TMI Tax Updates - e-Newsletter
December 9, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Tax Audit Report u/s 44AB obtained on the last day - the expression 'before the specified date' means 'on or before the specified date' -Tri

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• Levy of service tax - reverse charge - Revenue has to first identify taxable service received from abroad -which is not done & clearly fatal

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Articles

1. WHETHER OFFICIAL LIQUIDATOR IS A DEALER FOR THE PURPOSES OF SALES TAX?

   By: DR.MARIAPPAN GOVINDARAJAN

2. Supply to high seas vessel is liable to VAT if any territorial nexus exist in the State

   By: Bimal jain

3. Interest Equalisation Scheme for Pre & Post Shipment Rupee Export Credit for 5 years from April 2015-2020

   By: CSSANJAY MALHOTRA

News

1. High Level Committee on Corporate Social Responsibility (CSR)

2. Improving The Process of E-Filing of Documents

3. Discussion Paper on Convergence to Ind-As in Insurance Sector

4. Quarterly Report on Debt Management for the Quarter July-September 2015 (Q2 FY 16) Released; During Q2 of FY16, dated Securities worth ₹ 1, 71,000 crore issued taking the Gross Borrowings during H1 FY16 to ₹ 3, 51,000 crore (58.5 per cent of BE)

5. RBI Reference Rate for US $

6. Slump in Manufacturing Sector

7. Online digital platform (e-Nivesh)

8. Foreign Direct Investment (FDI) in flow

9. Diversification of Industries

10. Auction for Sale (Re-issue ) of Government Stocks

11. In Tamil Naidu, Public Sector Insurance Companies to organise awareness camps for facilitation and coordination in settlement of claims; Adequate number of surveyors deputed to process the claims speedily and effectively; Survey formats simplified to meet the emergent need; Private Sector Insurance Companies asked to appoint Nodal Officers and for expeditious disposal claims by them.

12. Minister of State for Finance Shri Jayant Sinha to inaugurate the 1st Conference of State Finance Secretaries in the national Capital tomorrow; Issues concerning Banking and Financial Sectors, Budget and Plan Expenditure high on the Agenda

Notifications

Central Excise

1. 24/2015 - dated 7-12-2015 - CE (NT)

Amendment of Notification No. 27/2014-Central Excise(NT), dated 16.09.2014

Customs

2. 137/2015 - dated 7-12-2015 - Cus (NT)

Amendment in Principal Notification No. 12/97-Customs(N.T.) dated 02.04.1997

Indian Laws

3. 54-EL(1)/12/2015 - dated 7-12-2015 - Indian Law

Re-voting date for votes in Chennai and other parts of the Southern Region

Circulars / Instructions / Orders

RBI

1. RBI/2015-2016/259 DBR.Dir.BC.No.62/04.02.001/2015-16 - dated 4-12-2015

Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit

Income Tax

2. LETTER F.NO.312/109/2015-OT - dated 2-12-2015

Issue the refund of less than amount ₹ 50,000 in case of non-CASS cases direct by Revenue Secretary

DGFT

3. 09/2015 - dated 8-12-2015

Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit w.e.f. 1st April, 2015

Central Excise

4. F.No.96/85/2015-CX.I - dated 7-12-2015

Minutes of Tariff Conference held on 28th and 29th October, 2015

Highlights / Catch Notes

Income Tax

• Assessee Must Deduct TDS on Payments to Intermediaries for Goods Carriage u/s 194C of Income Tax Act.

  Case-Laws - AT : TDS u/s 194C - the assessee was liable to deduct TDS u/s 194C of the Act on payments for carriage of goods through intermediaries as there was a contract covered u/s 194C of the Act between the assessee and these intermediaries - AT
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• Section 10A Deduction Must Be Calculated Initially for Business Profits Before Other Adjustments in Income Tax Act.

  Case-Laws - AT : Quantum of deduction to be allowed to the assessee u/s. 10A - the deduction under section 10A of the Act has to be given at the stage when the profits and gains of the business are computed in the first instance - AT
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• Interest Expenses Disallowed for Assessee Due to Non-Deduction of TDS; Form 15H Not Provided, Additions Confirmed.

  Case-Laws - AT : Disallowance of interest expenditure on account of non-deduction of TDS - Since the assessee failed to furnish the requisite Form 15H, therefore, additions confirmed - AT
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• Tax Audit Report Timing Meets Section 44AB Requirements; No Penalty for September 30 Submission u/s 271B.

  Case-Laws - AT : Penalty u/s 271B - assessee has obtained the tax audit report on 30th September 2008 and not before 30th September, 2008 - the expression ‘before the specified date’ in section 44AB of the Act means ‘on or before the specified date’. - there was no delay in audit of the accounts in terms of section 44AB of the Act - AT
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• Mid Day Meals Activity u/s 2(15) Challenged for Breach of Natural Justice; Case Remanded for Review.

  Case-Laws - AT : Charitable activity - addition made by the Assessing Officer treating the activity of providing Mid Day Meal being falling with the proviso to Section 2(15) - Breach of natural justice - matter remanded back - AT
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• Investor's Unexplained Cash Credit u/s 68: Income of Rs. 530 Requires Clear Source Documentation for Creditworthiness Proof.

  Case-Laws - AT : Unexplained cash credit u/s 68 - Investor had returned income of ₹ 530/-. Therefore, it is necessary that what was the source of investment of the investor has to be clearly brought on record. - Mere filing of return cannot establish the creditworthiness.- AT
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• Court Rules Commission to Directors Not Linked to Dividend Tax Evasion; Disallowance Overturned.

  Case-Laws - AT : Disallowance of commission paid to directors - allegation that commission was paid to avoid dividend distribution tax - there being no nexus between the two payments i.e., commission and dividend to the directors, the disallowance made could not have been sustained. - AT
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Customs

• Appellant disowns container with restricted goods; raises questions on legal ownership under Customs Act 1962, Section 2(26).

  Case-Laws - AT : Confiscation of goods - Import of restricted items - ownership of goods - documents of the said container are in the name of the appellant but appellant has disowned the ownership of the said container. As per section 2(26) of the Customs Act 1962 the importer is a person who cleared the goods for home consumption or claims to be owner of the said goods. - AT
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Service Tax

• "Service" Term Clarified: Foreign Social Security Doesn't Change Employee's Service to Indian Entity per Section 65 (44) (b.

  Case-Laws - AAR : Foreign Employees on Deputation in India - Interpretation of term "service" - merely because the social security of Mr. Sloan while he is in India is being taken care of by the NAC, US. The service of Mr. Sloan with NAC, India can not be viewed otherwise in view of the clear language of Section 65 (44) (b) - AAR
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• Court Rules Property and Bank Account Attachment Unjustified Due to Insufficient Justification and Mere Possibility of Fund Dissipation.

  Case-Laws - HC : Attachment of property and bank accounts - Only a cursory remark has been indicated namely that there is fair possibility of the funds getting dissipated. - cogent and sufficient justification was found lacking in the satisfactory note. The attachment proceedings could not be initiated on such ground - HC
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• Revenue Must Identify Taxable Foreign Service and Confirm Foreign Currency Payment Before Applying Reverse Charge Tax.

  Case-Laws - AT : For levying of service tax under reverse charge mechanism, Revenue has to first identify the taxable service received from abroad for which payment was made in foreign currency, which, as seen from the paragraphs of the impugned order quoted above, has not been done at all. This is clearly fatal - AT
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• Refund Denial Overturned: Payment in Indian Rupees Qualifies as 'Convertible Foreign Exchange' with FIRC from Foreign Bank.

  Case-Laws - AT : Denial of refund claim - payment received in Indian Rupees for which FIRC issued by the bank and payment is routed through foreign bank qualifies the condition of payment 'convertible foreign exchange', therefore on this ground refund cannot be rejected. - AT
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• CENVAT Credit Denial Challenged: Commissioner Criticized for Relying on ELT Headlines Without Examining Evidence or Law.

  Case-Laws - AT : Denial of CENVAT Credit - Commissioner (Appeals) has only printed the headlines from ELT and passed the order - Unless the material facts are tested by evidence and law, there shall not be any decision in the eyes of law. - It shall be an empty formality. - AT
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Case Laws:

• Income Tax

• 2015 (12) TMI 402
  Waiver of interest charged under Sections 234A and 234B seeked - Held that:- Interest charged under Section 234B of the Act was waived by respondent No.1 as the enhanced compensation and interest thereon was received by the assessee much after the due date for depositing the advance tax and for furnishing the returns of income for the assessment years 1988-89 to 1996-97. It was recorded that in such circumstances, the assessee could not have anticipated or determined the interest income that had accrued to him under the orders of the Land Acquisition Court prior to disbursement by HUDA on 13.12.1995 and 29.2.1996. On that basis, respondent No.1 held the assessee entitled to waiver of interest charged under Section 234B of the Act for the assessment years 1988-89 to 1995-96 upto 29.2.1996 Learned counsel for the assessee-petitioner could not demonstrate that there existed any illegality or perversity in the approach of respondent No.1 which may warrant interference by this Court. The discretion had been rightly exercised by respondent No.1 and no error could be pointed out in the impugned order dated 9.10.2014 (Annexure P-15). - Decided against assessee.

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• 2015 (12) TMI 401
  Entitlement to benefit of Article 8 of India-Singapore DTAA - voyage of the vessel between two ports in India treated as 'international voyage' - AO came to the conclusion that such transportation between Kandla to Visag cannot be considered as international traffic as defined in DTAA and between India and Singapore - ITAT allowed claim - Held that:- The term 'international traffic', as noted, is defined to mean any transport by a ship or aircraft operated by an enterprise by a contracting state. This definition, however, has an exception clause which excludes the transport when the ship or aircraft is operated solely between the places in the other contracting state. Thus, any transaction by a ship or aircraft operated by enterprise or contracting state would be an international traffic. However, this would be not so if a ship or the aircraft is operated solely between the places in the other contracting state. If ships in question, therefore, were operated solely between Kandla and Visag, in the present case, such transport would be excluded from the definition of term 'international traffic'. Here, the word 'solely' is all important. It is not even the case of the revenue that the journey being undertaken by such vessels in question were confined between the two ports in India either routinely or even in individual isolated case. Admitted facts, as noted above, are that such transportation was undertaking during a larger journey of the vessels from Singapore to Dubai. Under such circumstances, the requirement of such journey being solely between places in the other contracting state is not satisfied. The exclusion clause of the definition of term 'international traffic', therefore, would not apply. In other words, the transport, which was otherwise in the nature of international traffic, would be so treated in terms of Clause (h) of Article 3 of the DTAA. We see no error in the view of the Tribunal. - Decided against revenue.

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• 2015 (12) TMI 400
  Deduction u/s 10B - AO was of the view that even a switch over to Section 10B from Section 80IC of the Act was not admissible subsequently, therefore, held that the claim of the assessee for deduction u/s 10B of the Act was not tenable in law - CIT(A) allowed claim - Held that:- In the present case, the claim of the assessee was under the statutory provisions, only when it became eligible for such claim u/s 10B of the Act. In the present case, the AO disallowed the claim of the assessee only for the reason that it was earlier claiming the deduction u/s 80IC(5) of the Act. However, the assessee had forgone its earlier claim of deduction u/s 80IC of the Act. In the instant case, the assessee had not simultaneously claimed the relief u/s 80IC of the Act, therefore, the Subsection (5) of the said Section 80IC of the Act cannot be used to debar the assessee for claiming the deduction under any other section of Chapter-VIA or Section 10A or 10B of the Act, particularly when the AO had nowhere stated that the assessee had not fulfilled the conditions necessary for claiming the deduction u/s 10B of the Act, he only disallowed the claim of the assessee by relying upon the provisions of Section 80IC(5) of the Act which are not applicable for this year as the assessee did not claim deduction u/s 80IC of the Act. We, therefore, do not see any valid ground to interfere with the findings given by the ld. CIT(A) on this issue. - Decided against revenue Disallowance of interest on unsecured loan advanced to others by observing that it was on higher rate of interest - CIT(A) allowed claim - Held that:- AO had not brought any material on record to substantiate that the interest paid by the assessee to the creditors was not for the business exigencies or that the unsecured loans were utilized by the assessee elsewhere and not for the business purposes. Therefore, there was no justification in restricting the payment of interest at 8% instead of the actual rate of interest at 15%.Accordingly, we do not see any merit in this ground of the departmental appeal. - Decided against revenue Disallowance u/s 40A(2)(b) on interest on loan - CIT(A) allowed claim - Held that:- The interest has been paid by the assessee on the advances or loans utilized for the business purposes and it is not the case of the AO that the loans or advances on which the interest was paid by the assessee were not used for the business purposes. In the instant case, the contention of the assessee that no such disallowance was made in the earlier year was not rebutted and no reason has been given for deviating from the past history. In the present case, the contention of the assessee before the ld. CIT(A) was that there was a credit balance of Rs. 3,81,09,510/- in the partners capital account as on 31.03.2009 and even if the balance of Rs. 2,72,43,107/- in the account of Mr. Pradeep Windlass was to be adjusted, a net balance of Rs. 1,80,66,403/- is left in the partners capital account. The said contention of the assessee had not been rebutted. We, therefore, by considering the totality of the peculiar facts of the present case, do not see any valid ground to interfere with the findings of the ld. CIT(A). - Decided against revenue- Decided against revenue

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• 2015 (12) TMI 399
  TDS u/s 194C - Addition made by the AO u/s 40(a)(ia) - non deduction of tds on the transportation charges - CIT(A) deleted the addition - Held that:- The contracts envisages in Section 194C of the Act are not limited to written contracts and all payments made in pursuance of written, oral, implied or quasi contracts are covered u/s 194C of the Act. Thus, a contract need not be in writing; even an oral , implied or quasi contract is good enough to invoke the provisions of Section 194C of the Act. The contract also include sub-contract as it could be seen from coverage of payments to subcontractors by contractors within the ambit of Section 194C of the Act . In the instant case under appeal, the contractors i.e. intermediaries are transporting the goods by carriage for the assessee not themselves but through appointing sub-contractors independently i.e. actual transporters who are hired independently by contractors as sub-contractor for transporting the goods by carriage for the assessee and these sub-contractors are paid for by the intermediaries out of money collected from the assessee. Thus, the assessee has given work contract to intermediaries for hiring of transport for carriage of goods for the assessee which itself is a contract covered under Section 194C of the Act and in our considered view, the assessee was liable to deduct TDS u/s 194C of the Act on payments for carriage of goods through intermediaries as there was a contract covered u/s 194C of the Act between the assessee and these intermediaries - Hence , we set aside the orders of the CIT(A) and restore the orders of the AO. We accordingly uphold the orders passed by the A.O. - Decided against assessee.

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• 2015 (12) TMI 398
  Quantum of deduction to be allowed to the assessee u/s. 10A - Held that:- The assessee before us has furnished on record the audit report in Form No. 56F in respect of each of the unit against which it has claimed the deduction under section 10A of the Act. The quantification of the deduction under section 10A of the Act is to be worked out independently for each eligible unit and in case after the deduction so claimed under section 10A of the Act, there are profits in the hands of the assessee for such unit then the same can be set off against the losses, if any, incurred by the assessee in any other unit. There is no merit in first aggregating the profits of each of the eligible unit and setting of the losses of other units and on the net profits, if any, the deduction under section 10A of the Act to be computed. We find support from the ratio laid down in CIT Vs. Black & Veatch Consulting Pvt. Ltd. (2012 (4) TMI 450 - BOMBAY HIGH COURT ) wherein it has been held that the deduction under section 10A of the Act has to be given at the stage when the profits and gains of the business are computed in the first instance. In view thereof we reverse the order of Commissioner of Income Tax (Appeals) in this regard. The said deduction under section 10A of the Act is to be computed unit/undertaking wise and not for the assessee in totality. Reversing the order of the Commissioner of Income Tax (Appeals), we allow the grounds of appeal in favour of assessee.

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• 2015 (12) TMI 397
  Taxing the rental income under the head income from house property as against income from other sources - Allowance of interest expenditure - Held that:- In this case IOD was issued in relation to the plan that was put up on 25. 8. 2006 i. e. after entering into the development agreement. The fact is confirmed from the IOD dated 10. 1. 2007 and CC dt. 24. 4. 2007. It is found that amended plan was put up on 21. 2. 2007 and was approved on 8. 3. 2007, that construction work started in earlier assessment year and expenses were shown in the books of account from that year, that total expenditure incurred till 31. 3. 2007 was of Rs. 10, 53, 44, 733/-, that further expenses were incurred in the subsequent year and showed in the books of account, that the assessee had given details of the constructed area and the availability of certain areas free of FSI, that the certificate of the architect indicates that 3rd to7th floors were constructed later on, that the statement of the architect were not provided to the assessee though the same were relied upon by the AO, that as on 12. 4. 2008 two floors of the school building were complete. It is also found that in the case of BKF the AO has mentioned that the trust was conducting schools at Mira Road and Chembur, that there is no doubt that BKF was deducting tax at source on payment of rent to the Assessee. The AO has mentioned that instead of occupying the building the assessee might have utilised some other premises for running the school. We do not find any reason for arriving at the said inference. The evidences produced before the FAA about admission of students and their report cards for 3 academic years clearly prove that the school had commenced its activities in the year under consideration. We do not find any legal infirmity with the order of the FAA who had held that income could not be taxed as income from other sources and that interest paid had to be allowed u/s. 24 of the Act. - Decided against revenue. Allowance of expenses on account of improvement of leased premises - Held that:- We find that the assessee had installed various items as per the mutual agreement entered into with the lessee, that the amount was capitalised. We have, in the earlier part of the order, held that rental income was to be assessed u/s. 22 of the Act. Therefore, we agree with the observation of the FAA that capitalisation will not make any difference.- Decided against revenue. Allowance of expenses on account of bogus purchases and proportionate interest expenditure - Held that:- AO had made the disallowance on the basis of statements of Girish Sangani and Rajesh Kanakia, that both of them had admitted of accommodation entries and had made admission u/s. 132(4) of the Act with regard to these sale/purchases, that both of them had not alleged that the assessee had taken accommodation entries, that documentary evidences were produced regarding purchase of goods and same were not rebutted by the AO. In our opinion, the addition had to be restricted to the four entities who had taken the accommodation entries. As the AO has not brought on record that purchases made by the assessee were part of bogus bill transactions, so we are of the opinion that FAA was justified in deleting the addition with regard to addition made under the head bogus purchases as well as the proportionate interest disallowance - Decided against revenue. Addition made on account of accommodation entries - CIT(A) deleted the addition - Held that:- While deciding ground no. 4, we have held that the AO was not justified in making the addition for alleged accommodation entries in case of the assessee. Following the same we uphold the order of the FAA - Decided against revenue. Allowance of proportionate interest expenses related to advances made towards Juhu land - Held that:- FAA has given a categorical finding of fact that no interest bearing fund was utilised for purchasing the property in question, that the advances were given out of the funds received by the assessee from one of the group concerns namely Kanakia Spaces Pvt. Ltd., and it did not charge any interest from the assessee. Therefore, in our opinion disallowance was rightly deleted by the FAA - Decided against revenue.

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• 2015 (12) TMI 396
  Disallowance under section 40(a)(ia) - non-deduction of TDS on payments in the nature of purchases Held that:- Disallowance will not be attracted, if the respective payee has paid the required taxes in accordance with law. For verification of the actual position, we restore this issue to the file of the AO to verify whether the payee had paid the due taxes after computation of its income including the payments received from the assessee.- Decided in favour of assessee for statistical purposes. Disallowance of rent u/s.4O(a)(ia) - non-deduction of TDS - Held that:- Section 40(a)(ia) was amended by the Finance Act, 2010 and as per the amended provisions the expenditure has to be allowed if the deposit is made within the due date of filing of return of income. Mumbai Bench of the Tribunal, in the case of "Piyush C. Mehta" [2012 (4) TMI 349 - ITAT MUMBAI] has allowed the claim of the assessee if the deposit has been made before the due date of filing of return of income. We decide this issue accordingly and restore the matter to the file of the Assessing Officer (hereinafter referred to as the AO) to verify whether the TDS was deducted and deposited within the due date of filing of return and if found so, then the AO to allow the claim of the assessee accordingly. - Decided in favour of assessee for statistical purposes. Disallowance of salary paid to Mr. Hardik Kothari, son of the partner of the assessee firm - Held that:- justification has been given regarding payment of commission to Mr. Hardik Kothari and it has been explained that Mr. Hardik Kothari was son of the partner of the firm namely Mr. Viren Kothari that to encourage him for hard work, efficiency and sincerity the firm decided to offer him salary of Rs. 12,500/- and commission on sale of products. It has been explained that he has been looking after production quality and customer relationship. The Ld. A.R. has further invited our attention to the written submissions dated 29.08.11 submitted by the assessee to the Ld. CIT(A) wherein it has been explained that the amount of salary paid to Mr. Hardik Kothari was reasonable. The Ld. A.R. has further explained that the payment of salary was routed through salary account. He has further submitted that the payment of salary to Mr. Hardik Kothari has been allowed in the past. Considering the above submissions of the Ld. A.R., we do not find any justification on the part of lower authorities to disallow the amount of salary paid to Mr. Hardik Kothari, son of the partner. This issue is accordingly decided in favour of the assessee. Disallowance being 1/3rd of the payments made to Mr. Vinit Kothari and towards purchase of software - Held that:- We find that the assessee in his letter dated 31.08.10 has explained to the Commissioner that Mr. Vinit Kothari was doing engineering and that the software was developed by him. It is not disputed that Mr. Vinit Kothari is working for the firm. The Ld. CIT(A) has overlooked the contentions raised by the assessee and has disallowed the claim. It is not disputed that the services were provided by Mr. Vinit Kothari to the firm. It has also been explained that the software developed by him was very important to the business of the assessee firm. Considering the above facts and circumstances, in our view, the disallowance is not justified on this issue also and the same is accordingly ordered to be deleted. - Decided in favour of the assessee. Addition of unsecured loans under section 68 - Held that:- The said amount pertained to the commission of Rs. 1,79,400/- (net of TDS) that was already disallowed by the AO and confirmed by the Ld. CIT(A). He has explained that this amount was in respect of commission paid and not the loan received. Considering the above submissions of the assessee, we feel that the issue requires reexamination at the hands of AO. The AO is directed to examine the contentions of the assessee in this regard and decide the issue afresh in accordance with law.- Decided in favour of assessee for statistical purposes.

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• 2015 (12) TMI 395
  Profit earned on sale of shares - "business income" OR "short term capital gains" - Held that:- CIT(A) while deciding the issue in favour of the Assessee has held the profit earned to be as "capital gains" and has noted that Assessee has history of being an investor and claiming short terms capital gains and the activity of transactions were related to 5 scrips and the transactions were delivery based. He has further given a finding that it is not a case where the Assessee has done the transactions of sale and purchase on every day basis. He has further noted that the shares were considered by the Assessee as investment in its books of accounts, had not borrowed any finance to acquire the shares and out of the total gains earned by the Assessee, around 2/3 of the profits were earned from shares which were held for over 60 days. He thereafter relying on the ratio of the decision rendered by the Hon'ble Bombay High Court in the case of Gopal Purohit reported in 228 CTR 582 (Bom) held that only short term capital gains to the extent of Rs. 27,193/- earned on the transactions which were not transacted through Demat account is to be attributed to the business of share trading. Before us, Revenue has not placed any material on record to controvert the findings of ld. CIT(A). Further, it is also a fact that in the earlier assessment years, Assessee had offered the profits as short terms capital gains and the same was also accepted by the Revenue. No reason to interfere with the order of ld. CIT(A) - Decided against revenue

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• 2015 (12) TMI 394
  Disallowance of depreciation claimed on Wind Mill - Held that:- Since the facts of the present case are identical to the facts as were before the Coordinate Bench in the case of Besto Tradelink Pvt.Ltd.(2009 (10) TMI 896 - ITAT AHMEDABAD), therefore taking a consistent view, we do not see any reason to interfere with the order of the ld.CIT(A) upholding the action of A.O. disallowing the depreciation as the assessee-company never acquired dominion over the Wind Mills, therefore, it is not entitled to depreciation @ 100% as claimed in the assessment year - Decided against assessee. Disallowance of interest expenditure on account of non-deduction of TDS - Held that:- We find neither before the assessing authority nor before the appellate authority, the assessee had furnished the proof of requisite Form 15H. Even before the ld.CIT(A), it was contended by the assessee that the Form 15H received from the recipient was not forwarded to CIT(TDS) as required under the Act. Since the assessee failed to furnish the requisite Form 15H, therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against assessee.

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• 2015 (12) TMI 393
  Reopening of assessment - assessee has also assailed the action of the authorities below on merits and pleaded that the additions made are totally devoid of merits and are unsustainable in law - unexplained loan - Held that:- We find as a matter of fact that the impugned 'Annexure 4' showing loan received from Shri L.K. Jain (HUF) to the tune of Rs. 47.21 lacs was annexed along with the tax audit report filed and placed before the Assessing Officer in the course of the original assessment proceedings. It is also abundantly clear from the records and the assessment order that the Assessing Officer failed to take notice of the aforesaid Annexure 4 while completing the original assessment. After completion of the original assessment, it was found that the aforesaid loan has not been reflected in the Balance Sheet and accordingly was not subject-matter of the assessment in the original proceedings. Therefore, it is clear that the view taken by the Assessing Officer that there was a failure on the part of the assessee to disclose material facts fully and truly in tune with the authenticated tax audit report cannot be faulted. It is also clear that no conscious view was taken or no opinion was formed based on the impugned Annexure 4 to the tax audit report in the original assessment proceedings. Accordingly, it is not a case for change of opinion or a case of review. Therefore, the case laws cited by the assessee are clearly distinguishable on facts. The action of the Assessing Officer cannot be held to be hit by the embargo placed as per first proviso to section 147 of the Act. Thus, the objection raised by the assessee on lack of jurisdiction is not sustainable in law. - Decided against assessee. We find that the impugned 'Annexure 4' does not reflect the name of the assessee anywhere. Therefore, when seen independent of the tax audit report, the aforesaid Annexure 4 does not show any nexus with the assessee per se. We also find that Annexure 4 has no reference in the tax audit report and thus is not an integral part of tax audit report. This also establishes on facts that there is no nexus or live link between the impugned Annexure and the tax audit report. In view of these to important features, we find no difficulty in accepting the plea of the assessee that owing to some inadvertent error 'Annexure 4' not pertaining to assessee has crept in along with the tax audit report filed. The said Annexure 4 therefore appears extraneous. In our considered view, the assessee has discharged its onus of proving that the impugned loan is non-existent by furnishing the bank statements and confirmatory letters from the parties and co-relating the same with the Balance Sheet already placed on record. The facts and circumstances of the case as noted above clearly establishes the bonafides of the plea of the assessee. In view thereof, we hold that the impugned addition under section 68 of the Act is not sustainable on facts and law. - Decided in favour of assessee.

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• 2015 (12) TMI 392
  Penalty u/s 271B - assessee has obtained the tax audit report on 30th September 2008 and not before 30th September, 2008 - CIT (A) confirmed penalty holding that assessee has committed a default by not getting its accounts audited before the due date - Held that:- The meaning of the word ‘before’ in section 44AB of the Act is cloudy and uncertain. The word is possible of two meanings, one being the common meaning and the other as given in Chamber’s Twentieth Century Dictionary as ‘previous to the expiration of’. Looking to the other sections of the Act as above and giving harmonious construction we hold that the expression ‘before the specified date’ in section 44AB of the Act means ‘on or before the specified date’. In this view of the matter, there was no delay in audit of the accounts in terms of section 44AB of the Act - Decided in favour of assessee.

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• 2015 (12) TMI 391
  Addition in respect of commission - estimate the profit @0.50% of the total turnover - addition made in respect of unexplained cash credit u/s.68 - CIT(A) deleted the addition - Held that:- CIT(A) deleted this addition on the basis that the AO has rejected the books of account and estimated the income of the assessee at 0.52% of the total turnover. Therefore, once the books of account is rejected and the income of the assessee is estimated u/s.68 of the Act, it cannot be made separately of the deposits made in the bank account which is part and parcel of the books of account. We do not agree with this view of the ld.CIT(A) and no finding is given whether such deposits relate to the commission received by the assessee. In the absence of such specific finding, it cannot be presumed that the deposits as made were, in fact, the commission received by the assessee. Therefore, the decision of the ld.CIT(A) on this issue is hereby set aside and the addition made by the AO of Rs. 28,24,000/- is hereby upheld and this issue raised by the Revenue is allowed. - Decided partly in favour of revenue.

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• 2015 (12) TMI 390
  Levy of late filing fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- As the provisions accepting levy of late filing fees under section 234E have indeed been brought to the statute w.e.f. 1st June, 2015 and the impugned order was passed much before that date we hereby delete the levy of late filing fees under section 234E of the Act by way of impugned intimation issued. See Indian Overseas Bank Vs. DCIT [2015 (9) TMI 1290 - ITAT AHMEDABAD ] - Decided in favour of assessee

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• 2015 (12) TMI 389
  Additions u/s 69B - unexplained investment - CIT(A) deleted the addition invoking the provisions of Section 50-C - Held that:- In this case, the property was allotted by Ansal Housing and Construction Ltd. at its market value based on the rate of return from rentals and it was business asset for them. Therefore, the provisions of Section 50C will not be applicable in the case of purchaser of the property. The space was already rented, therefore, the fair market value of the property is decided by its rentals and the same was transferred to the assessee in the assessment year 2008-09. In this particular assessment year i.e. the assessment year 2009-10, the execution of sale deed was executed. It is very pertinent to mention that the provisions of Section 50C applies in case of calculation of sale consideration for the purpose of capital gain in the hands of seller of any capital asset. This aspect has been rightly taken into consideration by the Ld. CIT(A). Therefore, the action of Assessing Officer in making addition u/s 69B of the Income Tax Act, 1941 towards unexplained investment was not correct and Ld. CIT(A) has rightly directed the Assessing Officer to delete addition - Decided in favour of assessee.

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• 2015 (12) TMI 388
  Accrual of income - receipts of amount by sister concerns of the assessee as maintenance charges - whether lease agreement entered into between the assessee company and its tenant was a colourable devise to divert receipts/income to the other company to avoid tax liability in its hands - CIT(A) deleted the addition - Held that:- It is not in dispute that both the assessee company and its subsidiary company, providing maintenance services to the tenant of the assessee’s property, are two separate entities and income-tax assessees. The learned first appellate authority after considering the balance sheets of both the companies has arrived at a finding that the assessee company purchased the land and constructed the bare building at plot No. 7 Sector 127, Taj Express way, Noida and charged rent for the land and bare construction of building under an agreement entered into between the assessee company and the tenants. It is also born out on record that maintenance charges, whatsoever, were paid by the tenant to another company namely, M/s. IHDP Home Interiors Exports Parks Pvt. Ltd. under a separate agreement. It is also not in dispute that the lifts, generator, fire equipments etc. installed in the premises were not owned by assessee company, but by the other company who rendered maintenance services and received the maintenance charges CIT(A) appears to have committed no error while holding that there is no reason to include the income of maintenance charges earned by M/s. IHDP Home Interiors Exports Parks Pvt. Ltd who is a separate assessee, in the hands of the assessee-company. - Decided against revenue

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• 2015 (12) TMI 387
  Addition for a claim of interest and salary dues - CIT(A) deleted the addition - Held that:- Assessee had clearly mentioned in its return of income that he was following mercantile system of accounting. A system of accounting followed by the assessee cannot be changed simply based on an oral statement. We are of the opinion, that once the books of accounts are maintained in mercantile system of accounting, claim of outstanding expenditure if its correct, cannot be disallowed. AO also had not doubted the genuineness of the claim. In the circumstances, we are of the opinion, that CIT(A) was justified in deleting the addition. - Decided against revenue Addition for difference in capital account - CIT(A) deleted the addition - Held that:- Learned CIT(A) had directed the AO to verify whether the opening balance as on 01-04-2008 was the same as the closing balance as on 31-03-2008. The direction was to verify the claim and allow it, if found correct. We do not find any reason to interfere with such direction - Decided against revenue Additions made for unsecured loans - CIT(A) deleted the addition - Held that:- Assesese in his reply to a question raised during the course of his examination had stated that he was not having any confirmation from the loan creditors. The CIT(A) had given relief to the assessee with a finding that the Pan Nos. of the creditors were available and they were assessed by the very same AO. May be this is true. However, there cannot be any dispute that it required a verification by the AO. Just because the creditors were assessed by the same AO, would not be a reason to say that assessee had no duty to furnish a confirmation letter from the creditors. Confirmation letters can also throw light on the nature of the underlying transactions. We are of the opinion, that the issue requires a fresh look by the AO. We therefore, set aside the orders of the lower authorities in this regard and remit the issue regarding the addition for unsecured loans back to the file of the AO for consideration afresh in accordance with law. - Decided in favour of assessee for statistical purposes. Addition on deficit in source of drawings - CIT(A) deleted the addition - Held that:- The CIT(A), on appeal had considered the fact that assessee belonged to a group of individuals all of whom were assessed and located in Mandya. He held that an addition of Rs. 50,000/- would be fair, considering the fact that other family members of the assessee were also being assessed. We are of the opinion that the CIT(A) was justified in giving relief to the assessee - Decided against revenue Addition made for agricultural income - CIT(A) deleted the addition for a reason that assessee was owning 3 acres and 2 guntas of land situated at Devanagar, Dist. Maharashtra - Held that:- No doubt, learned DR argued that mere ownership of the agricultural land would not be sufficient to accept a claim of agricultural income. However, this argument can be considered only where the agricultural income claimed is of a higher order. It is admitted position that the holding of the assessee was at Sangli, which is a rich sugar belt area in Devanagar. Assessee had also given the details of the agricultural crops which are being raised by it. In such circumstances, on a preponderance of probability, the CIT(A) had allowed the claim. We do not find any reason to interfere with the order of the CIT(A). - Decided against revenue

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• 2015 (12) TMI 386
  Addition u/s 14A - CIT(A) deleted the addition - AO submitted that the assessee made the investment and had not bifurcated the investment and stock-in-trade. Therefore, the addition was rightly made by the AO by making the disallowance u/s 14A - Held that:- In the present case, it is an admitted fact that the provisions of Rule 8D of the IT Rules, 1962 are not applicable for the year under consideration because those rules are applicable for the assessment year 2008-09. It is also not in dispute that if any expenditure is incurred for earning the dividend income which is exempt from payment of tax, the said expenditure cannot be deducted against the taxable income. However, in the present case, the assessee had not retained the shares with the intention of earning dividend income. The investment was incidental to his business of sale of shares. Therefore, the ld.CIT(A) was justified in holding that the AO wrongly apportioned the expenditure incurred by the assessee in acquiring the shares to the expenditure of dividend income and making the disallowance u/s 14A of the Act. In the present case, the assessee did not make the fresh investment and even out of the stock-in-trade 75% of the shares were sold during the year which clearly shows that bulk of the shares which were purchased earlier, were sold and the income derived from those shares was offered to tax as ‘Business income’, the shares which could not be sold remained with the assessee and yielded the dividend for which the assessee had not incurred any expenditure at all. Therefore, the ld.CIT(A) rightly deleted the addition made by the AO. No valid ground to interfere with the findings of the ld.CIT(A). - Decided in favour of assessee.

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• 2015 (12) TMI 385
  Charitable activity - addition made by the Assessing Officer treating the activity of providing Mid Day Meal being falling with the proviso to Section 2(15) - Breach of natural justice - non providing opportunity to present case to assessee - Held that:- It is evident from the affidavit and its annexure that the assessee has duly filed application for adjournment before the learned Commissioner of Income-tax (Appeals), and therefore, the finding of the learned Commissioner of Income-tax (Appeals) that non attended on 13.06.2012 is not correct. The notices on the subsequent dates are also found not to be served properly on the assessee as asserted by the secretary of the assessee society in his affidavit. In view of these facts and circumstances, we are of the considered opinion that the assessee has not been provided any opportunity to represent its case, and therefore, following the settled rule of natural justice of “audi alteram partem” according to which nobody should be condemned unheard, we remit the matter back to the file of the learned Commissioner of Income-tax (Appeals) with a direction to provide opportunity of being heard and decide the appeal de novo. - Decided in favour of assessee for statistical purposes.

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• 2015 (12) TMI 384
  Registration u/s 12AA denied - Held that:- In perusal of the order of the DIT (Exemptions) denying denied registration u/s 12AA of the Act , it is apparent that he except relying on the office order dated 31.07.2007, has not specified any reasons for denial of registration. The copy of the order dated 31.07.2007 on which he relied has also not been supplied to the assessee nor even presented before the Tribunal. In view of the above facts, we are of the opinion that the assessee deserves to know the grounds on which its application for registration has been rejected. Therefore, in the interest of natural justice, we set aside the order of impugned order of the Director of Income-tax ( exemption) and remit the matter back for decide afresh, after giving due opportunity to the assessee. - Decided in favour of assessee for statistical purposes.

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• 2015 (12) TMI 383
  TDS u/s 194H - disallowance under section 40 (a)(ia) - commission paid by the assessee to its agent in relation to any transaction relating to securities for procuring business for it - Held that:- The impugned issue is squarely covered by various orders of the Tribunal in favour of the assessee. This Bench of the Tribunal has also taken a view in the case of ACIT vs. M/s Tandon & Mahendra (2014 (4) TMI 811 - ITAT LUCKNOW) that TDS is not required to be deducted on such payment of commission in relation to securities under section 194H of the Act. - Decided in favour of assessee

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• 2015 (12) TMI 382
  Addition u/s 68 - unexplained cash credit - CIT(A) deleted addition - Held that:- the assessee has proved to have purchased the shares of Rs. 25,10,000/- in the preceding assessment year duly shown in the balance sheet and then sold the same and shown an amount of Rs. 25,10,000/- as sale proceeds of the share as income, the provisions contained in Section 68 of the Act are not attracted and holding the same as income would tantamount to double taxation which is not permissible under law and as such, the Ld. CIT(A) has rightly deleted the addition made by the A.O. See Vishal Holding and Capital Pvt. Ltd. [2010 (8) TMI 634 - DELHI HIGH COURT ] - Decided in favour of assessee.

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• 2015 (12) TMI 381
  Addition on account of interest of delayed payment of license fee - CIT(A) deleted the addition - Held that:- There is a difference in the telecom policy which was upto July 1999 and new policy came into picture with effect from01/08/1999. The present licence fee is for financial year 2003-04, which is post July, 1999, therefore, the basic licence fee is allowable. It is also noted that for earlier year, even the Assessing Officer allowed the same as revenue expenditure. The allotment was under the old policy was allowed as revenue deduction and book entry was amortized as revenue fees. Even otherwise, the ratio laid down in CIT vs Bharti Hexacom Ltd. (2013 (12) TMI 1115 - DELHI HIGH COURT) supports the case of the assessee, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals), more specifically when, no contrary decision was brought to our notice. - Decided in favour of assessee. Addition on account of excess claim of depreciation on printers, UPS and other accessories - CIT(A) deleted the addition - Held that:- Peripherals such as printers, scanners, NT server etc, are integral part of computer, therefore, eligible for depreciation at higher rate. See DCIT vs Datacraft India Ltd. (2010 (7) TMI 642 - ITAT, MUMBAI), DCIT vs BTA Cellcom Ltd. (2011 (9) TMI 127 - ITAT, New Delhi), M/s Weizmann Ltd. vs DCIT (2013 (12) TMI 779 - ITAT MUMBAI)& Expeditors International (India) Pvt. Ltd. vs Addl. CIT (2008 (8) TMI 399 - ITAT DELHI-F ). - Decided in favour of assessee.

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• 2015 (12) TMI 380
  Addition made by the AO u/s 36(1)(iv) - assessee as Revenue expenditure for payment towards interest on PF - CIT(A) deleted the addition - Held that:- Identical issue has been considered and decided by the coordinate bench of the tribunal in the assessee's own case for the assessment year 1999-00 as well as for the assessment year 2006-07 and 2007-08 that it is not in dispute that the AO made the disallowance of the interest paid by the assessee on the running balance of PF. This issue was involved in an earlier assessment year 1998-99, in the assessee's case, and the ITA while deciding the appeal of the assessee. As the Department has accepted a similar claim in similar circumstances in AY 1998-99 and also for the AY 2005-06 thus keeping in view the principle of consistency, the Revenue could not be permitted to raise an issue in isolation only for one year in the case of one assessee, while accepting the findings on the same issue in the case of other assessees and for the other years in the case of the assesssee.- Decided in favour of assessee Disallowance u/s 14A - Held that:- Since there is a frequent movement in the investment portfolio of the assessee therefore, the question which requires to be ascertained by indentifying the particular items of the expenditure debited by the assessee in the profit and loss account which can be apportioned u/s 14A. Accordingly, in the facts and circumstances of the case, we are of the considered opinion that this issue requires a proper verification and examination of the fact on the aspect of identifying the particular expenditure for the purpose of disallowance u/s 14A. The AO has not given any finding or identified the expenditure which can be allocated for earning the exempt income. Therefore, this issue is set aside to the record of the AO for proper verification and for identifying expenditure which can be treated as allocable for the purpose of earning the dividend income and consequently can be disallowed u/s 14A of the Act. We make it clear that the disallowance made u/s 14A and quantum of disallowance worked out as per Rule 8D can't exceed the actual expenditure debited by the assessee in the profit and loss account which has a nexus for earning exempt income. - Decided in favour of assessee for statistical purposes

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• 2015 (12) TMI 379
  Unexplained cash credit u/s 68 - CIT(A) deleted the addition - Held that:- In view of the decision of Hon’ble Delhi High Court in the case of Nova Promoters & Finlease (P) Ltd. ( 2012 (2) TMI 194 - DELHI HIGH COURT) and in the case of Empire Buildtech Pvt. Ltd. (2014 (2) TMI 135 - DELHI HIGH COURT), unless all the three ingredients for invoking section 68 are fully satisfied, addition cannot be deleted merely on the ground that the identity had been established. We find that in order to establish the creditworthiness the assessee had claimed that the investor company was assessed to tax. However, as rightly pointed out by ld. CIT(DR), the investor had returned income of Rs. 530/-. Therefore, it is necessary that what was the source of investment of the investor has to be clearly brought on record. Mere filing of return cannot establish the creditworthiness.Therefore, we restore this matter to the file of AO to provide one more opportunity to assessee to establish the genuineness and creditworthiness of M/s Well Wish Credits Pvt. Ltd., as requested by ld. counsel for the assessee. Decided in favour of revenue for statistical purposes.

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• 2015 (12) TMI 378
  Addition u/s 69 - purchases were made from undisclosed/unverifiable/unidentifiable parties in the grey market by investing in cash and the purchases from the group concerns of Shri Rakeshkumar Gupta & family were only accommodation entries and not actual purchases - Held that:- The assessee before the AO vide letter dated 26th August, 2010 have submitted the entire quantitative details of opening stock, purchases, sales made during the year and closing stock, the details of which have already been noted above. The assessee in support of the entries of purchases and sales has produced, purchase bills sales bills and quantitative tally in which no defect has been pointed out. On these facts and also once the very basis of information that assessee was engaged in getting accommodation bill from Rakeshkumar Gupta has been denied by the Rakeshkumar Gupta and its concerns then, there remains no basis for making any addition on account of bogus purchases.If the opening stock, closing stock, sales, gross profit have not been disturbed and quantitative details of purchases are fully verifiable, then no addition on account of purchases can be made. Thus, the finding of the CIT(A) to this extent is upheld. However, the Ld. CIT(A) has went step further and made an addition of 10% on account of gross profit on such alleged purchases on the ground that such an addition will cover whatever little discrepancy is there in the trading account. Thus, we do not find any reason to deviate from such conclusion of Ld. CIT(A) accordingly, ground raised by the revenue is dismissed. - Decided in favour of assessee.

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• 2015 (12) TMI 377
  Rectification of mistake - CIT(A) quashed the order passed by the AO u/s 154 by holding that disallowance of depreciation in this case was not a prima facie mistake - Held that:- CIT(A) quashing the rectification order passed by the AO, has placed reliance on M/s. Hari Fashion vs. ACIT [2011 (5) TMI 931 - ITAT AHMEDABAD] wherein Tribunal observed that because of the above processes, which have to be carried out in a very careful manner, the embroidered fabric acquires entirely different looks and has different commercial value and that thus, because of the said operations, an entirely new commodity emerges. It was held that because of these operations, the look of the fabric changed substantially and the new article is commercially known differently from the original fabric; that even otherwise, the word “produce” has a wider connotation than the work “manufacture”; that in “S.S.M. Brothers (P) Ltd. and others vs. CIT”(1999 (1) TMI 2 - SUPREME Court ), development rebate claimed u/s 33(1)(b)(B)(i) of the Act was allowed by holding that the plant and machinery were used in the production of processed textiles (embroidery) and, therefore, machinery was entitled to the development rebate claimed; that the decision in “S.S.M Brothers (P) Ltd. that since section 32(1)(iia) also uses the expression ‘production of any article or thing’, any product with embroidery work is an article or thing; that the provisions of section 31(1)(iia) are larger in scope than those of section 33(1)(B)(b)(i) in as much as section 32(1)(iia) provides for additional depreciation on plant and machinery, which is used in the production/manufacture of any article or thing, whereas section 33(1)(b)(B)(i) pertains to development rebate on plant and machinery which is used in the construction, manufacture or production of any article or thing, as listed in the Fifth Schedule; that even from the angle of Excise Duty under the Central Excise Act, embroidery is subject to levy of duty and is considered as manufacture under Tariff item 5810. CIT(A) was correct in quashing the rectification order passed by the Assessing Officer. - Decided against revenue.

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• 2015 (12) TMI 376
  Disallowance of excess cost claimed - CIT(A) held that the assessee is not required to follow the method of valuation prescribed u/r 9B of I.T. Rule, 1962 thus deleted the addition - Held that:- Cost to be allowed during the year depends upon the closing stock of the previous year, purchases during the year and the valuation of the closing stock would be dictated by sub Rule 2 & 3. From the assessment order, it appears that the Assessing Officer has misconstrued the provisions of Rule 9B and has not applied sub Rule 2,3 properly. In fact ignored sub Rule 4 completely and did not allow the closing stock of the previous year of unsold films which is to be allowed as deduction irrespective of sale or not. Thus, instead of loss of Rs. 18,22,482/- claimed by the assessee in the return, loss of Rs. 62,94,368/- have to be allowed as per Rule 9B. We find that as per the cost of acquisition, closing stock adjustment in past year’s closing stock may lead to allowing higher losses in the instant assessment year. The method followed by the assessee is endorsed and the addition made by the Assessing Officer was rightly deleted by the CIT(A) in the assessment year i.e 2007- 08. This factual legal finding needs no interference from our side. We uphold the same. - Decided against revenue

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• 2015 (12) TMI 375
  Addition on account of bogus purchases - CIT(A) deleted the addition - Held that:- No reason to interfere with the decision of the learned Commissioner (Appeals) on this issue. As can be seen, the learned Commissioner (Appeals), on verifying the books of account of the assessee for the relevant assessment year has given a factual finding that the actual purchases made by the assessee during the year under consideration from Samarth Enterprises, was to the tune of Rs. 11,238. The Department has failed to bring any material before us to disturb the aforesaid factual finding of the learned Commissioner (Appeals). - Decided against revenue. Disallowance of commission paid to directors - allegation that commission was paid to avoid dividend distribution tax - CIT(A) deleted the addition - Held that:- the assessee during the year not only has paid dividend to the directors but has also paid commission @ 3% of the profits. It is also not disputed by the learned Departmental Representative that the assessee is continuously following the practice of payment of dividend as well as commission to the directors from past several years. It is also not disputed that the dividend payment to directors over the years has increased substantially and for the impugned assessment year, as noted by the learned Commissioner (Appeals), the assessee has declared dividend of approximately 55% of the profits. It is also not denied that the assessee has paid dividend distribution tax on the dividend declared. That being the case, there being a quantum jump in the dividend paid to the shareholders, it is difficult to believe that the assessee would have adopted a mechanism to avoid payment of dividend distribution tax on 3% of the profit by treating it as commission payment to the directors. More so, when it is a fact on record that such commission payment to directors is continuing for past several years and department has never questioned such commission payment. As rightly held by the learned Commissioner (Appeals), there being no nexus between the two payments i.e., commission and dividend to the directors, the disallowance made could not have been sustained. Accordingly, we uphold the order of the learned Commissioner (Appeals) - Decided against revenue.

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• 2015 (12) TMI 374
  Addition on account of preoperative expenses - CIT(A) deleted the addition - Held that:- As decided in assessee's own case [2014 (12) TMI 64 - DELHI HIGH COURT] none of the expenses mentioned therein are of personal in nature; and the said expenses are of revenue in nature. Even otherwise, the assessee has capitalized all the exploration cost and the same have been reflected as "capital work for progress" in the balance-sheet. The assessee has only claimed deduction of the expenses which have been incurred for day to day operation of the business which are eligible for deduction U/S 37(1) of the Act. Since the assessee has claimed deduction only in relation to the expenditure of revenue in nature in the Profit and Loss Account, we find no infirmity in the reasoned order of the ld CIT(A), therefore, we confirm the finding of the ld CIT(A) on this ground and dismiss the said ground of appeal of the revenue - Decided in favour of assessee.

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• Customs

• 2015 (12) TMI 409
  Waiver of pre deposit - Mandatory pre deposit - Held that:- present appeals filed by the appellants, in their individual capacity, and they have to submit proof of mandatory deposit separately. So we do not find any force in the submission of Learned Advocate to the extent the deposit made by the main appellant is sufficient to entertain the appeal of the present appellant. - Decided against assessee.

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• 2015 (12) TMI 408
  Confiscation of goods - smuggling of goods - whether mobile phones are rightly confiscated as smuggled goods and whether appellant is the rightful owner of the goods - Held that:- No investigations at all were conducted by the department to check the authenticity of the documents produced by the appellant. There was also no other claimant of present seized mobile phones of foreign origin and mobile phones are not notified under Sec 123 of the Customs Act 1962 where onus shifts to the owner / importer of the goods. Appellant has never claimed to be the original importer of the mobile phones. The requirement to meet with the prohibitions imposed by the DGFT notification No. 14/2009-14 dt 14/10/2009 can be only be questioned from the importer. No investigation was done from the seller of the mobile phones in Delhi to establish that mobile phones were of smuggled nature. Once appellant has produced the purchase bills with respect to the seized goods then it cannot be said that the seized goods were of smuggled nature when no investigation was done at sellers end. In the absence of any other claimant of goods the present appellant has to be considered as the rightful owner. Appellant cannot be questioned with respect to the restrictions imposed by DGFT when the same were also not the subject matter of the show cause notice. - Decided in favour of assessee.

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• 2015 (12) TMI 407
  Import of restricted item - Redemption fine - Penalty - Held that:- It is an admitted fact that the appellant imported the goods under one of a mistake. The violation of port restriction is only a venial breach. It is also not a fact that the appellant is a repeated offender. In view of the technical breach, and for that taking notice of the fact that the appellant have suffered heavy demurrage of Rs. 8 lakhs, I uphold the order of confiscation but reduced the redemption fine under Section 125 to Rs. 1 lakh and further set aside the penalty imposed under Section 112(a) of the Act - Decided partly in favour of assessee.

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• 2015 (12) TMI 406
  Denial of exemption claim - Ad-hoc Exemption notification order no. 3 of 2007 - Held that:- The excess duty was paid in exercise of the exemption notification, whereas in the present case the appellant had claimed exemption, but the same was denied and the duty was paid under protest. I find that the facts of the case are also similar to the facts in the case of Commissioner of Customs Vs. Tata Medical centre Trust - [2015 (1) TMI 68 - CESTAT MUMBAI], wherein the Division Bench of this Tribunal after referring and distinguishing the rulings of Hon'ble Supreme Court in Flock (India) Ltd. (2000 (8) TMI 88 - SUPREME COURT OF INDIA) and Priya Blue Industries Ltd. (2004 (9) TMI 105 - SUPREME COURT OF INDIA), in the case where duty was paid inadvertently - Assistant Commissioner has erred while passing the adjudication order as he has failed to take the documents already on recorded into notice while rejecting the claim of refund. Further, the Order-in-Original is also hit by limitation as the exemption granted by the Govt. of India, vide the latest letter dated 2.3.2009, which clearly shows that the exemption order granted earlier vide letter dated 11.1.2007, the validity period of the Ad-hoc exemption order may please be read as 31.12.2009 instead of 31.12.2008. By this letter, the Govt. had extended the exemption period with the retrospective effect, which is binding on officers of the Govt. of India. Accordingly, there is no error in the appellate order and the same is upheld and the appeal of the Revenue is dismissed. - Decided against Revenue.

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• 2015 (12) TMI 405
  Benefit of Notification No. 2/2002-Cus dated 01.03.2002 by treating the system as “Treatment Planning System” - Re-export of goods declared as “Ci Navigation System” - Held that:- Commissioner has given a categorical finding that there was no mis-declaration of the goods and claiming of the benefit of Notification cannot be called mis-statement. He has also recorded that an identical machine was allowed the benefit of the notification in Mumbai port. As such, it has to be held that the importer held a bonafide belief that they were entitled to the benefit of exemption notification. Accordingly he has accepted the importer’s prayer that if duty has to be paid on the said machine, it would not be economical for them to get the same cleared and hence has allowed re-export of the same. - if an identical machine was allowed the benefit of the Notification at Mumbai port, the same would lead to a bonafide belief on the part of the importer to claim the benefit of exemption notification. It is only for economical reasons that importer did not want the machine to be cleared on payment of duty and requested for re-export of the same. - Decided against Revenue.

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• 2015 (12) TMI 404
  Rejection of transaction value under Section 14 - Provisional assessment - Held that:- Even if there was a doubt in terms of Rule 12, the Rule requires that the authority must be proceed sequentially through Rule 4 to 9. Rule 4 requires the transaction value to be based on value of identical goods sold for export to India. The adjudicating authority based its decision on identical goods sold by the importer on high sea sale basis at US$ 165 PMT which is equal to the ‘Platt’ price. We find that the contract between the supplier and importer was agreed upon in July 2000 whereas the said high sea sale took place much later. The adjudicating authority did not consider this fact. At the same time, the Commissioner (Appeals) has clearly stated that on further inquiry in the Custom House, the contemporaneous imports in the months of July, August and October 2000 were found to be US$ 140, 125 & 115 PMT respectively. It is not established by the department in the grounds of appeal that such contemporaneous imports did not take place. In these circumstances, it is incorrect on the part of the adjudicating authority to ignore the actual contemporaneous prices in terms of Rule 4 (earlier Rule 5). The department has not been able to either establish existence of any circumstances as in Rule 3(2) [(earlier Rule 4(2)] nor did it consider the correct contemporaneous imports. Reliance on judgments must be made in a proper context and not out of context. The judgments cited by Revenue do not say that when contemporaneous import prices are available, the same should be rejected and journal prices accepted. In this view of the matter, the grounds of appeal have no basis and are accordingly rejected. - Decided against Revenue.

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• 2015 (12) TMI 403
  Confiscation of goods - Import of restricted items - ownership of goods - Held that:- In this case the container arrived at ICD TKD New Delhi on 06.06.2011 and remained unclaimed. On enquiry it was found that documents of the said container are in the name of the appellant but appellant has disowned the ownership of the said container. As per section 2(26) of the Customs Act 1962 the importer is a person who cleared the goods for home consumption or claims to be owner of the said goods. Admittedly, in this case the appellant has not cleared the goods for home consumption or not claimed to be the owner of the said goods. Under the said circumstances, the observation of the lower authorities that appellant is the owner of the said goods or the importer of the said goods is not tenable. Revenue has also not brought out on record any corroborative evidence to say that whether appellant is the regular importer from the same supplier of the goods or appellant is importing old and worn clothes. In these circumstances, benefit of doubt goes in favour of the appellant. - Decided in favour of assessee.

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• Corporate Laws

• 2015 (12) TMI 369
  Amended Regulations effective from 1.10.2006 introducing Schedule IIIA into the Regulations questioned - Interpretation of provisions of Securities and Exchange Board of India (Stock-brokers and sub-brokers) Regulations, 1992 (for short the Regulations) as amended from time to time including Schedule III and IIIA - Held that:- We find ourselves in agreement with submissions advanced on behalf of the appellant that after 30th September, 2006 i.e. after Schedule IIIA admittedly became applicable to the appellant, no provisions in Schedule III could be applied to his case. We also find no merit in the contention advanced on behalf of SEBI that clause 4 of Schedule IIIA protects the demand raised by SEBI. Clause 4 of Schedule IIIA along with clause 3 occurs in Part B which relates to charge of fees. It reads as follows : “4 – Nothing in clause 3 shall affect the liability of any stock broker to pay fees under Schedule III, which accrued before this Schedule became applicable to him and such fees shall be paid as per the relevant provisions of Schedule III as if they had not ceased to be applicable to him.” The aforesaid clause is clarificatory in nature. It clarifies that the liability to pay fees as per Schedule III which has already accrued and got fastened to a stock-broker before the Schedule IIIA became applicable, would remain payable as per the provisions of Schedule III even after they cease to be effective for subsequent period. This clause in our view does not affect the enforceability of Schedule IIIA from the date it became applicable to the appellant on account of option permitted by the relevant provisions. After Schedule IIIA became applicable, the Registration fee for any future period since 1.10.2006 could not be levied or demanded on the basis of Schedule III. It had to be calculated on the basis of monthly turnover and payable each month as per provisions in Schedule IIIA. Thus the impugned order of the SAT under appeal to be contrary to law. The same is accordingly set aside. The Appeal is allowed.

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• Service Tax

• 2015 (12) TMI 420
  Foreign Employees on Deputation in India - Interpretation of term "service" - Salary payment of US Company's employee recruited - Section 65(44) - Held that:- The agreement is very clear to suggest that so long as Mr. Sloan is serving in India, he will be treated to be the employee of the applicant though his interests as the employee of NAC, US, insofar as the social security interests are concerned, will be taken care of by NAC, US. It is trite that he does not get the salary from NAC, US when he is offering services to NAC, India in that behalf, the benefits are mutually exclusive, at least so far as, they are concerned with the salary. The only obligation on NAC, US is regarding the social securities which are not reimbursed by NAC, India to NAC, US - merely because the social security of Mr. Sloan while he is in India is being taken care of by the NAC, US. The service of Mr. Sloan with NAC, India can not be viewed otherwise in view of the clear language of Section 65 (44) (b). - there shall be no liability to pay service tax on the salary and the allowances payable by the applicant to the employee in terms of the dual employment agreement and such salary will not be eligible to levy the service tax as per the provisions of the Finance Act. - Decided in favour of assessee.

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• 2015 (12) TMI 419
  Attachment of property and bank accounts - Violation of principle of natural justice - Held that:- we find from a reading of the affidavits and impugned notice as well as the order directing attachment of the property and perusal of the satisfaction recorded in the original that without waiting for a reply to the show cause notice, and without giving any opportunity and without giving any notice, the bank accounts were attached in gross violation of Rule 3 of the Rules of 2008 read with paragraph 2 (iii) of the Circular dated 1st July, 2008. It is mandatory for the authority to issue a notice giving 15 days' time to reply before attaching a property. In the instant case, we find that the proposal submitted by the Deputy Commissioner, Respondent No. 3 clearly indicated that first the property should be attached and thereafter notice should be issued. This proposal was approved by the Commissioner without any application of mind and without considering the provision of the Rules and the circular. No cogent reason has been given justifying the action for attaching the property. Only a cursory remark has been indicated namely that there is fair possibility of the funds getting dissipated. In our opinion, cogent and sufficient justification was found lacking in the satisfactory note. The attachment proceedings could not be initiated on such ground. - action of the respondents was not malafide and consequently considering this fact, we issue only a warning to respondents 2 and 3 that they need to be careful while resorting to exercise the powers contemplated under Rule 3 of the Rules of 2008. Such exercise of power has to be resorted to with utmost circumspection and with maximum care and caution. - impugned orders are quashed - Decided in favour of assessee.

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• 2015 (12) TMI 418
  Rejection of request of rectification of bid - Held that:- The financial bids were opened on 20.07.2015. It was thereafter that the said letter dated 21.07.2015 was written by the official respondents to the petitioners calling upon them to rectify the bid. Clause-13 of the NIT specifically provided that a copy of the undertaking shall be scanned and uploaded to the etender website within the period of the bid submission. Further, Clause-15(d) required the undertaking as per Clause-13 to be scanned and uploaded within the period of bid submission. The undertaking furnished by the petitioners was the one dated 10.07.2015, which we referred to earlier. That undertaking, however, provided that service tax will be charged extra, if applicable at any stage. This, as we noted earlier, was contrary to Clause-34. It required the rates to be quoted inclusive inter alia of service tax - The petitioners do not deny that the condition contained in the undertaking is contrary to the terms and conditions of the tender. The petitioners, however, contend that it was an error that the official respondents called upon the petitioners to rectify and that the petitioners had, in fact, rectified the same. The petitioners, therefore, contend that their bid was not liable to be rejected. Clause-30 contemplates clarifications being sought by the official respondents and being furnished by the bidders. The imposition of the condition contrary to the terms of the tender that the price is exclusive of service tax if applicable, does not fall within the ambit of Clause-30. The respondents by their letter dated 21.07.2015 did not seek a clarification in that regard. No clarification was necessary. The condition was clear, namely, that service tax would be charged as applicable. The official respondents did not seek a clarification in that regard. They called upon the petitioners to delete the same. A post bid change in the price is normally not permissible. - Decided against the petitioner.

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• 2015 (12) TMI 417
  Request to issue discharge certificate for declaration filed under VCES - Held that:- Petitioner submitted that for the relief claimed in the writ petition, the petitioner has sent a letter dated 26.12.2014 (Annexure P-15) to respondent No.1, but no action has so far been taken thereon. - petition is disposed of by directing respondent No.1 to take a decision on the letter dated 26.12.2014 (Annexure P-15), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of a certified copy of this order. As regards, challenge to the show cause notice, the petitioner shall file a detailed and comprehensive representation. In case any such representation is filed by the petitioner, the same shall be decided by the competent authority expeditiously in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner. - Petition disposed of.

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• 2015 (12) TMI 416
  Jurisdiction of Court - Territorial jurisdiction - Held that:- Mr.Oza has urged that the unit is situated in Silvassa, which is an Union Territory and hence the matter arising from Dadra Nagar Haweli can only be heard by Bombay High Court and Gujarat High Court has no territorial jurisdiction to hear and decide the matter, irrespective of the fact that the impugned order of the Tribunal has been passed at Ahmedabad. We are neither condoning the delay nor admitting the appeal - Decided against assessee.

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• 2015 (12) TMI 415
  Demand of service tax - Renting of Immovable Property service and Leasing of Vehicles - held that:- There is no evidence that the property which appellant leased was further (sub) leased by it to its group companies/ employees. The appellant had repeatedly stated that the properties leased by it were used by it for providing services to its group companies and for such services they charged their group companies on which it paid service tax. In these circumstances, it does not come out at all that the appellant leased or sub-leased any immovable properties to its group companies/employees. In the Show Cause Notice or in the impugned order, no evidence that the appellant gave any premises on rent/lease has been mentioned. The appellant has shown that it took the premises on lease and therefore was a recipient of renting of immovable property service and not a provider thereof. The onus to establish that the appellant provided renting of immovable property service is on Revenue and as is evident from the paragraphs 38.4 and 38.7 quoted above, such onus has not been discharged by Revenue. Therefore, the question of levying service tax under “Renting of Immovable Properties” service does not arise. For levying of service tax under reverse charge mechanism, Revenue has to first identify the taxable service received from abroad for which payment was made in foreign currency, which, as seen from the paragraphs of the impugned order quoted above, has not been done at all. This is clearly fatal. It can be nobody’s case that any amount spent in foreign exchange is liable to service tax under reverse charge mechanism; such expenses have to be shown to be related to import of taxable service. Even so, the appellant has on its part stated that the expenditure relating to purchase of foreign exchange, school fees for American Embassy School, training and development on foreign locations, travel arrangement for foreign expatriates and employee benefits are not liable to service tax for the reasons given in their submissions and recorded earlier in para 3 and only foreign exchange expenses relating to tele-communication service and management consultant service were liable to service tax which it has paid along with interest. - Decided in favour of assessee.

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• 2015 (12) TMI 414
  Denial of refund claim - accumulated Cenvat credit against export of Services in terms of Rule 5 of CCR, 2004 and Notification No.5/2006 CE (N.T.) - Bar of limitation - Held that:- It is clear that payment received in Indian Rupees for which FIRC issued by the bank and payment is routed through foreign bank qualifies the condition of payment 'convertible foreign exchange', therefore on this ground refund cannot be rejected. As regard Cenvat Credit in respect of services namely, rent a cab, outdoor caterer's service, I fully agree with the findings of the Ld. Commissioner based on board circular dated 19/1/2010. Moreover on these two services there are number of judgment of this Tribunal including larger bench judgment in case of Commissioner of Central Excise, Mumbai-V vs. GTC Industries Ltd. [2008 (9) TMI 56 - CESTAT MUMBAI] where credit was held admissible. - Commissioner (Appeals) order is just and proper except in respect of two invoices No. 10/2009 dated 31/10/2009 and 11/2009 dated 31/11/2009. I therefore hold that respondent is not entitle for the refund in respect of two invoices. - Decided partly in favour of Revenue.

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• 2015 (12) TMI 413
  Denial of CENVAT Credit - Held that:- Apparent reading of page numbers 29 to 34 of appeal record, it discloses that the Commissioner (Appeals) has only printed the headlines from ELT and passed the order without examining the evidence and material fact in respect of each claim of CENVAT credit. Law is codified in section 35A(4) of the Central Excise Act, 1944 which is applied to Finance Act, 1994 requiring the Commissioner (Appeals) to decide an appeal clearly stating the points for determination, the decision thereon and the reasons for the decision. That is not followed in the present case. Unless the material facts are tested by evidence and law, there shall not be any decision in the eyes of law. It shall be an empty formality. - Commissioner (Appeals) has to take up each and every item of claim of CENVAT credit and discussing the material facts in respect of the claim of the assessee, test the same on the touch stone of law - Matter remanded back - Decided in favour of Revenue.

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• 2015 (12) TMI 412
  Imposition of penalty - whether concession in penalty to the extent of 25% of the tax liability discharged before the appellate authority disposed the appeal is deniable when such concession was allowed by adjudication order - Held that:- Department has not verified as to on whom the adjudication order was served. Mere dispatch of the order may not result in inference that it was served on the appellant. It should be addressed to the right addressee. There is no finding to that effect. Had the department verified the address of the addressee from envelope containing the order and caused an inquiry, truth would have been discovered to reach to a conclusion that the envelope containing the adjudication order was served on the assessee. In absence of any inquiry, appellant gets benefit of doubt of the service of the order upon it not earlier to 21.12.2009. When the order came to the knowledge of assessee, upon service, the crucial date for it to discharge penalty was 21.12.2009 and 30 days therefrom was to be reckoned. - to reduce litigation and also considering discharge of tax liability which is not in dispute by Revenue, penalty is reduced to 25% of tax liability which is also said to have been discharged by the appellant and not controverted by Revenue - Decided in favour of assessee.

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• 2015 (12) TMI 411
  Restoration of appeal - Appeal dismissed for non complaince with pre deposit order - Held that:- Appellant though preferred writ petition before Hon'ble High Court against the LAA's interim order of predeposit, till date there is no stay order passed by Hon'ble High Court against the predeposit order. Therefore, the LAA has rightly dismissed the appeal. Since the LAA has not discussed the issue in detail on merit, we find that it would be appropriate to call for the appellant to make predeposit so as to enable the appellant to appear before LAA to argue on merits - Appeal restored conditionally.

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• 2015 (12) TMI 410
  Denial of CENVAT Credit - whether CENVAT credit of service tax paid on Services of Guest House and Colony maintenance service is admissible to the appellant or not - Held that:- Appellant is not contesting the issue on merits but has contested the issue on time bar. It is the case of the appellant that the issue of admissibility of cenvat credit on the services availed on the Guest House and Colony maintenance services was only decided by the jurisdictional High Court in the case of CCE & Cus. vs. GHCL (2011 (5) TMI 132 - GUJARAT HIGH COURT) when the earlier decision passed by CESTAT Ahmedabad, in the case of GHCL vs. CCE, Bhavnagar (2009 (4) TMI 144 - CESTAT AHMEDABAD), was in their favour. It is observed that when an issue is disputable and a final view taken by this Bench was in favour of the assessee then appellant had a bonafide belief that cenvat credit was admissible of these services. Favourable view taken by CESTAT was reversed by Hon’ble Gujarat High Court in the case of CCE & Cus, Bhavnagar vs. GHCE (supra) in 2011. Under this factual matrix extended period cannot be invoked and demand has to be restricted to the period within one year from the date of show cause notice. The amount involved within the period of one year should be worked out by the adjudicating authority and communicated to the appellant. The same should be paid by the appellant along with interest. Imposition of penalty upon the appellant is concerned, no intention to evade duty can be attributed to the appellant when the issue of admissibility of cenvat credit on the amount of service was disputed. Accordingly, penalty imposed by the adjudicating authority under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 111AC of the Central Excise Act, 1944 is set-aside - Decided partly in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (12) TMI 373
  Denial of input tax credit - Discrepancy in monthy return - opportunity of being heard not given - Held that:- no opportunity of personal hearing was granted to the petitioner. Further, there is no such reference with regard to the purchase bills produced by the petitioner, when the petitioner complied Section 19(1) as well as Rule 10(2) of the TNVAT Act & Rules for claiming ITC, the denial of the same, for the lapses on the part of the sellers, cannot be justified. Hence, in the interest of justice, yet another opportunity is to be provided to the petitioner for placing all the materials along with objections, if any, before the respondent. - Matter remanded back - Decided in favour of assessee.

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• 2015 (12) TMI 372
  Rectification of mistake u/s 84 - Held that:- It is apparent that the second respondent, without permitting the petitioner to file objection and without affording due opportunity to the petitioner has passed the orders dated 20.02.2015. Further, realizing that a mistake has been crept in, the second respondent has passed the impugned orders (rectification), under Section 84 of the TN VAT Act, dated 19.06.2015. However, without affording any opportunity to the petitioner as contemplated under Section 84 of the TN VAT Act, the said orders have been passed, which is in violation of the principles of natural justice. Neither the order dated 20.02.2015 nor the order dated 19.06.2015 complied the provisions of the TN VAT Act. On this score alone, the impugned orders cannot be sustained. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

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• 2015 (12) TMI 371
  Determination of the total and taxable turnover - respondent has returned the appeal papers filed by the petitioner on the ground that the appeals were filed based on the revised assessment orders made under Section 84 of the Act - Held that:- Originally, assessment orders were passed for the assessment year in question. Aggrieved over the same, he filed rectification petitions under Section 84 of the Act before the 2nd respondent, in and by which, orders were passed reducing the taxable turnover for the respective years. Since the documents filed by the petitioner in respect of certain aspects have not been considered by the 2nd respondent, the petitioner filed appeals before the 1st respondent under Section 51 of the Act read with Section 9(2) of the CST Act, 1956, remitting 25% of the disputed tax for each of the assessment years. The 1st respondent, while returning the appeal papers by the impugned orders, has stated that the appeals are not maintainable, since revision will only lie as against the orders under Section 84 of the Act. - petitioner is permitted to file revision petitions under Section 54 of the TNVAT Act, along with stay applications, as against the orders passed under Section 84 of the TNVAT Act - there shall not be any recovery proceedings against the petitioner, since the petitioner had already remitted 25% of the disputed taxes. - Petition disposed of.

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• 2015 (12) TMI 370
  Reversal of input tax credit - levy of penalty under Section 27(3) - Held that:- Assessing authority has not furnished the invoice wise details, though specifically requested by the petitioner, this Court is of the view that suitable direction has to be issued to the respondent by setting aside the impugned orders. - Impugned order is set aside - respondent is directed to produce all the details relating to all the transactions which are the basis for passing the orders of assessment within a period of two weeks from the date of receipt of a copy of this order and on receipt of those details, the petitioner is permitted to file necessary objections, within a period of two weeks thereafter and after receiving the objections, the respondent is directed to pass appropriate orders on merits and in accordance with law, within a period of six weeks thereafter - Petition disposed of.

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