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TMI Tax Updates - e-Newsletter February 3, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws TMI SMS Doctrine of promissory estoppel - Tax Incentive scheme during the sales tax regime to be continued under VAT regime - HC Assessee received the Rent - service charges received by wife/ daughter of assessee towards the same property - No Clubbing of income - Tri Articles Rule 6 of CENVAT credit Rules CLASSIFICATION OF GOODS UNDER CENTRAL EXCISE ACT, 1944 News Proposed Amendments in the Companies Rules - as per the report of the Companies Law Committee Proposed Amendments in the Companies Act, 2013 - as per the report of the Companies Law Committee DEFINITIONS - Proposed Amendments in the Companies Act, 2013 INCORPORATION OF COMPANIES - Proposed Amendments in the Companies Act, 2013 PROSPECTUS AND ALLOTMENT OF SECURITIES - Proposed Amendments in the Companies Act, 2013 SHARE CAPITAL AND DEBENTURES - Proposed Amendments in the Companies Act, 2013 ACCEPTANCE OF DEPOSITS BY COMPANIES - Proposed Amendments in the Companies Act, 2013 REGISTRATION OF CHARGES - Proposed Amendments in the Companies Act, 2013 MANAGEMENT AND ADMINISTRATION - Proposed Amendments in the Companies Act, 2013 DECLARATION AND PAYMENT OF DIVIDEND - Proposed Amendments in the Companies Act, 2013 ACCOUNTS OF COMPANIES - Proposed Amendments in the Companies Act, 2013 AUDIT AND AUDITORS - Proposed Amendments in the Companies Act, 2013 APPOINTMENT AND QUALIFICATIONS OF DIRECTORS - Proposed Amendments in the Companies Act, 2013 MEETINGS OF BOARD AND ITS POWERS - Proposed Amendments in the Companies Act, 2013 APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL - Proposed Amendments in the Companies Act, 2013 INSPECTION, INQUIRY AND INVESTIGATION - Proposed Amendments in the Companies Act, 2013 COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS - Proposed Amendments in the Companies Act, 2013 PREVENTION OF OPPRESSION AND MISMANAGEMENT - Proposed Amendments in the Companies Act, 2013 REGISTERED VALUERS - Proposed Amendments in the Companies Act, 2013 REMOVAL OF NAMES OF COMPANIES FROM THE REGISTER OF COMPANIES - Proposed Amendments in the Companies Act, 2013 COMPANIES AUTHORISED TO REGISTER UNDER THIS ACT - Proposed Amendments in the Companies Act, 2013 COMPANIES INCORPORATED OUTSIDE INDIA - Proposed Amendments in the Companies Act, 2013 GOVERNMENT COMPANIES - Proposed Amendments in the Companies Act, 2013 REGISTRATION OFFICES AND FEES - Proposed Amendments in the Companies Act, 2013 COMPANIES TO FURNISH INFORMATION OR STATISTICS - Proposed Amendments in the Companies Act, 2013 NIDHIS - Proposed Amendments in the Companies Act, 2013 NATIONAL COMPANY LAW TRIBUNAL AND NATIONAL COMPANY LAW APPELLATE TRIBUNAL - Proposed Amendments in the Companies Act, 2013 SPECIAL COURTS - Proposed Amendments in the Companies Act, 2013 MISCELLANEOUS - Proposed Amendments in the Companies Act, 2013 PENALTIES - Proposed Amendments in the Companies Act, 2013 REVIVAL & REHABILITATION, AND WINDING UP - Proposed Amendments in the Companies Act, 2013 Proposed Amendments in COMPANIES (DECLARATION AND PAYMENT OF DIVIDEND) RULES, 2014 Proposed Amendments in COMPANIES (SPECIFICATIONS OF DEFINITIONS DETAILS) RULES, 2014 Proposed Amendments in COMPANIES (INCORPORATION) RULES, 2014 Proposed Amendments in COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) RULES, 2014 (PAS RULES) Proposed Amendments in COMPANIES (SHARE CAPITAL AND DEBENTURE) RULES, 2014 Proposed Amendments in COMPANIES (ACCEPTANCE OF DEPOSIT) RULES, 2014 Proposed Amendments in COMPANIES (REGISTRATION OF CHARGES) RULES, 2014 Proposed Amendments in COMPANIES (MANAGEMENT AND ADMINISTRATION) RULES, 2014 Proposed Amendments in COMPANIES (ACCOUNTS) RULES, 2014 Proposed Amendments in COMPANIES (AUDIT & AUDITORS) RULES, 2014 Proposed Amendments in COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014 Proposed Amendments in COMPANIES (MEETINGS OF BOARD AND ITS POWERS) RULES, 2014 Proposed Amendments in COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 Proposed Amendments in COMPANIES (AUTHORISED TO REGISTER) RULES, 2014 Proposed Amendments in COMPANIES (REGISTRATION OF FOREIGN COMPANIES) RULES, 2014 Proposed Amendments in COMPANIES (REGISTRATION OFFICES AND FEES) RULES, 2014 Proposed Amendments in NIDHI RULES, 2014 Proposed Amendments in COMPANIES (MISCELLANEOUS) RULES, 2014 Government sets-up Tax Policy Research Unit and Tax Policy Council to bring consistency, multidisciplinary inputs, and coherence in Tax Policy 1.15 Crore Subscribers for National Pension System (NPS) as on 23.1.2016 Finance Minister to inaugurate India Investment Summit 2016: Different Sectors to Showcase Investment Opportunities in Different Sectors Including Road, Highways, Oil and Gas, Urban Infrastructure, Railways among others RBI Reference Rate for US $ REPORT OF THE COMPANIES LAW COMMITTEE Sixth Bi-monthly Monetary Policy Statement, 2015-16 By Dr. Raghuram G. Rajan, Governor Aucton for Sale (Re-Issue) of Government Stocks Report of the Companies Law Committee Notifications Central Excise 01/2016 - dated 1-2-2016 - CE (NT) Amendment in CENVAT Credit Rules, 2004 - the provision restricting CENVAT credit to 85% under proviso to rule 3(i)(vii) of Cenvat Credit Rule, 2004 deleted. - Consequently ship breaking units would be entitled to avail 100% credit of the CVD paid with effect from 01.03.2015 Customs 7/2016 - dated 2-2-2016 - Cus Seeks to further amend notification No. 12/2012- Customs dated 17.03.2012 VAT - Delhi F.3(352)Policy/VAT/2013/1395-1405 - dated 1-2-2016 - DVAT Notify that the Form DP-1 shall be submitted online by all the dealers latest by 29.02.2016 Circulars / Instructions / Orders Central Excise 1014/2/2016-CX - dated 1-2-2016 Inclusion of show cause notice’s issued in relation to levy of CVD on vessels imported for breaking in the "Call-Book" Highlights / Catch Notes Income Tax Taxability of income earned by the Assessee in respect of a contract entered into by it with ONGC Limited, a public sector enterprise (hereafter ‘ONGC’) - There is also no material to indicate that the work done outside India included any input from the Assessee's PE in India. - Not taxable - HC Visit to Get Source Assessment of rental income - individual v/s HUF status - the departmental authorities have accepted the income in question of the assessee, in the status of the HUF for the previous and subsequent years and it is only for one assessement year in question, assessed in the status of HUF - Such a different stand taken only for one assessment year is not appreciable - HC Visit to Get Source Deemed dividend u/s.2(22)(e) - a business transaction between two concerns, under which amount is transferred from one to another cannot be treated as dividend in the hands of shareholder by applying the deeming provisions of section 2(22)(e) - AT Visit to Get Source As the assessee’s business was promotion of new ventures, the project expenditure was incidental to the business and hence could not be treated as preliminary or capital in nature and accordingly allowed the same as Revenue expenditure. - AT Visit to Get Source Clubbing of income - Rent received by the assessee whereas service charges received by wife and daughter of the assessee in relation to same property - There is no reason to assess the income received by the assessee‘s wife and daughter-in-law in the hands of assessee. - AT Visit to Get Source Disallowance u/s 14A - The claim of the assessee was that no expenditure was incurred for earning exempt income, but once the AO had recorded his satisfaction in terms of sub-section (2), then the disallowance can be made as per Rule 8D(2)(iii) - AT Visit to Get Source Addition of long term capital gain - Since the possession of the property was to be given to the developer only upon fulfillment of the conditions of the agreement i.e. last payment, therefore, there is no transfer in terms of section 2(47)(v) - AT Visit to Get Source Non deduction of tax at source in respect of interest on debenture u/s 193 - Mere because of Provision made in the books of account as per Accounting Standards, where no income has accrued to or has been received by then debenture holders, TDS not required to be deducted - Assessee cannot be treated in default - AT Visit to Get Source Customs Levy of additional Custom duty SAD @ 4% - With this intension in the present case since appellant's goods is not chargeable to additional duty (GSI) due to exemption Notification, SAD under Section 3A(1) is correctly and legally payable by the appellant. - AT Visit to Get Source Valuation - rejection of transaction value - if the value of contemporaneous imports were accepted and the transaction value in those case are not doubted by the revenue in the assessment orders, it is not understandable why the said values could not have been used for the purposes of comparing the same - AT Visit to Get Source Service Tax Cenvat credit and refund claim thereof for the period prior to registration - export of IT enabled services - nexus of input services with output services - refund allowed - AT Visit to Get Source Claim of exemption in relation to agriculture produce - acting as an agent for a number of South Indian Tea Estates in the marketing and sale of their tea overseas and are professional tea taster - the above activities do not fall within the meaning of commission agent - Not exempted - demand confirmed - AT Visit to Get Source Rejection of VCES-1 declaration due to short deposit of tax - There has been miscarriage of justice in the rejection of the application under the VCES of the appellant without any opportunity to remove the defects and further without any opportunity to be heard, the order of rejection was passed. - AT Visit to Get Source Levy of service tax on franchisee and royalty fee paid to their US based franchiser - sharing of compensation - prima facie the appellants are liable to pay service tax on the amount remitted to the overseas franchisee as per the agreement. - AT Visit to Get Source Central Excise Amendment in CENVAT Credit Rules, 2004 - the provision restricting CENVAT credit to 85% under proviso to rule 3(i)(vii) of Cenvat Credit Rule, 2004 deleted. - Consequently ship breaking units would be entitled to avail 100% credit of the CVD paid with effect from 01.03.2015 - Notification Visit to Get Source Extended period of limitation - Cenvat Credit - clearance of inputs as such - bonafide error in not reversing the credit as per Rule 3(5) of CCR - revenue neutrality - order of the tribunal dropping the demand confirmed - HC Visit to Get Source Utilized CENVAT Credit exceeding 20% of the amount of service tax payable on taxable output service - . The Tribunal proceeded to pass the order based on sentiments which is uncalled for, particularly, while adjudicating the revenue matters. - HC Visit to Get Source Admissibility of appeal - dispute on valuation of the goods - The pleadings are pertaining to the non-application of mind by the Tribunal, while interpreting the provisions of Section 35B of the Act. Therefore, the contention that this Court has no jurisdiction cannot be accepted. - HC Visit to Get Source VAT Doctrine of promissory estoppel - Tax Incentive scheme during the sales tax regime to be continued under VAT regime or not - State Government directed to issue appropriate exemption notifications u/s 5(1) of the KVAT Act on the sale of goods to/by the appellants in terms of Framework Agreement dated: 03.04.1997 - HC Visit to Get Source Entry tax - KTEG Act - Rubber Process Oil, which is used as a lubricating agent in the manufacture of rubber products - the classification under the Central Excise Act would have no application under the KTEG Act - HC Visit to Get Source Case Laws: Income Tax 2016 (2) TMI 47 Taxability of income earned by the Assessee in respect of a contract entered into by it with ONGC Limited, a public sector enterprise (hereafter ‘ONGC’) - existence of an Assessee’s PE in India in terms of Article 5 of the DTAA - whether income from the contract in question is not taxable under the Act by virtue of the Double Taxation Avoidance Agreement between India and United Arab Emirates (UAE)? - Held that:- Annexure C (Contract Price Schedule and Rental Rates Schedule) specifically assigns value to various activities. It is also not disputed that the invoices raised by the Assessee specifically mentioned the work done outside India as well as in India. Thus, even though the contracts in question may be turnkey contracts, the value of the work done outside India is ascertainable. There is no dispute that the values ascribed to the activities under the contracts are not at Arm's Length. There is also no material to indicate that the work done outside India included any input from the Assessee's PE in India. The ITAT had considered the contract and in view of the fact that the consideration for various activities such as design and engineering, material procurement, fabrication, transportation, installation and commissioning had been separately specified, the Tribunal rightly held that the consideration for the activities carried on overseas could not be attributed to the Assessee's PE in India Assessee did not have a PE in India during the AYs 2007-08 and 2008-09, no income of the Assessee from the projects in question can be attributed to the Assessee’s PE. The assessment orders dated 26th October, 2010 and 18th November, 2011 for the AYs 2007-08 and 2008-09 respectively as well as the corresponding orders passed by the ITAT in the corresponding appeals are set aside. - Decided in favour of assessee. 2016 (2) TMI 46 Assessment of rental income - individual v/s HUF status - ITAT held that the rental income is to be assessed in the hands of appellant-individual just because the PAN number of the appellant-individual has been indicated instead of PAN of HUF in the TDS certificate given by the Tenant, on the facts and circumstance of the case - Held that:- It is clear that the income from the property bearing No.58, Bommasandra, Bangalore was declared by the assessee as income of HUF for the previous assessment years and the subsequent assessment years including the current assessment year, the same is accepted by the authorities except the current year. It is only in the current assessment year, the authorities have assessed the income in question in the status of HUF and not as an individual. The assessee/appellant is having two PAN numbers, one as HUF and the other as an individual. If the submission made by the learned counsel for the assessee has to be accepted that the tenant has wrongly mentioned the PAN number (individual) of the assessee in the rental agreement due to some inadvertence, it would not change the status of the assessee/appellant. In such view of the matter, it requires detailed examination of the PAN numbers of the assessee in the context of the PAN number mentioned in the agreement said to have been disclosed by the tenant of the assessee. It is based on the rental agreement, the departmental authorities have proceeded to treat the assessee in the status of an individual regarding the income in question. The undisputed fact that the departmental authorities have accepted the income in question of the assessee, in the status of the HUF for the previous and subsequent years and it is only for one assessement year in question, assessed in the status of HUF would warrant interference of this Court. Such a different stand taken only for one assessment year is not appreciable in the facts and circumstances of the case. In the given circumstances, we set aside the order passed by the ITAT as well as the authorities and remit the matter back to the Assessing Officer to examine the issue afresh in accordance with law and to pass fresh assessment order as expeditiously as possible after providing an opportunity of hearing to the parties. - Decided in favour of assessee. 2016 (2) TMI 45 Penalty u/s 271(1)(c) - claim for business loss - CIT(a) and ITAT deleted the penalty - Held that:- CIT(Appeals) and the Tribunal have concurrently reached a finding of fact that the Respondent had not claimed any carry forward loss either in the return which he has filed for the subject assessment year or in the subsequent assessment years. In the subject assessment year, once a loss was shown in the E-return, the software suomotu reflects the loss returned as carry forward loss. The Respondent has not fed in the entry of carried forward loss while filing its return of income in the E-return. The fact that the Respondent-Assessee had in the subsequent assessment year not claimed carry forward loss is evidence of the fact that there was no intent to furnish inaccurate particulars of income or conceal income. The expenditure had been claimed as it had set up its business though not commenced during the subject Assessment years. This was a claim which was disallowed not on the basis that it had not set up its business. In any case, both CIT(A) as well as the Tribunal had concurrently reached a finding of fact that there was no intent on the part of the Respondent Assessee to evade tax. This finding is not shown to the arbitrary - Decided in favour of assessee 2016 (2) TMI 44 Revision u/s 263 - Whether Hon’ble Tribunal was right in law in quashing the order of the Commissioner of Income Tax under Section 263 of the Act which is as per law as the provisions of Section 14A are applicable to the total income under the Income tax Act and the fact whether the income of the assessee is computed as per Section 11 or not is of no relevance? - Held that:- The undisputed facts are that the assessment order under Section 143(3) of the Act was passéd by the Assessing Officer on 27.12.2009, subsequent to the registration under Section 12AA of the Act, granted to the assessee on 27.07.2009 with effect from 01.04.2003. The revision filed by the assessee under Section 264 of the Act was allowed accepting the claim of the assessee and the matter was remanded to the Assessing Officer to compute the income of the assessee in terms of the order of revision under Section 264 of the Act. The said order was given effect to by the Assessing Officer vide order dated 27.05.2011. Thus, it is clear that the order dated 27.12.2009 passed by the Assessing Officer is no longer in existence. CIT exercising the powers under Section 263 of the Act revised the non-existing order dated 27.12.2009, the Tribunal having considered this factual position arrived at a conclusion that CIT had no jurisdiction to revise the order which was not in existence. The order passed by the CIT, revising the non-existing order is void ab-initio and is a nullity in the eye of law. As such, the Tribunal setting aside the said void order passed under Section 263 of the Act, cannot be found fault with. It is pertinent to note that the computation of the income of the assessee has been done in accordance with Chapter III of the Act, the second question of law arises on the points urged in the cross-objection filed by the revenue before the Tribunal, which has been rejected. In the present case, the revenue has filed cross objections under Section 253(4) of the Act raising the points involved in second question of law now raised, in an appeal preferred by the assesee against the order of the revisional authority exercising the powers under Section 263 of the Act. No such cross objections are maintainable in an appeal filed against the order of revision in terms of Section 253(4) of the Act. Given the circumstances, the Tribunal rejecting the cross objections filed by the revenue as not maintainable is justifiable. - Decided in favour of the assessee 2016 (2) TMI 43 Computation of deduction under section 10A - Tribunal held that expenses incurred in foreign currency for providing software development services outside India should be excluded from the export turnover for the purpose of computation of deduction U/s. 10A - Held that:- An identical issue relating to section 80HHE of the Act was considered by this court in the case of 'THE COMMISSIONER OF INCOME TAX & ANOTHER v. MOTOR INDUSTRIES CO., LTD., [2015 (7) TMI 876 - KARNATAKA HIGH COURT ] and this court has held that though the services rendered in deputing the software engineers abroad who among other things have to do testing, installation and monitoring of software supplied to the client, appears to be technical in nature, it does not fall within the clause of providing technical service outside India in connection with the development or production of computer software and accordingly such expenditure cannot be excluded in computing export turnover. This court has held that the expenditure incurred in the development or production of computer software though is in the nature of technical services, is not so, for the purposes of the Act and the said expenditure cannot be excluded in computing export turnover. Thus, we are of the view that the said Judgment is squarely applicable to the facts of the present case. Accordingly, we answer the first question in favour of the assessee and against the revenue. Exchange fluctuation loss - Tribunal held that exchange fluctuation loss should be reduced from the total turnover for the purpose of computation of deduction U/s. 10A - Held that:- section 10A of the Act is a beneficial provision. The purpose of section 10A of the Act is also to bring more foreign exchange and to encourage export and as the Government decides to give some benefit to such undertaking which is helping the nation in bringing foreign exchange, the revenue should encourage such traders by giving more benefits as contemplated under the provisions of law as enunciated in the case of Tata Elxsi Limited [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] - Decided in favour of the assessee and against the revenue 2016 (2) TMI 41 Penalty under section 271(1)(c) - recovering full amount of penalty - Held that:- As against quantum addition, the petitioner has already appealed before the Tribunal. The Tribunal has granted stay against recovery on the condition of depositing 50% of tax dues. The appeal against quantum addition is ripe for hearing before the Tribunal. Quite apart from these developments, it is hugely doubtful whether this would be a case for penalty under section 271(1)(c) of the Act which is imposable on the assessee furnishing inaccurate particulars of the income or concealing the particulars of income. The fact that the petitioner as a statutory authority is engaged in implementing town planning schemes and in developing of Ahmedabad urban area is well known to the department and all concerns. Whether such activity is a charitable activity and would qualify for exemption under section 12A of the Act and consequently the income from such activity would be exempted from tax under section 2(15) of the Act, is only a matter of interpretation. Even post amendment with effect from 1.4.2009, the petitioner's claim for exemption would be eligible or not, is purely a question of law. We fail to see what could be the omission on part of the assessee to disclose inaccurate particulars of the income or conceal the particulars of income in the present case so as to invite penalty. Facts would have to be viewed in light of ratio of decision in case of Commissioner of Incometax v. Reliance Petroproducts Pvt. Ltd reported in (22010 (3) TMI 80 - SUPREME COURT). On such prima facie consideration, it is directed that pending the petitioner's appeal against the order of penalty imposed by the Assessing Officer, there shall be no coercive recovery of such penalty demand 2016 (2) TMI 40 Non deduction of tds u/s 194C - payments made to the labourers. - Held that:- We find no merit in the submissions of the assessee that the provisions of section 40(a)(ia) of the Act are applicable only to the amounts which are outstanding or remaining payable at the end of every year i.e. 31st March. The Pune Bench of Tribunal has consistently taken a view that the provisions of section 40(a)(ia) of the Act are applicable to the amounts irrespective of whether the same were paid during the year or were outstanding at the close of the year. In the absence of any justification for non-deduction of TDS out of sub-contract payments and in view of admission of the assessee before the Assessing Officer, we uphold the addition - Decided against the assessee Deemed dividend u/s 2(22)(e) - Held that:- Since the assessee is not the registered shareholder of the said company, we find no merit in the aforesaid addition made in the hands of the assessee - Decided in favour of assessee Addition u/s 68 - cash credit - Held that:- The perusal of the balance sheet filed by the assessee reflects that the closing balance as on 31.03.2007 was ₹ 2,42,500/- i.e. the amount due to Durvesh Construction Co. The case of the assessee before us is limited that it had received sum of ₹ 5 lakhs from M/s. Durvesh Construction Co., out of which sum of ₹ 2,57,500/- was the loan due from the said person and the balance of ₹ 2,42,500/- was the loan outstanding at the close of the year. The assessee had admittedly, received ₹ 5 lakhs from the said person and had only shown the balance of ₹ 2,42,500/- in the balance sheet. In the above said facts and circumstances, where the assessee had advanced sum of ₹ 2,57,500/- in the preceding year to Mr. S.R. Sharma, proprietor of M/s. Durvesh Construction Co., then to the extent of said amount, loan is explained as the creditworthiness can be accepted to the extent of amount which was advanced by the assessee. However, in respect of balance of ₹ 2,42,500/-, the assessee has failed to discharge his onus i.e. to establish the creditworthiness of the person advanced the loan. Accordingly, we direct the Assessing Officer to restrict the disallowance to ₹ 2,42,500/- - Decided partly in favour of assessee. Addition being difference in receipts - Held that:- The assessee claims to have booked the balance sale consideration in subsequent assessment year. Though the assessee is making the same plea before the authorities below and even before us, but the plea of the assessee cannot be accepted in the absence of any documentary evidence being filed by the assessee. Even before us, the assessee has failed to reconcile difference in sale consideration and / or to furnish the evidence that the said amount has been offered to taxation in the succeeding year and on what basis. In the absence of the same, we find no merit in the grounds of appeal, thus confirming the addition - Decided against assessee 2016 (2) TMI 39 Disallowance of deduction u/s 80IC - as per revenue ‘eco-tourism’ is a condition precedent for claiming deduction u/s 80IC and since the assessee failed to produce muster rolls of labourers, the same was not allowed - Held that:- The assessee falls in the ken of eco-tourism which qualifies for deduction u/s 80IC of the Act and, therefore, we set aside the orders of the authorities below and allow the grounds taken by the assessee. See Shri Bidhi Chand Singhal, Versus. Income Tax Officer [2010 (11) TMI 957 - ITAT DELHI] - Decided in favour of assessee 2016 (2) TMI 38 Deemed dividend u/s.2(22)(e) - contention of assessee that it was business advance - Held that:- e, the amount has been advanced as business advance, wherein the amount was advanced to a joint venture company for the purpose of purchasing machinery to carry on the business. The recipient company had purchased the machinery against the money so advanced and the assessee has also placed on record the trail of payments in this regard and in such facts and circumstances, where a business decision was taken between two concerns and the amount was advanced, such an advance cannot take the colour of loan simplicitor. Such a business transaction between two concerns, under which amount is transferred from one to another cannot be treated as dividend in the hands of shareholder by applying the deeming provisions of section 2(22)(e) of the Act. We find no merit in the order of CIT(A) in this regard and reversing the same, we direct the Assessing Officer to delete the addition - Decided in favour of assessee 2016 (2) TMI 37 Disallowance of write off of the cost of investments in equity shares - whether allowable as revenue loss or capital loss? - CIT(A) deleted the addition - Held that:- In the present case, the assessee is holding the investment in shares in capital field and it was not treated as stock-in-trade, the realization of investment and loss arising out of it only in a capital field and it is only a capital loss. For this purpose, the ld. DR placed reliance on the judgement in the case of Spectra Shares and Scrips Pvt. Ltd. v. CIT [2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT]. Accordingly, we reverse the order of the ld. CIT(A) on this issue and the ground raised by Revenue is allowed. Addition made in respect of the ASIDE grant received by the assessee - CIT(A) deleted the addition - Held that:- In the present case, the Comptroller and Auditor General of India and other audit agencies of Central Government have observed that the grant of ₹.9.53 crores received by the assessee from Central Government towards ASIDE was wrongly treated the amount received as a revenue receipt in its books and in view of the above observations, the assessee realised the mistake and rectified the same and filed revised return before due date of filing of return of income. Therefore, we find that the ld. CIT(A) has rightly deleted the addition made by the Assessing Officer and the order passed by the ld. CIT(A) on this issue stands confirmed. - Decided against revenue. Disallowance of unsuccessful project promotional expenses written off - Held that:- The issues is squarely covered by the decision of the Coordinate Bench of the Tribunal in assessee’s own case for earlier assessment years wherein hedl he assessee had been investing in several projects and whenever feasible, promoting new industrial undertakings. If the new undertakings materialized the expenses were transferred and recovered from the new unit. However, if the project was unsuccessful, the assessee wrote off the expenses. The Tribunal held that as the assessee’s business was promotion of new ventures, the project expenditure was incidental to the business and hence could not be treated as preliminary or capital in nature and accordingly allowed the same. The order of the Tribunal was upheld by the Hon’ble High Court.- Decided against revenue. 2016 (2) TMI 36 Addition on account of interest on Non Performing Assets - assessee is following the mercantile system of accounting - CIT(A) deleted the addition - Held that:- As decided in Unclaimed dividend in Deogiri Nagari Sahakari Bank Ltd. [2015 (1) TMI 1218 - BOMBAY HIGH COURT] question amounts to excess provisions for dividend made by the Assessee on an earlier occasion which has been reversed by the Assessee in the year under consideration and transferred to a reserve account. The provisions for dividend made earlier was not a charge action profits but it was appropriation of the profits available post taxation. Assessee bound by Reserve Bank of India directions to treat deposit as non-performing asset – Interest does not accrue - Decided in favour of assessee 2016 (2) TMI 35 Carry forward of deficit and allowing set off against income of subsequent years - assessee is a trust - CIT(A) allowed the claim - Held that:- Carry forward of deficit of earlier years has to be set off against the surplus of subsequent years. See Commissioner Of Income-Tax Versus Shri Plot Swetamber Murti Pujak Jain Mandal (1993 (11) TMI 17 - GUJARAT High Court ), Commissioner Of Income-Tax Versus Maharana Of Mewar Charitable Foundation(Raj.)[1986 (7) TMI 56 - RAJASTHAN High Court], Commissioner of Income-Tax Versus Institute Of Banking Personnel Selection [2003 (7) TMI 52 - BOMBAY High Court] Commissioner Of Income-Tax Versus Matriseva Trust [1999 (3) TMI 34 - MADRAS High Court] held that excess of expenditure over income in one year can be set off in subsequent year against the income u/s 11 as and by way of application of income. Respectfully following the aforementioned Hon’ble High Courts and specifically Hon’ble jurisdictional High Court,find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals) and affirmed the same. - Decided against revenue 2016 (2) TMI 34 Assessment of income from house property - actual rent received by the assessee - Held that:- The annual value of the property is required to be determined u/s 23(c) of the Act, since the property was let out in the preceding year as well as for a part of the year. It is seen that the actual rent received by the assessee for the year under consideration is less than the municipal rateable value as shown by the Ld A.R. In the case laws relied upon by the assessee, it has been held that the municipal rateable value should be adopted as the fair rental value u/s 23(a) of the Act. Accordingly, we agree with the submissions made by Ld A.R that the actual rent received by the assessee should be taken as annual value u/s 23(c) of the Act. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to adopt the actual rent received by the assessee as annual value for the year under consideration. - Decided in favour of assessee Clubbing of income - Rent received by the assessee whereas service charges received by wife and daughter of the assessee in relation to same property - Held that:- Considering the assessee's submissions that the two ladies cited have only received the payments, from which TDS was deducted by M/s Talwalkar. Further, it is not the case of the AO that the wife of the assessee and daughter-in-law did not provide any service to M/s Talwalkar Better Value Fitness Pvt. Ltd. The ld. AR also submitted that two ladies have declared the income received from M/s Talwalkar Better Value Fitness Pvt. Ltd in their respective hands and TDS deducted by M/s Talwalkar Better Value Fitness Pvt. Ltd from the same was also claimed by them we are of the view that the purpose of payment has clearly been demarked and there is no material on record to suspect the same. Accordingly, we are of the view that there is no reason to assess the income received by the assessee‘s wife and daughter-in-law in the hands of assessee. Since the assessee has not received any income and paid any payment to assessee’s wife and daughter-in-law, the question of deduction of TDS and application of the provisions of section 40(a)(ia) of the Act also does not arise. In view of the above, we set aside the order of ld. CIT(A) on this issue and direct the AO to delete the addition - Decided in favour of assessee 2016 (2) TMI 33 Disallowance u/s 14A - Held that:- We find from bare reading of the assessment order that AO has clearly recorded his satisfaction that the assessee’s stand that no expenditure had been incurred in earning exempt income was incorrect and such arguments were completely misconceived. The observations have specifically been made in para 7.1 of the assessment order. He clearly observed that though there were no direct expenses shown by the assessee in his books of account exclusively for earning such exempt income, but it cannot be denied that the assessee had been utilizing its administrative as well as managerial machinery for earning the exempt income in a prudent manner. The claim of the assessee was that no expenditure was incurred for earning exempt income, but once the AO had recorded his satisfaction in terms of sub-section (2), then the disallowance can be made as per Rule 8D(2)(iii). We, accordingly, do not find any reason to interfere with the finding of ld. CIT(A) on this count - Decided against assessee 2016 (2) TMI 32 Addition of long term capital gain - CIT(A) deleted the addition held that no transfer involved within the meaning of section 2(47) r.w.s. 53(a) of the transfer of the property Act, as the assessee was in the possession of the property and the possession was to be given to the developer only upon the last payment and till then the assessee had a right to revoke the agreement, therefore, it was held that no capital gain arose to the assessee - Held that:- it can be concluded that the property was not transferred within the meaning of section 2(47)(v) of the Act r.w.s 53A of the transfer of Property Act. Even, the condition of the development agreement could not reach to finality due to non-payment of specified amounts (clause-9 of the agreement) by the transferee, due to which, agreement was unilaterally canceled, therefore, we find merit in the claim of the assessee. Our view is fortified by the decision in the case of General Glass Company Pvt. Ltd. vs DCIT (2006 (12) TMI 170 - ITAT BOMBAY-J) and Asian Distributors Ltd. (2000 (1) TMI 990 - ITAT MUMBAI) wherein, it was held that where the payment of balance consideration within stipulated time is essence of the agreement of sale and such payments are not made within time by the transferee, such contract/agreement does not confer any righty on the transferee as envisaged u/s 53A of the transfer of the Property Act along with the provisions of section 2(47)(v) of the Act. Since the possession of the property was to be given to the developer only upon fulfillment of the conditions of the agreement i.e. last payment, therefore, there is no transfer in terms of section 2(47)(v) of the Act, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals). - Decided in favour of assessee 2016 (2) TMI 31 Addition on account of disallowance of provision for write off of spares - CIT(A) deleted the addition - Held that:- Physical inspection is conduced both departmentally as also by external agencies. During the year under consideration M/s. Bandyopadhyay & Associates, Cost Accountants, carried out the valuation of spares at Nagaon and Cachar Paper Mills and identified items of obsolete and damaged stores and spares and furnished report on valuation of stores and spares. Based on the valuation report that assessee written off ₹ 656.36 lacs in its profit and loss account for the year ended 31.03.2007. However, in respect of the very same items assessee had created provision in the earlier years to the extent of ₹ 646.36 lacs and therefore adjusting such provisions, the net additional sum of ₹ 10 lacs only was debited in the profit and loss account. We futher find that similar write off were also made by the assessee in the financial year 2003-04 and 2005-06. The disallowance made by the AO in AY 2004-05, was deleted by the CIT(A) and thereafter COD refused permission to file appeal against the said appellate order. In AY 2006-07 also the assessee had written off ₹ 184. 07 lacs. In the regular assessment u/s. 143(3) for A. Y. 2006-07 the same AO after due consideration of the explanation and the CIT(A)'s order for AY 2004-05, had refrained from making any disallowance. In view of the facts and circumstances of the present case, We are of the view that the claim of assessee, writing off in its Profit & Loss Account, the value of obsolete stores and spares, is a genuine claim and CIT(A) has rightly allowed the same. - Decided in favour of assessee. Disallowance 14A read with Rule 8D - Held that:- We are of the view that the AO was unjustified in making the disallowance of ₹ 98.23 lacs merely by adopting an arithmetical formula prescribed in Rule 8D(2)(iii) of the Rules. We are of the view that disallowance u/s 14A of the Act can be made only if the facts of the case prove that at least some expenditure was actually incurred by the assessee for earning exempt income. If, however, the facts on record and the assessee's accounts for the relevant year establish that in fact no expenditure was incurred in relation to earning tax free income then no disallowance is permissible under the substantive provisions of Sec 14A of the Act. We, therefore are of the view that CIT(A) has rightly deleted the disallowance of ₹ 98.23 lacs, arbitrary made by the AO without bring on record any material which even suggested that same expenditure was in fact incurred by the assessee for earning dividend from its wholly owned subsidiary Accordingly, we confirm the order of CIT(A) and this issue of revenue's appeal is dismissed.- Decided in favour of assessee. Addition of prior period adjustment - Held that:- The assessee being a government undertaking whose plants are situated in Assam and registered office at Calcutta besides administrative office at Delhi and its several office and depots in different part of the country. The accounting procedure prescribed by C&AG has institutionalized system of checks and balances and accordingly certain expenses required clearances from different authorities located at different locations and cities. This type of major expenditure debited under the head CENVAT credit wrongly claimed in earlier years, in which excess CENVAT credit was claimed on production of paper. During the year under consideration, on inspection of excise record by Central Excise Officials, certain procedural irregularities were detected while claiming CENVAT credit. On detection of irregularities the assessee was directed to pay basic excise duty of ₹ 1,31,10,849/-, education cess of ₹ 83,298/- and statutory interest of ₹ 66,08,110/-. The assessee provided liability of CENVAT of ₹ 198.09 cr. for the year ended 31.03.2007. This statutory liability was discharged during FY 2006-07 relevant to this AY 2007-08 and according to us, the same was allowable u/s. 43B of the Act. Accordingly, we are of the view that this liability is allowable liability and we direct accordingly.- Decided in favour of assessee. Disallowance of claim of write off of loose tools - Held that:- The method adopted by the assessee and accepted by the department in all the past assessment years by the same AO. In the immediately three preceding years, while completing regular assessment the AO had allowed the regular deduction for the write off of loose tools on amortization basis. In view of the above, we are of the view that the CIT(A) has erred in not allowing the deduction. We reverse the order of CIT(A) and allow the claim of deduction of write off of loose tools. - Decided in favour of assessee. 2016 (2) TMI 30 Non deduction of tax at source in respect of interest on debenture u/s 193 - Provision made in the books of account versus Actual liability - Held that:- Undisputedly no income has accrued to or has been received by then debenture holders under the provisions of the section 193 of the Act. At the end of tax deducting is requirement of paying any income by way of interest on security but above facts indicate that there was no such requirement at the end of the assessee for paying any income by way of interest on security to debenture holders. In view of precarious financial position of the assessee as stated above the provision of such interest was made in view of compulsory requirement of amounting standards as well as Companies Act, 1956 hence, assessee was rightly held not responsible for paying any income by way of interest on securities to debenture holders in such situation provisions of section 193 of the Act are not applicable. In this background CIT(A) was justified in holding that assessee has not committed any default in this regard. Thus, the assessing officer has rightly been directed not to treat as 'assessee in default' accordingly, he was rightly directed to delete the payment of ₹ 2,92,49,251/- as worked out under provisions u/s 201(1)/201(1A) of the Act. This reasoned factual finding of CIT(A) need not interfere from our side we uphold the same. As a result, appeal filed by revenue is dismissed. - Decided in favour of assessee Customs 2016 (2) TMI 11 Levy of additional Custom duty SAD @ 4% - goods of special importance - import of 'PVC Coated cloth of 68D/68D' under CTH 5903.10 - Held that:- additional duty of Excise is not chargeable and therefore appellant will not get shelter of subsection (5) of Section 3A from levy of SAD as provided under Section 3A. It is also to be noted that the intention of subsection (5) is that any one duty, either additional duty of Excise (GSI) or special additional duty shall be payable, for this reason subsection (5) was provided, according to which if the assessee is charged with additional duty of excise (GSI) then he shall be absolved from payment of SAD but for any reason if the additional duty of Excise (GSI) is not payable by the assessee then he shall be charged with special additional duty. With this intension in the present case since appellant's goods is not chargeable to additional duty (GSI) due to exemption Notification, SAD under Section 3A(1) is correctly and legally payable by the appellant. - Decided against the assessee. 2016 (2) TMI 10 Revocation of Custom Broker License - forfeiture of bank guarantee - period of limitation of 90 days - Held that:- the Show Cause Notice under Regulation 20(1) has been issued on 17.6.2014 which is admittedly beyond a period of 90 days prescribed under Regulation 20(1) of the Customs Broker CBLR. 2013. - proceedings against the appellant are not sustainable being time-barred - proceeding initiated against the appellant under CBLR, 2013 set aside - Decided in favor of appellant. 2016 (2) TMI 9 Department issued show cause notice (the present proceedings) proposing to confiscate the tug under Section 111(f) and impose penalty, for not filing IGM for the intervening period 16.07.2001 to 29.11.2002. - Held that:- the Department was aware of the irregularities committed by the Appellant at the time of first proceedings, wherein the Appellants were allowed to file Bill of Entry. It also appears that penalty was imposed at that time. Therefore, not amending the IGM amounts to only a technical offence, which calls for token penalty and token fine only, under the peculiar facts and circumstances of the case. Therefore, while upholding the impugned Order-in-Original, we reduce the redemption fine to ₹ 1 lakh (Rupees One lakh only) and penalty to ₹ 50,000.00 (Rupees Fifty Thousands only). - Decided partly in favor of appellant. 2016 (2) TMI 8 Valuation - rejection of transaction value of the imported and poppy seeds from Turkey - validity of documents relied upon by hte revenue - Revenue submitted that, the differential amount is sent to the suppliers by unofficial channels, the assertion of the appellants that the entire amount has been sent through banking channels is incorrect. - Held that:- The revenue relied upon copies of export invoices and declarations submitted by the suppliers/the exporters before the Turkish authorities. - It is settled law that in order to be admissible as evidence, the copies of foreign documents are required to be tested and signed by the Turkish Customs authorities which they were not. Further it is settled law that the documents must bear the signature of the officers making the enquiries and be certified as true copies. It is to be noted that the originals have not been made available even to the Tribunal and unauthenticated and unsigned documents were relied upon, which could not be used, even if they may have been forwarded by 'authorities' to the investigating agency through official channels. As regards the insurance documents as well as entries from Comtrade and UK public ledger and other journals it is now well settled law that such information cannot be used to doubt or reject the transaction value. We also note that the adjudicating authority has refused to look at other contemporaneous imports, which are not the subject matter of the present show cause notice on the ground that there was gross undervaluation being done by the trade. We find that if the value of contemporaneous imports were accepted and the transaction value in those case are not doubted by the revenue in the assessment orders, it is not understandable why the said values could not have been used for the purposes of comparing the same with the value of the consignments in question in these appeals. It is to be held that the impugned orders are unsustainable and liable to be set aside and we do so. - Demand and penalty set aside - Decided in favor of assessee. 2016 (2) TMI 7 Valuation - Whether the demurrage charges can form part of assessable value - Apex Court dismissed the Revenue appeal against the decision of tribunal [2007 (10) TMI 201 - CESTAT, BANGALORE] - this issue has already been decided Commissioner of Central Excise, Mangalore v. M/s. Mangalore Refinery & Petrochemicals Ltd. [2016 (1) TMI 325 - SUPREME COURT] in favour of the assessee Corporate Laws 2016 (2) TMI 3 Scheme of Amalgamation - As the requirements of the provisions of sections 391 to 394 of the Companies Act, 1956 are satisfied. The Scheme appears to be genuine and bonafide and in the interest of the shareholders and creditors. This Court, therefore, considers it proper to allow Company Petitions and approve the Scheme. The Scheme stands sanctioned and the prayers made in the respective Company Petitions are granted. 2016 (2) TMI 2 Scheme of Amalgamation is sanctioned. It is, however, directed that the petitioner Transferor Companies shall preserve their books of accounts, papers and record and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act, 1956. Service Tax 2016 (2) TMI 28 Cenvat credit and refund claim thereof for the period prior to registration - export of IT enabled services - nexus of input services with output services - Held that:- there is no provision in law that Cenvat credit can be allowed only after registration of the unit, cenvat credit is allowed in respect duty suffered on input/input services and the said payment is nothing to do with the registration of the recipient of the services therefore registration cannot be made criteria to reject the refund claim. - lower authority could not have denied the Cenvat credit and refund thereof to the appellant on the ground of registration. Nexus between input and output services - Held that:- On the ground that services have no nexus with the output service. In our view, firstly the appellant is engaged in export of 100% services and no part of the services is provided in India with this reason alone all the services which have been received and used by the appellant are deemed to have been used for providing output services which have been exported. Since there is no provision for domestic services, the ratio of services that how much related to export and how much related to domestic does not arise. Moreover, all these services as per its' use explained in the appeal memo, we find that all the services are essential for providing the call center services. - appellant is entitled for refund except amounts of ₹ 3581/- and ₹ 2930/- subject to only verification of calculation of refund amount. Refund allowed - Decided substantially in favor of assessee. 2016 (2) TMI 27 Business Auxiliary Service but not commission agent service - claim of exemption in relation to agriculture produce - acting as an agent for a number of South Indian Tea Estates in the marketing and sale of their tea overseas and are professional tea taster. - it is submitted that, appellant was undertaking the service on behalf of the tea exporters in various ways in respect of export of tea which is an agricultural produce and therefore, the demand of tax is unsustainable. - Exemption Notification no. 13/2003 Held that:- in the whole process of export of tea, they guide exporters suitably in achieving the objectives to fulfil the contractual obligation. The activity is undertaken by the service provider to market 'tea' among foreign buyers as covered under the scope of Business Auxiliary Service. Appellant's activities are not only restricted to sale, but includes host of other activities including assisting in the system of grading and standardization of tea for the purpose of export and also deals with details such as colour, taste, quality and quantity for export of tea and are professional tea taster. They also monitor the shipment of the goods and verify shipment documents, port regulations and other formalities for export of tea. Therefore, we find that the above activities do not fall within the meaning of commission agent. Accordingly, we hold that the appellant's activities are rightly covered under the category of "BAS" other than commission agent. Therefore, the question of appellant claiming tea as agricultural produce, which is applicable for only commission agent and not applicable to the appellant assessee's case. Accordingly, we hold that the demand along with interest is liable to be upheld. - Decided against the assessee. 2016 (2) TMI 26 Club Membership of Indian Banks - taxability - association established in 1947 of various banks as its Members and provides various activity to the member banks like organising meetings with Finance Minister, Chief Executives of various banks, intervening in court cases and representing the banking industry, issuing periodical newsletter/bulletin, giving publicity, negotiates wages between the employees union and banks. Held that:- his bench in the case of Matunga Gymkhana - [2015 (1) TMI 1146 - CESTAT MUMBAI] has held the same view that any association is not providing services to its own members and the bench relied upon the judgment of the Hon'ble High Court of Jharkhand in the case of Ranchi Club vs. Chief Commissioner of Central Excise & Service Tax, Ranchi - [2012 (6) TMI 636 - Jharkhand High Court] and also the judgment of the Honble High Court of Gujarat in the case of Sports Club of Gujarat vs. Union of India - [2013 (7) TMI 510 - GUJARAT HIGH COURT] - Demand set aside - Decided in favor of assessee. 2016 (2) TMI 25 Rejection of VCES-1 declaration due to short deposit of tax - appellant that as per their VCES declaration, they had deposited only ₹ 8,42,731/-whereas the amount to be deposited was ₹ 8,44,080, being 50% of the service tax due. - short payment of tax by ₹ 1,349/- Held that:- there is no case of deliberate default on the part of the appellant. No opportunity was ever given to the appellant after the filing of the VCES application to remove the defect. It was only after the payment of 2nd (final) instalment (100%) on or before 30/6/14, when the appellant had admittedly paid hundred percent of the tax dues under the scheme, that the objection for the first time was raised by revenue vide letter cum rejection order dated 11/9/14. I find that the facts in the present case are different from the facts before the Honourable Gujrat High Court [2014 (11) TMI 971 - GUJARAT HIGH COURT] where notice was issued prior to final payment. There has been miscarriage of justice in the rejection of the application under the VCES of the appellant without any opportunity to remove the defects and further without any opportunity to be heard, the order of rejection was passed. Further there were no tax dues on the date of issue of rejection order - Rejection of VCES set aside - Decided in favor of assessee. 2016 (2) TMI 24 Levy of service tax on franchisee and royalty fee paid to their US based franchiser - sharing of compensation - appellant is providing training and coaching service - Held that:- It is evident from the above that the percentage of franchisee fee and royalty fee that is 60% paid to the overseas franchisee is 35.5% is the royalty fees is paid to the producer. Therefore, prima facie, we do not find any merit in the appellant's claim that they have already paid service tax on the consideration received from other distributors and only remitted the amount after the payment of service tax. The appellants are registered under training and coaching service in India for which they have discharged service tax and what is demanded in the present appeal is franchisee service which is clearly established as per the agreement. Accordingly, the appellants are liable to pay service tax on the amount remitted to the overseas franchisee as per the agreement. - Stay granted partly. Central Excise 2016 (2) TMI 23 Refund - Commissioner (Appeals) is not deciding the appeals of the petitioners only on the ground that the Department's appeal against the judgment of the Tribunal is pending before the High Court. - Held that:- High Court has refused to grant stay against the judgment of the Tribunal, the Commissioner cannot indirectly ensure such stay by refusing to process and decide the appeals of the petitioners. This is precisely what the Commissioner has done in the present case. Refusal to decide the appeals on the ground that the Department's appeals are pending before the High Court would tentamount to ensuring stay against implementation of the decision of the Tribunal, which the High Court refused to grant. - the petition allowed - Decided in favor of assessee. 2016 (2) TMI 22 Demand of duty solely on the basis of confessional statement - confessional statements made by the assessee and other employees of the assessee - Held that:- the Commissioner (Appeals) put heavy burden on the assesse to disprove the case of the revenue - When in fact, the confirmation of duties and penalties were based on confessional statements which were promptly retracted and there was no other independent material on record, the Tribunal correctly reversed the orders of the authorities below. No question of law arises. - Decided against the revenue. 2016 (2) TMI 21 Extended period of limitation - Cenvat Credit - clearance of inputs as such - bonafide error in not reversing the credit as per Rule 3(5) of CCR - Held that:- It was noticed that the assessee had under bona-fide belief not reversed the CENVAT credit on the goods so cleared. That being a finding of fact, in our opinion, no question of law arises. - Counsel for the revenue pointed out that even the demand within the period of 1 year from the date of notice is struck down by the Tribunal on the ground that the situation was of revenue neutrality without full discussion on the issue. - Decided against the revenue. 2016 (2) TMI 20 Cenvat credit availed in respect of service tax paid on Goods Transport Agency Service in respect of outward transportation of the goods beyond the place of removal - CESTAT allowed the claim - Held that:- This issue is covered by the judgment of Division Bench of this Court in case of Commissioner of Central Excise & Customs v. Parth Poly Wooven Pvt. Ltd. [2011 (4) TMI 975 - GUJARAT HIGH COURT ] wherein held outward transport service used by the manufactures for transportation of finished goods from the place of removal upto the premises of the purchaser is covered within the definition of “input service” provided in rule 2(l) of the Cenvat Credit Rules, 2004. 2016 (2) TMI 19 Utilized CENVAT Credit exceeding 20% of the amount of service tax payable on taxable output service - Tribunal directing the respondent to make payment of ₹ 3,71,501/- for the normal period along with the interest for a month's period against the total demand of ₹ 2,15,14,945/- - Held that:- Tribunal without following the statutory provisions contemplated under the Act, proceeded to direct the assessee to make the payment of ₹ 3,71,501/- towards the amount due for the normal period with interest of ₹ 4025/- for a month and closed the matter as said to have been suggested. The Tribunal proceeded to pass the order based on sentiments which is uncalled for, particularly, while adjudicating the revenue matters. In the given circumstances, we are of the opinion that it would be appropriate to remand the matter back to the Original Authority to consider the matter afresh after providing an opportunity of being heard to the parties. 2016 (2) TMI 18 Validity of order directing to make pre-deposit while Remanding back the proceedings - The adjudicating authority proceeded ex-parte and passed the final order confirming the duty demand with penalty and interest. - Tribunal on the ground that twice the proceedings were earlier adjourned, refused to grant any further time and while remanding the proceedings to the adjudicating authority imposed the said condition of depositing sum of ₹ 50 lacs on the petitioners. Held that:- When the Tribunal in the present case set aside the order-in-original, there was no order confirming duty penalty or interest and in that sense, the condition of pre-deposit of any amount could not have been imposed. This is, however, not the same thing to suggest that even if the facts otherwise so merited, the Tribunal had no jurisdiction to impose suitable condition of depositing appropriate amount. Reverting to the facts of the case, it appears that the petitioners were not duly served with the notices of hearing of the show cause notice proceedings and hearing was revived after long gap of nearly 9 years. In the meantime, factory of the petitioners was closed down. Primarily on such grounds, we are inclined to set aside the condition imposed by the Tribunal of depositing a sizable sum of ₹ 50 Lacs which is made a precondition for fresh disposal of the show cause notice by the adjudicating authority. In order not to delay the proceedings further while setting aside the Tribunal's condition of pre-deposit of ₹ 50 Lacs, we direct that the petitioners shall deposit cost of ₹ 25,000/- with the Department subject to which the adjudicating authority shall grant hearing and dispose of the proceedings afresh. - Decided in favor of assessee. 2016 (2) TMI 17 Arrest of the petitioner for alleged evasion of excise duty - Authorization - Validity of extension of remand - The main thrust of argument of learned counsel for the petitioner is with respect to Section 9A(1A) of the Act by suggesting that only if the opposite parties come to a conclusion that the evasion of excise duty was to the tune of more than ₹ 1 crore, the offence can be treated to be a non bailable and cognizable offence. The second part of argument is with respect to non confirming with the provisions of Sections 19, 20 and 21 of the Act. Held that:- It does not appear from the facts of the case that evasion of excise duty as alleged touches on the border line to enable the petitioner to claim that the offence is bailable and non cognizable in nature. The prima facie assessment on scrutiny of the documents and on physical verification of the materials indicate evasion of excise duty at almost ₹ 10 crores. Such tentative assessment would not give any benefit to the petitioner as the same is almost ten times to the ceiling, by which the offence can be construed to be a bailable or non bailable offence. Procedure - Section 19 very categorically states that every person arrested under this Act shall be forwarded without any delay to the nearest Central Excise Officer empowered to send persons so arrested to a Magistrate. In absence of any authorization to act in terms of Sections 19 and 21 of the Central Excise Act, 1944, the remand of the petitioner pursuant to the prayer made by an officer not authorized to forward the petitioner for remand, the consequent order of remand dated 21.12.2015 automatically gets vitiated. It has been submitted at the Bar by the learned counsel for the petitioner that the remand of the petitioner is being extended from time to time without there being any such prayer made by the prosecuting agency. Be that as it may, since it has already been held that the impugned order dated 21.12.2015 is not in accordance with law and the remand being contrary to the provisions of Central Excise Act enumerated above, I am inclined to allow this application. Accordingly, this application is allowed and the impugned order dated 21.12.2015, passed by the learned Special Judge, Economic Offence in C-2-1/2015 is hereby quashed and consequently the petitioner is directed to be released forthwith. 2016 (2) TMI 16 Admissibility of appeal - dispute on valuation of the goods - Held that:- Admittedly, in the case on hand, the dispute before the Tribunal is, with reference to valuation of the goods. When the dispute is with reference to the valuation of the goods, even though the amount of duty involved is not more than Rupees Two Lakhs, the Tribunal has no discretion to refuse to admit the appeal. So far as this Court is concerned, when the issue relates to valuation, this Court has no jurisdiction to entertain the appeal. So far as the Tribunal is concerned, the Tribunal has no jurisdiction to refuse to admit the appeal, if one of the issues involved is with reference to valuation of goods. Without understanding the provisions of Section 35B of the Act, the Tribunal has chosen to dismiss the appeal and therefore, it is liable to be dismissed. Under Section 35G of the Act, the reference to the jurisdiction is not only with regard to valuation but also with reference to questions in relation to valuation. The phrase in relation to are words of comprehensiveness, which might both have a direct significance as well as indirect significance depending upon the context. But, the phrase has to be read not in isoloation, but along with the pleadings in the case. The pleadings are pertaining to the non-application of mind by the Tribunal, while interpreting the provisions of Section 35B of the Act. Therefore, the contention that this Court has no jurisdiction cannot be accepted. Therefore, this Court holds that this Court has jurisdiction to entertain these Appeals. Coming back to the orders passed by the Tribunal, it is clear that when the dispute raised is touching the valuation of the property, the Tribunal has no discretion to refuse to admit the appeal. After admitting the appeal, it is open to the Tribunal to decide the issues raised on merits.The Tribunal has no power to review its own order. However, the Tribunal can pass order for rectifying a mistake apparent from the records within six months from the passing of the order, as contemplated under Section 35C (2) of of the Act. At least, after the mistakes being pointing out, the Tribunal below ought to have rectified the same. Instead, the Tribunal has passed a cryptic order without assigning any reason. On the simple ground that it is a non-speaking order, the order is liable to be set-aside and it is set-aside accordingly. As the order in the appeal is set-aside, automatically, the order passed in the Application for Rectification of Mistake becomes non-est in law. 2016 (2) TMI 15 Manufacture of medical equipment - Defibrillators - Disallowance of benefit of the Notification No.8/96 dated 23.07.1996 and Notification No.4/97 dated 01.03.97 - Review petition against the decision reported in [2015 (5) TMI 248 - SUPREME COURT] - We have carefully gone through the review petition and the connected papers. We find no error much less apparent in the order impugned. The review petition is, accordingly, dismissed. 2016 (2) TMI 14 Manufacture - Calendering - Revenue appeal against the decision of tribunal in [2006 (2) TMI 371 - CESTAT, BANGALORE] - Apex Court dismissed the appeal as as the tax effect is only ₹ 3,45,000/- approximately 2016 (2) TMI 13 Valuation - Penalty - appeal against the decision of tribunal in [2006 (9) TMI 316 - CESTAT, MUMBAI] - Apex Court dismissed the appeal, since the tax effect involved in the instant appeal is negligible, the appeal is dismissed on this ground alone. 2016 (2) TMI 12 Classification of Cement capsules - Revenue appeal against the decision of tribunal in [2006 (3) TMI 477 - CESTAT, MUMBAI] - The tax effect involved in the present appeal is only ₹ 5,38,557/-. - Even otherwise, the matter is covered by the judgment of the Tribunal in ‘Mini Aid Products v. Commissioner of Customs and Central Excise’ [2003 (7) TMI 597 - CESTAT, MUMBAI]. - Appeal dismissed CST, VAT & Sales Tax 2016 (2) TMI 6 Doctrine of promissory estoppel - Tax Incentive scheme during the sales tax regime to be continued under VAT regime or not - It is contented that the appellants had made its establishment based on the promises made by the Government of Karnataka to extend certain benefits to the assessee including the tax benefits which was in fact implemented and acted upon by issuing two different notifications dated 1.8.1998 under the KST regime in respect of infrastructure project. Having implemented the said FWA, the Government of Karnataka was bound to extend the same, even in the VAT regime. - Challenge to the re-assessment orders - seeking exemption from the whole of the tax payable by the first to third appellants and their subcontractors - Karnataka Value Added Tax Act, 2003 (KVAT) Held that:- the State is empowered to issue exemption notification to the appellant company on the sale of goods and cannot deny extending the exemption benefit agreed upon, on the pretext that it has no powers under KVAT Act to extend such exemption. The terms agreed in the FWA amounts to promissory estoppel. - It is settled law that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires. At this juncture, it is significant to note that admittedly, Appellant Company No.4 is not an affiliate of the appellant company No.1. As per the terms of FWA, the benefit of tax exemption is available only to the appellant company, and its affiliates. - We cannot direct the State Government to issue any notification exempting the nonaffiliates of the appellant company from the tax payable under the provisions of the KVAT Act in terms of FWA. The fourth appellant, if aggrieved by any assessment/reassessment order, has to take recourse of statutory appeal available under the KVAT Act. Writ Appeals are allowed in part. - State Government is directed to issue appropriate exemption notifications under section 5(1) of the KVAT Act on the sale of goods to/by the appellants No.1 to 3 in terms of Framework Agreement dated: 03.04.1997. - Decided party in favor of assessee. 2016 (2) TMI 5 Entry tax - KTEG Act - Rubber Process Oil, which is used as a lubricating agent in the manufacture of rubber products - Appellant contended that the levy of entry tax at 5% on the value of Rubber Process Oil is lacking in jurisdiction and opposed to law - Held that:- the classification under the Central Excise Act would have no application under the KTEG Act. - the notification issued under the Central Excise Tariff could not be the basis to conclude that the Rubber Process Oil could be classified as a petroleum product falling under "Tar and others". The clarification issued by the Commissioner of Commercial Taxes is held to be bad in law and shall not bind the petitioner - impugned order quashed - Decided in favor of appellant. 2016 (2) TMI 4 Recovery proceedings where initially stay was granted and application for extension of stay is pending - Commercial Tax Officer (2) Unit-21, Ahmedabad, now has attached bank account of the petitioner - Held that:- It is an arbitrary act on the part of respondent No.3 - a case is made out to issue notice making it returnable on 10.2.2016 and granting ad-interim relief in terms of para 7 (B) (i) till then. Wealth tax 2016 (2) TMI 29 Inclusion of wealth - whether the ‘commercial building’ i.e. shop is falling within the scope section 2(ea)(i) of the wealth tax Act or not. - Held that:- these assets are commercial purposes which form part of stock-in-trade and these three assets have been noted as part of the stock-in-trade and acquired for the purpose of construction of flats, the nature of business of assessee is purchase and sale of immovable properties the assessee had undertaken construction of premises - These premises were purchased and the assessee disposed off the flats after construction. All the above noted three properties being the business assets which cannot form part of taxable wealth. - Decided in favor of assessee. Indian Laws 2016 (2) TMI 42 Non-deposit of the entire amount as envisaged under rule 60 of the Second Schedule to the Income Tax Act - Recovery proceedings - whether the provisions of rule 60 of the Second Schedule to the Income Tax Act have not been satisfied by the respondents No.1 to 3 and hence, the sale in favour of the petitioners could not have been set aside? - Held that:- On a reading of the proclamation for sale as a whole, it is not possible to state that the same specifies the sum of ₹ 1,27,30,527/- as the amount for the recovery of which the sale is ordered, inasmuch as, the same clearly says that such amount was due as on 30th June, 2006. The proclamation also refers to the contents of the certificate issued by the Presiding Officer, DRT which says that the sale is for the recovery of a sum of ₹ 71,88,819.87 ps. with further interest payable at the rate of 12% per annum from 27th December, 1999 till realization and the costs, charges and expenses of the proceedings for recovery thereof and says that the sale is for satisfaction of such certificate. Therefore, the amount specified in the sale proclamation would come to the amount specified as payable till 30th June, 2006 plus interest at the rate of 12% per annum on the sum of ₹ 71,88,819.87 paise from 30th June, 2006 till 28th November, 2006 namely, the date of publication of the proclamation of sale. In view of the provisions of rule 60 of the Second Schedule to the Income Tax Act, with effect from 28th November, 2006, that is, the date of the sale proclamation, the interest has to be calculated at the rate of 15% per annum. In the present case, it appears that due to oversight, or may be, due to a misreading of rule 60 of the Second Schedule to the Act, the certified debtor paid the amount specified in the proclamation of sale payable as on 30th June, 2006 with interest at the rate of 15% per annum from the date of the proclamation of the sale. Nonetheless, the fact remains that the total amount as specified in the proclamation of sale was not deposited within the prescribed period. In the opinion of this court, while equity may favour the certified debtor, the case cannot be decided on the basis of equities when the statutory provision is clear and unambiguous. As contemplated under rule 60 of the Second Schedule to the Act was required to be deposited within a period of thirty days from the date of the sale. Albeit the shortfall is very small, nonetheless, the respondents No.1 to 3 have failed to deposit the entire amount within the prescribed period of thirty days. Under the circumstances, the certified debtor is not entitled to the benefit of rule 60 of the Second Schedule to the Act as the requirements thereof have not been strictly complied with. It is evident that the requirements of rule 60 of the Second Schedule to the Income Tax Act, 1961 have not been satisfied. Under the circumstances, the application made by the first respondent for setting aside the sale held on 8th January 2007, could not have been allowed. The impugned order passed by the Appellate Tribunal setting aside the order passed by the Presiding Officer, Debts Recovery Tribunal and confirming the order passed by the Recovery Officer setting aside the sale in favour of the petitioners, therefore, cannot be sustained. 23. For the foregoing reasons, the petition succeeds and is accordingly allowed. 2016 (2) TMI 1 One Time Settlement Scheme - Notification dated 06.02.2009 whereby the One Time Settlement Scheme (for short, the 'OTS') for equity disinvestment in joint sectors/assisted sector companies, promoted by the respondent-Punjab State Industrial Development Corporation Ltd. (in short, the 'Corporation') and Punjab Agro Industries Corporation, has been amended challenged - Whether the State was permitted to alter the terms of the OTS on the ground that it being a public policy, could be modified? - Held that:- Question is answered in favour of the State that it has power to alter or modify the scheme once it comes to a conclusion that it was against the financial interest of the State and no fault can be found as such or any challenge can be raised to the withdrawal of the OTS to a certain category of industries who are profit making. Whether the said decision could be with retrospective effect in the absence of any statutory provision? - Held that:- Adverting to the factual matrix herein, as noticed, the petitioner, in pursuance to the OTS floated by the respondent- Corporation, had entered into an agreement with the Corporation on 04.08.2004 (Annexure P8) wherein he had taken the benefit of the low rate of interest and offered to pay within the time frame of the policy. In pursuance of the said agreement, the arbitration proceedings pertaining to the buy-back agreement were also terminated by placing the agreement on record and therefore, the Corporation also gave up its claim regarding the amounts due under the FCA, vide order dated 18.08.2004 (Annexure P9) passed by the Arbitrator. In pursuance of the agreement, further payments were made by the petitioner and it is not disputed that a sum of ₹ 96,94,094/- has been paid but was not acted upon. The Corporation cannot be allowed to blow hot and cold at the same time and could not withdraw from the concluded contract. The petitioner had also chosen to litigate and approached this Court seeking direction for transfer of shares on pro-rata basis, as per the agreement which provided that on the receipt of minimum payment of ₹ 20 lacs transfer would be made as per the OTS value of the shares, as calculated upto the date of transfer of shares. The Corporation had also agreed that in case the amounts were not paid as per the OTS, the Corporation would be entitled to claim the payments, as per the FCA. The resultant amendment, subsequently, would not and could not have been done, with retrospective effect. The withdrawal of the OTS offer earlier given would not apply with retrospective or retroactive effect. The amendment by way of notification could only be from the date of the decision so notified and the date could not have been preponed to a earlier point of time, to the prejudice of the petitioner who had acted upon the offer given. Thus, from the above discussion, it can be safely concluded that under the strength of public policy, the State is well within its vested right to review its earlier decision and restrict the benefit of the OTS which was a mere concession to a limited set of eligible persons on a valid criteria as to whether it was a profit making industry or not but not with retrospective effect. Whether the State and the Corporation are bound by the principle of promissory estoppel and can go back on the terms of the OTS agreement which had been duly acted upon by the petitioner by materially altering its position? - Held that:- issue no. (iii) is answered in favour of the petitioners that the State and the Corporation were bound by the principle of Promissory Estoppel and could not go back on the terms of the OTS which had already been offered and accepted by the collaborators/petitioners. The said persons had made payments in pursuance of the OTS and entered into agreements and acted on the promise held out by the State and the Corporation and the State was, thus, bound by the OTS agreement entered into. Having acted upon the said agreement, the petitioners had paid the amounts and were thus, entitled for the benefits of the lesser interest rate as per the OTS scheme. The said petitioners might not have taken offer of making the payment and the Corporation would have been left with litigation in hand by way of arbitration and for enforcement of the buy back agreements. However, after having given the offer and the petitioners having accepted the same and the Corporation having received the payments in satisfaction of the contract entered into, could not turn around and submit that they were not bound by the terms of the OTS. The pendency of the public interest litigation and the decision therein would not be of any assistance to the State since the writ petition was disposed of that the Corporation would take appropriate decisions in view of the modified policy. The petitioners were also left free to seek appropriate redressal in case adverse decision was taken and the petitioners were also given liberty to challenge the notification. Thus, the Division Bench has not opined on the said issue and it was a policy decision of the State as such. Consequently, issue no. is answered against the State and the Corporation.
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