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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 1, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Articles Is the Scheme of Dispute Resolution for Service Tax, useful? QUICK REACTIONS TO THE BUDGET PROPOSALS ON INDIRECT TAXES 7 - 7.75% growth in 2016-17: Key Highlights of the Economic Survey 2016 News Budget 2016 - Direct taxes Union Budget 2016-2017 Clean Energy Cess and Infrastructure Cess on Specified Goods Notifications Central Excise - Tariff Notifications, Non-Tariff Notifications and Circular - Budget 2016 Customs - Tariff Notifications, Non-Tariff Notifications and Circular - Budget 2016 Service Tax Notifications - Notifications and Circular - Budget 2016 ICAI Reaction: Union Budget 2016-17 1500 Multi Skill Training Institutes to be set-up across the country, ₹ 1,700 crore provided in the Budget 2016-17 Measures for moving towards a pensioned society FM: Tax Proposals are aimed at Boosting Economic Growth and Employment Generation FM: GDP Accelerates to 7.6%; Budget 2016-17 Built on Agenda ‘Transform India’ Important Announcements made by Union Finance Minister Shri Arun Jaitley in his Budget speech 2016-17 Fiscal Deficit Retained at 3.9 percent in RE 2015-16 and at 3.5 percent in BE 2016-17 100 Crore each allocated for celebrating Birth Centenary of Pt Deen Dayal Upadhyay and 350th Birth Anniversary of Guru Gobind Singh Certain Tax Reliefs announced for small tax payers and others Union Finance Minister Shri Arun Jaitley spoke on the Key Reform Measures in his Budget speech 2016-17 Measures to boost growth and employment generation Budget 2016: Cheaper V/S dearer Together with the Capital Expenditure of the Railways, the Total Outlay on Roads and Railways Proposed at ₹ 2,18,000 Crore in 2016-17 Government will provide calibrated marketing freedom to incentivise Oil & Gas production Birds eye view - What Budget says Budget Speech - 2016-2017 Key Features of Budget 2016-2017 Budget updates - one and all Reforms in FDI Policy in the Areas of Insurance and Pensions, Asset Reconstruction Companies, Stock Exchanges Finance Minister announces ₹ 2000 crore in the Budget to give LPG Connection to women member of poor households; Scheme to benefit 1.5 crore households below poverty line in the current year Promoting a tax-friendly regime through a new ‘Dispute Resolution Scheme’ Incentivising domestic value addition to help Make in India Plan – Non Plan Classification To Be Done Away from Fiscal 2017-18 Reducing black money through a Scheme to declare undisclosed income by paying 45% tax in a given compliance window Additional Resource Mobilization for agriculture, rural economy and clean environment Krishi Kalyan Cess @ 0.5% on all taxable services for financing initiatives relating to improvement of agriculture and welfare of farmers Increase of 15.3 percent in the Plan Expenditure over the current Financial Year Simplification and Rationalization of Taxation Ek Bharat Shreshtha Bharat Programme to be Launched Budget 2016-17 presented in Parliament; major focus on agriculture and farmers’ welfare 28.5 lakh Hectares to be brought under irrigation Comprehensive Code on Resolution of Financial Firms to be Enacted Allocation of ₹ 25,000 Crore Towards Recapitalisation of PSBS Target of Amount Sanctioned Under Pradhan Mantri Mudra Yojana is Proposed to be Increased to ₹ 1,80,000 Crore Corpus of ₹ 900 crores for Price Stabilisation Fund Government to Double the Income of Farmers by 2022 Union Budget 2016 Highlights - Economic issues Latest Updates - A quick go - Budget 2016 Companies Act 2013 to be amended to facilitate Ease of Doing Business Limit of Deduction of Rent Increased from ₹ 24,000 to ₹ 60,000 Measures for promoting affordable housing Government constitutes Banks Board Bureau (BBB) to Improve The Governance of Public Sector Banks: Shri Vinod Rai, Former CAG of India, appointed as the Chairman of Banks Board Bureau 40th Civil Accounts Day to be Celebrated on 1st March 2016 in the National Capital; Best Performing Principal Accounts Officers (Pr.AOS)/Pay And Accounts Officers (PAOS) to be Awarded on the Occasion India’s representative Shri Dinesh Sharma, Additional Secretary, Department of Economic Affairs elected as the Chairperson of the Governing Council of International Fund for Agriculture Development (IFAD), Rome Notifications Central Excise 18/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 6/2005-Central Excise dated 01.07.2008 so as to carry out Budgetary changes. 17/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 42/2008-Central Excise dated 01.07.2008 so as to carry out Budgetary changes. 16/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 16/2010-Central Excise dated 27.02.2010 so as to carry out Budgetary changes. 15/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 30/2004-Central Excise dated 09.07.2004 so as to carry out Budgetary changes. 14/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 33/2005-Central Excise dated 08.09.2005 so as to carry out Budgetary changes. 13/2016 - dated 1-3-2016 - CE Seeks to rescind Notification No. 62/91-Central Excise dated 25.07.1991 so as to carry out Budgetary changes 12/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 12/2012-Central Excise dated 17.03.2012 so as to carry out Budgetary changes. 11/2016 - dated 1-3-2016 - CE Seeks to exempt central excise duty on media with recorded Information Technology Software on so much value as is equivalent to the value of the Information Technology Software recorded on the said media which is leviable to Service tax under Finance Act, 1994 10/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 2/2011-Central Excise dated 01.03.2011 so as to carry out Budgetary changes 09/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 1/2011-Central Excise dated 01.03.2011 so as to carry out Budgetary changes 08/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 8/2003-Central Excise dated 17.03.2012 so as to carry out Budgetary changes 07/2016 - dated 1-3-2016 - CE Seeks to amend Notification No. 7/2012 - Central Excise dated 17.03.2012 so as to carry out Budgetary changes 06/2016 - dated 1-3-2016 - CE Seeks to suitably amend specified notifications relating to area based exemptions, so as to carry out Budgetary changes 05/2016 - dated 1-3-2016 - CE Seeks to suitably amend specified notifications relating to area based exemptions, so as to carry out Budgetary changes 21/2016 - dated 1-3-2016 - CE (NT) Seeks amend Notification No. 21/2004-Central Excise (N.T) dated 06.09.2004 so as to carry out Budgetary changes. 20/2016 - dated 1-3-2016 - CE (NT) Seeks to notify new Central Excise (Removal of Goods at Concessional rate of Duty for Manufacture of Excisable Goods), 2016. 19/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 36/2001-Central Excise (N.T.), dated the 26.06.2001 so as to carry out Budgetary changes. 18/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 19/2004-Central Excise (N.T.), dated the 06.09.2004 so as to carry out Budgetary changes. 17/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 31/2007-Central Excise (N.T.), dated the 02.08.2007 so as to make further amendments in notification No. 42/2001- CE (NT), dated the 26th June 2001 16/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 42/2001 - Central Excise (N.T.) dated 26.06.2001 so as to make further amendments in notification No. 42/2001- CE (NT), dated the 26th June 2001. 15/2016 - dated 1-3-2016 - CE (NT) Seeks to prescribe the rate of interest at fifteen per cent per annum for the purposes of section 11AA of the Central Excise Act, 1944. 14/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 27/2012-Central Excise (N.T) so as to prescribe the time limit for filing application for refund of CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, in case of export of services. 13/2016 - dated 1-3-2016 - CE (NT) Seeks to further amend the CENVAT Credit Rules, 2004. 12/2016 - dated 1-3-2016 - CE (NT) Seeks to further amend Notification No. 49/2008-Central Excise (N.T.), dated the 01.03.2016 so as to amend the rate of abatement from Retail Sale Price for commodities specified therein and bring certain commodities under Retail Sale Price based assessment. 11/2016 - dated 1-3-2016 - CE (NT) Seeks to further amend Notification No. 20/2001-Central Excise (N.T.), dated the 30.04.2001 so as to amend the tariff values prescribed for articles of apparel and clothing accessories not knitted or crocheted. 10/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 27/2012-Central Excise (N.T) so as to prescribe the time limit for filing application for refund of CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, in case of export of services. 09/2016 - dated 1-3-2016 - CE (NT) Seeks to further to amend the Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Rules, 2008 08/2016 - dated 1-3-2016 - CE (NT) Seeks to further amend Central Excise Rules, 2002 07/2016 - dated 1-3-2016 - CE (NT) Rescinds Notification No. 9/2012-Central Excise (N.T) dated 17.03.2012 06/2016 - dated 1-3-2016 - CE (NT) Seeks to amend Notification No. 35/2001-Central Excise (N.T) dated 26.06.2001. 05/2016 - dated 1-3-2016 - CE (NT) Seeks to provide a procedure for obtaining Centralized Registration for manufacturers of articles of jewellery. Customs 23/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 72/1994-Customs, dated the 01.03.1994. 22/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 81/2005-Customs, dated the 08.09.2005 so as to carry out Budgetary changes 21/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 42/96-Customs, dated the 23.07.1996 so as to make suitable amendments to the list of specified projects under heading 9801 of the first schedule to the Customs Tariff. 20/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 230/86-Customs, dated the 03.04.1986 so as to make suitable amendments to the Project Import Regulations, 1986 19/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 24/2005-Customs, dated the 01.03.2005 so as to carry out Budgetary changes. 18/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 25/2002-Customs, dated the 01.03.2002 so as to carry out Budgetary changes 17/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 25/1999-Customs, dated 28.02.1999 so as to carry out Budgetary changes 16/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 21/2012-Customs, dated the 17.03.2012 so as to specify the rate of additional duty of customs leviable under sub-section 3 (5) of Customs Tariff Act, 1975 for items specified therein. 15/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 27/2011-Customs, dated the 01.03.2011 so as to exempt duty of customs leviable under the Second Schedule, to the Customs Tariff Act, 1975 (51 of 1975) [Export Duty] on items specified therein 14/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 39/96-Customs, dated the 23.07.1996 so as to withdraw exemption of specified duties of customs on goods specified therein. 13/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 171/93 - Customs, dated the 16.09.1993 so as to increase the value limit for bona fide gifts imported by post or as air freight from Rs. Ten thousand to Rs. Twenty thousand. 12/2016 - dated 1-3-2016 - Cus Seeks to further amend Notification No. 12/2012-Customs, dated the 17.03.2012 so as to carry out Budgetary changes. Details are contained in Joint Secretary (TRU –I) DO letter dated 29.02.2016 11/2016 - dated 1-3-2016 - Cus Seeks to exempt CVD on imported media with recorded Information Technology Software on so much value as is equivalent to the value of the Information Technology Software recorded on the said media which is leviable to Service tax under Finance Act, 1994 33/2016 - dated 1-3-2016 - Cus (NT) Seeks to fix the rate of interest under section 28AA of the Customs Act, 1962 and supersede notification No. 17/2011-Cus (N.T) dated 01.03.2011. 32/2016 - dated 1-3-2016 - Cus (NT) Seeks to notify the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods), Rules 2016. 31/2016 - dated 1-3-2016 - Cus (NT) Seeks to further amend Customs Baggage Declaration (Amendment) Regulations, 2016. 30/2016 - dated 1-3-2016 - Cus (NT) Seeks to notify Baggage Rules, 2016. Indian Laws 02/2016 - dated 1-3-2016 - Indian Law Seeks to amend Notification No. 5/2010-Clean Energy Cess dated 01.03.2015. 01/2016 - dated 1-3-2016 - Indian Law Seeks to provide effective rates of Infrastructure Cess on specified goods. 01/2016 - dated 1-3-2016 - Indian Law Seeks to rescind Notification No. 1/2015-Clean Energy Cess dated 01.03.2015. Service Tax 19/2016 - dated 1-3-2016 - ST Seeks to amend Service Tax Rules, 1994. 18/2016 - dated 1-3-2016 - ST Seeks to amend notification No. 30/2012-Service Tax dated 20th June, 2012, so as to prescribe, the extent of service tax payable by the service provider and any other person liable for paying service tax other than the service provider 17/2016 - dated 1-3-2016 - ST Seeks to bring into effect certain provisions of notification No. 05/2015-ST dated 1st March, 2015. 16/2016 - dated 1-3-2016 - ST Seeks to bring into effect certain provisions of notification No. 07/2015-ST dated 1st March, 2015. 15/2016 - dated 1-3-2016 - ST Seeks to bring into effect provisions of clause (h) of section 107 of the Finance Act, 2015. 14/2016 - dated 1-3-2016 - ST Seeks to prescribe interest rate under section 73B of the Finance Act, 1994. 13/2016 - dated 1-3-2016 - ST Seeks to prescribe interest rate under section 75 of the Finance Act, 1994. 12/2016 - dated 1-3-2016 - ST Seeks to amend notification No. 32/2012-Service Tax dated 20th June, 2012, so as to exempt services provided by the bio-incubators approved by the Biotechnology Industry Research Assistance Council, under Department of Biotechnology, Government of India. 11/2016 - dated 1-3-2016 - ST Seeks to exempt services in relation to Information Technology Software recorded on a media bearing RSP, provided Central Excise Duty has been paid. 10/2016 - dated 1-3-2016 - ST Seeks to amend Point of Taxation Rules, 2011 so as to insert clarificatory Explanations. 09/2016 - dated 1-3-2016 - ST Seeks to amend notification No. 25/2012-Service Tax, dated 20th June 2012, so as to amend certain existing entries granting exemption on specified services and inserting new entries for granting exemption from service tax on specified services. 08/2016 - dated 1-3-2016 - ST Seeks to amend notification No. 26/2012-Service Tax, dated 20th June 2012, so as to make necessary amendments in the specified entries prescribing taxable portion and the conditions for availing the exemption therein. Circulars / Instructions / Orders Service Tax F. No. 334/8/2016-TRU - dated 29-2-2016 Union Budget 2016 - Changes relating to Service Tax Customs D.O.F.No.334/8/2016-TRU - dated 29-2-2016 Finance Bill, 2016 - Changes in Customs and Central Excise law and rates of duty Central Excise D.O.F.No.334/8/2016-TRU - dated 29-2-2016 Finance Bill, 2016 - Changes in Customs and Central Excise law and rates of duty Highlights / Catch Notes Income Tax TDS u/s 194J OR 194C - The amounts paid to sub-contractors is either for erection, installation, fabrication, commissioning, testing & trial operation of some parts of the Power Plant and therefore cannot be termed as technical services as per the definition in Explanation 2 to section 9 (1) (vii). - AT Visit to Get Source Entitlement to deduction u/s 11 - The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. The restrictive condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object - Exemption allowed - AT Visit to Get Source TDS u/s 194I or 194C - logistic service for carrying goods by sea route in containers -In any event, tax deduction at source liability is only a vicarious liability and when the principal liability of the assessee is discharged, it ceases exist. - AT Visit to Get Source Entitlement to exemption u/s 10(34) - When the company with which SARA Fund has been invested, had already paid additional income tax on the earned dividend as required u/s 115-O of the Act, SARA fund was not required to pay additional income tax second time on the same income - AT Visit to Get Source Liability to pay tax on long term capital gains - cancellation document - since the cancellation document as is alleged is the title document in favour of the assessee, therefore, the original document should have been in possession of the assessee, but the assessee has failed to produce the original document during the assessment proceedings, in our view, it goes against the assessee - AT Visit to Get Source Validity of penalty orders u/s 271(1)(c) - assessee has not filed the details in respect of interest payment, unexplained investment in jewellery, bogus sundry creditors. - levy of penalty confirmed - AT Visit to Get Source TDS U/s 194J - sharing of fees - payments made by the appellant to ITGK for its share in RS-CIT course fees - the act of sharing of revenue in a multi entity business model cannot be held as contract payments and taking the logic further they cannot be held as payments on account of rendering of any professional or technical services as contemplated by Section 194J - AT Visit to Get Source Claim of deduction written off on account of unrecoverable advance made for purchase of machinery - deduction allowed - AT Visit to Get Source Customs Retrospective levy of anti-dumping duty - provisional duty was imposed on 25.07.2014 and the same could not extend beyond six months, that is, 24.01.2015. The notification has been issued on 27.05.2015, therefore, there is a gap between 25.01.2015 and 26.05.2015. - no duty can be collected during the ‘Gap Period’. - HC Visit to Get Source Import of old dore bars with impurity - claim of benefit of concessional rate of customs duty - The words "in accordance" requires a literal interpretation and should not be confused with the use of words "along with goods". Both of them would give different meanings. - HC Visit to Get Source Bill Amendment of section 28. - any sum received or receivable, in cash or kind, under an agreement, for not carrying out any activity in relation to any profession, shall also be income chargeable to income-tax under the head “Profits and gains of business or profession” Visit to Get Source Substitution of new section for sections 25A, 25AA and 25B.- It is proposed to provide that the amount of rent received in arrears or the amount of unrealised rent realised subsequently by an assessee shall be charged to income-tax in the financial year in which such rent is received or realised, whether the assessee is the owner of the property or not in that financial year. - It will be taxable @30% after allowing deduction Visit to Get Source Amendment of section 24. - the deduction of an interest amount of two lakh rupees under the said proviso shall be allowed if the acquisition or construction is completed within five years from the end of the financial year in which the capital was borrowed. [old three years] Visit to Get Source Amendment of section 17. - “perquisite” to include, inter alia, the amount of any contribution to an approved superannuation fund by the employer in respect of the assesse, to the extent it exceeds one lakh rupees. - Limit to excess to one lakh and fifty thousand rupees. Visit to Get Source Amendment of section 10AA. - the deduction under this section is available only for Units in Special Economic Zones, whose unit begins to carryout above referred activity before the 1st day of April, 2021. Visit to Get Source Amendment of section 10. - any income arising from specified services provided on or after the date on which the provisions of Chapter VIII of the Finance Act, 2016, comes into force and chargeable to equalisation levy under that Chapter shall be exempt Visit to Get Source Amendment of section 10. - Provides exemption in respect of any income of a foreign company on account of storage of crude oil in a facility in India and sale of crude oil therefrom to any person resident in India subject to the conditions Visit to Get Source Amendment of section 10. - Provides exemption from capital gains tax in case of income arising from transaction undertaken on a recognised stock exchange located in the International Financial Services Centre and the consideration for such transaction is paid or payable in foreign currency. Visit to Get Source Amendment of section 10. - Any income by way of distributed income referred to in section 115TA received on or after the 1st day of June, 2016 shall be taxable Visit to Get Source Amendment of section 10. - Any income by way of dividend in excess of ten lakh rupees shall not be exempt from tax in the case of an individual, Hindu undivided family or a firm Visit to Get Source Amendment of section 10. - Any distributed income from a business trust received by a unit holder which is of the same nature as dividend referred to in sub-section (7) of section 115-O shall not be included in the total income of such unit holder. Visit to Get Source Amendment of section 10. - Any income of a business trust by way of interest received or receivable from a special purpose vehicle or the dividend referred to in sub-section (7) of section 115-O shall also not be included in total income of such business trust. Visit to Get Source Amendment of section 10. - The term “securitisation” for the purposes of the said clause shall also include securitisation, as defined in clause (z) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Visit to Get Source Amendment of section 10. - Interest on deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Government shall also be exempted from income-tax. Visit to Get Source Amendment of section 10. - Withdrawal from EPF, National Pension System Trust, superannuation fund in excess of 40% shall be chargeable to tax for the contribution made on or after 1.4.2016 Visit to Get Source Amendment of section 9A. - certain activities not to constitute business connection in India. - eligible investment fund also means a fund established or incorporated or registered in a country or a specified territory notified by the Central Government in this behalf. Visit to Get Source Amendment of section 9. - no income shall be deemed to accrue or arise in India through or from the activities which are confined to the display of uncut and unassorted diamond in any special zone notified by the Central Government in the Official Gazette in this behalf. Visit to Get Source Amendment of section 6. - a company shall be said to be resident in India, in any previous year, if – (a) it is an Indian company; or (b) its place of effective management, in that year, is in India. Visit to Get Source For the purposes of deduction of tax u/s 194LBB, or u/s 194LBC the “rates in force” in relation to an assessment year or financial year shall mean the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or rate or rates of incometax specified in an agreement entered into by the Central Government u/s 90 or notified by the Central Government u/s 90A, whichever is applicable. Visit to Get Source Subsidy or grant by the Central Government for the purpose of the corpus of a trust or institution established by the Central Government or a State Government, as the case may be, shall also not form part of income w.e.f. 1.4.2017 Visit to Get Source Personal Hearing to include communication of data and documents through electronic mode - An attempt to avoid physical appearance during scrutiny assessment proceedings. w.e.f. 1.6.2016 Visit to Get Source The deposit certificates issued under the Gold Monetisation Scheme, 2015 from the definition of capital asset will be excluded from the scope of Capital Assets w.e.f. 1.4.2016 Visit to Get Source Finance Bill, 2016 [Clause by Clause] Visit to Get Source Service Tax Levy of penalty - proprietary concern - respondents had been under the impression that they being “proprietary concern” were not covered by wordings “commercial concern” and were consequently not liable to payment of service tax. - levy of penalty set aside - AT Visit to Get Source Validity of rectification of its order by the Commissioner - principle of natural justice - an order passed without affording personal hearing is an erroneous order, rectification order passed by the the commissioner is valid - AT Visit to Get Source Claim of refund of service tax paid under reverse charge mechanism - export of services - non submission of BRC - since the payment of service tax was correct, revenue cannot retain the same - refund allowed - AT Visit to Get Source Central Excise Demanding duty on scrap and waste generated - the metal which becomes non-useable as such waste and scrap admittedly in this matter, the waste and scrap has been used for fabrication of trolley line cannot be the said unusable waste and scrap as such. Therefore, the appellant is not liable to pay duty thereon. - AT Visit to Get Source Valuation of machineries cleared to the job-workers - if any capital goods on which Cenvat credit has been availed and put to use and subsequently removed, depreciation needs to be given as per the clarification of C.B.E.C - AT Visit to Get Source Input credit of service tax - the services which were crucial for maintaining the staff colony, such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding etc. necessarily had to be considered as "input services" falling within the ambit of Rule 2 (l) of the Cenvat Credit Rules, 2004. - AT Visit to Get Source VAT Levy of penalty under section 72(2) of the KVAT Act 2003 - there is no understatement of tax liability made by the assessee, the same are disclosed in the returns to claim input tax deductions. In such circumstances, the Assessing Officer levying penalty as mandatory is not acceptable. - HC Visit to Get Source Case Laws: Income Tax 2016 (2) TMI 893 Disallowance u/s 14 r.w.r 8D - Held that:- Since assessee has investments and shares which are yielding exempt incomes, we have no option than to confirm the amount under Rule 8D(2)(iii). - Decided against assessee 2016 (2) TMI 892 TDS u/s 194J OR 194C - design & drawings of the work are prepared by BHEL which is executed by the contractors under the supervision of BHEL - technical services - work by subcontractors - short deduction of tax - Held that:- CIT (A) has rightly observed that the scope of work given to the sub-contractors is for erection, testing, commissioning and trial operation and handing over of boiler units, electrostatic precipitators etc. and these activities involve construction work, welding, erection, alignment, transportation of equipment and materials etc. with the help of men & machines, which cannot be termed as technical services as per the definition given in section 9 of the Act. The ld. CIT (A) correctly stated that the contracts awarded by the assessee are for the Erection/Testing/ Commissioning of Plant & Machinery and are in the nature of carrying out any work including supply of labour for carrying out such work. We take note that the supply of labour to carry out the work/contract involves both skilled & unskilled labour. Further, we take note that for commission of power plant, qualified engineers and skilled manpower along with unskilled labour need to use by the sub-contractors for execution of the contract including testing/trial operations. The nature and scope of the subcontract as rightly held by the ld. CIT (A) was actual execution of work involving the services of technical personnel as well as non-technical personnel. In a turn-key project like commissioning of power plant etc. what the assessee intended to get from its sub-contractor was a physical output, a tangible structure and not merely the services of its qualified engineers/ staff. CIT (A) has rightly observed that any payment for technical services in order to be covered u/s 194J, should be a consideration for acquiring or using technical know-how provided or made available by human element. The work entrusted for the sub-contractors is part of the contract offered to the assessee by its client and hence the sub-contractors also come in the purview of the Act and the assessee has deducted the tax is u/s 194C from the payments made to it. The amounts paid to sub-contractors is either for erection, installation, fabrication, commissioning, testing & trial operation of some parts of the Power Plant and therefore cannot be termed as technical services as per the definition in Explanation 2 to section 9 (1) (vii). We also take note that in any case, the sub-contractors have already offered the payments received from the assessee to tax and so the short deduction of tax cannot be demanded from the assessee as per the case law of Hon'ble Supreme Court in Hindustan Coca Cola Beverage (P) Ltd. V. CIT (2007 (8) TMI 12 - SUPREME COURT OF INDIA). - Decided in favour of assessee 2016 (2) TMI 891 Addition u/s 42 - application filed by for extending the exploration period as AO held that there was no voluntary surrender of the oil fields, that the assessee could not claim deduction u/s. 42(1) - FAA allowed the claim - Held that:- Purposive interpretation of the provisions of the Act will be useful to decide the issue. Section 42 of the Act was brought on statute with a very specific purpose- to encourage oil exploration. Purpose to introduce it was to tide over the ever increasing import bill of petroleum products. PSC is the testimony of the efforts and intention of the government to deal with the oil crisis. To encourage the oil exploration area incentive in form of introduction of section 42(1)was given to the assessees. As an exception capital expenditure and other expenditure are fully allowed, under section 42(1)(a)of the Act, even when the exploration of oil results in failure. Such expenditure is not being amortised or not is being allowed partially year after year-it has to be allowed in full. If the background of the legislation is considered it becomes clear that there was no scope for bringing in the concept of voluntarily surrender/forced surrender. The Act has not provided such terms in the section and therefore there was no justification in denying the assessee a legitimate benefit. We find that the PSC had distinguished relinquishment and termina -tion of contracts. As per Article4 of PSC(Pg-1. 19 of the PB)‘if the contractor exercises the option provided in paragraph (b)of Article 3. 5 the contractor shall, after any development area has been designated, relinquish all of the contract area not included within the said develop ment area’. Article-30of PSC(pg. 1. 84)deals with termination of contract. It provides 10 circumstances under which the government could terminate the contract. Clearly relinquishment and termination of agreement are two different concepts as per the PSC. In his letter, dated 28. 03. 2007, the DGHC has informed the assessee that its contract stood relinquished The termination condition of the PSC deals with totally different situations. We find that the letter dt. 28. 3. 2007 talks of Article -4 and not of Article- 30 of the PSC. Clearly, the case of the assessee does not fall in the category of termination. Considering the above, we are of the opinion that the order of the FAA does not suffer from any legal or factual information. So, confirming his order, we decide effective ground of appeal against the AO. - Decided in favour of assessee 2016 (2) TMI 890 Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee. 2016 (2) TMI 889 Set off interest on income tax refund received from interest on income tax paid - Held that:- The set off of interest paid against that received shall accordingly be subject to the two being for the same period, and to the extent of interest income for the said period. Two, the interest rate paid to the Revenue is higher than the interest rate paid by it. Now, without question, interest as an expenditure u/s. 57(iii), i.e., under which provision deduction in its respect is claimed and allowed, could only be allowed to the extent of interest attributable to the rate at which interest is received from the Revenue. This is as nobody can be said to have borrowed funds at a rate (of interest) to earn interest income at a lower rate – there being no scope for earning any income, which is only net of expenditure, under such an arrangement. It needs to be appreciated that it is only toward earning (net) interest that the expenditure is allowed u/s. 57(iii), presuming a nexus between the ‘funds’ borrowed and lent. True, the interest rates are not in the control of the assessee, but statutorily defined. That, in fact, is a basis on which we have opined of the interest suffered as being a statutory liability, unconnected with the earning of interest, so that it is not admissible as a deductible in the first place. However, even granting deductibility, the parameters of section 57(iii) do not admit of expenditure being incurred to sustain a predetermined loss, which again points to the expenditure being involuntary - another aspect of the matter emphasizing its’ non-deductibility. The deduction for interest paid would thus be limited to the quantum of interest received on the like (principal) amount for the same period, defined as from a particular date to a particular date. Subject to these two caveats, forming part of the application of the principle of deductibility of interest expenditure to Revenue against that received from it, accepted by us in principle respectfully following the decisions by the co-ordinate benches of this tribunal, we allow the assessee’s claim - Decided in favour of assessee 2016 (2) TMI 888 Bogus purchase - addition as assessees income - Held that:- AO was not justified in holding that the entire bogus purchases by the assessee from the aforesaid two parties in the assessee’s undisclosed income. The assessee had earned commission @ 5% for clandestinely facilitating the bogus transactions of the parties to purchases and sales. 2016 (2) TMI 887 Eligibility of registration u/s 12AA - Held that:- It is now well settled that at the time of grant of registration u/s 12AA, the ld. Commissioner is required only to examine the objects of the society. A bare perusal of the objects of society makes it clear that the pre-dominant object of the society is to impart education. - Decided in favour of assessee As we have directed for registration of society u/s 12AA in terms of observations the assessee’s claim for approval u/s 80G(5)(vi) is allowed. 2016 (2) TMI 886 Entitlement to deduction u/s 11 - Held that:- Merely because the assessee receives some recognition fees will not deviate the fact that the main object of the assessee is to promote sports which is apparently for the advancement of general public utility as provided in Section 2(15) of the Act which defines charitable purposes. The words "advancement of any other object of general public utility" would exclude objects of private gain; but this requirement is also stratified in the present case because the object of private profit is eliminated by the assessee under the objects as per Memorandum of Association of Society which was quoted in Assessment Order. The test to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. The restrictive condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object. Therefore the assessee is entitled for the deduction under Section 11 of the Act. - Decided in favour of assessee. 2016 (2) TMI 885 Penalty u/s 271(1)(c) - income offered by the assessee pursuant to search carried out at his premises - advances received in cash from the customers and gifts received - Held that:- In the facts of the present case, we hold that the declaration made by the assessee on account of advances received in cash from the customers which was shown in the books of account, balance sheet and even in the return of income, filed before the date of search, in view of the declaration of the assessee while recording the statement under section 132(4) of the Act, during the course of search and seizure action at the premises of the assessee on 06.01.2010, represents the additional income in the hands of the assessee, which have been declared by the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act. Such additional income offered by the assessee falls within the purview of Explanation 5A to section 271(1)(c) of the Act of the Act and t he assessee is liable for levy of penalty under section 271(1)(c) of the Act on the aforesaid amounts offered by the assessee on account of advances received in cash from customers shown in the balance sheet. Similarly, the gifts shown in the books of account which have been offered as additional income by the assessee during the course of search itself, in the statement recorded under section 132(4) of the Act is liable for levy of penalty under section 271(1)(c) of the Act i.e. on offer of income of ₹ 90,000/- in assessment year 2006-07 and ₹ 8,17,200/- in assessment year 2007-08. We find no merit in the order of CIT(A) in this regard that where the advances from customers, gifts received by the assessee and unsecured loan have been shown in the books of account and were part of the balance sheet filed by the assessee along with return of income originally filed by the assessee prior to date of search does not warrant the levy of penalty under section 271(1)(c) of the Act. In view of the amended provisions of Explanation 5A to section 271(1)(c) of the Act, the said finding of the CIT(A) is reversed and we hold that the assessee is liable to levy of penalty under section 271(1)(c) of the Act on the income offered by the assessee pursuant to search carried out at his premises, during the course of recording of statement under section 132(4) of the Act and by way of additional income in the return of income filed pursuant to issue of notice under section 153A of the Act. Similarly, unsecured loans shown in assessment year 2007-08 is liable for levy of penalty under Explanation 5A to section 271(1)(c) of the Act, which was offered by the assessee as additional income during the course of search and also declared in the return of income filed pursuant to notice under section 153A of the Act. Applying the ratio laid down by the Pune Bench of Tribunal in Sarita Kaur Manjeet Singh Chopra Vs. ITO (2015 (12) TMI 1025 - ITAT PUNE ), we hold that the assessee is exigible to levy of penalty under Explanation 5A to section 271(1)(c) of the Act on the incomes offered in the return of income pursuant to issue of notice under section 153A of the Act. - Decided against assessee Addition made on account of undisclosed rent from shop and house on estimated basis - Held that:- The assessee offered to tax the notional income in respect of the said vacant house at Malegaon and shop at Nashik. The assessee admittedly, had not received any income from two properties and the income was assessed in the hands of assessee on notional basis as the assessee owned one self occupied property at Nashik. The said addition was made in the hands of assessee during the course of assessment proceedings and no information in this regard was found during the course of search proceedings. In view thereof, the provisions of Explanation 5A to section 271(1)(c) of the Act are not applicable. However, the substantive provisions of section 271(1)(c) of the Act are attracted, but in view of the notional income being assessed in the hands of assessee and in the absence of any evidence found during the course of search or otherwise as to the receipt of rental income from the said properties, we find no merit in the levy of penalty under section 271(1)(c) of the Act on such notional rent - Decided against revenue Addition made on account of notional rental income from hotel - Held that:- The offer of the rental income during the course of assessment proceedings was to buy peace of mind and to avoid litigation. However, there is no finding of any of the authorities that the assessee had indeed received the aforesaid rental income from the said hotel. In view of the explanation of the assessee, which was not accepted by the Assessing Officer and addition was made in the hands of assessee on notional basis, does not justify the levy of penalty under section 271(1)(c) of the Act. We further hold that on such additions made in the hands of assessee and in the absence of any evidence found during the course of search, Explanation 5A to section 271(1)(c) of the Act is not attracted. Accordingly, we upho ld the order of CIT(A) in deleting penalty - Decided against revenue Addition on account of undisclosed profit on sale of flat - Held that:- The claim of the assessee in this regard is that the said income was voluntarily offered by the assessee and was not found during the course of search. In case, no evidence was found during the course of search, then admittedly, the provisions of Explanation 5A to section 271(1)(c) of the Act are not attracted. However, the assessee is exigible to levy of penalty for concealment under section 271(1)(c) of the Act under the substantive provisions since the assessee had failed to disclose the profits earned by it on the sale of flats of ₹ 22,500/- and 42,250/- in assessment years 2008-09 and 2009-10. Accordingly, we reverse the order of CIT(A) in this regard and direct the Assessing Officer to levy penalty under section 271(1)(c) - Decided against assessee Addition of on-money received on sale of plot - Held that:- Where the assessee had not offered true taxes on the income declared by the assessee and addition was made on account of on-money received on sale of plots in the hands of assessee, then the provisions of section 271(1)(c) of the Act with regard to concealment of income are attracted and the assessee is liable to levy of penalty under substantive provisions of section 271(1)(c) of the Act. We reverse the order of CIT(A) in this regard and uphold the levy of penalty under section 271(1)(c) of the Act on receipt of on-money of ₹ 12,000/- in assessment year 2006-07 and ₹ 10,000/- in 2007-08.- Decided against assessee Disallowance of labour payment for non-payment of taxes at source - Held that:- The addition was made in the hands of assessee by the Assessing Officer for non-deduction of tax at source and in view of the provisions of section 40(a)(ia) of the Act. The disallowance was made in the hands of assessee on account of deeming provisions of the Act. However, it is not the case of Revenue authorities that the aforesaid amount on account of labour was not paid by the assessee. Merely because the addition has been made in the hands of assessee, does not justify the levy of penalty under section 271(1)(c) of the Act. We hold that there is no merit in the order of Assessing Officer in this regard and upholding the order of CIT(A) in deleting the penalty levied on the said addition - Decided against revenue Change in head of income - long term capital gains offered to tax in the return of income was assessed as business income in the hands of the assessee by the Assessing Officer - Held that:- The assessee is undoubtedly carrying on the business of developers, but it can hold assets in two fields i.e. on account of trading or on account of investment. Merely because the assessee was not able to substantiate its claim before the Assessing Officer and had offered the said income to be assessed as business income, instead of under the head ‘capital gains’ as shown in the return of income, does not justify the levy of penalty under section 271(1)(c) of the Act See CIT Vs. Bennet Coleman & Co. Ltd. [2013 (3) TMI 373 - BOMBAY HIGH COURT] . Accordingly, we uphold the order of CIT(A) in this regard as where the assessee only changed head of account and in the absence of any facts that claim of assessee was not bonafide, the deletion of penalty under section 271(1)(c) of the Act by the Tribunal was upheld. - Decided against revenue 2016 (2) TMI 884 Eligibility of benefit of deduction u/s.80IB(10) - case of the Revenue that since the assessee has not completed the B2 project, therefore, the assessee is not entitled to deduction u/s.80IB(10)- Held that:- We find the assessee in the instant case has constructed the housing project namely “Kumar Paradise” at Hadapsar, Pune on Plot No.2 Survey No.134/1/1A/1. The said plot is divided into 3 parts, Part A, Part B and Part C. The first layout of the plan of the entire scheme was sanctioned by the local authority, i.e. PMC on 21-10-2003. The assessee proposed 2 separate projects Part A and B on the aforesaid plot. The project A of the plot comprised of the Buildings A1 and A2 and project B comprised of Buildings B1, B2, B3 and B4. The total area of the project A was 8,853 sq.mtrs. The construction of the building A1 was started vide commencement certificate dated 08-01-2004 and the said building A1 comprising of 108 units was completed on 06-07-2006. Similarly, Building A2 which was commenced vide commencement certificate dated 18-05-2004 consisting of 108 units was completed on 06-11-2007. The project B comprising of 10, 394.66 sq.mtrs of Part B and 1606.02 sq.mtrs of Part C. The Building B1 commenced construction vide commencement certificate dated 28-06-2006 and the same comprised of 44 residential units and the said building B1 was completed on 18-03-2008. The other building B2 was commenced vide commencement certificate dated 28-06-2006. However, the same was not completed as according to the assessee there was inadequate FSI to complete the entire building since the same was sanctioned with only 16 units with an FSI of 677.64 sq.mtrs. Since according to the assessee the same was not economically viable the assessee did not complete the residential floors but only completed the parking floors for want of adequate FSI. However, subsequently, the assessee renewed the same on 22-06-2010 vide a separate commencement certificate. For the other 2 buildings, i.e. B3 and B4 on Part C of the plot another commencement certificate was obtained and building plan was sanctioned as there was no adequate FSI for building B2 itself. It is the case of the assessee that it has completed A1, A2 and B1 of the project and because of inadequate FSI the assessee did not complete B2 building as it was not economically viable. Therefore, on stand alone basis itself, it is entitled to deduction u/s.80IB(10) in respect of whatever portion is completed. It is also the case of the assessee that in A.Y. 2007-08 the deduction claimed u/s.80IB(10) was allowed in order passed u/s.143(3). In A.Y. 2008-09 the deduction claimed was allowed in the order passed u/s.143(3)/147. Therefore, there is no justification for denying the claim of benefit of deduction u/s.80IB(10). There is no dispute to the fact that the assessee in the instant case has completed the B1 building consisting of 44 flats. As mentioned earlier the building B1 is having built up area of more than 1 acre. The built up area of all the residential units are less than 1,500 sq.ft. and there is no commercial construction and the building independently on standalone basis satisfies all the conditions u/s.80IB(10). It has been held by various decisions that deduction u/s.80IB(10) of the Income Tax Act, 1961 is to be allowed on standalone basis on satisfaction of the conditions prescribed under the said section. - Decided in favour of assessee 2016 (2) TMI 883 TDS u/s 194I or 194C - logistic service for carrying goods by sea route in containers - Held that:- The use of containers is incidental to the whole process of transportation of goods between ship and shore and it cannot be considered as a standalone transaction in its own character. The question of tax deduction under section 194I could have, if at all, arisen only when it was a rental simplictor of the equipment. That is not even the case here. No doubt the bills have been raised on the basis of the size of the container because irrespective of the weight of the container, it is size which determines how much space is taken by the goods transported. The billing on the basis of the size of the container cannot lead to the conclusion that the billing is for container rental rather than transportation of goods contained in the container. The very foundation of the impugned demands raised by the Assessing Officer is thus devoid of any legally sustainable foundation. The activity, for which the impugned payments are made, is the activity of transporting the goods which is a service in nature. The assessee was thus quite justified in deducting tax at source under section 194C. What is to be seen is whether use of the asset which is said to have been used, is incidental activity for attaining some other goal or is it the core activity which can be viewed on standalone basis in its own character. On the facts of this case, as we have held earlier in the order, the use of containers is only incidental and cannot be viewed as a core or standalone activity. It is merely incidental to transportation of, or loading and unloading of, cargo. The payments cannot, therefore, be treated as constituting payment for rent of containers. In any event, tax deduction at source liability is only a vicarious liability and when the principal liability of the assessee is discharged, it ceases exist. In the present case, the assessee has filed tax returns of the recipient to demonstrate that the recipient has duly included the payments in question in the computation of his income, and duly discharged tax liability on the same. No infirmity is pointed out in the information so furnished. The Assessing Officer was, for this reason also, not justified in raising the demands in question. He had noted the contention of the assessee, in this respect, but left it at that. Such an approach cannot meet any judicial approval. 2016 (2) TMI 882 Entitlement to exemption u/s 10(34) - dividend income distributed as per the provisions of Sections 115-O and 115-R - Held that:- CIT(A) have taken a wrong view by holding that the assessee cannot grow tax free income u/ss 10(34) and 10(35) of the Acts unless additional tax has been paid as per the provisions of Sections 115-O and 115-R of the Act and as such the exemption claimed u/ss 10(34) and 10(35) is to be allowed only if the dividend income distributed as per the provisions of Sections 115-O and 115-R whereas, the conditions laid down u/s 115-O to avail the exemption u/s 10(34), is to be complied with at the level of venture capital undertaking and not at the stage when the investor, the assessee in this case, received the dividend income from VCF. So, the assessee is entitled for exemption u/s 10(34) of the Act and its share of dividend income is out of dividend income received by SARA fund. When the company with which SARA Fund has been invested, had already paid additional income tax on the earned dividend as required u/s 115-O of the Act, SARA fund was not required to pay additional income tax second time on the same income - Decided in favour of assessee Disallowance of expense - taxing the share of appellant as interest income from VCF under the head ‘other income’ on gross basis and not on net basis - Held that:- The provisions contained u/s 115U discussed in the preceding paragraphs which mandates that venture capital company and venture capital fund is given the status of pass through vehicle for the purpose of treatment of income received on account of investment made in the venture capital undertaking. A person who makes investment in the venture capital company or venture capital fund, the assessee in this case, earned the income out of such investment which income shall be treated firstly as investment directly in the venture capital undertaking and venture capital fund or venture capital company is only a pass through vehicle. So, in these circumstances, the assessee company is entitled to book expenditure incurred by SARA fund as if the same has been incurred by the assessee directly in the venture capital fund. So, we are of the view that the expenses of ₹ 1,13,11,955/- disallowed by Ld. CIT(A) by taking the shares of the assessee in interest income from VCF under the head other sources on gross basis and not the net basis, which requires to be determined by treating the same nature of income like long term capital gain, short term capital gain, dividend and other income such as interest etc - Decided in favour of assessee Taxability of assessee’s share in the payment @ 22.23% - assessable in assessee’s hands as ‘income from other sources’- Held that:- The assessee in this case, earned the income out of such investment, which income shall be treated as if the investment was directly in the VCU and VCF and VCC is only a pass through vehicle. So, the assessee has rightly taken the net income for tax at ₹ 11,97,38,454/- by subtracting the amount of ₹ 5,62,61,546/- and the assessee is liable to be taxed accordingly. So, Ld. CIT(A) has erred in holding that the appellant’s share in the payment of ₹ 5,62,61,546/- (17,60,00,000 – 11,97,38,454) @ 22.73% i.e. ₹ 1,27,88,250/- as income from other sources in the hands of assessee, which is required to be assessed in view of the provisions contained u/s 115U of the Act - Decided in favour of assessee 2016 (2) TMI 881 Liability to pay tax on long term capital gains - cancellation document - Transfer - Held that:- If there was any cancellation document which has taken place, the original document would have been with the assessee, as the assessee would have been the sole beneficiary of said document . In our view, the alleged cancellation agreement between the assessee and the purchaser, if accepted, is a title document qua the assessee that will nullify the effect of the original sale deed as per the assessee (though this contention of nullifying the effect of registered document is highly disputable and debatable in view of provisions of Transfer of Property Act). But since the cancellation document as is alleged is the title document in favour of the assessee, therefore, the original document should have been in possession of the assessee, but the assessee has failed to produce the original document during the assessment proceedings, in our view, it goes against the assessee. Therefore, we have no hesitation to hold that the complete transfer in accordance with law has taken place on account of registered sale deed dated 16.04.2007 and, therefore, the assessee is liable to pay the long term capital gain on sale of the capital asset on DLC rate of the property at ₹ 11,40,453/-. Accordingly, this issue is decided against the assessee. Applicability of provisions of section 53A of the Transfer of Property Act - Held that:- Provisions of section 53A of the Transfer of Property Act is not attracted as the assessee has failed to produce the written contract between the assessee and Shri Praveen Kumar Jain, pursuant thereof in part performance of the contract, the possession of the property was handed over to Shri Praveen Kumar Jain. Therefore, the issue is decided against the assessee. Entitlement to benefits under 54F - Held that:- The comparison of the two registered sale documents clearly shows that the property which was earlier sold by the assessee to the purchaser, namely Praveen Kumar Jain was later on transferred by Shri Praveen Kumar Jain to the assessee by registered sale document. Both the transactions i.e. one between the assessee and Praveen Kumar Jain dated 16.04.2007 and another between Praveen Kumar Jain and assessee dated 23.02.2008 have taken place within the A.Y. 2008-09 and in both the sale transactions the DLC rate is applied was ₹ 11,40,453/-, though in the later transaction the sale consideration was mentioned as ₹ 3,00,000/- whereas in the earlier sale consideration received by the assessee was ₹ 1,05,000/-. Thus the assessee had paid ₹ 1,95,000/- more for getting back the title in respect of the same property on 23.02.2008. If we examine the issue, the in the light of above facts, in our view, there is no income which can be subjected to tax as the income which was received by selling the property was ₹ 1,05,000/- and the amount paid for purchase of the said property was ₹ 3,00,000/-. The full value consideration in the case of selling the property to Shri Praveen Kumar Jain was required to be considered as ₹ 11,40,453/- in accordance with sec. 50C. However, the same yardstick is required to be applied when it comes to sale consideration paid by the assessee. In our view, for the purpose of the cost of the new asset, the same principle, in the peculiar facts and circumstances is required to be applied. The assessee cannot be axed twice. In fact, if we see the fate of transactions, the genuineness of the transaction is loud and clear and is apparent though we have held that the transfer has taken place between the assessee and Shri Praveen Kumar Jain, but nonetheless the re-transfer/fresh sale deed was also executed by Shri Praveen Kumar Jain in favour of the assessee on 23.02.2008. Therefore, in our view, the assessee is entitled to the relief claimed under this provision. Thus, we hold that the assessee is entitled to the benefit of the amount spent by him for purchase of plot for the sale consideration of ₹ 3,00,000/- and any other addition caused which may have been incurred by him on the said purchase of the land. The same parameters should be applied for giving the benefits under 54F as had been applied under section 50C. Though section 50C(2) provides that it is for the assessee to claim before the AO that the value adopted by the stamp valuation authority exceeds the fair market value, in that eventuality the AO may refer to the Valuation Officer for the valuation of the capital asset in accordance with law. In the present case no request has been made before the AO. The perusal of the paper book and record shows that even before the AO or before us, the assessee has not filed any fair market value of the property to the estimation of the assessee. Further, the assessee has not challenged the value adopted by the stamp valuation authority either at the time of selling the property to Shri Praveen Kumar Jain or at the time of purchasing the property from Shri Praveen Kumar Jain. In our view the ground of the assessee is required to be dismissed and accordingly we dismiss the ground of the assessee. 2016 (2) TMI 880 Cost of acquisition - capital gain on account of sale of TDR as long term capital gain - assessee along with his family members owned an ancestral land near Parvati, Pune which was reserved and subsequently acquired by PMC - Held that:- As regards the contention of the assessee that since the land was acquired by the PMC in the F.Y. 1999-2000 and TDR was received in the month of March 2000 for which the gain arising on account of acquisition of the land could not be taxed in A.Y. 2001-02 is without any merit. The tax has been levied on the basis of the sale of TDR during the impugned assessment year. The TDR has been obtained on account of acquisition of land by PMC. It is not a case that the value of the land is not ascertainable. Therefore, the argument of the Ld. Counsel for the assessee that the assessee is not liable to capital gain tax at all or that it cannot be taxed in this year because it relates to A.Y. 2000- 2001 is without any merit. Therefore the additional ground on this issue is dismissed. Adoption of rate of ₹ 120.98 per sq.ft. as the sale consideration is concerned, we find the Ld.CIT(A) on the basis of the entries found on the seized documents of the loose paper Bundle No.12 has computed rate per sq.ft. at ₹ 120.98 per sq.ft. The Ld. Counsel for the assessee could not controvert the factual analysis done by the Ld.CIT(A) on the basis of the seized document. Merely because the department did not find any unaccounted asset cannot be a ground to adopt the sale consideration at ₹ 80/- per sq.ft. as against ₹ 120.98 per sq.ft. computed by the CIT(A) on the basis of the seized document. In view of the detailed reasoning given by the CIT(A) adopting the rate per sq.ft. at ₹ 120.98 per sq.ft. and in absence of any cogent material brought to our notice by the Ld. Counsel for the assessee against the same the order of the CIT(A) determining the rate per sq.ft. at ₹ 120.98 per sq.ft. is upheld and the ground raised on this issue is accordingly dismissed. Determination of FMV per sq.ft. as on 01-04-1981 - in absence of any satisfactory reply from the valuer whose statement was recorded u/s.131 on 15-09-2004 the AO rejected the valuation report given by the valuer - Held that:- We find a somewhat similar case had come up before the Pune Bench of the Tribunal in the case of Sathe Biscuit and Chocolate Company Ltd. (2010 (9) TMI 1107 - ITAT PUNE) Tribunal after considering the above circular considered the rate of the land as on 01-04-1981 at 40% of the value determined as on 01-04-1989. After considering the fact that the property of the assessee was having at a better location and holding that the stamp valuation rates are generally lesser than the FMV, the Tribunal determined the FMV at ₹ 630/- per sq.mtr. Adopting the principle laid down by the Pune Bench of the Tribunal in the case of Sathe Biscuit and Chocolate Company Ltd. (Supra) we find the FMV of the said land as on 01-04-1981 comes to ₹ 55.74 per sq.ft. if the ready reckoner rate of 1989 at ₹ 1,500/- per sq.mtr is considered. Since the assessee has adopted the rate of ₹ 20/- per sq.ft. as against ₹ 55.74 per sq.ft. as per the ready reckoner rate of 1989 and proportionately brought down to 1981 rate the same appears to be reasonable. In this view of the matter, we direct the AO to adopt the rate of ₹ 20/- per sq.ft. as the cost of acquisition as on 01-04-1981 and compute the capital gain. Taxation of entire amount in this year - the assessee has sold the TDRs in different assessment years - Held that:- The assessee in the paper book filed has furnished the details of party-wise summary along with copies of TDR/DRC allotted by PMC on 03-03-00 at paper book pages 248 to 348. These documents were very much available before the AO as well as the CIT(A). Even the AO in the assessment order at page 3 has mentioned the date of issue of DRC as on 03-01-00 and 03-03-00. The details of utilization of DRC and transfers, copies of which are placed at pages 256 to 347 show the sales in different financial years. For example Certificate No.0002195 shows sale of 297 sq.mtrs on 01-02-00 to Shri D.M. Bhutala, another 392 sq.mtrs on 01-02-00 to Shri S.S. Raut. The assessee has sold 69 sq.mtrs on 18-10-00 to Shri Vimalkumar Jain and another 25 sq.mtrs on 11-11-00 to Shri V.D. Dhattar, 100 sq.mtrs on 19-12-00 to Shri Anjum Parvez Patel. The assessee has sold 62 sq.mtrs on 27-04-2002 to Shri Anjum Parvez Patel. As per Certificate No.0002196 the assessee has sold 561 sq.mtrs to Shri Vimalkumar Jain on 18-10-00. As per Certificate No.0002340 apart from sale of TDR during F.Y. 2000-01 the assessee has sold 28.81 sq.mtrs to Shri Sayed Abbas Zaidi on 16-12-2002. These are only some of the examples. The various certificates filed in the paper book show sale of TDR in different financial years and the entire sale does not relate to the current assessment year. Although documents were very much available with the AO as well as the CIT(A) they have not considered the year of taxability on the basis of sale of TDR. Therefore, we find some force in the submission of the Ld. Counsel for the assessee that correct income has to be taxed in the impugned assessment year. We therefore direct the AO to verify from the details furnished before him from the utilization of DRC and transfer certificates and bring to tax the correct income for the impugned assessment year. So far as sale proceeds in the assessment years other than the impugned assessment year the AO will follow due process of law for bringing to tax the capital gain on transfer of TDRs in respective years. We hold and direct accordingly. Actual area transferred by the Raut family - Held that:- Restore the issue to the file of the AO with a direction to verify the exact area considering the actual area of TDR sold and compute the capital gain accordingly. 2016 (2) TMI 879 Deduction claimed under section 80P(2)(a)(i) - interest income earned on investment / deposits with other banks -assessee is a credit co-operative society, which is accepting deposits from its members and using the same for giving loans to its members - Held that:- The surplus amount which was on account of amount received from its members only, which had not been advanced to any of the members was invested in the banks, against which the said investment was made out of surplus funds available with the assessee, which in turn, were amounts advanced by the members itself. The said parking of funds with the co-operative banks was claimed by the assessee to be in the nature of its business activity as it was the requirement of Maharashtra Co-operative Societies Act, 1960, that 20 to 30% of total deposits are to be parked in the investments with co-operative banks. It is not the case of the Department that the amount invested by the assessee was out of any liabilities due by the assessee. In the absence of the same and following the same parity of reasoning laid down by the Hon’ble High Court of Karnataka in Tumkur Merchants Souharda Credit Co-operative Ltd. Vs. ITO ([2015 (2) TMI 995 - KARNATAKA HIGH COURT]) and the facts of the present case being at variance to the facts before the Hon’ble Supreme Court in Totgar’s Co-operative Sale Society Ltd. Vs. ITO (2010 (2) TMI 3 - SUPREME COURT) we hold that the assessee is entitled to the claim of deduction under section 80P(2)(a)(i) - Decided in favour of assessee. Profit from other activities and services - deduction under section 80P(2)(a)(i) - relief allowed by the CIT(A) - Held that:- The perusal of the details filed of receipts totalling ₹ 50,21,759/-, out of which some details totalling ₹ 44,21,523/- are tabulated at page 9 of the CIT(A)’s order, it reflects that the assessee has received dividend of ₹ 160/-. The assessee had received interest income from savings account totalling ₹ 3,28,820/- and service charges of ₹ 4,48,431/-, cheque return charges of ₹ 68,680/- and charge and DD commission of ₹ 93,131/-, processing fees of ₹ 10,38,970/-, loan form fees of ₹ 10,780/- and interest received account of ₹ 24,15,280/-. As against the receipt of ₹ 44,21,523/- + other receipt from MSEB of ₹ 32,356/- and ₹ 4,65,343/-, totalling ₹ 50,21,759/-, proportionate expenditure relatable to such receipts at ₹ 43,01,457/- has been allowed by the Assessing Officer. The CIT(A) on the other hand, had upheld the order of Assessing Officer in respect of interest / commission from MSEB and had worked out the balance receipt eligible for deduction under section 80P(2)(a)(i) of the Act at ₹ 44,21,523/-. The proportionate expenditure on the same was allowed and the balance profit was determined as ₹ 6,34,206/- being eligible for deduction under section 80P(2)(a)(i) of the Act. We find no merit in the aforesaid order of CIT(A) in view of the nature of receipts in the hands of assessee being not covered by the provisions of section 80P(2)(a)(i) of the Act. The interest from savings bank account and the other receipts are not eligible for the aforesaid deduction under section 80P(2)(a)(i) of the Act. Accordingly, we reverse the order of CIT(A) in this regard - Decided in favour of revenue 2016 (2) TMI 878 Validity of penalty orders u/s 271(1)(c) - period of limitation - Held that:- The case of Rayala Corporation Pvt. Ltd. Vs. UOI & Ors. (2006 (4) TMI 96 - MADRAS High Court) has considered proviso to section 275(1)(a) of the Act vis-à-vis appeal to the Tribunal and held that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of 6 months from the end of the month when the order of the Tribunal, is received by the third respondent. The Hon’ble Madras High Court also supports our view expressed above. In view of the above, we find that the Ld. CIT(A) has rightly held that the penalty order passed by the A.O. within the period of limitation i.e. within 1 year as per the proviso to section 275(1)(a) of the Act. Thus, we uphold the order of the CIT(A). This ground of appeal raised by the assessee is dismissed. After careful consideration of the orders of the authorities below and also particularly the penalty order passed by the A.O., we find that the assessee has not filed the details in respect of interest payment, unexplained investment in jewellery, bogus sundry creditors. Therefore, the A.O. after considering the non-filing of the above details and held that the assessee has concealed the income and came to a conclusion that it is a fit case to levy the penalty and accordingly penalty has been levied. We find that the assessee has not filed details in respect of the interest payment, unexplained investment in jewellery, sundry creditors. Therefore, by filing inaccurate particulars, the assessee has concealed the income. In the present case, section 271(1)(c) of the Act attracts on both the counts i.e. concealment of particulars of income and furnishing inaccurate particulars. Therefore, the penalty levied by the A.O. is justified and the notice issued by the A.O. cannot be said that a vague notice. - Decided against assessee 2016 (2) TMI 877 TDS U/s 194J - sharing of fees - payments made by the appellant to ITGK for its share in RS-CIT course fees - Held that:- As decided in assessee’s own case for A.Y. 2009-10 to 2011-12 the uncontroverted fact which emerges from the record is to the effect that the payments in question were not made by assessee qua any service of professional or technical nature rendered to the payee. All the above entities by a valid collaboration, formed a business module on the revenue sharing basis for imparting computer education to Rajasthan Govt. employees and others. The services if any were provided to the students and the payee in question. The nature of internal distribution of revenue based on the mutual agreements can’t be held to be rendering of professional or technical services by any stretch of imagination. We find merit in the erudite contentions of ld. counsel for the assessee. Our view is reinforced by Hon’ble Delhi High court judgment in the case of Career Launchers [2012 (4) TMI 440 - DELHI HIGH COURT], the act of sharing of revenue in a multi entity business model cannot be held as contract payments and taking the logic further they cannot be held as payments on account of rendering of any professional or technical services as contemplated by Section 194J of the Act - Decided in favour of assessee 2016 (2) TMI 876 Claim of deduction written off on account of unrecoverable advance made for purchase of machinery - Held that:- As second installment of the claim made on account of unrecoverable advance to the extent of 30% of the total amount. The facts and issues arising in the present captioned assessment year are identical to the facts and issues in assessment year 2009-10 and following the same parity of reasoning, we hold that the assessee is entitled to the claim of deduction of ₹ 43,34,640/-, written off on account of unrecoverable advance made for purchase of machinery. - Decided in favour of assessee 2016 (2) TMI 875 Computation of deduction under section 80IA - assessee had already claimed deduction under section 80HHC - Held that:- We modify the directions of the CIT(A) and direct the Assessing Officer to first compute the deduction under section 80IA of the Act and restrict the deduction under section 80HHC of the Act to the profits of business that remains after excluding the profits on which deduction under section 80IA of the Act is allowed. Further, the Assessing Officer is directed to restrict the total deduction to be allowed under sections 80IA and 80HHC of the Act to the extent of 100% of the eligible profits as directed by the Hon’ble Bombay High Court in Associated Capsules (P.) Ltd. Vs. DCIT (2011 (1) TMI 787 - BOMBAY HIGH COURT ). 2016 (2) TMI 874 Transfer pricing adjustment - computation of ALP based on interim and unaudited financial statements - Held that:- We are of the considered opinion that we have to restore the entire issue of determination of ALP to the file of the A.O. for fresh adjudication in accordance with law. When audited financial statements are available in the public domain, computation of ALP based on interim and unaudited financial statements cannot be accepted. A fresh exercise has to be done based on the audited financial statements of each of the parties for all the segments/international transactions. Regarding the plea of the assessee to direct the A.O. to apply the Second Proviso to S.92(2) of the Act and to exclude comparables having related party transactions in excess of 25% and to direct the AO to grant working capital adjustment, we hold that the assessee would be free to take up any legal argument or contentions before the A.O. The law with respect to transfer pricing has developed over the period of time and the assessee/revenue should not be deprived of taking benefit of the latest legal developments on any issue. The AO is directed to consider all these fresh contentions and arguments raised by the assessee and dispose of the same and arguments in accordance with law. The AO/TPO shall afford adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes Customs 2016 (2) TMI 861 Retrospective levy of anti-dumping duty - provisional duty was imposed on 25.07.2014 and the same could not extend beyond six months, that is, 24.01.2015. The notification has been issued on 27.05.2015, therefore, there is a gap between 25.01.2015 and 26.05.2015. - One of the issues raised was that the Central Government could not have levied the anti dumping duty retrospectively and that in case it did so, the provisions of Rule 20(2)(a) would be ultra vires the Customs Tariff Act, 1975 which does not speak of retrospectivity. - Held that:- in order to avoid the provisions of Rule 20(2)(a) being rendered ultra vires Section 9A of the said Act, the Supreme Court has clearly held that no duty can be collected during the ‘Gap Period’. - no anti dumping duty can be levied and collected during the ‘gap period’. - Decided in favor of petitioner. 2016 (2) TMI 860 Import of old dore bars with impurity - claim of benefit of concessional rate of customs duty - the Central Government granted exemption from payment of duty in excess of "BCD NIL and CVD @ 2% ad valorem, for imports upto 20.01.2013 and in excess of BCD NIL and CVD @ 4% for imports w.e.f 21.01.2013 on gold dore bars having gold content not exceeding 95% vide Sl.No.318 of Notification No.12/ 2012 dated 17.03.2012, subject to fulfillment of condition No.5 and 34 of the said notification by the importer. Held that:- A reading of the aforesaid condition requires two fold compliance: firstly, goods must be imported, which the petitioner has done. Secondly, the goods should be in accordance with the 'packing list' issued by the mining company by whom they were produced. If regard is had to Annexure-B, 'list of goods', apparently goods were imported 'in accordance with' the packing list issued by the mining company by whom the goods were produced, since assay certificate is issued by the Perth Mint, a government company constituted by the Government of Australia under the statute known as "Gold Corporation Act, 1987'. The words "in accordance" requires a literal interpretation and should not be confused with the use of words "along with goods". Both of them would give different meanings. Learned counsel for the petitioner is correct in his submission that the words "in accordance" when inserted in the condition 34(b) in the Notification No.12/2012, the requirement was to furnish the 'packing list' and if so done, it cannot be said that there is non compliance with condition No.34(b). If the words "along with" is placed by removing the words "in accordance", then a different meaning could be attached to compliance of Section 34(b); that is the goods will have to be necessarily accompanied by 'packing list'. Admittedly, petitioner produced the assay certificate and the 2nd respondent accepted the same on the date when it came to the Airport, Cargo Division and was permitted to be released while granting exemption from duty under the relevant Notification. Therefore, in my opinion, exfacie, petitioner did comply with the requirements of condition No.34(c) in the matter of import of gold dore bars from Australia and the mines from Australia. From the material on record, more appropriately the packing list, Annexure-B and the assay certificate, Annexure-C of Perth Mint relating to import of gold dore bars mentioned therein, at the time of import, petitioner complied with condition Nos.34(a), 34(b) and 34(c) of the Customs Notification No.12/2012 dated 17.3.2012. Benefit of exemption / concessional rate of duty allowed - Decided partly in favor of assessee. Corporate Laws 2016 (2) TMI 857 Company in liquidation - interpretation of the words used in condition No.7 i.e. “the taxes in relation to property” and whether the said words include the sales tax liability of the company in liquidation or not - whether purchaser is required to pay all the taxes in relation to the property including all outstanding dues? - Held that:- Merely because this Court has observed in condition No.7 of the terms and conditions that the purchaser is required to pay all the taxes in relation to the property levied/leviable by the State Government or any local authority in relation to the company in liquidation, it does not mean that preferential payment from the sale proceeds be made to any Government Authority or any local authority over the other secured creditors, workers, etc. of the company in liquidation in contravention to the provisions of Section 530 of the Companies Act, 1956. Moreover, as observed above, as per the condition No.7 of the aforesaid order, the purchaser is required to pay all the taxes in relation to property and sales-tax is not the taxes in relation to the property. The sales tax dues of the company in liquidation for the year 1988 cannot be termed as the taxes in relation to the property. Further, when the respondent No.2 has already lodged its claim before the respondent No.1 – Official Liquidator in the year 1995, the same would be considered by the Official Liquidator as per the provision of Section 530 of the Companies Act and therefore the charge created by the respondent No.2 in respect of the land of the company in liquidation is required to be removed and the concerned revenue authority is required to make necessary entries in the revenue record entering the name of the applicant No.1 as purchaser of the land of the company in liquidation. Hence, the Mamlatdar, Anand is hereby directed to cancel the entry registering the so-called charge of Sales Tax Department as arrears of land revenue to ensure that the applicant No.1 gets free and clear marketable title qua the property of the company in liquidation purchased vide order dated 06.05.2004 passed in O.L.R. No. 22 of 2004 2016 (2) TMI 856 Criminal proceedings instituted on the basis of such FIR - Held that:- As allegations made in the FIR even if taken on the face and accepted in the entirety do not constitute any offence and thus to the mind of this Court the criminal proceedings instituted on the basis of such FIR needs to be quashed. Though, it is relevant to point out here that grouse, if any, regarding running of this company by any of the constituents of the company they are well within their rights to move the appropriate forum for any acts of oppression or mismanagement in terms of Sections 397 and 398 of the Act. Thus, the continuation of the criminal proceedings qua the present petitioners would not lead to any conclusive result and rather would only be a wastage of time of the Court as well as putting the petitioner to undue harassment and torture and, thus, the complainant cannot be allowed to have recourse against the present petitioners by such a means. Thus, in the light of what has been discussed above the present FIR No.69 dated 19.4.2012 under Sections 420, 465, 467,468, 471, 120-B IPC registered with Police Station Division No.3 Chandigarh Annexure P/1 qua the present petitioners is hereby quashed with all consequential effects. Service Tax 2016 (2) TMI 873 Classification of services - Levy of interest and penalty - It merely pleaded that there was no malafide intention in not remitting the tax and therefore, neither interest nor penalty should be levied. - Held that:- As the validity of the classification of the service is a factor integral to the legitimacy of levy and collection of tax, we have allowed the miscellaneous application for raising additional grounds and we consider the factual matrix of the Appellant’s rendition of service in the context of the two competing services ‘ ‘site formation etc.’ and ‘mining’ service. On a true and fair construction of the matrix and bouquet of service provided by the Appellant, considered in the light of the two taxable services i.e. ‘site formation’ on the one hand and ‘mining’ on the other, and applying the provisions of Section 65A of the Act, the conclusion is compelling that since the essential character of the services provided by the Appellant is mining of Lignite and removal of Over Burdens is an activity incidental to facilitate and effectuate mining of lignite and as the quantum of lignite mined is also, under the schedule of quantities of the agreement between the Appellant and GHCL is predominantly, the contract should be considered in essential character as a contract for mining of lignite. On this reasoning, the service provided by the Appellant to GHCL clearly and undisputedly falls within the ambit of mining service and cannot be classified as “site formation etc” service. Demand of service tax with interest and penalty set aside. 2016 (2) TMI 872 Mandap Keeper services - Valuation - inclusion of catering charges - Held that:- the appellant’s claim that the entire charges relating to buffet dinner should be excluded from the assessing value in terms of notification No.12/2003-ST is clearly not sustainable. However, it is also a fact that when the cost of food is included in the overall charges recovered by the appellant which included hall rent and buffet dinner charges it is entitled to the benefit of Notification No.12/2001-ST as amended by Notification No.8/2004-ST and the Commissioner has extended the said benefits and allowed abatement of 40% on the gross value charged by the appellant - No infirmity in the impugned order - Decided against the appellant. 2016 (2) TMI 871 Levy of penalty - proprietary concern - it was pleaded that the definition given for the services in question namely “Commercial or Industrial Construction” defined under Section 65(105)(zzq) of the Finance Act, 1994 earlier used by words “Commercial Concern” which was substituted by wordings “by any other person” by Finance Act, 2006 dated 18.4.2006 with effect from 1.5.2006, and therefore, the respondents had been under the impression that they being “proprietary concern” were not covered by wordings “commercial concern” and were consequently not liable to payment of service tax. Held that:- it is clear that there were sufficient reasons for the respondents in bona fidely believing that they were not liable to service tax during the relevant period especially when we view the amendments in the definition of “Industrial Construction” service made on 28.4.2006 by the Finance Act, 1994 made effective with effect from 1.5.2006 and the C.B.E.C’s letter No. 334/4/2006-TRU dated 28.2.2006; thus invoking the provisions of Section 80 of the Finance Act and the provisions of Section 73(3) of the Finance Act, 1994, the respondents’ case on non-imposition of penalty is sustainable and the appeal filed by the Revenue deserves to be rejected. - Decided against the revenue. 2016 (2) TMI 870 Validity of rectification of its order by the Commissioner - principle of natural justice - although the respondent appeared before the Commissioner for hearing, it requested vide letter dated 29.03.2008 for one month's time. The Commissioner did not reject its request but at the same time went ahead and passed an order dated 30.04.2008 without notice to it and so the impugned order was in effect passed without personal hearing. Therefore, there was a mistake apparent from the records which needed rectification. - Held that:- Revenue has not been able to produce any evidence before us to show that vide letter dated 29.03.2008 the respondent had given up its right to be heard in person. It is thus evident that the order dated 30.04.2008 was passed without granting personal hearing when there was a request made for the same and without rejecting that request. It is certainly an error which is apparent from the records of appeal and such an error renders the orders to be a nullity. - Decided against the revenue. 2016 (2) TMI 869 Claim of refund of service tax paid under reverse charge mechanism - export of services - non submission of BRC - whether service tax paid inadvertently, can be retained by the Govt. Exchequer on the ground of non-submission of BRC, especially in the contest of specific observations made by lower authorities that the appellant was not liable to pay service tax under Reverse Charge Mechanism. - Held that:- since the authorities below have specifically recorded the findings that the refund claim of service tax including interest paid by the appellant under Section 66A vide Challan No. 00037 dated 26.06.2011 against the services received during 01.01.2005 to 17.04.2006 from overseas agent is legally tenable, then rejection of refund claim on the ground of non-submission of BRC's is not supported by any provisions of law. - refund allowed - Decided in favor of assessee. Central Excise 2016 (2) TMI 868 Demanding duty on scrap and waste generated during the course of fabrication of factory shed - Held that:- The metal which has been used for fabrication of trolley line cannot be defined as waste and scrap as per section note 8 to section 15 of Central Excise Tariff Act, 1985 As by plain reading of the said section note, it is clear that the metal which becomes non-useable as such waste and scrap admittedly in this matter, the waste and scrap has been used for fabrication of trolley line cannot be the said unusable waste and scrap as such. Therefore, the appellant is not liable to pay duty thereon. Further, the trolley line cannot be classified under Chapter 72 of Central Excise Tariff Act, 1985. Therefore, the waste and scrap in question is not liable for payment of duty. Decided in favour of assessee 2016 (2) TMI 867 Wrong availment of CENVAT credit - credit availed by the appellant in respect of 11 invoices stands denied on the sole ground that there are no corresponding GRNs and bin cards - Held that:- The appellants have explained that out of the huge number of invoices being received by them, such non-maintenance or non-availability of GRNs and BIN cards cannot be held to be leading to the conclusive findings of non-receipt of inputs. Also find force in the above contention of the learned advocate. The Revenue has not made any enquiries from the sender of the inputs, as reflected in the invoice. The appellants have recorded the invoices, inputs along the available CENVAT credit in their statutory records. Also find force in the appellants contention that in the absence of the inputs in question, corresponding final products could not have been manufactured by them. The non-availability of the said documents which are not even the prescribed documents in terms of the CENVAT Credit Rules and the purpose of which is only to show the receipt of the materials at the factory gate, cannot be held to be conclusive evidence so as to arrive at a finding of the non-receipt of the goods. In the absence of any corroborative evidence, find no merits in the Revenue’s stand. Accordingly, the impugned orders are set aside and the appeal is allowed in favour of assessee 2016 (2) TMI 866 Refund under Rule 5 of the Cenvat Credit Rules 2004 - denial of refund credit on input service used in relation to the manufacturing of the said goods - Commissioner (Appeals) allowed the claim - Held that:- In our considered view, while the Adjudicating Authority allowed the input credit on the exported goods, there should not be different yardstick to establish nexus input service and export goods. In the instant case, there is no material available on record that the input service were not used for the export of goods. In view of the above discussions, we do not find any reason to interfere the order of the Commissioner (Appeals). - Decided against revenue 2016 (2) TMI 865 Cenvat credit admisibality on input service namely ‘outdoor catering service' - Held that:- the issue raised in the show cause notice is admissibility of cenvat credit on the outdoor catering service. As regard the cost of food recovered from the employees, it only decides the quantum of the cenvat credit which is admissible. Therefore, in my considered view, it is not a fresh issue as the same coexists in the issue of admissibility of cenvat on outdoor catering service. Moreover the judgment of Ultratech Cement [2010 (10) TMI 13 - BOMBAY HIGH COURT ] squarely covered the issue, accordingly do not agree with the Ld. Counsel on the point that it is a fresh issue which was not covered in the show cause notice and raised first time at this stage. As per the above discussion, remand the matter to the adjudicating authority to quantify the actual credit allowable to respondent as per my above observation. Looking to the nature of the issue as same involved interpretation of cenvat credit provision that whether the outdoor catering service is an input service or otherwise, the respondent cannot be penalized. Needless to say that the respondent be given sufficient opportunity of hearing before denovo adjudication. 2016 (2) TMI 864 Valuation of machineries cleared to the job-workers - duty liability by the appellant as the value after availing benefit of depreciation - Held that:- As it is undisputed that the appellant has cleared the machineries to their job-workers from whom they got the goods manufactured. Such manufactured goods were brought to their factory for use and final products were cleared on payment of appropriate duty. It is responsible statement of the learned counsel, that the machineries subsequently returned back to the appellant, though this position is not forthcoming from the records. In our considered view that the discharge of duty liability by the appellant as the value after availing benefit of depreciation seems to be correct for more than one reason. The machinery being manufactured in the year 1996 was disputed by the first appellate authority in his impugned order while we find from the adjudication order that the adjudicating authority has recorded that it is claimed by the assessee that the machinery was manufactured in 1996, but the said claim of the assessee is not controverted in anyway in the adjudication order. The first appellate authority was hearing the appeal filed by the assessee could not have come to a conclusion that the said machineries were indeed not manufactured in 1996, without any evidence. Secondly, we find that C.B.E.C. in Circular No. 643/34/2002-CX. dated 1.7.2002 at point No. 14 while accepting the discharge of duty liability in respect of capital goods on which Cenvat credit has been taken and put to use cleared for subsequently, categorically stated that in respect of capital goods adequate depreciation may be given as per the rates fixed in letter F. No. 495/16/93-Cus-VI dated 26.5.1993, issued on the Customs side. From the above, clarification, it is clear that if any capital goods on which Cenvat credit has been availed and put to use and subsequently removed, depreciation needs to be given as per the clarification of C.B.E.C - Decided in favour of assessee 2016 (2) TMI 863 Duty liability - assessee liable to pay 8% or 10% of the value of electricity cleared outside in terms of Rule 6 of Cenvat Credit Rules - proportionate reversal of credit - Held that:- The Tribunal in the case of Standards Intl. Precision Engineers P. Ltd. vs. CCE, Bangalore - II (2010 (6) TMI 395 - CESTAT, BANGALORE ) held that when the credit attributable to inputs or input services used in or in relation to manufactured of exempted goods is reversed the same should be considered as sufficient compliance of the provisions of Rule 6 (4). The Hon'ble Supreme Court in the case of Maruti Suzuki Ltd. vs. CCE, Delhi - III (2009 (8) TMI 14 - SUPREME COURT) held that the Cenvat credit could not be admissible for the inputs attributable to the generation of electricity wheeled out. As such, we find that the respondents have not taken any undue benefit and they have reversed the credit attributable to the electricity cleared outside. There is no cause for initiating action for recovery of 8% or 10% of the value of such electricity. - Decided against revenue 2016 (2) TMI 862 Input credit of service tax - Cenvat credit of service tax - Cenvat credit in respect of services utilized for the maintenance or repairs of residential buildings/ quarters - as per Revenue these services will not fall under the ambit of "input service" in terms of Rule 2 (l) of Cenvat Credit Rules, 2004, notice dated 19/8/11 was issued to disallow and recover the credit - Held that:- Similar issue was under consideration by in the case of CC & CE., Hyderabad - III vs. ITC Limited (2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT ) wherein held that staff colony provided by the company, being directly and intrinsically linked to its manufacturing activity could not therefore be excluded from consideration of credit. Consequently, the services which were crucial for maintaining the staff colony, such as lawn mowing, garbage cleaning, maintenance of swimming pool, collection of household garbage, harvest cutting, weeding etc. necessarily had to be considered as "input services" falling within the ambit of Rule 2 (l) of the Cenvat Credit Rules, 2004. Cenvat credit of service tax paid on various services which were utilized for residential colony/township of the appellant's factories are eligible for credit. - Decided in favour of assessee. CST, VAT & Sales Tax 2016 (2) TMI 859 Levy of penalty under section 72(2) of the KVAT Act 2003 and interest under section 36 of the said Act for all the Tax periods under consideration i.e., 2006-07 to August 2012 - the grounds urged by the petitioner in the memorandum of petitions whereby it is contended that the returns filed by the assessee disclosed the deduction of input tax claimed, for all the tax periods under consideration. The returns filed by the assessee have been accepted by the department and in such circumstances, imposing the penalty on the ground that the petitioner has understated the tax liability in the returns is uncalled for. Held that:- the assessee has claimed the input tax deduction on the purchase of manure like pesticides, chemicals etc, used in the course of business declaring the same in the returns filed. As such, there is no understatement of tax liability made by the assessee, the same are disclosed in the returns to claim input tax deductions. In such circumstances, the Assessing Officer levying penalty as mandatory is not acceptable. The view of the Assessing Authority is confirmed by the appellate authority and Tribunal without appreciating the provisions of Section 72(2) of the Act. Hence, we are of the opinion that the Assessing Officer ought to have considered the objections filed by the assessee in a right perspective and would have passed a speaking order for levying penalty. Levy of interest confirmed - levy penalty set aside - Decided partly in favor of assessee. 2016 (2) TMI 858 Waiver of the condition of pre-deposit and stay of the recovery - non speaking order passed by the tribunal confirmed huge tax demand - Held that:- without expressing any opinion on the merits of the controversy, these appeals can be disposed of by accepting the statements made on instructions as undertakings given to this Court. Now, Ms. Badheka, appearing on behalf of the appellants - dealers in all these appeals shall be provided inspection of all the relevant records and documents from the files of the Assessing Officer and the date and time for such inspection to be determined by previous appointment. After the inspection is taken and completed, which entire exercise shall be done within four weeks from today, within two months thereafter the Assessing Officer shall pass a reasoned order and after hearing Ms. Badheka and duly noting and considering all the contentions raised before him, such order shall be passed and duly communicated - Matter remanded back.
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