TMI Tax Updates - e-Newsletter
February 18, 2016

Case Laws in this Newsletter:

Income Tax FEMA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

TMI SMS

• Unconstitutionality in SSI Exemption - Exports to Nepal not allowed - notification is discriminatory - the portion "and Nepal" deleted - HC

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Articles

1. BASIC CONCEPTS OF GST (PART-8)

   By: Dr. Sanjiv Agarwal

2. PRINCIPLES FOR GRANT OF ANTICIPATORY BAIL

   By: DR.MARIAPPAN GOVINDARAJAN

3. Wish List - Budget 2016

   By: Suryanarayana Sathineni

4. MAT . S. 115JA and 115JB – full Deferred Revenue Expenditure (DRE) is to be debited claimed in profit and loss account to be prepared even if in P & L account for shareholders a part is debited – window dressing to be eliminated for MAT

   By: DEVKUMAR KOTHARI

News

1. NOTICE INVITING COMMENTS ON THE DRAFT COMPANIES (ACCOUNTING STANDARDS) AMENDMENT RULES 2016

2. Cabinet approves nomination of Chief Executive Officer, NITI Aayog as a part-time Member of the Telecom Commission

3. Cabinet approves Trade Facilitation Agreement (TFA)

4. RBI Reference Rate for US $

5. NOTICE INVITING COMMENTS ON THE DRAFT COMPANIES (INDIAN ACCOUNTING STANDARDS) AMENDMENT RULES 2016

6. Interest Rates of Small Saving Schemes to be recalibrated w.e.f. 1.4.2016 on a Quarterly Basis to align the small saving interest rates with the market rates of the relevant Government securities;

Notifications

Customs

1. 10/2016 - dated 17-2-2016 - Cus

Seeks to further amend notification No. 12/2012-Customs, dated 17.03.2012

2. 9/2016 - dated 16-2-2016 - Cus

Customs duty on electricity imported or cleared from SEZ to DTA

3. 26/2016 - dated 16-2-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

Service Tax

4. 5/2016 - dated 17-2-2016 - ST

Swachh Bharat Cess - Seeks to amend notification no. 22/2015-ST dated 6.11.2015.

Highlights / Catch Notes

Income Tax

• Short-Term Capital Loss Denied for Intra-Group Share Sale; Deemed Sham Transaction During Lock-In Period.

  Case-Laws - AT : Disallowance of short term capital loss on sale of shares - sale of share was effected between two group companies having the same directors about the shares of the group company during the lock-in period - it is case of sham transaction - loss booked not allowed - AT
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• Tax Appeals Win: CIT(A) Deletes Bogus Purchase Additions, Citing Progressive Gross Profit Rate Accepted by AO.

  Case-Laws - AT : Bogus purchases - CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. - AT
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• Court Rules Share Transfer Not a 'Reorganisation'; Focus Was Exit Strategy for Non-Resident Shareholders.

  Case-Laws - AT : Capital gain arising on transfer of shares - the attempt of the assessee to bring the transferring of shares within the ambit of the term “reorganisation” may not be correct, since the object of the arrangement was not financial restructuring, but to provide an exit route to the non-resident shareholders. - AT
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• Section 80-IB(10) Deduction Allowed: Assessee Can Claim Benefits Without Being Landowner, Taking on Project Risks and Rewards.

  Case-Laws - AT : Claim of deduction u/s.80-IB (10) - As the assessee has executed the project undertaking the risks and rewards and therefore, the claim of Section-80IB(10) is justified. Needless to mention that "the appellant need not be the landowner for claiming deduction uls.80-IB(10) - AT
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Wealth-tax

• Assessing Officer to Determine Asset Inclusion in Individual's Net Wealth vs. Larger Hindu Undivided Family.

  Case-Laws - AT : Inclusion of assets in to the the net wealth of the assessee (Individual) - whether assets are belonging to bigger HUF - AO directed to make addition of assets in the net wealth of M.N. Navale (Bigger HUF) to the extent of matching sources of funds available and the remaining assets, if any in the net wealth of the assessee - AT
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Service Tax

• Refund for Service Tax on College Construction Approved by Commissioner (Appeals) After Initial Rejection.

  Case-Laws - AT : Claim of refund of service tax paid by them during the period from April, 2011 to March, 2012 on services of constructions of college building - Ld. Commissioner (Appeals) by proper application of mind set aside rejection of refund claim and allowed appeal of the respondent. - Refund cannot be denied - AT
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Central Excise

• High Court Rules "and Nepal" in SSI Notification No. 8 of 2003 Unconstitutional; Affects Exports and SSI Exemption.

  Case-Laws - HC : Unconstitutionality in SSI Exemption - Exports to Nepal - notification discriminatory - the portion “and Nepal” appearing in Explanation Clause (G) to SSI Notification No.8 of 2003 declared unconstitutional with effect from 01.03.2012 - HC
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VAT

• High Court Protects Tax Exemption Despite Delay by Khadi and Village Industries Commission Under GVAT Rule.

  Case-Laws - HC : Cancellation of exemption from Value Added Tax - GVAT - where mere delay in issuance of such certificate by the khadi and Village Industries Commission should be fatal to the petitioner's claim for exemption? - Held No - HC
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Case Laws:

• Income Tax

• 2016 (2) TMI 505
  Disallowance u/s 14A - whether ITAT is justified in law to hold that the disallowance made under section 14A read with Rule 8D cannot exceed the exempt income, in the absence of any such restriction being there in the relevant section or rule? - Held that:- In the present case, when the assessee claimed that it had not made any expenditure on earning exempt income, the Assessing Officer in terms of sub section (2) of Section 14A of the Act was required to collect such material evidence to determine expenditure if any incurred by the assessee in relation to earning of exempt income. The income from dividend had been shown at 1,11,564/- whereas disallowance under Section 14A read with Rule 8D of the Rules worked out by the Assessing Officer came to 4,09,675/-. Thus, the Assessing Officer disallowed the entire tax exempt income which is not permissible as per settled position of law. Consequently, the Tribunal remitted the matter to the Assessing Officer with a direction to decide the same afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee The view adopted by the Tribunal being a plausible view based on factual position and the relevant case law on the point, does not warrant any interference by this Court. Learned counsel for the appellant-revenue has not been able to show any illegality or perversity in the impugned order. - Decided against revenue.

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• 2016 (2) TMI 504
  Bogus purchases - Held that:- FAA had raised certain objections like supply of goods for a particular period, absence of delivery challans or impossibility of production of finished goods. But, he had not given reasons for arriving at such conclusions. The assessee had produced all the delivery challans along with the inward register. The suppliers of the raw material had specifically mentioned that delivery was made at the work place and that they did not charge transportation charges from the assessee. It is a fact that the goods manufactured by the assessee were supplied to parties who are in the field of transmission business. The AO/FAA have not made any enquiry with the recipient of the finished goods. In our opinion, the information received from sales tax was a good starting point for making further investigation, but it was not taken to the logical end. If the evidences produced by the assessee are vague against the conclusions drawn by the AO/ FAA it becomes clear that the assessee had discharged the burden cast upon it. Therefore, reversing the order of the FAA we decided the effective Ground of appeal in favour of the assessee

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• 2016 (2) TMI 503
  Transfer pricing adjustment - selection of Motilal Oswal as comparable - Held that:- functions and activities carried out by Motilal Oswal are different from the functions and activities of the assessee company. Accordingly, the risk profiles of the two are also different. It has been clearly mentioned in the annual report of Motilal Oswal that the said company is engaged in the business of merchant banking and investment, business advisory services. We find that Motilal Oswal is not comparable to the assessee company and the AO is directed to exclude the same from the list of comparables and re-compute the Arm’s Length Price and also the Transfer Pricing Adjustment to be made, if any after the excluding the aforesaid company.

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• 2016 (2) TMI 502
  Disallowance of loss suffered in cancellation of foreign currency forward contracts by treating the same as speculation loss - Held that:- Forward contracts entered by the assessee, an exporter and not the dealer in foreign exchange, with the Banks as incidental to the export business, are business transactions and loss or gains is not of speculation nature. The loss arising on cancellation of matured forward contracts was allowable as deduction We are unable to agree with the view taken by the tax authorities on this issue. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to allow the claim relating to loss arising on cancellation of foreign exchange forward contracts. - Decided in favour of assessee

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• 2016 (2) TMI 501
  Assessment u/s 44BB - Including revenue from part of contract executed outside Indian taxable territory, for the purpose of aggregate amount referred under sub-section (2) of Section 44BB - Held that:- Revenue/receipt from mobilisation charges (i.e. for work performed outside India) received by the assessee has been rightly taken for the purpose of amount referred under sub-section (2) of Section 44BB of the Act by the Ld CIT(A) and thus no interference is required on his findings on the issue in dispute. Accordingly, this ground of appeal of the assessee is dismissed. Income from hiring of the vessels was rightly held as taxable under Section 44BB of the Act by the ld CIT(A) and no interference is required in finding of the ld CIT(A) on the issue in dispute. Retrospectivity of amendment - Held that:- The amendment brought by the Finance Act, 2011 cannot be made effect from the retrospective effect as that it adversely affects the interest of the assessee. We are in agreement with the findings of the Hon’ble Supreme Court in the case of Sedco Forex International Drilling Incorporation Vs. Commissioner of Income Tax, (2005 (11) TMI 25 - SUPREME Court ) that clarificatory provisions should be made applicable form the date when the main provision was introduced. In above judgment it is also held that if the amendment changes the law , it has to be prospective in nature. The Tribunal in the case of the assessee for AY 2008-09 cited above have already been dealt the arguments of the Commissioner of Income Tax(Departmental Representative ) that the effect of amendment carried out in Section 44BB and Section 44DA are not having retrospective effect Interest under section 234B - Held that:- Though the issue in dispute has already been decided in favour of the assessee by the Tribunal in AY 2008-09, but facts in the year under consideration may be different as regards to role of the assessee in getting lower or no deduction of certificate, following the judgement of the Jurisdictional High Court in the case of Jacabs Civil Incorporated (2010 (8) TMI 37 - DELHI HIGH COURT ) , we restore the issue to the file of Assessing Officer for verification of the fact , whether any certificate of lower or no deduction of tax was obtained and provided by the assessee to the payer, and if the answer is negative, no interest under section 234B of the Act is chargeable in the case of the assessee

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• 2016 (2) TMI 500
  Reference to Districts Valuation Officer (DVO) - addition on LTCG - Held that:- The ratio of the judgement CIT Vs Nelopher I. Singh (2008 (8) TMI 165 - DELHI HIGH COURT) is that when there is nothing on record to prove that assessee received a consideration from the sale of said property more than what is shown in the sale documents, the actual sale consideration recorded in the sale documents cannot be substituted by the value of the property arrived at by the DVO. Moreover, when Ld. CIT(A) has himself held in para 8 of the impugned order that neither the DVO nor the A.O. allowed any opportunity of being heard to the assessee before relying upon the report of DVO and thereby violated the rules of natural justice, he has committed error in deleting the addition on account of LTCG on land at 2,35,97,760/- and STCG on building at 60,16,039/-. So, we are of the considered view that the matter is required to be restored to Ld. CIT(A) to decide afresh after providing adequate opportunity of being heard to the parties Disallowance deduction on account of loss on sale of investment / asset - Held that:- Shri Vinay Gupta has failed to prove the source of investment of 5,00,000/-in the shares of M/s. Moriic India Ltd. As none has appeared on behalf of M/s. Vgyapan Bureau despite issuance of summon u/s 131 of the Act, to prove the contention of the assessee. he assessee’s contention to have sold 3,00,000 shares of its subsidiary company at loss to generate liquidity of 5,00,000/- is incomprehensible for the reason that after 15 years of investment he has sold shares at loss just to generate liquidity of 5,00,000/- particularly when he had already generated funds to the tune of 4,50,00,000/- on account of sale of property earlier than sale of shares and the assessee has even furnished no explanation when called upon to explain as to why the sale of shares of M/s. Moriic India Pvt. Ltd. be not treated as sham transaction. Therefore, the amount of 5,00,000/- credited in the books of accounts of Vinay Kumar Gupta on 29.10.2005, who has debited equal amount of payment to the assessee by reflecting the same in his books of accounts on 02.11.2005 and resultantly a sham transaction - Decided in favour of revenue Disallowance of claim of assessee qua bad debts - addition on the ground that the assessee has failed to prove that the return of debts had actually become bad and even list of parties whose debts were written off, has not been provided despite numerous opportunities deleted by CIT(A) - Held that:- In the instant case, assessee has written off bad debts to the tune of 90,97,536/- as irrecoverable in the accounts books for the Assessment Year 2005-06 and in these circumstances, assessee has no need to further prove that the debt has become bad and it is not necessary for the assessee to establish that the debt has actually become irrecoverable. The judgement of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT ) is squarely applicable to the facts and circumstances of this case. Hence, we are of the considered view that there is no scope to interfere into the findings returned by Ld. CIT(A) in deleting the addition on account of disallowance of bad debts. - Decided against revenue Addition u/s 41(1) on account of cessation of liability - Held that:- The issue to be decided by the Tribunal is squarely covered by the judgement cited at Sugauli Sugar Works Ltd. (1999 (2) TMI 5 - SUPREME Court ) because merely by virtue of fact that a debt become time barred the right of the creditor will not come to an end nor the liability will cease and in these circumstances, Section 41 (1) of the Act is not attracted. So, when the liability qua the amount which is still standing in the balance sheet of the assessee, which fact has not been disputed by the A.O., the same cannot be said to have ceased. So, we are of the considered view that there is no scope to interfere in the findings returned by Ld. CIT(A). - Decided against revenue Addition of deduction of VRS expenses for the financial year 2000-01 u/s 35DDA - disallowance on the ground that the aforesaid section came into effect w.e.f. 01.04.2001 without any retrospective effect - Held that:- he addition has been made merely on the basis of wrong interpretation of the provisions contained u/s 35DDA of the Act. Any deduction claimed for the financial year 2000-01 u/s 35DDA is to be considered for assessment year 200 1-02, when undisputedly, section 35DDA become the statute w.e.f. 01.04.2001, the assessee is certainly entitled to get the benefit for the same. Moreover, A.O. himself had allowed VRS payment in the earlier year, and the deduction claimed in the year under consideration is only a consequential relief for the 5th year. So, even otherwise, Section 35DDA does not preclude the assessing authority to consider the VRS payment as revenue expenditure. - Decided against revenue Disallowance on account of late payment of PF contribution - Held that: It is the settled principle of law that the expenditure are allowable u/s 43B of the Act, even if deposited late, but before the date of filing of return of income. In the instant case, the assessee has deposited the amount late by 5 days but before the filing of return for the relevant period. So, we find no ground to interfere into the findings returned by Ld. CIT(A) on this issue deleting the addition - Decided against the Revenue Addition on account of communication expense and vehicle running and maintenance expenses - Held that:- A.O. has merely disallowed 1/4th of the total expenditure on account of communication expenditure on the basis of letter written by the assessee, but has failed to make out any element of personal nature by applying his mind in the said expenditure particularly in case of a company. When expenses have been made by a company, a juristic person, the question of disallowance of the amount on the ground that the same were of personal nature, does not arise. Addition on account of communication expenditure and vehicle running and maintenance expenses by considering the same of personal nature in case of assessee company, is not permissible as there is no element of personal nature in the communication expenses incurred by the assessee company - Decided against the Revenue Addition on account of staff welfare expenses and on account of conveyance expenses - Held that:- When the A.O. has accepted the books of accounts of the assessee and all such expenditure have been explained in the books of accounts as business expenditure, it is not permissible for the A.O. to proceed at his will by making the addition on the ground of whims and fancies. Moreover, the issue as to the admissibility of staff welfare expenses for the assessment years 1998-99 and 2001-02 has already been decided by the Coordinate Bench of ITAT for A.Y. 1988-89 and 2001-02, in favour of the assessee. So, we find no ground to interfere into the findings returned by Ld. CIT(A) on this issue also - Decided against the Revenue

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• 2016 (2) TMI 499
  Disallowance of short term capital loss on sale of shares - whether entire transaction was sham and arranged with a view to book an artificial loss when in fact the transactions of purchase as also the sale have been carried out at the prevailing market rates by actual payment / receipt of funds Held that:- The assessee had no bonafide reason or cause in September, 2008 which forced the assessee to sale shares during the lock-in period which resulted into huge loss to the assessee. In this situation, we are also inclined to agree with the conclusion of the authorities below that sale of share was effected between two group companies having the same directors about the shares of the group company during the lock-in period wherein the transactions of sale and purchase of these shares were expressly prohibited by the allotting authority during lockin period which was to be expired on 30.03.2009. There was no good cause for the assessee to sale these shares back to HPC group company which was purchased from HPC and thus, we have hasitation to hold that the transaction of sale of shares under taken by the assessee company during the relevant financial period, with group company was a sham transaction and the loss booked under said transaction cannot be held as allowable claim of short term capital loss for the assessee. Finally, we uphold the impugned order which confirm the disallowance and addition made by the AO. - Decided against assessee Disallowance u/s 14A - Held that:- When we analyse the facts and circumstances of the present case, admittedly and undisputedly, the assessee has not claimed any exempt income for AY 2009-10, thus, in the view of dicta laid down by Hon’ble Jurisdictional High Court of Delhi in the case of Holcim India (supra) we hold that there could be not disallowance u/s 14A read with rule 8D of the Act and respectfully following the same the issue is decided in favour of the assessee

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• 2016 (2) TMI 498
  Bogus purchases - Held that:- AO has not pointed out any defects in the books of accounts, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. The observations made by the assessing officer when analyzed, it can be safely concluded that it is certainly not the case of assessing officer that what is stated by Sh. Surendra Kumar Sharma alone is absolutely correct and consequently, it cannot be used in the case of the assessee till it is established beyond doubt that what is stated by him is true and correct. Whatever findings are recorded in the case of Sh. Surendra Kumar Sharma, it is simply a reflection of his system of working, presentations and conduct which cannot be generalized and imported to the case of the assessee. - Decided in favour of assessee

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• 2016 (2) TMI 497
  Addition of u/s.2(22)(e) - Held that:- Since there is continuous and substantial business transaction between PPPL and Shri Chhatrapati Press and considering the fact that the amount of 2 crores has been adjusted against the bills for printing labour charges, therefore, in view of the decision of Creative Dyeing and Printing Pvt. Ltd. cited (2009 (9) TMI 43 - DELHI HIGH COURT ) the amount of 2 crores cannot be taxed u/s.2(22)(e) of the I.T. Act. In this view of the matter, we set aside the order of the CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee

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• 2016 (2) TMI 496
  Payment of ASSF during the relevant financial period towards export of oil drilling equipments etc. - whetehr allowable expenditure u/s 37 - kick back - Held that:- In the present case, lower authorities have not brought out any allegation of illegal gratification or kick back payment or allegation of bogus payment by the assessee and as per proposition laid down by ITAT, Kolkata in the case of Rajrani Exports (2012 (6) TMI 62 - ITAT, Kolkata payment made to Iraqi Company for receiving services to facilitate export is allowable business expenditure and this fact is not relevant for making disallowance of such payment on the premise that such payment was passed on by Iraqi Company as kick back or illegal gratification to Iraqi authorities or any other entity or person. In the present case, there is no such allegation of the revenue, therefore, the present assessee before us has a better case and does nothit by explanation to section 37(i) if the Act. Finally, we are inclined to hold that the payment of ASSF made by the assessee during the relevant financial period towards export of oil drilling equipments etc. does not fall in the first category payments as per Volker Committee report and thus the same is allowable business expenditure and therefore, we direct the AO to allow the same. - Decided in favour of assessee Profit element for the purpose of computing the adjusted profit u/s 80HHC - Held that:- Conclusion of the CIT(A) in directing the AO to consider the only profit for the purpose of computing the adjusted profit u/s 80HHC of the Act is upheld - Decided in favour of assessee

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• 2016 (2) TMI 495
  Capital gain arising on transfer of shares taxable in India - whether the exception given in Article 13(5) of the India Netherland DTAA is not applicable to the said transaction - Held that:- Two different activities have been combined with the scheme of arrangement. The first one was to buy back shares belonging to non-resident share holders and the second one was to cancel the shares so purchased. We agree with the view taken by Ld CIT(A) that they are two different actions and both should not be clubbed together, even though M/s Century Enka Ltd has combined the same, for the sake of its convenience, in the scheme of arrangement. The assessee herein, in our view, should in no way concerned by the action of cancellation of share resulting in reduction of share capital. Accordingly, we are of the view that the attempt of the assessee to bring the transferring of shares within the ambit of the term “reorganisation” may not be correct, since the object of the arrangement was not financial restructuring, but to provide an exit route to the non-resident shareholders. In view of the above, we are of the view that the Ld CIT(A) was justified in upholding the view taken by the AO on this issue. Accordingly we uphold his order on this issue. - Decided against assessee Entitlement to concessional rate of tax provided in the second proviso to sec. 112 - Held that:- The only contested in the appeal filed by the revenue relates to the rate at which the capital gains is taxable. The Ld A.R submitted that this issue is covered in favour of the assessee by the decision rendered by Hon ble Delhi High Court in the case of Cairn U.K. Holdings Ltd (2013 (10) TMI 430 - DELHI HIGH COURT ), which was followed by the co-ordinate bench of Tribunal in the case of ADIT Vs. Abbott Capital India Ltd ( 2014 (5) TMI 316 - ITAT MUMBAI ). Hence, we are of the view that the Ld CIT(A) was justified in holding that the assessee is entitled to concessional rate of tax @ 10% on the impugned Capital gains.- Decided against revenue

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• 2016 (2) TMI 494
  Levy of fee u/s 234E in the order u/s 200A - Held that:- The adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. This intimation is an appealable order under section 246A(a), and, therefore, the CIT(A) ought to have examined legality of the adjustment made under this intimation in the light of the scope of the section 200A. Learned CIT(A) has not done so. He has justified the levy of fees on the basis of the provisions of Section 234E. That is not the issue here. The issue is whether such a levy could be effected in the course of intimation under section 200A. The answer is clearly in negative. No other provision enabling a demand in respect of this levy has been pointed out to us and it is thus an admitted position that in the absence of the enabling provision under section 200A, no such levy could be effected. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234 E is unsustainable in law. We, therefore, uphold the grievance of the assessee and delete the impugned levy of fee under section 234E of the Act. See Lions Club of North Surat Charitable Trust Versus Income Tax Officer TDS-2, Surat (New). [ 2015 (9) TMI 1231 - ITAT AHMEDABAD ] - Decided in favour of assessee

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• 2016 (2) TMI 493
  Gain for taxation on actual sale consideration - expression “capital asset" - Transfer of asset - genuity - addition by the AO on the ground that the assessee has sold land i.e. “capital asset” in this year and failed to offer gain for taxation on actual sale consideration in her return of income for this assessment year - Held that:- The rights acquired by SDS under the agreement dated 4.4.2008 are of capital nature. In other words, the rights assigned by the assessee by virtue of this agreement are of capital nature and this agreement was enforceable in law under the Specific Relief Act. The time limit for filing of the suit for specific performance of the contract has been provided in Schedule-II of the Indian Limitation Act, 1905. This time is three years from the date of execution of the agreement. The assessee was bound by this agreement, and if she violates this agreement, she could be exposed to civil as well as criminal proceedings. Her right in the property after the execution of this agreement has been curtailed or encumbrance has been created. On an analysis of various case laws, it emerges out that clause (v) and (vi) were included in section 2(47) with an intention to cover those cases of transfer of ownership where the prospective buyers becomes owner of the property by becoming a member of company, cooperative society or to include those transactions that closely resembles transfer, but are not treated as such under general law. Under section 2(47)(v) of the Act any transaction involving allowing of possession referred to section 53A of the Transfer of Property Act would come within the ambit of transfer. Even arrangement conferring privileges of ownerships without transfer of title would come within the ambit of section 2(47)(v) of the Act. The whole scheme for introduction of clauses (v) and (v) in section 2(47) of the Act was that the capital gain is taxable in the year in which such transactions are entered into even if the transfer of immovable property is not effective or complete under the general law.Thus, in the present cases we are of the view that on execution of agreement dated 2.3.2009, when the possession was also handed over, the transfer within the meaning of section 2(47)(v) and (vi) was complete. The parties to the agreement are not challenging the genuineness of the agreements. An analysis of all the facts and circumstances, discussed by the ld.Revenue authorities, we are of the view that setting of surrounding facts and circumstances, even as a whole, does not suggest that agreement dated 4.4.2008 or 2.3.2009 are sham or bogus. Their enforceability in the law cannot be ignored. The alleged gains on sale of property calculated in the hands of the assessee are not sustainable. We allow the appeal of the assessee and delete the addition from the hands of the assessee. - Decided in favour of assessee

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• 2016 (2) TMI 492
  Eligibility for deduction u/s 80IB - income from scrap sales - assessee is mainly involved in manufacturing activities - Held that:- If the main manufacturing activity is eligible for deduction u/s 80IB of the Act then receipt from sale of scrap generated in the process of manufacturing as well as the scrap from other items available in the manufacturing unit, then such receipts from sale of scrap shall come within the ambit of gains eligible for deduction u/s 80 IB of the Act. In the case of assessee the issue is similar as the assessee’s business is eligible for deduction u/s 80IB and it has also received income from sale of scrap and, therefore, in view of our above discussion, we find that the issue of assessee is covered by the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Jikar A. Saiyed (2013 (12) TMI 1562 - GUJARAT HIGH COURT). The ground raised by the Revenue is dismissed. - Decided in favour of assessee

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• 2016 (2) TMI 491
  Exemption under section 80P as interest from schedule bank denied - Held that:- As consistently, it has been held that the interest income earned by a credit co-operative society on the FDRs. with nationalized bank would qualify for grant of exemption under section 80P(2) of the Income Tax Act. Thus allow the appeal of the assessee and direct the AO to grant exemption to the assessee. - Decided in favour of assessee

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• 2016 (2) TMI 490
  Addition u/s 68 for unexplained cash credit for want of non-compliance - Held that:- Respectfully following the judgment of CIT vs Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ] wherein it has been held that "Since no incriminating material was unearthed during the search, no additions could have been made to the income already assesseed", we hold that the completed assessments can be interfered with by the Assessing Officer only on the basis of some incriminating material unearthed during the course of search in the earlier assessment years. Since no incriminating material was found during the course of search with regard to the identity, genuineness and creditworthiness of the assessee company, we hold that the addition made by the ld. CIT(A) is unsustainable and deserves to be deleted - Decided in favour of assessee

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• 2016 (2) TMI 489
  Claim of deduction u/s.80-IB (10) - Revenue has rejected the claim of the assessee under Section-80IB(10) of the Act only for the reason that, (a) the appellant was not the owner of the land, (b) the building plan approval and completion certificate were not in the name of the appellant, (c) M/s.Ishwaraylakshmi Properties Pvt. Ltd., on who's name the building plan approval & completion certificate obtained was a loss making company having carried forward losses and therefore would not be worthwhile to claim the benefit of Section-80IB(10) of the Act, etc. - Held that:- The assessee had undertaken to complete the project with all risks attached to the project and accordingly it is eligible to claim the reward also. It is pertinent to mention here that the entire project is developed as Joint Venture between the owners of the land and the assessee firm. The owners of the land and the assessee firm have their respective roles in the development of the project jointly, sharing the risk involved in the project and also executing the project. Further, it is evident that the entire project is jointly developed by both the parties ie., the owners of the land and the assessee firm on the land extending more than one acre(106 cents) as stipulated under the Act. No other associate concern of the assessee has claimed the benefit of Section-80IB (10) of the Act on the same project as the entire profit was declared in the hands of the assessee firm and deduction claimed accordingly. As the assessee has executed the project undertaking the risks and rewards and therefore, the claim of Section-80IB(10) of the Act is justified. Needless to mention that "the appellant need not be the landowner for claiming deduction uls.80-IB(10) of the Act and further the approvals or the completion certificate need not be in the name of the appellant who is the developer of the property" as held by the decisions cited by the assessee supra. Hence, we hereby direct the Ld. Assessing Officer to grant deduction U/s.80IB (10) of the Act to the assessee. - Decided in favour of assessee

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• 2016 (2) TMI 488
  Allowance of business expenditure - Commencement of business - whether there is a distinction between setting up of the business and commercialization of the operation, which generates actual revenue to the business? - Held that:- In this present case, the assessee is in the business of construction and development of technology park. In this line of business, the process commences from the date of negotiation for acquiring land, actual purchase of the land and then actual development of such land. The concept of commencement will change according to the nature and facts of the particular industry. It may vary depending upon the business model and business cycle of the industry. In the present case under consideration, the business said to have set up, when it is ready or established to commence its operation. The assessee's business had commenced since incorporation and the assessee is eligible to claim the expenditure incurred for running of the business activities. Hence, the assessee is eligible for the business expenditure of 29,54,923/-. - Decided in favour of assessee Treatment of interest income - whether income from business or from other sources - Held that:- As observed above, the assessee had set up the business prior to this AY 2009-10, assessee is eligible to treat the interest income earned during this year earned out of the excess funds available in the business. It was earned by the assessee while carrying on the business activities.Similar view was upheld in the case of Dakshin Shelters Pvt. Ltd. [2012 (5) TMI 649 - ITAT HYDERABAD] wherein it was allowed to claim expenses as incurred which was debited to profit & loss a/c against interest income. Similar view also expressed by this coordinate bench in the case of ITO Vs. Trident Shelters Pvt. Ltd. [2014 (1) TMI 1224 - ITAT HYDERABAD] - Decided in favour of assessee

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• FEMA

• 2016 (2) TMI 480
  Levy of penalty for Non realization of export proceeds (foreign exchange) within six months of the date of shipment or within the extended period - Held that:- Considering the submission that almost entire sale proceeds have been realized and loss to the exchequer has subsequently been made good therefore, taking a holistic view, we are of the opinion that it will be just and fair in the circumstances that the penalties imposed which are almost half of the amount of alleged amount appear to be excessive and need to be reduced. In our considered view, the amount of penalties imposed may be slashed down to half of the amount of penalties imposed in each case. The appeals in view of the above are partly allowed. The findings of the Adjudicating Officer holding the appellants guilty of contravening the provisions of FERA is affirmed with reduced penalty.

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• Service Tax

• 2016 (2) TMI 486
  Claim of refund of service tax paid by them during the period from April, 2011 to March, 2012 on services of constructions of college building - The said refund claim was rejected by the Adjudicating Authority on the ground that the appellant have not produced (a) approved plan of the building (b) they have not produced proof such as MOU or certificate that the construction of building for the purpose of educational, religious, charitable, health, sanitation or philanthropic purpose and not for any purpose of profit, (c) and appellant recovered the amount of service tax by way of issuing debit note. Held that:- it is clear that building constructed by the respondent is not commercial and industrial construction, therefore does not fall under the category of taxable services, as the same is not used for commercial and industry but it is used for providing education. Therefore service tax paid by the respondent is liable to be refunded. - there is no dispute raised as regard the facts that the respondent by issuing credit note not collected the service tax from the service recipient. Ld. Commissioner (Appeals) by proper application of mind set aside rejection of refund claim and allowed appeal of the respondent. - Refund cannot be denied - Decided against the revenue.

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• Central Excise

• 2016 (2) TMI 485
  Recovery of duty - Entitlement to exemption notification - whether once the applicant had paid the amount by way of utilizing Cenvat credit, it was not permissible for the applicant to suo motu reverse the Cenvat credit? - Held that:- As the applicant has already deposited a sum of 6.5 crore pending the appeal before the Tribunal, under the circumstances, having regard to the peculiar facts and circumstances of the case, the respondent be restrained from enforcing coercive recovery of duty against the applicant pursuant to the impugned order. Having regard to the submissions advanced by the learned counsel for the applicant, the court is of the view that a prima facie case has been made out for grant of the relief prayed for in the application

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• 2016 (2) TMI 484
  Unconstitutionality of Explanation Clause (G) to SSI Notification No.8 of 2003 - Exports to Nepal in SSI exemption - notification discriminatory - Held that:- For the purpose of SSI exemption under said notification No.8/2003, however, it would continue to be treated as clearances for home consumption. This will be plainly discriminatory vis-a-vis other SSI units who might be having exports to countries other than Nepal as compared to the SSI units like the petitioners whose substantial exports may be to Nepal. Under such circumstances, the former set of SSI units would claim total exclusion of all clearances made by them to all countries while computing exemption limit under notification No.8/2003, whereas the later would be subjected to inclusion of value of exports made to Nepal for computation of such limit. Since with effect from 01.03.2012 exports to Nepal are put at par with exports to other countries, the petitioners and other SSI units making exports to the countries other than Nepal form a homogeneous class. Both sets of manufacturers are SSI units. Both export their goods to various countries. There cannot be further sub-classification of SSI units exporting to Nepal and those SSI units exporting to the countries other than Nepal since after 01.03.2012 the distinction has been obliterated. This distinction which was prevalent till 01.03.2012 lost its relevance on account of change of the Government of India policy. Continued reference of exports to Nepal in SSI exemption notification No.7/2003 would render, to that extent, such notification discriminatory and, therefore, violative of Article 14 of the Constitution. Under the circumstances, the portion “and Nepal” appearing in Explanation Clause (G) to SSI Notification No.8 of 2003 is declared unconstitutional with effect from 01.03.2012.

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• 2016 (2) TMI 483
  Modvat Credit denied - denial on the ground that the appellant have not filed 57T(1) declaration and 57T(2) intimation in the proper format - Held that:- The allegation made in show cause notice is very vague as no description of capital goods was provided in the show cause notice, at the same time it is undisputed that the appellant had filed declaration in respect of various capital goods and spares. Unless the show cause notice specify particular capital goods, it cannot be ascertained in respect of which capital goods, the declaration was not filed. In absence of such description in the show cause notice, the show cause notice appears to have been issued on presumption/assumption only. In this fact, the demand of Modvat Credit cannot be sustained. Moreover the filing of declaration is a procedural requirement and for this lapse, substantial benefit of Modvat cannot be denied. In this regard Board Circular dated 09-02-1999 and 23-02-1999 clarified that due to said procedure lapse, Modvat credit cannot be denied which was further reinforced by Larger Bench in the case of Kamakhya Steels (P) Ltd. (2000 (8) TMI 113 - CEGAT, NEW DELHI ). In the case of A.B. Card Clothing (Pvt.) Ltd. (2006 (11) TMI 108 - HIGH COURT PUNJAB AND HARYANA ) held that for non-filing of declaration under Rule 57T, Modvat Credit cannot be denied. As regard receipt of Capital Goods and use thereof, there in no allegation in the show cause notice. - Decided in favour of assessee

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• CST, VAT & Sales Tax

• 2016 (2) TMI 482
  Cancellation of exemption from Value Added Tax - GVAT - where mere delay in issuance of such certificate by the khadi and Village Industries Commission should be fatal to the petitioner's claim for exemption? - manufacturer of specified goods - Held that:- There is nothing on record to suggest that the petitioner did not apply for such certificate in time or did not fulfill the requirements of the Commission to enable the Commission to grant such certificate within the time. The Tribunal's presumption to the contrary is not borne out from the record. It is not even the case of the Department that the petitioner was late in applying for such certificate. Counsel for the petitioner would point out that even the Commission has confirmed that such application was made well in time. When thus such a certificate was issued somewhat belatedly by the Commission but covering entire period between 25th December, 2005 to 24th December, 2008, the Department, in our opinion, committed a serious error in treating the petitioner ineligible to claim exemption - Benefit of exemption allowed.

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• 2016 (2) TMI 481
  Transport of goods with insufficient documents - Detention of a vehicle with goods is an extreme measure and unless supported by strong materials, would result into damage that can be irreversible. At the same time, the question of safeguarding the interest of Revenue would also arise in case where the dealers or the transporters may not have a permanent base in the State and, therefore, often times may not be possible to be traced at the time of assessment. - Goods to be released subject to conditions.

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• Wealth tax

• 2016 (2) TMI 487
  Inclusion of assets in to the the net wealth of the assessee (Individual) - whether assets are belonging to bigger HUF - Commissioner of Wealth Tax (Appeals) further directed the Assessing Officer that in case the Bigger HUF is not able to show the source of funds for acquiring the aforesaid properties, the same should be included in the net wealth of the assessee. - Held that:- There is no infirmity in the order of Commissioner of Wealth Tax (Appeals) in directing the Assessing Officer to make addition of assets in the net wealth of M.N. Navale (Bigger HUF) to the extent of matching sources of funds available and the remaining assets, if any in the net wealth of the assessee. - Decided against the assessee.

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