TMI Tax Updates - e-Newsletter
February 20, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

TMI SMS

• All the services provided by the Government or local authority to a business entity, shall be liable to service tax w.e.f. 1.4.2016

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Articles

1. LEVY OF CESS AND ITS PURPOSES

   By: DR.MARIAPPAN GOVINDARAJAN

2. Rectification of mistake apparent from records- a rarely useful remedy for tax payers in spite of clear provisions- whether recent instructions of CBDT will help assesses?

   By: DEVKUMAR KOTHARI

3. Demand of Service Tax under Reverse charge - on the amounts of Fees paid to US FDA and Other Regulatory Authorities - An analysis

   By: Suryanarayana Sathineni

News

1. Clarification for implementation of FATCA and CRS

2. Clarifications for implementation of FATCA and CRS

3. Exchange Rate of Foreign Currency relating to imported and export goods notified

4. The Central Government issues notification to reappoint Shri U.K. Sinha to the post of Chairman, SEBI

Notifications

Indian Laws

1. G.S.R. 180(E). - dated 17-2-2016 - Indian Law

Government - announced initiative for creating a conducive environment for ‘Startup India’

Service Tax

2. 07/2016 - dated 18-2-2016 - ST

Amendment In Notification No. 25/2012 by inserting new entry for granting exemption from service tax for the services provided by Government or a local authority to a business entity having turnover upto rupees of ten lakh in the preceding financial year

3. 06/2016 - dated 18-2-2016 - ST

All the services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax w.e.f. 1.4.2016 . - Seeks to appoint 1th day of April, 2016 as the date with effect from which the provisions of Section 109(1) as contained in the Finance Act, 2015 shall come into effect.

Circulars / Instructions / Orders

VAT - Delhi

1. 38/2015-16 - dated 19-2-2016

Framing of central assessments

DGFT

2. 20/2015-20 - dated 19-2-2016

Online filing and processing of application for export of SCOMET items- uploading of documents relating thereto.

Highlights / Catch Notes

Income Tax

• Court Upholds Validity of Section 245R(2) Exemption for PSUs; No Violation of Article 14 Equality Rights Found.

  Case-Laws - HC : Advance Rulings - it serves no purpose, and certainly not that of the Petitioner, to pronounce on the validity of the portion of clause (i) of Section 245R(2) of the Act, that exempts resident PSUs from the bar of that provision, to be violative of Article 14 of the Constitution - HC
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• High Court Confirms No Section 80-IA Deduction Without Taxable Income, Despite Net Profit in Eligible Unit.

  Case-Laws - HC : Deduction u/s 80-IA - Whether the Tribunal was right in holding that the deduction under Section 80-IA is not allowable at all to the assessee since there was no taxable income though the unit eligible for deduction had net profit - Held Yes - HC
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• Transfer Pricing Adjustment Upheld: PLI Calculation Using TNMM Deemed Accurate by TPO, No Modifications Needed.

  Case-Laws - AT : Transfer pricing adjustment - calculation of the assessee’s PLI - the calculation of PLI of the assessee done by the TPO under TNMM is correct, which does not warrant any interference. - AT
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• Petition Denied: Institution Fails to Meet Section 80G(5) Requirements, Lacks Specific Religious or Substantially Religious Purpose.

  Case-Laws - AT : Registration petition u/s. 80G(5) denied - the assessee is not an institution expressed to be for the benefit of any particular religious community or caste u/s. 80G(5)(iii) or having any purpose the whole or substantially the whole of which is of religious nature under explanation 3 therein. - AT
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• Concluded assessments u/s 153A remain unchanged if based on the same material facts as the original assessment.

  Case-Laws - AT : Assessment u/s 153A - concluded assessments in the instant appeal cannot be disturbed on the same set of material facts as prevailing when the assessment was framed u/s 153A read with Section 143(3) of the Act on 31.12.2009 in pursuant to search - AT
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• Sub-contract expenses partially disallowed due to lack of proper supporting bills and insufficient evidence.

  Case-Laws - AT : Disallowance of sub-contract expenses not supported by proper bills - if expenditure claimed was not supported by proper evidence and some deficiency persist in evidence, part expenditure is disallowed on estimated basis. - AT
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• Tax Exemption Denied: Concerns Over Settler's Son Building Under Entity's Name, Not Trust's, Affecting Charitable Status.

  Case-Laws - AT : Registration u/s 12A and approval u/s 80G denied - The only grievance of the ld.CIT(Exemptions) appears to be that the son of the settler is constructing a building in the name of the entity in which he was interested as a shareholder or director and not in the name of the trust proposed to be used for the purpose of the appellant-trust. This, does not, in any way militate against the charitable character of the objects of the appellant-trust - AT
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Customs

• Court Accepts Government's Explanation for Provisional and Country-Specific Caps on Turkish Poppy Seed Imports.

  Case-Laws - HC : Import of poppy seeds from Turkey - The explanation offered by the respondents (government) as to the reason and rationale in adopting a prescription of a provisional cap and a country cap, in so far as the imports from Turkey is concerned, is also acceptable. - HC
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Indian Laws

• Court Upholds Tax on Banquet Halls for Marriages in Haryana u/ss 2(c) and 2(k) of Luxury Tax Act.

  Case-Laws - HC : Levy of tax on open space termed as “banquet halls” providing only accommodation or space for marriages/receptions in terms of Section 2(c) in the manner stated under Section 2(k) of the Haryana Tax on Luxuries Act, 2007 - The validity of the same is upheld and the petition is dismissed. - HC
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Service Tax

• CESTAT Dismisses Appeal for Non-Prosecution; Order Criticized for Being Cryptic and Lacking Essential Reasons.

  Case-Laws - HC : CESTAT dismissed the appeal for non prosecution - The order passed by the CESTAT with regard to the non-appearance of the Assessee is cryptic and devoid of reasons. The reasons are the soul of the Judgment. The order passed without giving reasons cannot be sustained - HC
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• Court Overturns Order on Refund Claim Due to Incorrect CENVAT Credit Calculation in Export Services Case.

  Case-Laws - AT : Refund of unutilized CENVAT credit on export of services - prescribed formula - The order rejecting the refund claim by adopting the wrong method of computation is not justified and liable to be set aside - AT
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• Government Services Exempt from Service Tax for Businesses with Turnover Under Ten Lakh Rupees Since April 1, 2016.

  Notifications : Exempts services provided by Government or a local authority to a business entity with a turnover up to rupees ten lakh in the preceding financial year w.e.f. 1.4.2016
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• Government Services to Business Entities Taxable from April 1, 2016, Unless Exempted or in Negative List.

  Notifications : All the services provided by the Government or local authority to a business entity, except the services that are specifically exempted, or covered by any another entry in the Negative List, shall be liable to service tax w.e.f. 1.4.2016.
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Central Excise

• CENVAT Credit Denial Overturned: Xerox Copies of Courier Bills Accepted for Credit Claims, Avoiding Technical Grounds Rejection.

  Case-Laws - AT : Denial of benefit of CENVAT Credit on Xerox copy of courier bill of entry - appellant have correctly claimed the CENVAT Credit on the photocopy of the courier bill of entry filed by them and CENVAT Credit cannot be denied on mere technical grounds - AT
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• Liability for Duty on Scrap at Job Worker's Premises under CENVAT Credit Rules, 2004 Disputed; No Direct Buyer Interaction.

  Case-Laws - AT : Liability to pay duty on the scrap generated at job workers premises under CENVAT Credit Rules, 2004 - Since the debit was made by the appellants in their CENVAT account while invoice if any was issued by the job worker. Since they had no direct interaction with buyer of scrap question of recovering duty does not arise - AT
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Case Laws:

• Income Tax

• 2016 (2) TMI 575
  Advance Rulings - Constitutional validity of clause (i) of the proviso to 245R (2) - When can a question be stated to be 'pending'? - whether the said provision is discriminatory and violative of Article 14 of the Constitution of India as well Article 25 of the Double Taxation Avoidance Agreement (‘DTAA’) between India and the Republic of South Korea? - Held that:- Article 45 of the DTAA mandates that the Petitioner as a South Korean entity should not be subject to any taxation requirement which is more burdensome than the requirement to which an Indian entity is subject. Section 90 (2) of the Act mandates that where any provision of the Act is more beneficial to an Assessee than a provision of the DTAA, then the provision of the Act shall apply. It is not understood how clause (i) of the proviso to Section 245R of the Act can be said to be more beneficial to the Petitioner even if the discriminatory portion which exempts Central Government notified PSUs from its ambit is invalidated. Even if the offending portion is invalidated, the result would be that in terms of clause (i) of the proviso to Section 245R(2) of the Act, the bar would apply equally to both a resident and a non-resident. In other words, the provision would become equally burdensome to both a resident and a non-resident. Consequently, neither Article 25 of the DTAA can come to the aid of the Petitioner. For all of the aforementioned reasons, the Court finds that it serves no purpose, and certainly not that of the Petitioner, to pronounce on the validity of the portion of clause (i) of Section 245R(2) of the Act, that exempts resident PSUs from the bar of that provision, to be violative of Article 14 of the Constitution. Therefore, the Court declines the prayer to declare clause (i) of the proviso to Section 245 R (2) of the Act to be violative of Article 14 of the Constitution. The applications filed by the Petitioner in respect of the transaction of supply of equipment for AY 2008-09 and 2009-10 were rightly rejected by the AAR since on the date of filing of such applications before the AAR, the question raised therein was already pending before the income tax authorities by virtue of the notices under Section 142 (1) of the Act having already been issued to the Petitioner. However as regards the three applications concerning the supply contracts executed during AY 2010-11, the AAR erred in rejecting them by applying clause (i) to proviso to Section 245R(2) of the Act. Notices under Section 142(1) of the Act in respect of those transactions pertaining to AY 2010-11 were issued only after the filing of the application before the AAR.

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• 2016 (2) TMI 574
  Deduction under Section 80-IA - Whether the Tribunal was right in holding that the provisions of Section 80-AB over-ride Section 80-IA read with Section 115-JA and so the appellant is not entitled to the deduction? - Held that:- Assessee admittedly maintained a consolidated set of books of accounts in respect of both the units. If an Assessee does not maintain two sets of books of accounts in respect of different units, then the question of eligibility would arise only if there was a positive income. The question of deduction will not arise, if there was no positive income. In this case the Assessee having maintained single set of books of accounts, wants to claim that there was a positive income in Pondicherry unit but there was a loss in Chennai unit. Therefore, the Assessee is not entitled to the said benefit, in view of the decision of the the Supreme Court in IPCA Laboratory vs. Deputy Commissioner of Income Tax [2004 (3) TMI 9 - SUPREME Court ]. - Decided against assessee

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• 2016 (2) TMI 573
  Exclusion from the income of the firm, the amounts relatable to the retired/deceased partner/s share - diversion on account of overriding title in favour of the expartner/ s or their heirs/ executors by virtue of the partnership deed - Tribunal held that sum paid to ex partners amounted to diversion of income by overridding title and so was allowable as deduction? - Held that:- We find that the impugned order of the Tribunal has dismissed the Revenue's appeal by inter alia recording the fact that in the order of the Commissioner of Income Tax (Appeals) (CIT(A)) had only followed the consistent view of the Tribunal in the assessee's own case for the earlier Assessment Years. Also see CIT Vs. Mulla and Mulla and Craigie, Blunt and Caroe, (1990 (9) TMI 32 - BOMBAY High Court ) while dismissing the Revenue's appeal.

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• 2016 (2) TMI 572
  Addition u/s 41 - cessation or remission of liability - Held that:- There are concurrent findings of fact that the lease for the air crafts has been extended for further period and liability of expenses at the time of redelivery of the aircrafts has not ceased. Thus, the same would have to be provided for, as it is likely to be incurred when the lease expires and said four air crafts are redelivered. Section 41(1) of the Act has application only when there is cessation and/or remission of liability incurred (which has been duly paid and/or provided for) in the subsequent years, consequent of which some benefit in cash or in any other manner were obtained by the party whose liability has ceased. In this case, in fact, there is no cessation or remission of liability nor any benefit obtained by the Respondent-Assessee for the purposes of Section 41(1) of the Act to be invocable. Written back of excess provision made in earlier years - AO held it to be a part of prior period income - Held that:- The Tribunal, on examination of the order of the CIT(Appeals) upheld the same as the amount of 68.50 lacs was erroneously shown as prior period income and had rectified the same subsequently. We find that both the CIT(Appeals) as well as the Tribunal have arrived at concurrent findings of fact. The Revenue has not been able to show that the same is in any way perverse and/or arbitrary. Disallowance of business expenditure - Held that:- We find that the CIT(Appeals) as well as the Tribunal have arrived at findings of fact that the expenses of 11,65,950/- were incurred for the purposes of Respondent's business. The concurrent finding of fact has not been shown to be in any way perverse and/or arbitrary to give rise to any substantial question of law Additional expenditure relating to aircrafts taken on finance lease - Held that:- It is not disputed before us that the revised return of income was a valid return. In that view of the matter, the Assessing Officer was not justified in not considering the claim only on the ground that the claim of 25.22 crores for expenditure was made only in the revised return of income. It is not disputed before us that the expenditure as claimed is eligible for deduction under Section 37(1) of the Act as it has been expended exclusively for the business of the Respondent-Assessee.

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• 2016 (2) TMI 571
  Transfer pricing adjustment - calculation of the assessee’s PLI - Whether projected profit rate of subsequent years can also be considered ? - Held that:- Essence of the entire transfer pricing provisions is to compare the actual price/profit realized/earned by the assessee from an international transaction with the price/profit realized/earned from comparable uncontrolled transactions. It is totally impermissible to substitute actual profit earned by the assessee from an international transaction with any other profit base, either by considering the actual profits for the earlier years as well or by taking into account the projected profits of the subsequent years, for the purposes of determining the ALP of an international transaction. Moreover, the figures taken for subsequent three years are mere projections. The correctness of these projections is mystery for us. We, therefore, jettison the view point of the assessee in calculating its PLI by considering figures for the current year and also projected figures for subsequent three years. The impugned order is, therefore, upheld on this score. Foreign Exchange Fluctuation - Held that:- . On going through all the Agreements entered into by the assessee with its AEs, to which our attention was drawn by the ld. AR, it is manifest that these have been made effective from 1.4.2007, being the current year alone. Under such circumstances, there can be no ground for arguing that the Agreements were entered in the preceding year and the remuneration as realized in the current year on the basis of the foreign exchange rates as applicable, adversely affected its profit margin for the current year, thereby requiring an upward revision in PLI of the assessee. Once the Agreements have been entered into with effect from the first day of the previous year, there can be no scope for comparing the rate of foreign exchange during the year with that of the preceding year or any other earlier year, so as to claim any adjustment. It is, therefore, held that neither the assessee can claim any adjustment on account of foreign exchange fluctuation rate in its profit nor such an adjustment, on the facts and circumstances of the instant case, is warranted in the profit margin of comparables. Revenue sharing formula - Held that:- The assessee was not right in working out its PLI by also considering projected profits for the three subsequent years; no deduction on account of foreign exchange fluctuations can be allowed in the facts and circumstances of the instant case; and the revenue sharing formula as put forth by the assessee as relevant under the CUP method for determining the ALP, is not correct. Consequently, it is held that the calculation of PLI of the assessee done by the TPO under TNMM is correct, which does not warrant any interference. We, therefore, countenance the same. The assessee fails on this issue. Selection of comprables - Held that:- As assessee company, which is engaged in providing software development services to its group concerns companies with different scope of work to be rejected as comparable. Deduction u/s 10A- whether any TP adjustment is permissible? - Held that:- Eligibility of the assessee to deduction u/s 10A of the Act does not operate as a bar for determining the ALP of international transaction undertaken by it and further the enhancement of income due to such transfer pricing addition cannot be considered for allowing the benefit of deduction under this section. Thus we set aside the impugned order and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction of `Software development services’ in consonance with our decision on various aspects given above. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. Short deduction u/s 10A in respect of Noida unit, which is eligible for tax holiday u/s 10A - Held that:- A sum of 1,22,342/- has been apportioned by the AO himself as relatable to the eligible unit D-4, Noida. This apportionment has been done of sum of two items, namely, 1,48,180/- which was claimed as deduction by the assessee in earlier years and a sum of 1,93,018/- which is the amount of bank charges refunded during the year. These two items were claimed as deduction in the earlier years from the eligible income and these have turned out to be excessive to this extent, either because of the excess provision created in the earlier year which has been now reversed or the excess bank charges claimed which have been refunded in the instant year. Since these expenses at the time of their incurring in the earlier years went on to reduce the eligible income of the Noida unit, in our considered opinion, when the excess amount is reversed in the current year, the same should also be made eligible for the benefit of deduction u/s 10A of the Act. We, therefore, overturn the assessment order on this point, and direct the inclusion of a sum of 1,22,342/- in the eligible profit for the purposes of deduction. Disallowance of deduction u/s 10A being the amount of depreciation disallowed - Held that:- The opening written down value to the extent of 2,55,500/- was excessive and ought to have been reduced. Once this amount is reduced, the assessee’s claim for depreciation on such amount to the tune of 1,53,300/- also becomes disallowable. We, therefore, approve the action of the AO in making addition for a sum of 1,53,300/-. However, the disallowance of depreciation to this extent will correspondingly enhance the eligible profits of Noida unit and the resultant amount of deduction u/s 10A to this extent. Thus, the disallowance so made would be set off with the increased claim of deduction u/s 10A resulting into no ultimate addition on this score. As the AO has simply made disallowance on account of depreciation without allowing benefit of section 10A on this disallowance, we hold that the assessee should also be allowed benefit u/s 10A of the Act to this extent. This ground is allowed.

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• 2016 (2) TMI 570
  Non-granting of exemption available u/s. 54 - the investment in the new residential house property was not situated in India - Held that:- Following the decision of the Coordinate Bench of this Tribunal in the case of Ms. Dhun Jehan Contractor (2015 (8) TMI 316 - ITAT MUMBA) we hold that the assessee is entitled to be allowed exemption under section 54 of the Act in respect of the investment made in the purchase of the new residential property abroad in 151, Whispering Lane, Winona, Winona County, Minnwsota 55987, USA.- Decided in favour of assessee Computation of LTCG - indexation of the cost of acquisition - property acquired through inheritance - Held that:- Respectfully following the decision of the Hon'ble Bombay High Court in the case of Manjula J. Shah ( 2011 (10) TMI 406 - BOMBAY HIGH COURT ), we hold that while computing the LTCG on transfer of the said property acquired by the assessee in the case on hand by inheritance, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset (i.e. the assessee's late mother first held her 50% share in the said property by inheritance on the expiry of her husband on 11.11.1963) and not in the year in which the assessee became the owner of the asset, viz. in 2006. We, accordingly, hold and direct the AO to allow indexation of the cost of acquisition of the said property entirely w.e.f. 01.04.1981. - Decided in favour of assessee

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• 2016 (2) TMI 569
  Registration petition u/s. 80G(5) denied - Section 12AA registration - whether the assessee can be held to be a religious trust not entitled for 80G registration or not. We have already summarized arguments of both the parties? - Held that:- We take into account the assessee's objects and activities performed, draw strength from co-ordinate bench decision hereinabove and hold that the same are not expressed to be for benefit of a particular religious community or caste. It is to be seen that the assessee has provided kites for distribution in general public, carried out free medical check-up, distributed provisions, run music school, planted trees, provided lunch to children, started library, supplied food and clothes to flood victims, carried out dental check up, lunch for orphanage, paid needy children fees, offered free medical aid to poor for treatment of cancer, free check up diabetes and blood pressure, organize teaching class, and distributed books. The paper books comprise of photographs and letters which have gone un-rebutted in the course of argument. We quote all this material and findings on record to hold that the assessee is not an institution expressed to be for the benefit of any particular religious community or caste u/s. 80G(5)(iii) or having any purpose the whole or substantially the whole of which is of religious nature under explanation 3 therein. We accept assessee's arguments and reject those raised at Revenue's behest. The assessee's registration petition u/s. 80G(5) succeeds accordingly. - Decided in favour of assessee

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• 2016 (2) TMI 568
  Deduction u/s.54F - Held that:- Since the assessee had a right in the said property which he released and obtained 3 crores in lieu of the same, therefore, the gain that has arised is capital gain. The assessee is therefore entitled to get deduction u/s.54F from such capital gain. However, since the lower authorities have not verified the claim of allowability of deduction u/s.54F from such capital gain, therefore, we restore the issue to the file of the AO with a direction to verify the claim of deduction made by the assessee and upon satisfaction allow appropriate relief u/s.54F. The ground raised by the assessee is accordingly allowed for statistical purposes.

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• 2016 (2) TMI 567
  Assessment u/s 153A - nexus between the interest expense and interest income - disallowance u/s 14A - Held that:- As could be seen AO has duly examined the claim of the assessee with respect to the deduction of interest expenses on loan borrowed from the interest income earned from the loans advanced and has disallowed 38,19,800/- and 90,000 out of the interest expenditure claim of 96,24,943/- . Apart from the above, the assessee has also voluntarily offered disallowance of interest of 9,92,861/- u/s 14A of the Act. Thus, the assessee claimed deduction of balance amount of interest expenditure of 47,22,282/- towards loan borrowed against interest income of 99,01,472/- from loan advances , which claim was duly examined and allowed by the AO while framing the assessment orders dated 31.12.2009 u/s 153A read with Section 143(3) of the Act pursuant to first search on 19.07.2007 and no new incriminating material was found or unearthed during search u/s 132(1) of the Act, having being brought on record before the Tribunal and the assessment framed vide orders dated 31.12.2009 being concluded assessment as framed prior to date of second search on 29/03/2011, we are of considered view that the concluded assessments in the instant appeal cannot be disturbed on the same set of material facts as prevailing when the assessment was framed u/s 153A read with Section 143(3) of the Act on 31.12.2009 in pursuant to first search on 19.07.2007 and hence, we dismiss the appeal filed by the Revenue. - Decided against revenue

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• 2016 (2) TMI 566
  Disallowance of deduction claimed u/s. 80IB(10) for non-completion of project before the due date - incomplete housing project - Held that:- As decided in Income Tax Officer Vs. M/s. Paras Construction [2015 (8) TMI 266 - ITAT PUNE ] non obtaining of completion certificate in respect of project approved prior to 01-04-2005 will not render the assessee ineligible for claiming deduction u/s. 80IB(10) in the impugned assessment year. Thus, in the facts of the case and the well settled law discussed above, we are of the considered opinion that the assessee is eligible to claim deduction u/s. 80IB(10) in respect of its project, ‘Laxmi Vihar’ at Hadapsar, Pune. - Decided in favour of assessee

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• 2016 (2) TMI 565
  Disallowance of sub-contract expenses not supported by proper bills - Held that:- The only discrepancy noticed by the Assessing Officer is that the payments are not supported by the bills raised by the parties and only self-made vouchers were maintained by the assessee. In our opinion, considering the nature of work carried on by the assessee, there is no question of not incurring of expenditure by the assessee to carry on the road work contracts and the work is mentioned in the M book maintained by the assessee and counter signed by the sub contractors. However, there is chances of inflating the expenditure for which the CIT(A) has already disallowed 10% of the expenditure claimed by the assessee to the extent of 4,41,08,210/-. Hence, the contention of the ld. DR that the entire amount of 4,41,08,210/- is to be disallowed cannot be appreciated as held by the Tribunal in the case of EDAC Engineering Ltd vs ACIT, [2013 (9) TMI 1090 - ITAT CHENNAI] wherein held that if expenditure claimed was not supported by proper evidence and some deficiency persist in evidence, part expenditure is disallowed on estimated basis. Being so, by placing reliance on the above decision of the Tribunal, the CIT(A) is justified in disallowing only 10% of the sub-contract expenses not supported by proper bills.- Decided in favour of assessee in part. Addition made u/s 41(1) as cessation of liability - Held that:- Before coming to the conclusion by the Assessing Officer that the creditors were no more existing, it is incumbent upon the Assessing Officer to make necessary enquiry to bring on record material that the creditors were ceased to exist. He could have made necessary enquiry to this effect. The assessee herein is a limited company and as per the legal position the acknowledgement of the liability in favour of the creditors in its Balance Sheet extends the period of limitation for the purpose of sec. 18 of the Limitation Act. It is the assessee’s claim that the debts are subsisting and it continues to be liable to pay the creditors. Therefore, it is not open to the Assessing Officer to draw the conclusion that the creditors have remitted the liability or that the liability has otherwise ceased without evidence or material when the assessee acknowledges a liability in the Balance Sheet and Explanation 1 is not applicable. Since the creditors are continued to be appearing in the Balance Sheet from year to year and the accounts of the creditors have not been written back, the conclusion of the Assessing Officer that it was ceased to exist is not proper. Accordingly, in our opinion, the CIT(A) is justified in deleting the addition made by the Assessing Officer u/s 41(1) of the Act. This view of our is fortified by the judgment of the Delhi High Court in the case of CIT vs Hotline Electronics Ltd, [2011 (12) TMI 90 - DELHI HIGH COURT ] and CIT vs GP International Ltd, [2009 (12) TMI 33 - PUNJAB AND HARYANA HIGH COURT ]. Accordingly, the deletion made by the CIT(A) is confirmed. - Decided in favour of assessee.

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• 2016 (2) TMI 564
  Interest u/s 244A - Interest on refund where no claim is needed - Whether Commissioner (Appeals) erred in holding that delay in issue of refund was attributable to the assessee without considering the fact that application for rectification of mistake was filed on 17-12-2008. - Held that:- After going through the provisions of section 244 and 244A we are of the considered opinion that the appellant is entitled for simple interest on the excess tax paid, by whatever name called, such as TDS or Advance Tax or self assessment tax. Such interest is payable to the assessee after adjustment of taxes due, from the date from which the assessee claims it. - Decided in favour of assessee

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• 2016 (2) TMI 563
  Registration u/s 12A and approval u/s 80G denied - Held that:- Once the objects of the trust are found to be charitable, the CIT has no option but to grant registration. The issues such as violation of provisions of sec.13 and the exemption u/s 11 and 12 can be examined by the AO after the return of income is filed. It is only after the activities of the trust are commenced the genuineness of the objects can be examined during the course of assessment proceedings, after the grant of registration by the IT Authorities. Applying the above legal position to the facts of the present case, it is not the case of the ld.CIT(Exemptions) that the objects of the trust are not charitable in nature. The objects of the appellant-trust clearly fall within one of the limbs of charity i.e. education and the appellant-trust had complied with all the procedural requirements and filed the details as called for by the ld.CIT(Exemptions). The only grievance of the ld.CIT(Exemptions) appears to be that the son of the settler is constructing a building in the name of the entity in which he was interested as a shareholder or director and not in the name of the trust proposed to be used for the purpose of the appellant-trust. This, does not, in any way militate against the charitable character of the objects of the appellant-trust. It is not the case of the ld.CIT(Exemptions) that the funds of the appellant-trust were used for the construction of the building in the name of that entity. This, neither infringes the provisions of sec.13 nor can be examined at the stage of granting registration. The genuineness of the activities of the trust can be examined only after commencement of the activities of the appellant-trust. Thus we direct the ld.CIT(Exemptions) to grant registration u/s 12A of the IT Act. Following the same parity of reasoning give by us in the appeal filed against denial of registration u/s 12A, we direct the ld.CIT(Exemptions) to grant the approval u/s 80G. - Decided in favour of assessee.

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• 2016 (2) TMI 562
  Denial of registration u/s 12A and approval u/s 80G - Held that:- Genuineness of the activities of the trust cannot be gone into at the time of registration of the trust. It is only after the activities of the trust are commenced the genuineness of the objects can be examined during the course of assessment proceedings, after the grant of registration by the IT Authorities. We direct the ld.CIT(Exeptn.) to grant the registration u/s 12A of the IT Act, after satisfying himself that the objects of the trust are charitable in nature. With this direction, we restore the matter to the file of the ld.CIT(Exeptn.). - Decided partly in favour of assessee for statistical purpose.

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• 2016 (2) TMI 561
  N.P. rate determination - addition on account of unverifiable purchases - Held that:- There is nothing on record to demonstrate as to what was the turn over and the net profit of the Assessee in immediately preceding and subsequent years which could demonstrate the trend of NP/GP earned by the Assessee in those years. We are further of the view that in the present case, it would not serve the purpose if the matter is remanded back to decide the issue for estimation of income afresh in view of the fact that the matter is almost five years old and would result into prolonging the litigation and delay in attaining finality to the issue and more so even in that case, the income will have to be estimated. Considering the totality of the facts, we are of the view that in the present case, the ends of justice shall be met if the income is estimated by applying the Net Profit Rate of 2.5% as against 2% considered by the CIT(A). We thus direct accordingly. - Decided in favour of revenue Addition under the head "Indirect Expenses" - Held that:- CIT(A) while deleting the addition has noted that since he had directed the adoption of net profits @ 2% further adhoc disallowance would result into double disallowance. Before us, apart from other findings, the observation and finding of CIT(A) of double disallowance has also not been controverted by the Revenue. - Decided in favour of assessee Addition u/s.68 - Held that:- CIT(A) correctly deleted the addition as the appellant had filed a confirmation from the parties wherein the parties confirmed their account with the appellant. Since the opposite party has confirmed to give the said sum to the appellant, the addition made by the AO in this regard is directed to be deleted correctly. - Decided in favour of assessee

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• 2016 (2) TMI 560
  Grant of registration u/s 12AA rejected - Held that:- If similar institutions having similar objects have been granted registration under section 12AA of the Income Tax Act, 1961, there is no justifiable reason as to why the assessee should be deprived from availing of such benefit. In the aforesaid facts and circumstances, we set aside the impugned order of the learned Director of Income-tax (Exemptions) and remit the matter to the Ld. DIT (Exemptions) to verify this aspect and if it is found that similar institutions in other places having similar objects have been granted registration under section 12AA, he may consider granting registration under section 12AA of the Act to the assessee. The learned Director of Income-tax (Exemptions) must afford reasonable opportunity of being heard to the assessee in the matter. - Decided in favour of assessee for statistical purposes.

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• Customs

• 2016 (2) TMI 579
  Grant of bail to Detenu - Prosecution and arrest of person - criminal proceedings are initiated against the detenu insofar evasion of the duty payable to the Revenue on the illegally imported goods - Held that:- not taking action against the detenu during the relevant period of time prima facie is a serious dereliction of duty on the part of the concerned officials who, were/ have been in office of the Customs Department, therefore, we direct the C.B.I. to conduct investigations in this matter and submit a report to the Competent Authority to take appropriate action in this regard and submit compliance to this Court for its perusal and giving appropriate further directions in this regard. The appeals filed by the appellant-detenue are allowed by quashing the conditions imposed in the impugned order passed by the High Court. The appeal filed by the Union of India & Anr. is dismissed.

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• 2016 (2) TMI 578
  Prosecution proceedings against the customs officers - sanction under the Prevention of Corruption Act Claim of duty drawback on the basis of forged Import Code (IEC) number, forged identity proof to open bank accounts and forged 213 shipping bills - Accused customs officers had dishonestly and fraudulently transferred passwords and login ID to the private persons illegally engaged by them to work in the office in order to facilitate dishonest and illegal duty drawbacks by Amandeep Singh and Parminder Kumar. The custom officers had also not physically verified the exporting of goods and their stuffing into the containers for extraneous reasons, committed criminal misconduct as public servants. Held that:- Even the Division Bench judgment in Anur Kumar's case held that a petition under Section 482 Cr.P.C. can be entertained in exceptional circumstances viz. where there is an abuse of the process of the Court or where interference is absolutely necessary for securing the ends of justice. However, in my opinion, the issue will turn on the fact that this Court has come to the conclusion that in the absence of notice the prosecution is illegal. Once that is held, it would not be in the interest of justice to subject the petitioners to a trial which will ultimately be still-born. For this purpose recourse can be taken to the provisions of Section 482 Cr.P.C., more so since the said section has been invoked in these petitions. Consequently, the criminal miscellaneous petition is also allowed and the FIR is quashed qua petitioner-Raj Kumar Patial.

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• 2016 (2) TMI 577
  Import of poppy seeds from Turkey - change in the procedure and policy for import of poppy seeds from "free import" to import on "first come first served basis" - Held that:- it is an admitted fact that the petitioner is not an applicant seeking registration of any sale contracts for the import of poppy seeds from Turkey, as against the impugned notification. The mala fides urged against the respondents, in relation to the earlier public notifications are no longer relevant as the respondents have abandoned the said notifications. This would only require the limited questions of whether the policy now sought to be adopted by the respondents of categorization of importers lacks a rational basis. As has been demonstrated by the respondents in relation to the actual figures as to the number of applicants and the quantity available for allocation, it cannot be said that it leads to any imbalance or is arbitrary. It may not be the best policy that could have been adopted by the respondents, but it cannot be characterized as illegal or arbitrary. The explanation offered by the respondents as to the reason and rationale in adopting a prescription of a provisional cap and a country cap, in so far as the imports from Turkey is concerned, is also acceptable. Hence, the petition lacks merit and is hereby dismissed.

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• 2016 (2) TMI 576
  Undervaluation of import - Demand of differential duty - Appellate remedy - Principle of natural justice - petitioners stated that before they could file their replies, they should be furnished the non-relied upon documents - It is stated that the Adjudicating Authority gets only the relied upon documents from the Investigative Agency i.e. DRI and the Adjudicating Authority is not possessed of the documents demanded by the petitioners. - Held that:- The counsel for the petitioners states that though according to him no appeal lies against such order but in view of the said statement of the counsel for the respondent, the petitioners would avail the remedy of appeal. - Recording the aforesaid, the petitions are disposed of.

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• Corporate Laws

• 2016 (2) TMI 551
  Scheme of Amalgamation - Held that:- Considering the totality of the above facts and circumstances and taking into account the contentions raised in the affidavits and reply affidavits and the submissions advanced during the course of hearing, this Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, have been answered. It appears from the record that the present Scheme of Arrangement will be in the interest of the shareholders and creditors of all the companies as well as the public interest and the same deserves to be sanctioned. It is hereby sanctioned.

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• Service Tax

• 2016 (2) TMI 581
  CESTAT dismissed the appeal for non prosecution - The grievance of the Assessee is that the case was not listed for some hearings and on two hearings, the adjournment sought was granted and that on 21.09.2015, even though written argument was filed, the contentions raised in the written submissions were not taken into account, while passing the final order. - Held that:- These submissions made clearly go to show that the Assessee has got an arguable case. The order passed by the CESTAT with regard to the non-appearance of the Assessee is cryptic and devoid of reasons. The reasons are the soul of the Judgment. The order passed without giving reasons cannot be sustained. - Matter restored before the tribunal.

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• 2016 (2) TMI 580
  Refund of unutilized CENVAT credit on export of services under Rule 5 of Cenvat Credit Rules, 2004 (CCR) - Eligible input services - method of calculation of credit to be refunded - prescribed formula - adjudicating authority while computing the value has deducted the value of SEZ exports from the export turn over (numerator) but retained the SEZ export turn over in the total turnover (Denominator). - Held that:- the appellants are eligible for refund under Rule 5 of CCR on the input services used in the export of service. The order of the LA rejecting the refund claim by adopting the wrong method of computation is not justified and liable to be set aside to that extent of restriction of the refund claim. We hold that the value of export turnover should be equal to the total turnover and the value of SEZ exports should be included in the export turnover (numerator). Accordingly, the appellants are eligible for the full refund claim. Decided against the revenue and in favor of assesseee.

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• Central Excise

• 2016 (2) TMI 559
  Quantification of 8% under Rule 6(3)(b) of Cenvat Credit Rules when the Respondents are clearing the exempted final product - whether the demand is clearly hit by the time bar? - Held that:- The clearance of exempted goods and the reversal of 8% of value of the sale on the collection of the 8%, money from the buyers are all in the knowledge of the Department. Hence, we agree with the Ld. Commissioner (Appeals) on the point of time bar. Regarding inclusion of freight for arriving at the value of exempted goods, the Ld. Commissioner (Appeals) recorded that the payment of 8% made by the Respondent was with reference to sale value of the bare pipes and coating cost is as per the contract with the party. Hence, he held that the question of payment of 8% amount on the transportation cost would not arise. The Ld. Commissioner (Appeals) also held that the demand is clearly time barred on the second issue also. He found that the bare pipes cleared from the factory of the Respondent to the Job worker's premises for coating is in terms of permission granted by the Commissioner of Central Excise, Indore. The sale value (contract price) has been adopted by the Respondent for quantifying the 8% amount for reversal. Hence, the Ld. Commissioner (Appeals) concluded that the demand is not sustainable on merit as well as on time bar. On careful consideration of the impugned order and the grounds of appeal, we find no reason to interfere with the impugned order, accordingly, the appeal is dismissed.

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• 2016 (2) TMI 558
  Denial of exemption Notification No. 6/2002-CE - penalty imposed under Rule 26 of Central Excise Rules, 2002 - Held that:- On perusal of the judgment of this Tribunal in the case of Relpol Plastic Products Ltd. (2013 (11) TMI 1118 - CESTAT MUMBAI ) against the very same impugned order, we find that the demand has been dropped. Therefore, the penalty under Rule 26 imposed on the present appellant which is consequential to the duty demand on M/s. NOCIL (Now known as Relpol Plastic Products Ltd.) is not sustainable. Penalty set aside. Appeal is allowed with consequential relief, if any, in accordance of law. - Decided in favour of assessee

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• 2016 (2) TMI 557
  Entitlement to claim CENVAT Credit of input services - services of travel agent - Held that:- This Tribunal in the appellant's own case [2012 (11) TMI 376 - CESTAT, MUMBAI ] allowed the appeal of the appellant and it has been held that the appellant is entitled to CENVAT Credit on the services of travel agent which was used by the appellant for travelling technicians and accountant for visiting the job workers as per Rule 2(l) of CENVAT Credit Rules, 2004. - Decided in favour of assessee

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• 2016 (2) TMI 556
  Evasion of duty - penalty imposed under Rule 173Q of Central Excise Rules, 1944 and Rule 25 of Central Excise Rules, 2002 - Held that:- We find that the respondent right from beginning had informed the department regarding removal of 105 prototype vehicles and they have bonafidely claimed exemption under Notification No. 161/71 and on rejection of the request for extending the benefit of the said notification by the department, they cleared the vehicles on payment of duty taking the highest approximate value of the vehicles. In the present case, the issue is only of payment of differential duty which also they paid before issuance of show-cause notice. Therefore, we do not find any mala fide intention on the part of the respondent and the facts clearly show that there is no intention of evasion of any duty. Taking into consideration the overall facts, the learned Commissioner (Appeals) has rightly dropped the penalty. We, therefore, uphold the impugned order and dismiss the Revenue’s appeal. - Decided in favour of assessee

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• 2016 (2) TMI 555
  Denial of benefit of CENVAT Credit on Xerox copy of courier bill of entry - Held that:- There is no dispute that the material on which the credit has been taken was imported by the appellant and was used for manufacturing of the product. The objection of the department is that the appellants have not produced the original bill of entry and the photocopy of the courier bill of entry or consolidated courier bill of entry is not admissible for denying credit under Rule 9. Thus hold that the appellant have correctly claimed the CENVAT Credit on the photocopy of the courier bill of entry filed by them and CENVAT Credit cannot be denied on mere technical grounds - Decided in favour of assessee

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• 2016 (2) TMI 554
  Liability to pay duty on the scrap generated at job workers premises under CENVAT Credit Rules, 2004 - Held that:- As find that Hon'ble High Court in case of Rocket Engineering Corporation Pvt. Ltd. (2005 (3) TMI 314 - CESTAT, MUMBAI ) has clearly held that in CENVAT Credit Rules, 2004 there is no liability of the assessee sending in the inputs for job work in respect of scrap generated at job workers end. The appellants have paid the said amounts in discharge of the liability of duty on scrap generated at job worker premises. Since they are not liable to pay excise duty on such clearances, any amount paid on this count is refundable. Since the debit was made by the appellants in their CENVAT account while invoice if any was issued by the job worker. Since they had no direct interaction with buyer of scrap question of recovering duty does not arise. Moreover debit in account was made much after actual clearance of scrap from job workers premises. The impugned order is set aside and the appeal is allowed in favour of assessee

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• 2016 (2) TMI 553
  CENVAT Credit in respect of Service Tax paid on services received from CHA in respect of export of consignment - Held that:- The issue is settled in view of the clarification issued by CBE&C. In view of a clear cut clarification by CBE&C, demand of reversal of CENVAT Credit taken in respect of CHA services utilized for export of goods cannot be sustained.

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• 2016 (2) TMI 552
  Cenvat Credit - Input Services - Held that:- The issue involved in this case is squarely covered by the decision of CCE, Nagpur vs. Ultratech Cement Ltd. reported ( 2010 (10) TMI 13 - BOMBAY HIGH COURT ) held that the credit of service tax would be allowable to a manufacturer even in cases where the cost of the food is borne by the worker (see last para). That part of the observation made by the Larger Bench cannot be upheld, because, once the service tax is borne by the ultimate consumer of the service, namely the worker, the manufacturer cannot take credit of that part of the service tax which is borne by the consumer. Shri Shridharan, learned Counsel for the assessee fairly conceded to the above position in law and in fact filed an affidavit affirmed by a responsible officer of the assessee wherein it is stated that the proportionate credit to the extent embedded in the cost of food recovered from the employee/worker has been reversed. Since the issue is squarely covered by the judgment cited by the learned AR, do not find any infirmity in the order of the Commissioner (Appeals) denying the benefit of cenvat credit to the appellant

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• Indian Laws

• 2016 (2) TMI 550
  Levy of tax on open space termed as “banquet halls” providing only accommodation or space for marriages/receptions in terms of Section 2(c) in the manner stated under Section 2(k) of the Haryana Tax on Luxuries Act, 2007 - whether these are not covered under the head 'Luxury' vide entry No.62 of List II of Schedule VII of the Constitution of India? - Held that:- The explanation being clarificatory in nature has simplified the calculation as to what amount would be included for quantifying 20,000/-. It cannot be held to be unreasonable or arbitrary in any manner as it encompasses those cases where the facilities or amenities are provided by the proprietor of the banquet hall or any person on his behalf when such amenities are provided within the precincts of such banquet hall. It can by no stretch of imagination on taking hypothetical illustration be declared to be ultra vires without showing lack of legislative competence of the State to enact such a provision or there being violation of any constitutional mandate. Nothing has been shown by the learned counsel for the petitioner to substantiate that the State legislature was not empowered to define the expression 'luxury in the banquet hall' under Section 2(k) in the statute. The definitions of various expressions under Section 2 of the Act and other substantive provisions of the Act are within the legislative competence and have not been shown to be contrary to any constitutional mandate. The services provided by the petitioner do fall under the said definition so as to be liable to levy of tax. Once there exists legislative competence in the State legislature to enact a provision, in the absence of the learned counsel for the petitioners to demonstrate that the same is arbitrary, discriminatory or violative of Article 14 of the Constitution of India, it cannot be declared to be unconstitutional. Thus the provisions of Explanation to Section 2(k) of the Act and also the other provisions of the Act to which an attempt has been made to assail as ultra vires, cannot be held to be beyond the legislative competence of the Haryana State Legislature or that they had exceeded its law making power or contravened any of the provisions of the Constitution of India on the basis of which it could be declared to be unconstitutional. The validity of the same is upheld and the petition is dismissed.

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