Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 29, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Undisclosed receipt on sale of flats/space - Sale of flats of VT [Vatika Triangle] - The burden shifted to the Revenue to show, on the basis of some reliable and tangible material, how the rate at which the flats on the second and third floors of VT was higher than that indicated in the sales register or the sale deeds themselves. - HC
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Disallowance of secret commission - CIT(Appeals) has not disallowed the entire claim but limited it to 1% of the turnover of the assessee - When these are the parameters which the CIT(Appeals) considered, for restricting the claim, no interference is required - HC
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Since in the instant case, the department has not been able to demonstrate that notice u/s. 143(2) was served within the statutory time limit, the assessment made on the basis of such invalid notice could not be treated to be valid assessment - AT
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Losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against profits of other businesses cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s. 80IA - AT
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Revision u/s 263 - disallowance u/s 14A - where the Assessing Officer had recorded the satisfaction as required under section 14A of the Act, made enquiries and accepted the calculations of the assessee, such an order passed by the Assessing Officer cannot be said to be erroneous - AT
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In view of the frequency of sale of ‘ownership lands’; the fact that the same was treated as stock-in-trade and the extent of expenses involved to execute conveyance deeds, maintain its rights and legal and other expenses incurred in this regard, the income from sale of ‘ownership lands’ is to be assessed as ‘business income’- AT
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Penalty u/s 271(1)(c) - Assessee’s explanation and the claim has not been rebutted by bringing any material on record except for rejecting the same on the basis of presumption and surmise that the loss has been shown purely to set off the recovery of bad debts. Thus, the penalty levied on such a disallowance cannot be upheld and same is directed to be deleted on merits. - AT
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Entitlement to the benefit of deduction u/s.10(10C) - RBI employees retiring under OERS - The fact that the Assessee voluntarily offered the sum in question to tax cannot be the basis to sustain the levy of tax. - Deduction to be allowed by rectifying the order u/s 154 - AT
Customs
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Classification of import of mobile phone by the name of Galaxy K Zoom under the Galaxy series - as per trade parlance and consumer perception test also, the product is mobile phone, classifiable under CTH 8517 12 - AAR
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Valuation - import of wood veneers of various thickness - documents procured by the Revenue do not bear any signatures and are photocopies which are not even attested and accordingly, the assessable value could not be enhanced on the basis of such documents - SC
Indian Laws
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Per capita net national income of the country at current prices for the year 2015-16 is estimated to attain the level of ₹ 93231/-
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Reforms in Tax Rates - tax rates of the major countries of Asia
Service Tax
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The "mark up" charges accruing to the issuing bank when card holder uses credit card to pay in foreign exchange abroad is not liable to service tax under credit card services (under Banking & Other Financial Services) during the relevant period. - AT
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Reverse charge - GTA services - it was contended that the FCI has wrongly deducted the service tax from the contractual amount and the same should be ordered to be refunded to the petitioners. - scope of the contract / agreement - when contractor is liable to pay all taxes as per the agreement, deduction of service tax from the amount payable to him is correct - HC
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Claim of refund of interest on service tax demand paid earlier - the same is barred by limitation of time, being filed beyond the period of one year from the relevant date. Further there is no document available on record to prove that the interest amount was paid by the appellant under protest - AT
Central Excise
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Benefit of cenvat credit of service tax denied - The credit was availed by the appellant, by reflecting the same in the statutory records as also in the monthly returns. As such no malafide can be attributed to the appellant so as to invoke the longer period. - AT
VAT
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Levy of vat / taxability of sale of land after plotting - While so, it had incurred certain expenses for the leveling of the land, laying of roads and for the creation of other infrastructural facilities, before the plots were advertised and sold. - matter remanded back - HC
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Rate of VAT @14.5% or 20% - Classification of Appy Fizz as 'Fruit Juice Based Drink', as similar other products not mentioned or aerated branded soft drinks excluding soda - The product answers to the description of aerated branded soft drink which would fall specifically within the confines of Section 6(1)(a) - to be taxes at 20% - HC
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Claim of refund of VAT paid on purchases and export of tractors - VAT was not deposited by the seller - Apart from the obvious error committed by the VATO in purporting to review a non-existent order, even the requirements of Section 74 B of the DVAT Act were not satisfied and therefore the powers thereunder could not have been invoked. - HC
Case Laws:
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Income Tax
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2016 (2) TMI 840
Deduction u/s 80IB - Held that:- We have no hesitation in holding that this is not a case of reconstruction as alleged by the Department. We are unable to concur with the findings of the authorities below and while allowing the grounds of appeal, we direct that the assessee shall be entitled to claim deduction u/s 80IB of the Income Tax Act in the assessment year under consideration. - Decided in favour of assessee
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2016 (2) TMI 839
Entitlement to exemption under section 10 (8) - CIT(A) deleted the addition - Held that:- As per the conditions prescribed in section 10 (8), the project Samastha which the employer of the assessee stems from the agreement between the Indian and the foreign State USA by virtue of agreement dated 30.09.1992 and the terms of the agreement specifically exempts income of the personnel working with the USAID Project as required by the section 10(8) of the Act and the assessee being paid indirectly by the United States Agency for International Development satisfies the requirement of law to claim exemption u/s 10 (8) of the Act. Moreover, we also get support from the decision of the coordinate Bench of the Tribunal wherein the Tribunal has also accepted the claim of the assessee in the assessment years 1999-00 and 2000-01. In the said factual backdrop and since there is no change in the facts, we find no infirmity in the order of the ld. CIT (A) and, therefore, we uphold the order of the CIT (A) and dismiss the appeal of the revenue. - Decided in favour of assessee
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2016 (2) TMI 838
Sanction u/s 151 - Validity of sanction by the ld. CIT/competent authority for initiation of proceedings and issuance of notice u/s 147/148 - Held that:- While granting sanction u/s 151 of the Act for issuance of notice u/s 148 of the Act. The Additional CIT, Range 13, New Delhi only put his signature alongwith date 27.02.2006 which is not suffice to show application of mind by sanctioning authority. Furthermore, from the copy of reasons recorded by the AO for A.Y 2002-03, we are unable to see any sanction as required u/s 151 of the Act prior to issuance of notice showing the initiation of reassessment proceedings u/s 147 of the Act. In view of the above, we have no hesitation to hold that in the present case, mandatory sanction u/s 151 of the Act for issuance of notice has not been granted by the competent authority with full application of mind and thus, the AO could not assume valid jurisdiction for issuance of notice u/s 148 of the Act and initiation of proceedings and passing impugned order in pursuance thereto and hence, notice u/s 148 of the Act and re assessment orders u/s 143(3) r.w.s 147 of the Act cannot be held as valid and sustainable and we quash the same. See CIT Vs. Amar Khosla [2016 (2) TMI 796 - DELHI HIGH COURT] - Decided in favour of assessee
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2016 (2) TMI 837
Disallowance of expenses - AO has disallowed the expenses in proportion to various streams of income earned by the assessee company considering the expenses as common expenses - Held that:- We have observed that the assessee company is a listed company and the assessee company had to perform certain corporate , regulatory , management and compliance functions under various statutes/regulations like Companies Act, listing regulations under the SEBI Act , stock exchange compliances and the mandatory Corporate Governance provisions etc. for which the services of the staff is retained and for doing other business which is carried on by the assessee company. The assessee company has stated to have invested in the subsidiary company WTFL keeping in view the commercial expediency. Thus, it cannot be said that the assessee company is not engaged in carrying on the business. It has voluntarily disallowed expenses directly relatable to the property income and exempt income u/s 14A of the Act. The AO has disallowed the expenses in proportion to various streams of income earned by the assessee company considering the expenses as common expenses. In our considered view , the expenses cannot be disallowed in the manner as was done by the AO unless the AO bring on record cogent material and evidence to substantiate that the expenses claimed by the assessee company are not attributable to the business carried on by the assessee company and the disallowance carried on by the assessee company are not correct . The appeal of the assessee company to this extent is accepted and allowed and we order deletion of addition of ₹ 77,71,800/- as made by the AO and confirmed by the CIT(A). - Decided in favour of assessee Non charging of rent - Addition being notional rent on account of allowing subsidiary company to use its office space - Held that:- Section 22 and 23 of the Act warrants that the income from house property under the head ‘income from house property’ which shall be the annual letting value from year to year for any part of the property which is let , then sum for which the property might reasonably be expected to be let from year to year in the hands of the owner u/s 22 and 23 of the Act shall be brought to tax but in the instant case the assessee company has merely allowed the usage of the area/space to WTFL without earmarking any specific area , hence, the same cannot be charged to tax under the head income from house property as it could not be said that the said premises are let or is available for letting as infact the said premises is occupied by the assessee company for its business usage while at the same time the premises is allowed to be used by the subsidiary company only without granting any benefits of tenancy such as right of possession and enjoyment of the property as tenant . No tenancy rights has been created in favour of the subsidiary company, the addition of ₹ 50,10,563/- being notional rent on account of allowing subsidiary company to use its office space added in the manner by the ld. AO cannot be sustained in the hands of the assessee company which is ordered to be deleted and the order of CIT(A) is confirmed/sustained in which we have found no infirmity. - Decided in favour of assessee Income from house property - addition made by the AO of the notional rent in the hand of the assessee company - Held that:- Section 269UA(f) stipulates that transfer of property by way of sale or exchange or lease for a term of not less than twelve years and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 and shall be deemed to be the owner of the property u/s 27(iii)(b) of the Act for the purposes of computing under the head ‘Income from House Property’ . We have observed that the assessee company has been granted lease w.e.f. 12th October, 1994 for a period of 11 years 11 months, however, it is stipulated in the agreement that the lessee is occupying the same since last several years. Further the right of sub-letting has also been provided to the lessee. The assessee company has expressed its desire to renew the same for further period of 11 years and 11 months n response to the request of the lessee. M/s Walchand & Co. Pvt. Ltd. subletted the said premises which has been offered to tax the actual rent of ₹ 1,54,41,265/- under the head ‘income from house property’ which has been accepted by the Revenue. The rental received of ₹ 1,54,41,265/- by Walchand and Company Private Limited, the lessee is assessed to tax and revenue has got the due taxes and now to again tax the same rental on notional basis in the hands of the assessee company will lead to double taxation of the same income, which is not permitted under the Act. We do not find any infirmity in the order of the CIT(A) and we uphold the same and confirm the deletion of the addition made by the AO of the notional rent in the hand of the assessee company which is subject to verification by the AO that the same rent has suffered taxation in the hands of the Walchand and Company Private Limited which was also stipulated by the CIT(A) in his orders dated 05.02.2013 which we confirm.- Decided in favour of assessee
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2016 (2) TMI 836
Transfer pricing adjustment - application of Profits Split Method (PSM) - Held that:- In this case, the DRP has accepted the PSM for 80% of the ad-revenue in PSM Pool, therefore, it would not be proper that for the balance, a separate determination of profit is required and that to be at a higher profit rate of 28%. Once the combined net profit has been arrived at by taking into account all the transactions of AE as well as non-AE which is factored into all the costs and revenue then to separate out non-AE transaction over and above such a profit determined is not desirable. Thus, we hold that any income if at all from non-AE cannot be taxed separately by applying net profit rate of 28%, because it has already included in the combined profit of entire international transaction of the entities and have already been taxed on the profit rate of 27.18%. Thus, the addition of ₹ 118,59,30,000/- cannot be separately made and we direct to delete the addition.- Decided in favour of assessee Addition on account of distribution revenues - 50% of total distribution revenues which has been taxed on protective basis under section 44DA and balance 50% has been taxed in the hands of Channel Companies - Held that:- Such an amount cannot be added separately, because it has already been included in the PSM Pool and in the combined rate of 27.18% and accordingly, the same is directed to be deleted, because it will be subject to double taxation when all the revenues has been factored into the combined profit of 27.18%. It is not understood as to why DRP/AO is again taxing part of same revenue again. This is wholly and arbitrary action which cannot be upheld.- Decided in favour of assessee Disallowance of cost on advertisement revenue - non deduction of TDS - Held that:- No separate addition is called for; firstly, the provision of withholding tax cannot be applied on the basis of any amendment which has come subsequently by giving retrospective effect, as held by various Courts, on the reasoning that assessee cannot be expected to withhold tax when there was no such provision under the statute and secondly, prior to such amendment, there was a judgment of Hon'ble Supreme Court in the case of Vodafone International Holdings BV (2012 (1) TMI 52 - SUPREME COURT OF INDIA ) that payment made by one non-resident to another non-resident, provisions of TDS are not applicable; thirdly, when income has been determined under PSM, inter-company transactions are eliminated and in such a methodology the combined net profit is first worked out and then divided as per the relevant functions and role of each entity. Last but not the least, the channel companies have been separately assessed and they have discharged their tax liability and, therefore, there is no requirement by the assessee to deduct tax and accordingly, no disallowance can be made.- Decided in favour of assessee Disallowances made under section 40(a)(i) on account of payment made to Asia SAT, payment for foreign content and payment for technical cost, also cannot be made for the reasons given above that, while computing the profit under PSM at 27.18%, there is no requirement for making separate disallowances under section 40(a)(i) and same are directed to be deleted. - Decided in favour of assessee Taxation of service fee income @ 41.82% on the gross basis as against applicable @ 10.455% on gross basis - Held that:- We direct the AO to apply the correct tax rate in accordance with section 115A and examine the contention of the assessee that tax rate of 10.45% and 20.91% should be applied.- Decided in favour of assessee Disallowance of interest expense - Held that:- Addition should also be deleted, because it stands already disallowed by the assessee while computing PSM profit. Thus, such disallowance made by the AO in the computation of income, as incorporated above stands deleted on the reasons stated herein above.- Decided in favour of assessee Levy of interest under section 234B - Held that:- we find that this issue stands covered in favour of the assessee by the decision of Hon'ble Delhi High Court in the case of NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT ). The High Court further held that the primary liability of deducting tax was that of the payer. The payer would be an assessee in default, on failure to discharge the obligation to deduct tax, under Section 201 of the Act and no interest was leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment. - Decided in favour of assessee
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2016 (2) TMI 835
Undisclosed receipt on sale of flats/space - Sale of flats of VT [Vatika Triangle] - additions made on account of sale of space - application of standard rate - documents found during the search and seizure action relied upon for addition - Held that:- In the present case, there was no material on the basis of which the AO could have applied a standard rate of ₹ 4,800 per sq ft for all the floors of VT [Vatika Triangle]. It was also not open to the AO to draw an inference on the basis of the projection in the document, particularly when the Assessee offered a plausible explanation for the document. The burden shifted to the Revenue to show, on the basis of some reliable and tangible material, how the rate at which the flats on the second and third floors of VT was higher than that indicated in the sales register or the sale deeds themselves. In the circumstances, the Court is of the view that the ITAT was justified in coming to the conclusion that the addition made by the CIT (A) was not sustainable in law. - Decided in favour of assessee
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2016 (2) TMI 834
Disallowance of secret commission - CIT(Appeals) has not disallowed the entire claim but limited it to 1% of the turnover of the assessee - ITAT confirmed disallowance - Held that:-CIT(Appeals) making the disallowance limited it to 1% of the turnover of the assessee noticing that the claim of secret commission, had shot up to 7.03% of the turnover for the year under consideration whereas the gross profit rate had gone down from 13.26% to 10.26%. More importantly, it was noticed that as against the net profit of ₹ 6.14 lacs, the assessee claimed to have paid secret commission of ₹ 19.85 lacs. The revenue authorities also noted that the assessee had not kept any accounts or receipts of where and to whom such commission was paid. When these are the parameters which the CIT(Appeals) considered, for restricting the claim, we do not see any reason to interfere in exercise of our jurisdiction to consider substantial question of law - Decided against the assessee.
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2016 (2) TMI 833
Suppression of cost of construction - amount invested by the appellant outside its books - Held that:- It clearly emerges that the disclosed cost of construction of ₹ 191.85 lacs was inclusive of ₹ 39.20 lacs of disclosure made by the assessee during the search. The Assessing Officer as well as the Tribunal at multiple places have referred to this figure inclusive of the disclosure by the Director of the assessee-Company. That being the position the Assessing Officer compared the fair value of construction cost, the expenditure disclosed by the assessee in the books of accounts which was added by a sum of ₹ 39.20 lacs admitted and disclosed by assessee during search. If this be so, the difference between two figures, namely, ₹ 40.28 lacs was justifiably added by the Assessing Officer by way of undisclosed income. Had the said figure of ₹ 191.85 lacs of cost of construction not accounted for the disclosed sum of ₹ 39.20 lacs during search, the counsel for assessee would have been justified in arguing that further addition of ₹ 40.28 lacs by way of estimation of cost of construction would amount to double taxation. That is not the case here. Appellant, however, raised an additional contention that the Assessing Officer could not have referred the cost of construction for his valuation. However, in the present appeal, we are not concerned with this controversy. The only question framed by the Court is with respect to addition of sum of ₹ 40.28 lacs when there is already a finding (in other words corresponding addition) of a sum of ₹ 39.20 lacs by way of investment by the assessee outside the books. - Decided against assessee
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2016 (2) TMI 832
Revision u/s 263 - as per CIT(A) AO has not disallowed the expenditure under Section 40a(ia) of the Act as per the audit report submitted by the statutory auditors in Form 3-CD wherein it was specifically made clear that the assessee has not considered CBDT Circular No.715 in respect of Section 194C of the Act pertaininig to deduction of TDS on advertisement contract with M/s TLG India Pvt. Ltd - Held that:- The Tribunal having considered the explanation furnished by the assessee before the Assessing Officer which forms part of the assessment records, has come to a conclusion that the assessee has deducted TDS under Section 194H of the Act and the provisions of Section 194C of the Act are not applicable to the present case. On law, it has followed the Judgment of the Calcutta High Court reported in [2012 (12) TMI 873 - CALCUTTA HIGH COURT]. As regards the binding nature of the CBDT Circular, the Tribunal has followed the Judgment of the Apex Court in Hindustan Aeronautics Limited reported in [2000 (5) TMI 3 - SUPREME Court] Thus, Tribunal having considered the case on facts and law, has come to a correct conclusion that the Commissioner had no jurisdiction to invoke the provisions of Section 263 of the Act as the twin conditions which are mandatorily required to be satisfied for invoking the provisions of Section 263 of the Act i.e., (i) order to be revised is erroneous and (ii) prejudicial to the interest of the revenue are not satisfied. - Decided in favour of assessee
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2016 (2) TMI 831
TDS u/s. 194C not paid - Addition u/s. 40(a)(ia) - payment of labour charges - non genuineness of the entire payment - Held that:- On perusal of the Ld. CIT(A)’s order, the remand report submitted by the AO, further enquiries conducted by the Ld. CIT(A), we do not find any infirmity in the order passed by the Ld. CIT(A) in deleting the disallowance made u/s. 40(a)(ia) of the Act as the payment made by the assessee to karigars is not contractual and therefore, the provisions of Sec. 194C have no application. The Ld. CIT(A), however, sustained the disallowance made by the AO at 20% of the labour charges holding that assessee has not been able to establish the genuineness of the entire payment. As could be seen from the remand report of the AO, the assessee produced the workers to whom he has paid labour charges. They have produced their ID proof, PAN, Driving Licence, Adhar card. They have stated that they are the main karigars during relevant period and confirmed that they have received the payments from the assessee by way of either in cash or in cheque. The workers two of them filed copy of bank books in Development Credit Bank, Kurla and Bank of India. They have also confirmed that the lump sum amounts received from the assessee are distributed among other works as wages. Therefore it cannot be said that the assessee has not proved incurring of expenditure. Taking all these facts into consideration, we are of the view that the lower authorities are not justified in coming to the conclusion that the expenses are not genuine. In the circumstances, we delete the adhoc disallowance made by the AO at 20% of labour charges. - Decided partly in favour of assessee
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2016 (2) TMI 830
Validity of assessment - non-service of notice u/s.143(2) - Held that:- there is no evidence or even presumption of service of notice u/s.143(2) by post on the assessee. Since in the instant case, the department has not been able to demonstrate that notice u/s.143(2) was served within the statutory time limit, the assessment made on the basis of such invalid notice could not be treated to be valid assessment and, hence, such assessment order deserves to be treated as null and void and liable to be quashed and annulled. Accordingly, we allow assessee’s appeal on legal issue regarding non-service of notice u/s.143(2). The consequential additions thus have no legs to stand and the same accordingly stand deleted. The other grounds raised by the assessee have thus become infructuous and need no adjudication. - Decided in favour of assessee
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2016 (2) TMI 829
Nature of the receipts received on account of forfeiture of warrant/share application money - whether the same is to be treated as capital in nature or the Revenue income of the assessee - Held that:- In the case of “Prism Lt. vs. JCIT” (2006 (3) TMI 204 - ITAT BOMBAY-I ) wherein the Tribunal has held that the amount received on account of forfeiture of NCDs for non payment of call money was to be treated as capital in nature as the issuance of NCDs (non convertible debentures) was not a business of the assessee and hence such amount cannot be charged to tax even under section 41(1) of the Act. In the case in hand also, the assessee had forfeited the advance/application money of ₹ 1,78,50,000/- received from the warrant holders after the expiry of the date for converting the same into the shares and the same had been credited to the capital reserve account in the balance sheet. - Decided in favour of assessee Carry forward of notional loss under section 80IA for the purpose of computation of eligible claim/deduction - Held that: We find that the Hon'ble Madras High Court in the case of “Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT” ( 2010 (3) TMI 860 - Madras High Court)has held that the assessee is entitled to claim deduction u/s 80IA for 10 consecutive years out of 15 years and that initial year of benefit can be opted by the assessee. Losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against profits of other businesses cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA - Decided in favour of assessee
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2016 (2) TMI 828
Disallowance on account of the alleged late payment of PF and ESIC dues - Held that:- The perusal of the details of employees PF reflect that for the month of January, 2008, sum of ₹ 2,18,226/- was due to be paid by 20.02.2008, but the same was deposited on 27.02.2008. Further, the said contribution to Employees’ PF for March, 2008 amounting to ₹ 1,96,794/- was due to be deposited by 20.04.2008, but was deposited by 29.04.2008, hence, the delay in making the aforesaid contribution is period of 7 and 9 days, respectively. In respect of Employees’ ESIC contribution for the month of December, 2007, sum of ₹ 1,452/- had to be contributed and the due date was 15.01.2008 and was paid on 06.08.2008. Admittedly, all these amounts have been paid before the due date of filing the return of income. In this regard, we place reliance on the ratio laid in CIT Vs. M/s. Alom Extrusions Limited reported in (2009 (11) TMI 27 - SUPREME COURT ) and following the said ratio, we hold that the assessee is entitled to the claim of deduction of ₹ 4,15,020/- i.e. the contribution to the Employees’ PF and ESCI, which has been deposited before the due date of filing the return of income - Decided in favour of assessee Disallowance of Bad debts u/s 2(24) (x) read with Section 36(va) - Held that:- The Hon’ble Supreme Court in TRF Ltd. Vs. CIT (2010 (2) TMI 211 - SUPREME COURT ) has laid down the proposition that where the assessee is of the view that the debt had become irrecoverable, it was enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Undoubtedly, it is the bad debt written off, which are allowed as deduction under section 36(1)(vii) of the Act. The Assessing Officer had disallowed the claim of the assessee on the ground that the onus was upon the assessee to prove that the debts can no longer be collected and need to be written off. The CIT(A) was also of the view that only the debts which had become bad had to be written off. We find no merit in the observations of the authorities below in this regard. The year under appeal before us is assessment year 2008-09, the assessee has written off the sundry balances which were outstanding since financial year 2000-01, totaling ₹ 12,30,042/- and further outstanding since 2001-02 and 2002-03 amounting to ₹ 2,49,578/- and ₹ 1,15,923/- respectively. The claim of the assessee before the authorities below was that amounts could not be recovered from the respective parties, despite several efforts. Where the assessee has not been able to recover the amounts for such long period, the said debt has become bad in the hands of assessee and the same was written off in the books of account. Such writing off of bad debt is duly allowable as deduction in the hands of the assessee. Accordingly, we direct the Assessing Officer to delete the addition - Decided in favour of assessee Disallowance of travelling and conveyance expenses - Held that:- The assessee before us is a limited company and had booked expenditure of ₹ 11,24,461/- on account of vehicle expenses, in addition to the expenditure booked on account of travelling and conveyance expenditure. The Assessing Officer had disallowed 20% out of total expenditure under travelling, conveyance and vehicle totaling ₹ 20,38,691/- resulting in an addition of ₹ 4,07,738/-. However, the CIT(A) allowed the claim of the assessee in respect of travelling and conveyance expenses, but restricted the disallowance to 10% on vehicle expenses on the premise that it could not be concluded that the entire expenses had been incurred wholly and exclusively for the purpose of business. We find no merit in the aforesaid finding of CIT(A), where the assessee was a limited company and no disallowance could be made for nonbusiness purpose in the hands of limited company. Even otherwise, the assessee had paid the fringe benefit tax on the aforesaid expenditure booked as vehicle expenses and out of such business expenses on which FBT tax had been paid, no disallowance for personal use can be warranted. Accordingly, we allow the claim of the assessee. - Decided in favour of assessee
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2016 (2) TMI 827
Revision u/s 263 - disallowance u/s 14A - Held that:- Assessing Officer while passing the assessment order is mandatorily required to record a satisfaction as to why suo moto disallowance made by the assessee of the expenditure relatable to exempt income was unreasonable and unsatisfactory, under sub-section (2) to section 14A of the Act and thereafter, resort is to be made to the provisions of Rule 8D of the Rules. In case, where the Assessing Officer is satisfied with the correctness of the claim of the assessee in respect of the expenditure relatable to the exempt income, then there is no reason to apply the method prescribed by the Rules as laid down by the jurisdictional High Court in Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT ) In such circumstances, where the matter has already been considered by the Assessing Officer while completing assessment in the hands of the assessee, the Commissioner has no authority to initiate proceedings under section 263 of the Act in directing the Assessing Officer to re-look at the facts and apply the provisions of Rule 8D of the Rules in order to work out the disallowance under section 14A of the Act. We find no merit in the said directions of the Commissioner, where the Assessing Officer had applied his mind and was satisfied with the working of assessee and had not resorted to the provisions of Rule 8D of the Rules, and since one view has been taken by the Assessing Officer, the same cannot be substituted by the Commissioner in the garb of exercise of jurisdiction under section 263 of the Act. In case, where the Assessing Officer had recorded the satisfaction as required under section 14A of the Act, made enquiries and accepted the calculations of the assessee, such an order passed by the Assessing Officer cannot be said to be erroneous as the same has been passed in line with the provisions of the Act. In this regard, we find no merit in the exercise of jurisdiction by the Commissioner under section 263 of the Act and the same is held to be invalid - Decided in favour of assessee
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2016 (2) TMI 826
Claim of expenditure under the head business income - CIT(A) allowed the claim - Held that:- CIT(A) had noted that the business activity of the assessee continues and therefore the relevant corresponding expenditure is allowable. While observing that the expenditure claimed by the assessee’s in its business of trading in derivates, other securities and money lending was substantial when compared to meagre income/revenue therefrom, the Ld. CIT(A) held that the expenditure necessary for maintaining the assessee’s corporate existence or expenditure relating to the assessee’s trade in derivates, securities and money lending are to be allowed. The finding of the Ld. CIT(A), in our considered view, is reasonable in the facts and circumstances of the case. Before us, except for raising this ground, Revenue has filed to controvert the finding of the Ld. CIT(A) on this issue. In this view of the matter, we uphold the finding of the Ld. CIT(A) that since the business activity of the assessee in trading of derivates, other securities, and money lending continues in the year under consideration, even though on a much reduced volume and scale, the expenditure claimed in respect of such business income is to be allowed to the extent that they are necessary for maintaining the corporate existence of the assessee or those expenses which are related to such business - Decided against revenue Sale consideration received on sale of ‘ownership land’ - business income or capital gain - Held that:- CIT(A) observing that since the actively of sale of ‘ownership lands’ plots was quite frequent, that the land was treated as stock-in-trade and the assessee had to execute conveyance deeds and maintain its rights and in this context requires legal consultation and other expenses to be incurred; concurred with the view of the AO that the income from sale of ‘ownership lands’ is business income . Except for raising the ground that income from sale of ‘ownership lands’ should be assessed as capital gains, since the assessee had declared the same as income from capital gains, no cogent reasons or evidence has been put forth by the Ld. DR to controvert the factual findings of the Ld. CIT(A) and also those of the AO that the income from sale of ‘ownership lands’ is to be assessed as business income. In the facts and circumstances of the case as discussed above, we concur with the findings and reasoning of the Ld. CIT(A) that, in view of the frequency of sale of ‘ownership lands’; the fact that the same was treated as stock-in-trade and the extent of expenses involved to execute conveyance deeds, maintain its rights and legal and other expenses incurred in this regard, we uphold the view of the ld. CIT(A) that the income from sale of ‘ownership lands’ is to be assessed as ‘business income’ - Decided against revenue Applicability of provisions of Section 50C - Held that:- CIT(A) has in fact correctly held that the provisions of Section 50C of the Act are not applicable in the case of in case business income in view of the decision of inter alia, Indralok Hotels P. Ltd.(2009 (2) TMI 235 - ITAT BOMBAY-I ) - Decided against revenue Allowance of expenses claimed by the assessee as the computation has started from net profit - Held that:- we concur with the observation of the Ld. CIT(A) that the AO at para 9 of the Order of assessment, while assessing the transfer of ‘ownership lands’ as business income, has allowed all expenses claimed by the assessee in regard to transfer of lands. We also find that the AO has observed that the various components of income and expenses in respect of transfer of ownership lands left him with no other option than to conclude that land dealings constitute that main business of the assessee and that the nature of expenses are such that it is apparent that the assessee has been employing various resources for maintaining its rights in land, for disposing the assets through lawyers, brokers, employees, directors etc. In this factual matrix as laid out above, we concur with the order of the Ld. CIT(A) in holding that all expenses, other than that part of the legal expenses, relating to ‘Eksali lands’ and those for maintaining the corporate existence of assessee and for the assessee’s trading in derivatives, other securities and money lending, are to be allowed against business income from sale of ‘ownership lands’. - Decided against assessee
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2016 (2) TMI 825
Penalty u/s 271(1)(c) - disallowance of loss on the date of conversion of stock-in-trade - Held that:- The loss on the date of conversion is supported by the market data available in the public domain, that is, as listed in the stock exchange. At the time of conversion of stock-in-trade, there was no recovery of bad debts up till 3.4.2006 (i.e. on the date of conversion), hence it cannot be inferred that the Assessee had intended to set off the future bad debts recovery from the loss on conversion and later on valuation of the stock at the year end. Another important factor which has been pointed out by the ld. Counsel at the time of the hearing is that, now in A.Y 2015-16 the value of the shares has shot up manifold and if the Assessee has to pay tax now on such shares (which is still being held by the Assessee), then the Assessee will have huge income tax liability of more than ₹ 22.72 lacs whereas, had it been held as investment, then, the entire income would have been exempt u/s 10(38). If we take into account the future event of A.Y 2015-16, when the value of the shares have shot up, then, it cannot be held that the Assessee has planned any colourable device deliberately only to set off the recovery of bad debts. The loss on account of valuation of stock as on 31.3.2007 is actually a book loss as per the market rate. Under these facts and surrounding circumstances the loss on conversion cannot be doubted as all these factors strongly point out that the loss of ₹ 1,83,75,418/- is genuine loss and no penalty can be levied on disallowance of such a loss. The Assessee’s explanation and the claim has not been rebutted by bringing any material on record except for rejecting the same on the basis of presumption and surmise that the loss has been shown purely to set off the recovery of bad debts. Thus, the penalty levied on such a disallowance cannot be upheld and same is directed to be deleted on merits. Another important thing which is to be noted here is that, in the quantum proceedings the AO has disallowed the loss on alternate ground also by invoking Explanation to Sec. 73, holding that it is a speculation loss. However, neither in the penalty order nor in the subsequent quantum order this issue has been decided. Therefore, the same cannot be held to be a ground for levy of penalty. Moreover, before us the ld. Counsel had pointed out that in A.Y 2008-09 the AO had disallowed a similar loss as speculative loss by invoking explanation to Sec. 73, however, no penalty proceedings have been initiated. Therefore, on these facts it cannot be held that penalty can be confirmed on this alternate ground taken by the AO. - Decided against revenue
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2016 (2) TMI 824
Claim of deduction u/s 10B - Assessee had claimed deduction u/s 10B on the ground that it has been registered and approved under the STP scheme of the Government of India as 100% EOU for the period of 5 years effective from 7.3.2007 to 6.3.2012 - Held that:- In terms of Explanation II(iv) to Sec. 10B, 100% EOU has been defined as an undertaking which has been approved as 100% EOU by the Board appointed in this behalf by the Central Government in view of Sec. 14 of Industries (Development & Regulation) Act, 1951 and rules made thereunder. The Assessee’s unit has not been approved by the said authority. Thus the Assessee is not eligible for claim of deduction u/s 10B and accordingly, the decision of the ld. CIT(A) on this score is reversed and the ground raised by the Revenue is treated as allowed. Eligibility of deduction u/s 10A - Held that:- We are inclined to accept the additional plea raised by the ld. Counsel before us, that its claim for eligibility of deduction u/s 10A needs to be examined afresh. Accordingly, we remit the matter to the file of the Assessing Officer to see, whether the Assessee is eligible for claim of deduction u/s 10A or not and examine the eligibility criteria of the Assessee and whether the conditions laid down u/s 10A stands fulfilled and accordingly decide this issue afresh and in accordance with the provisions of the law. Thus, with this direction the appeal of the Revenue is treated as partly allowed for statistical purpose.
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2016 (2) TMI 823
Rectification application u/s 154 to claim exemption - Entitlement to the benefit of deduction u/s.10(10C) - RBI employees retiring under OERS - Held that:- The issue whether deduction u/s.10(10C) of the Act should be allowed to RBI employees retiring under OERS is no longer res integra and has been concluded in several decisions including the decision in the case of CIT Vs. Koodathil Kaliyatan Ambujakshn (2008 (7) TMI 259 - BOMBAY HIGH COURT). In fact the CBDT in Instruction dated 8.5.2009 has accepted this decision and opined that employees of RBI who accepted OERS would be entitled to the benefit of Sec.10(10C) of the Act. In view of the above, we hold that the claim for deduction u/s.10(10C) of the Act has to be allowed to the Assessee. The fact that the Assessee voluntarily offered the sum in question to tax cannot be the basis to sustain the levy of tax. Therefore hold that there was a mistake apparent on the face of the record and the application u/s.154 of the Act filed by the Assessee ought to be allowed. Thus direct the AO to allow deduction accordingly. - Decided in favour of assessee
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Customs
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2016 (2) TMI 855
Classification of import of mobile phone by the name of Galaxy K Zoom under the Galaxy series - Whether the product is rightly classifiable as a telephone under Custom Tariff Heading (hereinafter referred to as "CTH") 8517 or as a Camera under CTH 8525? - Claim of benefit of exemption under the Notification 25/2005 - Held that:- as per trade parlance and consumer perception test also, the product is mobile phone, classifiable under CTH 8517 12. The product i.e. Galaxy K Zoom is classifiable as telephone under Customs Tariff Heading 8517. Second question i.e., if the correct classification of the product is under CTH 8525, then whether applicant is entitled to the benefit of the exemption provided under Notification No. 25/2005, becomes infructuous.
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2016 (2) TMI 854
Possession of old, silver, precious stone or foreign currency - offence punishable under Section 135(1)(a)(i) of the Customs Act, 1962 read with Section 13(1) of the Foreign Exchange Regulation Act, 1973 - sentenced to undergo two months rigorous imprisonment and a fine of ₹ 10,000/-, with default clause. - Held that:- the value of the goods which have been brought to India from Sri Lanka by the appellant is assessed at ₹ 12,27,730/-, therefore, in our considered opinion, the provisions of Section 135(1)(a) of the Customs Act, 1962 are not attracted. Further, the conviction under Section 13(1)(a) also cannot be sustained as the goods in relation to gold, silver, precious stone or foreign currency to be brought from abroad to India, then only it will constitute an offence under the aforesaid provisions. None of these goods have been brought by the appellant from Sri Lanka to India on the alleged date of the occurrence, therefore, the finding of reversal recorded by the first appellate court is bad in law and is liable to be set aside. - Decided in favor of appellants.
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2016 (2) TMI 853
Smuggling of gold - detention of the individual - challenge to the order passed under Sections 3(1)(i) and 3(1)(iii) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 qua the detenu Barik Biswas, brother of the appellant. - Held that:- we are unhesitatingly satisfied that adjudication on the issue of remittance of a pending representation to the Advisory Board would suffice to dispose of this appeal. We, thus, propose to adopt this course. As admittedly, the detenu's representation dated 08.07.2014, pending with the Central Government, the appropriate Government in the case, was not forwarded to the Advisory Board and was instead rejected during the pendency of the proceedings before the Advisory Board, we are constrained to hold that the detention of the detenu is constitutionally invalid. The rejection of the representation by the Central Government later on 21.07.2014 during the pendency of the proceedings before the Advisory Board is of no consequence to sustain the detention. Consequently, the order of confirmation as well is rendered non est by this vitiation. In view of the determination made on the above aspect of the debate, we do not consider it necessary to dilate on the other pleas raised on behalf of the detenu. In the result, the appeal succeeds. The impugned judgment and order is set aside. The orders of detention as well as the order of confirmation are hereby annulled. The detenu is directed to be set at liberty, if not wanted in any other case.
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2016 (2) TMI 852
Valuation of import of equipment - On the basis of this parroted determination of derived value of the imported equipments, the CESTAT further purported to hold that there was alleged undervaluation of the imported equipments by the appellant and, hence the goods were liable to confiscation but was to be allowed to be redeemed on payment of redemption fine of ₹ 2 crores, reduced from ₹ 6.5 crores imposed by the Adjudicating Authority. Held that:- Insofar as the order of CESTAT on merits is concerned, we do not find any fault therein. However, at the same time, we are also of the view that there may be some dispute about the actual value to the extent to which there was under-valuation of the imported equipments. The price which was disclosed in the Bill of Entry of the aforesaid equipment was shown as DM 13.5 million. The Department has stated that the price should have been DM 21.27 million. - Without going into the details in this behalf, we are of the view that the ends of justice would be sub-served by reducing the said price to DM 17 million. - Decided partly in favor of assessee.
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2016 (2) TMI 851
Levy of anti dumping duty on import of glass parts of lamp making, electronics parts of lamp making and not Compact Fluorescent Lamp. - Revenue appeal against the decision of tribunal in [2007 (5) TMI 381 - CESTAT, AHMEDABAD] - goods imported by the appellant in this case are not ready to use CFL, but are parts/components of CFL and anti-dumping duty is not imposable on these parts under Notification No. 139/2002-Cus., dated 10-12-02 - Decided of tribunal confirmed - Decided against the revenue.
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2016 (2) TMI 850
Levy of customs duty on goods cleared from SEZ to DTA and non-processing area of the SEZ - retrospective levy - Apex court dismissed the appeal against the decision of HC in [2015 (11) TMI 1466 - GUJARAT HIGH COURT] - Decided against the revenue.
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2016 (2) TMI 819
Valuation - demand of differential duty due to undervaluation of import of goods - import of wood veneers of various thickness - Held that:- CESTAT has found that the documents procured by the Revenue do not bear any signatures and are photocopies which are not even attested and accordingly, the assessable value could not be enhanced on the basis of such documents. In arriving at this conclusion, while doubting the genuineness of those documents, the CESTAT has kept in mind the provisions of Section 139 of the Customs Act and has relied upon various judgments of the Tribunal on this issue. - Order of tribunal sustained - Decided against the revenue.
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Corporate Laws
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2016 (2) TMI 818
Scheme of Amalgamation - stamp duty and penalty was payable as presentation was not within one year from the date of the order of the Company Court - Held that:- When the order under Section 394 of the Companies Act sanctioning the Scheme of Amalgamation is made chargeable to duty, levy of duty is not on the order as such, but it is on the effect of the order, that is transfer of properties and assets of the transferor company to the transferee company envisaged under the Scheme. The said transfer took effect only upon sanction granted by the BIFR which was a condition mentioned in the order of the Company Court. In other words, the properties/assets can be said to have been “transferred” or “conveyed” when BIFR granted sanction. The “conveyance” within the meaning of Section 2(g)(iv) can be said to have been created at such point of time when the BIFR granted sanction. Therefore it is the said date and not the date of the order of the Company Court. In the facts and circumstances of the case, would bring the subject matter within the ambit of Section 2(g)(iv) to become the conveyance. Such “conveyance” was presented within one year as above for the purpose of stamp duty, the same was therefore regularly presented. The impugned orders taking view that stamp duty and penalty was payable as presentation was not within one year from the date of the order of the Company Court are not liable to be sustained. They are therefore hereby quashed and set aside. It appears from order dated 28th January, 2011 in the petition that petitioner had paid 25% of the total amount at the time of preferring Appeal before the Chief Controlling Revenue Authority and had also paid remaining 75% subsequently under protest. As the impugned orders are set aside, consequences including refund of the said amount to the petitioner, shall follow.
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2016 (2) TMI 817
Right of dissenting workmen - Adjudication of claims of workmen and secured creditors of the company (In liquidation) by Official Liquidator - Whether the dissenting workmen are bound by the consent terms or whether they are entitled to be paid in accordance with Sections 529 and 529A of the Companies Act, 1956? - Held that:- Only such of the dissenting workmen of the Company who became members of the Workers' co-operative in terms of the scheme sanctioned by BIFR and actually worked with the Company till 31 December 1998 are entitled to be paid wages upto the date of the winding up order. Others are not entitled to any wages with effect from 20 September 1991. There is no question of the workmen getting any notice pay under Section 25-N of the Industrial Disputes Act by virtue of Section 25-O introduced by the Maharashtra amendment. Notwithstanding the fact that such worker did not work for the entire period specified in Sub-section (1) and to the extent he had not actually availed of such leave, he will be entitled to wages in lieu of the unavailed leave. Sub-section (3) does not provide for wages in lieu of leave generally, but only in the contingencies referred to therein. So far as accumulation of unavailed leave is concerned, Subsection (5) enables a maximum accumulation of leave of thirty days by carrying forward earned leave. The leave that can, thus, be encashed under Section 79 of the Factories Act is only the earned or accumulated leave during the calender year upto a maximum of thirty days under conditions of Sub-section (3). The rate of such wages has to be as per Section 80 of the Factories Act. As held by this Court in the case of Swadeshi Mills (2016 (2) TMI 645 - BOMBAY HIGH COURT ), bonus is not included in the category of wages under Sections 529 and 529A of the Companies Act and cannot be accorded any priority. The dissenting workmen in the present case accept this position, though they would like to keep their option to claim bonus in the event of availability of surplus funds so as to satisfy nonpriority debts of the Company (in liquidation). On gratuity, all parties including the Official Liquidator agree that gratuity would be payable. The consent terms provide for such gratuity. So does the adjudication made by the Official Liquidator. The dissenting workmen would accordingly have to be paid gratuity in accordance with law. Gratuity, however, in the present case has become due and payable only at the date of the winding up order. Any interest post winding up order is governed by Rule 179 of the Companies (Court) Rules. Such interest at a rate not exceeding four per cent per annum is payable only in the event of there being a surplus after payment in full of all claims admitted to proof. There is no question of awarding any interest on gratuity, in the premises, as preferential payment under Sections 529 and 529A of the Companies Act. If and when there is a surplus, a claim for interest on gratuity can be considered, but not otherwise The Official Liquidator is directed to adjudicate the claims of the Applicants in the Company Applications herein on the basis of this order and after taking into account the documentary evidence available on record and verifying the respective claims. The Official Liquidator shall enlist the assistance of any advocate and / or chartered accountant on his panel for the purpose of such adjudication. The costs of such advocate and / or chartered accountant shall be defrayed from the funds of the Company (in liquidation) available with the Official Liquidator.At any time during the course of such adjudication or after adjudication but before disbursal of payment on the basis thereof, the Official Liquidator shall give an option to each of the Applicants to accept their dues in accordance with and on the principles of the consent terms taken on record in full and final settlement of their claims against the Company (in liquidation).
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Service Tax
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2016 (2) TMI 849
Refund of such accumulated unutilized Cenvat credit - Rule 5 of CCR - Export of services some of which taxable and some non-taxable. - Nexus between input service and output services - period of limitation - relevant date - Held that:- such nexus can be examined only at the level of the original adjudicating authority. - Matter remanded back on this ground. Regarding period of limitation - Held that:- the relevant date was held to be the date on which the consideration was received by the service provider. However with effect from 1.4.2011, the law has been changed for the purpose of payment of service tax and it has been held to be the date on which date invoice was raised. Accordingly, the relevant date which has been held as receipt of consideration received, in the decision in the case of Hyndai Motor India Engg (P) Ltd. should be shifted as date of raising of invoice. We note that the period in the present appeal is prior to 1.4.2011 and as such, this is not one of the issues to be decided in the present case. Accordingly, the same is kept open. We find no merits in the appellant's contention on the point of limitation. Accordingly, we uphold a part of the impugned order vide which he has held that a part of the demand is barred by limitation. Inasmuch as the appeal stands remanded to the original adjudicating authority for the purpose of examination of nexus, he would decide the quantum of refund falling for the period within the limitation, based upon the date of consideration received by the appellant - Decided partly in favor of assessee.
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2016 (2) TMI 848
Demand of service tax on Currency Conversion Charges (mark up of 3%) in respect of under Credit Card and Debit Card services - Scope of Banking and Financial Services Territorial jurisdiction - payment in relation to foreign transactions - Held that:- the mark up charges accruing to the appellant when card holder uses card to pay in foreign exchange abroad is not liable to service tax under 'Credit Card Services' during the impugned period. This conclusion is based both on merit of scope of 'Credit Card Services' during relevant period and lack of territorial jurisdiction of charge. the mark-up on foreign currency transaction in case of a credit card is part of the cost of goods / services purchased by the card holder and is not a consideration for extending credit facilities. - The "mark up" charges accruing to the issuing bank when card holder uses credit card to pay in foreign exchange abroad is not liable to service tax under credit card services (under Banking & Other Financial Services) during the relevant period. Since we have already held in respect of credit card services, the mark-up charges is not liable to service tax under credit card services -section 65 (12) (ii), the same is applicable to the mark-up charges accruing to the issuing bank in respect of debit card charges. - Demand set aside - Decided in favor of assessee.
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2016 (2) TMI 847
Availing cenvat credit while availing the benefit of abatement notification - CESTAT while deciding the issue in favor of assessee observed that, assessee was not put to notice on the question whether they had claimed Cenvat credit for claiming the abatement and there is no documentary evidence on record to prove that they had accordingly availed the credit during the impugned period. - Held that:- This fact that the documents are already on record is not disputed by the assessee. Shri Dawda, learned counsel submits that there was no specific notice in this respect to the assessee. In addition he also points out that the appellant was duty bound to point out to CESTAT a notification dated 28.07.2010 which exempted a contractor engaged in a contract covered thereunder, from payment of service tax. - Matter remanded back to Tribunal - Decided in favor of revenue.
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2016 (2) TMI 846
Waiver of pre-deposit - Demand of service tax on works contract - electrical contractor engaged in executing contracts for various Government Departments/Corporations such as CPWD, PWD, Government hospitals, etc. - The service tax demand of around ₹ 58 lakhs has been calculated by the Adjudicating Authority by taking a notional turnover of ₹ 5.38 crores which included the cost of the goods and materials apart from the service component. - Held that:- prima facie, the Court finds justification in the grievance of the Appellant that the computation of the service tax ought to have been confined to the service component and not the entire turnover and that notional turnover determined was at least twice the actual turnover and therefore excessive. - interim order of the tribunal modified - Decided partly in favor of assessee.
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2016 (2) TMI 845
Cargo Handling Service - Revenue contended that appellant liable for service tax under 'Cargo Handling Service' on the activity of unitisation, straping and packing of goods - Contrary decision by the tribunal on the same issue - Revenue appeal in the case of [2007 (8) TMI 57 - CESTAT, KOLKATA] - Held that:- CESTAT directed to onstitute a Larger Bench for deciding the issue involved. Since the matters have now become old, we would appreciate if the Larger Bench decides the matters within one year. Needless of mention, the Larger Bench of the CESTAT shall decide all the issues involved.
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2016 (2) TMI 844
Demand of service tax Cleaning Agency Services - contract for Cleaning Services by Nashik Thermal Power Station - SCN was issued on the ground that there was an escapement of tax under Cleaning Agency Services, Business Support services and Cargo Handling Services. The adjudicating authority has confirmed demand raised on all these services. The first appellate authority has set aside the demands on Business Support Services and Cargo Handling Services but confirmed the demands under Cleaning Agency Services. Held that:- the Cleaning services which were expected our of appellant is very clear that there is no doubt the appellant has been awarded contract for Cleaning of plant, machinery, buildings etc. At the same time, we also find that the contract which is awarded to the appellant, also has elements of loading and unloading of Coal, to our mind, value in respect of such loading and other activities may not be covered under the category of Cleaning Agency Services. While upholding the demand raised under the category of cleaning services, we remand the matter back to the adjudicating authority for limited question of requantification of the demand, interest and penalties by reduction of the value indicated for loading and unloading of coal, movement of coal etc. - Decided partly in favor of assessee.
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Central Excise
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2016 (2) TMI 822
Maintainability of appeal - Remission of excise duty on account of fire occurred in the factory of the appellant - Held that:- In the instant appeal is not maintainable before this Tribunal and remedy before the appellant is to file the revision application before the Revisionary Authority, Government of India in terms of Section 35EE of the Central Excise Act. In view of this, the appeal is dismissed being not maintainable. However, the appellant is at liberty to file revision before the Revisionary Authority in terms of Section 35EE of the Central Excise Act, 1944.
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2016 (2) TMI 821
Benefit of cenvat credit of service tax denied - service tax paid as consultancy fees to M/s. NABARD for preparation of the draft project report for maize processing and dairy units - denial of credit on the ground that the same cannot be considered to be covered by the definition of “input services” - invoking extended period of limitation - Held that:- Admittedly the service tax was paid by the assessee on the services obtained from NABARD in relation to preparation of draft project report for maize processing and dairy units, in the same factory, in which the appellant was manufacturing sugar and molasses. The definition of “input services” includes the services used in relation to setting up of factory. The draft project report prepared by M/s. NABARD was in respect of individual setting up of part of the factory and as such can be held to be covered by the said definition. Further the said explanation used the expression that any activities relating to business would also be covered by the definition of “input services”. The said phrase i.e. “activities relating to business” was the subject matter of the Hon’ble Bombay High Court decision in the case of Coca Cola India Pvt. Ltd. Vs. CCE, Pune-III [2009 (8) TMI 50 - BOMBAY HIGH COURT ] and it was held that the expression “business” is an integrated continuous activity and not confined or restricted to mere manufacture of product. Activities in relation to business can cover all activities relating to functioning of a business and the said term cannot be given a restricted meaning inasmuch as the same is of wide import in fiscal statutes. As such it is of the view that the said activity being in relation to the appellant’s business and in relation to setting up of a factory has to be held as covered by the definition of “input service”. Apart from that also find that the demand stands raised by invoking the longer period of limitation. The credit was availed by the appellant, by reflecting the same in the statutory records as also in the monthly returns. As such no malafide can be attributed to the appellant so as to invoke the longer period. Accordingly hold the demand is barred by limitation also. - Decided in favour of assessee
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2016 (2) TMI 820
Non payment of duty - Interest payment made from Cenvat credit account - Held that:- It is not under dispute that the appellants cleared the goods from February, 2006 to March, 2008 without payment of duty. They did not file any quarterly/monthly returns. The only explanation given by them is that they have financial difficulties. It is not in dispute that the said amount of duties were collected from their customers. It was their duty to deposit clearance of the goods on the due date. Under these circumstances, we do not find any merit in the appeal either for duty, interest or penalty. Cenvat Credit can be used only for the purpose specified in the Cenvat Credit Rules. Interest payment cannot be made from Cenvat credit account. As far as the penalty on the Director is concerned, we find from the records that he was also concerned with the Central Excise as also other financial matters. The fact that they had collected duty but not deposited the duty is not disproved. He cannot absolve himself from the penalty. However, keeping in view the overall facts and circumstances of the case, we reduce the penalty on the Director Shri Atul Ashok Purandare from ₹ 10 lakhs to ₹ 2 lakhs, except the above modification, both the appeals are dismissed.
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CST, VAT & Sales Tax
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2016 (2) TMI 843
Detention of goods - DVAT - there were some documents being carried by the transporter which according to the VATO were found to be inadequate. The other strange thing that was sought to be explained to the Court was that "W/Bill" should be read as "without bill". While, the original of the said document was retained by the VATO, the copy thereof given to the Petitioner No. 2 was obviously unsigned. - Held that:- the entire matter has to be examined afresh with an opportunity being given to the Petitioner No. 1 to produce all the documents in its possession and to urge all the points urged in the present petition, including questioning the authority of the VATO (Enf) to pass the order of detention and make an assessment. It is directed that, if Petitioner No.1 pays the entire amount of the VAT on the value of the detained goods then the said goods shall be released forthwith to Petitioner No.1 by the VATO (Enf). This is without prejudice to the rights and contentions of either party and subject to the final order that may be passed by the VATO (Enf).
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2016 (2) TMI 842
Levy of vat / taxability of sale of land after plotting - While so, it had incurred certain expenses for the leveling of the land, laying of roads and for the creation of other infrastructural facilities, before the plots were advertised and sold. The petitioner had not constructed any flats or residential apartments for its customers. The petitioner had sold 213 plots in phase I and 89 plots in phase II of its development scheme, for which sale deeds had been registered - the first respondent had considered the land development and construction charges incurred by the petitioner, up to the period 2011-12, as the sale consideration, for the construction of the flats and had determined the deemed sales value and had levied tax and also levied penalty, under Section 27(3) of the Act, in the impugned proceedings, when there was no proposal to levy such penalty in the pre-revision notices, dated 20.8.2015. Held that:- order set aside - matter remanded back for fresh decision.
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Wealth tax
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2016 (2) TMI 841
Addition of plot of land (agriculture) and a house in the net wealth - it was submitted that the investment in the property at Jubilee Hills was utilized for exemption u/s 54 of IT Act which was upheld by ITAT, Hyderabad. Thus, as the said property is a house eligible for exemption u/s 5(vi) of the Wealth Tax Act, 1961. - Held that:- residential house is not includible into the net wealth - the land classified as agricultural land and used for the purpose of agriculture would not fall within the meaning of ‘asset’ and would be exempt from wealth tax.” Moreover, the section 2(ea) Explanation 1(b), the definition of ‘urban land’ amended by the Finance Act, 2013, w.e.f. 01/04/1993. - No additions - Decided against the revenue.
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Indian Laws
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2016 (2) TMI 816
Alternative statutory remedy of preferring appeal before the Tribunal - Held that:- The petitioners have got an alternative statutory remedy of preferring appeal before the Tribunal. The Tribunal has powers to pass interim as well as final order. It is therefore open to the petitioners to challenge notice dated 02.02.2016 by preferring appeal before the Tribunal. This Court is therefore not inclined to entertain this petition in exercise of writ jurisdiction. For the above reasons, this petition is not entertained. Without expressing any opinion on the merits of the case of the petitioners, the petitioners are relegated to pursue the alternative remedy before the Debts Recovery Tribunal.
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