREs-1 where in such duty particulars are clearly given. Further there is no dispute that such duty paid goods have not actually been exported. Under such circumstances, when substantial condition of export of duty paid goods stands established, the rebate claims cant be held inadmissible considering a situation that excise invoices are not submitted - as regards rebate specifically, it is now a established law that the procedural infraction of Notifications, circulars, etc. are to be condoned if exports have really taken place, and the law is settled now that substantive benefit cannot be denied for procedural lapses. Procedure has been prescribed to facilitate verification of substantive requirement. The core aspect or fundamental requirement for rebate is manufacture and subsequent export. As long as this requirement is met other procedural deviations can be condoned. - Decided in favour of assessee.

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• 2014 (12) TMI 993
  Valuation of goods - Addition of 4% notional profit to the processing charges - Addition on whether the fabrics cleared by the appellant vide 22 invoices mentioned in the show cause notice are Velvet fabrics or not - Commissioner has dropped the demand of excise duty on the 4% notional profit on the ground that the processing charges collected includes the profit elements and therefore, there is no need to make further addition towards profit - Held that:- The claim of the appellant is that they are man-made fabrics. The basis of the Revenue’s claim is that samples drawn from Lot No. 12831 and 14954 were opined to be velvet fabrics by SASMIRA. Samples drawn from the same lot No. by the appellant and subjected to test by SASMIRA vide test report dated 10-8-1998 show them to be other than velvet fabrics. These two lot nos. pertained to invoice No. 5854, dated 16-2-1998 whereas in the show cause notice, the invoices referred to thereunder pertains to the period August, 1997 to January, 1998 and the said invoice does not figure in the show cause notice. In these circumstances, the Revenue has not established its case that the fabrics processed and cleared during August, 1997 to January, 1998 were Velvet fabrics falling under Chapter 58. As regards Revenue’s appeal, since the job-charges already includes profit of the job-worker, the question of adding notional profit of 4% does not arise. Impugned demand is not sustainable in law and consequently the demand for interest under Section 11AB and equivalent amount of penalty imposed under Section 11AC and penalties of Rs. 25,000/- and Rs. 10,000/- imposed respectively on Shri D.G. Agarwal and Shri S.B. Yadav, Excise official of the appellant firm do not survive - Decided in favour of assessee.

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• 2014 (12) TMI 992
  Exemption Notification No. 7/2003-C.E., dated 1-3-2003 - Manufacture of Buckram - rate of duty - 8% or 16% - Held that:- The impugned order passed by the Commissioner (Appeals) is based on a verification report submitted by the Jurisdictional Central Excise Superintendent who has reported that since November, 2002, the respondent had stopped the manufacture of starch based stiffened fabrics called Buckram and had switched over to manufacture of interlining fabric by LDPE powder coating method. Therefore, just because during June, 2003, the respondent had described the goods in the ER-1 return as Buckram by mistake, the same cannot be treated as Buckram in view of the report of the Range Superintendent affirming that during that period the respondent were manufacturing LDPE powder coated interlining fabrics. In the grounds of appeal, the Department has not disputed the report dated 11-8-2005 of the Range Superintendent explaining the process of manufacture and reporting that since November, 2002, the respondent have discontinued the manufacture of starch based stiffened fabrics called Buckram and have switched over to manufacture of LDPE powder coated fabrics to be used as interlining cloths. In view of this, we do not find any merits in the Revenue’s appeal. - Decided against Revenue.

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• 2014 (12) TMI 991
  Clandestine manufacture and clearance of their final product - Held that:- There is no other evidence to show clandestine removal of the goods. It is a well settled that the charges of clandestine removal cannot be upheld on the basis of such theoretical productions calculated on the basis of chemical formula. Manufacturing of formulates is not mechanical process. The same is chemical process where oxygen react with methanol under presence of silver catalyst and resultantly formaldehyde is produced. There are various factors such as purity of water & air, voltage fluctuation, impurity in catalyst, etc. which directly or indirectly affect on and cause variation in the production of formaldehyde. The revenue has not conducted any physical experiment to arrive at the actual production. Otherwise also I find that in the absence of the corroborative evidence, the confirmation of demand stands rightly set aside by Commissioner (Appeals) - Decided against Revenue.

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• 2014 (12) TMI 990
  Manufacture of Curved Steel Roof Panels - fabrication at site - Exemption under Notification No. 3/2005-C.E. - Classification of goods - Classification under Heading No. 7308 or under Heading No. 7210 - Held that:- Commissioner (Appeals)’s order classifying the goods under Heading No. 7210 is not correct, as Heading No. 7210 covers the primary products - “Flat Rolled Products of Iron or Non-alloy Steel, of a width of 600 mm. or more clad, plates or coated”, while the goods, in question, are Roof Panels, which are specifically covered by Heading No. 7308. Since the goods as mentioned in the very first para of the SCN are classifiable under Heading No. 7308 and since the same have been fabricated at site for use in the construction work at that place, the same would be eligible for exemption under Notification No. 3/2005-C.E. (Sl. No. 64). The impugned order, therefore, is not correct. The same is set aside. - Decided in favour of assesse.

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• 2014 (12) TMI 989
  Cenvat Credit - Bogus Invoices - Non receipt of goods mentioned in invoices - Statement given by job worker - Held that:- In the invoices, description of the goods is shown as stainless steel sheets/coil only. There is no specification regarding the grade of the stainless steel sheets/coils. Mere statement given by the supplier does not establish the fact that these stainless steel sheets/coils were of 304, 316 or J4 grade. No test has been conducted of these goods. Further, no enquiry has been made at the end of the supplier regarding the procurement of the stainless steel sheets of 304, 316 or J4 grade. In the absence of any evidence on record, the mere statement of supplier cannot be relied upon. Further the goods were available at the end of the job worker also. No test was conducted to ascertain the quality of steel and merely allegation were made on the basis of marking on the sheets of the figure “200” and presumed that these sheets are of “200” grade only. In these circumstances, where no evidence is available on record and there is no description of the goods regarding the grade of the stainless steel sheets/coil in the invoice, the allegation cannot be made against the respondent that goods were not physically received by the respondent. When there are evidence on record for actual receipt of the goods by the respondent, the ld. Commissioner (Appeals) has rightly set aside the order of adjudication and held that respondent are entitled for Cenvat credit. In these circumstances, I do not find any infirmity in the impugned order, the same is upheld - Decided against Revenue.

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• CST, VAT & Sales Tax

• 2014 (12) TMI 998
  Whether there is a "sale" under the contract - purchase value of bamboo cut bundles - Section 22(1) of Andhra Pradesh General Sales Tax Act, 1957 - Relevant clauses of the agreement between the Government of Andhra Pradesh and the respondent- company for grant of long term leases of forest land for making bamboo available, for the consumption of the respondent, at their paper mills - Held that:- Whether the subject transactions concern 'goods' or 'moveable property' or 'immovable property' - Are the bamboos delivered to the respondent-company, from the departmentally extracted coupes, exigible to tax under the APGST Act – Held that:- While several of the terms and conditions of the agreement are common, both to the bomboo industrial cuts delivered from the departmentally worked coupes and the bomboo extracted, from the allotted coupes, by the company themselves, additional terms and conditions, with regards the supply of departmentally extracted bamboos, were specified in the annexure to the agreement - These conditions related mainly to the mode of delivery, the sale price and the mode of payment - In addition, 7% of the sale price was payable by the respondent-company to compensate the Government for loss of moisture in the bamboos (condition No.6) - In view of Condition 7(ii) of the Annexure to the Agreement, the terms and conditions, as applicable for the bamboo extracted by the respondent-company, were applicable to the bamboo industrial cuts delivered to the respondent-company from the departmentally worked coupes regarding payment of the selling price for the departmentally extracted bamboo industrial cuts - Extraction and supervision charges were also payable by the respondent-company. The "bamboos" were not removable even after they were cut unless they were weighed and permits were granted. Severance of bamboo, even in the departmentally extracted coupes, was not under the contract of sale, but was prior thereto - The bamboos, liable to be cut each year, were not in a "deliverable state" on the date of the agreement - The various clauses in the contract show that there is no "sale", on the contract date, of bamboos as the goods were not in a deliverable state - As the bamboo cannot be cut or removed except as provided therein, the contract is not an agreement to sell bamboos standing in the contract areas, with an accessory licence to enter upon such areas for the purpose of felling and removing the bamboos - Nor is it only in respect of a particular felling season - It embraces not only bamboos which are in existence on the date of the contract, but also bamboos which are to grow and come into existence thereafter. Is the subject contract a grant of a profit a prendre – Held that:- The subject contract is not, and cannot be, a contract of sale of goods - It confers upon the respondent Company a benefit to arise out of land, namely, the right over the bamboos which grow from the soil coupled with several ancillary rights and is thus a grant of a profit a prendre - It is equally not possible to view it as a composite contract one - an agreement relating to standing bamboos agreed to be severed and the other - an agreement relating to bamboos to come into existence in the future - The terms of the Contract make it clear that it is one, integral and indivisible contract which is not capable of being severed - The terms and conditions of the contract confers upon the respondent-company a benefit to arise out of land, and it would thus be an interest in immovable property - It is a grant by the government of an interest in land - The grant of such right, not being for the beneficial enjoyment of any land of the respondent- company, would not be an easement - As the respondent-company was entitled, under the agreement, to take away the bamboos grown even in the departmentally extracted coupes, the agreement, in its entirety (including the part relating to the departmentally extracted bamboos), is a grant of a profit a prendre and is not a sale or purchase of goods exigible to tax under the APGST Act - Being a profit a prendre, or a benefit to arise out of land, any attempt on the part of the State government to tax the amounts, payable under the subject Contract, would not only be ultra vires the APGST Act but also unconstitutional as being beyond the State's taxing power under Entry 54 in List II of the Seventh Schedule to the Constitution of India. Applicability of decision of Supreme Court in the case of Titaghur Paper Mills Co. Ltd [1985 (3) TMI 226 - SUPREME COURT OF INDIA] after the amendment - Held that:- the ratio is applicable to the present case as the relevant parts of the definition of goods continued to remain a part thereof even after its amendment - Decided against the revenue.

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