TMI Tax Updates - e-Newsletter
February 25, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. GLANCE AT BURNIG LEGAL ISSUES TO SET OFF IN THIS BUDGET!

   By: Pradeep Jain

News

1. Railways on the track of paper economy

2. As against share of 6.16% of total tax devolution during 13th Finance Commission award, North Eastern States now get 7.94% of total tax devolution under 14th Finance Commission (FFC) award

3. RBI Reference Rate for US $

4. NOTICE INVITING COMMENTS ON THE DRAFT COMPANIES (COST RECORDS AND AUDIT) AMENDMENT RULES, 2016

5. IFCI Ltd. Pays 10% Interim Dividend to the Government; CEO & MD,IFCI Presents a Dividend Cheque of ₹ 92.30 Crore to Shri Arun Jaitley, Finance Minister

6. NTPC OFS Oversubscribed 1.8 Times by the Investors of Different Categories

Circulars / Instructions / Orders

SEZ

1. P.6/3/2006-SEZ (VOL.III) - dated 16-2-2016

GUIDELINES FOR POWER GENERATION, TRANSMISSION AND DISTRIBUTION IN SPECIAL ECONOMIC ZONES (SEZs)

Customs

2. F. No. 450/117/2013-Cus IV - dated 14-1-2016

Regarding Request to provide port wise details of unclaimed containers of plant and plant products

3. F. No. 450/214/2015-Cus IV - dated 4-1-2016

Green Channel facility for Cruise Tourism passengers

Highlights / Catch Notes

Income Tax

• High Court Rules House Construction Costs as Revenue Expenditure Due to Government Ownership and Rent Requirement.

  Case-Laws - HC : Expenditure on construction of house of labourer - revenue v/s capital expenditure - when the structure does not vest in the assessee and it has to pay monthly rent thereof to the Government, the expenditure incurred by the assessee thereon has been rightly treated as a revenue expenditure - HC
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• Court Rules Share Premium Above Intrinsic Value Not Taxable as Income; Reassessment of Escaped Income Addressed.

  Case-Laws - HC : Reopening of assessment - charging of share premium over and above the intrinsic value of the share is income which has escaped assessment - the share premium being on the capital amount cannot be subjected to tax as income. - HC
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• High Court Rules Adjustments on Interest and Sales Tax Penalty u/s 43B Unsustainable in Section 143(1)(a) Case.

  Case-Laws - HC : Adjustments of interest payable to IFCI and sales tax penalty under section 43B while processing the case under section 143(1)(a) - As the adjustments made by the AO could not be said to be prima facie adjustments, therefore, the additions made in the intimation issued u/s 143(1)(a)were not sustainable - HC
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• Court Rules Pendant Qualifies for Deduction u/s 10AA of Income Tax Act; Product Retains Pendant Status.

  Case-Laws - AT : Deduction under Section 10AA - whether what was manufactured by the assessee is pendant and it can also be known as medallion.? - merely because the pendant / medallion is of 99.5% purity, it would not lose its character as pendant. - Deduction allowed - AT
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• Depreciation Eligibility Requires Asset Use in Business and Ownership by Assessee, Tribunal Rules.

  Case-Laws - AT : Unless and until the capital asset is used as a tool for carrying out the business of the assessee and the assessee becomes the owner, this Tribunal is of the considered opinion that the assessee may not be eligible for depreciation - AT
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• Court Rules Liaison Office in India Does Not Constitute Permanent Establishment Due to Insufficient Evidence by Revenue Authorities.

  Case-Laws - AT : Existence of P.E. in India - nature of power of attorney - whether the liaison office (L.O.) of the assessee constitutes Permanent Establishment (P.E.) of the assessee in India? - Revenue could not demonstrate that the assessee has a P.E. in India - AT
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• Court Allows Deductions for Society Maintenance and Taxes from Gross Rent, Subject to Lessee Obligation Verification.

  Case-Laws - AT : House property income - Reduction of Charges on account of society maintenance charges and Municipal Corporation taxes from the gross rental received - Reduction allowed subject to verification of the claim that such payment stated to be obligation of the lessee and stated to be duly included in the gross rent received by the assessee before allowing the claim of the assessee - AT
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• Loan to Non-Shareholder Not Taxed as Deemed Dividend u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Deemed dividend addition u/s. 2(22)(e) - loan or advance to a non-shareholder cannot be taxed as Deemed Dividend in the hands of a non-shareholder. Since the Assessee in the present case is not a shareholder in the lender company, addition to be deleted. - AT
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• Clarification on "Lack of Enquiry" vs "Inadequate Enquiry" u/s 263 of the Income Tax Act.

  Case-Laws - AT : Revision u/s 263 - distinction between "lack of enquiry" and "inadequate enquiry" - AO is not required to give detailed reason in respect of each and every item of deduction in the assessment order. AO had called for explanation regarding suppressed sales and the assessee had furnished his explanation. Thus, it cannot be said that it is a case of 'lack of enquiry'. - AT
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• Assessing Officer's Calculation of Business Profits: Net vs. Gross Interest Income for Section 10AA Deductions Disputed.

  Case-Laws - AT : Whether AO ought to have reduced not the gross interest income but the net interest income for qualifying the profits of the business for determining the eligible deduction u/ 10AA - As the DRP has not decided this issue and the final assessment order is only for implementing the direction of the DRP u/s 144C(13), the assessee cannot raise this issue at this stage - AT
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• Undisclosed Bank Deposits and Interest Not Taxable as Account Holder's Income Under Current Tax Rules.

  Case-Laws - AT : Undisclosed deposits in bank account - . When the deposit of an amount cannot be added in the hands of the assessee, the interest accrued on such deposit also cannot be taxed in the hands of the assessee - AT
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Customs

• Importer Accused of Fraudulently Using DEPB Scrips; Tribunal Rules Extended Limitation Period Inapplicable.

  Case-Laws - HC : Extended period of limitation - alleged that DEPB Scrips were obtained by the importer fraudulently - import under fake / fraudulent DEPB licence - The Tribunal has thereafter merely applied the decision of the Jurisdictional High Court to the facts of the case by holding that the extended period of limitation could not be invoked in the facts of the present case. - HC
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Corporate Law

• Court Upholds SEBI Penalties for Fraudulent Trade Practices, Finds No Grounds for Intervention in Tailored Decisions.

  Case-Laws - SC : Fraudulent/ manipulative practices under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations - if the primary authority had thought it proper to impose different penalties in different cases involving different set of facts, we do not see how and why interference should be made in present appeals. - SC
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Service Tax

• Refund Denied Despite Higher Authority's Instructions; New Notice Issued Citing Limitation Grounds, Exceeding Authority Scope.

  Case-Laws - AT : Refusal to give refund despite clear direction by the higher authority - it appears that the refund sanctioning authority took it on himself to sit in judgment on the higher appellate authority by issue of a fresh notice for rejection on the ground of limitation without applying his mind to the scope of his authority - AT
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• CENVAT Credit Refund Approved for Exported 'Scientific and Technical Consultancy' Services Performed Outside India.

  Case-Laws - AT : Refund of cenvat credit - Export of services are not - providing 'scientific and technical consultancy service' to clients located outside India - place of performance of services - refund allowed - AT
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Central Excise

• Tribunal Order Grants Refund, Establishing Revenue Neutrality; Interest and Penalty Demands Dropped.

  Case-Laws - AT : Demand of interest - Taking suo-moto credit of duty paid earlier for with refund was sought for - since the appellant was entitled to refund after Tribunal order dated 24/1/2008 it is a case of Revenue neutral therefore interest and penalties are dropped. - AT
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• Embroidery and hemming a saree isn't manufacturing u/s 2(f) of the Central Excise Act, 1944; no excise duty.

  Case-Laws - AT : Conversation of saree into a designer saree - whether such conversion is not a process of manufacture as per Section 2 (f) of the Central Excise Act, 1944 - duty demand - embroidery and hemming work after purchase of saree will not change the character of sarees - AT
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• Excise Duty Demand on Furniture Manufacturing by Job Worker Deemed Incorrect; Appellant Not the Manufacturer.

  Case-Laws - AT : Excise duty demand - work through job worker - manufacturing of furniture comes in to existence at the site, in the hands of the job worker - appellant being not manufacturer, demand is not correct - AT
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• Deposit Duty with Interest Aims to Prevent Litigation, Undermined by Show Cause Notices Despite Compliance.

  Case-Laws - AT : Levy of penalty where duty was deposited with interest before issuance of SCN - The legislative intent for creation of the said sub-section is to avoid any futile litigation, which purpose stands defeated by the lower authorities by issuing show cause notice to the appellant. - AT
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Case Laws:

• Income Tax

• 2016 (2) TMI 713
  Reopening of assessment - Taxation on royalty payment -taxable as business profits and not as royalty under Article 12 of DTAA - Held that:- Insofar as the interest on royalty is concerned, the same was clearly disclosed by the Petitioner in the audit return (form 2 CEB). Further, the TPO has also recorded the same as a disclosed international transaction in his order dated 29th September, 2008. Thus, the contention that the Petitioner had failed to fully and truly disclose any material fact relevant for assessment of that income is plainly unsustainable. The question whether such income was to be taxed as interest income and not as royalty is again a matter of inference. The earlier decision of the AO to assess the same as royalty cannot be traced to any failure on the part of the Petitioner to disclose fully and truly any primary fact. It is apparent that whereas the AO while framing the assessment had not applied the rule of “force of attraction”, the present incumbent apparently feels that the rule of force of attraction ought to have been applied; he now infers that income by way of royalty can also be taxed under Section 44D of the Act as business income in terms of paragraph 1 of Article 7 of the Indo-US DTAA read with paragraph 6 of Article 12 of the Indo-US DTAA. Plainly, this is a change of opinion. It is now well settled that it is impermissible to re-open concluded assessments on the basis of such change of opinion This Court in a recent decision in Sun Pharmaceuticals Industries Ltd. v. Deputy Commissioner Of Income Tax & Anr.[2016 (1) TMI 788 - DELHI HIGH COURT] had examined the CBDT Instruction No. 9 of 2006 and held that the same could not over-ride the statutory powers exercised by an AO in terms of Section 147 of the Act. The said CBDT instruction cannot be understood to compel the AO to re-open assessments that are inconsistent with his views. In the present case, the letter dated 1st September, 2009 clearly indicates that the AO had not accepted the view that the royalty paid to the Petitioner was liable to be taxed at the rate of 20% under Section 44D of the Act. He had expressly stated that ‘no inference may be drawn that the royalty income has accrued to the petitioner from its PE in India’. Mr. Syali is probably correct in assuming that the Petitioner’s assessment for AY 2005-06 is being re-opened only on the basis of CBDT Instruction No. 9 of 2006. This, as held in Sun Pharmaceuticals Industries Ltd (supra), is impermissible. Even if, Mr Chaudhary’s contention is accepted that the decision to re-open the assessment is not based on the audit objections but on independent reasons, it is apparent that the same is on account of a change in opinion. Whereas the AO by its letter dated 1st September, 2009 had reasoned to the contrary, he seems to have veered in favour of the opinion that was espoused by the audit party. As stated earlier, re-opening of assessment on account of change in opinion is also impermissible. - Decided in favour of assessee

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• 2016 (2) TMI 712
  Addition u/s 68 - Held that:- Assessee has not been able to discharge the initial onus of proving the creditworthiness of the six lenders. The mere fact that the Assessee had produced the bank account statements of the six lending parties would not per se relieve it of the burden particularly if these bank accounts gave rise to further questions regarding the creditworthiness of the six lenders. For instance, at least three of the lenders were not paid any interest. Compared to the income disclosed in the returns, the amounts advanced as loan to the Assessee were disproportionately large. In particular one of the parties advanced a loan of 1.40 crore free of any interest. It is in these circumstances and upon a thorough analysis of the bank accounts of the six lenders that the CIT(A) came to the conclusion that their creditworthiness was not established. The question was not one of demonstrating the sources of the income of the lenders as much as establishing their financial capacity to advance the sums in question to the Assessee. - Decided against assessee

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• 2016 (2) TMI 711
  Nature of payment - revenue v/s capital expenditure - Held that:- Here the capital assets has never come into existence and the I.T.A.T. has allowed travelling expenses or ore testing charges only as revenue expenditure. This treatment is only in dispute before us. The travelling expenses or manganese ore testing charges pertaining to the existing mine allowed by the I.T.A.T. in the present facts cannot be directly corelated with the acquisition of any capital asset. We, therefore, do not find anything wrong with said exercise undertaken by the I.T.A.T. Also it is clear that study undertaken by the foreign company ie M/s. Seltrust Engineering Company Limited, U.K. was in connection with working of assessee's existing mines and optimization of the assessee's existing product. It did not relate in any way to proposed new plants. In view of undisputed findings on facts mentioned supra, the above logic also holds good here. - Decided in favour of assessee Expenditure on construction of house of labourer - revenue v/s capital expenditure - Held that:- The scheme framed by the State Government and the M.I.D.C. basically was to construct houses for industrial employers. In the matter before us, the employer is put under obligation and accordingly on a nominal premium of 1/, it has leased out certain lands to the Central Government. The houses upon it are constructed by the Central Government and assessee has been treated as lessee thereof. The ownership and title of the structure vested in the Government and the assessee has to pay rent of 2.50 per unit per month to the Government. After expiry of period of lease, the assessee has option to purchase said structure or then it is open to the Government to remove the same and to return back the land. Thus, the basic difference in scheme before us & one looked into in Commissioner of Income Tax vs. National Machinery Manufacturers Ltd. (1991 (3) TMI 115 - BOMBAY High Court ) is apparent. In this situation, when the structure does not vest in the assessee and it has to pay monthly rent thereof to the Government, the expenditure incurred by the assessee thereon has been rightly treated as a revenue expenditure.- Decided in favour of assessee

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• 2016 (2) TMI 710
  Reopening of assessment - charging of share premium over and above the intrinsic value of the share is income which has escaped assessment - Held that:- The reason in support of the impugned Notice proceed on the basis that the regular Return of income was assessed by Intimation under Section 143(1) of the Act and no scrutiny assessment was done. In the above view, to ascertain the nature and the justification for charging share premium, the Assessing Officer has reason to believe that charging of share premium over and above the intrinsic value of the share is income which has escaped assessment. The Notice itself does not indicate the approximate amount of income, which the Assessing Officer has reason to believe has escaped assessment nor does it quantify the extent to which the share premium received was in excess of intrinsic value, which has escaped assessment. It gives no reasons to indicate the basis of coming to the conclusion that share premium is excessive and, therefore, income. Moreover, the Notice also does not dispute that this is a share premium but seek justification for charging the share premium over and above intrinsic value of the share premium. Primafacie, we are of the view that the basis of the impugned Notice stands concluded by the decision of this Court in Vodafone India Services Ltd. Vs. CIT [2014 (10) TMI 278 - BOMBAY HIGH COURT ], wherein it has been held that the share premium being on the capital amount cannot be subjected to tax as income. - Decided in favour of assessee

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• 2016 (2) TMI 709
  Applicability of Section 154 - Rectification of mistake - permissibility of computation of deduction under Section 80HHC - Held that:- No error can be said to be apparent on the face of the record, when it is not manifest or self-evident, but requires an examination or argument to establish it. Admittedly, the issue involved pertains to permissibility of computation of deduction under Section 80HHC of the Act, by excluding 90% of the gross lease income from the business profits. The issue admittedly involves closer scrutinity/ examination of facts and application of law to the facts stated supra and therefore, the mistake cannot be construed to be apparent on the face of the record. Therefore, the Assessing Officer has no jurisdiction to invoke Section 154 of the Act, while making the assessment order dated 27.06.2001. Therefore, the order by the Tribunal upholding the same has to be set aside.

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• 2016 (2) TMI 708
  Adjustments of interest payable to IFCI and sales tax penalty under section 43B while processing the case under section 143(1)(a) - Held that:- It has been categorically recorded by the Tribunal that adjustments could be made only on the basis of the details available on record. For making such disallowances, it was open for the Assessing Officer to follow the procedure laid down in the Act by issuance of notice under Section 143(2) of the Act. There was nothing wrong in issuing the notice under section 143(2) of the Act and the intimation under section 143 (1)(a) of the Act on the same date. Thus, notice under section 143(2) of the Act could not be termed as invalid. As the adjustments made by the Assessing Officer could not be said to be prima facie adjustments, therefore, the additions made in the intimation issued under Section 143(1)(a) of the Act were not sustainable. The view taken by the Tribunal is in accordance with law which has not been shown to be illegal or perverse in any manner. Thus, the question of law referred is answered against the revenue and in favour of the assessee

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• 2016 (2) TMI 707
  Deduction under Section 10AA - whether what was manufactured by the assessee is pendant and it can also be known as medallion.? - Held that:- The product manufactured by the assessee even though called as “medallion”, it is pendant in the Indian context. It is an ornament worn by hanging in the chain or necklace. It is common knowledge that the award / medal conferred on special and ceremonial occasions would be normally known as “medallions”. It does not mean that the medallions could not be worn as ornament/jewellery in the normal course. In our opinion, the pendant and medallion can be used as ornament/jewellery along with chain and necklace. At the best, one may say that pendant and medallion are nothing but a designery jewellery to be worn along with chain or necklace. By taking into consideration of the utility of the medallions, this Tribunal is of the considered opinion that medallion is also a pendant. Therefore, merely because the product manufactured by the assessee was described as medallion, it cannot be said that there was any violation of approval granted by the Development Commissioner, Special Economic Zone. Irrespective of nomenclature used by the assessee or the Special Economic Zone, this Tribunal is of the considered opinion that what was manufactured by the assessee is pendant. Therefore, there is no violation of conditions imposed by the Development Commissioner. Coming to quality/purity of the gold, the contention of the Revenue is that the purity of gold is 99.5% in the product manufactured by the assessee. The pendants usually have the purity of 91.6%. No doubt, the purity of the gold would depend upon the product manufactured by the assessee. When the product is manufactured with diamond as a designery stone, the purity is normally less than 90%. In other words, the pendant or medallion with diamond would have the purity of gold at 18 Carat. In case, the ordinary stones are used, the purity would be normally 20 to 22 Carats. If the pendant or medallion is made without any natural or artificial stone, then it can have the purity of 99.5% or 24 Carat. Therefore, the purity would depend upon the design and stones implanted on the pendant or medallion. Therefore, this Tribunal is of the considered opinion that merely because the pendant / medallion is of 99.5% purity, it would not lose its character as pendant. As already observed, this Tribunal is of the considered opinion that what was manufactured by the assessee is pendant and it can also be known as medallion. In view of the above, we are unable to uphold the orders of the lower authorities and accordingly, the same are set aside. The Assessing Officer is directed to grant deduction under Section 10AA of the Act. - Decided in favour of assessee

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• 2016 (2) TMI 706
  Disallowance of depreciation on goodwill in connection with takeover of unit from Ashok Leyland Limited - Held that:- The assessee has paid over the value of net asset to the extent of 147.57 lakhs and claimed the same as cost of the goodwill. However, the Assessing Officer disallowed the claim of the assessee on the ground that the payment does not fall within the meaning of know-how, patent or copyright. The Assessing Officer has not considered the judgment of Apex Court in SMIFS Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT ) wherein after considering the provisions of Explanation 3 to Section 32(1) of the Act found that the word “any other business or commercial rights of similar nature” in clause (b) of Explanation 3 indicates that goodwill will fall under the expression “any other business or commercial rights of similar nature”. In view of the above judgment of Apex Court in SMIFS Securities Ltd., we are unable to uphold the orders of the lower authorities. Accordingly, we set aside the orders of the lower authorities. The Assessing Officer is directed to allow depreciation at the applicable rate on the payment relatable to goodwill. - Decided in favour of assessee Disallowance of expenditure which was capitalized in the books of account - expansion of the units - Held that:- Even though it is independent, because of the interconnection of management, financial, administrative and production aspects of each expenditure has to be construed as revenue in nature and therefore, deductible while computing the taxable income.By respectfully following the judgments of Madras High Court in Rane (Madras) Ltd. (2007 (6) TMI 25 - HIGH COURT, MADRAS ) and in Sakthi Sugars Ltd. (2010 (8) TMI 456 - MADRAS HIGH COURT), the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the expenditure incurred by the assessee in connection with the expansion of the units at Sriperumbudur and Hyderabad as revenue expenditure.- Decided in favour of assessee Assessee is eligible for additional depreciation Depreciation on the amount paid to SIPCOT towards development of infrastructure - Held that:- The assessee has contributed to SIPCOT for creation of common facilities such as roads, bridges, electrical lines, drainage, etc. These facilities are owned by the SIPCOT / Government and not by the assessee. Merely because the assessee contributed for establishment of common infrastructural facilities, it cannot be construed that the assessee owned those facilities. For claiming depreciation under Section 32 of the Act, the assessee should be the owner of the property / asset and the same should be used for business of the assessee. In the case before us, the common infrastructural facilities may be assets of the SIPCOT or Government agency to provide certain infrastructural facilities to the assessee. It is not the case of the assessee that those amenities are tools for carrying out the business of the assessee. Unless and until the capital asset is used as a tool for carrying out the business of the assessee and the assessee becomes the owner, this Tribunal is of the considered opinion that the assessee may not be eligible for depreciation. - Decided against assessee

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• 2016 (2) TMI 705
  Existence of P.E. in India - nature of power of attorney - whether the liaison office (L.O.) of the assessee constitutes Permanent Establishment (P.E.) of the assessee in India? - Held that:- A plain reading of the clauses in the power of attorney takes us to a conclusion that the powers given therein are L.O. specific. No doubt the AO can investigate, call for evidences and come to a conclusion where any income earning activity has been carried out by the L.O. so as to construe it as fixed P.E. but, in our view it is beyond the jurisdiction of the AO to adjudicate and conclude that the assessee has filed false declarations before the RBI. At best, he can bring his findings to the notice of the RBI which may consider the same in accordance with law. The RBI has not found any violation of conditions laid down by it while permitting the assessee to have an L.O. In such circumstances, no adverse inference can be drawn. Having come to conclusion that prima facie a reading of the power of attorney does not demonstrate that the employees of the assessee at the L.O. are authorised to do core business activity or to sign and execute contracts etc., we now examine whether the AO has brought out any documentary evidences in support of his contention that the assessee has a P.E. in India. The assessee has furnished before the AO as well as before the DRP numerous documents, in support of his contention that all purchase orders would be raised directly by the Indian Customers on the Head Office of the assessee and that the Head Office had directly send quotations/invoices to its Indian customers and that these were signed and executed directly by the head office, without any involvement whatsoever by the LO in India. The AO has not given any adverse finding on the evidences filed before him nor did he point out from the evidences filed, as to why the claim of the assessee is not acceptable. There is no adverse comment by the D.R. on these voluminous evidences filed before us by the assessee to demonstrate that it does not have a P.E. in India. The AO has also not brought on record any material, other than his interpretation of the terms of the power of attorney, to demonstrate that the L.O. is carrying on core business activity warranting his conclusion that the assessee has a P.E. in India. Thus neither the documents produced by the assessee are rebutted by the Revenue, nor the Revenue has brought on record any evidence in support of its contention.Thus we have to necessarily hold that the Revenue could not demonstrate that the assessee has a P.E. in India. - Decided in favour of assessee

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• 2016 (2) TMI 704
  Sale of shares - "Profits and Gains from Business or Profession" OR "Short Term Capital Gains" - Held that:- The transaction in the shares are also repetitive like in the shares of Zee Telefilms Limited, Garware Ship, Gammon,Carborundum Universal, Simbholi Sugar etc. whereby the assessee indulged in repetitive transactions and also sold the shares after holding for short period . Under these circumstances in order to do complete justice in the instant case based on facts and circumstance of the case, we hold that the gains arising from sale of shares held by the assessee up to one month be classified as income from business despite being delivery based transactions, while the gains arising from sale of shares held for more than one month and up-to twelve months should be classified as short term capital gain. We have come to the above decision keeping in view the peculiar facts and circumstances of the instant case as we have observed that in large number of transactions of purchase and sale of shares, period of holding is from 1 day to 30 days, the transactions of purchase and sale of shares being repetitive and the assessee has dealt in large number of companies, the prime objective of such transactions which are concluded within one month in our considered view is to earn and maximize profits in shortest period of time which is akin to intention of doing business by maximizing profits while dealing in sale and purchase of shares rather to hold shares as investment with a vision to earn dividend and other benefits attached to holding of shares such as entitlement to right shares, bonus shares etc.. House property income - Reduction of Charges on account of society maintenance charges and Municipal Corporation taxes from the gross rental received - Held that:- We have observed that the assessee has paid society maintenance charges which is stated to be the obligation of the lessee and the same is duly included in the rent received by the assessee. In our considered view, this issue is squarely covered by the decisions of the Tribunal in the cases of Sharmila Tagore (2004 (6) TMI 591 - ITAT MUMBAI) and Bombay Oil Industries (2000 (11) TMI 1225 - ITAT MUMBAI). Respectfully following the decisions of the Tribunal in the cases cited (supra), we hold that assessee is entitled for deduction of 1,17,825/- u/s 23 of the Act apart from the standard deduction u/s 24(a) of the Act. We direct the AO to verify the claim of deduction of the assessee of the said society maintenance charges paid by the assessee but stated to be obligation of the lessee and stated to be duly included in the gross rent received by the assessee before allowing the claim of the assessee.

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• 2016 (2) TMI 703
  Deemed dividend addition u/s. 2(22)(e) - Held that:- The ordinary and natural meaning of the term dividend would be a share in profits to an investor in the share capital of a limited company. To the extent the meaning of the word “Dividend” is extended to loans and advances to a shareholder or to a concern in which a shareholder is substantially interested deeming them as Dividend in the hands of a shareholder the ordinary and natural meaning of the word “Dividend” is altered. To this extent the definition of the term “Dividend can be said to operate. If the definition of “Dividend” is extended to a loan or advance to a non shareholder the ordinary and natural meaning of the word dividend is taken away. In the light of the intention behind the provisions of Sec.2(22)(e) and in the absence of indication in Sec.2(22)(e) to extend the legal fiction to a case of loan or advance to a non-shareholder also, we are of the view that loan or advance to a non-shareholder cannot be taxed as Deemed Dividend in the hands of a non-shareholder. Since the Assessee in the present case is not a shareholder in the lender company, addition to be deleted. - Decided in favour of assessee Revision u/s 263 - Held that:- We are of the view that the order of CIT cannot be sustained as in any case there can be no addition and there can be no prejudice to the interest of the revenue in as much as no addition on account of deemed dividend u/s.2(22)( e ) can be made in the facts and circumstances of the present case. We therefore quash the order u/s.263 of the Act and allow the appeal by the Assessee.- Decided in favour of assessee

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• 2016 (2) TMI 702
  Revision u/s 263 - unrecorded purchases - distinction between "lack of enquiry" and "inadequate enquiry" - Held that:- AO failed to make proper enquiry which he ought to have made before completing the assessment. There is a distinction between "lack of enquiry" and "inadequate enquiry". If there is an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order under s. 263, merely because he has a different opinion in the matter. Such a course of action is open only in cases of "lack of enquiry". Although apparently the assessment does not give any reasons why purchased were not being added as income, that by itself would not be indicative of the fact that the AO has not applied his mind to the issue. AO is not required to give detailed reason in respect of each and every item of deduction in the assessment order. AO had called for explanation regarding suppressed sales and the assessee had furnished his explanation. Thus, it cannot be said that it is a case of 'lack of enquiry'. Further, even the CIT is not clear as to whether entire purchases has to be added or peak purchases has to be added or the entire sales has to be added as income. Therefore, the view taken by the AO was one of the possible views and the assessment order passed by the AO could not be held to be prejudicial to the Revenue. Even the CIT conceded the position that the AO made the inquiries, elicited replies on Gross Profit and thereafter passed the assessment order. The grievance of the CIT was that the AO should have made further inquiries as to whether any addition has to be made on account of unrecorded purchases or whether the entire suppressed sales had to be regarded as income of the Assessee rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'. The decision of the Hon’ble Bombay High Court in the case of Ganbriel India Ltd. (supra) clearly supports the stand taken by the Assessee in this regard. Thus we are of the view that the jurisdiction u/s.263 of the Act was not properly exercised by the CIT as the condition precedent for invoking the same viz., that the order of the AO is erroneous and prejudicial to the interest of the revenue is not shown to be present in the present case. We therefore quash the order u/s.263 of the Act and allow the appeal by the Assessee.

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• 2016 (2) TMI 701
  Penalty u/s 271(1)(c) - Held that:- As on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon’ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ], we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. Levy of penalty in the present case cannot be sustained. - Decided in favour of assessee

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• 2016 (2) TMI 700
  Revision u/s 263 - subsidy received by the assessee under the West Bengal Incentive Scheme 2000 was capital or revenue subsidy - Held that:- It is clear from the order passed by AO u/s 143(3) of the Act and enquiry made by the AO before passing such order that the AO went in to the question as to whether the subsidy received by the assessee under the West Bengal Incentive Scheme 2000 was capital or revenue subsidy. Though the AO had not raise any specific query as to whether the subsidy in question has to be reduced from the value of fixed assets for the purpose of allowing depreciation invoking the provisions of Explanation 10 to section 43(1) of the Act. The assesse in its reply to the notice u/s 142(1) of the Act has clearly set out that the subsidy in question need not be reduced from the value of fixed assets. We have extracted the reply of the assessee in the earlier part of this order. Therefore the CIT in exercising his powers u/s 263 of the Act cannot come to a conclusion that there is a failure on the part of the AO to have made proper and adequate enquiry with regard to applicability of Explanation 10 to section 43(1) of the Act to the subsidy received by the assessee. Thus it cannot be said that the incentive in question was granted to meet any portion of the actual cost of fixed assets and the same is not required to be excluded from the cost of fixed assets on which the depreciation is to be allowed. We also find force in the submissions of learned counsel for the assessee that AO has taken one of the possible view and at best it would be a case where the CIT in exercising his powers u/s 263 of the Act wants to substitute his view with that of the view by the AO. Such a course is not permissible in the proceedings u/s 263 of the Act. For the reasons given above, we quash the order u/s 263 of the Act and allow the appeal of the assessee.

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• 2016 (2) TMI 699
  Notional adjustment of interest on delayed payment from Associated Enterprise - Held that:- Transaction relating to extended credit period provided to A.E. is required to be aggregated with other international transactions for computing ALP and cannot be done separately. For doing so rate of interest has to be on the basis of LIBOR+ basis point and not domestic PLR. As in the present case, TPO himself has worked out LIBOR rate of 2.69% same can be considered. As, neither the department nor the assessee has undertaken this exercise. We remit this issue to the file of the AO/TPO for verifying this aspect and determining the ALP of international transaction with A.E. after affording full opportunity to the assessee to establish its case. - Decided in favour of assessee for statistical purposes. Disallowance of interest under section 36(1 )(iii) - Held that:- The assessee during the course of assessment proceedings on its own offered the disallowance of interest expenditure attributable to interest free advances given to its AE. It is also a fact on record that before DRP, the assessee has not challenged the disallowance of the aforesaid interest expenditure. This fact clearly proves that the assessee had accepted the disallowance of interest expenditure of 94,44,829/- and that being the clear factual position, in our view, the assessee cannot raise this issue. Accordingly, we decline to entertain this ground raised by the assessee. Eligible deduction u/s 10AA - whether AO ought to have reduced not the gross interest income but the net interest income for qualifying the profits of the business for determining the eligible deduction u/ 10AA - Held that:- The assessee has fairly admitted that this issue was not raised before the DRP. Therefore, when the assessee has not raised any objection on this issue before the DRP, in our view, the assessee cannot raise such issue before us at this stage as the assessee has accepted the decision of the AO in the draft assessment proceedings, wherein he excluded the interest income while computing the deduction u/s 10AA of the Act. The final assessment order passed by the AO is only to give effect to the direction of DRP, wherein this issue was not raised by the assessee. As the DRP has not decided this issue and the final assessment order is only for implementing the direction of the DRP in terms of section 144C(13) of the Act, the assessee cannot raise this issue at this stage, Therefore, we decline to entertain with this ground Eligible deduction under section 10AA - whether A. O. Ought to have increase the profits of the business by the amount of interest disallowed under section 36(1)(iii) ? - Held that:- As can be seen the facts and material relating to the interest expenditure claimed by the assessee are available before the AO as the assessee itself disallowed interest expenditure relatable to interest free advances. Whether any statutory disallowance made by A.O. would enhance the profit of the assessee thereby making him eligible to claim deduction u/s 10AA on such enhanced profit is a purely legal issue. Therefore, assessee’s claim of deduction u/s 10AA has to be examined by keeping in view principle laid down in judicial precedents. However, considering the fact that this issue was neither raised before the AO nor before the DRP and has been raised for the first time before this forum, we deem it proper to remit the issue to the file of the AO for deciding the same after due opportunity of being heard to assessee. This ground of appeal is allowed for statistical purposes.

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• 2016 (2) TMI 698
  Revision u/s 263 - Deduction u/s 80IB(10) to be disallowed - Held that:- Cl. (d) of s. 80-IB(10) inserted w.e.f. 1st April, 2005 which provides that deduction under s. 80-IB(10) would be allowable where the commercial user does not exceed five per cent of the aggregate built-up area of the housing project or two thousand square feet, whichever is less. In the absence of any restriction under the Act, it was not open to the Tribunal to hold that the projects approved by the local authorities having residential buildings with commercial user upto 10 per cent of the plot area are alone entitled to deduction under s. 80-IB(10). Restriction regarding commercial user has been imposed for the first time by inserting cl. (d) in s. 80-IB(10) w.e.f. 1st April, 2005. The argument of the Revenue that s. 80-IB(10) as amended by inserting cl. (d) should be applied retrospectively has no merit as cl. (d) has been specifically inserted w.e.f. 1st April, 2005 and, therefore, it cannot be applied for the period prior to 1st April, 2005. In the present case, the plan for construction of the Housing Project at 1/1, R.R.L.Mitra Road, Kolkata 700085 was sanctioned by the Kolkata Municipal Corporation 09.12.1999, i.e., prior to 1-4-2005. In view of the aforesaid decision on the point, we do not find that any useful purpose will be served by examining this issue again by the AO, as admittedly the plan sanction in the case of the Assessee was prior to the statutory amendment. In the given facts and circumstances we are of the view that jurisdiction u/s 263 of the Act has not been properly exercised by C.I.T. as the condition precedent for exercise of such power viz., that the order of the AO was erroneous and prejudicial to the interest of revenue for failure on the part of the AO to make proper enquiries before completion of assessment. The jurisdiction u/s.263 of the Act could not have also been exercised for the reason that the AO did not enquire or examine as to whether commercial area in the project exceeded to statutory limits laid down in Sec.80IB(10)(d) of the Act. We, therefore, quash the order u/s 263 of the Act and allow the appeal of the assessee.

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• 2016 (2) TMI 697
  Prior period adjustments- Held that:- We have observed that the assessee had already claim depreciation allowances over the period and has claimed interest expenses either in a capitalized form or in Revenue form on the asset against the liability existent. The said liability no longer remains during the year under consideration. In fact the expenses was also claimed during the past years. The submission made by the assessee before the Assessing Officer that the same should have been treated prior period adjustments of 3,41,25,895/- and the same has been treated as Revenue receipt for the tax purposes. In light of this, the matter is remitted back on the short issue to the Assessing Officer.

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• 2016 (2) TMI 696
  Reference of matter to DVO - AO authority - Held that:- AO has no jurisdiction to refer the matter to the DVO for determination of the value since the value declared by the assessee is more than the fair market value. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed. - Decided in faovur of the assessee

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• 2016 (2) TMI 695
  Eligibility of deduction under section 80IB(10) - Held that:- Co-ordinate Bench of the Tribunal in assessee’s own case in the preceding assessment years has held that the assessee is eligible to claim deduction under section 80IB(10) of the Act on all the residential buildings comprising in Phase-I (A-1 and A-2) and Phase-II (A-3 to A-8). The date of completion of Phase-II shall be reckoned from the date of commencement certificate issued by PMC in respect of buildings A-3 to A-8. Respectfully following the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case, we hold that the assessee is entitled to prorata deduction under section 80IB(10) of the Act on the completed flats. In this regard, we modify the directions of the CIT(A). - Decided in favour of assessee

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• 2016 (2) TMI 694
  Treatment of income of Portfolio Management Fees (PMS) - STCG or business income - Held that:- Finding of AO for treating the income from PMS is income from business and not STGC, are erroneous and the same is set-aside, and we direct the AO to treat the income from PMS as income on account of STGC. Disallowance of STCL u/s 94(7) - Held that:- As we have noticed that the assessee purchased mutual fund of three different companies on 12.04.2004 and sold on 14.12.2004 on a total loss of 41,431/-, thus, all the transaction/sale/purchase were made within 9 months, hence, the assessee is not entitle to claim STCL.

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• 2016 (2) TMI 693
  Undisclosed deposits in bank account - Held that:- From the order of the CIT(A) it appears that a sum of 10 lakhs was deposited in bank by Shri Subramanian and not by the assessee. When Shri Subramanian deposited the money and the bank account relates to all the family members, this Tribunal is unable to accept the contention of the ld. DR. Therefore, the CIT(A) has rightly deleted the addition made by the Assessing Officer. When the deposit of 10 lakhs cannot be added in the hands of the assessee, the interest accrued on such deposit of 4,81,953/- also cannot be taxed in the hands of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A) - Decided in favour of assessee

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• Customs

• 2016 (2) TMI 731
  Extended period of limitation - alleged that DEPB Scrips were obtained by the importer fraudulently - import under fake / fraudulent DEPB licence - Held that:- where the appellants did not have any role in the fraud and no fraud had been practised by said person, the Revenue cannot get the benefit of extended period of limitation when such person is not party to the fraud. It is apparent that the impugned order passed by the Tribunal is based upon findings of fact recorded by it upon appreciation of the evidence on record. The Tribunal has thereafter merely applied the decision of the Jurisdictional High Court to the facts of the case by holding that the extended period of limitation could not be invoked in the facts of the present case. The conclusion of the Tribunal being based upon findings of fact recorded by it does not give rise to any question of law much less, a substantial question of law so as to warrant interference. - Decided against the revenue.

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• 2016 (2) TMI 730
  Import of of chemicals and dyes - retained by the authorities for want of certification from the Food Safety and Standards Authority of India (FSSAI) - appellant claimed that they are selling this Acid to food industries and they are not selling it as a food product or directly to any consumer for consumption as a food item. - Held that:- Since the petitioner has filed an undertaking to the effect that the goods would be sold only for non-food manufacturing industries listed in the affidavit numbering 27 and thereafter to file a proof report in this regard before the authorities concerned, recording the said submission made by the petitioner in the affidavit filed before this Court, by placing the same on record, the respondents are directed to release the consignment in question forthwith. - Decided in favor of appellant.

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• Corporate Laws

• 2016 (2) TMI 723
  Fraudulent/ manipulative practices under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations - What is the degree of proof required to hold brokers/sub-brokers liable for fraudulent/ manipulative practices under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations and/or liable for violating the Code of Conduct specified in Schedule II read with Regulation 9 of the Securities and Exchange Board of India (Stock-Brokers and Sub-Brokers) Regulations, 1992? (hereinafter referred to as the ‘Conduct Regulations, 1992’) - Held that:- No other material to hold either lack of vigilance or bona fides on the part of the subbroker so as to make respondent-broker liable. An irresistible or irreversible inference of negligence/lack of due care etc., in our considered view, is not established even on proof of the primary facts alleged so as to make respondent-broker liable under the Conduct Regulations, 1992 as has been held in the order of the Whole Time Member, SEBI which, according to us, was rightly reversed in appeal by the Securities Appellate Tribunal. The difference between violation of the Code of Conduct Regulations and the FUTP Regulations would depend on the extent of the persistence on the part of the broker in indulging with transactions of the kind that has occurred in the present cases. Upto an extent such conduct on the part of the brokers/sub-brokers can be attributed to negligence occasioned by lack of due care and caution. Beyond the same, persistent trading would show a deliberate intention to play the market. The dividing line has to be drawn on the basis of the volume of the transactions and the period of time that the same were indulged in. In the present cases it is clear from all these surrounding facts and circumstances that there has been transgressions by the respondents beyond the permissible dividing line between negligence and deliberate intention. Insofar as the plea of violation of principles of natural justice, as raised on behalf of the respondent in C.A.No.282/2014 (Monarch Networth Capital Ltd.) is concerned, we do not think the same to be justified in any manner. The relevant extracts of the trade log which have been perused by us, in view of the clear picture disclosed with regard to the particulars of the offending transactions, must be held to be sufficient compliance of the requirement of furnishing adverse materials to the affected party. It is not the case of the respondents that such trading in the scrips in question had been a regular feature all along. Insofar as the statement of Indumati Gowda is concerned, it is the stand of the SEBI that the same was not relied upon to come to the impugned conclusions and findings. The statement of Shirish Shah, who admittedly was behind the manipulative practices in question through the brokers, was definitely not the foundation of the impugned findings recorded by the Whole Time Member of SEBI. The statement of Shirish Shah, even if not furnished to the respondent brokers, would not materially alter the situation inasmuch as it is the liability of the respondent-brokers, on account of their failure to correct the huge irregularities that were going on through their terminals, that was the subject matter of consideration of the Whole Time Member. The fact that on behalf of the client Indumati Gowda similar transactions were entered into in respect of other illiquid scrips which did not disclose any irregularities can hardly be a ground to overlook what has happened in case of the scrip involved in which the respondent Monarch Networth Capital Limited had indulged in. The stage at which the monetary penalty was imposed on the two other brokers indulging in circular trading is prior to any determination of liability of the said two brokers who did not contest the charges. In the case of M/s Monarch Networth Capital Limited the stage has advanced far beyond the above and had culminated in operative findings against the said subbroker. The imposition of monetary penalty in the case of M/s. Ess Ess Intermediaries Pvt. Ltd., M/s. Rajesh N. Jhaveri and M/s. Rajendra Jayantilal Shah [second category] for violation of the FUTP Regulations cannot be a basis for alteration of the punishment of suspension imposed on M/s. Monarch Networth Capital Limited to one of monetary penalty. In this regard, provisions of Section 15J of the SEBI Act has to be kept in mind and if the primary authority had thought it proper to impose different penalties in different cases involving different set of facts, we do not see how and why interference should be made in present appeals. We allow the same and set aside the orders of the Securities Appellate Tribunal, Mumbai passed in each of the appeals and restore the orders and penalty imposed on the respondents - brokers by the respective orders of the Whole Time Member of the SEBI.

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• 2016 (2) TMI 722
  Scheme of Amalgamation - Restructuring of capital - Held that:- Taking into account the contentions raised in the affidavits and reply affidavits, and the submissions advanced during the course of hearing, this Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, are answered satisfactorily. It appears that the present Scheme of Arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest and the same deserves to be sanctioned. The proposed Scheme of Arrangement in nature of amalgamation as well as restructure of capital is, hereby, sanctioned. The Reduction of Equity Share Capital of the Transferee Company is, hereby, confirmed.

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• Service Tax

• 2016 (2) TMI 729
  Export of services or not - providing radio programmes for broadcasting to the principal BBC World located in UK - Receipt of consideration through Standard Chartered Bank in Indian Rupee vostro mechanism - leasing out their copyright to the local broadcaster - Held that:- appellant has received the payment in foreign convertible exchange in the light of RBI circular dated 06.02.2008. Therefore, applicants are not liable to pay service tax to the tune of 5,10,23,578/-. We further find that a demand of service tax has been confirmed against the applicant for 7,79,630/-on account of leasing out their copyright to the local broadcaster and some period in dispute has implication thereafter. Therefore, at this stage without discussing the merits of the case, we direct the applicant to pre-deposits of 3,50,000/- (Rupees Three lakh fifty thousand only) - Stay granted partly.

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• 2016 (2) TMI 728
  Levy of penalty for delayed registration - requirement to seek registration starts from crossing of turnover limit as per accrual basis or receipt basis - small service provider being chartered accountant - Notification No.6/2005-Service Tax dated 01.03.2005 - Held that:- receipts for the purposes of Notification, have to be taken as aggregate value of payment receipts consecutively in any financial year. In view of this admitted fact that there is no receipt during the financial year 2004-2005 and the aggregate receipt in the financial year, 2005-06, is below the threshold limit - order set aside - Decided in favor of assessee.

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• 2016 (2) TMI 727
  Refund claim - export of services - period of limitation - Held that:- that the limitation cannot start to run unless right to receive a claim or refund crystallized. In the present case, the right to claim/refund under Notification No.41/2007-Service Tax crystallized only when the service tax was deposited in October, 2008. Thus, the refund claim was filed within six months on 30.03.2009. - refund allowed.

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• 2016 (2) TMI 726
  Refusal to give refund despite clear direction by the higher authority - Claim of refund of tax paid earlier - Taxability of activity of operation and maintenance of railway tracks as well as maintenance of rolling stock - this is the second round of appeal. - Held that:- The orders of the first appellate authority in the first round are crystal clear in setting aside the rejection of the refund claim after detailed appreciation of facts and circumstances in which the tax had been paid by the appellant besides taking into account the eligibility of the appellant for the refund claim. The original authority was merely required to implement the direction relating to consequential relief. Contrarily, it appears that the refund sanctioning authority took it on himself to sit in judgment on the higher appellate authority by issue of a fresh notice for rejection on the ground of limitation without applying his mind to the scope of his authority In such a scheme for protection of the rights of the individual against arbitrariness of the tax executive, a lower authority is mandated to comply with the orders of the higher appellate authority or to act in accordance with the decision of the reviewing authority. Here the two have coalesced and, by its action of choosing a third option, the original authority has placed himself beyond the pale of acceptable behavior. Refund allowed - Cost of 10,000 imposed on the Deputy Commissioner of Central Excise, Service Tax Division -III, Delhi - Decided in favor of assessee.

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• 2016 (2) TMI 725
  Demand of service tax on commission received for sale of SIM cards and top-up cards - t the impugned order has built its foundation on the assumption that appellants render “business auxiliary service” in relation to SIM cards and hence liable to tax on the commission earned by them. At the same time, the impugned order has considered the commission received as discount on sale of recharge and “top-up” coupons as not liable to tax. Held that:- An attempt has been made to catalogue the various activities that devolve on the appellants in relation to activation of SIM cards without appreciating the fact that the SIM cards are marked with an MRP on which tax is collected in full from the customer. Therefore, the commission paid to appellants is also included in the value on which tax has been collected from the customer. The customer is, consequently, the recipient of the full value of services from none other than M/s Bharat Sanchar Nigam Ltd; thus, it is no different from the other two products. As commission system and sale methodology in relation to SIM cards is the same as the other two products, we, for the reason elaborated supra, set aside the impugned orders and allow both the appeals with consequential relief. - Decided in favor of assessee.

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• 2016 (2) TMI 724
  Refund of cenvat credit - Export of services are not - providing 'scientific and technical consultancy service' to clients located outside India - place of performance of services - Held that:- the services rendered by the appellant were consumed abroad where the appellant's clients used the service of inspection/test/analysis to decide whether the goods intended to be imported by them from India conformed to the requisite specifications and standards. In other words, the benefit of the service accrued to the foreign clients outside the Indian territory. By no stretch of imagination can it be said that there was no export of service - refund cannot be denied - Decided against the revenue.

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• Central Excise

• 2016 (2) TMI 720
  Denial of cenvat credit - original authority denied these credit mainly on the ground that these services are not used in or in relation to the manufacturing activities or clearance of final products - Held that:- In Hindustan Zinc Ltd. (2014 (7) TMI 485 - CESTAT NEW DELHI ) the Tribunal held that cenvat credit is eligible on insurance services for insuring plant, machinery and goods/cash in transit, vehicles and computers. In Endurance Technologies P. Ltd. (2011 (7) TMI 373 - CESTAT, MUMBAI) the Tribunal held that services of repair and maintenance of windmills for generation of electricity are eligible for credit. In Dolphin Automative System P. Ltd 2014 (2015 (3) TMI 297 - CESTAT NEW DELHI ) the Tribunal held that various services like cleaning services, legal services, management services, celeberation of annual day etc are eligible services for credit. In Ultratech Cement Ltd. (2010 (9) TMI 126 - CESTAT, MUMBAI ) the Tribunal held that credit on services used outside factory premises cannot be denied. Having examined the scope of input services now in dispute we find denial of credit on them is not legally sustainable. - Decided in favour of assessee

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• 2016 (2) TMI 719
  Demand of interest - Taking suo-moto credit of duty paid earlier for with refund was sought for - Held that:- As regard the refund application, the applicant has filed refund claim immediately after settling the dispute of classification vide their application dated 20/2/1997, which was disputed and matter of the refund was finally decided by this Tribunal vide Order dated 20/8/2008 thereafter it is the department who was supposed to grant the refund by implementing this Tribunal's order. However, the appellant had taken suo moto credit. In view there is no provision in Law to take suo-moto credit of any amount paid during the litigation of the matter, the only course of action is to seek refund under Section 11B. However, refund application was already filed with the department and it was not processed. In view of this Tribunal order dated 24/1/2008 there is no dispute that appellant is entitle for refund alongwith consequential relief. In view of this fact, direct appellant to reverse the Cenvat credit taken suo moto by them and the Adjudicating authority is directed to sanction the refund claim in accordance with law. Taking into consideration the facts and the circumstances of the case, since the appellant was entitled to refund after Tribunal order dated 24/1/2008 it is a case of Revenue neutral therefore interest and penalties are dropped. Due to peculiar facts involved in the case, since appellant had taken credit and enjoyed credit, they are not entitle for the interest only for the period i.e. from the date of taking suo moto credit till the sanction of refund claim

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• 2016 (2) TMI 718
  Interest on account of late remittance of central excise duty - delay by 22 days from July, 2013 - Held that:- On true, fair and interactive analysis of the Rules and in particular Rules 6 to 13 the conclusion is irresistible and compelling that where during any period, a manufacturer intimates its intention not to operate a packing machine and the same is sealed by the authorized officers, such machine is deemed have been uninstalled in terms of Rule 6(5). Third proviso to Rule 9 provides that in case of increase in the number of operating packing machines in the factory during the month on account of addition or installation of packing machines, the differential duty amount, if any, Shall be paid by the 5th day of the following month. In the facts of this case, the sealing of the 12 machines of the appellant occurred prior to 1.7.2013. The machines were inoperative during 1.7.2013 to 7.7.2013. The machines were unsealed and reinstalled on 8.7.13. This is evident from the abatement order dated 20.9.2013. In the circumstances under the third proviso to Rule 9, the duty was payable by the 5th of August, 2013. Duty was in fact paid on 27th July, 2013. There is therefore no delayed payment of duty warranting levy of interest under Section 11AA of the Act.

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• 2016 (2) TMI 717
  Recovery of excess amount of rebate sanctioned to the appellant - extended period of limitation invoked - Held that:- As the show cause notice has been issued by invoking extended period of limitation without alleging fraud, collusion, willful mis-statement suppression or contravention of any provision of Act or Rules with malafide intention not to pay the duty. Therefore, we hold that show cause notice issued to appellant is barred by limitation. Consequently, the demands are set aside. In these circumstances, the impugned order is set aside, appeal is allowed with consequential relief, if any. - Decided in favour of assessee

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• 2016 (2) TMI 716
  Conversation of saree into a designer saree - whether such conversion is not a process of manufacture as per Section 2 (f) of the Central Excise Act, 1944 - duty demand - Held that:- We are also in agreement with the finding of the learned Commissioner (Appeals) and hold that as the respondent had purchased sarees and did embroidery and hemming work thereon will not change the character of sarees, therefore, the activity undertaken by the respondent does not amount to manufacture as per Section 2 (f) of Central Excise Act, 1944, consequently, not excisable. In these terms, we do not find any infirmity in the impugned order, therefore, appeal filed by the Revenue is dismissed. - Decided in favour of assessee

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• 2016 (2) TMI 715
  Excise duty demand - work through job worker - Held that:- Central Excise duty is payable on manufacturing activity by the manufacturer. The manufacturing activity of the furniture at the site is by the job worker and not the appellant. The written contract between the appellant and subcontractor is not disputed by the revenue. The sub contractor is required to purchase material, procure his own labour to execute the contract given to him. If that be so, the manufacturing of furniture comes in to existence at the site, in the hands of the job worker. The judgement of the Tribunal in the case of Raymond Ltd. (2014 (12) TMI 947 - CESTAT NEW DELHI) is applicable in this case. Secondly, we find that appellant has given back-to-back contract to the subcontractor by a written agreement, a fact which was not on records in the appellant's own case in an earlier issue wherein the same allegations were levelled against the appellant. This factual difference in the case in hand was not considered by the adjudicating authority while deciding the issue. Thus we hold that the impugned order is incorrect and unsustainable - Decided in favour of assessee

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• 2016 (2) TMI 714
  Penalties imposed under Section 11AC and Rules 25 and 26 of the Central Excise Rules - Duty was deposited before issuance of SCN - Held that:- As there is no dispute about the fact that such short payment, which according to the appellant has occurred inadvertently, on account of non-computation of the value of clearances, was detected by themselves only. The said fact of exceeding the exemption limit came to the notice of the appellant by way of their own audit. As such, in such a scenario, no mala fide can be attributed to the assessee. The differential duty already stands deposited by the appellant immediately after the detection of the mistake, along with interest. The demand of interest is in the nature of a penal action. I fully agree with the learned advocate that in such a scenario no other proceedings should have been initiated against the appellant. The legislative intent for creation of the said sub-section is to avoid any futile litigation, which purpose stands defeated by the lower authorities by issuing show cause notice to the appellant. Having said so we set aside the impugned orders of the authorities below upholding the penalties imposed under Rules 25 and 26 of the Central Excise Rules. Inasmuch as penalties stand set aside, imposed in terms of the above Rule, no infirmity can be found for non-imposition of penalty under Section 11AC. Accordingly the Revenue’s appeal is required to be rejected. - Decided in favour of assessee

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• Indian Laws

• 2016 (2) TMI 721
  RTI - copies of ACC note on the ground that the information sought forms part of Cabinet papers and the same is exempted from disclosure under Section 8(1)(i) of the RTI Act - Held that:- The Commission observes that in the matter relating to the ACC note, a final decision has been taken and the matter is over. Hence, in view of the proviso to Section 8(1)(i) the information pertaining to the matter has to be made public. The Commission, therefore, directs the CPIO to provide (i) copies of the pages of ACC note as sought by the appellant and (ii) information pertaining to File 6/7/2007EO MMI within a period of four weeks from the date of the receipt of a copy of this order.

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