Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 20, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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When there is no misunderstanding between the parties on the terms and conditions of the agreement, in our view, the tax authorities may not be justified in interpreting the agreement in a different manner - AT
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TDS u/s 194H - the consideration received by the bank on account of guarantee commission cannot be reckoned as commission as contemplated u/s 194H and accordingly, there was no requirement to deduct TDS on this payment. - AT
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Sale of patent/ know-how known as “Profofal” - disputed amount is taxable as capital receipt/ gains u/s. 55 (2) - The assessee was not in the business of purchase and sale of patents, so the sale proceed of the assignment agreement could not be treated a revenue receipt. - AT
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MAT - As per the provisions of section 115JB of the Act the amount of book profit will not be increased by the amount of bad debts actually written off in the books of accounts - AT
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The submission that, non-payment of advance tax was on account of circumstances beyond the control of the assessee and for a reasonable cause, would not warrant deletion of interest payable on account of short payment / non-payment of the advance tax u/s 215(1) - HC
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Denial of exemption under sections 11/12 - propagation of yoga - commercial activities by receiving certain contributions under the scheme for construction of cottages at Patanjali Yogpeeth–II known as “Vanprastha Ashram” - Benefit of exemption allowed - AT
Customs
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Valuation - when the said import documents reveal that the goods have been procured from third party and the value declared is the value of the third party supplying the goods to Italian sister concern of the appellant, no question of rejection of transaction value arises - AT
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Valuation - the amount paid for technical know-how fee and the royalty charges are not to be included in the assessable value of the imported goods, if such payment is for the goods to be manufactured out of the technical know-how, which is transferred by an agreement - AT
Indian Laws
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Misconduct of CA - He cannot be a director of a company without the permission of the Council - Being a Chartered Accountant the respondent cannot actively carry on business through companies, trusts and firms - HC
Service Tax
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Joint Development Agreement - The OMDA does not constitute a “Franchise” in terms of Section 65(47) of the Finance Act and the transaction between the Petitioners and AAI does not constitute a taxable service in terms of section 65(105) (zze) of the Finance Act - HC
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CENVAT credit - input service distributor (ISD) - The objection of the department that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004 - HC
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Refund claim - input services (GTA) received were exempted retrospectively - the order denying refund only on the non compliance of procedural condition cannot be sustained - AT
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CENVAT credit - duty paying document - endorsed bill of entry - import of goods by the customers for use in rendering of ‘technical testing and analysis service' - Credit cannot be allowed - AT
Central Excise
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Reversal of CENVAT credit - Department has force upon the assessee to pay 10% of the value of clearances even though the assessee has reversed the credit attributable to the input services used for manufacture of exempted goods - Demand unsustainable - AT
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SSI exemption - use of brand name of others - , the appellant did not disclose the relevant facts in respect of the clearances of goods affixed with brand name "5 CEES" and "KILLER" without payment of duty - extended period under proviso to Section 11A(1) has been correctly invoked - AT
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Classification - gun metal castings - the cast iron and goods remain classified under chapter 74 unless certain machining is done however as the goods emerged from the castings process they remain under chapter 74 - AT
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Self adjustment of excess duty paid with short duty paid - Price variation clause - the appellant has gone ahead and adjusted the excess duty paid with the short paid duty which is not permissible in law - AT
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Classification of Katha - classified as Indian Katha under Tariff item No. 14049050 or as Katha substitute under Tariff item No. 32019090 - during the relevant period it was to be classified under 14049050 as ‘Indian Katha' - AT
VAT
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Levy of entry tax - the petitioner cannot be permitted to ignore, and circumvent the alternative remedy provided by law. It cannot be allowed to rush to this Court after the limitation period is over, and to plead that the writ jurisdiction should be invoked by this Court - HC
Case Laws:
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Income Tax
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2017 (2) TMI 809
Foreign exchange gain as part of operating revenue - computation of operating margin of the assessee-company - whether such foreign exchange gain is in respect of the turnover of the present year or for turnover of an earlier year because the bench felt that if the said gain is not on account of turnover of the present year then, such gain cannot be part of operating profit of the present year to work out the operating profit margin percentage? - Held that:- This matter should go back to the file of the ld. CIT (A) for a fresh decision after examining this aspect as to whether such foreign exchange gain is in respect of turnover of the present year or of an earlier year because in our considered opinion, the foreign exchange gain is no doubt an operating profit of the assessee-company if the same is on account of collection of sale proceeds of the assessee-company but for the purpose of computing the ALP, such foreign exchange gain cannot be added in operating profit of the assessee-company if such gain is arising on account of turnover of an earlier year because for the purpose of computing the ALP, operating profit margin over the turnover has to be worked out and since the turnover of the present year is not inclusive of turnover of earlier year for which the exchange fluctuation gain is arising, such gain also cannot be taken into account for computing the operating profit percentage of the present year in order to finalise ALP and since these details are not available on record as to whether the foreign exchange fluctuation gain in the present case is in respect of turnover of the present year or of an earlier year, we restore the matter back to the file of the AO/TPO for fresh decision Exclusion of one comparable company i.e. Sat Investeck Ltd - Held that:- This issue should be restored back to the file of TPO for fresh decision after examining the RPT percentage of this company because, as per the annual report of this company available in the paper book, the RPT percentage of this company is much higher than the RPT percentage being accepted by the Tribunal i.e. 15% but there is no finding of any of the authorities below on this aspect. Hence, on his aspect, we set aside the order of ld. CT (A) and restore the matter back to the file of the AO/TPO to decide the issue afresh 5% standard deduction allowed by ld. CIT (A), it was fairly conceded by the ld. AR of the assessee that this issue has to be decided in favour of the revenue and against the assessee in view of subsequent amendment in the provisions of sec. 92C of the IT Act, 1961. Accordingly, we decide this issue in favour of the revenue Computation of deduction 10A - Held that:- The total turnover is sum total of domestic turnover and export turnover and therefore, if an amount is reduced from export turnover then the total turnover also goes down automatically by the same amount.
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2017 (2) TMI 808
Disallowance of alleged refunds to customers - rate difference and discount allowed to the customers - Held that:- CIT(A) has given a finding that the amount has actually been refunded and the list of such customers to whom the amount has been refunded is identifiable and the same has been verified by him along with documentary evidence. The said findings remain uncontroverted before us. In terms of quantum and nature of refund, the same depends upon various factors such as initial advance received from the customers, loan approved and credited to the customer account, value of sales recorded, various charges debited to the customer account and off course, the rate difference and discount allowed to the customers. The same will vary from customer to customer and from product to product sold by the assessee. In absence of a specific finding, it is difficult to generalise that in all cases, the refund has arisen only on account of discount offered to the customer as held by the AO. It is only in a particular situation where the cash advance alongwith loan amount equals the sales and other charges, it can be said that the balancing figure relates to discount offered to the customer. In light of above, we confirm the order of the ld CIT(A) and sustain the deletion of addition made by the AO. - Decided against revenue Disallowance of financial service charges - in the absence of actual third party expenditure vouchers from salesmen supporting their respective claims, disallowance of 20% of these expenses was held reasonable and disallowed by the ld CIT(A) for want of verification - Held that:- The incurrence of expenditure for business purposes cannot be disputed. Secondly, one can debate about the basis of 20% disallowance and whether the same is reasonable or not. In this regard, we were informed by the ld AR that the Revenue has accepted the said position of 20% disallowance in subsequent years while completing the assessments u/s 143(3) for A.Y. 2011-12 & 2012-13. In light of that, where the facts and circumstances are same and the Revenue has accepted the said position in subsequent years, we don’t feel it would be appropriate to unsettle the position. We accordingly confirm the order of the ld CIT(A).- Decided against revenue Addition on account of commission on sale of implements - Held that:- The AO has made the subject addition towards earning commission income by the assessee without any material/evidence and is thus on a presumptive basis. Mere suspicion or probability of earning commission income cannot form the basis for bringing the amount to tax in the hands of the assessee. There has to be something positive and tangible to subsantiate the said position taken by the Revenue which unfortunately is not apparent in the present case. In light of above, we donot see any infirmity in the order of the ld CIT(A) which is hereby confirmed. - Decided against revenue
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2017 (2) TMI 807
Penalty u/s. 271(1)(c) - unexplained income of assessee - validity of notice - whether the proceedings were initiated for ‘concealment of penalty’ or ‘for furnishing inaccurate particulars’? - Held that:- The reason for adding the amounts in the hands of assessee is only because the AO did not find necessary entries in the books of account of the above two concerns. If that is the case, since those people have owned up the amounts, necessary proceedings could have been initiated in their hands. However, in order to settle the matter, assessee had accepted the addition and paid the taxes accordingly. In these circumstances, we are of the opinion that assessee’s explanation given has not been disproved. Just because an addition has been made and agreed by assessee, it does not automatically lead to levy of penalty u/s. 271(1)(c). Notice does not specify for what offence the proceedings are initiated.The copy of the notice placed on record do indicate that it is a printed proforma, without striking-off the relevant columns and simply signed by the AO which has served on assessee. On similar facts, as in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the practice of the department sending a printed form where all the grounds mentioned in 271 are mentioned would not satisfy the requirement of law when the consequence of assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 10% to 300% of tax liability. As the said provisions have to be held to be strictly construed, notice u/s. 274 should satisfy the grounds which he has to meet specifically. - Decided in favour of assessee
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2017 (2) TMI 806
Penalty u/s 271(1)(c) - income of management bonus not disclosed in the return of income filed by the assessee - Held that:- The entire amount of management bonus was subjected to deduction of tax at source at maximum marginal rate by the employer M/s Fairdeal Multimedia Pvt. Ltd. on behalf of the assessee, and thus the entire due taxes had been deposited to the credit of Central Government albeit by the employer. The ld. D.R. as well the authorities below could not controvert these contentions of the assessee. Considering this no penalty u/s 271(1)(c) of the Act can be levied under these circumstances wherein the assessee has come forward with an bonafide explanation . It is a case of bonafide mistake on the part of the assessee and more so Revenue has got tax deducted at source at maximum marginal rate on the entire management bonus albeit paid by the employer on behalf of the assessee. Thus, penalty levied u/s 271(1)(c) of the Act by the AO and as confirmed by learned CIT(A) is not sustainable keeping in view bonafide explanation offered by the assessee as detailed above - Decided in favour of assessee.
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2017 (2) TMI 805
Enhancement of rental income receivable - Held that:- We notice that the tax authorities have interpreted the agreement entered between the assessee and M/s Visage studios in their own way and accordingly came to the conclusion that the assessee was entitled to a sum of ₹ 1.11 crores. However, the fact remains that the recipient of the share, being the assessee and the payer of the share, being M/s Visage Studios have understood the transactions in a particular way and accordingly shared the lease income. When there is no misunderstanding between the parties on the terms and conditions of the agreement, in our view, the tax authorities may not be justified in interpreting the agreement in a different manner. As contended by Ld A.R, the assessing officer has not brought any material on record to show that there was suppression of share of income. It is also not the case of the AO that the rent received from M/s Visage studio was less than the fair market value. In view of the above, we are unable to agree with the view taken by Ld CIT(A) as well as the AO. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the enhancement made by him. Disallowance of expenses claimed under the head Security charges, Depreciation and Interest - Held that:- There is no dispute with regard to the fact that the assessee is a private limited company and it did not discontinue the business. It is stated that similar expenses claimed in the past have been allowed. The AO has not shown that the assessee has discontinued the business activities permanently. Hence we are of the view that the expenses claimed by the assessee should be allowed fully, since they have been incurred for the purposes of business only. With regard to the depreciation, the assessee has submitted it has been claimed in respect of entire building, plant and machinery etc. With regard to the depreciation claimed on the building, we direct the AO to disallow depreciation pertaining to the let out portion on proportionate basis from the WDV of the building, since the building let out cannot be considered to be used for the purposes of business. Accordingly we modify the order passed by Ld CIT(A) on the lines discussed above. Determining ALV of the property let out by taking the share of income of the assessee in lease rent as the basis - Held that:- M/s Rem Nord Lab P Ltd have been occupying the premises of the assessee since 1995 and the agreement is being renewed periodically. The AO has not shown that the fair rental value of the property was more than the rent received by the assessee. The agreement with M/s Visage studios was entered only in the preceding year and the assessee could fix the rental value on some other methodology depending upon market conditions. The same, in our view, would not render the agreements entered by the assessee with M/s Rem Nord Lab P Ltd since 1995 void. Hence we are of the view that the AO was not justified in determining the Annual Letting value of the property let out to M/s Rem Nord Lab P Ltd by taking the share of income of the assessee in lease rent as the basis. We notice that the Ld CIT(A) has analysed the facts in a proper perspective in accordance with the law and hence we do not find any reason to interfere with his decision rendered on this issue.
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2017 (2) TMI 804
Validity of reopning of assessment - non issue of notice - Held that:- AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law. Therefore, the assessment order as well as the appellate order stand cancelled and appeal of the assessee stands allowed.
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2017 (2) TMI 803
Disallowance u/s 40(a) (ia) - non deposit of TDS within the statutory period in the government treasury - Retrospectivity of the second proviso to Section 40(a) (ia) - Held that:- As decided in Commissioner of Income Tax-1 Versus Ansal Land Mark Township (P) Ltd.[2015 (9) TMI 79 - DELHI HIGH COURT] the second proviso to Section 40(a) (ia) was inserted by the Finance Act 2012 with effect from 1st April 2013. The effect of the said proviso is to introduce a legal fiction where an Assessee fails to deduct tax in accordance with the provisions of Chapter XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to sub-Section (1) of Section 201 of the Act, then, in such event, “it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso Second proviso to Section 40 (a) (ia) of the Act is declaratory and curative in nature and has retrospective effect from 1st April 2005, merits acceptance. - Decided in favour of the Assessee.
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2017 (2) TMI 802
TPA - selection of comparable - inclusion of M/s. Anshuni Commercials Ltd in the final set of comparables - Held that:- Turnover filter is being selectively sought to be used by the Revenue to exclude M/s.Anshuni Commercials Ltd., whereas the surviving comparables have not been put to such a test by the Transfer Pricing Officer. Therefore, following the decision of the Hon'ble Delhi High Court in the case of M/s. Nortel Networks India A. Pvt. Ltd.(2015 (3) TMI 14 - DELHI HIGH COURT ), the stand of the Revenue seeking exclusion of M/s. Anshuni Commercials Ltd. from the set of final comparables is quite untenable and is hereby rejected.
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2017 (2) TMI 801
TDS u/s 194H - TDS liability on Processing Fees - Held that:- It is sine qua non that there has to be a principal – agent relationship for a payment to be treated as commission or brokerage. The recipient of the income must act on behalf of the principal. Here the banker does not act on behalf of the assessee for rendering any kind of service. The contract of guarantee does not give any rise to principal - agent relationship between the assessee and the bank and, therefore, the consideration received by the bank on account of guarantee commission cannot be reckoned as commission as contemplated under section 194H and accordingly, there was no requirement to deduct TDS on this payment. TDS u/s 194I - Addition with regard to payments made by the assessee for holding/display rights - Held that:- Definitely there is no requirement of deducting TDS under section 194I on such payment, because it does not fall within “rent”. Interest levied u/s. 201 (1A) - Held that:- There was no liability to deduct tax at source for the payment made on account of Processing Fees and Guarantee Commission, that there was no short deduction of tax with regard to payments made for holding/display rights by the assessee. So, the issue of levying interest would not survive. - Decided in favour of assessee
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2017 (2) TMI 800
Re-opening of assessment u/s 147 - assessee was not eligible to set off the business loss and depreciation of the amalgamated company - Held that:- It is not in dispute that the assessment was re-opened within a period of four years from the end of the relevant assessment year. Moreover, the so called business loss and depreciation of the amalgamated company namely M/s.TTK Biomed Ltd. and TTK Medical Devices Ltd. was not considered by the assessing officer. Therefore, this Tribunal is of the considered opinion that the assessment was rightly re-opened by the assessing officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and the same is confirmed. Carry forward of loss - Held that:- An identical issue was disallowed by this Tribunal in view of the decision of this Tribunal in the assessee’s own case for the assessment year 2004-05. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed. Disallowance of gift - Held that:- The citizen of this country deserves better medical treatment. The medical treatment shall be made available by the state at a reasonable cost. The practice of marketing the drugs or medical devices on extraneous consideration cannot be allowed to continue any further. Therefore, the gift said to be given by the assessee is against the public policy. Hence, even if the so called gift is genuine transaction, the same cannot be allowed as ‘business expenditure’ under Section 37 of the Income Tax Act. In the case before us, the genuineness of the gift is also not proved by the assessee by giving the name and address of the doctors to whom the gift was said to be given. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed. Disallowance of logo charges - CIT-A allowed claim - Held that:- Under Income Tax Act, the partnership firm is an independent and separate assessable unit. Therefore, the assessee obtained a license from M/s.T.T.Krishnamachari & Co., for using the logo (ttk). In pursuant to the agreement, the assessee has paid 0.5% of the sales as logo charges. This Tribunal examined the agreement for the assessment year 2008-09 and found that the logo charges paid by the assessee are revenue expenditure. Accordingly, confirmed a similar order of the CIT(A). In view of the order of this Tribunal for the assessment year 2008-09 in the assessee’s own case allowing a similar payment of logo charges as revenue expenditure, this Tribunal do not find any reason to interfere with the order of the CIT(A) Depot charges paid at 3% of the sales - Held that:- Payment of depot charges at 3% of the sales are reasonable and not excessive
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2017 (2) TMI 799
Validity of assessment u/s. 153A - legal validity of additions made by AO under section 153A proceedings - Held that:- AO has estimated the profit from brick business at a higher rate of profit on the basis analysing of earlier years and financial data of subsequent years of the assessee. The AO has brought no defect in the profit & loss account of the assessee. Similarly the information regarding the gift and unsecured loan was available in the return of income as capital account had been credited and balance sheet reflecting the loan. It is pertinent to note that all the details i.e ITR and some bank statements of donors are placed at page no’s 24 to 41 which clearly shows that the donors i.e Smt.Radha Ghosh donated ₹ 2,00,000/- in cash to Assessee, like wise Smt Minati Ghosh donated ₹ 2,00,000/- by cheque, Brindavan Ghosh for ₹ 50,000/-, Sambhu Ghosh for ₹ 50,000/-, Ashwini Ghosh for ₹ 2,00,000/- and Sita Ghosh for ₹ 1,00,000/- and confirmed the said transactions by letter of confirmations. It is observed form the assessment order that the AO had not referred to any incriminating material found during the search based on which addition had been made. - Decided in favour of Assessee.
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2017 (2) TMI 798
TDS liability - failure to deposit TDS with Central Government - Held that:- The assessee entered into an agreement of leave and license with M/s. Om Sai Auto World which lies at page 15 to 21 of the paper book. According to the said agreement the assessee was entitled to recover an amount of ₹ 2,00,000/- per month. The assessee received an amount of ₹ 1,80,000/- per month in accordance with bank statement lies at page 25 which speaks that the licensee deducted the TDS but nothing came into the notice that the licensee deposited the same with the Central Government or not. But is not the liability of the appellant to pay the TDS when the TDS has already been deducted by the licensee. We are of the view that the finding of the CIT(A) is wrong against law and facts and is not liable to be sustainable in the eyes of law, therefore is hereby ordered to be set aside and the Assessing Officer is directed to delete the addition on account of TDS. However, recovery can be initiated against the person who deducted the TDS in accordance with law. Accordingly, all these issues decided in favour of the assessee against the revenue.
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2017 (2) TMI 797
TDS u/s 195 - Disallowance under section 40(a)(i) - ‘subscription fees’ paid to DTT Swiss Verein for non-deduction of tax at source - DTAA - Held that:- Prerequisite condition for going through the procedure of 195 is that, income should be first held to be chargeable to tax in India. The assessee, as noted above, has made out its case in a very elaborate manner as to why the payment made to DTT Switzerland is not liable for tax in India. However, both the authorities have not properly adjudicated these aspects. Therefore, in the interest of justice, we are of the opinion that this matter should go back to the file of the Assessing Officer who shall decide, firstly, whether the payment of subscription fee to DTT is liable to tax in India under the provisions of the Act or not; and secondly, he should also to examine whether it is in the nature of reimbursement of expenses. If it is found that the payment made to DTT Switzerland is in the nature of reimbursement of expenses, then assessee cannot be held to be liable for deducting TDS. With this direction, the matter is restored back to the file of the Assessing Officer and accordingly, ground No.1 is treated as party allowed for statistical purposes. disallowance of payment of ‘professional fees’ - non deduction of tds - Held that:- CIT (A) has reckoned the payment as “fees for technical services” without elaborating or elucidating the nature of payment. So far as the benefit under India-New Zealand DTAA, the payment of professional fee is not taxable under Article 14, which deals with “Independent personal services”. The language of Article 14 is similar to the language of India-Canada DTAA which has been reproduced hereinabove. Here also DTT New Zealand neither has any fixed base/ PE nor had any of its employees/professionals stayed in India for the period exceeding 183 days in any consecutive twelve months period. Accordingly, under the DTAA the “professional fee” paid to DTT is not taxable in India. However, Article 12(4) of India-New Zealand DTAA dealing with “fees for technical services” imbibes same definition as has been given under the Income Tax Act. Our finding given on the issue of FTS under Section 9 (1) (vii) will apply mutatis mutandis here also. Therefore, in view of our finding given therein, the said payment cannot be held to be taxable in India either under Section 9 (1) (vii) or under Section 9 (1) (i). Accordingly, disallowance made by the AO u/s 40(a) (i) is directed to be deleted. Interest u/s 244A - Held that:- As it has been pointed out by the learned Sr. Counsel that for one month i.e. September, 2003 the rate of interest was two third percent instead of half percent in terms of Rule 119A. The AO has not correctly worked out the interest in accordance the said Rule. Accordingly, the AO is directed to examine the working of the interest and rate of interest and grant correct interest in accordance with the Law. Disallowance of payment of professional fees made to DTT Australia - Held that:- T he payment of professional fee to DTT Australia is held not to be taxable u/s 9(1)(i) or 9(1)(vii) or in terms of Article 12(4) of DTAA, which has ‘make available clause’ and is similar to India Canada DTAA. Thus, the disallowance made by the AO and as confirmed by the CIT (A) is directed to be deleted. Disallowance of ‘Satyanarayan puja’ expenses - Held that:- Satyanarayan puja’ is done at the business premises for the larger interest of the professional and employees of the assessee firm. It was more in the nature of goodwill gesture and keeping good relationship and environment amongst the colleagues. If any expenditure which is incurred for the general benefit of the professionals and employees, the same cannot be held to be incurred for non-business purposes. Thus the puja expenses have been allowed for business purposes. - Decided in favour of assessee Disallowance of entertainment expenses - Held that:- We find that there is no reason to tinker with the disallowance upheld by the learned CIT (A), because the assessee could not furnish any details to controvert the finding. The disallowance as confirmed by the learned CIT (A) appears to be reasonable because personal nature expenditure cannot be ruled out in the entertainment expenses in absence of details. - Decided against assessee
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2017 (2) TMI 796
Addition u/s 69C - bogus purchases - Held that:- CIT(A) has considered the contention of the assessee that there was no material before the AO to doubt the genuineness of payments made by assessee through bank challan. The ld. CIT(A) has examined the entire transaction and observed that the onus to prove that transaction is genuine is on the tax payer/assessee when he is making the claim when the Department doubted the genuinity on the basis of enquiries conducted by Sales Tax Department. The ld. CIT (A) has observed that AO himself said that doubt is not the quantity of perse but the purchases were billed through bogus purchases. After examining the gross profit declared by the assessee, the ld. CIT(A) sustained the disallowance which was offered by assessee before the Settlement Commission and thus granted partial relief. We have seen that order of CIT(A) is reasoned one and does not require any further interference at our end. Hence, the appeal of the Revenue is dismissed.
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2017 (2) TMI 794
Capital gain - rights of the assessee as well as other legal heirs - assessmnet as legal heir - individual share in property - receipt of earnest money - Held that:- The assessee filed the original return in which she had shown the transaction of property under question but later on filed the revised return and try to apprise the Revenue Authorities that she is not a sole owner of the said property and having discussed the details of the legal heirs and other relevant information relating to her deceased husband, it was incumbent upon the Assessing Officer to bring on record all the legal heirs of to assess the impugned capital gain, rather than restricting it in the hands of Mrs. Manjeet Kaur. We have minutely gone through the documents as it reflects from the facts that the assessee have received the earnest money from the Punjab Co-operative House Building Society, Mohali, but there is no document which reflects that earnest money have been distributed among the legal heirs or not even otherwise this required to be invested that whether the assessee had shown herself as sole and exclusive owner of the properties under consideration and/or having any testamentary documents to claim exclusive ownership with rights to take care, deal and disposed off the property under question. We feel it appropriate that the ld. CIT would have taken into consideration of the actual amount received as an earnest money for taxation purposes. Finally as the instant case requires elaborate discussion with regard to the rights of the assessee as well as other legal heirs qua entitlement /rights/ obligation/liabilities of individual and as the order passed by the ld. CIT is erroneous to the extent that he has considered the complete amount including unpaid and unrealized also as notional capital gain, therefore, in our considered opinion, this is fit case to be remanded to the file of the ld. Assessing Officer for deciding afresh while considering the documents pertaining to the sale deed, agreement, society documents, relinquishment deeds etc. and other documents submitted by the other legal heir and/or claim of the Assessee as well the applicability of the same in the instant case and also while considering the Sec.159 and 168 of I.T. Act and Hindu Succession Act etc to which the Assessee and legal heirs are subjected. - Decided n favour of assessee for statistical purposes.
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2017 (2) TMI 793
Addition of ‘liquidated damages received’ - revenue or capital receipt - Held that:- In the present case,we find that the FAA has not discussed anything. He has just reproduced the order of the AO and added one line to the order stating that he is convinced with the arguments advanced by the AO. We are unable to understand rational behind such an order. A reasoned order is primary pre-condition of any order-especially of appellate authorities. An order without reasons is no order at all. Appellate authorities are required to meet the arguments advanced before them during the course of hearing. In the matter before us, the FAA has not uttered a single word as to why the arguments of the assessee were not to be considered or as to why the cases relied upon by her were not applicable to the facts of the case. We have, after considering the available material, reached to the conclusion that liquidated damage received by the assessee on account of failure of the purchaser of shares of GOL to purchase the same, that it is a capital receipt as the shares were not held by the assessee as stock in trade. Reversing the order of the FAA,we decide the effective ground of appeal in favour of the assessee.
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2017 (2) TMI 792
Disallowance of license fees claimed - Held that:- DR rightly contended that license fee was actually paid by the M/s. Digvijay Chemicals Ltd., however, the fact remains that the liability is/was supposed to be discharged by the assessee company according to MOU. Therefore, on the aforesaid analization, we do not find any hesitation to hold that said liability of 87,50,000/- was the liability of the appellant out of total amount of ₹ 1,27,50,000/- in proportionate from 1966 to 2006. Even otherwise, M/s. Digvijay Chemical Ltd. raised a debt note of ₹ 66,53,000/- and ₹ 20,97,000/-(total ₹ 87,50,000/-) towards renewal and license fee from 1966 to 31st March, 2006 deposited by them. But in fact, this was the liability of the assessee company as per said MOU dated 18.05.2006. Even otherwise the said expenses were accordingly recorded by the appellant in its books of accounts and claimed as deduction on accrual basis for debiting the profit and loss account in the year under consideration. Even otherwise, the liability for business expenditure is admissible in the year, it attends finality as enforceable and under the mercantile system of accounting. The liability is liable in the year of accrual, even it relates to an earlier year and said expenditure of ₹ 87.50 in respect of license fee was the business expenditure which had crystallized , accrued and paid during the financial year under consideration and incurred wholly and exclusively for the business of the assessee.- Decided against revenue
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2017 (2) TMI 791
Disallowance u/s.14A r.w.r 8D - Held that:- We find that the assessee had not claimed any exempt income in its return. However he made disallowance of ₹ 1.25 crores(Rs.1.19 crores interest expenditure + ₹ 6.89 lakhs administrative expenses) and same was upheld by the FAA. The pre-requisite to invoke the provisions of section 14A r.w.r.8D of the Rules is that the assessee should have claimed some expenditure against exempt income. In the case under consideration, no exempt income was shown by the assessee in its return, so, there was no justification for making disallowance of any kind. Disallowance being loss incurred due to revaluation of open forward exchange contract - Held that:- We find that in the case of M/s. D.Chetan & Co. [2016 (10) TMI 629 - BOMBAY HIGH COURT] held that Tribunal was justified in deleting the addition of 'Mark to Market' Loss made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss. - Decided in favour of assessee MAT computation on Disallowance u/s 14A - Held that:- As no addition should have been made u/s.14A for the year under consideration. Following the same, we hold that addition confirmed by the FAA for computing the book profit u/s.115JB has to be deleted. Consideration received on assignment of patent - applicability of provisions of section 55(2) - Held that:- The patent was for the purpose to have right to manufacture /produce/ process some article/thing. The patent was registered for commercial exploitation of the same in India as well as in the international market. It was transferred to the assignee for exploiting it commercially. Section 55(2)(a) talks of right to manufacture, produce or process any article or thing.Therefore, as per the amended provisions, the right to manufacture/ produce/ process would be taxable under the head capital gains and cost has to be taken at Rs. nil. In these circumstances, in our opinion the FAA has rightly invoked the provisions of Section 55 and taxed the disputed amount under the head capital gain. - Decided against the assessee. Sum received on sale of patent / know-how known as “Profofal” - capital receipt OR trading receipt - Held that:- After hearing the rival submissions, we are of the opinion that the FAA had rightly treated the disputed amount as capital receipt and had taxed it as capital gain u/s.55 (2) of the Act. The assessee was not in the business of purchase and sale of patents, so the sale proceed of the assignment agreement could not be treated a revenue receipt.
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2017 (2) TMI 790
Determination of the ‘year’ of taxability of the capital gains arising on sale of residential Flat - Held that:- For completion of sale in absolute terms, fulfilment of all the three conditions mentioned above are must, i.e. execution of registration of conveyance deed, handing over of possession and payment of full consideration. In the case before us, only first condition was completed and the remaining two conditions were still pending to be executed and were not completed in the impugned year. In addition to that, all the legal formalities for affecting the transfer of the property in the name of purchaser were also not complied with and the same were completed only after payment of maintenance charges by the assessee to the said society. The said Flat came into full and exclusive control of the new purchaser only after when the possession of the same was handed over to them by the assessee on 26-06-2011. Thus, the said Flat was available for enjoyment by the purchaser only after the said date. Thus, taking into account all the facts and circumstances of the case, the sale of the Flat cannot be said to be completed in the year before us. Therefore, the resultant gain arising on the sale of the Flat concluded in the subsequent year could not have been brought to tax in the impugned year. Further, in any case, the taxable amount of capital gain has already been offered to tax by the assessee in the assessment year 2012-13 and has been accepted as such by the Revenue as per the information provided to us. Under these circumstances, it would not be justified to adopt a hyper technical approach and tax the same in this year also which will lead to double taxation and avoidable hardship to the assessee. Therefore, keeping in view the peculiar facts and circumstances of this case and in the interest of justice and all fairness we direct the AO to delete the addition. - Decided in favour of assessee
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2017 (2) TMI 789
Validity of order u/s.201(1) - period of limitation for declaring Assessee in default - time limit for proceedings u/s 201(1) and (1A) - Held that:- After issuance of notice the order should probably passed within one year and the proceeding was held to be time barred. The facts is not in dispute wherein the notice has been issued on 24.09.2003 u/s.201(1)/ 201(1A) of the Act and thereafter the order was passed u/s.201(1)/ 201(1A) of the Act on 28.03.2011 after the expiry of more than seven years . In view of the said circumstances and in view of the above mentioned law, we are of the view that the CIT(A) has decided this issue wrongly and illegally which is not liable to be sustainable in the eyes of law. Since the order passed after the expiry of limitation period, therefore, the same is hereby ordered to be set aside and accordingly appeal of the assessee is hereby accepted. See Director of Income Tax (International Taxation) Versus M/s. Mahindra & Mahindra Limited [2014 (7) TMI 265 - BOMBAY HIGH COURT ]- Decided in favour of assessee
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2017 (2) TMI 788
Gain on office unit (flat) sold - LTCG v/s STCG - computation of Holding period - Held that:- Holding period should be computed from the date of issue of allotment letter. If we do so, the holding period becomes more than 36 months and consequently, the property sold by the assessee would be long term capital asset in the hands of the assessee and the gain on sale of the same would be taxable in the hands of the assessee as Long Term Capital Gain. - Decided in favour of assessee
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2017 (2) TMI 787
Treatment to investment in shares - trading activity and taxing as short term capital gain or business income - Held that:- In the preceding year also, we find, that the department has accepted the treatment of STCG on the investment division and profit from business in trading division and therefore the stand of the revenue is in variance to the principle of consistency in the in the pattern of assessment. Under these facts and circumstances,we are of the view that the finding of the lower authorities are not correct and cannot be sustained as the facts on records amply proved the fact of having earned short term capital gain out of investments held for a short period out of proceeds from the units of Birla Sun Life which were also held as investments. We are, therefore, inclined to set aside the orders of lower authorities and direct the AO to treat the income of ₹ 21,10,696/- as STCG and not as business income. - Decided in favour of assessee
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2017 (2) TMI 786
Income from transaction of purchase and sale of shares - STCG OR business income - Held that:- Transaction in the shares was treated by the Assessing Officer as income from Short Term Capital Gain in the earlier as well as in the subsequent years. No major change of any kind was brought into the notice by the revenue. The rule of consistency has properly been followed. In view of the said circumstances, we are of the view that the CIT(A) has passed the order judiciously and correctly treating the transaction of purchase and sale of shares as STCG instead of business income. - Decided against revenue.
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2017 (2) TMI 785
Disallowance of bad debts written off under the normal provisions of Income Tax Act - MAT applicability - Held that:- AO has disallowed the provisions for bad & doubtful debts while working out the book profit for the computation of Tax under the provisions of section 115JB of the Act. The ld. CIT(A) has confirmed the same in terms of clause (i) to explanation 1 of section 115 JB of the Act which was brought to tax by the Finance Act 2009. From the perusal of the records we find that the AO has never disallowed the provision for bad and doubtful debts under the normal provisions Act. As the disallowance of bad & doubtful debts is not arising from the order of AO and the same has not been dealt by the learned CIT(A) in his appellate order. Accordingly we hold the issue raised by the assessee as infructuous. Thus the ground raised by assessee is dismissed. Disallowance u/s 14A r.w.s Rule 8D(ii)&(iii) - Held that:- From the perusal of the records, admittedly, the investment was made by the assessee in the earlier years but the learned AR has not brought anything on record before us whether the investment in the earlier years was made out of the own funds of the assessee. In our considered view it is the duty of the assessee to justify on the basis of evidences that the investment was made out of own funds. - Matter refereed back for reconsideration. Whether the disallowance to be made u/s 14A r.w.s rule 8D shall also be added in the computation of book profit in terms of clause (f) of explanation 1 to section 115JB - Held that:- From the provision of section it is clear that the expenses incurred on the earning of exempted income are liable to be added in the working of the book profit. Therefore we hold that the expenses to be disallowed by the AO in terms of rule 8D(ii) and (iii) of Income Tax Rules 1962 would be added to the book profit as specified under section 115JB of the Act. As the issue of disallowance in terms of rule 8D(ii) and (iii) of Income Tax Rules 1962 has been restored to the AO for fresh adjudication, therefore we are inclined to restore this issue as well to the AO for fresh adjudication. Addition on account of excess book depreciation - Held that:- As from the perusal of assessment order we find that the AO has added the amount of the depreciation for ₹ 31,86,80,0254.00 for working out the profit as per the provisions of section 115 JB of the Act. The learned DR raised no objection if the matter is restored to the learned CIT(A) for fresh adjudication as per law & after verification of the depreciation amount. Addition on account of bad debt which were actually written off in the books of account while working out the book profit u/s. 115JB - Held that:- AR has not brought anything on record to demonstrate that the provisions for the bad and doubtful debts have actually been written off in the books of accounts and in the ledgers of respective parties. As per the provisions of section 115 JB of the Act the amount of book profit will not be increased by the amount of bad debts actually written off in the books of accounts. Accordingly we in the interest of justice & fair play we are inclined to restore this issue to the file of learned CIT(A) for fresh adjudication as per law Addition while computing the book profit u/s. 10(34) - Held that:- The assessee is entitled for the reduction of dividend income while computing the book profit in terms clause (ii) of explanation 1 to section 115JB of the Act if such amount is credited to the profit and loss account. Hence this ground of appeal of the assessee is allowed. Disallowance on account of Fringe Benefit Tax - Held that:- The assessee is entitled for the reduction of FBT while computing the book profit in terms of circular no. 8/2005 issued on 29/8/2005 if such a amount is debited to the profit and loss account. Hence this ground of appeal of the assessee is allowed.
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2017 (2) TMI 784
Revision u/s 263 - reference to the re-assessment order in respect of the issues raised on the premise that the alleged error were not subject matter of reassessment proceedings at all - wrongful set off of unabsorbed depreciation while computing the business income - eligibility of incremental subsidy for the determination of deduction u/s 10B - Held that:- We find that the set off was duly claimed in the original assessment order was admitted in full. Similar set off was granted in repetition while making the revised computation under section 147 of the Act. The reasons recorded also do not cast any aspersions on the correctness of the allowability of set off of unabsorbed depreciation claimed. There is no discussion on the point in the reassessment order either. Besides, as noted, the set off of unabsorbed depreciation has been duly accepted in the original proceedings. Thus, the set off of unabsorbed depreciation claimed rightly or wrongly was not subject matter of reassessment at all. Hence, it is manifest that cause of action under section 263 of the Act will arise, if any, with reference to original assessment proceedings only. The subsequent re-assessment proceedings will not obviate the bar of limitation prescribed under section 263(2) of the Act on an unconnected issue. Thus so far as alleged wrong set off of unabsorbed depreciation against the business income of the current year is concerned, the issue is clearly time barred due to lapse of statutory time limit with reference to the original assessment order Hence, we are of the firm of opinion that the jurisdiction of CIT to invoke the revisional power in respect of claim of set off is time barred and cannot be sustained.- Decided in favour of assessee Wrongly acceptance of eligibility of incremental subsidy for the determination of deduction under section 10B - Held that:- AO has denied the incremental subsidy under section 10B of the Act in the re-assessment proceedings which was reversed in section 154 of the Act. Both these orders have been subjected to revision under section 263 of the Act. When the issue of eligibility of incremental subsidy for the purpose of deduction under section 10B is seen in the light of the CBDT Circular No.39/2016, wherein it has been noted that subsidy is part and parcel of profit and gains of business for the purpose of deduction we find it difficult to hold that the AO committed “error” per se in accepting the stand of the assessee. In the absence of error, the CIT could not have proceeded under section 263 of the Act. Thus, the action of the CIT under section 263 is without authority of law in so far as the second issue is concerned. - Decided in favour of assessee
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2017 (2) TMI 783
Disallowance of certain professional fees - Held that:- It is an admitted position that the payee was non-professional entity to which the ‘success based’ fees has been paid. So far as the legality of the payment is concerned, a perusal of the case laws cited by the Ld. AR, give rise to conclusion that there was no illegality in such mode of payment to non-professional entities. The impugned payments were incurred by the assessee against services rendered and for the purposes of the assessee’s business and hence, allowable. The appeal of the assessee stands allowed.
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2017 (2) TMI 782
Denial of the assessee's liability to interest under Section 215 - Held that:- It is clear that an appeal would lie against the charging of interest under Section 215 of the Act only if the appellant assessee denies his liability to pay the advance tax at all or challenges the quantum of advance tax determined by the Assessing Officer. Therefore, an appeal simplicitor to reduce the interest or waive the interest without challenging the determination of the advance tax either in whole or in part, would not be maintainable. Therefore, if the amount of advance tax is not disputed, the respondent cannot challenge only the levy of interest. This understanding of our is fortified by the decisions of this Court in Gammon India Vs. CIT [1993 (2) TMI 89 - BOMBAY High Court] & Phaltan Sugar Vs. Commissioner of Income Tax [1993 (8) TMI 41 - BOMBAY High Court] wherein even the Advocates for the assessee conceded the position that no appeal would lie only against levy of interest under Section 215 of the Act. It is made clear that we have independently applied our mind to the decision of Central Provinces Manganese Ore Co. Ltd. (1986 (5) TMI 3 - SUPREME Court ) to reach to the conclusion that no appeal under Section 246(1) (c) of the Act would lie only against levy of interest. As we are conscious that the above two decisions of this Court proceeded on concession of the Counsel for the assessee therein. Thus, this question is to be answered in favour of the applicant assessee. Liable to pay any interest under Section 215 of the Act for non-payment of advance tax in December, 1975 - Held that:- Considering the submission of the applicant assessee that non-payment of advance tax was on account of circumstances beyond the control of the assessee and for a reasonable cause, would not warrant deletion of interest payable on account of short payment / non-payment of the advance tax while considering the Subsection (1) of Section 215 of the Act. The considerations may have been different if we were considering an application of waiver under Subsection (4) of Section 215 of the Act.In the above view the applicant assessee is liable to pay the interest under Section 215 of the Act as held by the Tribunal.- Decided against the applicant assessee.
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2017 (2) TMI 781
Denial of exemption under sections 11/12 - propagation of yoga - commercial activities by receiving certain contributions under the scheme for construction of cottages at Patanjali Yogpeeth–II known as “Vanprastha Ashram” - non-applicability of proviso to section 2(15) - allegation of anonymous donation - Alleged activities undertaken outside India - Absolute Denial of exemption - violation under section 13(1) - Held that:- The activities undertaken by the appellant, being in the nature of providing medical relief through Pranayam and Yoga and also to impart education in the field of yoga, would fall under the category of providing ‘medical relief’ and ‘imparting education’ as provided under section 2(15) of the Act, meaning thereby that the proviso to section 2(15) of the Act would not apply. “ The assessee has applied substantial amount in setting up of “Patanjali University”, a Deemed University set up under the University of Patanjali Act, inter-alia, for having courses in M.A. {Yoga Science}, M.Sc. (Yoga Science), B.A. (Yoga Science) Post Graduate Diploma in Panchkarma, Post Graduate Diploma in Yoga Science and Post Graduate Diploma in Yoga Health and Cultural Tourism. It has also been informed that the university has become operational on September, 2009. The finding of the authorities below that propagation of Yoga by the assessee does not qualify as medical relief or imparting of education is thus held as not justified. Vanprastha Ashram” at Patanjali Yogpeeth-II was proposed to be constructed by the assessee in furtherance of its charitable objectives of providing medical relief through Yoga and to impart Yoga training /education. It was submitted that assessee did not charge any fee / rent from the general public for uses of such cottages constructed under Vanprastha Ashram Scheme. The cottages are allotted to general public on the basis of availability i.e. on first come first served basis and no other conditions are stipulated for uses of such cottages. We also agree with the submission of the ld. AR that “business refers to real, substantial, organized course of activity for earning profits as “profit motive is essential requisite for conducting business. We have discussed the facts of the present case in the preceding paragraphs as well as the predominant objects of the assessee in detail supported with activities done by it from which no inference can be drawn that assessee is in trade, commerce and business. Allegations of violation of provisions of section 13 of the Act made by the authorities below are erroneous and legally unsustainable. The allegations are based on incorrect appreciation of the facts of the case and the position of law. On the basis of those unsustainable allegations the action of the Assessing Officer in assessing the income of the assessee treating it to be a non-charitable is not tenable in law. We find that the ld. CIT (Appeals) has also summarily concluded that the assessee has violated the provisions of section 13 of the Act without judiciously disposing off the specific objections raised by the assessee meeting out the various allegations leveled by the Assessing Officer in the assessment order. In view of these observations, we conclude that the allegations leveled by the authorities below are not tenable and hence their action of denial of exemption on the basis of violation of the provisions laid down under section 13 of the Act is held as not justified We concur with the contention of the ld. AR that in terms of section 2(24)(iia), voluntary donations received, inter alia, by a charitable trust/institution are by legal fiction treated as income and is thereafter, excluded from total income in accordance with the provisions of sections 11/12 of the Act. Such voluntary contributions are contributions other than for capital purposes i.e. contributions which do not form part of the corpus of the trust, whether or not such trust is eligible or not for exemption. We hold accordingly. In para No. 7.5(k) of the assessment order, the Assessing Officer has alleged that assessee had undertaken various activities outside India which was in violation of provisions of section 11(1)(c) of the Act. We, however, find that the Assessing Officer has not brought anything on record to substantiate the aforesaid allegation nor has he quantified the amount of expenditure incurred in relation to such activities undertaken outside India. Assessee had furnished affidavits of organisors of ad-hoc committees through whom the assessee had organized Yoga camps made available at page Nos. 503 to 569 of the paper book, but the Assessing Officer did not bother himself to verify the same even on test-check basis. In absence of such efforts by the Assessing Officer, we are of the view that the authorities below were not justified in making and sustaining the treatment of receipt of ₹ 13.68 crores as annonymous donation. Undisputedly, in almost all donations name and address of the donors have been maintained and thus bonafide of the assessee cannot be doubted where such detail has remained to be maintained in some cases. Such donations worth ₹ 1,07,73,438/- has also not been alleged to spent on other than the objects of the assessee trust. We, thus, while setting aside orders of the authorities below in this regard, direct the Assessing Officer to accept the claimed receipt as donation. We agree with the submission of the assessee that application of income in the form of acquisition of fixed assets and other capital expenditure incurred solely for the purpose of fulfillment of its charitable objectives during the year should be considered as application of income for charitable purposes. Besides, the explanation of the assessee to meet out the small irregularities shown in the books of account maintained by the assessee, which are based on special audit report, cannot be out-rightly ignored especially when it is not the case of the Revenue that the out-come of it was utilized somewhere else rather than on the objects of the assessee - Decided in favor of assessee
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2017 (2) TMI 780
Validity of reopening of assessment - assessee was making sales in India with the involvement of its Permanent Establishment (PE) in India and, accordingly, the profits attributable to such PE were chargeable to tax - whether No name of the assessee, business transactions and the relevant year appear in the reasons ? - Held that:- AO categorically recorded in para 7 of the reasons dated 26.3.2008 that such information was demanded, but, not given by the GE group, which demonstrated that there were other expats working/making sales of GE Overseas throughout the period 1.4.2000 onwards. The assessee raised objections to the reasons recorded by the AO vide its letter dated 7.10.2008, whose copy is available on pages 1-16 of the assessee’s fourth paper book. It is vivid that the assessee did not controvert this fact. The assessee has taken several legal objections against the initiation of reassessment, but did not deny correctness of factual assertions in this regard in the reasons. As noticed from the survey documents paper book, being, a letter from Price Waterhouse Coopers to some person of the GE group at AIFACS Building, 1, Rafi Marg, New Delhi intimating the approval by the RBI of change of nodal office of GEIOC from Mumbai to New Delhi vide its letter dated 8th March, 2000. It is this address which was subjected to survey proceedings in 2007. Page 311 of the survey documents paper book is a copy of the lease agreement for the official premises of the LO which shows that the lease agreement of AIFCAS premises was renewed from 1st December, 2003. The same page indicates that the earlier lease agreement dated 1st March, 1994 came to an end on 28th February, 2003. These two documents corroborate that the premises, subjected to survey proceedings on which business activities of GE overseas entities were found to be carried on, was at their disposal for all the years under consideration. These two documents coupled with the GE group supplying information about the sales made by the GE overseas entities from the year 2000 onwards tilt the balance in favour of the Department. Above discussion boils down that the seven expats worked in India for a period of 2-5 years covering some of the years and for the prior period covered in this batch of appeals, some other expats were working in India for the GE overseas entities in a similar manner. To sum up, we jettison the contention of the ld. AR that the reasons for reopening do not refer to the name of the assessee or its business activities for the year under consideration. Whether No assertion in reasons that any person in India entered into contract on behalf of assessee? - Held that:- We do not concur with the submissions put forth on behalf of the assessee in this regard. Some documents found during the course of survey zeroed in the possibility of the GE overseas entities conducting full-fledged business in India, which got fortified from post-survey enquiries divulging more specific information on the business of the assessee carried out from India. Para 4 of the reasons categorically notes that the survey and post-survey enquiries transpired that the GE Group was engaged in various sales activities in India for which seven business heads, viz., Dan Nalawade, Riccardo Procacci, Wllliam Blair, Ashfaq Nainar, Kenneth Peirson, Sameer Aggarwal and Prat. Kumar, mostly expats from GEII, were appointed to head Indian operations, with the support staff provided by GEIIPL and also third parties. Details of business and the sales made by such entities during the period 01.04.2000 to 31.03.2006 form part of the reasons by way of Annexure. It is ergo abundantly clear that the AO has clearly asserted in the reasons that GE India carried out full-fledged business activities and made sales in India for all the GE overseas entities. This contention fails. Whether no assertion in reasons that income escaped assessment because of failure of assessee to disclose fully and truly all material facts? - Held that:- It is apt to take note of the fact that the assessee had not filed return of income prior to the issue of notice u/s 148. Explanation 2(a) to section 147 provides that where no return of income has been furnished by the assessee although his total income during the previous year exceeded the maximum amount, which is not chargeable to income-tax, it shall be deemed to be a case where income chargeable to tax has escaped assessment. Business carried on by the GE overseas entities in India was never disclosed to the Department. Business connection of the assessee in India, as set up by the AO, has not been denied. In that view of the matter and the further fact that the sales were made by GE Overseas in India through GE India, there was income of the assessee chargeable to tax in India for which the return of income ought to have filed and the benefit of DTAA, if any, could have been claimed as was done pursuant to the notice u/s 148. The fact that the assessee had a PE in India and no return was filed prior to the issuance of notice u/s 148 also brings the case within the fold of Explanation 2(a) to section 147. In view of the foregoing discussion, we are fully satisfied that the AO was justified in initiating reassessment proceedings. TP Adjustment - Held that:- ALP of payment made by GEIOC to GEIIPL was determined only w.r.t. the apparent services elaborated in the Agreement which are more or less of liaison nature, not leading to the doing of some income generating activity. But in reality, the actual services rendered by GEIIPL to the GE overseas entities under the leadership of expatriates from GEII is alien to the Agreement. Such activities performed by GEIIPL beyond the scope of the Service agreement have led to the creation of the PE of the assessee in India. Such services have not been remunerated at all. Since the transfer pricing analysis did not reflect these functions performed by GEIIPL, there is a need to attribute profits to the PE for those functions/risks that have not been considered. Further, it came to light during the course of the survey and the postsurvey proceedings that the premises of the LO of GEIOC was being used as a fixed place PE by the GE overseas entities including the assessee, which fact was never disclosed to the Department. Our attention has not been drawn towards any payment having been made by the GE overseas entities to GEIOC on this account. As this international transaction was not reported at all, there was no question of any transfer pricing analysis of the same. These facts delineate that the instant cases fall under the exception to the rule laid down in Morgan Stanley (2007 (7) TMI 201 - SUPREME Court) as reiterated in LG Electronics (2014 (8) TMI 210 - ALLAHABAD HIGH COURT ). We, therefore, reject this contention raised by the ld. AR. Mandatory sanction required under section 151(2) not taken - Held that:- Addl. DIT should not hurriedly accord sanction in a mechanical way but properly examine the facts before giving approval. Criteria for examining validity of a sanction is the genuineness of reasons for re-assessment and application of mind by the authority before granting sanction u/s 151 of the Act. We are satisfied that in the given circumstances, the Addl.CIT committed no mistake in granting sanction u/s 151(2) of the Act. This ground, therefore, fails. Existence of PE - taxability of income of GE Overseas under the Act as well as the Double Taxation Avoidance Agreement - Held that:- All the three conditions for constituting a fixed place PE in terms of paras 1, 2 and 3 of the Article 5 are fully satisfied as AIFCAS building is a fixed place from which business of GE Overseas is partly carried on in India and the activities carried out from such fixed place are not of preparatory or auxiliary character. See Liaison Office vs. CIT (International Taxation) and Another [2011 (2) TMI 1233 - KARNATAKA HIGH COURT] wherein held that merely because the buyers place orders directly with the Head Office and make payment directly to the Head Office and it is the Head Office which directly sends goods to the buyers, would not be sufficient to hold that the work done by the liaison office is only liaison and it does not constitute a permanent establishment as defined in Article 5 of DTAA, liaison office is undertaking an activity of trading and therefore entering into business contracts, fixing price for sale of goods and merely because, the officials of the liaison office are not signing any written contract would not absolve them from liability, finding recorded by the tribunal is based on legal evidence and that the finding that the liaison office is a permanent establishment as defined under Article 5 of DTAA and therefore, the business profits earned in India through this liaison office is liable for tax is established , Agency PE - Held that:- The nature of activities done by GE India, which are of core nature and not merely preparatory or auxiliary, we hold that they clearly indicate its authority to conclude contracts on behalf of GE Overseas. It is, consequently, held that GE India constituted agency PE of all the GE Overseas entities in India. Attribution of income - chargeability of tax in India - Held that:- Considering the nature of activities performed by GE India in generating sales of GE Overseas in India, we have elaborately taken note of the lead role played by GE India and GE overseas playing only a supporting role. In such circumstances, we cannot approve attribution of whole of 35% of the profits relating to sales and marketing to the PE in India. Considering all the relevant facts and adopting a holistic approach, we hold that GE India conducted core activities and the extent of activities by GE Overseas in making sales in India is roughly one fourth of the total marketing effort. Ergo, we estimate 26% of total profit in India as attributable to the operations carried out by the PE in India. Therefore, as against the AO applying 3.5% to the amount of sales made by the assessee in India, we direct to apply 2.6% on the total sales for working out the profits attributable to the PE in India. Interest u/s 234B - Held that:- The Hon’ble Delhi High Court in assessee’s own group cases involving identical facts has approved the cancellation of the levy of interest u/s 234B for the assessment years 2001-02 to 2006-07. Facts relating to the A.Ys. 2007-08 and 2008-09 instantly before us, are, admittedly, similar to such facts considered and decided by the Hon’ble Delhi High Court. When there is a judgment of the Hon’ble jurisdictional High Court directly in assessee’s own case and the facts and circumstances for the later years are similar, there can be no question of applying the ratio decidendi of another judgment laying down a different proposition. It is more so, when the earlier judgment was also considered by the Hon’ble High Court in a later decision in assessee’s own case. In view of the foregoing discussion and respectfully following the precedent in assessee’s own case for the immediately preceding assessment years, we are satisfied that the interest u/s 234B has been wrongly charged for the A.Ys. 2007-8 and 2008-09. The same is hereby cancelled.
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2017 (2) TMI 779
Eligible for the benefits of India-UK DTAA - Held that:- There is no dispute on facts that ultimately tax has been paid either by the said firm or by its partners in UK. No distinction has been pointed out by the Ld. CIT-DR on facts or law. Under these circumstances, respectfully following the orders of the Tribunal in Linklaters’s case for earlier years, we hold that the assessee is entitled to claim benefits of India UK- DTAA. Taxability of income (fee) received by the assessee in terms of Articles of DTAA - income of the assessee is in the nature of ‘Fee for Technical Services’ - Held that:- None of the transactions, the Ld. CIT-DR was able to point out as to how there was transfer of technical knowledge, skill, experience or know-how, etc. in such a manner that these recipients were able to utilise and perform these tasks again on their own without falling back upon the assessee for its assistance. If any of these recipients would come up with a new project next time in future, whether identical to the previous projects or not, it would again need the services of assessee or any other legal advisor for availing advisory on new issues. The Revenue has taken help of few judgments which are not applicable on the facts of the case before us. We are not in a position to agree with the view taken by the Revenue and thus hold that the income of the assessee would not fall in the category of “Fee for Technical Services” as envisaged in Article 13 of India-UK DTAA. Further, since this amount is not taxable under DTAA as FTS, it cannot be brought to tax as FTS as per provisions of section 9 of the Income Tax Act, 1961, in view of section 90(2) of the Act. Liability to tax in India under Article 15 of India-UK DTAA - Held that:- Article 15 of DTAA deals with taxability of independent personal services. This Article starts with the words “Income derived by an individual..in respect of professional services or other independent activities of similar character.”It is noted by us that Article 15 shall be applicable for determining taxable income in the hands of individual and not other persons. The assessee is certainly not an Individual. Thus this Article cannot be made applicable on the assessee being not an individual. Similar issue had come up before the Tribunal in the aforesaid case of M/s Linklaters (for AY 1995-96) wherein the Tribunal held that Article 15 shall be applicable only when services are rendered by an individual. Thus, respectfully following the order of the Tribunal it is held that impugned amount of fee received by the assessee would not be liable to be taxed under Article 15 of India-UK DTAA Reimbursement of expenditure - AO treated the same as part of gross receipts and therefore, included the same as part of taxable income - Held that:- The perusal of chart containing details of the expenses clearly shows that all these items are in the nature of expenses. These are apparently not items of revenue. These are mostly expenses of routine nature incurred by the assessee in the normal course of business. It is noted from the perusal of orders passed by the lower authorities that AO did not bring anything on record to show that whether any element of mark-up was involved in the expenses, which have been reimbursed to the assessee. However, that is even not the case of the Revenue. Under these circumstances, it cannot just be presumed that income element was involved in the reimbursement of expenses. Therefore, respectfully following the orders of the Tribunal of earlier years, these grounds are allowed and decided in favour of the assessee. Change of assessee’s status to “Limited Liability Partnership” by AO as against the status of “Company” as was stated by the AO in the draft assessment order and was not disputed by the DRP - Held that:- Nothing is coming out as to how contradictions emerged in the orders passed by lower authorities. No reasoning has been given by the AO. Thus, this issue is remitted back to the file of AO to decide this issue after providing adequate opportunity of hearing to the assessee to file requisite details and documentary evidences and to raise any legal or factual issue in this regard. Non granting 5% deduction of expenses u/s 44C - It is noted that the AO has denied the benefit of deduction in the final assessment order without giving any reason. It is also noted that in the draft order such deduction was allowed, but in the final order, the same was not granted without giving any reasoning whatsoever. Therefore, we send this issue back to the file of the AO, who shall, after verifying the facts grant the deduction u/s 44C as per law. Levy of interest u/s 234B - Held that:- It is noted that this issue has already been decided by the Hon'ble Bombay High Court in the case of NGC Network (2009 (1) TMI 174 - BOMBAY HIGH COURT ). The Tribunal has consistently followed the said judgment and held that interest u/s 234B is not leviable in the case of Linklaters, on the facts and circumstances of the case.
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Customs
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2017 (2) TMI 756
Valuation - related party transaction - rejection of transaction value - Held that: - the import price of 60 litres of lubricating oil as purchased from M/s. Kluber Lubrication India Pvt. Ltd. was sent to India at the same price at which the said products are sold in the market by Kluber Lubrication India Pvt. Ltd. - when the said import documents reveal that the goods have been procured from third party and the value declared is the value of the third party supplying the goods to Italian sister concern of the appellant, no question of rejection of transaction value arises - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 755
Confiscation of imported cars - redemption fine - penalty - the appellant is not the importer. In the SCN, the duty has not been demanded from the appellant. He was directed only to show cause as to why the impugned care should not be confiscated u/s 111(d) and 111(m) of the CA, 1962 - Held that: - the said cars are imported by mis-declaring the year of make and manipulating the sales record. If the cars are liable for confiscation and held as confiscated under Section 111 of the Customs Act, 1962, then the adjudicating authority was correct in extending the opportunity of redeeming the same on payment of redemption fine. Since the cars were provisionally released to appellant herein, he is liable to pay the redemption fine. In the facts and circumstance of these cases, we find that redemption fine imposed is not excessive - appeal rejected - decided against appellant.
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2017 (2) TMI 754
Refund claim - the machinery imported was covered under EPCG licence and the EPCG licence is now discharged - Held that: - Revenue's appeal is devoid of merits as the first appellate authority has merely stated the fact of the case in the impugned order. We find nothing improper in the said recording of the fact. The cross-objection of respondent-assessee is also of devoid of merits, as any refund application of duty paid needs to be processed under the provisions of Section 27 of the Customs Act, 1962. Appeal rejected - decided against appellant.
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2017 (2) TMI 753
Seizure of the deposits and balance thereof in the subject property - natural justice - the appellant has failed to discharge the burden of proof as required u/s 8 of the SAFEM (FOP) Act, 1976 despite being provided sufficient opportunities for the same. Hence, the deposits and balance thereof in the subject property were forfeited to the Central Government, free from all encumbrances, in terms of the provisions of Section 7(1) and (3) of SAFEM (FOP) Act, 1976 - Held that: - the notice was not served upon the applicant which was mandated u/s 6(2) of SAFEM (FOP) Act, 1976 - It is well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner - the impugned order dated 17th March, 2016 is not sustainable as far as the said property of the applicant is concerned, as the same is passed contrary to the provisions of Section 6(2) of the SAFEM (FOP) Act, 1976 and the same is accordingly set aside - property to be released - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 752
Valuation - technical know-how fees - royalty - whether the assessment of Perfume and Deodorants imported by the appellant is to be loaded by 20% of the value as technical know-how fees paid and 1% of the value to be loaded on the royalty paid by the appellant to their parent company Unilever PLC or otherwise? - Held that: - the amount paid for technical know-how fee and the royalty charges are not to be included in the assessable value of the imported goods, if such payment is for the goods to be manufactured out of the technical know-how, which is transferred by an agreement - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 751
Implementation of this Tribunal’s Order dated 6-8-2015 as held in the case of Ratnadip Shipping Pvt. Ltd. Versus Commr. of Customs (General), Mumbai [2016 (3) TMI 217 - CESTAT MUMBAI] - against the Tribunal’s order, the appeal filed by the Revenue has been dismissed by the Hon’ble Mumbai High Court by upholding the Tribunal’s order - After Hon’ble High Court’s order, this Tribunal cannot pass any order for implementation as the Hon’ble High Court’s order is in force and this Tribunal has no jurisdiction to pass any order after the Hon’ble High Court’s order - application dismissed.
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2017 (2) TMI 750
Imposition of penalty u/s 112 of the CA, 1962 - Betel nuts - the appellant is the owner of the vehicle which was used for carrying betel nuts by the driver without the knowledge of the appellant - Held that: - when even driver did not had the knowledge of foreign origin of betel nuts it cannot be construed by any stretch of imagination that the appellant had the knowledge of foreign origin of betel nuts, leave aside their smuggled nature. There is no evidence on record that betel nuts seized by the department have come from Nepal - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 749
Benefit of concessional rate of CVD @ 2% under N/N. 1/2011 as amended by N/N. 8/2014-C.E - import of polyester staple fibre made from 100% recycled PET bottles - denial on the ground that the importer has not satisfied the condition of not availing credit - Held that: - reliance placed in the case of SRF Limited v. CC, Chennai [2015 (4) TMI 561 - SUPREME COURT], where it stands held by the Hon’ble Supreme Court that CESTAT denied the exemption from CVD only on the ground that condition of non-availment of Cenvat credit was not fulfilled inasmuch as Cenvat credit was not admissible to the importer and the question of fulfilling of the said condition does not arise - exemption available - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (2) TMI 746
Appointments, probation and termination of service - appointment by deputation - Writ Petition seeking direction not to fill up 50% of the posts of Executive Director, henceforth by direct recruitment or deputation and/or on contract basis unless there is no eligible and suitable officer available internally in SEBI Held that:- Executive Director can be a promotee. He can also be a deputationist. He can also come by direct recruitment and that direct recruitment is distinct from another mode of recruitment and that is on contract basis. However, 50% of the total posts are to be filled from internal candidates and the remaining 50% to be filled-in by deputation / contract and/or direct recruitment. In case of non-availability in any category, namely, internal and deputation / open market the post may be filled in from other categories. Thus, a person who has experience and special knowledge of law, investigation, finance, economics, accountancy, administration etc and found to be useful to the Board, can be recruited. The Petitioners have projected that though there are eligible departmental candidates available working in Grade-F posts having completed three years or more service in the said grades, they have not been considered for being appointed to the post of Executive Director by way of promotion and instead a practice has been followed to invariably bring persons for appointment by other methods, namely, deputation / contract basis. The appointment to the post of Executive Director by way of deputation is permissible only in terms of Regulation 7(3). The Petitioners have not projected the specific grievance of employees who have been over-looked and in preference to the deputationist. If the Petitioners are praying for safeguarding and protecting the just, legitimate right and interest of internal SEBI employees working in Grade-F and below in matters of promotion to the post of Executive Director, then, they ought to have indicated with clear example of individuals who have been adversely and prejudicially affected. The promotional avenues of the SEBI employees to the extent indicated in the Regulations are untouched and undisturbed. The general grievances as projected in the Writ Petition and in the representations / legal notice have been rightly answered by relying on the provisions of the Act and the Regulations. Notwithstanding anything in the employees Regulations the Board’s right to appoint the officers of its choice has not been affected. The internal candidates and their interests are not sacrificed or surrendered much less defeated or frustrated. Once the recruitment even from open market enables Petitioner No.1 and its members to apply and they can be considered, then, all the more we do not see any substance in the Petitioners' grievance. Further, paragraph 5 of the affidavit highlights as to how the eight positions have been filled in and/or are being filled in. The four positions of the Executive Directors have been filled in by promoting the officers from highest grade i.e. Grade-F. For the remaining four posts, two are filled in by the Executive Directors who have been appointed on contractual basis for three years, one by deputation and remaining two are vacant. They are to be filled in by the process of advertisement. In that process as well, the Petitioners have participated. If their understanding was as projected in the Writ Petition or their representations, possibly they would not have been able to apply at all. As a result of the above discussion, we do not find that the Petitioners have any pre-existing legally enforceable right to claim a writ of mandamus and direction in terms of prayer clauses (a) and (b). The Writ Petition is devoid of merits and it is dismissed. Rule is discharged. In the circumstances, there shall be no order as to costs.
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Service Tax
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2017 (2) TMI 778
CENVAT credit - duty paying document - endorsed bill of entry - import of goods by the customers for use in rendering of ‘technical testing and analysis service' - Held that: - Taxability under the charging section was predicated upon three essential factors: an activity, a provider and a recipient - without all three ingredients, the intangible service is not amenable to isolation as taxable and, unless taxable, provider of a service could not claim coverage under CENVAT Credit Rules, 2004. The situation has not altered in the ‘negative list’ regime either. The proposition is, indeed, dangerous; an importer may use or keep imported goods and, not having taken credit, may endorse the bill of entry to another person for availment of credit. We would thereby be legalising trafficking in CENVAT credit if the contention of appellant is accepted because of the accounting perfection that it portrays. That there is no loss to public exchequer as credit is an entitlement. Credit is an entitlement only to the extent the output is transacted in a normal commercial engagement. The specific reference to lease, hire-purchase or loan of capital goods appear to be intended to delink the goods from ownership without detracting from the documentary pre-requisites. That, in view of the primary condition of eligibility for CENVAT credit, is the scope of the reference to such acquisition. It was only in December 2013 by notification no. 18/2013-CE (NT) that rule 2 (ij) incorporated importer issuing an invoice among the first stage dealer with appropriate safeguards. Till such amendment, CENVAT Credit Rules, 2004 did not facilitate the transfer of credit concomitant with transfer of imported goods. Credit denied - appeal dismissed - decided against appellant.
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2017 (2) TMI 777
CENVAT credit - input service distributor (ISD) - denial on account of nexus between three units - Held that: - all the three units had a common management and no contrary material was placed on record by the Commissioner while holding that there was no nexus in between the three units - reliance was paced in the case of COMMISSIONER OF CENTRAL EXCISE Versus DASHION LTD [2016 (2) TMI 183 - GUJARAT HIGH COURT]. It was only later on that additional condition by way of Clause-(d) of Rule 7 was added - The objection of the department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004. The respondent has been able to prove that all the three units are one and the same, have common management and the Revenue has not been able to disprove this fact. Appeal dismissed - decided against Revenue.
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2017 (2) TMI 776
Refund claim - export of services - credit relates to export made prior to 14/03/2006 - denial on the ground that provisions of Rule 5 of CCR, 2004 as amended by N/N. 04/2006 dated 14/03/2006 will not apply to the credit earned prior to the said date - Held that: - the ground on which the Commissioner (Appeals) has rejected the refund claim has been discarded by the original adjudication authority itself. In these circumstances, it is not open to the Commissioner (Appeals) to reject the claim on the said ground, which has been discarded in order-in-original - appeal disposed off.
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2017 (2) TMI 775
Levy of tax - classification of services - Operations, Management and Development Agreement (OMDA) with the AAI - in the nature of franchise services or not - annual fees - upfront fees - renting of immovable property or franchise services - Held that: - The Petitioners, under the OMDA, had to develop, operate and manage the Airports. AAI handed over the demised premises (under the lease deeds) at the Airports to the Petitioners. The Petitioners have spent their own money for designing, developing, constructing, upgrading, modernizing, financing etc., of the airports - the Petitioners do not undertake any process identified with AAI. The Petitioners run their own operations using their own processes, policies, methods, design, techniques etc. The sole responsibility and liability for performances of the services is that of the petitioners. AAI has completely divested its rights (other than reserved activities) to build operate and maintain the airport. Once the functions of AAI have been completely divested by it and assigned to the Petitioners, there is no question of the petitioners representing AAI in performance of those functions. There is no representation right that has been assigned to the petitioners by AAI. The taxable service is not mere granting of a franchise but is where the franchisor provides service to a franchisee. For the transaction to be taxable, it is necessary that the service should be provided by the AAI to the Petitioners. It is not pointed out by the Revenue as to how and in what form service is being provided by AAI to the Petitioners. The Annual Fees paid is not because of any service rendered by AAI to the Petitioner. AAI has entrusted the petitioners with some of its functions under Section 12 of the Airports Authority of India Act and no service is being rendered by the AAI to the petitioners in performance of those functions. Perusal of clauses of OMDA clearly shows that AAI does not render any service to the petitioners. The blocking of Escrow account cannot be sustained as the transaction is not exigible under the taxing entry “Renting of Immovable Property Services” and further the transaction does not fall within the taxing entry “Franchise Service”. The OMDA does not constitute a “Franchise” in terms of Section 65(47) of the Finance Act and the transaction between the Petitioners and AAI does not constitute a taxable service in terms of section 65(105) (zze) of the Finance Act - petition allowed - decided in favor of petitioner.
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2017 (2) TMI 774
Refund claim - input services (GTA) received were exempted retrospectively - denial on the ground that invoice issued by the service provider does not contain the name and date of the consignment note - Held that: - the appellant in lieu of the said compliance provided the records of supply of drivers by the man power recruitment agency and the said records shows that the service of manpower recruitment agency has been used for providing GTA service - The objective of condition of the notification regarding mention of details of consignment note in the invoice of service provider is to establish correlation between services provided and used in GTA service - As per the details of supply of the drivers by manpower supply agency, it is established that drivers were used for transportation of vehicle by which GTA service is provided. Therefore the object of the said condition stood made with the such records of supply of drivers and payment of service charges there against - impugned order denying refund only on the non compliance of procedural condition cannot be sustained - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 773
Autonomous body incorporated by the statutory provision and functioning within the State of Madhya Pradesh - recovery of 10% service tax for the service rendered - whether the extraordinary jurisdiction under Article 226 and 227 of the Constitution should be invoked or the petitioner should be relegated to take recourse to the remedy of appeal before the Tribunal? - Held that: - the Board was notified by issuance of notification under Section 3(1) of the Adhiniyam, 2007 only on 14.03.2016 and, therefore, prior to that date the Board continue to be a Department of the State Government, this aspect of the matter required consideration by the enquiry officer - in treating the petitioner organization to be an autonomous corporation created under the Adhiniyam, 2007 and rejecting the objection that it is not a department of the State, the respondent No.2 has committed an error and this has been done without taking note of the legal aspect of the matter. Matter remanded for re-consideration.
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Central Excise
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2017 (2) TMI 772
Validity of impugned order passed by adjudicating Commissioner - The appeal contends that the adjudicating Commissioner had erroneously applied the finding in the finalisation of provisional assessment to the valuation of goods in the impugned order and that, instead of sample, all the invoices should have been verified. Held that: - Once the foundation of the proposed enhancement in value loses validity, a fresh value using another method that was not proposed in the notice can be adopted only at peril to the correctness of the proceedings. It is well settled that adjudication orders cannot travel beyond the notice - Revenue has not adduced any evidence to support the contention that scrutiny of all invoices would have unearthed evasion of duty. That is a mere presumption and, hence, not tenable - appeal dismissed.
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2017 (2) TMI 771
Condonation of delay - Held that: - no justification has been offered for the lapse of time in filing this appeal. The only ground appear to be withdrawal from the jurisdiction of the Tribunal to make itself subject to the jurisdiction of the Settlement Commission and the failure to secure relief - Non-compliance of the directions of the Settlement Commission by the officer to whom directions of the Commission was directed appears to have dictated this appeal before us. Such switching of jurisdictions is not in conformity with judicial propriety - application for COD dismissed.
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2017 (2) TMI 770
Exemption under N/N. 167/71-CE dated 11-9-1971 - High Energy Storage Primary Batteries - Held that: - reliance placed in the case of HIGH ENERGY BATTERIES (I) LTD. Versus COLLECTOR OF CENTRAL EXCISE, TRICHY [1997 (5) TMI 151 - CEGAT, NEW DELHI], where similar issue was decided and it was held that the laboratory of the appellants’ factory, who are engaged in commercial production, of high energy storage batteries and sale thereof, cannot be held to be an institute which is of a technical educational or research type - exemption rightly denied - appeal dismissed - decided against appellant.
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2017 (2) TMI 769
Reversal of CENVAT credit - Rule 6(3)(b) of the CCR, 2002 - appellants maintained separate accounts in regard to common inputs used for manufacture of exempted and dutiable products, no such separate accounts was maintained in respect of input services - Held that: - the period involved is prior to 01/04/2008 wherein the amendment was brought forth by Finance Act, 2010 by giving an option to the assessee to reverse the credit attributable to the inputs/input services used in the manufacture of exempted goods within a period of 6 months from the date of which the said Finance Bill receives the assent of the President. The appellant has not filed an application for opting to reverse the credit. However, even prior to this amendment, the appellant has reversed the credit - the Department has force upon the assessee to pay 10% of the value of clearances even though the assessee has reversed the credit attributable to the input services used for manufacture of exempted goods. Demand unsustainable - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 768
SSI exemption - use of brand name of others - Evasion of duty - Valuation - Short payment of duty - Penalty - Time limitation - Held that: - be due to ignorance on the part of the appellant firm, as disinfectant was an item notified under Section 4A during 2006-2007 also and during that period also, the appellant firm paid duty on transaction value under Section 4 while during that period, and as is clear from Annexure D-1 to show cause notice, duty payable on transaction value under Section 4 was more than the duty payable on assessable value determined under Section 4A and as such the appellant had paid excess duty to the tune of ₹ 2,19,478/- - the demand for recovery of this duty raised vide show cause notice dated 10/7/09 is time barred. The denial of SSI exemption under Notification No. 8/03-CE in respect of goods affixed with brand name is linked with the brand name being owned by some other person and, thus, for this purpose what is relevant is the ownership of the brand name - Since, the appellant did not disclose the relevant facts in respect of the clearances of goods affixed with brand name "5 CEES" and "KILLER" without payment of duty, extended period under proviso to Section 11A (1) has been correctly invoked for recovery of the duty short paid on this count. Penalty on Shri Vishal Makhija under Rule 26 of the Central Excise Rules, 2002 has been correctly imposed as admittedly he received non-duty paid goods cleared by the appellant firm - Appeal disposed of.
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2017 (2) TMI 767
Cenvat credit - Capital goods - Interest - Penalty - Held that: - As shown in the table above, the entire credit availed except to the tune of ₹ 1,67,162/- falls within the period prior to 07.07.2009 on which date the definition of inputs was amended so as to exclude the cement from inputs - In view thereof, following the decision passed in the above stated Final Order in the appellants own case, I hold that the appellants are eligible for credit for the period prior to 07.07.2009. It is stated specifically that the appellants are not eligible for credit post 07.07.2009 to the tune of ₹ 1,61,762/-. I am of opinion that since the appellant has continued to avail in eligible credit post 07.07.2009, when they have a decision disallowing the credit under the category of capital goods they ought not to have availed the credit. In view thereof, I sustain the penalty imposed for the period after 07.07.2009 - Appeal partly allowed.
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2017 (2) TMI 766
SSI exemption - captively consumed castings - exemption under N/N. 1/93-CE - Held that: - irrespective of the value of such captive clearance the said clearances remain duty free if they are consumed captively - M/s. WPPL has clearly shown that they have been claiming the said SSI exemption during that period and no challenge to that was made - M/s. WPPL was entitled to claim SSI benefits and the goods captively become exempt by virtue of the said exemption. Classification - gun metal castings - classifiable under chapter 74 or under chapter 84? - Held that: - the cast iron and goods remain classified under chapter 74 unless certain machining is done however as the goods emerged from the castings process they remain under chapter 74 - In view of exemption to the goods for the entire period under various notifications, the classification of the goods becomes irrelevant. Appeal disposed off - decided partly in favor of appellant - matter regarding refund is remanded to the original adjudicating authority.
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2017 (2) TMI 765
Price variation clause - self adjustment - the appellant adjusted the excess paid differential duty with the short paid duty - whether such adjustments were proper? - Held that: - The central Excise law provides for claiming refund of excise duty paid in excess, subject to various conditions prescribed in Section 11 B. Once duty has been paid in excess, the assessee is required to file refund claim and satisfy all the conditions prescribed, to get back the excess paid duty - In the present case, the appellant has gone ahead and adjusted the excess duty paid with the short paid duty which is not permissible in law - appeal dismissed - decided against appellant.
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2017 (2) TMI 764
Classification of manufactured item - Katha - classified as Indian Katha under Tariff item No. 14049050 or as Katha substitute under Tariff item No. 32019090 - common parlance test - Held that: - Original Authority has decided classification of the goods under question on the basis of composition and on the basis of Standard of quality in Rule 5 of Prevention of Food Adulteration, 1955 - the Hon'ble Supreme Court has laid down the principle that the manner in which the trade concerned with the goods understands the goods should be taken into consideration while deciding the classification and not the provisions of other statue - The Original Authority has nowhere establish that the goods under question are understood in the trade as tanning extracts whereas the learned consultant for the appellant has brought to our notice the invoices issued by the appellant, describing the goods as ‘Indian Katha'. The goods manufactured by the appellant during the relevant period are classified under 14049050 as ‘Indian Katha' - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 763
Cenvat credit - Business Auxiliary Services - Held that: - I find that the sole question required to be decided in the present appeal is as to whether goods claimed as capital goods are covered by the definition given in Rule 2(a) of Cenvat Credit Rules or as to whether the goods claimed as inputs stands actually used in the process of crushing of iron ore or so as to earn the Cenvat credit of duty paid on the same - Neither of the authorities below have examined the said issue vis-ŕ-vis the definition of capital goods or the use of the inputs. Rejection of the Chartered Engineer certificate on the simplicitor ground that the same relates to the purchase of the goods prior to the date of certificate cannot be appreciated, inasmuch as the certificate reflects upon the use of the goods and is not relatable to the date of purchase of the good - Appeal allowed by way of remand.
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2017 (2) TMI 762
MODVAT credit - recovery along with interest - the appellant opted to avail the benefit of N/N. 16/97, dated 1-4-1997. Subsequently, the appellant informed the department that it did not want to avail the benefit contained in the said Notification - whether, once the entire duty of ₹ 2,21,712/- paid by the appellant can be appropriated partially and demand be confirmed for the balance amount of ₹ 1,00,000/- and interest can be demanded? - Section 11AA ibid - Held that: - since the Central Excise duty liability was paid by the appellant prior to passing of the said adjudication order, the provisions of Section 11AA would not be applicable for confirmation of the interest liability - Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 761
Benefit of N/N. 275/88-C.E., dated 4-11-1988 - SG Iron castings - Spacer rings - no proof-machining is carried out on these two items - Held that: - the said products are not proof-machining and therefore entitled to benefit of N/N. 275/88-C.E - it was not open to the Dy. Commissioner to rely on the record of personal hearing held on 18-3-1994 as the same has been challenged before higher authorities in the earlier round of litigation - benefit allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 760
Maintainability of appeal - condonation of delay - Held that: - issue is related to only two parties i.e. M/s. Metro Shoes Ltd. and M/s. Metro Shoes, therefore, appeals lie only against these two parties - Revenue has no authority to file any appeal against the persons other than M/s. Metro Shoes Ltd. and M/s. Metro Shoes, therefore appeals filed in respect of above eight persons are not maintainable. As regard the COD Applications of M/s. Metro Shoes, since main appeal of M/s. Metro Shoes Ltd. was filed in time, this appeal of M/s. Metro Shoes being supplementary appeal, COD application can be allowed. Other appeals dismissed being not maintainable.
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2017 (2) TMI 759
Benefit of N/N. 30/2004-C.E., dated 9-7-2004 - denial on the ground that the appellant has taken the credit on the inputs - Held that: - before clearance of the said goods, the appellant has reversed the credit attributable to the inputs used in the manufacture of said goods - the reversal of credit is equivalent to not taken the credit on inputs used, in the manufacture of said goods - the appellant is entitled to avail the benefit of N/N. 30/2004-C.E - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 758
100% EOU - production of proper rewarehousing certificate - evidence of goods reaching consignee's end - CT3 certificate - Held that: - The learned Commissioner (Appeals) has not examined all these evidences before coming to any conclusion that mere countersignature in the AR3 by the range superintendent is sufficient evidence of receipt of goods at the consignee’s end - Therefore, we are not satisfied with the evidences placed before the learned Commissioner (Appeals) by the respondent about delivery/receipt of the impugned goods at the consignee’s factory - duty is recoverable from the respondent - appeal allowed - decided in favor of Appellant-Revenue.
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2017 (2) TMI 757
Valuation - transportation expenses - whether the amount recovered from the buyer towards the cost of return fare of the empty vehicle from the place of delivery will not be available for deduction for the purpose of determination of the duty liability? - Held that: - the C.B.E. & C. has issued the Circular No. 923/13/2010-CX., dated 19-5-2010 in amending its earlier Circular dated 1st July, 2002, where, it has been clarified that cost of return fare of vehicle is not required to be added for determining the assessable value - demand not justified - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (2) TMI 748
Alternative remedy of appeal - writ jurisdiction - Levy of entry tax - purchase of bitumen - Held that: - since the petitioner was advised not to pursue the alternative remedy, therefore it failed to pursue the alternative remedy is clearly untenable and unacceptable - For, ignorance of law is not a valid defence. The petitioner would be well aware of the facts that assessment orders needs to be challenged by filing an appeal under the KTEG Act. In case the petitioner has chosen to not avail the alternative remedy, the choice has been made at its own peril. But, the petitioner cannot be permitted to ignore, and circumvent the alternative remedy provided by law. It cannot be allowed to rush to this Court after the limitation period is over, and to plead that the writ jurisdiction should be invoked by this Court. Court is not inclined to invoke its writ jurisdiction - petition dismissed.
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2017 (2) TMI 747
Detention of goods - non-production of E-transit pass - Form LL, in which, the application for issuance of transit pass is made, was downloaded from the website, though after the goods had been detained, and was, accordingly, furnished to the respondents - Held that: - the subject goods can be released to the petitioner, on payment of one time tax equivalent to ₹ 19,800/- - petition allowed - decided partly in favor of petitioner.
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Indian Laws
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2017 (2) TMI 745
Misconduct of Chartered Accountant - director of a company without the permission of the Council - Held that:- In the instant case the admitted position is that the respondent is registered with the Council to practice as a Chartered Accountant. He cannot be a director of a company without the permission of the Council. The appellant is the promoter of various companies of which he is a director as per the evidence on record. Being a Chartered Accountant the respondent cannot actively carry on business through companies, trusts and firms. There is evidence that the respondent is doing so. Affirming the verdict of guilt and keeping in view the gravity of the misconduct we answer the reference by imposing the penalty of removal of respondent’s name from the Register of Members of the Institute of Chartered Accountants for a period of two years.
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