Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 29, 2018
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Guidelines for processing of applications for financial assistance under the Central Sector Scheme named ‘Seva Bhoj Yojna’ of the Ministry of Culture.
Income Tax
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Reopening of assessment for second time on the day on which the first reassessment was completed on 31.03.2015 is bad in law. Even if there was escapement of income, the AO ought to have brought to taxation on the basis of notice issued on 03.10.2013 u/s 148.
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Disallowance in respect of Hedging Loss - there is no such detail available to show that the alleged transactions entered on the portal of NCDEX were entered to counter or hedge the probable loss from the contract for actual delivery of goods. - To be treated as speculative loss.
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Addition on account of sale of shares - auditors have given a remark that payment has not been made by the company on the sale of the shares and Demat account has not been provided for verification - to hold that the entire sale of shares should be added would be erroneous.
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Quantification of capital gains arising on transfer of immovable property being land - CIT(A) ought to have weighed the jantri value/circle rate vis-à-vis the sale price agreed by the assessee with Melody Complex while granting relief to assessee.
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Interest earned on income-tax refund - AO directed to levy the tax on the interest of income-tax refund at 15% on gross basis.
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Addition as amount paid to Sundry creditors - a half baked enquiry has resulted in an erroneous order passed by the CIT(A).
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Demand notice issued u/s 156 - Treating the petitioner as the relative of the deceased - Merely because the petitioner is residing in the same property where the deceased assessee was living before her death, cannot be a reason to conclude as if the petitioner is also one of the legal heirs of the deceased.
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Extending the due date for filing returns u/s 139(1) - seeking extension of time in Kerala also since the time limit for filing returns in terms of Section 139(1) for larger periods in the State of Jammu & Kashmir was extended - The applications received by the CBDT shall be considered by the CBDT, taking note of the flood situation.
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Stay of recovery of demand - Addition u/s 68 - Taxing capital gains claimed by the assessee as exempt u/s. 10(37) - assessee has been unable to establish a prime facie case - No stay.
Customs
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Refund of SAD - time limit of one year - the Commissioner(Appeals) has committed an error while giving an expanded interpretation qua limitation to favour assessee - Claim of refund rejected.
DGFT
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Allocation of preferential export of sugar to USA under TRQ for the year 2018-19 - Clarification on definition of raw sugar.
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Extension of validity period of Advance Authorisation
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Increased validity and utilisation of the norms ratified by Norms Committee (NC) under Para 4.12 of Hand Book of Procedures 2015-2020 of the Advance Authorization obtained under para 4.07, by other applicants of advance authorisations.
Service Tax
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Refund of accumulated CENVAT Credit - export of service - It is a settled position of law that the authorities while adjudicating the refund application under Rule 5 of the rules, should not look into the aspect of consideration of the requirement of Rule 2 (l) of the rules.
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Refund claim - input services - export of services - The appellant is eligible to avail cenvat credits to get refunds on those services namely club and association, rent a cab management, maintenance and visa service.
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Classification of services - re-rubberisation of rollers provided by them to various customers/clients - demand raised under the category of 'Management, Maintenance or Repair' Service - Since the service is to be as 'Business Auxiliary Services' (BAS) demand set aside.
Central Excise
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Valuation - scrap - with effect from 1st July 2000, with the introduction of transaction value concept in Section 4 of the Central Excise Act, 1944, duty has to be determined on the basis of actual transaction value and not on the basis of any “contemporaneous value”
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CENVAT Credit - input services - Engineering Designs and Drawings for civil and structural works - the definition of ‘input service’ is very wide and includes inputs used in or in relation to the manufacturing activity.
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CENVAT Credit - input services - construction services - alteration and extension of railway track - locomotive engine servicing charges - to be treated as used in the factory - credit allowed
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CENVAT Credit - input services - Event Management Service - these services are in the nature of sales promotion service and would eonomine fall within the inclusive part of definition of input service provided in Rule 2(1) of Cenvat Rules - credit allowed.
VAT
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Whether the admitted activities carried on by the petitioner viz., slaughtering, defeathering, cleaning and cutting the poultry would be construed as an act of processing? - Held Yes
Case Laws:
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Income Tax
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2018 (12) TMI 1526
Extending the due date for filing returns u/s 139(1) - seeking extension of time in Kerala also since the time limit for filing returns in terms of Section 139(1) for larger periods in the State of Jammu & Kashmir was extended - Held that:- In the event of an application being preferred by the petitioners, giving details of the difficulties faced by them in making a claim for the benefit of deduction, exemption or refund within time, we have no reason to think that the CBDT would not consider their applications in accordance with law and taking note of the peculiar difficulties faced by them on account of the devastating flood that affected the State of Kerala in August 2018. As regards those assessee who have filed their returns within the extended time granted under Section 139(1) of the Act namely 31.10.2018, any interest that might have accrued on delayed payment of taxes under the Act can be condoned by the CBDT on an application preferred by the assessee under Section 119(2)(a) of the Act. As mentioned in the case of the applications preferred under Section 119(2)(b), we have no reason to believe that, if an application seeking waiver of interest is preferred by the assessee citing the difficulties faced by them, which led to the delayed payment of taxes, the CBDT will not consider the same in accordance with law and taking note of the flood that affected Kerala. While the specific grievances of the assessee in individual cases can be dealt with by the CBDT through a consideration of the applications filed by the assessee concerned in terms of Section 119(2)(a)/119(2)(b) a general direction for extending the due date for filing returns u/s 139(1) cannot be issued to the Income Tax Department by entertaining these Public Interest Litigations. To issue such directions would be contrary to the scheme of the Act. For the same reason, and in the absence of any material to indicate the nature of applications that were considered by the CBDT, we are not persuaded to think that there has been any discrimination meted out to the assessees in Kerala merely on account of the fact that in Jammu & Kashmir, there was an exercise of power by the CBDT, which led to the extension of last date for filing returns for a longer duration.
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2018 (12) TMI 1525
Stay petition - invoking powers u/s 154 modifying the demand of tax. - recovery proceedings - Held that:- This writ petition is disposed of by directing the 2nd respondent to consider and pass appropriate orders on Ext.P3 stay petition filed along with Ext.P2 appeal, as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a certified copy of this judgment.Till such time, any recovery pursuant to Ext.P1 order, as modified by Ext.P4 order, will stand deferred.
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2018 (12) TMI 1524
Rejection of books of accounts - Held that:- Assessee's book results and to make additions on the grounds that the assessee had made sales at low rates and in some cases sales were to non-existing parties. The Tribunal in the impugned judgment examined relevant material on record and came to the conclusion that the Assessing Officer was not justified in rejecting the book results. The Tribunal also gave detailed reasons why the action of the Assessing Officer in comparing gross profit of other entities engaged in the same business was not justified or correct. We also notice that the CIT appeals had also given substantial relief to the assessee.
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2018 (12) TMI 1523
Demand notice issued u/s 156 - Treating the petitioner as the relative of the deceased - Held that:- One Sulochana was the assessee, who also was no more at the time of passing the impugned proceedings. It is stated by the petitioner that the said deceased assessee is the sister-in-law of the petitioner's mother-in-law. Section 2(41) defines the term relative as follows: “relative”, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. Certainly, the definition of the term relative, as defined under section 2(41), does not include the relationship between the petitioner and the deceased assessee. Therefore, find that the order of assessment and the consequential demand issued on the petitioner by treating the petitioner as the relative of the deceased cannot be sustained in the eye of law. Merely because the petitioner is residing in the same property where the deceased assessee was living before her death, cannot be a reason to conclude as if the petitioner is also one of the legal heirs of the deceased. If such presumption is permitted, it would go against the definition of “relative” as defined under section 2(41). Therefore, find that the impugned order cannot be sustained, insofar as the petitioner is concerned. Accordingly, the Writ Petition is allowed and both the proceedings are quashed only insofar as the petitioner is concerned.
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2018 (12) TMI 1522
Eligibility for deduction u/s. 80IB(10) - construction was not completed within a period envisaged under the statutory provision - Tribunal allowed the claim - Held that:- Tribunal has come to factual findings, essentially holding that the Assessee had entered into an agreement with the previous Promoters and that the Assessee had acquired land along with development rights. Further, that the housing project constructed by the Assessee, consisted of building which only included flats. This project was quite different from the project which the previous developer had conceived. The Assessee had undertaken development and construction of housing project on a piece of land which was different from the land on which the erstwhile Promoters had completed construction of 40 row houses. Under the circumstances, no question of law arises.
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2018 (12) TMI 1521
Lease rentals paid under the Lease Agreement - revenue expenditure - an allowable expenditure - Held that:- We may refer to Accounting Standard 19 issued in the year 2001 and in particular, the Chapter relating to classification of leases and in Clause 8 of the said Chapter, it has been stated that whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than its form. Illustrations have been given pointing out the examples of situation which would normally lead to a lease being classified as finance lease. However, the Tribunal did not make any endeavour to appreciate the documents examining the effect of Accounting Standard 19 as projected by the assessee. Therefore, the matter has to be decided afresh by the Tribunal by examining the documents, effect of Accounting Standard 19 as pointed out by the assessee and then take a decision on merits and in accordance with law. As we are convinced that the Tribunal did not undertake any exercise to examine the factual aspect, we are well justified in interfering with the order passed by the Tribunal and remanding the matter for fresh consideration. Having come to such a conclusion, there would be no necessity of answering the Substantial Questions framed for consideration. The appeals are allowed; the order passed by the Tribunal is set aside and the matter is remanded for fresh consideration to examine all factual and legal issues and proceed in accordance with law and the Substantial Questions of Law framed for consideration are left open
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2018 (12) TMI 1520
Addition as amount paid to Sundry creditors - documents could not be produced - Held that:- It is not clear as to why the documents, which were produced before the CIT(A), were not produced before the Assessing Officer, though the assessee was represented by a Chartered Accountant as its AR. Furthermore, the CIT(A) does not state as to on account of whose illness, the documents could not be produced. In any event, as pointed out by us earlier, no exercise has been done for correlating the document, its validity and genuineness and to consider to what extent the assessee has explained the case. Thus, a half baked enquiry has resulted in an erroneous order passed by the CIT(A). Thus, we are of the clear view that the order passed by the Tribunal, confirming the order passed by the CIT(A), calls for interference. The appeal filed by the Revenue is allowed. Consequently, the order passed by the Tribunal as well as the Commissioner of Income-tax (Appeals)-V, Chennai are set aside and the matter is remanded to the Assessing Officer for fresh consideration, who shall consider the confirmation vouchers placed before him by the assessee and make a thorough verification and redo the assessment under the said head in accordance with law. - Decided in favour of the Revenue.
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2018 (12) TMI 1519
Deduction u/s 10A - Tribunal held that, expenditure incurred in foreign currency which are excluded from the export turnover should also be excluded from total turnover in order to grant relief under 10A - Held that:- Substantial question of law framed for consideration has been answered by the Hon'ble Supreme Court in CIT vs. HCL Technologies Ltd.(2018 (5) TMI 357 - SUPREME COURT), wherein held that definition of total turnover given under Sections 80HHC and 80HHE of the Act cannot be adopted for the purpose of Section 10A of the Act. The Revenue cannot dispute the above legal position, which has been settled by the Hon'ble Supreme Court. In the light of the same, the appeal is dismissed and the substantial question of law is answered against the Revenue.
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2018 (12) TMI 1518
Interest chargeable to Interest Tax or not - Minimum guarantee charges received by the assessee from companies to whom financial assistance is given - ITAT held minimum guarantee charges received by the assessee from companies to whom financial assistance is given is not 'interest' chargeable to Interest Tax - whether Tribunal was right in holding that the financial assistance is not a loan or advance but an investment? - Held that:- Revenue would submit that the Tribunal, in its impugned order, followed the decision of the Allahabad High Court in the case of CIT Vs. Sahara India Savings and Investment Corporation Ltd. [2003 (9) TMI 74 - ALLAHABAD HIGH COURT]. The said decision has been upheld by Hon'ble Supreme Court [2009 (11) TMI 25 - SUPREME COURT OF INDIA] in the decision and the substantial question of law has been answered in favour of the assessee as held Interest-tax Act is attracted only in respect of interest on loans and advances and the additional discount charges which is an amount given as a premium, would not attract the provisions of the Interest-tax act. The Tribunal is therefore correct in excluding additional discount charges from the chargeable interest under the Interest-tax Act.
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2018 (12) TMI 1517
Reopening of assessment u/s 147 - mere change of opinion - Held that:- For initiating a proceeding under section 147, the scrutiny assessment having been carried out, the limitation would be applicable, is the contention of the assessee. We need not go into this controversy since we have found that the block assessment could have taken note of and took note of the bank transactions, the details of which were obtained from the banks, on specific directions based on the partial details of such accounts recovered on search. As a matter of fact the bank transactions in its entirety were noticed by the AO who carried out the block assessment and decided to treat it as inclusive of professional income. The attempt of the next incumbent officer who issued notice under section 148, is a mere change of opinion. We hence refuse to answer the second question of law framed by us for reason of the answer to the first having decided the appeals. The first question, on the reasoning above of mere change of opinion is answered in favour of the assessee and against the Revenue. We deem it fit, on the answer given by us, to allow the appeals thus setting aside the proceedings initiated, under section 148 read with section 147, against the assessee.
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2018 (12) TMI 1516
Reopening of assessment - reasons not supplied to the assessee during the contemporary period - Held that:- In the present case, admittedly, such reasons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, the Tribunal in our opinion was perfectly justified in quashing such reassessment order. - decided against revenue
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2018 (12) TMI 1515
Adjustment made on account of income tax on brand usage royalty - Held that:- We find that the application made by the assessee to RBI for brand usage agreement specifically mentions that the royalty to be remitted is net of taxes. Further, the approval was received from the RBI to remit the royalty on brand usage by the assessee @ 1% net of taxes. Considering the brand usage agreement vis-à-vis the approval granted by RBI, it can be safely inferred that taxes were liability of J&J India under the terms of agreement. The assessee has entered into a commercial arrangement with J&J US and it has been so arranged that the payment of taxes have to be borne by the assessee being a commercial arrangement, the same should not be questioned while calculating arm's length price. Reliance by the assessee on the decision of the Tribunal in the case of Dresser Rand India Pvt. Ltd. [2012 (10) TMI 127 - ITAT MUMBAI] is well founded. Considering the entire facts in totality in the light of the brand usage agreement and the approval of the RBI, the findings of the Ld. CIT(A) is set aside. The AO is directed to delete the addition. Addition on account of unrecorded production - Held that:- The special auditor after extensive study of production process did not find any issue against the assessee. Based on the Audit Report, no addition was made in A.Y. 1993-94. Copy of Assessment Order and Audit Report is placed on record. Further, based on the said Audit Report, no addition was made in A.Y. 1993-94. The ld. AR further submits that similar addition was made for A.Y. 2002-03 and the Tribunal on the basis of decision of A.Y. 1991-92 deleted the addition. By following the order of Tribunal, similar issue was decided in favour of assessee by Tribunal in A.Y. 2003-04 & A.Y. 2004-05. Copy of which placed on record. The ld. DR for the Revenue after going through the various as referred by ld. AR not disputed the factual position canvassed by ld. AR of the assessee. MODVAT credit relating to opening stock - Held that:- CIT(A) allowed relief to the assessee by following the decision of Hon’ble High Court in Mahalaxmi Glass Works [2009 (4) TMI 182 - BOMBAY HIGH COURT] which was also followed by his predecessors in A.Y. 2003- 04 & A.Y. 2004-05. Considering the consistent view on the issue which was followed by ld. CIT(A), therefore, we do not find any justification to interfere in his order. Disallowance of depreciation on testing equipment - Held that:- As decided in assessee's own case in A.Y. 2000- 01 Depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. The learned Departmental Representative did not contravene this position. Respectfully following the Tribunal order passed in another group concern of the assessee, whose facts have not been distinguished by the ld. DR, we uphold the impugned order on this issue. disallowance of 10% of payment made to Crawford Bailey & Co. - addition u/s 40A - Held that:- As decided in assessee's own case for A.Y. 2002- 03 AO has disallowed invoking provisions of Sec. 40A(2)(b) on fees paid for legal counseling. We find that the Ld. CIT(A) has deleted the addition holding that for the payments for legal counseling, it is futile to think of comparables because counsels may not charge standard fee but may charge according to the issue involved. The Ld. CIT(A) further observed that if the AO wanted to disallow on the ground of excessive payment, he ought to have established excessiveness of the payment. This has not been done. Considering the decision of the Tribunal in assessee's own case, in the light of the observations made by the Ld. CIT(A), we do not find any reason to interfere with the findings of the Ld. CIT(A).
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2018 (12) TMI 1514
TDS u/s 194C - Non deduction of TDS u/s 40(a)(ia) - freight and loading / unloading charges - Held that:- There is no dispute about the assessee being engaged in transport and handling services. It admittedly made the impugned freight and loading / unloading charges to four parties M/s Jai Gopal Pariwahan, Cargo Liners Pvt. Ltd., Jagannath Enterprise and R.M. Logistics. This what has made both the lower authorities to invoke sec. 40(a)(ia) to disallow the twin payments on account of non-deduction of TDS. CIT-DR vehemently contends during the course of hearing that the assessee has made the impugned payments u/s 194C as contractual expenses & therefore, it ought to have deducted mandatory TDS thereupon. He strongly supports both the lower authorities’ action invoking the impugned disallowance. No reason to concur with Revenue’s above vehement contentions. The CIT(A)’s above extracted detailed reasoning makes it clear that he has nowhere concluded that the assessee’s payees had ever made themselves liable for its freight or loading / unloading responsibilites nor there is any material on record indicating the assessee to have passed on any of its contractual liability to the four payees thereby treating them as sub-contractors inviting sec. 194C TDS deduction. The appellant was not liable to deduct TDS u/s. 194C(1) for payments made to the outside parties and consequently the disallowance made u/s.40(a)(ia) by the authorities below are deleted We adopt the above detailed reasoning mutatis mutandis to conclude that both the lower authorities have erred in invoking the two disallowance(s) under challenge u/s 40(a)(ia) of the Act. The same are accordingly deleted. - Decided in favour of assessee.
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2018 (12) TMI 1513
Penalty u/s 271AAB (1)(a) - whether the authorized officer had found any specified asset i.e. any money, bullion, jewellery or other valuable article or things as per explanation (c) forming of sec. 271AAB? - Held that:- There is no such material indicated during the course of hearing. We find that co-ordinate bench’s order in ACIT vs. Sri Kanwar Sain Gupta [2018 (6) TMI 1559 - ITAT KOLKATA] declines Revenue’s identical arguments as held section 271AAB of the Act applies in relation to the impugned penalty @ 10% of the undisclosed income as stood defined in Explanation (c) thereto. There is no material in the case file to indicate that the assessee's undisclosed income represents any money, bullion, jewellery or valuable article or any entry in the books or other documents therein. We make it clear that we are dealing with a penalty provision in tax statute which is to be strictly interpreted. We therefore are of the opinion that the CIT(A) has rightly deleted the impugned penalty as the assessee's search statement nowhere indicated the corresponding undisclosed income as per specific requirement in the Act. - Decided in favour of assessee.
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2018 (12) TMI 1512
Addition for unexplained cash credit - identity, genuineness and creditworthiness as the sale deeds - Held that:- Sale consideration received by the assessee has been duly offered to tax in the year when sale deeds were registered and due taxes have been paid thereof. It is also evident from the record that the excess amount left with the assessee, if any was also refunded to the respective parties and the same is verifiable from going through para 13 of the registered sale deeds where the purchaser accepts to have received any excess amount received as advance and it has been duly admitted that the advanced amount have been received. So in nutshell there seems to be no loss to the revenue as regards to sale consideration received. Identity is already not disputed. Sale consideration received in cash as well as the cheque has also been accepted by the alleged cash creditors. We find merit in the contention of Ld. Counsel for the assessee that the alleged cash credits of ₹ 43,12,250/- are duly explained with regard to the identity, genuineness and creditworthiness as the sale deeds have been registered in the name of the four persons accepting the transactions. Therefore no addition was called for u/s 68 - Decided in favour of assessee. Disallowance for cash expenditure - Held that:- We find that before the first appellate authority necessary details were placed and remand report was called for but Ld. A.O objected to acceptance of additional evidence. We find that statements of some of vendors Shri Gyanswaroop Vishwakarma who did the electrification work, Shri Firoz Khan who did the labour work and Shri Narendra Kumar Thakur who had did the labour work gave their statements on oath stating that they received the amounts from the assessee for various works provided by them. All necessary vouchers have also been placed on record of which major are cash expenses. Books of accounts have been maintained. 10% disallowance of the impugned expenditure will be justified.
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2018 (12) TMI 1511
Interest earned on income-tax refund - taxed as income from other sources as per Article 12(2) of the DTAA between Indian and UK - income accrued in India - Held that:- A careful perusal of the order of the Tribunal and the order giving effect to the directions of the ITAT amply makes it clear that the decision of a coordinate bench of this Tribunal in the case of ACIT, Dehradun vs Clough Engineering Ltd. [2011 (5) TMI 562 - ITAT, DELHI] is applicable to the facts of the case and the interest on income-tax refund cannot be treated as effectively connected with PE of the assessee and has to be taxed as per beneficial provisions of the treaty between the two countries. In view of the decisions in the case of Clough Engineering Ltd. (supra) and the stand taken by the revenue in assessee’s own case for earlier years, we are of the considered opinion that the interest earned on income-tax refund has to be taxed as income from other sources as per Article 12(2) of the DTAA between Indian and UK at 15% on gross basis. With this view of the matter, we uphold the contention of the assessee and direct the learned AO to levy the tax on the interest of income-tax refund at 15% on gross basis. Now coming to the appeal of the revenue challenging the directions of the DRP in respect of interest free foreign bank account and also foreign exchange gains on reinstatement of bank balance of foreign bank account during the year. At the outset, it is brought to our notice by the learned AR that for the Asstt. Year 2006-07, a coordinate bench of this Tribunal considered both these issues at length and reached a conclusion that the interest earned outside India has to be excluded and also that the gain on account of fluctuations of foreign exchange on reinstatement of balance lying in the foreign bank outside India should not be subjected to tax in India at all. There is no change of facts for this year from the earlier years. We, therefore, find it difficult to take a different view from the one taken. While respectfully following the same, we hold these two issues in favour of the assessee and find the grounds of appeal of the revenue devoid of merits.
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2018 (12) TMI 1510
Addition u/s 68 - treating the share capital and share premium amount as unexplained cash credits - Held that:- CIT(A) was not justified in treating the share premium amount of ₹ 28 lacs received by the assessee as unexplained and enhancing the addition made by the AO to that extent. He has contended that the assessee is very much in a position to produce the shareholders for verification before the AO and also to produce all the relevant documentary evidence to explain the share capital as well as share premium amounts in terms of section 68 and urged that an opportunity may be given to the assessee by sending the matter back to the AO. Although the learned DR has opposed this plea made by the learned counsel for the assessee by submitting that proper and sufficient opportunity has already been given by the authorities below to the assessee consider it fair and proper and in the interest of justice to give one more opportunity to the assessee to explain the relevant cash credits representing share capital and share premium amounts in terms of section 68 keeping in view all the facts and circumstances of the case - restore this matter to the file of the AO for deciding the same afresh after giving one more opportunity of being heard to the assessee - Appeal of the assessee is treated as allowed for statistical purpose.
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2018 (12) TMI 1509
Rejection of books of account - estimation of income of the assessee by applying the N.P. rate of 8.5%, 9.5% and 10% for the A.Y. 2012-13 to 2014-15 respectively - CIT-A's power of enhancement U/s 251 - Held that:- In the case in hand, the Assessing Officer made certain disallowances of expenses while completing the assessment U/s 143(3) of the Act whereas the ld. CIT(A) invoked the powers to enhance the assessment by rejecting the books of account and consequently the income of the assessee was enhanced by applying the G.P. rate to estimate the income of the assessee. Therefore, it is clear that the said issue and aspect of not accepting the book results of the assessee was never taken up by the Assessing Officer in the scrutiny assessments of the assessee. Even if the Assessing Officer ought to have considered the said point of correctness of the books of account and rejection of same U/s 145(3) of the Act if the said matter was not taken up for scrutiny and enquiry then it is a subject matter falling in the ambit of revisionary power U/s 263 of the Act due to the reason that there was a complete lack of enquiry on the part of the Assessing Officer to examine the correctness of books of account. Since this was not at all subject matter of the assessment, therefore, it cannot be a subject matter of enhancement of income U/s 251 - As relying on SH. JAGDISH NARAYAN SHARMA VERSUS ITO WARD-7 (2) [2018 (7) TMI 1398 - ITAT JAIPUR] we set aside the order of the ld. CIT(A) qua this issue being beyond the jurisdiction of the ld. CIT(A). Rejection of books of account by the ld. CIT(A) is not valid as not based on any material defect pointed out by the CIT(A), hence, the same is set aside. TDS u/s 194C - payments of transportation to various contractors without deduction of TDS - Disallowance made U/s 40(a)(ia) - Held that:- CIT(A) has considered the fact of production of relevant information as printed on challan/builties issued by the recipients in respect of the payment on account of transportation of goods under contract and to that extent the ld. CIT(A) has deleted the disallowance made by the Assessing Officer. The revenue has challenged the order of the ld. CIT(A),however, it is not disputed by the revenue that the record produced by the assessee contains the requisite information as required U/s 194C(6) of the Act. Hence, in view of the various decisions as relied upon by the assessee and followed by the ld. CIT(A), we do not find any reason to interfere with the order of the ld. CIT(A) so far as the disallowance made U/s 40(a)(ia) of the Act is deleted. Scope of amendment brought into the provisions of Section 40(a)(ia) - We find merits in the alternative plea of the ld AR that the amendment brought into the provisions of Section 40(a)(ia) of the Act by the Finance Act, 2015 has been held as remedial in nature and retrospective in applicability -amendment brought into Section 40(a)(ia) of the Act has been considered at retrospective in nature. Accordingly, the disallowance sustained by the ld. CIT(A) is restricted to 30% of the amount. The Assessing Officer is directed to recomputed the disallowance of 30% of the sum paid without TDS which was sustained by the ld. CIT(A). Disallowance of employees contribution to PF and ESI U/s 43B - Held that:- We are of the view that where the PF and/or EPF, CPF, GPF etc., if paid after the due date under respective Act but before filing of the return of income under Section 139(1), cannot be disallowed under Section 43B or under Section 36(1)(va) of the IT Act. See COMMISSIONER OF INCOME TAX, JAIPUR-II VERSUS JAIPUR VIDYUT VITRAN NIGAM LTD AND RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT]. Disallowance of service tax - claim denied by the authorities on the ground that this service tax liability pertains to the A.Y. 2012-13 and not for the A.Y. 2013-14 - Held that:- There is no dispute that the payment of tax is allowed only on actual payment as per Section 43B of the Act and not on the basis of accrual of the liability. It is matter of fact that the liability is not in dispute and the disallowance is made only on account of year of allowability of claim. It is pertinent to note that when both the years were before the ld. CIT(A) and decided by the composite order then if the claim of assessee regarding actual liability of service tax was allowable in the assessment year 2012-13 then instead of sustaining the disallowance for the A.Y. 2013-14, the ld. CIT(A) ought to have allowed the claim of the assessee in terms of the provisions of Section 43B or at the best for the A.Y. 2012-13. Hence, we direct the Assessing Officer to allow the claim of the assessee for the A.Y. 2012-13. Disallowance of service tax - Held that:- Assessing Officer and the ld. CIT(A) has disallowed this claim on the ground that this demand was crystallized in the F.Y. 2013-14, which is relevant to the assessment year 2014-15 and not for the A.Y. 2013-14. An identical issue has been considered by us while deciding ground No. 7 of this appeal. Accordingly, the Assessing Officer is directed to allow the claim for the A.Y. 2014-15 which is also decided by the ld. CIT(A) by composite order and is being decided by us in this order. Deductions made by the awarders of the contract/clients which includes a sum towards the loss and damages - AO held that the alleged deduction are not supported by documentary evidence - Held that:- , there is no dispute that the assessee has produced documentary evidence in support of the claim of deduction made by the clients only to the extent of ₹ 22,12,096/-. As regards the remaining deductions, the assessee has not produced any documentary evidence, however, the assessee has claimed that these deductions were made by the awarders of the contract on account of damages and losses. Since the claim is not supported by any documentary evidence, however, the facts remains that the assessee has not received the amount to the extent of the deduction stated to have been made by the parties for whom the assessee has executed the work. Therefore, it is pure matter of fact and requires a verification and confirmation on behalf of the parties. Accordingly, in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of the Assessing Officer to verify the correctness of the claim. Disallowance of interest on account of interest free advances given - Held that:- not disputed by the revenue that the assessee has shown an interest free loan of ₹ 16.5 crores from M/s KSK Mahanandi Power Co. Ltd.. Considering the said amount of interest free loan of ₹ 16.5 crores, the loan given by the assessee is otherwise covered by the said interest free loan. Hence, the assessee has explained the availabilities of interest free funds for the interest free advance to the group concern then no disallowance on account of interest is called for. AO has also not considered the aspect of commercial expediency for giving the advance to the group concerns. Accordingly the disallowance made by the Assessing Officer in respect of ₹ 2,06,64,063/- which was not given during the year under consideration and no disallowance was made in the earlier year further the assessee was having sufficient interest free funds to give the advances then the disallowance made by the Assessing Officer on this account is not justified and the same is called for and is deleted.
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2018 (12) TMI 1508
Assessment u/s 153A - Addition merely relying upon the statement of the appellant recorded u/sec. 132(4) - as per assessee statement recorded allegedly during the course of search was not free and fair and therefore addition cannot be made on that basis - Held that:- Referring to submission filed before the Ld. CIT(A) reiterating that surrender made by assessee and her husband was not voluntary and was under undue pressure from the search officials with assurance to conclude search. However, the assessee explained the source of each and every asset/loose paper found during the course of search and submitted before AO and Ld. CIT(A) that as to why additions cannot be made in respect of such assets/loose documents. The AO made an abrupt addition of ₹ 1,50,00,000/- which was affirmed by Ld. CIT(A) as against amount of ₹ 15, 58,632/- offered by the assessee suo-moto before the Ld. CIT(A). We also note that the case laws cited by the Ld. CIT(DR) are not exactly on the same facts and circumstances of the present case, hence, does not support the case of the Revenue. Keeping in view all as well as the CBDT Instructions vide its Instructions No. F. No. 286/2/2003-IT (Inv.II), dated 10.3.2003 has made it clear that reliance shall not be solely placed on the statements recorded in the search survey - we delete the addition in dispute and allow the grounds raised by the assessee.
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2018 (12) TMI 1507
Addition on account of premium received against transfer of tenancy rights - considering the receipts as “Capital receipts” - Held that:- CIT(A) has decided the issue in favour of the assessee after considering the documentary evidences furnished by the assessee and the decision reached by the ITAT in the case of assessee for A.Y. 2005-06 which was followed in assessment year 2006-07, 2007-08 and 2008-09. CIT(A) has also followed the decision of Tribunal in A.Y. 2009-10. There being no contrary material on record from the side of Revenue to take a contrary view, we find no justification to disturb the findings reached by the CIT(A). We, think it appropriate to add that the asset, the tenancy right of which were transferred by the assessee was undoubtedly an income earning source and therefore, the amount received against transfer of tenancy rights should have been treated as compensation for sterilization of profit earning source and not in ordinary course of its business. For this, we find support from the decision of CIT vs. Saurashtra Cement Ltd. [2010 (7) TMI 11 - SUPREME COURT] relied by the ld. AR. - Decided in favour of assessee. Disallowance u/s. 14A - Held that:- Jurisdictional High Court after considering the decision of Special Bench of Tribunal in Cheminvest Ltd. [2009 (8) TMI 126 - ITAT DELHI-B] and Rajendra Prasad Moody [1978 (10) TMI 133 - SUPREME COURT] has held that merely because tax auditor had suggested in tax audit report that there ought to be such disallowance, it could not be a ground to make disallowance in terms of section 14A read with rule 8D. In the instant case also, the Assessing Officer has only speculated that the income from investment in share shall be exempt from tax, but there is no finding that any such income has been earned by the assessee or not. There are plethora of decisions to support the aforesaid finding. We accordingly, do not find any infirmity in the impugned order on this count. Accordingly, the appeal of the Revenue deserves to be dismissed. Disallowance of bad debt written off in the name of Punjab Fibers Ltd. - Held that:- Non-recoverability of advance in the year under consideration either in terms of money or in terms of supply of goods. The assessee has filed copy of agreement between the parties which has been doubted without any verification and the impugned amount has been written off in the books of assessee as irrecoverable advance. Even if such write off is not held to be in the nature of bad debt, then also it certainly would be in the nature of business loss. CIT(A) appears to have further treated the impugned debt as loan given by the assessee on the premise that the purchases made in earlier years and in the year under consideration were not shown either in the sales or in the closing stock. This, however, at the most be a ground from making trading addition in the hands of the assessee or for rejection of books of account, but cannot be a valid ground to hold the money advanced as loan by the assessee to Punjab Fibers Ltd., which was advanced during the ordinary course of its business. No material is placed on record on behalf of the Revenue to substantiate that the amount advanced by assessee to M/s. Punjab Fibers Ltd. was a loan transaction and not an advance against supply of goods as per agreement produced. We accordingly, are not inclined to justify the sustenance of addition, being a business loss allowable u/s. 28 of the IT Act. Accordingly, the impugned addition deserves to be deleted and the cross-objection of the assessee has to be allowed.
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2018 (12) TMI 1506
Undisclosed long term capital gains - quantification of capital gains arising on transfer of immovable property being land - ascertainment of jantri value/circle rate - Whether the rights acquired under the agreement to sale is a capital asset or not? - whether such right stands transferred/extinguished within the meaning of Section 2(47) while executing the agreement to sale dated 25.03.2009 as a confirming party having regard to provisions of Section 2(14) and Section 2(47)? Held that:- The consideration agreed by the ultimate purchaser over and above the consideration freezed by the assessee with Melody Complex was directly given by ultimate buyer (Gatil Properties) to the intermediary/confirming party (Melody Complex). There is no material available on record to hold that the assessee herein is the beneficiary of the excess consideration. Noticeably, the provisions of Section 50C of the Act have not been invoked at all. Therefore, where the deeming provisions of Section 50C has not been invoked and there is nothing to demonstrate that the assessee has received more than what is offered for the purposes of determination of capital gains, it is difficult to draw inference against the assessee on the basis of suspicion howsoever strong. We may however hasten to add that the CIT(A) ought to have weighed the jantri value vis-à-vis the sale price agreed by the assessee with Melody Complex while granting relief to assessee. Thus, the order of the CIT(A) suffers from inadequacy or infirmity to this extent. No plausible reason to depart from the view taken by the first appeallate authority, until it is found that jantri value of parcels of land in question is higher than the sale price agreed by the assessee with Melody Complex. Thus remit the matter back to the file of AO to ascertain the jantri value/circle rate existing at the time of agreement with Melody Complex on 15.09.2008 and substitute the same with sale consideration agreed by the assessee with Melody Complex in case it is found higher than the actual sale consideration of ₹ 19.10 Lakhs. - issue is required to be restored back to the file of AO for its consideration. - Appeal of the Revenue is allowed for statistical purposes.
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2018 (12) TMI 1505
Addition on account of sale of shares - auditors have given a remark that payment has not been made by the company on the sale of the shares and Demat account has not been provided for verification - Held that:- From the perusal of the material placed it cannot be disputed that amount of ₹ 1,20,56,085/- on account of sale of shares have been duly reflected in the P&L account which is fairly evident from the break up given by the learned counsel as incorporated above. The profit on the sale of shares amounting to ₹ 28,88,975/- had already been disclosed in the accounts. Even from the bare perusal of the auditor’s note it is seen that the amount has been shown by the assessee from sale of shares albeit it has been noted that there is some dispute against the broker for recovery of the amount. Once there is no dispute regarding sale of shares and profit on such shares duly disclosed, then to treat that the whole amount of sale separately as income of the assessee once again would be absurd. It is not the case of the Assessing Officer and ld. CIT(A) that the transaction of sale of shares is not genuine. Whence, neither the auditor has disputed the sale nor the accounts otherwise show that the sale of shares has not been reflected, then to hold that the entire sale of shares should be added would be erroneous. Thus, the addition of this amount in wake of aforesaid documents can be upheld and same is directed to be deleted. Disallowance being 4/5th of the expenditure claimed - amount incurred in respect of Bus Queue Shelters which has been treated as Deferred Revenue Expenditure by the AO - whether Department can treat a revenue expenditure claimed by the assessee as deferred revenue expenditure to be allowable over a period of time - Held that:- As decided in TAPARIA TOOLS LIMITED VERSUS JOINT COMMISSIONER OF INCOME TAX [2015 (3) TMI 853 - SUPREME COURT] once the assessee has shown it as revenue expenditure, then revenue cannot disallow the same by spreading it over the years and allow only part of it. In any case, this issue stands decided in favour of the assessee in the succeeding years, therefore, respectfully following the order of the Tribunal,we decide this issue in favour of the assessee. Accordingly, this ground of the assessee is allowed. Disallowance of expenditure in respect of charges for late filing of Service Tax return - Held that:- After hearing both the parties and looking to the nature of disallowance made, it is seen that the payment has been made for delay in filing of return which is mere compensatory in nature and is not on account of any offence prohibited under any law. Hence such a payment cannot be disallowed by invoking Explanation to Section 371 and the same is hereby directed to be deleted. Addition of expenditure in respect of Bihar Project Expense - AO Denied the claim on the ground that assessee could not prove the expenses nor any nexus with business activity was submitted - Held that:- Even before us, the assessee has only furnished details and ledger account but no evidences of such expenses have been filed to show that the same has been incurred for the purpose of business. Accordingly, the action of the authorities below is upheld. Thus, this ground is dismissed. Addition on account of notional interest on the amount of loans and advances - Held that:- From the perusal of the financial statements it is quite evident that the assessee has huge surplus funds aggregating to ₹ 15.75 crore and thus, when assessee has such huge interest free surplus funds then presumption is always there that these funds must have given out of surplus funds This proposition has been upheld by catena of judgment like, CIT vs. Bharti Televentures Ltd. [2011 (1) TMI 326 - DELHI HIGH COURT]. No reason to sustain such a disallowance of notional interest and same is directed to be deleted. Disallowance of sum on account of notional interest on investment in a joint venture with a purpose to develop a residential plot belonging to Director the company - Held that:- Assessee has made investment in a joint venture for the purpose of developing a residential plot and disallowance of interest has been made on notional basis on the ground that the Director has more than 20% of interest in the company and interest-bearing funds have been diverted. Once assessee’s interest free surplus funds far exceeds the funds given to sister concern or to any joint venture company, then to hold that the said amount must have been given free interest-bearing funds would be farfetched so as to make any kind of disallowance of notional interest. Accordingly, following the same reasoning and the finding given in the foregoing paragraph, we direct the Assessing Officer to delete the said addition. Addition on account of share capital/share premium raised by the assessee during the year from two shareholder companies - Held that:- The assessee cannot prove the source of the source and if there was any dubious nature of transaction for routing any unaccounted money then onus was upon the revenue to prove it. Even at the remand stage also, no inquiry whatsoever has been made by the Assessing Officer to prove that assessee’s own accounted money has been routed through these companies. Even if during the year, these companies did not have any revenue from operations, but if it is an investment company which has funds available with it in the form of share capital and share application money which has been made for the purpose of investment in other group companies, then it cannot be held that their source is not proved or these companies did not have any creditworthiness. Thus, in this case, nature and the source of the credit has been fully explained and without there being any contrary material brought on record by the department the addition cannot be sustained u/s 68; and consequently, same is directed to be deleted. Disallowance u/s.40a(ia) - assessee has raised loan from NBFC and has paid interest as claimed as an expenditure but the assessee has not deducted TDS on such a payment - scope of amended provision - Held that:- efore us the ld. counsel though admitted that TDS has not been deducted but now in view of 3rd proviso to section 40(a)(ia), brought by the Finance Act, 2014, w.e.f. 2014-2015, the disallowance if at all which could be made, would be 30% of the expenditure claimed, and therefore, the disallowance if at all should be restricted to 30%. Such a proviso has to be given retrospective effect in view of various decisions, like in the case of CIT vs. Ansal Land Mark Township which was in respect of 2nd proviso to Section 40a(ia). He submitted that same principle would apply here also. Accordingly, we direct the Assessing Officer that disallowance should be restricted to 30% in view of the newly inserted proviso. Thus, this ground is partly allowed.
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2018 (12) TMI 1504
Levy of penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that:- Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. In the instant case the AO while levying penalty u/s 271(1)(c) has observed that the assessee has concealed the particulars of his income and has also furnished inaccurate particulars thereof. Thus, he is not specific as to whether the penalty is levied for concealment of income or for furnishing inaccurate particulars of income. - Decided in favour of assessee.
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2018 (12) TMI 1503
Disallowing assessee’s salary expense as bogus - CIT DR vehemently contends seeking to revive the impugned salary disallowance as bogus expenditure - Held that:- We make it clear first of all that assessee has already filed a compilation chart of its total salary and wages vis-a-vis service income right from assessment year 2009-10 to impugned assessment year 2011-12 sufficiently indicating the impugned expenditure to be within same range. It has come on record that assessee runs 24 working establishments at different places and its payees ESI/PF details form part of record. AO never made even a single effort to either summon any of the assessee’s payees or for getting their records verified from State Insurance or PF authorities. We therefore conclude that the CIT(A) has rightly reversed assessment findings disallowing assessee’s salary expenditure claimed to be bogus in this peculiar facts and circumstances. The Revenue fails in its instant first substantive ground therefore. Addition in the nature of undisclosed income due to alleged difference shown and Form 26AS - Held that:- Assessee has successfully reconciled the impugned difference emanating for the sole reason of non-recognition of income in the impugned assessment year. The Revenue fails to dispute all these clinching reconciliation details. - Decided against revenue
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2018 (12) TMI 1502
Capital expenditure for scientific development expenses u/s 35(1)(iv) - revenue expenditure has not been doubted on its genuineness then the same even if not having connection with the research and development activity, is still allowable as business expenditure u/s 37(1) - Held that:- Hon’ble High Court of Mumbai in the case of CIT V/s Sales Magnesite (P) Ltd [1994 (11) TMI 38 - BOMBAY HIGH COURT] held that “commercial expediency must be decided from businessmen’s point of view. Even expenditure incurred voluntarily on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business would be deductible under this section. The question whether it was necessary or commercially expedient or not is a question that has to be decided from the point of view of the businessman and not by the subjective standard of reasonableness of the revenue”. Hon’ble Apex Court in the case of CIT V/s Dhanrajgirji Raja Narasasingirji [1973 (3) TMI 6 - SUPREME COURT] held that “it is not open to the department to prescribe what expenditure an assessee should incur and in what circumstances he should incur that expenditure”. As in the case of Hemraj Nebhomal V CIT [2005 (3) TMI 76 - MADHYA PRADESH HIGH COURT] held that “Once the conditions laid down in section 37(1) are found satisfied, it is not proper on the part of the taxing authorities to probe into the question as to whether the expenditure is legitimate or necessary etc. This type of inquiry is neither contemplated nor called for. It is only when the Assessing Officer finds that the claim made is bogus or false or not incurred as a fact, it can be disallowed, otherwise not valid" Thus we are of the considered view that the alleged revenue expenditure incurred needs to be allowed as business expenditure incurred for scientific research and development activity u/s 35(1)(iv) and we therefore set aside the finding of CIT(A) making an appropriation of the expenditure between commercial and agricultural activity completely ignoring the fact that separate details were maintained by the assessee including quantitative details of goods produced under both the activities, no major abnormality in the percentage of expenditure of the total agricultural proceeds consistently shown in the preceding years and most importantly no material evidence has been placed before us which could prove that the assessee has intentionally claimed the expenditure relating to agricultural operations against the revenue from commercial activity just to evade tax. Addition made on account of disproportionate agricultural expenses - A.O disallowed this amount by taking the basis of percentage of expense of the agricultural proceeds of the preceding year and applied it to Assessment Year 2008-09 wherein the assessee claimed lower percentage of the expenditure - CIT(A) sustained this addition - Held that:- The expenditure claimed by the assessee against the agricultural activities comes to 20.91% for Assessment Year 2007-08 and it decreased to 16.39% in Assessment Year 2008-09. The reason for the decrease in the percentage in expenditure given by the assessee are general in nature and the submissions mainly included the reason for increase in revenue due to better selling price and use of varieties of hybrid seeds. Nothing concrete has been placed on record to show that why the expenses decreased during the year even when other expenditure on commercial activities have increased in comparison to preceding years. No plausible reason with documentary evidences were placed before us. No reason to interfere in the finding of Ld.CIT(A) and therefore confirm the addition of ₹ 10,48,112/- made by the A.O on account of disproportionate agricultural expenses. Accordingly Ground No.3 of the assessee for Assessment Year 2008-09 is dismissed. Addition u/s 36(1)(iii) r.w.s. 40A(2)(b) - Held that:- Apex Court in the case of S.A. Builders V/s CIT [2006 (12) TMI 82 - SUPREME COURT] held that “borrowed funds advance to a third party should be for commercial expediency, if it is sought to be allowed u/s 36(1)(iii). It can be said to be advanced to the sister concern for commercial expediency where holding company (assessee) has a deep interest in its subsidiary and the holding company holds advances the borrowed money, the subsidiary and the same is used by the subsidiary for some business purposes, the holding company would ordinarily be entitled for deduction of interest on its borrowed funds” - A.O failed to appreciate the fact that similar type of addition was made in the case of the assessee for Assessment Year 2003-04 which was deleted by Ld.CIT(A) and subsequently the revenue could not succeed before the Tribunal as the decision of the Ld.CIT(A) was upheld - no disallowance was called for u/s 36(1)(iii) r.w.s. 40A(2)(b) - Decided in favour of assessee.
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2018 (12) TMI 1501
Interest u/s 234A & 234B - benefit of the TDS deducted - Held that:- As agreed by both the sides that the matter needs to be set aside to the file of the AO with a direction to decide the issue afresh in the light of decision in the case of ITO Vs. Bachu Lal Kapoor Kewal Ram [1965 (12) TMI 24 - SUPREME COURT]. The assessee stated that specific time limit should be prescribed to the Assessing Officer for deciding the issue. Considering we deem it proper to restore the issue to the file of the AO with a direction to adjudicate the issue regarding granting of TDS benefit deducted in the case of M/s. MSRC in its return of income in A. Y. 2008-09 to the assessee and to re-compute the interest u/s 234A & 234B of the IT Act. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee within a period of 3 months from the date of receiving of this order by him. We hold and direct accordingly. The grounds raised by the revenue are accordingly allowed for statistical purpose.
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2018 (12) TMI 1500
Revision u/s 263 - assessee had made provision for excise duty on closing stock of finished goods to the tune of ₹ 5,74,21,924/- and that as per the tax audit report of the assessee, a sum of ₹ 30,45,000/- only was paid before the due date of filing of return of income u/s 139(1) of the Act and accordingly, the remaining sum of ₹ 5,43,76,924/- ought to have been disallowed u/s 43B Held that:- As per the provisions of section 145A the excise duty component on closing stock of finished goods is required to be provided for inclusion in the valuation of closing stock of finished goods thereby making it revenue neutral. The assessee sought to explain that this excise duty provision on closing stock of finished goods gets effectively adjusted with the available input credit in the subsequent year before us due date of filing of return of income under 139(1) of the Act. We find that these facts are not properly appreciated by the CIT and we hold that the Ld. CIT had erroneously invoked revisionary jurisdiction in the instant case as there is absolutely no error in the order of the AO or any prejudice that is caused to the interest of the revenue in the instant case. From the facts and evidences available on record, we hold that the assessee is entitled for deduction u/s 43B in respect of provision for excise duty on closing stock of finished goods. CIT erred in concluding that no enquiry was made with regard to this excise duty component on valuation of closing stock by the AO. We find from pages filed by the assessee before us contains questionnaire dated 11.11.2014 issued together with the notice u/s 142(1) wherein, the AO had sought for calculation of valuation of closing stock during the course of assessment proceedings. This has been duly replied by the assessee vide letter dated 13.02.2015 wherein it was subsequently brought to the notice of the AO that the finished goods are inclusive of excise duty. The entire calculation of closing stock of finished goods together with other closing stock details were also furnished as annexure III of the said letter dated 13.02.2015. AO was convinced on the said workings and the calculations given by the assessee and accordingly deemed it fit not to make any addition or disallowance u/s 43B on the impugned issue. This, in our considered opinion, cannot be termed as erroneous action on the part of the AO. Since adequate enquiries were duly made by the ld. AO in the assessment proceedings thus, there is no question of invoking revisionary jurisdiction u/s 263 of the Act by the Ld. CIT. - Decided in favour of assessee.
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2018 (12) TMI 1499
Disallowance in respect of Hedging Loss - assessee has achieved the gross turnover at ₹ 112.75 crores approx - Held that:- For instance the assessee being in the business of trading of soya agrees to make supply to a customer for 12 months at an agreed price. To honour such contract regular purchase/supply of soya would be needed by the assessee. The prices of such commodities are bound to fluctuations. If the assessee in order to guard against the loss (if any) from price fluctuation against the specific contract for supply of goods, enters into another contract being speculative in nature then the case may fall under proviso (a) of the Section 43(5) of the Act. However in the instant case there is no such detail available to show that the alleged transactions entered on the portal of NCDEX were entered to counter or hedge the probable loss from the contract for actual delivery of goods. The loss from the alleged contracts giving rise to the liquidated damages of ₹ 37,88,391/- do not fall under proviso (a) of Section 43(5) and therefore no interference is called for in the finding of CIT(A) confirming the disallowance thereby treating the alleged loss of ₹ 37,88,391/- as speculation loss. However the assessee will be at liberty to set off the alleged speculation loss against the speculation profits if any during the year or in the subsequent years as allowable under provisions of Section 73 which provides for set off and carry forward or brought forward loses of speculation business. - Decided against assessee. Disallowance u/s 14A - Held that:- From perusal of the finding of CIT(A) while adjudicating the issue of disallowance of interest expenditure made by the A.O, we find that the alleged amount sustained by CIT(A) is not with regard to disallowance u/s 14A of the Act rather it is the addition sustained u/s 36(1)(iii) of the Act for the amount of interest paid in respect of amount invested in equity shares otherwise than for the purposes of business or profession. Our view get further fortified to the fact that the assessee has itself accepted that interest bearing funds were applied for making interest in the equity shares of ₹ 88,00,000/- of M/s. Girdharilal Sugar & Allied Industries Limited. Assessee has placed reliance on plethora of judgments but after examining the facts of the assessee’s case we find that none of the judgments and the decisions are applicable on the facts of the assessee. We in view of our above discussions find no reason to interfere in the findings of Ld.CIT(A) and therefore confirm the disallowance of ₹ 6,82,287/- and ₹ 1,73,382/- which the assessee has itself accepted while preparing the income tax return.- Decided against assessee.
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2018 (12) TMI 1498
Reopening of assessment - application of higher rate of tax @30% on certain Short Term Capital Gains [STCG] of ₹ 343.94 Lacs as against 15% assessed u/s 143(3) - Held that:- AO could not be granted second chance to have a relook at the matter without there being any cogent material on record which comes to his possession subsequently so as to justify reopening. Hence, we are of the opinion that reassessment proceedings stood vitiated for want of fulfillment of primary conditions as envisaged by Section 147 since Ld. AO had formed an opinion during assessment proceedings u/s 143(3) and adopted one of the possible view. Therefore, reopening was not justified on mere change of opinion. Hence, we agree with the conclusion drawn by Ld. CIT(A), though on different reasoning, that reassessment proceedings stood vitiated for want of fulfillment of jurisdictional condition as envisaged by law. Finding no infirmity in the stand of first appellate authority, we dismiss this ground of revenue’s appeal whereas the grounds raised by assessee, under Rule 27, in this regard, stands allowed. So far as the merits of the case is concerned, CIT(A), in our opinion has clinched the issue in right perspective since there is no bar under law from setting-off of the Short Term Capital Loss (STT Paid) suffered from transactions carried out through recognized stock exchange against the Short Term Capital Gains realized from off-market transactions. The same is in line with the statutory provisions of Section 74(1)(a). No infirmity in the impugned order, in this regard. The grounds raised by revenue stands dismissed. Resultantly, the revenue’s appeal stands dismissed. Disallowance u/s 14A - MAT computation - Held that:- We concur with the stand of Ld. AR that the matter stood squarely in assessee’s favour by the decision of Delhi Tribunal (Special Bench) rendered in ACIT Vs. Vireet Investment (P.) Ltd.[2017 (6) TMI 1124 - ITAT DELHI]. We hold that adjustment of disallowance u/s 14A was not required to be made in Book Profits for the purpose of Section 115JB. See M/S JSW ENERGY LTD. [2015 (5) TMI 823 - BOMBAY HIGH COURT]. Resultantly, the appeal stands allowed.
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2018 (12) TMI 1497
Disallowance u/s 14A r.w.r. 8D - Held that:- Admittedly, no disallowance has been made on account of interest expenditure by Assessing Officer, accepting the plea of assessee that no interest cost was attributable to tax free investments made by assessee. AO worked out disallowance under Rule 8D(2)(iii) of the Rules after recording satisfaction under section 14A(2). The assessee on its own motion had disallowed ₹ 39,76,231/-, so it is not the case where no disallowance is to be made in the hands of assessee. The provisions of Rule 8D(2)(iii) of the Rules are clearly applicable to the year under appeal and once the same are attracted, then the disallowance, if any, has to be computed as per the said Rule. AO has computed the said disallowance at ₹ 61,34,350/- and disallowed differential amount of ₹ 21,58,119/-. We find no merit in the plea of assessee in this regard and dismissing the same, we uphold the disallowance made by AO. - Decided against assessee Disallowance of weighted deduction of expenditure incurred on in-house research development activities under section 35(2AB) - Held that:- The issue arising before us is similar to the issue in Cummins India Ltd. Vs. DCIT [2018 (5) TMI 1314 - ITAT PUNE] and following the same parity of reasoning, we hold that where facility has been recognized by the prescribed authority and agreement has been entered into between facility and the prescribed authority and thereafter the role of Assessing Officer is to look into and allow the expenditure incurred on in-house R D facility as weighted deduction under section 35(2AB) - No merit in the orders of authorities below in restricting weighted deduction claimed under section 35(2AB) on the ground that DSIR had not approved the said expenditure. It may be pointed out herein itself that reasons for not approving expenditure have also not been made available to the assessee. Consequently, the same cannot be basis for curtailing deduction claimed under section 35(2AB) of the Act. The Assessing Officer is thus, directed to allow weighted deduction under section 35(2AB)
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2018 (12) TMI 1496
Reopening of assessment u/s 147 - issue a notice once again when the first reassessment proceeding was pending - Held that:- In this case, the Assessing Officer passed reassessment order on 31.03.2013 and again issued notice on the very same day. No fresh material came to the possession of the Assessing Officer on the day on which the first reassessment order was passed. As held in TANMAC India v. DCIT (2017 (1) TMI 122 - MADRAS HIGH COURT) Section 147 is not for extending time limit for completing assessment. This Tribunal is of the considered opinion that reopening of assessment for second time on the day on which the first reassessment was completed on 31.03.2015 is bad in law. Even if there was escapement of income, this Tribunal is of the considered opinion that the AO ought to have brought to taxation on the basis of notice issued on 03.10.2013 under Section 148. Therefore, reopening of assessment by issuing another notice on 31.03.2015 is not justified. - Decided in favour of assessee.
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2018 (12) TMI 1495
Stay of recovery of demand - Addition u/s 68 - Taxing capital gains claimed by the assessee as exempt u/s.10(37) and treating the deposits in bank account from consideration received on such sale as unexplained income of the assessee - stay petitions filed by the assessee - Held that:- Assessee was given opportunity for cross examining Shri. S.D. Sethu. Shri. S.D. Sethu had completely denied paying any money other than C25,00,000/- on 07.01.2008 and feigned ignorance of any other transactions. That apart, lower authorities had also examined the Village Administrative Officer Shri. R. Devaraj who had stated that land was converted to saleable plots, when he conducted inspection in November, 2015. No doubt, Village Administrative Officer did say that the Revenue record reflected it to be agricultural land. However, registered sale deed showed consideration as C23,34,900/- against the claim of the assessee that he had received C1,91,50,575/-. It is difficult to accept the contention of the assessee that he had received anything more than what was mentioned in the conveyance deed. We are thus of the opinion that assessee has been unable to establish a prime facie case. Financial difficulty if any faced by the assessee is also not demonstrated. We are therefore not inclined to grant a stay sought by the assessee - stay petitions filed by the assessee are dismissed.
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2018 (12) TMI 1494
Rental income - income assessable under the head “income from house property” OR “income from other sources” - Held that:- The assessee has temporarily let out its factory on rent. The factory building is classified as plant and machinery. The Jurisdictional High Court in the case of CIT vs. Ajmira Industries Pvt. Ltd.[1974 (5) TMI 13 - CALCUTTA HIGH COURT] held that the if an assessee derives any income by exploitation of commercial assets whether itself or though other agencies, such income should be assessed under the head “business income”. The income in question is directed to be assessed under the head “income from other sources”. Appeal of the assessee is allowed.
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2018 (12) TMI 1493
Allowability of busniss expenses - expenses on premium payment - disallowance as no business income was declared - Held that:- AO has not adduced sufficient reasons to assert that the appellant was not engaged in business activities. Whereas he has base his conclusion on the fact that no business income was declared, the fact that the sale of the property did not take place due to various reasons during the year cannot automatically imply hat no business is carried on. This is particularly true of a case where a legal dispute exists. The appellant is a partnership based on a registered deed which is part of the record. Business assets exist in the balance sheet and bank loans support these assets. For the immediately preceding year in appeal before it on similar grounds, the Ld. ITAT Bangalore Bench has fund that the appellant did engage in business activity. It is inconceivable that a businessman can be engaged in business activities in an intermittent manner from year to year, when the sale of operations and quantum of loans raised by the appellant are considered. In view of the above - the appellant is actually engaged in the business of development and sale of real estate, and that the expenses on the premium payments are allowable u/s 37(1). - Decided in favour of assessee Allowability of partnership insurance premium - Held that:- For these two years paid by the firm being the insurance premium in the nature of keyman insurance premia and regarding allowability of expenditure issue, no ground has been raised by revenue in the these two appeals filed before Tribunal for these two years. Since no difference in facts has been pointed out by ld. DR of revenue in present two years i.e. Assessment Years 2013-14 and 2014-15, in our considered opinion, in view of the principle of consistency, the order of CIT(A) does not contain any infirmity on this issue in both these years Disallowance of interest expenditure - interest free advances given by the assessee firm to its three sister concerns - Held that:- It is seen that the interest free funds available with the assessee is much more than the interest free advances given by assessee firm to its sister concerns. In the light of these facts, we examine the applicability of the judgments of Hon’ble Bombay High Court rendered in the case of CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and of Hon’ble Karnataka High Court rendered in the case of CIT vs. Brindavan Beverages Pvt. Ltd.[2016 (10) TMI 1242 - KARNATAKA HIGH COURT]. As per para 10 of this judgment of Hon’ble Bombay High Court, it is held that if interest free funds available with assessee is sufficient to meet its investments and at the same time, the assessee has raised a loan, it can be presumed that the investments were from the interest free funds available and in that situation, no disallowance can be made out of interest expenditure. CIT(A) was not justified in making disallowance out of interest expenditure in respect of interest free advances given by the assessee firm to its three sister concerns because the interest free funds available with the assessee as on 31.03.2014 of ₹ 35.17 Crores is higher than the interest free advances given by the assessee firm to its three sister concerns - Decided in favour of assessee
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2018 (12) TMI 1492
Disallowance u/s 14A - Held that:- The provisions of sub-section 2 of section 14A are very clear and as per the said provision, if a certain claim is made by the assessee in respect of expenditure incurred in relation to exempt income, the AO cannot vary the amount of such expenditure for the purpose of making a disallowance u/s 14A unless and until he, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee. A perusal of the assessment order passed in the case of the assessee shows that the AO has not recorded any such dissatisfaction in respect of the correctness of the claim of the assessee and in the absence of the same, find myself in agreement with the learned counsel for the assessee that disallowance made by the AO u/s 14A by invoking Rule 8D is not sustainable and the same is liable to be deleted. - Decided in favour of assessee. Addition of miscellaneous expenses and Puja Chanda expenses - Held that:- As regards the puja chanda expenses as find merit in the contention of the learned counsel for the assessee that the puja chanda expenses were required to be incurred by the assessee on account of payment to various sanghas and clubs on the occasion of puja at the locations where the projects of the assessee were being developed. Moreover, the details of such expenses show that the same were incurred by the assessee by cheques therefore hold that the disallowance of puja chanda expenses made by the AO and confirmed by the CIT(A) is not sustainable. As regards the disallowance made on account of security deposit paid to CESC and Post Delivery Expenses since the assessee was engaged in the business of development, construction and sale of apartments on ownership basis, the security deposit paid to CESC was in the nature of revenue expenditure incurred by the assessee for its project and the same therefore was allowable as deduction as claimed by the assessee. Similarly, the Post Delivery Expenses were duly explained by the assessee as the expenses for doing some finishing work which had remained incomplete mainly for the common area facilities after delivery of flats and this explanation offered by the assessee was rejected by the AO without giving any reasons whatsoever. Keeping in view the nature of the expenditure as well as the nature of assessee’s business, the expenses incurred by the assessee on account of security deposit paid to CESC as well as Post Delivery work represented part of the project expenses incurred by the assessee and the same were allowable as deduction as rightly claimed by the assessee. - decided in favour of assessee.
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2018 (12) TMI 1491
Revision u/s 263 - time limit for passing order under section 263 - assessment under section 143(3) of the Act as already completed and the proceedings u/s 153A initiated - Held that:- In the chart of chronological events, the Ld. counsel has computed the limitation in respect of order passed under section 143(3) of the Act. But the said order was not subjected to revision. Actually, the CIT proposed to revise the order passed by the AO u/s 153A dated 28/02/2013. The show cause notice was issued on 17/01/2014 and the order under section 263 has been passed on 12/03/2015. Under section 263(2) the time limit for passing order under section 263 has been provided as before expiry of two years from the end of the financial year in which the order sought to be revised was passed. Since the impugned order dated 12/03/2015 passed by the CIT under section 263 of the Act is within the period of two years from the end of the financial year in which the order under section 153A was passed, i.e., 31/03/2015, we do not find any force in the arguments of the Ld. counsel on this issue and accordingly we reject the same. Since in the instant case originally, the assessment under section 143(3) of the Act was already completed and in the proceedings under section 153A of the Act, there is no mention of any incriminating material particularly on the issues on which the Ld. CIT has held that the Assessing Officer has not made any enquiries. If as per the law laid down by the Hon’ble Delhi High Court, the Assessing Officer is not empowered to make any addition, then he is not required to carry out any enquiry or verification in respect of those issues. In such a scenario, the order passed by the Assessing Officer cannot be held as erroneous insofar as prejudicial to the interest of the Revenue. We are of the opinion that CIT has exceeded his jurisdiction provided under section 263 of the Act and accordingly, we set-aside the order passed by the Ld. CIT under section 263 of the Act. Since we have already held that the Ld. CIT was not correct in revising the assessment order in view of the decision in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] - Decided in favour of assessee
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2018 (12) TMI 1490
Addition as undisclosed income ignoring the provisions of sec. 199 - assessee has declared income far exceeding the income shown in ITS details - Held that:- The assessee had shown total turnover of ₹ 54,91,34,241/- whereas the total income as per ITS details was only to the tune of ₹ 23,43,57,693/- and thus we note that assessee has declared income far exceeding the income shown in ITS details. CIT(A) has correctly appreciated the facts that the assessee has accounted for the income shown in ITS details which is part of the income shown by the assessee in its P&L Account. We note that the assessee’s only income is from transportation and rental charges of vehicles and if the payee/deductee of TDS has wrongly deducted tax or mistakenly filled up the return in no way affect the nature of services rendered by the assessee. Since the amount of mis-match taken note by the AO is part of the income shown by the assessee which has been offered to tax by the assessee in its return of income, we agree with the Ld. CIT(A)’s view on this issue and confirm his action and dismiss the ground of appeal of the revenue. Addition under the head ‘royalty expenses’- Held that:- We note that in this year the basis of royalty computation has been changed with retrospective effect from 01.04.2003 arising out of a policy decision and the additional expenditure on account of royalty has been actually determined during the year under consideration before us. CIT(A) has clearly made a finding of fact that this liability was determined this year and this liability crystallized during the current year. This finding of fact has not been challenged by the revenue before us. Therefore, when the liability has crystallized in this year, it cannot be called as prior period expenditure and since the additional expenditure on account of royalty has been determined and has crystallized during the year under consideration, it is an allowable business expenditure and so we find no infirmity in the order of the CIT(A) and we confirm the same. This ground of appeal of revenue is dismissed. Addition of provision for bad debts to assessee’s book profit ignoring the provisions of item (c) of Explanation 1 below section 115JB - Held that:- At the time of hearing Ld. AR fairly conceded that this issue needs to be held against the assessee. We note that the Hon’ble Delhi High Court in the case of CIT Vs. ILPEA Paramount P. Ltd. (2010 (2) TMI 45 - DELHI HIGH COURT) with the introduction of the said amendment with retrospective effect from April 1, 1998, the provision for doubtful debts and the provision for doubtful advances, which are nothing but provision for diminution in the value of asset, are specifically covered under clause (g) of the said Explanation. Consequently, the question in so far as it relates to provision for doubtful debts and provision for doubtful advances, requires to be answered in favour of the Revenue and against the assessee. It is so answered - decided in favour of revenue
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2018 (12) TMI 1489
Difference in the 26AS statement and income as shown in Profit and Loss account - Held that:- The different methods of revenue recognition may also create difference between form No.26AS statement and income as shown in Profit and Loss account. Therefore, taking into account these reasons of differences, as explained above, we are of the view that a reconciliation statement may be prepared by the assessee, explaining the reasons of differences between form No.26AS statement and income as shown in Profit and Loss account and may be submitted before the assessing officer for his perusal - remit the matter back to the file of the assessing officer to adjudicate the issue after taking into account the reconciliation statement. Disallowance on account of commission paid - Held that:- We note that impugned order is an ex parte and assessee could not plead his case before the ld CIT(A) therefore, we are of the view that one more opportunity should be given to the assessee to plead his case and submit relevant documents to prove his bona fide before the ld assessing officer. Therefore, we set aside the order of ld CIT(A) and remit the matter back to the file of the assessing officer to adjudicate the issue afresh. We also direct the assessee to submit the relevant documents and explanation before the ld AO to prove his bona fide. Statistical purposes, the appeal of the assessee is allowed.
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2018 (12) TMI 1488
Reopening of assessment - adequacy of reasons - addition of sum received Baroda Cricket Association under the head income from Profession under section 28 - Assessee reported earning of income from Honorarium from BCCI, rental income, income from other sources and capital gains etc. - Held that:- AO is on record in stating that he assumed jurisdiction “To verify exempted income claimed by the ‘A’ in his return of income.” The same was examined in the light of the CBDT Circulars (supra) which infact orders for exemption of such OTB-receipts in cases of sportsman. AO did not refute the assessee’s claim that he is not a professional. He is merely a sportsman. At the relevant point of time, Mr. Chandrakant Gulabrao Borde is an employee of Cooper Engineers Ltd. Chinchwad and hence, he constitutes sportsman only. Further, we also examined various decisions on similar cases receiving amounts from the BCCI and found that the said amounts were considered exempt and not to be included in the total income of the assessee. AO failed to satisfy the test of adequacy of the reasons for assuming jurisdiction u/s.148 r.w.s.147 of the Act. Accordingly, the additional ground raised by the assessee is partly allowed on this aspect of adequacy of reasons. On merits of case so long as the recipient is not a professional and the award/OTB is not the receipt for the professional reasons, and it is received in the capacity of a “Sportsman”, the OTB/rewards are exempt from tax in view of the CBDR Circular No.447 (supra). Similar OTB/awards are exempted in the case of (1) Shri Abhinav Bindra; (2) Shri Sameer Sudhakar Dighe; and (3) Shri Navab Mansur Ali Khan Pataudi (supra) etc., On facts, the said OTB/rewards are received by the assessee who is merely an ex-cricketer and not a professional cricketer. He was merely a sportsman. From the above finding of fact and law evolved in other cases, it is evident that the facts of the above case are identical to the facts of the present case on hand. AO did not make out a case that the assessee is a professional. Considering the favourable decisions on merits of the case too, we are of the opinion that the decision of CIT(A) upholding the addition made by the AO needs to be reversed. Accordingly, the grounds/additional ground raised by the assessee are allowed.
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Customs
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2018 (12) TMI 1487
Refund of SAD - N/N. 102/2007-Cus dated 14.09.2007 - rejection of refund on the ground that the same has been filed after the prescribed time limit of one year from the date of payment - whether there is any time limit prescribed by law for filing the refund claim of additional duty of Customs as stands exempted vide the N/N. 102/2007? Held that:- The refund in question was filed on 31.03.2017, i.e. much beyond the amended Notification and also the Customs Act itself contains a provision about claim of refund of duty in Section 27 thereof - Apparently and admittedly none is the fact of the present Appeal. It is also not the case that Notification 93/2008 has been repealed. In absence thereof also, Section 27 of Customs Act prescribes a period during which refund of any type can be claimed. The refund claim of additional duty due to the exemption flowing out of N/N. 102/2007 has to be filed within one year in view of the subsequent N/N. 93/2008-Cus which still holds good and also in view of Section 27 of the Customs Act, 1962 - the Commissioner(Appeals) has committed an error while giving an expanded interpretation qua limitation to favour assessee - appeal allowed - Claim of refund rejected.
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2018 (12) TMI 1486
Exemption under N/N. 203/92-Cus - Value Based advance License - import of polyester fabrics - Held that:- The issue in the matter can be decided in a very narrow campus for consideration of the test reports and clarifications issued by the DGFT in the matter. Both the authorities have failed to consider these documents and render a finding in respect of these - Since these documents have not been considered by the lower authorities, the matter needs to go back to the original adjudicating authority for reconsideration of the issue in light of the clarification given by the Director General Foreign Trade and the test reports - appeal allowed by way of remand.
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Service Tax
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2018 (12) TMI 1484
Classification of services - re-rubberisation of rollers provided by them to various customers/clients - whether classifiable under the category of ‘Management, Maintenance or Repair’ Services or under the category of ‘Business Auxiliary Services’? Held that:- The issue decided in the case of M/S ZENITH ROLLERS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [2013 (12) TMI 620 - CESTAT NEW DELHI], where it was held that Activities of the appellants are equally classifiable under two services namely Business Auxiliary Service and Maintenance or Repair service. Since the service cannot be classified under clause ‘a’ and ‘b’ of Section 65A, clause ‘c’ of Section 65A is attracted according to which service is classifiable under the sub-clause of Clause (105) of Section 65 which comes first. Business Auxiliary service is covered under Section 65(105)(zzb) and Management, Maintenance or Repair Service is covered under Clause 65(105)(zzr). Since Business Auxiliary Service comes first under Clause 65(105)(zzb), we hold that service is classifiable under Business Auxiliary Service. demand raised under the category of 'Management, Maintenance or Repair' Service - Since the service is to be as 'Business Auxiliary Services' (BAS) demand set aside.
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2018 (12) TMI 1483
Refund claim - input services - rent a cab service - membership of club or association service - real estate agency service (visa) - management, maintenance repair services - export of services - Rule 5 of the Cenvat Credit Rules - Circular dated 19.01.2010 vide 120/01/2010-S.T. - Held that:- The order of the Commissioner (Appeals) would have been sustained if there not been a clarificatory circular issued on 19.01.2010 vide 120/01/2010-S.T. by the Department of Revenue. The circular clearly indicates that conjoint reading of the Cenvat Credit Rules is to be made with Notification no. 5/2006-CX(NT) to broaden the meaning of input service so as to cover its relationship to output service. The said circular also has attempted a liberal approach in stating that example of services like outdoor catering, rent a cab for pick up and drop of employees to office etc. are input services, without reference to if such pick up is from office or from airport. It also had indicated that correlation and scrutiny of documents to establish nexus is not required to be made if Chartered Accountant certificate or a self certification of the exporter is available to that effect and the department officers are only required to make basic scrutiny of the documents, which if found in order, sanction the refund within a month in order to given effect export to zero rate. The said circular was mainly issued for call centres and BPOs established to cover export of services but contained broad outlines of admissibility of credits on export oriented units. The appellant is eligible to avail cenvat credits to get refunds on those services namely club and association, rent a cab management, maintenance and visa service which were held to be inadmissible by the Commissioner (Appeals) - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1482
Condonation of delay of 18 days in filing the appeal - there was a demise in the family of the Consultant resulting into the delay - Held that:- For the delay at consultant’s end the appellants should not suffer. Accordingly, the delay is condoned - COD allowed.
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2018 (12) TMI 1481
Refund of accumulated CENVAT Credit - export of service - refund rejected on the ground that the input services are neither confirming to the definition of input service or have any nexus with the output service exported by the appellant and in some cases refund benefit was also denied on the ground that the services provided by the appellant cannot be considered as export of service. Held that:- In the present cases, the department has taken a stand that the services provided by the appellant are not conforming to export of service for the purpose of claiming of refund. It is difficult to accept such findings of the department inasmuch as the services all along were provided by the appellant pursuant to the contract to its parent company located in Japan. The situation being same for entire period, denial of refund for a part period is not legally sustainable, without substantiating the fact that the appellant also provided services to the parties within the country. In view of the fact that input services were used for providing the output service, which was exported, the appellant should statutorily be entitled for refund of service tax paid on input services, which were lying unutilised in the Cenvat account for a considerable period of time. It is a settled position of law that the authorities while adjudicating the refund application under Rule 5 of the rules, should not look into the aspect of consideration of the requirement of Rule 2 (l) of the rules inasmuch as other provisions exist in the statute for consideration of such dispute. There are no merits in the impugned order, so far as it denied refund benefits to the appellant, other than the service tax paid on immovable property service - appeal allowed in part.
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2018 (12) TMI 1480
Recovery of the amount of service tax adjusted along with interest and penalty - Non-compliance with the conditions prescribed under Rule 6 (3) and Rule 6(4B) of Service Tax Rules, 1994 - Held that:- Undisputedly the appellant has adjusted the excess amount of service tax paid during the relevant period April 2010 to March 2011 in accordance with Rule 6(3) of the Service Tax Rules 1994. For the subsequent period this Tribunal has allowed to adjust excess amount of service tax paid by the appellant in similar facts and circumstances. However, in the present case to ascertain whether the amount collected in excess has been refunded on to the customer by way of credit note or otherwise matter is remanded to the adjudicating authority. Appeal allowed by way of remand.
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Central Excise
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2018 (12) TMI 1479
CENVAT Credit - input services - Group Insurance Health Policy - Real Estate Agent Service - Event Management Service. Group Insurance Health Policy - Held that:- On a plain reading of the definition of input services in Rule 2(1) of CENVAT Credit Rules ,2010 as is in existence during the period from April, 2003 to March, 2011, the amounts paid to the Insurance Companies for Insurance of the employees is input service. This is particularly, so as there is no exclusion clause therein, as was provided by the amendment in April, 2011 - taking of Insurance for the employees used in providing output service as it enables the employee to work with a peace of mind - credit allowed. Real Estate Agent Service - Held that:- The services of a Real Estate Agent is obtained by the Respondent. This for the purpose of allotting accommodation to its employees when posted at a particular station - This services would be covered by the definition of input services under Rule 2(1) of the CENVAT Credit Rules. These services enable the Respondent to keep its personnel available to provide services at a particular station. Thus, it has a nexus to the output services being provided by the Respondent - Credit allowed. Event Management Service - Held that:- These events are held/ organized by the Respondent to target people with high net worth so as to attract/ retain them as their constituents. Thus, these services are in the nature of sales promotion service and would eonomine fall within the inclusive part of definition of input service provided in Rule 2(1) of Cenvat Rules - credit allowed. Appeal dismissed - decided against Revenue.
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2018 (12) TMI 1478
CENVAT Credit - inputs/capital goods - M.S. Angles, Joists, Channels, M.S. Plates/sheets, etc. used for fabrication of supporting structures for the equipments - time limitation - Held that:- The appellants have proved that they have used these impugned items for support of capital goods which is essential for use of capital goods - Since the impugned items have been used for supporting structure of the machinery, therefore, the appellants are entitled to CENVAT credit on the same. Time Limitation - Held that:- The entire demand is also barred by limitation because the period in dispute is June 2006 to November 2008 whereas the show-cause notice has been issued on 6.4.2011 - no mala fide can be attributed to the assessee and longer period of limitation would not be available to the department. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1477
CENVAT Credit - input services - construction services - alteration and extension of railway track - locomotive engine servicing charges - Held that:- The issue involved in the present case is covered by the Division Bench decision of this Tribunal in the case of Jaypee Rewa Plant [2018 (9) TMI 633 - CESTAT NEW DELHI], where it was held that the railway track laid by the Appellant (which connects the railway siding outside the factory with the siding inside the factory) shall have to be treated to have satisfied the condition of ‘used in the factory’ and credit is allowed. The impugned order denying the CENVAT credit on the railway sidings or alterations of sidings and extension of siding is not sustainable - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1476
CENVAT Credit - input services - Engineering Designs and Drawings for civil and structural works in respect of Special Alumina Expansion Project services - Held that:- In view of the Purchase Order and the various invoices issued by DCPL (Development Consultants Private Limited, Kolkata), it is found that the service provided by them are not construction service and are not covered under exclusion clause of Rule 2(l) of the Cenvat Credit Rules which only excluded specific services relating to construction service or works contract service when used in or in relation to construction of a building or a civil structure or a part thereof. The services rendered by DCPL is only relating to Drawing or Design and Consulting Engineer’s Services whereas the construction services have been rendered by some other person and the DCPL are not concerned with the construction activity at all - further, the definition of ‘input service’ is very wide and includes inputs used in or in relation to the manufacturing activity. Credit cannot be denied - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1475
SSI Exemption - benefit of N/N. 8/2003-CE dated 01.03.2003 - availing of simultaneous of benefit under N/N. 8/2003 CE and CENVAT Credit in respect of the goods cleared on payment of duty - whether simultaneous availment of CENVAT Credit in respect of the inputs used in manufacture of dutiable final products viz Branded Goods and SSI exemption under N/N. 8/2003=CE dated 01.03.2003 as amended is permissible or not? - Difference of opinion. Held that:- There is a difference of opinion - the difference of opinion is on the point: Whether the appeal has to be rejected as held by Learned Member (Technical) or the same has to be allowed as held by Learned Member (Judicial)?
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2018 (12) TMI 1474
Refund of excess amount of duty paid - goods were cleared to their depots on stock transfer basis - Section 4(1)(a) of the Central Excise Act, 1944 - extended period of limitation - whether the duty short paid by the appellant amounting to ₹ 6,44,517/- during the period from July 2005 to March 2005 would be adjusted against the refund of ₹ 10,79,333/- claimed by the appellant for excess amount of duty paid? - Held that:- The adjudicating authority has categorically held that the self assessment undertaken by the appellant was on provisional basis. Also, from the records, particularly the letter dated June 2001 and the ER-1 returns filed from time to time to the department, the appellant has categorically claimed that their assessment was provisional and no communication was addressed by the Revenue denying the said facility of assessment on provisional basis. There is no merit in the observation of the learned Commissioner (Appeals) that the assessment was since not provisional, therefore, the appellant is not entitled to adjust the duty short paid against the amount excess paid during the particular period of assessment - the appellant is entitled to adjust the duty short paid during the relevant period with that of excess paid - appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1473
Demand of duty short paid - extended period of limitation - appellants did not follow the proper procedure as per Central Excise Rules, 2002 and retained/ destroyed the sample without payment of appropriate Central Excise duty leviable on these samples and thereby short paid the duty to that extent - Section 11A(1) of the Central Excise Act, 1944 - Held that:- The issue involved in the matter is squarely covered by the decision of larger bench of Tribunal in case of Dabur India Ltd, [2005 (2) TMI 166 - CESTAT, NEW DELHI], where larger bench has considered all the arguments and ruled in the favour of assessee holding that no duty is required to be paid in respect of such samples drawn for quality control purpose. Since we are deciding the appeal on merits itself we are not considering the other grounds taken by the appellant in their appeal and during arguments. Appeal allowed - decided in favor of appellant.
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2018 (12) TMI 1472
EOU - clearance of final products in domestic tariff area, without payment of duty - benefit of N/N. 30/2004-CE, dated 9.07.2004 - recovery of short paid duty - difference of opinion. Held that:- There is a difference of opinion - the point of difference is: Whether the appeal has to be rejected on merits as held by Hon'ble Member(Technical) or the matter has to be referred to larger Bench as observed by Hon'ble Member(Judicial)?
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2018 (12) TMI 1471
Refund of MODVAT Credit - refund rejected on the ground of time limitation - Whether the Commissioner (Appeals) was right in rejecting the refund claim on merits also when the Assistant Commissioner has not done so? - difference of opinion. Held that:- There is a difference of opinion - the difference of opinion is on the point: Whether the appeal has to be rejected in toto as held by the learned Member (Technical) or the matter has to be remanded to the original adjudicating authority for fresh decision as observed by the learned Member (Judicial).
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2018 (12) TMI 1470
Valuation - includibility - inclusion of automobile cess in their input value - demand of duty short paid - CENVAT Credit - extended period of limitation. Held that:- The issue is squarely covered by the decision of Apex Court in case of Daichi Karkaria [1999 (8) TMI 920 - SUPREME COURT OF INDIA], where it was held that In determining the cost of an excisable product covered by the Modvat scheme under Section 4(1)(b) of the Act read with Rule 6 of the Valuation Rules the excise duty paid on raw material also covered by the Modvat scheme is not to be included. The issue in the present case is not in respect of manner of collection of automobile cess but is in respect of the admissibility of Cenvat Credit on the said automobile cess. Automobile cess is a cess collected by the department of labour in the Ministry of Industries and is levied under Industries (development and Regulation), Act, 1951 read with Automobile Cess Rules, 1984 - Since automobile is not Cenvatable, in view of the decision of the Apex Court in case of Dai Ichi Karkaria, the same needs to be added for determining the assessable value of the finished goods cleared by the appellant. CENVAT Credit - automobile cess - Held that:- In terms of Rule 3 of the Credit Rules, a manufacturer is entitled to avail Cenvat credit only of excise duty as mentioned under the Excise Act, specified additional duties and also of education cess, national calamity contingency duty, etc. Cenvat credit is also available on all of the above duties paid during the time of import. However, the cess levied under various other acts, though collected as in manner similar to excise duty in the respective acts, is not in the list of duties eligible for Cenvat credit - None of the authorities cited by the appellant have stated in respect of admissibility of CENVAT Credit in respect of the automobile cess. Thus the submission of the appellant in this respect is not tenable. Time Limitation - Held that:- The issue of inclusion of the taxes and fees which were not Cenvatable has been decided by the Apex Court in case of Dai Ichi Karkaria in the year 1999. After the said decision, there can be no justification for non inclusion of the same in assessable value. Appellant cannot claim that they were under bonafide belief that the said automobile cess was not includable after the decision of the Apex Court - Further all these details were not made available to the department while filling the returns. Hence there was suppression of material facts from the revenue with the intention to evade, accordingly demand of duty short paid by invoking extended period of limitation cannot be faulted in the present case - thus, extended period of limitation has been correctly invoked for demanding the duty short paid. Demand of Interest and penalty - Held that:- Demand for interest is natural consequence of the delay in payment of the duty from the due date. Since the duty as determined under Section 11A(2) has been short paid on the due date, demand for interest under Section 11AB cannot be faulted with - Since we have held that necessary ingredients to invoke extended period of limitation are present in the case, penalty under Section 11AC read with rule 25 of the Central Excise Rules, 2002 justified - interest and penalty upheld. The benefit of proviso to Section 11AC extended to them for discharging the liabilities adjudged against them in respect of duties, interest and penalty. Appeal allowed in part.
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2018 (12) TMI 1469
Valuation - scrap - Appellants have worked out the waste generated as 0.2% department contended it to be 1% - demand of duty on excess quantity - Held that:- This is unique case where the revenue has issue the notice claiming that the total waste generated, is much higher than the waste as claimed o be generated by the assessee. It is not the case of the department that total of finished products and waste generated is not in accordance with the raw material received and consumed by them. In case if there was any difference, then why should duty not be demanded on the finished good. Appellants have in fact paid the duty on the waste as actual cleared by them. When they have paid the duty on the waste cleared by them, and range officer has determined that actual waste generated was only 0.027%, then where is question of any further demand being made by arriving at imaginary percentage of waste generation as 1% or 0.137% - Appellants have themselves, classified and paid the duty on the waste cleared by them. The goods cleared by them were actually marketed or sold by them and they have paid duty on the actual transaction value in respect of these sale. Once having accepted that the goods were marketed by them the appellants could have not claimed in any subsequent proceedings that department has not established the marketability of the said goods or classification of the same. Since the appellants have paid the duty on the actual quantum and the value of clearances there cannot be any further demand on the basis of imaginary or hypothetical figures - Further with effect from 1st July 2000, with the introduction of transaction value concept in Section 4 of the Central Excise Act, 1944, duty has to be determined on the basis of actual transaction value and not on the basis of any “contemporaneous value” as has been held by the Commissioner (Appeal). Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (12) TMI 1468
Maintainability of petition - availability of statutory appellate remedy - validity of assessment orders passed in respect of the assessment years 2014-15 and 2015-16 - interpretation of statute - Entry No.108 of Part B of Schedule I and Section 15 of TNVAT Act, 2006 read with Schedule IV, Part B, Entry 54 of the said Act - slaughtering, cleaning and cutting the poultry/live chicken - whether fall within the meaning of 'processing' - classified under Entry 108 of Part-B of Schedule-I or not. Held that:- Entry 108 deals with the poultry, which has undergone the process such as slaughtering, defeathering, cleaning and cutting so as to enable the consumer of the same to carry it to the next stage of cooking. Certainly, the petitioner is not entitled to take shelter under the word meat referred to under Entry 54 especially, when the word poultry is specifically referred to therein, apart from the word 'meat', while describing the goods under such Entry. Even otherwise, 'meat' referred to under Entry 54 is a meat other than branded, processed and packed. Thus, it is evident that if an act of process takes place in respect of the poultry, such poultry will not fall under Entry 54, since, the term 'poultry' referred to therein would certainly indicate poultry as such or live poultry and not the processed one. Therefore, if the poultry is processed, the same would certainly fall under Entry 108 of Part B of I Schedule only and not under Entry 54 of Part B of IV Schedule. Whether the admitted activities carried on by the petitioner viz., slaughtering, defeathering, cleaning and cutting the poultry would be construed as an act of processing? - Held that:- The above said activities carried on by the petitioner on the poultry, that too, with the aid of the sophisticated machineries, would certainly fall under the purview of 'processing' and consequently, supply of such chicken which undergone such process, would certainly fall under Entry 108 in Part B of I Schedule and not under Entry 54 in Part B of IV Schedule. Thus, the activities carried on by the petitioner viz., defeathering, cleaning and cutting the chicken would certainly fall under the purview of processing and consequently, such sale would fall under Entry 108 of Part B of Schedule I and not Entry 54 of Part B of Schedule IV, as claimed by the petitioner - the Assessing Authority has rightly brought the turnover to tax by bringing such sale under Entry 108. Petition dismissed - decided against petitioner.
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Indian Laws
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2018 (12) TMI 1485
Pre-deposit as a condition precedent for grant of leave - Held that:- The petitioner appears to be an educated lady. As a prudent person she is not supposed to hand over signed blank papers/promissory notes /blank signed cheques to any one unless she owe money to such person hence it has been rightly held by the learned Trial Court that the defence of the petitioner appears to be highly improbable. Even as per Section 91/92 of the Indian Evidence Act, 1872 no contrary oral version is admissible unless fraud and misrepresentation is alleged, which is missing in this case as petitioner had failed to lodge any complaint to the police. Petition dismissed.
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