TMI Tax Updates - e-Newsletter
February 28, 2015

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Supply of drugs, medicines, implant, stents, valves are integral to a medical services & cannot be held as sale - VAT is not applicable - HC

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• Audio-conferencing / web-conferencing services - prima facie covered as Telecommunication services and not as Business Support Service - Tri

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• Wealth-tax would not be levied on such residential property that has been let out for a period of minimum 300 days in a year - Tri

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• Supply of tangible goods -transport of passengers by air -charter hiring of helicopter -Levy of Service Tax confirmed for normal period -Tri

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Articles

1. THE RELEVANCE OF 'PROVISO'

   By: Dr. Sanjiv Agarwal

2. Highlights from Railway Budget - 2015

   By: CSSwati Rawat

3. CENVAT CREDIT REVERSAL ON REMOVAL OF CAPITAL GOODS AS SCRAP/WASTE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. RBI Reference Rate for US $

2. National Company Law Tribunal

3. Regulation of Salary

4. Contribution to Political Parties

5. Corporate Frauds

6. Competition Commission of India

7. Dr. Kshatrapati Shivaji, IAS(MH:86) Appointed as Chairman and Managing Director, Small Industries Development Bank of India(SIDBI) on Deputation Basis for a period of Three Years

8. ED Investigation on Black Money

9. Recommendations made by the Shome Committee/Tax Administration Refroms Commission

10. Rashtriya Swasthya Bima Yojana; Provides Health Insurance to Unorganized Workers Belonging to BPL Category and their Families

11. Cut in Repo Rate

12. Payment of Dividents from Public Sector Banks

13. Economic Survey 2014-15 - Volume II

14. Economic Survey 2014-15 - Volume I

15. Inflation shows a declining trend during the year 2014-15 (April-December)

16. Foodgrains production for 2014-15 estimated at 257.07 million tonnes; will exceed average food grain production of last five years by 8.5 million tones

17. From Carbon Subsidy to Carbon Tax: India’s Green Actions

18. Food Subsidy Bill stands at ₹ 107823.75 crore during 2014-15 (upto January, 2015), shows an increase of 20% over previous year

19. Create National Common Market in Agricultural Commodities: Economic Survey 2014-15

20. Revive public investment to improve investment climate: Economic Survey 2014 – 15

21. Improvement in Female Literacy and Educational Challenges

22. Wiping Every Tear from Every Eye: The Jan Dhan Yojana, Aadhaar and Mobile Numbers Provide the Solution

23. A Growth Rate of over 8 Per Cent Expected for the Coming Year

24. Government Remains Committed to Fiscal Consolidation; Economic Survey says Enhanced Revenue Generation is a Priority

25. Infrastructure Growth in terms of Eight Core Industries Higher than Industrial Growth since 2011-12

26. India’s National Solar Mission Being Scaled up Five-Fold to 100,000 Megawatts

27. India needs to create additional Fiscal Space: Economic Survey 2014 – 15

28. Economic Survey Recommends Reform of Railway’s Structure, Commercial Practices, Overhaul of Technology

29. Skill Development and Employment are major Challenges: Economic Survey

30. Economic Survey 2014-15 Highlights

31. The Fourteenth Finance Commission (FFC) will enhance Fiscal Federalism in India: Economic Survey 2014-15

32. Government approves a ₹ 200 crore Central Sector Scheme for implementing e-platform for agri-marketing

33. Hyper-Growth in Tech start ups in India, says Economic Survey on Services Sector

34. Services Sector Clocks Double Digit Growth

35. External Sector is returning to the path of strength and resilience: Economic Survey

36. Government Remains Committed to Fiscal Consolidation; Economic Survey says Enhanced Revenue Generation is a Priority

37. Major Reform Initiatives Undertaken by Government in Banking, Insurance and Financial Sector

38. Economic Survey highlights the need for balance between ‘Make in India’ and ‘Skilling India’

Notifications

Customs

1. 26/2015 - dated 27-2-2015 - Cus (NT)

Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001.

Circulars / Instructions / Orders

VAT - Delhi

1. 27/2014-15 - dated 27-2-2015

Special drive for disposal of objections relating to mismatch of Annexure 2A/2B cases for the Assessment Year 2012-13.

Central Excise

2. 995/2/2015 - dated 27-2-2015

Central Excise and Service Tax Audit norms to be followed by the Audit Commissionerates–reg.

Highlights / Catch Notes

Income Tax

• High Court Validates 6.5% Additional Interest Payment Despite Revenue's Classification as Tax Planning Scheme.

  Case-Laws - HC : Revenue splitted the transactions in such a manner that it upheld the genuineness of borrowing, payment and receipt of interest but when question of considering payment of additional interest of 6.5% came into consideration, it termed the said part of transaction as colourable device/tax planning - expenditure allowed - HC
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• Penalty Confirmed for Lack of Details on R&D Capital Expenditure u/s 271(1)(c.

  Case-Laws - HC : Penalty under section 271(1)(c) - disallowance of capital expenditure of Research and Development - The facts material to the computation were not produced - levy of penalty confirmed - HC
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• Deduction Dispute Over Section 80-IA: Electricity Assets from Tata Tea Ltd. Not Attributed to Assessee Company.

  Case-Laws - AT : Deduction under section 80-IA - since the plant and machinery used for transmission and distribution of electricity has been acquired from Tata Tea Ltd., it cannot be said that the book value appearing in the books of Tata Tea Ltd. as on April 1, 2004 relates to the assessee-company - AT
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• Tax Deduction Dispute for Cooperative Society's Banking Services u/s 80P(2)(a)(i) Examined.

  Case-Laws - AT : Disallowance of deduction u/s 80P(2)(a)(i) - carrying on business of banking facilities to its members and to the public - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members - AT
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Corporate Law

• High Court Division Bench erred in allowing contempt appeal, overturning K.S. Raju's conviction for violating CLB order.

  Case-Laws - SC : Respondent K.S. Raju wilfully disobeyed the order of CLB and breached the undertaking given to CLB, and thereby committed Contempt of Court subordinate to High Court as such the Division Bench of the High Court has erred in law in allowing the Contempt Appeal No. 3 of 2007 filed by K.S. Raju and setting aside his conviction and sentence. - SC
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Wealth-tax

• Proposal to Exempt Let-Out Residential Properties and Commercial Establishments from Wealth-Tax if Rented 300+ Days Annually.

  Case-Laws - AT : Wealth-tax is not levied on productive assets, and in view of that logic, it was proposed that wealth-tax would not be levied on such residential property that has been let out for a period of minimum 300 days in a year and to exempt commercial establishments and complexes from the ambit of wealth-tax - AT
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Service Tax

• CENVAT Credit Permitted for Service Tax on Rent-a-Cab Services for Transporting Officials and Guests to Factory Premises.

  Case-Laws - AT : CENVAT Credit - Service Tax paid on rent-a-cab services which were used for transporting of officials and guests to and from the factory premises - Credit allowed - AT
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Central Excise

• Delayed Cenvat Credit Claim: Entitlement Remains Valid Even Beyond One-Year Limit.

  Case-Laws - AT : Cenvat credit - Cenvat credit has been availed with inordinate delay - it does not mean that if the credit is not taken within one year it is not entitled to take credit. - AT
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• Revenue Appeals Dismissed Due to Invalid Review Authorization, Ignoring Merits of Proceedings.

  Case-Laws - AT : Appeals filed by the Revenue filed on the basis of an invalid Review authorization deserve to be dismissed as not maintainable on this ground alone, without further going into the merits of these proceedings. - AT
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VAT

• Medical Supplies Integral to Services, Exempt from VAT Under Punjab & Haryana Acts: No Separate Sale Classification.

  Case-Laws - HC : The supply of drugs, medicines, implant, stents, valves and other implants are integral to a medical services/procedures and cannot be severed to infer a sale as defined under the Punjab or the Haryana Act and therefore, are not exigible to value added tax - HC
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• Commissioner Not in Contempt for Ignoring Tribunal Order; Errors Corrected by Superior Forums, No Malice Found.

  Case-Laws - HC : Whether Commissioner has indulged in “disobedience” or that his order bordered on “contempt” by not following the direction of the tribunal - Held no - errors do occur and the hierarchy of superior forums (appellate etc.) is provided to bring in corrections. Wrong orders passed by the forum lower in order, unless actuated by malice, do not necessarily undermine “majesty of law” or lower the dignity of superior authorities. - HC
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• Appellate Tribunal Can Direct Sales Tax to Compound Offense u/s 81, Despite FIR and Charge Sheet Filed.

  Case-Laws - HC : Compounding the offences - Section 81 of DVAT 2004 - Whether the Appellate Tribunal, Value Added Tax can give direction to the Sales Tax Department to compound a FIR which was registered and charge sheet has been filed by the police department - Held Yes - HC
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Case Laws:

• Income Tax

• 2015 (2) TMI 996
  Disallowance of interest u/s 57(iii) - AO observed the transaction as colourable device / tax planning - Held that:- It is an admitted fact that the Revenue has not disbelieved the loan transaction of 3 crores with the company, namely, Arvind Mills Ltd. at the rate of 18.5% p.a. and payment of interest at the rate of 12% to the said four companies where, the appellant - Assessee made investment. It is not in dispute that the appellant - Assessee invested the amount equally in the above four companies so as to get interest at the rate of 12% p.a. It is not a case of the Revenue that the estimated book value of the shares of the said company, as reproduced hereinabove, is not true or correct. Thus, the transaction of borrowing of 3 crores and payment of interest at the rate of 18.5% made by the appellant - Assessee to Arvind Mills Ltd. and, in turn, receipt of 12% interest by the appellant - Assessee from the investment made by it in the above four companies are believed and, therefore, the said transactions are genuine in nature. To disallow the deduction under Section 57(iii) of the Act, the assessing authority considered the transactions as loan and not as OCDs. The investment made by the appellant - Assessee in the said four companies were not loss making concern at the relevant time and, therefore, the decision of the appellant - Assessee to borrow the money at a higher rate of interest and to invest the same in the said four companies at the rate of 12% with a hope to get shares in future was made to earn income. So, it appears that the Revenue splitted the transactions in such a manner that it upheld the genuineness of borrowing, payment and receipt of interest but when question of considering payment of additional interest of 6.5% came into consideration, it termed the said part of transaction as colourable device/tax planning. So, the question is whether the Revenue can split the transaction in the manner it did so. It is true that the Court cannot re-examine/re-appreciate the findings of fact recorded by the Tribunal but as a matter of fact, after splitting transaction, as done in the case on hand, the Tribunal was required to term/treat the entire transaction as a whole colourable device. Had it been so, the matter would stand on different footing. In our opinion, the Tribunal cannot split the transaction into two parts or more. For that purpose, we made searching inquiry from learned advocate Mr.Bhatt to show any provision of law under the Act or precedent which empowers the Revenue to split transaction into two or more parts and then to hold any one particular part of said transaction as legal/permissible/admissible and other part of the same transaction being colourable device. Learned advocate Mr.Bhatt could not lay his finger on any provision/ precedent which empowers the Revenue to do so. So, once the primary transaction of lending, borrowing and passing of payment of interest is found to be genuine, merely because it resulted into equal amount of income, it would not become a colourable device and consequently earning any disqualification. - Decided in favour of Assessee.

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• 2015 (2) TMI 995
  Deduction in respect of income of co-operative societies - Interest earned on short- term deposits - whether were only investment in the course of activity of providing credit facilities to members and that the same cannot be considered as investment made for the purpose of earning interest income - Held that:- In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME -TAX III, HYDERABAD VS . ANDHRA PRADESH STATE COOPERATIVE BANK LTD ., reported in (2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT). In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. - Decided in favour of assessee.

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• 2015 (2) TMI 994
  Penalty under section 271(1)(c) - disallowance of capital expenditure of Research and Development - whether the Tribunal was justified in upholding the imposition of penalty pertaining to addition of Research and Development expenditure? - Held that:- In the present case at all stages, whether in Quantum Proceedings or Penalty Proceedings the materials were the bills which were required to be produced. It was not the case of the Assessee that these have been destroyed or lost. The claim was that there was other material. However, it has been concurrently found that the bills have not been produced. In these circumstances, the expenses were disallowed and the penalty was imposed. That was on the satisfaction that the Assessee has furnished inaccurate particulars. The facts material to the computation were, therefore, not produced and in relation to such an act on the part of the Assessee, it is open for the authorities to take assistance of section 271(1)(c) read with explanation 1(B). This was a case where the explanation gave was not sustained. The genuineness of the claim itself was in issue and in our opinion the Tribunal while upholding the order of Commissioner of Income Tax (Appeals) and that of the Assessing Officer partially did not act perversely nor committed an error of law apparent on the face of the record. No substantial question of law - Decided against assessee.

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• 2015 (2) TMI 993
  Rejection of stay application - non recording of reasons - Held that:- As relying on Hitech Outsourcing Services Versus Income Tax Officer [2015 (2) TMI 209 - GUJARAT HIGH COURT] suffice it to observe that when the stay application is to be considered and decided, it would be required for the concerned authority to record the reasons and then to reach to the ultimate conclusion as to whether the stay should be granted or not and if yes on what condition. In absence of any reasons, the order cannot be sustained. The order can be said to be nonspeaking order since no reasons are mentioned. If the facts of the present case are considered in light of the above referred view taken by this Court, the decision for rejection of the stay application at Annexure-S (Page 372) cannot be sustained in the eye of law. Hence, the same deserves to be quashed and set aside with the further direction that the stay application shall stand restored to the file of the competent appellate authority and the stay application shall be considered on merits and appropriate decision shall be taken after recording reasons. - Decided in favour of assessee for statistical purposes.

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• 2015 (2) TMI 992
  Deduction u/s 80HHC - AO restricted the claim after adjusting the trading loss to its manufacturing profits and adding of 90% export incentives - CIT issued a notice u/s 263 to held that the respondent is not entitled to claim deduction under Section 80HHC - whether Commissioner of Income Tax could not have exercised jurisdiction under Section 263 to revise an order of assessment dated 30 January 2004 when the same has been a subject matter of appeal before the Commissioner of Income Tax (Appeals) - Held that:- When the assessment order was passed, absent the amendment of 2005, it was not open to the Assessing Officer to set off losses against export incentives. In terms of the first proviso, only profits could be increased by export incentives and therefore the order of assessment dated 30 January 2004 was erroneous and prejudicial to the interest by the Revenue and powers under Section 263 of the Act could legitimately be exercised by the CIT. For the purposes of this appeal even if assume (without having examined the same) that the Revenue is correct and set aside the impugned order and restore the matter to Assessing Officer, yet the Assessing Officer will while recomputing the benefit available under Section 80HHC of the Act will have to extend the benefit of the retrospective amendment resulting to the same result as found in the Assessment Order dated 30 January 2004. It is relevant to note that even the Revenue does not dispute the applicability of retrospective amendment. In the above view, we do not deem it necessary to answer the substantial question of law as formulated particularly in view of the retrospective amendment making the challenge academic. - Decided against revenue.

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• 2015 (2) TMI 991
  Disallowance u/s 14A - assessee/appellant had declared tax free dividend income to the tune of 2,71,83,864/- - Held that:- The statutory disallowance mandated by Section 14A - the procedure to which - has been subsequently spelt out in Rule 8D, has been interpreted in Maxopp [2011 (11) TMI 267 - Delhi High Court] and Taikisha (2014 (12) TMI 482 - DELHI HIGH COURT) in a particular manner, i.e., that the AO would first needs to be satisfied as to the assessees explanation, or its absence [see Section 14A (3)] before coming to the conclusion that some expenditure was in fact incurred or deemed to have been incurred. Though the grounds of appeal in the CIT (A) proceedings do not expressly spell out this aspect, it cannot be denied that this matter was agitated before the CIT (A) for hearing as well as before the ITAT. At the same time, this Court notices that in both Maxopp and Taikisha, and the ultimate order made by both the Division Benches was to remit the matter for fresh consideration by the AO. Perhaps this was necessitated by the fact that the interpretation of Section 14A - guided by Rule 8D was in the light of the decision in Godrej and Boyce Mfg. Co. Ltd. vs. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] and the fact that the Rule 8D was brought in later, i.e., w.e.f. AY 2008-09 - Thus matter is remitted to the Assessing Officer for consideration whether, in fact, there was any necessity for invoking the Section 14A (3) read with relevant part of Rule 8D - Decided in favour of assessee for statistical purposes.

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• 2015 (2) TMI 990
  Deemed dividend - assessee had received unsecured loan of 1,25,00,000 from M/s Kohli Housing s word and nothing is on record to establish the credibility of Sh. Om Prakash who does not identify himself by a PAN and merely as the husband of Smt. Dayawati, his education, his legitimate source of livelihood, financial background etc. are all left unaddressed as would be evident from answers to Question No-1 put by the AO to Sh. Om Prakash on 26.12.2008 as opposed to Question No.-1 put by the AO to his wife on 14.12.2008. we hold that the AO erred in making the addition of 10 lakh and the CIT(A) erred in conforming the same based on the statement of a tutored witness who as per her own statement had no personal knowledge of the events and relied blindly in good faith on hearsay information given to her by her husband. Since in the facts of the present case nothing has been placed by the department apart from the statement of a tutored witness the action cannot be upheld. Accordingly the remaining additions sustained by the CIT(A) are also ordered to be deleted. - Decided in favour of assessee. Considering the other sale instances wherein the AO applied a flat rate of 6,60,000/- per acre and the CIT(A) proceeded to sustain the addition on the basis of value adopted for stamp duty purposes found recorded in the Registered Sale Deeds itself, we find that since the whole action had started on the basis of the fact that Smt. Dayawati has alleged that the figures given in the sale deed were not reliable and the same on facts has not been upheld by us in the circumstances the very edifice on the basis of which the additions have been made having fallen the remaining additions fall. Thus where the very basis justifying interference by the Revenue stands demolished the occasion to interpolate the amounts in the absence of any other cogent evidence does not arise. Since the sale price remains undisturbed the addition on brokerage etc. also does not survive which was made by the AO u/s 69C and partly sustained by the CIT(A). - Decided in favour of assessee.

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• 2015 (2) TMI 989
  Disallowance of deduction under section 80-IC - assessee was not carrying on any manufacturing activity as held by AO - complete procedure was not being carried out in Himachal Pradesh, the assessee was not entitled to the claim of deduction under section 80-IC of the Act - CIT(A) deleted part addition - Held that:- In the totality of the facts and circumstances, we are in conformity with the findings of the Commissioner of Income-tax (Appeals) that the old machinery held by the assessee has been transferred from Ludhiana to Parwanoo which in-turn was used for the manufacturing process undertaken by the assessee and the total value of the said plant and machinery transferred was of 9,500 only. In the first year of start of business, the assessee had established plant and machinery totalling 3,94,500 and the value of 9,500 being less than 20 per cent. cost of machinery, we find no merit in the plea of the Assessing Officer in this regard and upholding the observations of the Commissioner of Income-tax (Appeals), we hold that the assessee was entitled to claim of deduction under section 80-IC of the Act. The manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity. During the appellate proceedings, evidence was filed by the assessee that only 5 per cent. of the total manufactured goods were subjected to printing and bleaching process which admittedly was being carried out at Ludhiana. The learned Departmental representative for the Revenue failed to controvert the said findings of the Commissioner of Income-tax and in the absence of the same, we find no merit in the order of the Assessing Officer in holding that the assessee was not entitled to the claim of deduction under section 80-IC of the Act. As during the relevant period, the assessee was engaged in carrying on of manufacturing activity and merely because the unit was closed on a subsequent date, the claim of deduction under section 80-IC of the Act cannot be denied. In view of the discrepancies in mentioning the numbers of various vehicles and also co-relating the information received from the Commissioner Excise and Taxation, Himachal Pradesh, with the facts of the case, we, accordingly uphold the order of the Commissioner of Income-tax (Appeals) and in view of the fact that the assessee has failed to reconcile the passage of vehicle through the barrier carrying the raw material, certain disallowance of deduction under section 80-IC is merited in the case. The total cost of raw material claimed to be transported through such vehicles was 45,33,495 and the same corresponds to sales of 67,66,410. The assessee had declared gross profit rate of 37 per cent. and applying the same to the sales, the profit works out to 25,03,572.Therefore, we hold that the profits of the eligible business are to be reworked and profits to the extent of 25,03,572 are not liable for claim of deduction under section 80-IC of the Act. However, deduction under section 80-IC(2)(a)(ii) of the Act is to be allowed to the assessee on the balance sales of 97,34,564. - Decided against revenue.

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• 2015 (2) TMI 988
  Expenditure on purchase of software disallowed - Held that:- Respectfully following the decisions of the Hon ble High Court of Karnataka in the case of IBM India Ltd. (2013 (10) TMI 1225 - KARNATAKA HIGH COURT) and the co-ordinate bench of this Tribunal in the assessee s own case for Assessment Year 2001-02 we hold that the expenditure incurred by the assessee for purchase of application software is revenue in nature. - Decided in favour of assessee. Provision for expenses related to HRD, Retail, Consumer product assets and Retail Deposit Operations - AO disallowed claim as these are provisions and had not crystallized or arisen during the course of the year - Held that:- It is settled principle that if expenditure is crystallized, then even if the payment is due at a later date, it is allowable expenditure. It is seen from the submissions of the assessee in this regard that, though the assessee has categorized these expenses as provisions, the same represents expenditure actually crystallized and the amounts are eligible for being claimed as deduction in view of the fact that the assessee is following the Mercantile System of Accounting.These expenses appear to be more in the nature of write off. Thus we are satisfied that these amounts are allowable expenditure while computing the assessee s total income - Decided in favour of assessee. Non-applicability of Section 115JB - whether provisions of MAT are not applicable to the assessee since it is a banking company - Held that:- As decided in assessee s own case [2015 (2) TMI 892 - ITAT BANGALORE] for Assessment Year 2002- 03, provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. - Decided in favour of assessee. Disallowance of provision for expenses u/s. 115JB - Held that:- Once the provisions of section 115JB of the Act are not applicable to the assessee, which is a banking company, consequently, the disallowance of provisions for expenses made by the authorities below while computing the ‘book profits’ under Section 115JB of the Act also fails.- Decided in favour of assessee. Broken Period Interest - CIT(A) held that the broken period interest accrued but not received should not be brought to tax until the receipt thereof - Held that:- Respectfully following a decision of the Hon ble Karnataka High Court in the case of Karnataka Bank Ltd. (2014 (11) TMI 221 - KARNATAKA HIGH COURT), we hold that the broken period interest does not constitute income in the year under consideration as it has not become due and payable / receivable as per the provisions of the Act.- Decided in favour of assessee. Write off of Non-Convertible Debentures - CIT (A) upheld the claim of the assessee that the amount represents write off and allowed the same as deduction - Held that:- Co-ordinate bench of this Tribunal, in the assessee s own case for Assessment Year 2002-03 has held that the loss in question is incidental to the business of the assessee and had to be allowed as a diminution in the value of stock-in-trade. We also find that the learned CIT (Appeals) in the impugned order has only mentioned the alternate submissions of the assessee, that since the said debentures were treated as investments in the ‘available for sale’ category, any diminution in the value of such investment is eligible for deduction. The learned CIT (Appeals) has not rendered any finding that the alternate submissions of the assessee is acceptable or otherwise. - Decided in favour of assessee. Disallowance of operational losses - CIT(A) held that these amounts are eligible for deduction, holding them to be business losses arising out of technical defaults incurred by the assessee in day-to-day revenue earning activity. - Held that:- these amounts represent operational losses on account of debit balance lying in the accounts where customers accounts were overdrawn and lying in such accounts for a period of more than one year. The discrepancies arose due to delayed posting of offline ATM transactions, reversals for suspect ATM transactions which were subsequently debited back from customers accounts, offline ATM transactions not debited to customers accounts done subsequently and credits given to wrong ATM claims which were debited back, etc. Evidently, these are operational mistakes as admitted by the Assessing Officer. After having held these amounts as having arisen out of operational mistakes, the Assessing Officer was wrong in holding these to be capital in nature. As these amounts have been written off as irrecoverable, we concur with the view of the learned CIT (Appeals) that these are eligible for deduction. - Decided in favour of assessee. Mark-to-Market Losses - Held that:- In the case on hand a contract has been concluded and a liability has crystallized. In this factual matrix, from the wordings of the Instruction, it follows that the loss arising out of the forward contract is not notional. In such a case, the CBDT Instruction requires the Assessing Officer to examine whether such a loss is on account of a speculative transaction as contemplated in section 43(5) of the Act. As discussed earlier, in the case on hand, there has been an existing contract with a binding obligation accrued against the assessee when it entered into derivative contracts. Hence, transaction in question cannot be called as a speculative transaction. Thus we hold that the assessee s claim in respect of MTM losses is allowable as revenue expenditure. - Decided in favour of assessee. Diminution in value of investment under AFS / HFT Categories - Held that:- We concur with the decision of the learned CIT (Appeals) in allowing the assessee s claim of diminution in the value of investments under the AFS/HFT categories as relying on assessee s own case for the A.Y. 2007-08 - Decided in favour of assessee. Insurance Premia for Housing Loan - Held that:- he expenditure incurred on insurance premium on housing loan are revenue in nature and is an allowable deduction. It is not the case of the Assessing Officer that these expenses are not for the purposes of the assessee s business or that they are capital in nature. These expenses are related to the housing products which are very much a part of the assessee s business activities and the payment of insurance premium on the housing products is also not capital in nature. Once the expenditure is accepted to be revenue in nature and incurred for the purposes of business, then it is allowable in the year in which it is incurred. There is no concept of deferred revenue expenditure in the scheme of the Act and unless otherwise expressly provided, the revenue expenditure is to be allowed in full, in the year in which it is incurred. - Decided in favour of assessee.

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• 2015 (2) TMI 987
  Penalty u/s 271D - violation of provisions of section 269SS - CIT(A) deleted penalty levy - Held that:- The CIT(A) has clearly recorded the finding that there was the business transaction between the assessee firm and M/s Rups Craft Inc. and all the transactions with the said party were business transactions only and there was no transaction of loan or deposit. It was also observed that in fact there was no cash payment. On the other hand, the payment of 15,45,000/- was made by account payee cheque No.57308 to M/s Rups Craft Inc. by Shri Inderpal Singh Wadhawan, partner of the firm and consequently, the entry was passed in the assessee’s books of account. Therefore, there was no cash transaction. Both these findings recorded by the CIT(A) remained uncontroverted before us. We, therefore, find no justification to interfere with the order of learned CIT(A) in this regard. The same is sustained and the appeal of the Revenue is dismissed. - Decided in favour of assessee. Penalty u/s 271E - violation of provisions of section 269T - CIT(A) deleted penalty as partner and partnership firm is one and the same person in the eyes of law and provision of section 269T are not applicable on the transaction entered by the partner with the firm - Held that:- All the payments were made by M/s Vardaan Fashion, a partnership firm in which assessee is a partner. All the payments were made by account payee cheque and in the assessee’s books of account, there was only a journal entry (book entry), thus, the provisions of Section 269SS/269T cannot be said to have been violated. The factual finding recorded by the CIT(A) that the payment was for share application money has not been controverted by the Revenue before us. Therefore, the same is accepted and we have no hesitation in holding that payment for allotment of shares as share application money cannot be said to be repayment of loan or advance so as to violate provisions of Section 269T. - Decided in favour of assessee. Penalty u/s 271D - violation of provisions of section 269SS - Held that:- The acceptance of the cash by the husband from his wife cannot be said to be taking of the loan or advance in strict sense of Section 269SS. We, therefore, find no infirmity in the order of learned CIT(A) wherein he cancelled the penalty levied under Section 271D for the acceptance of cash by the assessee from his wife. We, therefore, uphold the order of learned CIT(A) and dismiss the appeal filed by the Revenue. - Decided in favour of assessee.

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• 2015 (2) TMI 986
  Deduction of TAS for purchase of programmes - Demands u/s 201/201(1A) - assessee was either deducting TAS at a lower rate or was not deducting any TAS at all on various payments being made by the assessee - carriage fee /placement fee paid by the assessee to various cable operators/MSO/DTH service providers- whether the service provided was work within the meaning of section 1940 and not technical service u/s 194J? - Held that:- CIT(A) has applied the provisions of the Act, before coming to a conclusion, that u/s 194C "work includes production of programmes". We find that similar issue was contested before the Hon’ble Delhi High Court in the case of CIT vs Prasar Bharti, reported in (2006 (11) TMI 159 - DELHI High Court ) and followed by ACIT(TDS) vs Sahara One Media event management fees paid by the appellant to its event managers cannot be held to be in the nature of ….for technical services in the current year. Since the Appellant has already deducted TDS under section 194C of the Act, the AO is directed not to consider the Appellant to be an assessee in default under Section 201(1) of the Act as there is no short deduction by the Appellant. - Decided in favour of assessee. TDS on Equipment Hire Charges - Held that:- CIT(A) has applied the provisions of the Act and have delved on the same. We also find that the AO termed the payment made for hire charges as FTS, which the CIT(A) has categorically demolished. We find that similar issue was dealt with by the coordinate Bench at Mumbai in the case of ACIT (TDS) vs Sahara One Media & Entertainment Ltd., [2014 (4) TMI 113 - ITAT MUMBAI] wherein it was held that payment made by assessee under a contract, which is a part of production of programme, TDS is required to be deducted u/s 194C. No mistake in the order of the CIT(A), which we sustain on the issue, thereby rejecting the ground as raised by the department.- Decided in favour of assessee. TDS on reimbursement of commission expenses - CIT(A) deleted the tax charged on the assessee. - Held that:- In the instant case, the assessee had only made good the payments made by Zee Turner Ltd., which it had paid on behalf of the assessee. Hence there was no profit element involved in those payments, being "reimbursements" made by the assessee to Zee Turner Limited. In the proceedings before the revenue authorities, the assessee was able to demonstrate the different characters of payments made by it. The payments, where Zee Turner Limited paid its taxes, the assessee was under no obligation and/or became defaulter u/s 201(1). We find ourselves benefitted by the decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages [2007 (8) TMI 12 - SUPREME COURT OF INDIA ], wherein it was held that where the deductee/recipient has already paid taxes on amount received from deductor, the department cannot recover the tax on the same amount, as that would result in double taxation. - Decided in favour of assessee. short deduction of TAS - Held that:- As the assessee submitted the details and proofs of payment of tax and interest no short deduction proved. CIT(A)correctly deleted the demand as raised by the AO. - Decided in favour of assessee. Payment of commission to non-executive/independent directors - AO came to the conclusion that these directors were actually employees of the company and were paid salary, which was shown as commission to avoid withholding tax - Held that:- AO went on wrong track and did not consider the provisions/expressions used in the relevant section, i.e. 194J. Since the CIT(A) has applied the right law, we are inclined to sustain the order of the CIT(A)held that these directors did not have any employer - employee relationship and nor did they receive any pecuniary benefits. Payment of commission to them, itself, could not be categorised as salary, consequentially reject the ground as raised by the department. - Decided in favour of assessee.

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• 2015 (2) TMI 985
  Deduction u/s.37(1) - CIT(A) allowed 50% of the claim - Held that:- From the written submission filed before the CIT(A), we find the assessee has stated that the business of the assessee is that of liaisoning, maintaining good relationship with politicians, Govt. authorities and also clients. The assessee has to make payments to mediators for further liaisoning with various authorities and politicians to obtain various permissions and sanctions from Govt. departments. Therefore, he has made substantial payments towards clearance expenses, service charges, commission and brokerage expenses to the mediators. Therefore, the assessee is not expected to know their addresses and such persons are not likely to communicate their correct addresses. The assessee has paid such payments to mediators. We find the Ld. CIT(A) completely ignored the above submissions and allowed 50% of the expenses on the ground that payments have been made by banking channels and disallowance of such expenses will increase the profit percentage from liaisoning work. When the assessee has failed to discharge the onus cast on him by bringing sufficient evidence to prove that such expenditure is incurred wholly and exclusively for business purpose and the very nature of such expenses as stated by the assessee before the Ld. CIT(A) is against public policy, therefore, such expenses in our opinion cannot be allowed. Further, the Assessing Officer had also given a finding that the money has come back to the assessee indirectly. Under these circumstances, we are unable to uphold the order of the CIT(A) and the same is set-aside and the order of the Assessing Officer is restored. - Decided in favour of revenue. Amount in the form of advance - whether not income of the assessee? - Held that:- From the letter addressed by Nitro Tiles Ltd. to the assessee on 23-01-2007, we find Nitco Tiles Ltd. has given assessee an amount of 50,00,000/- as advance payment against the purchase of the property at Khandivali. Similarly we find Nitco Tiles Ltd., vide letter dated 01-04-2009 has confirmed the debit balance of the assessee in its books at 52,97,171/- as on 31-03-2009. All these details were very much available with the AO but he has not considered all these things. Since Nitco Tiles Ltd. has paid an amount of 50 lakhs as advance to the assessee for proposed purchase of land belonging to one Shri S.S. Patil and since the deal could not be materialised due to certain clearances, therefore, the assessee in our opinion has rightly shown the amount as advance in its books and the Ld.CIT(A) was justified in treating the same as advance and not revenue in nature. - Decided against revenue. Unaccounted expenditure - AO disallowed an amount of 8,65,924/- on adhoc basis being 50% of such expenses - .CIT(A) restricted such disallowance to 11,550/- and deleted the balance amount of 8,54,379/- - Held that:- No infirmity in the order of the CIT(A). Admittedly, the books of accounts of the assessee are audited and no adverse comments have been reported by the auditors. Since the assessee is engaged in the business of liaisoning and consultancy, expenses such as hotel expenses, travelling expenses, etc. are routine expenses and are required to be incurred. Similarly, the assessee has incurred an amount of 13,08,300/- as salary which in our opinion is commensurate with the business of the assessee. The assessee has filed sample copies of salary vouchers which were available before the AO. However, he is silent on the same. Similarly, we find from the paper book the details of various expenses filed before the AO. Under these circumstances, we do not find any infirmity in the order of the CIT(A) restricting the disallowance to 11,550/- being personal in nature as against 8,65,924/- made by the AO. - Decided against revenue. Unsecured loan - CIT(A) deleted the addition - Held that:- AO made addition of 25 lakhs being unsecured loan obtained from S.D. Corporation on the ground that assessee did not file any confirmation letter for such loan. We find the assessee filed such confirmation letter before Ld.CIT(A) and requested him for admission of the same as additional evidence under rule 46A of the I.T. Rules. Although such confirmation letter was forwarded to the AO by the Ld.CIT(A) for his comments in the form of a remand report, we find the AO did not bother to comply with the direction of the Ld.CIT(A). Further, there is no dispute to the fact that the amount has been received by cheque. We find the assessee during the impugned assessment year has received consultancy charges of 40,15,332/- from S.D. Corporation Pvt. Ltd., and the same has been credited to the P&L account of the assessee. Further, S.D. Corporation Pvt. Ltd. has deducted TDS from such payment. Therefore, when the commission received from S.D. Corporation is treated as genuine by the AO without any further query, therefore, its identity is very much proved. Although the confirmation letter filed by S.D. Corporation Pvt. Ltd. was forwarded to the AO by the Ld.CIT(A), we find the AO remained silent. This otherwise indicates that the AO has no grievance - Decided against revenue. Unexplained cash credit - CIT(A) deleted the addition - Held that:-Although the assessee has given general statement for explaining the source of such deposits, however, we find the assessee has not given any confirmation from the said parties nor proved their source to extend such huge payments. Under these circumstances, we are unable to accept the order of the CIT(A) on this issue deleting the addition made by the AO. However, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue back to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the source of such deposits and capacity of the payers. We hold and direct accordingly. - Decided in favour of revenue for statistical purposes.

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• 2015 (2) TMI 984
  Addition on account of rental income - addition of 4,00,285 on account of difference in value of immovable property located at Raj Villa, Kanti Factory Road, Patna and valued at 5,95,100 by the learned Departmental Valuation Officer against the value of 1,94,815 as declared by the assessee - Held that:- No incriminating material has been seized with respect to the undisclosed investment in the building, during the course of search and seizure operations. Probably no occasion with the Revenue has arisen to record reasons for referring the matter to the Departmental Valuation Officer. Accordingly, in the facts and circumstances of the case, the addition so made on the basis of Departmental Valuation Officer report by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is against the law and facts of the present case. Accordingly, the addition so confirmed by the learned Commissioner of Income-tax (Appeals) is bad in law and the Assessing Officer is directed to delete the addition so made. On merit also, the valuation report issued by the Departmental Valuation Officer is not reliable as there are several limitations of plinth area rate method applied. Also the valuation report submitted by the assessee has not been refuted by the Departmental Valuation Officer in spite of many opportunities given to the Departmental Valuation Officer during the course of proceedings under section 263 of the Act. It is also a fact on record that the assessee had submitted year-wise cash flow statement considering the receipts and expenses of the assessee before the Assessing Officer, which are of the accurate amount and the Assessing Officer has not cast upon any doubt in the entries in the cash flow statement and has not pointed out any defect in the same, which in fact, has been considered by the Assessing Officer for making addition to the returned income of the assessee. Thus no addition on this account can be made and so directed to be deleted - Decided in favour of assessee. Non deletion of addition of 8,18,998 on account of rental income from house property, located at Raj Villa, Kanti Factory Road, Patna by CIT(A) - Held that:- The learned Commissioner of Income-tax (Appeals) has taken note of annual rent of 2,76,360 derived from the Punjab National Bank for the ground floor of block A and has taken the same as basis for estimating the floor-wise rent for three floors of block A at a total of 6.62 lakhs, which is self-contradictory. Though he himself has accepted that except the ground floor of block A, the apartment was still under construction and the property was incapable of being let out prior to its completion. Therefore, there was no basis for adopting estimation of 6.62 lakhs for the three floors, which is highly excessive. It is also on record that ground floor of block A has been out to Punjab National Bank and is used for commercial purposes whereas other floors are used for residential purposes. The institutions like banks, etc., using properties for commercial purposes, normally paying higher rent than others used for residential purposes. Therefore, the learned Commissioner of Income-tax (Appeals) is not justified in estimating rent on the basis of rent received from Punjab National Bank for all the floors of block A. Also the estimation of 3,000 per flat in block B is without any basis. The assessee has submitted confirmations from the concerned tenants with regard to the rent paid by them, which is on record. Accordingly, the estimations made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) are without any basis and cannot be approved. here is no evidence with the Revenue to show that the assessee had collected more rent than what has been declared in the returns of income filed regularly with the Income-tax Department. Accordingly, no addition is called for on such account. - Decided in favour of assessee.

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• 2015 (2) TMI 983
  Disallowance u/s 40(a)(i) - non deduction of TDS on payments made to non-resident persons outside India for representation charges - whether the consideration paid by assessee to overseas nonresident agents can be categorized as FTS u/s 9(i)(vii) - Held that:- From the nature of services to be performed by the overseas agents, we are of the view that services rendered by the agents in this case are purely in the nature of advancement of business of the assessee company and cannot be categorized as managerial / technical / consultancy services. Accordingly, the consideration paid by the assessee cannot be classified as fee for technical services (FTS). Representation charges and commission paid by assessee were not liable to be taxed in India and consequently no tax was required to be deducted and therefore disallowance u/s 40(a)(i) was not warranted. - Decided in favour of assessee.

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• 2015 (2) TMI 982
  Disallowance u/s 40(a)(ia) - Held that:- Following the decision of CIT v/s VIRGIN CREATIONS [ 2011 (11) TMI 348 - CALCUTTA HIGH COURT ] amendment to the provisions of section 40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from April 1, 2005. Consequently, any payment of tax deducted at source during the previous years relevant to and from the assessment year 2005-06 can be made to the Government on or before the due date for filing return of income under section 139(1) of the Act. If payments are made as aforesaid, then no deduction under section 40(a)(ia) of the Act can be made. Admittedly in the present case, the assessee had deposited the tax deducted at source on or before the due date for filing return of income under section 139(1) of the Act and therefore the impugned disallowance deserves to be deleted - Decided in favour of assessee. Deduction on account of bad debts written off - CIT(A) allowed the claim - Held that:- In the case of Sabra Impex Ltd. (2011 (3) TMI 1553 - ITAT MUMBAI) a consistent view has been taken that non-realisation of export proceeds from a foreign party can be considered as a bad debt and written off and claimed as a deduction. It was also held that the fact that permission of the Reserve Bank of India has not been obtained for such write off will not be a bar to claim deduction on account of such bad debts written off.As far as the issue of applicability of the Explanation to section 37(1) of the Act is concerned, we are of the view that the aforesaid Explanation will apply only when an expenditure is incurred for any purpose which is an offence or which is prohibited by law. In our view, the sale proceeds to be received from a foreign buyer which already shown as income and which is now written off as irrecoverable, cannot be said to be an expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. - Decided against revenue.

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• 2015 (2) TMI 981
  Transfer pricing adjustment - international transactions in the `Back office support services segment’ - selection of comparables - Held that:- Accel Transmatic Ltd. (Seg.) - it can be seen from the Annual report of this company has three divisions, namely, Systems and Services Division, Technologies Division and Animation Division. A bare perusal of the nature of activities done by this company under this segment divulges that it is into software development services and also the sale of software products. On the other hand, the assessee in question is involved into rendering software non-development services, which are far away different from software development services. We, therefore, order for the exclusion of this company from the list of comparables. Avani Cimcon Technologies Ltd. - from the Annual report of this company, a copy of which is available in the paper book, it can be seen that this company is engaged in providing software development services. In view of the fact that the assessee is not providing any software development services, this company cannot be considered as comparable. We, therefore, order to eliminate this company from the list of comparables. Celestial Labs Ltd. - it is manifest from the Annual report of this company that the same cannot be considered as comparable on entity level when it has dealt not only with software products, but has also engaged itself into software development and also rendering services. In comparison with that, the assessee company is simply providing software nondevelopment services to its AEs. Flextronics Software Systems Ltd. (Seg.) - it is a software products company and is also providing software development services, even the segmental results of software development services cannot be equated with the activities undertaken by the assessee for its AEs. We, therefore, order to exclude this company from the list of comparables. Helios & Matheson Information Technology Ltd. - as find from the Annual accounts of this company it is engaged into similar business activity as is done by the assessee. After going through some pages of the Annual report, giving details about the nature of business activity done by this company, the ld. AR also candidly accepted that functional profile of this company is comparable with the assessee company. We, therefore, uphold the impugned order on the inclusion of this company in the list of comparables. Infosys Technologies Ltd. - It is an undisputed fact that the assessee rendered services to its AEs as a captive unit without retaining any rights in intellectual property in the work done by it. In contrast to that, Infosys Ltd. is a giant company in terms of risk profile, scale, nature of services, revenue ownership of branded/proprietary products, on site and offshore services, etc. As decided in CIT vs. Agnity India Technologies Pvt. Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] this company cannot be considered a comparable. Infosys Technologies Ltd., has been held to be not comparable with a company engaged in the business of development of software for its parent company - we direct not to consider this company as a comparable. KALS Information Systems Ltd. (Seg.) - The company consisting of STPI unit engaged software products and in development of software is also undertaking training activity of software professionals on online projects. Not only the revenues of the segment considered by the TPO also include the revenue from software products, but also from training imparted on commercial basis. When we consider the assessee’s functional profile, the only irresistible conclusion which can be drawn is that it is not a comparable company. Accordingly, this company is ordered to be expunged from the set of comparables. Lucid Software Ltd. - Considering the assessee’s balance sheet, it turns out that the assessee has also shown a particular amount under the head ‘Software’ in its Schedule of fixed assets, and, thereafter, it also claimed deduction on account of amortization during the year, leaving the balance unamortized amount under the head ‘Software.’ It shows that the assessee is also using its software for rendering the services in the similar manner as is done by Lucid Software Ltd. Apart from that, the ld. AR could not point out any functional difference with Lucid Software Ltd. We, therefore, approve the inclusion of this company in the list of comparables. Megasoft Ltd. (Seg.) - It is patent that the mergers/demergers largely influence the profitability of a company during the year of happening of such event, which makes it incomparable. As there have been acquisitions by Megasoft Ltd., during the year in question and the financial results of the erstwhile company stand included in the overall profitability of this company, respectfully following the precedents, we hold that this company cannot be considered as a comparable. Persistent Systems - The acquisition took place in this company during the relevant to the assessment year under consideration. Following the reasons given above while discussing the case of Megasoft Ltd., we order for the exclusion of this company from the list of comparables. Sasken Communication Technologies Ltd.- we find that the financial results of this company stand distorted due to certain acquisitions made by it during the relevant year. It also transpires from this Annual report that the companies getting merged with the assessee company also provided software services focused on telecom operating systems. Thus, it is abundantly patent that the segmental results taken by the TPO of this company have been influenced by the mergers and acquisitions taken place during the year, thereby making such financial results as incomparable. Following the reason given above, we order for the exclusion of this company from the list of comparables. Tata Elxsi Ltd. (Seg.) - Since the assessee is engaged in providing software non-development services to its AEs, this segment of Tata Elxsi Ltd., being that of software development services’ cannot be considered as comparable. It is, therefore, directed to be eliminated from the list of comparables. Wipro Ltd. (Seg.) - As the TPO has himself noticed that this company is engaged in providing software development services as against the assessee’s provision of software non-development services, we hold that this company cannot be considered as comparable. Non approving the use of multiple year data of comparables - Held that:- Nothing has been placed on record by the ld. AR to demonstrate that the case falls under proviso to rule 10B(4), which provides that the data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. In view of a plethora of decisions including the Special Bench decision in the case of Aztech Software Technologies Ltd. (2007 (7) TMI 50 - ITAT BANGALORE), we approve the view taken by the authorities below in considering only the current year’s data. - Decided against assessee. Seeking information u/s 133(6) by the TPO from the companies considered as comparable - Held that:- No embargo on the powers of the TPO in seeking the relevant information from the companies. Unless germane information is obtained, we fail to see as to how the TPO can be sure about the comparability or otherwise of a particular company with the assessee. However, the rider is that such information obtained from the companies must be confronted to the assessee before using against it. As the needful has been done by the TPO, we see no reason to disturb the view taken by the TPO in collecting information u/s 133(6) of the Act.- Decided against assessee.

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• 2015 (2) TMI 980
  TDS on freight charges paid to agent of foreign shipping companies - CIT(A) deleted disallowance u/s. 40(a)(ia) - whether the provisions of section 172 are not overriding to provisions of section 194, and therefore, assessee was liable to deduct TDS? - Held that:- As relying on CIT vs. M/s. Orient Goa Pvt. Ltd. [2009 (10) TMI 575 - Bombay High Court]wherein held Section 172 comes under sub-title "H-Profits of non-residents from occasional shipping business". Title of Section 172 is "Shipping business of non-residents." For bringing a case under Chapter XV, H of the Act 1961, one has to establish a case of profits of non-residents from occasional shipping business. "Nonresident" is defined under section 2(30), as a person who is not a "resident" and for the purpose of Sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of Section 6. The respondent assessee is a company, incorporated under the provisions of Indian Companies Act, 1956, is fairly an admitted position. The assessee cannot be said to be non-resident. Thus the respondent assessee cannot lay fingers on section 172, since we are not dealing with profits of non-residents. we set aside the order of CIT(A) qua this issue and restore the order of the AO. The disallowance is confirmed. - Decided against assessee. TDS on transport charges - CIT(A) deleted disallowance u/s. 40(a)(ia) on the ground that the recipients have paid the tax on the transportation charges collected from the assessee and therefore, no TDS was required to be deducted on the same payment - Held that:- There is no dispute that the resident transporters have paid the tax for transportation charges collected from the assessee. Therefore, we do not find any error in the order of CIT(A) in deleting the disallowance by following the judgment of Hon ble Supreme Court in case of Hindustan Coca-cola Breweries (P) Ltd.(2007 (8) TMI 12 - SUPREME COURT OF INDIA ). It is pertinent to note that as per the 2nd proviso to section 40(a)(ia) no disallowance can be made in case where the payee has paid the tax on the said amount. Though, the said proviso is applicable w.e.f. 01/04/2013 however, in view of the judgment of Hon ble Supreme Court we find that this amendment is remedial in nature and similar to the amendment under section 43B. The amended provision clearly support view that the expression “said due date” used in clause A of proviso to unamended section refers to time specified in Section 139(1) of the Act. The amended section 40(a)(ia) expands and further liberalises the statue when it stipulates that deductions made in the first eleven months of the previous year but paid before the due date of filing of the return, will constitute sufficient compliance. - Decided in favour of assessee. TDS on Machinery maintenance charges - CIT(A) deleted disallowance u/s. 40(a)(ia) - Held that:- Out of total expenditure of 92,700/- 51,000/- relates to the purchase of machinery parts, therefore, provisions of chapter XVII-B are not applicable so far as the expenditure relates to purchase of machinery parts. The remaining expenditure is comprising of several bills and the amount of one individual bills does not exceed 20,000/-. Accordingly we do not find any error or illegality in the impugned order of CIT(A). - Decided in favour of assessee. TDS on clearing and forwarding expenses - disallowance under section 40(a)(ia) - IT(A) deleted the disallowance made by the AO to the extent of reimbursement of expenses amounting to 4,19,505/- and confirmed the disallowance of the balance amount of 1,10,964/- Held that:- Plea of having no contract between assessee and C 4,19,505/- claimed to be reimbursement of expenses. The CIT(A) has accepted the said contention of the assessee and allowed to the extent of said amount of 4,19,505/-. Accordingly, the balance amount of 1,10,964/- was confirmed by CIT(A). As it is manifest from the record, that no such grievance was raised before CIT(A), and further, the fresh plea raised before this Tribunal required the finding of fact, whether any contract between the parties did exist or not. Even otherwise the payment of service charges to C&F agent is based on agreed rate/charges which constitute an agreement between the parties. Accordingly in the facts and circumstances of the case we do not find any merit or substance in the cross objection of the assessee hence, the same is dismissed. - Decided against assessee.

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• 2015 (2) TMI 979
  Deduction under section 80-IA - AO disallowed claim on the reason that the assessee has not complied with the provisions of section 80-IA(4)(iv)(c) also confirmed by CIT(A) - Held that:- the assessee s claim of capitalisation of expenditure incurred on renovation and modernisation in the books of account is a condition precedent for allowing the claim of deduction under section 80IA(4)(iv)(c) of the Act. In the present case, since the plant and machinery used for transmission and distribution of electricity has been acquired from Tata Tea Ltd., it cannot be said that the book value appearing in the books of Tata Tea Ltd. as on April 1, 2004 relates to the assessee-company. Being so, in our opinion the assessee has not complied with the provisions of section 80-IA(4)(iv)(c) of the Income-tax Act. Further, we make it clear that income so increased on disallowance of deduction under section 80-IA(4)(iv) of the Income-tax Act, is to be considered as income from plantation of tea only - Decided against the assessee. Restriction on allowance u/s 43B - Held that:- In the present case, the contribution to the approved gratuity fund cannot be allowed. Being so, the Commissioner of Income-tax (Appeals) is justified in disallowing the same. The claim of the assessee that for invoking the provisions of section 43B, actual payment is to be allowed. This argument of the assessee is totally misconstrued. Only the expenditure relevant to the assessment year under consideration is to be allowed. Being so, we do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against assessee. Alternative claim that in the event of disallowance, it should be considered as part of the income from tea business - relied on the judgment of Karimtharuvi Tea Estates Ltd. v. State of Kerala [1962 (11) TMI 44 - SUPREME COURT] - Held that:- If the assessee claimed as expenditure relevant to the tea business, then, it should be considered as income of the tea business only. Disallowance of provision made for dearness allowance - the liability is unascertained and is to be treated as contingent liability - Held that:- If this amount is claimed as relating to tea business as a expenditure on adding back the same to the income of the assessee, then it is to be treated as income from tea business only. With this observation, we dismiss this ground.

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• 2015 (2) TMI 978
  Unaccounted cash credits - unsecured loans - AO noted that assessee has shown new unsecured loans amounting to 30,56,500 out of which loans amounting to 19,56,000 were introduced from persons specified under section 40A(2)(b) - CIT(A)deleted part addition - Held that:- If the Assessing Officer has suspicion that commodity profit was not genuine in the hands of various family members, the same could have been added in their assessments by reopening the same but the same cannot be assessed in the hands of the assessee because such persons have confirmed the transactions of loans and has filed the relevant papers. Therefore, in our opinion the view taken in the case of Seva Ram v. ITO (2015 (2) TMI 935 - ITAT CHANDIGARH) is squarely applicable in this case also and we decide the issue in favour of the assessee.

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• 2015 (2) TMI 977
  Disallowance of deduction u/s 80P(2)(a)(i) - whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007.? - whether C.I.T (A) erred in denying deduction u/s 80 (P) (2) (a) (i) of the Act to a co operative society by applying amendment by insertion of section 80P (4) which is applicable to co - operative banks? - Held that:- Where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilties to its members will only be eligible for deduction u/s 80P(2)(a)(i). There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. Since the Assessee cannot be regarded to be a primary co-operative bank, therefore, it cannot be a co-operative bank and therefore the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee shall be entitled for deduction u/s 80P(2)(a)(i). We, therefore, set aside the order of CIT(A) and allow deduction to the Assessee u/s 80P(2)(a)(i). - Decided in favor of assessee.

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• Customs

• 2015 (2) TMI 1004
  Duty demand - Utilization of DEPB scrips on clearance of capital goods after issue of Public notice - Held that:- On a plain reading of the above Public Notice, it is clear that the payment of customs duty by utilizing the credit under DEPB cannot be utilized on capital goods imported after 07.04.2000. In the present case, we find that the Bills of Entry were filed on 03.06.2000, i.e ., after the Public Notice dated 07.04.2000. The respondent instead of paying the duty amount in cash, they produced two DEPB scrips dated 26.04.2000 and 31.08.1999, for value of capital goods. The duty amount was debited from the DEPB scrips . We find that there is no dispute that the goods in question are capital goods as held by the Commissioner (Appeals), which was not challenged by the respondent. The Public Notice had clearly imposed restriction of DEPB scrips for payment of customs duty from 07.04.2000, on capital goods. - after the Public Notice dated 07.04.2000, the respondent is not eligible to pay the customs duty by utilizing the DEPB Scrips on the clearance of capital goods. - Following decision of Sai Graphic Systems [2013 (5) TMI 650 - MADRAS HIGH COURT] - Decided in favour of Revenue.

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• 2015 (2) TMI 1003
  Pre-deposit of penalty - Import of the capital goods by 100% EOUs, free of duty - Company floated with malafide intention;short span of the lease period - Held that:- The company itself was floated with a malafide intention, which is clear from the fact that the premises were rented only for a period of 8-9 months. The short span of the lease period for a company which is to be run as a call centre, is itself indicative of the fact that there was no intention to conduct the business of running a call centre for a longer period. All the three Directors including the appellant and the NRI Director joined hands for duty free imports, which were to be cleared subsequently to the domestic market. We also note that the evidence procured on record by the Revenue reveals the fact that the company was closed and the premises were vacated in May 2006 itself and the subsequent resigning of the present Director in May, 2006 and leaving India in July, 2006 i.e. subsequent to the completion of the fraud was by a malafide design. In view of the above, we find that appellant has no prima facie case. Decided against the appellant.

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• 2015 (2) TMI 1002
  Waiver of pre deposit - Misdeclaration of value of goods - Demand of differential duty - Penalty u/s 112(a) - Held that:- chart showing comparison of the value declared at the time of export in Turkey and declared in India prepared by the First Secretary (Trade), Embassy of India, Moscow on the basis of documents of Turkish Customs would show that the exporter declared in Turkey as US$ 2500 per MT and it was declared in India as US$ 750 per MT. On a perusal of the invoice dt. 24.3.2006 of the supplier to the applicant would show that the value was declared as US$ 2500 per MT without reference on Turkish attested documents. We find that no attempt was made to get English translation of the Turkish documents from their supplier. applicant failed to make out a strong prima facie case for waiver of predeposit - Partial stay granted.

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• 2015 (2) TMI 1001
  Benefit of Notification No. 21/2002-Cus dated 1.3.2012 - machine in question is imported by the appellant as a sub contractor and his name is not figuring in the contract entered by the M/s Essar Oil Ltd with the Government of India which is a requirement as per the condition No. 32 of the Notification - transfer of imported goods from one eligible project to another project - Held that:- Notification No. 12/2012-Customs dated 17.3.2012 is issued in supersession of the earlier Notification 21/2002 dated 1.3.2002 which is the subject matter of the present appeal. The Board has issued clarification vide Circular No. 21/2013-Customs dated 16.5.2013 - The circular is issued after the date of the impugned order. In these circumstances, we find that matter requires reconsideration by the adjudication authority afresh in view of the Board s circular. The impugned order is set aside and the matter is remanded to the adjudicating authority for de novo adjudication - Matter remanded back - Decided in favour of assessee.

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• Corporate Laws

• 2015 (2) TMI 1000
  Invocation of Corporate Guarantees - Default in repayment of dues - Serious disputes involved - Guarantees not valid, void ab-initio - Winding up petition - Winding up petition in case of arbitration clause - Non compliance of provisions of sec.592 and 599 of the Companies Act - Place of business within India Held that:- In the background of the assertion on the part of the petitioners, the respondent was required to prove that they have established a place of business in India as the mere fact that they are having business transaction with Indian customers would not be sufficient. Though the content downloaded purportedly from the website of the petitioner in Co.P.No.122/2012 is produced as Annexures-R8 and R9 to the objection statement, in the rejoinder of the petitioner it is denied that it pertains to them. In that light it is also explained that the screen shot of the web page of the Registrar of companies relied at Annexures-R10 and 11 is of no consequence when there is no requirement to register. Therefore, when it is not shown conclusively that the petitioners herein have established a place of business in India, the bar pleaded under Section 599 of the Act would not apply. The contention of the respondent in that regard is liable to be rejected. A cumulative perusal of the decisions referred to by the learned senior counsel on either side would disclose that the decisions of the Hon ble Supreme Court and a learned Single Judge of this Court cited by the learned senior counsel for the respondent company are not in the context of maintaining a winding petition as against a recovery proceeding. Further, the decision of the learned Single Judge of the Bombay High Court was on its facts and not as laying down a principle of law. On the other hand the decisions of the Hon ble Division of this Court and Delhi High Court cited by the learned counsel for the petitioner Banks has held that the winding up petition would be maintainable even in the teeth of the other recovery proceedings initiated. In that view, I am of the opinion that the winding up petition cannot be dismissed by considering it as a parallel remedy as it is a distinct statutory remedy though in appropriate cases, on facts, the Company Court may refuse to exercise its discretion to entertain a winding up petition. A collective perusal of the decisions cited by the learned counsel which has been referred in sufficient detail will disclose that irrespective of the ultimate decision taken in each of the cases cited, the decision leading to the same should be, as to whether the defence set up by the respondent-company is a substantial bonafide defence which is not a moonshine or a mirage of a defence used as a cloak to defeat the petition.n that light, if the facts herein are examined, the fact that the petitioners herein had entered into the transactions with Kingfisher of which the respondent company herein was the holding company is evident. In that view, in respect of the amounts due and payable by Kingfisher the respondent company has executed corporate guarantee to repay the amount. The petitioners despite having invoked the guarantee have not received the payment and in that regard alleging that the respondent company who is to honour the guarantee is unable to pay its debts are before this Court. In that background, the fact that Kingfisher owes the amount to the petitioners herein cannot be in serious dispute and to that extent, the debt is ascertained. For the purpose of reference, a perusal of the decision in the case of Kingfisher Airlines Limited v. State Bank of India and others (ILR 2014 Karn 1739)indicates that the petitioner Banks have initiated winding up proceedings in addition to their security interest, which has been approved by this Court. In so far as the petitioner Banks, the Master Debt Recast Agreement dated 21.12.2010 executed by Kingfisher is produced at Annexure-C to their petition. It is also observed therein that an attempt is being made by the respondent company by taking all possible technical defence only to wriggle out of the situation. In that view, all other contentions urged in the other petitions including the contention raised with regard to not being liable to pay interest as claimed in Co.P.No.99/2013 also will have to be considered as without merit and not as a bonafide defence. Though the learned senior counsel for the respondent company contended that they have deposited a sum of 1250 crores including FD receipts, the said amount will not satisfy the claim. Further, the said amount is not a voluntary deposit to establish their bona fides and raise the dispute, but the deposit made is pursuant to the orders of this Court in the fringe proceedings relating to the sale of shares. For all the aforestated reasons, the above referred petitions are liable to be admitted. - Decided in favour of appellants.

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• 2015 (2) TMI 998
  Default in repayment of deposits - Contempt petition under Section 12 read with Section 10 of the Contempt of Courts Act, 1971 - Violation of the orders of the Company Law Board - Personal liability of promoter director in pursuance of undertaking signed by him, on behalf of company - Held that:- Learned counsel for the respondent K.S. Raju argued that in the undertaking given by K.S. Raju, only this much has been stated that the Company will make the payment, as such it is not the personal liability of said respondent. But needless to say that Company functions through its directors, in its operations. Company is not such person which can be sent to jail. It is the director controlling the affairs of Company through whom it has committed the disobedience, if any, and as such, such director has to suffer the consequences of disobedience if it is wilful. We have already discussed above that from the affidavits filed before the High Court, it is clear that K.S. Raju was not only the Promoter Director of NFL, but the Managing Director of said Company, working for a decade, was his nominee, and practically all the powers to run the NFL vested with K.S. Raju, the Promoter Director, and his nominees, whom he appointed under Articles 104 and 140 of Articles of Association. In our opinion, having considered the submissions of learned counsel for K.S. Raju, Promoter Director, and considering his role in the operation of the Company, as discussed above, the Division Bench of the High Court erred in law in holding that he was not guilty of wilful disobedience of the order of the CLB. It is pertinent to mention here that after giving undertaking dated 14.2.2000, respondent K.S. Raju submitted his resignation in September, 2000, which clearly reflects that the same was done in order to save himself and his company, from making the repayment directed to be made by the CLB, and thereby dishonestly made attempt in not making repayment to the depositor E. Bapanaiah. It is not the case of respondent K.S. Raju, Promoter Director, who gave undertaking that he had no knowledge of the order of the CLB, or that he made any attempt to prevent the disobedience of the order. The arrangements made between the company and MFSL shall not be of any consequence in relation to the repayment schedule approved by the CLB. The company, its promoter Director and Group Holding Companies shall continue to be responsible for due compliance of the order stated. The present case relates to a civil contempt wherein an undertaking given to Company Law Board is breached. Normally, the general provisions made under the Contempt of Courts Act are not invoked by the High Courts for forcing a party to obey orders passed by its subordinate courts for the simple reason that there are provisions contained in Code of Civil Procedure, 1908 to get executed its orders and decrees. It is settled principle of law that where there are special law and general law, the provisions of special law would prevail over general law. As such, in normal circumstances a decree holder cannot take recourse of Contempt of Courts Act else it is sure to throw open a floodgate of litigation under contempt jurisdiction. It is not the object of the Contempt of Courts Act to make decree holders rush to the High Courts simply for the reason that the decree passed by the subordinate court is not obeyed. However, there is no such procedure prescribed to execute order of CLB particularly after proviso is added to Section 634A of the Companies Act, 1956, vide Companies (Second Amendment) Act, 2002. Therefore, having considered submissions of learned counsel for the parties, and material on record, and further considering the relevant provisions of law and the cases referred above, and exercising powers under Article 136 read with Article 142 of the Constitution, we think it just and proper to interfere with the order passed by the Division Bench of the High Court whereby the Division Bench erroneously set aside the finding and sentence awarded by the learned single Judge against K.S. Raju. In our opinion, respondent K.S. Raju wilfully disobeyed the order of CLB and breached the undertaking given to CLB, and thereby committed Contempt of Court subordinate to High Court as such the Division Bench of the High Court has erred in law in allowing the Contempt Appeal No. 3 of 2007 filed by K.S. Raju and setting aside his conviction and sentence. For the reasons, as discussed above, we allow the present appeal filed against respondent K.S. Raju, and set aside the impugned order of the Division Bench of High Court. However, exercising powers under Article 142 of the Constitution of India, to do complete justice between the parties, we allow sixty days time to respondent K.S. Raju, with effect from pronouncement of this judgment to repay the entire amount to the depositor/appellant as directed by CLB, and if within the said period of sixty days payment is not made to the depositor/appellant, respondent K.S. Raju shall be taken into custody to serve out sentence as recorded against him by the learned Single Judge vide order dated 3.8.2007 in Contempt Case No. 915 of 2002. If the amount is paid to the present appellant as directed by this Court within sixty days, the sentence shall be reduced to the extent of fine only.

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• Service Tax

• 2015 (2) TMI 1019
  Refund of CENVAT Credit - Held that:- Interest has been granted vide Order-in-Original dated 30.12.2014, wherein the interest of 4,37,95,262/- has been granted against the claim of the appellant for rebate of Service Tax of 5,45,77,651/-. It appears from the Order-in-Original dated 30.12.2014 that the interest has been allowed from the date when C.A certificate (certifying utilization of CENVAT Credit) was filed. - appellant made prayer for compliance of order by the Revenue. We note the compliance reported by the Revenue in terms of order of this Tribunal. Thus, the miscellaneous application is disposed of. The assessee/appellant may seek/resort to remedy, against the Order-in-Original dated 30.12.2014, in accordance with law. - Revenue is in appeal before the Hon ble Supreme Court in Civil Appeal no. 38259 of 2014 against final order dated 21.08.2014 and if the Revenue succeeds, the appellant shall be bound to refund the amount to the Revenue along with interest - application disposed of.

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• 2015 (2) TMI 1018
  Waiver of pre deposit - Business auxiliary service or banking and other financial services - Held that:- Prima-facie, the conclusions recorded by the adjudicating authority on both the services alleged, appears unsustainable. Insofar as BAS is concerned, the service provided by the assessee prima-facie falls within the ambit of export of service in view of the Larger Bench decision in CCE, Chandigarh vs. Paul Merchant Ltd. reported in [2012 (12) TMI 424 - CESTAT, DELHI (LB)]. Insofar as BAFS is concerned, prima-facie and in view of the analysis in Association of Leasing and Financial Services Companies vs. Union of India reported in [2010 (10) TMI 4 - SUPREME COURT OF INDIA], particularly in pargraph 20 and 37 (of the report) and the decision of this Tribunal in Commissioner of Service Tax, Delhi vs. M/s.Lufthansa Technik Services India Pvt. Ltd. reported in [2013 (12) TMI 968 - CESTAT NEW DELHI], the transactions do not amount to BAFS and equipment leasing of transactions between the assessee and its customers falls outside the ambit of financial leasing as defined in section 65 (12) read with Section 65 (105) (zm) of the Act. - strong prima-facie case in favour of the petitioner/ appellant. We therefore order waiver of pre-deposit in full and stay all further proceedings for realization of the adjudicated liabilities, pending disposal of the appeal - Stay granted.

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• 2015 (2) TMI 1017
  Waiver of pre deposit - Commercial or Industrial Construction Service - Held that:- On perusal of Notification No.32/2007 (ST) dated 22.5.2007, which stipulates that no CENVAT credit be availed on the inputs and if the credit is availed, then it should be restricted at 40% subject to service tax at the rate of 4.12% being paid on the total invoice value of the service after availment of said CENVAT credit on the inputs. The learned counsel contested the adjudication order that this option came by Notification No.1/2011-ST (supra). However, we find some force in the submission of the learned counsel on the ground of limitation. Prima facie, we find there is a dispute regarding the eligibility of the benefit of Notification No.32/2007-ST. At this stage, the learned counsel submits that they have already paid a sum of 38,23,115/- out of which 33,39,585/- has been appropriated by the adjudicating authority. We find that the amount paid by the applicant is sufficient for the purpose of waiver of predeposit of balance dues. Accordingly, waiver of predeposit of balance dues is granted and recovery thereof is stayed during the pendency of the appeal - Stay granted.

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• 2015 (2) TMI 1016
  Erection, Commissioning or Installation Service - Notification No.45/2010-ST, dated 20.07.2010 - Held that:- inquiries conducted on the activities of the appellant revealed that they have provided services, which includes earth excavation, stub setting, concreting tower erection, stringing power conductors and earth wire and also construction of revetment, construction of control room retaining walls etc. The activities would be classifiable under Erection, Commissioning or Installation Service. - impugned order is set aside and the matter is remanded back to the Adjudicating authority to decide afresh in the right of the Exemption Notification in accordance with law - Application disposed of.

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• 2015 (2) TMI 976
  CENVAT Credit - Service Tax paid on rent-a-cab services which were used for transporting of officials and guests to and from the factory premises - Cenvat credit is sought to be denied only on the ground that and rent-a-cab services in relation to the business activity and more so if such services are rendered for guest. In my considered view, both the lower authorities have overlooked the judicial pronouncement made by the Hon’ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore v. Stanzen Toyotetsu India (P) Ltd. - [2011 (4) TMI 201 - KARNATAKA HIGH COURT]. - those who are visiting the factory premises either be guests or otherwise for the purpose of business activity. In my view, the ratio can be extended and the impugned order to the appellants are unsustainable and liable to set aside the impugned order. - Decided in favour of assessee.

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• Central Excise

• 2015 (2) TMI 1012
  Denial of CENVAT Credit - reduction on account of Cenvat credit attributable to inputs - Held that:- Main raw material for manufacturing the fabric is yarn and as per the Show Cause Notice and the order impugned, it has been alleged that the respondent has purchased the inputs i.e. yarn to the tune of 77,27,761/- but it is not coming out from the investigation from where this figure they have got when the respondent has made a statement that he has destroyed the purchase invoices. The investigation was not conducted to verify the invoices issued by the suppliers and it is alleged that the invoices issued by the dealers are not Cenvatable invoice. It is a mere presumption that the invoices issued by the suppliers are not Cenvatable but no verification is done in this case at the suppliers end during the course of investigation. Therefore, at this stage, it cannot be alleged that the invoices issued by the suppliers are not cenvatable, in the absence of any concrete evidence brought on record by the Revenue during the course of investigation that the invoices issued by the suppliers are not cenvatable. In the impugned order the learned Commissioner (Appeals) has considered all the aspects and thereafter he has arrived at a decision that for the purchase of yarn to the tune of 77,27,761/- the respondent is entitled for Cenvat Credit on these inputs which works out to 5,48,401/-. In these circumstances, when the investigation is weak therefore I do not find any infirmity in the impugned order. The same is upheld - Decided against Revenue.

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• 2015 (2) TMI 1011
  Cenvat credit - Cenvat credit has been availed with inordinate delay - Held that:- In Cenvat Credit Rules, 2004 there is no time period prescribed of taking the Cenvat Credit on inputs. In the case of SGS India Pvt. Ltd. (2011 (3) TMI 759 - CESTAT, MUMBAI) the issue came up before this Tribunal and the Tribunal held that Cenvat credit can be taken at any time after purchase of the goods. Further the case law cited by the learned A.R. has no relevance to the facts of the present case as in that case the assessee took the credit within one year of the purchase of the inputs and this Tribunal held that the credit is taken within a reasonable time. Therefore it does not mean that if the credit is not taken within one year it is not entitled to take credit. With these terms, I do agree with the findings of the learned Commissioner (Appeals) holding that the respondents are entitled to take credit. Therefore the impugned order has no infirmity and the same is upheld. - Decided against Revenue.

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• 2015 (2) TMI 1010
  Denial of input service credit - Job worker - Held that:- The main argument of the learned A.R. is on the admissibility of credit on the service tax paid for job worker service but in that case this Tribunal has not held that job worker is not entitled to take credit but in case if the job worker has not taken exemption under Notification No. 8/2005-ST in that case the principal manufacturer is entitled to take Cenvat credit of input services. Therefore, the facts are not relevant to the facts of the present case but the facts of the case in Aurangabad Auto Engg Pvt Ltd (2011 (6) TMI 171 - CESTAT, MUMBAI) are identical to the facts of this case wherein the Tribunal held that the appellant is entitled to Cenvat Credit. Therefore, relying upon the decision of the decision in Aurangabad Auto Engg Pvt Ltd (supra) I hold that in this case also the appellant is entitled to Cenvat credit. - Decided in favour of assesse.

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• 2015 (2) TMI 1009
  Denial of refund claim - Cash refund of accumulated CENVAT Credit - refund claims were disallowed on the ground that the CHA services and courier services are not eligible for Cenvat credit and secondly the export proceeds have not been received by the appellant - Held that:- There is no dispute that the refund amount under Rule 5 of the Cenvat Credit Rules, 2004 which have been disallowed is in respect of the Cenvat credit availed in respect of CHA service availed for export of the goods and courier service availed in connection with manufacturing business of the appellant company. The department has denied the refund claims on the ground that the Cenvat credit in respect of these two services is not admissible. However, this issue stands decided in appellant's favour in the appellant's own case by the Commissioner (Appeals) in previous case. In view of this, the first ground on which the refund claims have been denied would no longer be valid. As regards the other ground for denial of the refund claims that the sale proceeds in respect of goods exported have not been received, it is seen that this condition is neither there in Rule 5 of the Cenvat Credit Rules nor this condition has been prescribed in the Notification No. 5/2006-CE (NT) issued under Rule 5 of the Cenvat Credit Rules. In view of this, the denial of refund claim on the ground that the export proceeds have not been received is not sustainable. - impugned order is not sustainable. The same is set aside. - Decided in favour of assessee.

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• 2015 (2) TMI 1008
  Enhancement in rate of duty - Enhancement from date of Finance Bill or from the date it received the assent of President - Held that:- Issue is no more res integra in view of the Board’s Circular F. No. 345/01/2013-TRU dated 11.2.2014 in respect of effective date of levy of excise duty on cigarettes at the enhanced rate vide Finance Act, 2012. The Board has clarified that the amendment in the Finance Act, 2012, shall be applicable from the date of enactment of the said Finance Act i.e. on 28.5.2012 and not from 17.3.2012. - Finance Act, 2012 shall be applicable only from 28.5.2012; date of assent. Accordingly, we set aside the impugned order - Decided in favour of assessee.

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• 2015 (2) TMI 1007
  CENVAT Credit - Inputs - Removal of waste and scrap as such - Held that:- Following decision of Madras Cements Ltd. vs. CCE, Trichy reported in2010 (7) TMI 398 - CESTAT, CHENNAI] - Decided against Revenue.

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• 2015 (2) TMI 1006
  Clandestine manufacture and removal of goods - Notification No.24/2005-CE(NT), dt.13.05.2005 - Maintainability of appeal - Held that:- Committee for Ahmedabad-II Commissionerate. When this preliminary objection was raised on 19.11.2012 by the Advocate of the Respondents during hearing, ld.A.R. sought time to satisfy the preliminary objection but no evidence is produced by the Department that on the date of signing the Review authorization Chief Commissioner of Central Excise Vadodara was also holding additional charge of Chief Commissioner Central Excise Ahmedabad. Further, both the Chief Commissioners have signed the authorization on different dates, which means that committee as such has not met on a single day. On this issue the case laws CST Vs L.R. Sharma & Co. [2013 (6) TMI 537 - CESTAT NEW DELHI] and CCE Vs Honda Motorcycles & Scooters India P. Ltd [2014 (2) TMI 587 - CESTAT NEW DELHI] have already decided the issue in favour of the assessees. Appeals filed by the Revenue filed on the basis of an invalid Review authorization deserve to be dismissed as not maintainable on this ground alone, without further going into the merits of these proceedings. - Decided against Revenue.

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• 2015 (2) TMI 1005
  Valuation of goods - Inclusion of transportation charges of the inputs in the assessable value - Held that:- cost of the input will not only be the charges on which such goods have been purchased by M/s Indian Security Press, but also include the transportation cost upto the job-worker's place. Accordingly, we do not find any infirmity in the impugned order. - Decided against assessee.

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• CST, VAT & Sales Tax

• 2015 (2) TMI 1015
  Whether on the facts and circumstances of the case and on a true and correct interpretation of the provisions contained in Sections 57 and 55 of the Bombay Sales Tax Act, 1959, the Tribunal was legally justified in holding Bombay High Court that the Administrative Asstt. Commissioner was legally justified in assuming the revisional jurisdiction under section 57, despite the appeals against the very assessment orders being pending under section 55 before the Appellate Asstt. Commissioner who was his co-ordinate authority Held that:- As Assessing Officer had accepted the contention of the assesses for exemption of brass sheets from levy of sales tax without there being its specific reference in the eligibility certificate, the revisional authority appears to have called for and examined the matter and has come to a conclusion that brass sheets manufactured and sold by the assessee would not be eligible to exemption from levy of sales tax under the 1979 Package Scheme of incentives and notification entry No.136 under Section 41 of Bombay Sales Tax Act, 1959. The Assistant Commissioner in exercise of the powers pursuant to Section 57(1) had proceeded with the revisional proceeding and has passed order in the same. The revision is an independent power of an authority calling for and examining record and orders passed by an officer subordinate and to pass such order as he may think just and proper. Appeal by the assessee had been filed since him being not satisfied by certain other disallowances. As such, orders in respect of certain other disallowances in the appeal pending before the Assistant Commissioner of Sales Tax, Kolhapur would be hardly a matter which concerns the matter in revision. There is no decision by the appellate authority in said appeal which has been filed by the assessee aggrieved by other disallowances and much less there is any matter - such, exercise of revisional powers by the co ordinate authority would not be trammeled by pendency of appeal. Decision in Santoshi Tel Utpadak Kendra (1978 (7) TMI 233 - BOMBAY HIGH COURT) would hardly have any application in the present set of facts and circumstances. Tribunal is justified in holding that there is no error in exercise of powers u/s. 57 by the revisional authority. Whether on the facts and in the circumstances of the case and on a true and correct interpretation of the provisions contained in the 1979 Scheme of Incentives and the Notification Entry 136 under section 41 of the Bombay Sales Tax Act, 1959, the Tribunal was legally justified in holding that the appellant was not entitled to the exemption benefits in the context of manufacture of brass sheets for the reason of the brass sheets being not specifically mentioned in the class of manufactured goods as specified in the eligibility certificate - Held that:- List of products under the eligibility /entitlement certificate does not make reference to sheets or other products by strips, rods circles etc. of brass like the one the case of aluminum appearing in the list under the eligibility certificate. Moreover, in the absence of copper sheets being listed, the contention that brass sheets being its alloy qualify for exemption from levy of sales tax under the eligibility/entitlement certificate cannot be sustained. As such there does not appear to be any substance in the contention with regard to claim for exemption from levy of sales tax for brass sheets. As such, the second question also stands answered in the affirmative. - Decided against assessee.

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• 2015 (2) TMI 1014
  Whether supply of medicines, drugs, stents, and other implants etc., during the course of treatment or a medical procedure is a sale in the States of Punjab and Haryana - Held that:- Admittedly, hospitals administer drugs, implants, stents to a patients on medical advice. The dominant purpose of medical treatment is medical services and integral to such a service is a medical procedure that involves administering medicines and drugs and may involve, implants, stents etc. as integral to a successfully medical treatment/procedure. - A perusal of the statutory definition of sale in both the Punjab and Haryana enactments, reveals that after setting out that a sale is a transfer of ownership in goods for consideration it proceeds to replicate Article 366 (29-A) of the Constitution of India. A medical procedure is a pure service with no part having the attributes or the elements set out in Article 366 (29-A) of the Constitution of India or the definition of sale under the Punjab and Haryana statutes and, therefore, cannot be held to involve a sale . The power to impose sales tax/VAT flows from Entry 54 of List II of Schedile VII and Article 366(29-A) of the Constitution, the latter assigning the status of a deemed sale to transactions where one or the other element of sale is missing, but where the element of sale is altogether missing and the transaction does not fall within any of the clauses of Article 366(29-A) of the Constitution of India, a State shall not be empowered to levy of value added tax on such a transaction. For the purpose of attracting VAT, a transaction or a part thereof, which is essentially a service would have to qualify as a sale within the meaning of Sales of Goods Act, 1930 or the definition of sale. The fiction of a deemed sale applies only to such situations as would fall within the sub-clauses of Article 366(29-A) of the Constitution of India which permit severance of the service element from the sale element and empowers the State to tax the element of sale. A perusal of Article 366(29-A) of the Constitution of India does not enable us to record an opinion that it covers services provided by hospitals. Before such a transaction is put to tax, whether under the Haryana or Punjab VAT Act, it would have to satisfy the dominant nature test by reference to the substance of the contract. A contract for medical treatment necessarily involves medicines, supply of surgical items, stents, implants, valves, without which a medical procedure or medical treatment cannot be completed. A deeming fiction, must be rational and not farcical. The dominant purpose of a hospital is to provide medical treatment and if during a medical procedure it is required to provide medicines, stents, implants etc., it cannot by a deeming fiction be held to be a sale . A patient may have a choice as to the quality of implant/stent but even that choice is confined to the suitability of a stent etc. The fact that a hospital may charge money for individual stents etc., whether as part of a package or separately is entirely irrelevant. A contract of medical service cannot be said to be a contract for sale of a stent, or valve or of medicines to be used in a medical/surgical procedure. The essential element of such a contract is the procedure of knee replacement, hip replacement, angioplasty, which as an intrinsic and integral part involves placing an implant whether in the knee, hip or a heart etc. The only choice available to the patient is the nature of the implant, namely, its quality but such a procedure is admittedly, a medical procedure and a service that cannot be completed without an implant/drugs and medicines as an integral part of the procedure. A private hospital does not provide medical services for free. The fact that it charges money, for drugs, medicines etc. cannot raise an inference of intent to sell goods in the shape of medicines, stents, implants etc. We are, therefore, in complete agreement with the opinion recorded by the Jharkhand High Court in Tata Main Hospital (2007 (9) TMI 599 - JHARKHAND HIGH COURT) and the Allahabad High Court in M/s International Hospital Pvt. Ltd. v. State of U.P. and two others [2014 (2) TMI 765 - ALLAHABAD HIGH COURT]. No hesitation in holding that medical procedures/services offered by the petitioners are a service. The supply of drugs, medicines, implant, stents, valves and other implants are integral to a medical services/procedures and cannot be severed to infer a sale as defined under the Punjab or the Haryana Act and therefore, are not exigible to value added tax. - Decided in favour of assessee.

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• 2015 (2) TMI 1013
  Compounding the offences - Section 81 of DVAT 2004 - Whether the Appellate Tribunal, Value Added Tax can give direction to the Sales Tax Department to compound a FIR which was registered and charge sheet has been filed by the police department - Whether the order of Commissioner on application under Section 54 Sales Tax Act is final not subject to scrutiny by the Appellate Tribunal - Held that:- It is clear that Section 93 of Delhi VAT Act differs materially from Section 54 of Delhi Sales Tax Act. Under the repealed law, the composition is permissible either before or even “after the commencement of the proceedings” in respect of the offence. In contrast, under Section 93 of Delhi VAT Act, the authority to compound is restricted to the period “before the institution of proceedings” for an offence under the law. - In the scheme for composition of offences under Delhi Sales Tax Act, the matter cannot end merely by rejection of the request of the offender on the ground that the composition money offered is “inadequate”. Rule 44(2), quoted earlier, clearly envisages that it is the obligation of the Commissioner to “determine” the amount of money subject to deposit of which he is agreeable to the composition. He cannot close the request for composition merely by conveying the composition money offered is inadequate. He must determine the appropriate amount of money and intimate to the offender giving him requisite time for its deposit. Though for purposes of the present discussion it may be a digression, considering the directions that we intend to issue, it must also be observed here that unlike the scheme of Section 320 of the Code of Criminal Procedure (referable to the general penal law), in case of composition of offences under Section 54 of Delhi Sales Tax Act, the matter does not depend upon the approval of the criminal court which is seized of such prosecution. The composition is brought about and given effect to by the offender and the Commissioner on their own. The terms are settled, formalized and acted upon outside the criminal court. Once the Commissioner accepts the composition on conditions as to which he has reached an appropriate satisfaction, within the sphere of guidance given to him by the law, further “proceedings” before the criminal court (even if already commenced) for such offence under the special law can “not be further proceeded with” [Section 54(2)]. Law expects the Commissioner to take a conscious and informed decision. The prosecution for criminal offence under Section 50 is to be launched not as a general rule but in exceptional cases. If the Commissioner finds that enough deterrence can be provided by penalty to be imposed under Section 56 (inasmuch as it permits him to impose penalty two and half times the tax that has accrued in favour of the Revenue), he would choose that course instead of sending the matter to criminal court under Section 50. Noticeably further if, given the gravity of the facts involved, the matter has been taken to the criminal court for prosecution, the consequences for the wrongdoer are stiffer, even if he is able to persuade the Commissioner to compound, for the reason the composition money might represent even a higher revenue in the form of three times the tax that would have been evaded. Expression “may consider” used by the Appellate Tribunal in its order dated 16.01.2006 could not have been construed by the Commissioner as anything but a direction. By using such phraseology, the Tribunal was being courteous. The only task remitted was to determine if the amount offered was the maximum permissible composition money that could be levied. In this fact situation, it was the turn of the Commissioner to show due deference to the views of the higher forum (Appellate Tribunal) and restrict his inquiry only to the subject of determination of the composition money. Decision of the Commissioner on application under Section 54 for composition cannot be treated as final or immune from further scrutiny by the appellate authority. It necessarily follows that the Appellate Tribunal scrutinizing such order is competent to pass all such orders as the lower authority (subject to its appellate jurisdiction) is competent to pass. Since the Appellate Tribunal allowed the request for composition on modified terms and remitted the matter to the Commissioner, the latter was bound by the said mandate. - Decided against the revenue. Whether Commissioner has indulged in “disobedience” or that his order bordered on “contempt” by not following the direction of the tribunal - Held that:- It was not correct for the Commissioner, to whom the matter had been remitted by the Appellate Tribunal by its order dated 16.01.2006, to assume that it was not bound by the views of the Appellate Tribunal, particularly by relegating the case back to the stage of scrutiny of the request for composition on considerations other than that of adequacy of the composition money. - While we affirm the conclusion reached by the Appellate Tribunal in the impugned order dated 07.01.2014 as to the impropriety of the second rejection of the request for composition, we do not uphold the findings that the Commissioner had indulged in “disobedience” or that his order bordered on “contempt”. There is no foundation for such adverse views to be recorded. We must also point out to the Appellate Tribunal that errors do occur and the hierarchy of superior forums (appellate etc.) is provided to bring in corrections. Wrong orders passed by the forum lower in order, unless actuated by malice, do not necessarily undermine “majesty of law” or lower the dignity of superior authorities.

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• Wealth tax

• 2015 (2) TMI 997
  Exclusion of values of land and house property from net wealth - renting out of property - commercial establishment or complex - assets are situated in urban area and have been shown under separate block in the audited accounts - Held that:- The facts emerges are that total area of land consists of 20164 sft out of which area is 10771 sft namely, the factory building, courtyard, electrical substation, labour quarters, office and godown etc. The assessee rented out this premises to M. S. Dalmia 12 lakh per annum and this rent was assessed under the head ‘Income from House Property’. From the very reading of Sub-clause (5) it is clear that this covers all those properties which are in the nature of commercial establishment or complex meaning thereby that the property must be in the nature of commercial establishment or complex which in turn indicates that the property must also be actually used for the purpose of any business or trade carried on in those commercial establishments or complexes. We are of the view that this Sub-clause (5), "complexes or establishments" are qualified with an adjective commercial . Establishment or complex, therefore, must be of a commercial in nature. The word commercial means something which is used in or related to, a business or a trade. Commercial means relates to or engaged in or used for commerce or trade. The word establishment means an organization, building, construction, shop, store, concern or corporation. Thus, commercial establishment means some kind of place or building or shop or store where business or trade is carried on. Further, the Memorandum explaining the provisions in the Finance No. 2 Bill, 1998, under the head "Incentives proposed under the Wealth-tax Act", it is clarified that wealth-tax is not levied on productive assets. In view of this logic, it is proposed that wealth tax would also not be levied on such residential properties that have been let out for a period of a minimum of three hundred days in a year, and, it is also proposed to exempt commercial establishments and complexes from the ambit of Wealth-tax Act. It is, thus, clear that the Legislature has adopted a logic that wealth-tax is not levied on productive assets, and in view of that logic, it was proposed that wealth-tax would not be levied on such residential property that has been let out for a period of minimum 300 days in a year and to exempt commercial establishments and complexes from the ambit of wealth-tax. Therefore, while construing the meaning to Sub-clauses (4) and (5) inserted by the Finance No. 2 Act, 1998 with effect from 1.4.89. the intention of Legislature is that wealth-tax is not to be levied on productive assets and that is to be kept in mind. In view of the facts of this case and discussion in view of insertion of Sub-clause (5) as inserted by the Finance No. 2 Act, 1998 with effect from 1.4.89 wealth-tax is not to be levied on productive assets. Hence, in view of reasoning given above, we confirm the order of CIT(A) and dismiss both appeals of revenue. - Decided against Revenue.

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• Indian Laws

• 2015 (2) TMI 999
  Variation in salaries of different members of the same Tribunal - Respondent in order to remove dissimilarity reduced the pay scale of those members who getting the higher salary - Held that:- Since the petitioner performed the same functions and discharged the same responsibilities as a member of the ATFP as any other member appointed under the NDPSA, 1985, at the time when the petitioner was appointed, he could not have been granted a pay scale or other service conditions, which were less advantageous when compared to a member appointed under the NDPSA, 1985. Such differentiation would be clearly discriminatory. The classification of members of the same Tribunal, i.e. ATFP on the basis of the enactment to which they trace their appointment could not be said to be a reasonable classification much less one having nexus to the object sought to be achieved. The members of the Tribunal being co-equals in terms of their functions, responsibilities and status, such classification was most unreasonable and arbitrary. Consequently, when the petitioner was appointed as the member of the ATFP vide order dated 13.04.1999, he was entitled to the same pay scale that is offered to the other members of the Tribunal appointed under NDPSA, 1985, i.e. 24050-650-26000. The respondent effectively realized that the two pay scales offered to members appointed under the SAFEMA, 1976 and NDPSA, 1985 led to discrimination and, consequently, sought to amend the rules framed under the aforesaid two enactments by the impugned notification by equalizing the pay scales of the members appointed under both the enactments. However, while doing so, the pay scale permissible to members appointed under NDPSA, 1985 was lowered and made equal to that prescribed for members appointed under the SAFEMA, 1976. - As it is already held that the petitioner was entitled to the higher pay scale of 24050-650-26000 from the date of his appointment, i.e. 13.04.1999. That being the position, the respondent could not have varied, or altered the terms of his engagement to his disadvantage by reducing the pay scale admissible to him since the petitioner was already entitled to the higher pay scale of 24050-650-26000. The same could not have been lowered to 2400-525-24500. - impugned amendment notifications issued by the respondent, altering the conditions of service to the detriment of members of the ATFP by lowering their pay scale, are illegal, unjust and arbitrary, and are, accordingly, struck down. Petitioner was entitled to the higher pay scale of 24050-650-26000 from the date of his appointment, i.e.13.04.1999. As the petitioner had retired from the post of member, ATFP on 31.12.2002, he is entitled to be granted back wages from the date of his appointment till his retirement. Therefore, we allow the present petition and quash notification No. 10/2001 dated 01.10.2001 amending the ATFP Rules, 1978 and notification dated 24.12.2001 amending ATFP Rules, 1989 and grant to the Petitioner the pay scale of 24050-650-26000. The petitioner shall be entitled to interest on the arrears on the arrears @ 8% per annum from the date of retirement till payment. - Decided in favour of appellant.

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