Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 13, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. - SC
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Non issuance of notice u/s 143(2) - Reassessment u/s 147 - , this defect in the assumption of jurisdiction by the Assessing Officer cannot be cured by taking recourse to the deeming fiction u/s 292BB of the Act - AT
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Bogus accommodation entry - share application was received through banking channel - The assessee furnished the copy of share application forms, copy of Form no. 2 filed with Register of Companies (ROC), showing allotment of shares to the applicants - onus discharged - No addition - AT
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Deduction u/s 80IB - if the disallowance u/s 40A(3) is directly relatable to the profit of the eligible projects, then the deduction u/s 80IB be accordingly recomputed - AT
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Validity of notice u/s 148 - notice issued against ONGC as the representative assessee of the non-resident company - CIT(A) was not correct in holding that the notice u/s 148 of the Act was issued beyond prescribed limitation period - AT
DGFT
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Only three documents each would be mandatory for exports and imports of goods w.e.f. 1-4-2015 - DGFT
FEMA
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Citizens of Macau and Hong Kong will included in the list of countries which are prohibited to acquire/transfer immovable property in India - Circular
Service Tax
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Renting of premises by IRCTC/Railways - The argument is not valid that, the said part of the railway station premises and catering services through eating joints is nothing but part of essential passenger amenity to enable the travelling public to find easy access to eateries and the said catering service is not done by the railway administration with any profit motive - HC
Central Excise
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There is mutuality of interest on the basis of evidence placed by the Revenue that the transaction value of the two dealers is much lower than the transaction value of other buyers and therefore the applicant failed to make out a prima facie case for waiver of predeposit of entire dues - AT
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Cenvat credit - denial on the premise that the process of repairing, reconditioning etc. cannot be treated as manufacturing activities - appellants are entitled to avail input credit on the Rubber Conveyor Belts in question - AT
VAT
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Return of cheques collected illegally and without authority of law without assessment order - petitioner's legal right has to be safeguarded, but, at the same time, liberty should be given to the Department to take action in accordance with law - Revenue directed to return the cheques - HC
Case Laws:
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Income Tax
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2015 (3) TMI 368
Disallowance of commission purportedly paid to commission agents for procurement of order for supply of liquor - deduction under Section 37 - questions reframed by the High Court have been answered against the appellant-assessee and in favour of the revenue - whether the High Court could have reframed the questions after the conclusion of the arguments and that too without giving an opportunity to the assessee? - Held that:- A reading of the questions initially framed and subsequently reframed show that what was done by the High Court is to retain three out of twelve questions, as initially framed, while discarding the rest. Some of the questions discarded by the High Court were actually more proximate to the question of perversity of the findings of fact recorded by the learned Tribunal, than the questions retained. From a reading of the Order of the High Court it is clear that the High Court examined the entitlement of the appellant assessee to deduction/disallowance by accepting the agreements executed by the assessee with the commission agents; the affidavits filed by C. Janakiraman and Shri A.N. Ramachandra Nayar, husbands of the two lady partners of RJ Associates and also the payments made by the assessee to RJ Associates as well as to Golden Enterprises. The question that was posed by the High Court was whether acceptance of the agreements, affidavits and proof of payment would debar the assessing authority to go into the question whether the expenses claimed would still be allowable under Section 37 of the Act. This is a question which the High Court held was required to be answered in the facts of each case in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income Tax [1966 (9) TMI 30 - SUPREME Court] and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 [1972 (9) TMI 4 - SUPREME Court] werein held that mere existence of an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purpose of the assessee's business. Although there might be such an agreement in existence and the payments might have been made. It is still open to the Income tax Officer to consider the relevant facts and determine for himself whether the commission said to have been paid to the selling agents or any part thereof is properly deductible under Section 37 of the Act. The true effect of the Government Circulars along with the agreements between the assessee and the commission agents and the details of payments made by the assessee to the commission agents as well as the affidavits filed by the husbands of the partners of M/s. R.J. Associates were considered by the High Court. The statement of the Managing Director of Tamil Nadu State Marketing Corporation Ltd. (TASMAC Ltd.), to whom summons were issued under Section 131 of the Act, to the effect that M/s. Golden Enterprises had not done any liaisoning work with TASMAC Ltd. was also taken into account. The basis of the doubts regarding the very existence of R.J. Associates, as entertained by the Assessing Officer, was also weighed by the High Court to determine the entitlement of the assessee for deduction under Section 37 of the Act. In performing the said exercise the High Court did not disturb or reverse the primary facts as found by the learned Tribunal. Rather, the exercise performed is one of the correct legal inferences that should be drawn on the facts already recorded by the learned Tribunal. The questions reframed were to the said effect. The legal inference that should be drawn from the primary facts, as consistently held by this Court, is eminently a question of law. - Appeal dismissed.
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2015 (3) TMI 367
Application for issue of Notification under Section 80IA4(iii) rejected - Held that:- The impugned order for rejecting application is a speaking order. It is a settled principle of law that a person who claims benefit of exemption from payment of taxes has to fully satisfy the provisions extending the benefit. Data furnished by the applicant, being inconsistent and divergent does not lead to a conclusive inference regarding whether the total allocation for industrial use is actually 75% keeping in view the discrepancies in area as well as ambiguity about industrial activities carried out in several units owned by individuals and families, which has remained unspecified. Moreover, the unsubstantiated claim about the fulfillment of conditions pertaining to commercial activity also does not prove that the same is in accordance with para 4(2A) of the Scheme. In fact, the inconsistencies in data and manipulation of information does not lead to evidences on the basis of which the application deserves approval.Despite giving many opportunities and substantial time for compliance, satisfactory explanation has not been filed. It has thus not been found to be a fit case for notification u/s. 80IA(4)(iii) of the Act. Hence, the competent authority has decided to reject the application. - Decided against assessee. Stay application - Held that:- We are not inclined to stay this order for the reason that the assessment order for Assessment Year 2011-12 has already been passed on 28.3.2014 and the amounts due thereunder have not been paid only because of its application for benefit of Section 80IB(4) was pending before the CBDT. We did indicate to Mr.Jhaveri that in case the petitioner deposit the entire amount of demand attributable to the claim under Section 80IA(4) of the Act, we would be inclined to grant stay. This was unacceptable to the petitioner. At this stage Mr.Jhaveri states that the petitioner is ready to offer security. We are not inclined to accept it. Accordingly, the application for stay of this order is rejected. - Decided against assessee.
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2015 (3) TMI 366
Recovery notice - letter issued to the Oriental Bank of Commerce to release an amount of ₹ 1,67,16,160/- (plus interest) payable to the respondent/Income Tax Department pursuant to the assessment completed on 13.03.2014 for Assessment Year (AY) 2011-12 - Held that:- At this stage we cannot express any opinion on the merits of the appeal and/or feasibility of the demand. At the same time, the Court is not oblivious to the circumstance that if any order is made, the assessee/petitioner is likely to suffer irreparable loss. Balancing the hardship, the Court is of the opinion that the respondent should vacate the garnishee order/letter to the extent of 50%, keeping in mind the condition imposed in the letter dated 03.02.2015. The bank is directed to - within next four days ensure that the letter addressed to the bank on 24.02.2015 is withdrawn and a suitable letter directing the payment of half the amount is issued at the same time. Consequently, the assessee and the bank would be at liberty to service the petitioner's account to the extent of the balance. The CIT (Appeals) is directed to hear and consider the matter on the merits and render final decision thereon at the earliest preferably in four months from today. This arrangement shall be applicable till the disposal of the appeal by CIT (Appeals). It is open to the petitioner to deposit the corresponding amount of 50% of the sum (i.e. ₹ 1,67,16,160/-) demanded with the Income Tax Department and seek necessary variation.
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2015 (3) TMI 365
Order passed by the DRP - whether directions issued by the Hon’ble DRP are bad and liable to be quashed having been passed beyond the period of limitation prescribed under the statute - Held that:- Entire basis on which the assessee claims that the impugned order is hit by limitation is an assumption that the DRP order dt. 29th August,2014, was handed over on the very same day to the AO. This is not a valid assumption. The Revenue claims that the DRP order in question was served on the AO on 2nd September,2014. The DRP having passed the order on 29th August, 2014 and having served the same by hand on 2nd September, 2014 will not mean that DRP has not passed the order within the time prescribed. In our view it is not correct that date of the order to be considered for limitation will be the date on which the order goes out of the hands of the DRP. Further the final assessment order passed by the AO on 21st October,2014, is within one month from the end of the month in which the AO received the DRP order and hence is within the limitation period. - Decided against assessee. Reference made for special audit under section 142(2A) - whether bad in law? - Held that:- The AO as well as the DRP have, keeping in view the complexities in the accounts and the volume came to a conclusion that this is a fit case for application of provisions of S.142(2A) of the Act. We do not find any perversity in this view of the AO as approved by the DRP. Sufficient opportunity has been granted to the assessee and it was only after considering the objections, special audit was ordered. We see no reason to interfere with these findings of the Revenue authorities.- Decided against assessee. Unaccounted credit notes issued - Held that:- As per this reconciliation, the credit notes issued by the appellant in the name of M/ s Bright Point India Pvt Ltd during the financial year 2009-10 were ₹ 125,92,827/- whereas the debit note raised by M/ s Bright Point India Pvt Ltd on the appellant company was ₹ 125,94,969. Thus there was a small excess debit by M/s Bright Point India Pvt Ltd of ₹ 2142.02. Thus, it cannot be said that credit note issued by the assessee has not been accounted for by Bright Point India Pvt Ltd. Even this difference has also been explained by the special auditor in its report. Similar reconciliation has been given by the special auditor for the financial year 2010-11 whereby it has been stated that the appellant company has issued credit note of ₹ 30,13,25,910 and the corresponding debit note raised by M/ s Bright Point India Pvt Ltd on the appellant company were of ₹ 30,67,54,495. Thus, the credit note issued by the appellant company were not excessive. On the contrary, claim made by Bright Point India Pvt Ltd on the assessee was more.payments received by the appellant company and the payments stated to have been made by M/s Bright Point India Pvt Ltd as per its accounts during the year are exactly the same, i.e., ₹ 161,81,58,957. All these facts are borne on record and the same were brought to the notice of the DRP by the assessee. The observations made by the DRP in this regard are in total disregard to the facts and evidences on record. Accordingly, DRP was not correct in not deleting the addition on this account. In the result this addition on account of credit notes are deleted. - Decided in favour of assessee. Addition on account of remaining super distributors of ₹ 346,57,17,107, we note that this addition has been made not on the basis of any adverse material or information collected against the assessee. The assessing officer in the draft assessment order has drawn adverse inference on the ground that the appellant company has not provided its ledger account in the books of the 65 super distributors. It is not a case where assessee has failed to provide what was available with it.- Decided in favour of assessee. Addition of ₹ 947,21,431 on account of difference as per the accounts of the distributors examining as per these copy of accounts and the reconciliation, each and every account stood reconciled including the accounts whereby difference of ₹ 947,21,431 was pointed out. The DRP ignoring all these evidences and the material have confirmed the action of the Assessing Officer. During the course of hearing with the assistance of the learned AR, we have verified these accounts. At the time of the hearing before us, the learned DR could not controvert the above facts. The conclusion of the AO as upheld by the DRP, in our view is contrary to facts on record and based purely on surmises and conjectures - Decided in favour of assessee. Addition on account of swap units/warranty reimbursement - addition made by the AO on the sole ground that the confirmations given by various parties, were on plain paper and not on letterheads - Held that:- These are all confirmations filed by foreign suppliers. The assessee had submitted arguments including purchase invoices, bill of entry, custom clearance, stock entries etc. The confirmation in question from these foreign parties are on additional documentary evidences. In our view these confirmations cannot be summarily rejected by the AO. The AO, in our view, should not have rejected these confirmations without enquiry. The AO had the address of these parties, the telephone numbers, e-mail addresses. The format in which the confirmations were given by foreign parties, is not within the control of the assessee. We further note that the assessee has submitted all evidences which included third party/government evidences in the form of bill of entry, custom-attested purchase invoices. All these purchases are from foreign suppliers and are liable for custom duty. All units received by way of import have to be declared in the bill of entry. As regards the vendors with whom there is no such arrangement, we note that there is no evidence or material to even suggest that assessee would have received swap units. No material was found during search to this effect. We further note that before the DRP the assessee has also filed confirmation on the letterhead of these vendors. In view of the facts, the findings of the DRP are incorrect and against the facts on record. Under these circumstances, we are of the considered opinion that the addition in question is bad in law as it is made without any evidence. - Decided in favour of assessee. Addition on under valuation of closing stock of DOA mobile on NO3 location - Held that:- Assessee has submitted a detailed note pointing out the recovery which are made from the dead-on-arrival mobile phones in the form of charger, hands free and battery. The assessee has done the valuation of the dead-onarrival mobile phones at its N-3 location on the basis of this salvage value computed at ₹ 212. This valuation done is in accordance with the accounting standard AS-2 whereby closing stock is to be valued at lower of cost or net realisable value. The fact that these are mobile phones, which are dead on arrival and the fact that these are cannibalised and certain parts are gathered and valued is not disputed by the Revenue. The cost of a live mobile phone, cannot, in our view, be adopted as the cost of a dead on arrival mobile phone. Under these circumstances we have no other alternative but to delete this addition. When the facts stated by the assessee are not contradicted by gathering of evidence, then the addition based on presumptions cannot be made. The observations made by the DRP that such valuation of closing stock was highly under valued shows that DRP has not been able to appreciate the facts in right perspective. It has failed to distinguish between a working mobile phone and a dead-onarrival mobile phone. The dead-on-arrival mobile phone cannot be valued at cost. It has to be valued at salvage value. The valuation of ₹ 1,677 is at cost of mobile phone which is working. If the mobile phone is dead, its value has to be salvage value which has been worked out at ₹ 212. The detailed working of this has been submitted by the assessee with which has not been disputed. - Decided in favour of assessee. Addition on account of sale of DOA mobiles and accessories - addition is made on the presumption of the AO that the assessee would have recovered 14% of the value of phones which are dead on arrival - Held that:- There is no iota of evidence with the AO to come to a conclusion that the assessee would have sold the accessories recovered from dead on arrival phones, out of the books. The assessee has submitted complete quantitative details during the course of assessment proceedings. As per these details the total value of such accessories was ₹ 3,66,45,443. These have been duly accounted for in the books of accounts. The total quantity of such accessories were valued and utilised by giving the same to super distributors. Confirmations were filed from the super distributors. The AO is factually incorrect in stating that the assessee has not filed a reply to the show cause notice issued by the AO as is evident from the reply on record. In fact the assessee has filed detailed explanation with supporting evidences. Even during the course of search no incriminating material was found to show that the assessee has not made sales, outside the books of accounts. - Decided in favour of assessee. Addition on account of sale of scrap - Held that:-The special auditor by extrapolation of sale of the scrap under the year of consideration worked out the same at ₹ 84,25,360/-. The special auditors in its report has given a basis for computing scrap value for each year. The AO has no basis whatsoever to come to a conclusion that the sale of scrap amounted to ₹ 2.74 crores. Taking the total imports of the assessee and applying of a percentage cannot be considered as a scientific basis for arriving at the transaction. The special auditor in its report which has been quoted by the AO in the assessment order has given the basis for working out the value of the scrap. Thus, the DRP was correct in holding that the value of the scrap as computed by the special auditor be adopted which comes to ₹ 84,20,360. Nevertheless, we note that the assessee has already accounted for scrap to the tune of ₹ 37.47 lakhs as is evident from its profit and loss account. This figure has to be reduced from the figure of ₹ 84,20,360 worked out by the special auditor as value of scrap generated during the year and it is only the balance amount which can be brought to tax. - Decided partly in favour of assessee. Addition on account of notings in seized documents - Held that:- Examining of document A-2, A-3 and Annexure A-3 and Revenue’s contention that there is a clear mention of the word “gift for Major” and that the assessee has not explained the same we are of the considered opinion that the onus shifted to the assessee, to prove that this entry is not a gift given by the Mayor, which is not recorded in the books of accounts. Hence we sustain this addition. - Decided against assessee. On examining Annexure A-4. no addition can be made based on these notings on loose papers, without any corroborating evidence. The addition is made purely on surmises and conjectures. - Decided in favour of assessee. On examining page no. B9 of Annexure A-5 we are of the considered opinion that this rough calculations cannot lead to a conclusion that the assessee has earned unaccounted income. As held earlier scribbling and figures on loose papers, without any corroboratory evidence cannot lead to a conclusion that the assessee has received unaccounted money. Hence this addition is hereby deleted.- Decided in favour of assessee. On examining B-31 of Annexure A-6 The assessee explains that these are notings made by Mr.Jha, the accounts clerk of the company and that these notings were recording entries, which were reversed in the books of accounts. The AO assumed that these reversal of entries are unaccounted income. Such a view cannot be sustained. When entries are found in the books of accounts and when the same corroborates to rough workings made by the Accounts Clerk of the assessee, to argue that these rough notings on a piece of paper are unaccounted income of the assessee is incorrect and against the facts of the case. The addition in question is purely made on the basis of conjectures and surmises, hence we delete the same.- Decided in favour of assessee. On examining page no.1 Annexure A-V. The assessee has explained that this sheet of paper consists notings on a proposal for a module factory. It is submitted that the cost of the module factory has been stated therein, including the proposed locations. Here also the addition is based on the imagination of the AO, rather than on gathering of evidences. A plain look at the document does not by any stretch of imagination leads us to a conclusion that unaccounted income/assets have been recorded therein. The Ld.DR while agreeing with the papers points out to the establishment of a factory at Haryana, Himachal Pradesh, submits that the assessee has failed to explain the transaction. In our view such addition based on surmises and conjectures, without enquiry or gathering of evidence cannot be sustained. In the result we delete this addition. - Decided in favour of assessee. On examining page 2 of Annexure A 5 assessee clarified that this sheet of paper is a continuation of paper where certain figures are mentioned while planning establishment of a module factory. The explanation given by the assessee has been ignored both by the AO as well as by the DRP. For the reasons given while deleting this amount of ₹ 10 crores in above paras, we delete this addition of ₹ 3 crores and allow this ground of the assessee. - Decided in favour of assessee. Non deduction of TDS - invoking the provisions of section 40(a)(ia)- expenses in relation to providing transportation to employees. - Held that:- The DRP has restricted the addition to ₹ 54,30,030/-. The AO should have followed these directions of the DRP. The AO cannot ignore these directions of the DRP. Be it as it may, subsequent to the amendment made by the Finance Act, 2012 to S.201(1), wherein a Proviso was inserted, the assessee cannot be treated as an assessee in default, if the deductee has furnished return of income u/s 139 of the Act. The assessee has submitted the details whereby all the 3 deductees are income tax payees. However, the assesss is required to submit the certificate as prescribed in the proviso to s.201(1). The DR has submitted that it has no objection if this issue is remitted to AO to make necessary compliance by filing the prescribed certificate about the deductee having filed the return of income, paid taxes thereon and the above said amount on which TDS was liable to be deducted has been included in their income. Under these circumstances, the issue is remitted to the file of the AO to do the necessary compliance as required u/s 201(1) of the Act - Decided in favour of assessee for statistical purposes. Non deduction of TDS - invoking the provisions of section 40(a)(ia)- identification of nature of the transactions - Held that:- directions given by the DRP have not been followed by the AO. The final assessment order passed by the AO cannot be in violation of the directions given by the DRP. The assessee has explained that there is no default on its part in deducting tax at source and has also filed details before the AO and the DRP. With the assistance of the AR, we have verified the details with the supporting evidences. As per the details on record and ejvidences in support thereof, there is no default in respect of the amount added by the AO. The assessee has submitted compelte reconciliation and the reason thereof. Further, the assessee’s contentions that tax has been deducted on an amount of ₹ 1,59,65,555/- and its contention that tax is not deductible on the balance due to various reasons, has not been contradicted by the DR. Under these circumstances we delete this addition of ₹ 3,22,39,995 and allow this ground of the assessee. - Decided in favour of assessee. Disallowance on account of bonus - invoking the provisions of the section 43B - DRP directs the AO to allow the claim of the assessee u/s 43B after proper verification - Held that:- The AO has not bothered to carry out the directions of the DRP. The claim made by the assessee is as per law. It only required verification of the facts as submitted by the assessee. This is not done by the AO. Under these circumstances we delete the addition and set aside the matter to the file of the AO. The AO will verify the claim of the assessee and whether the disallowance has to be restricted to ₹ 24,40,854/- is correct or not. - Decided in favour of assessee for statistical purposes. Addition on account of sundry creditors - Held that:- This addition has been made by the AO on mere surmises without verifying the explanations and evidences filed by the assessee. Merely because there are certain variations in reconciliation on accounts with three parties, variations are treated as income. The assessee has placed a copy of a note giving reconciliations on accounts with these parties at apge 2410 of the paper book. It is also claimed that there are factual errors in the case of Cargo Planners and as per party account it is ₹ 2,28,30,232/- and not ₹ 22,83,232/- as mentioned in the assessment order. Such silly type of mistakes have been made a basis for the addition, without considering the submissions of the assessee. As the accounts stand fully reconciled, thus addition deleted. - Decided in favour of assessee. Addition on account of shortage of mobile phones - Held that:- The assessee has filed a reconciliation statement, reconciling the stock physically found, during the post search proceedings, before the Dy.Director of Income Tax (Investigation) vide letter dt. 8.11.2011 and 16.5.2011. This explanation was again repeated before the AO on 1.11.2013. We have perused the detailed reply as well as the connected papers. In our view the revenue authorities have not bestowed any attention to the explanation given by the assessee. There is no evidence whatsoever found during the course of search of the assessee having sold stock outside the books of accounts. We further note that the total shortage of mobile phones is of 3125 handsets. The total quantity sold during the year by the assessee is 1,01,92,239. Further, the inventory at the time of the search was counted at 122,287 at different locations. Considering this volume of business, the number of mobile phones found short are not significant. Thus addition deleted. - Decided in favour of assessee. Addition on account of entries appearing in HSBC a/c no 05441758900 at Gurgaon - Held that:- This account is an official bank account of the assessee and the details are available in the books of accounts. The DRP had held that the AO was totally unjustified in adding back payments made for bank charges, LC charges and TD. The AO records that the assessee has not submitted proper reconciliation statement and documentary evidence. This is a bank account maintained officially by the assessee. This was stated as such before the AO in a letter dt. 10th September,2012. The assessee has furnished explanation of the debit and credit balances with vouchers from pages 1216 to 1234 of the paper book. The allegation of the AO that the assessee has not filed the details is factually incorrect. The transactions done through this bank account, apart from regular books of accounts of the assessee. The books have been audited not only by the auditors appointed by the assessee but also by the special auditors. Under the circumstances the addition in question is totally unjustified. The very fact that the entire debit balances have been audited by the AO demonstrates that there is total non application of mind by the assessing authority. The entire addition is arbitrary. Hence we are of the considered opinion that such additions should be deleted. - Decided in favour of assessee. G.P. addition - rejection of books of account - Held that:- The assessee has maintained regular books of accounts and these have been audited by the tax auditors as well as by the special auditors appointed by the AO. Both these auditors have certified that the assessee was maintaining proper books of accounts. The AO seems to have based his opinion on the report of KPMG India. This report was a due diligence report obtained by the prospective investors. Such due diligence reports cannot lead to formation of an opinion that proper books of accounts have not been kept by the assessee. The assessee also maintained quantitative details of inventory. On the one hand the AO seeks to rely on the books of accounts and on the other hand the AO rejects the books of accounts for estimated profits on adhoc basis. This in our view is not permissible. As we have held that the rejection of books of accounts is bad in law the question of enhancement of gross profit on estimate basis does not arise. The AO is directed to adopt the profits as declared by the assessee in its books of accounts - Decided in favour of assessee. Adjustment on the transaction of loan given to the AE - The DRP has directed to apply SBI base rate plus 150 base points - Held that:- For proper bench marking, interest rate to be applied is the interest rate of the currency in which the amount has been advanced. Since in this case the loan has been given in USD, the interest rate will be LIBOR+. The international rate fixed by the LIBOR has to be considered for bench marking. The assessee has charged interest @ 9.25% which is much above the LIBOR and hence, no further adjustment on this account needs to be made. - Decided in favour of assessee. Adjustment on account of provision of the facility of Standby Letter of Credit - Transfer Pricing adjustment - Held that:- As the assessee has obtained stand by letter of credit @ 1%, the rate suggested by the DRP at 2% in our view is not justified. We direct that 1% of stand by letter of credit amount be taken as arm’s length price. - Decided partly in favour of assessee. short deduction at TDS - Held that:- Under the circumstances we uphold the finding of the DRP that s.40a(ia) cannot be invoked for short deduction of tax as held by Hon’ble Calcutta High Court in the case of Commissioner of Income Tax vs. AK Tekriwal (2012 (12) TMI 873 - CALCUTTA HIGH COURT). Even otherwise, this addition otherwise cannot be sustained in view of the amendment made by the Finance Act, 2012 where a proviso has been inserted below section 201(1) to provide that the assessee shall not be treated as an assessee in default in case the deductee has furnished the return of income, included the sum in the income and paid taxes as per the return of income. In the present case, the assessee has complied with these conditions as is evident from the letter dated 8th November,2013 filed before the AO along with the certificate in the prescribed form to this effect. - Decided in favour of assessee. Addition on account of prior period expenses - assessee had explained that the prior period expenditure of ₹ 16,037/- and that a sum of ₹ 15,94,202/- relating to clearing and forwarding of M/s SSS Sai Shipping Services P.Ltd. The clearing and forwarding agent reported loss of mobile units and hence a debit note was raised on the said agent during the Previous Year 2009-10. In the current AY, after mutual consultation the debit note was reversed. As the dispute was settled in the year under consideration as is evident from the MOU, the assessee was correct in reversing the claim amde in the preceding year. On these facts and circumstances we uphold the finding of the DRP that the claim in question has crystallised during the year and the same is evidenced by way of MOU wherein the dispute of the assessee is settled with the shipping agent. - Decided against revenue. Disallowance of advertisement expenses - DRP deleted the addition - Held that:- The books of accounts of the assessee are audited and no adverse comments have been given by the auditor. These books of accounts have also been provided before the AO. As the AO has not given any specific instance or valid reason for making this adhoc disallowance we sustain the finding of the DRP and dismiss this ground of the Revenue. - Decided against revenue.
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2015 (3) TMI 364
Royalty received - whether amount from the manufacturers of the CDMA handsets and infrastructure equipment manufactured outside India but used on the India based CDMA networks is taxable in India? - Held that:- There cannot be any adjudication on the basis of a press report, nor does this report, in any way, demonstrate that in the case of this assessee also the royalty was for use of patents or patented products, and not for use of patents in the manufacturing process. However, what this development does show that the payment of royalty on the basis of use of patented product in a jurisdiction is one of the, even if not universally applicable, criterion. The claim of the revenue, to the effect the payment was for use of intellectual properties embedded in the handsets even though the royalty is collected from the OEM, cannot thus be simply brushed aside as beyond the realm of possibilities. Since the AO had brought the impugned royalties to tax under the first limb of Section 9(1)(vii)(c), there was no occasion to hold that the income in question could also be brought to tax under second limb of Section 9(1)(vii)(c) but that does not denude this Tribunal of the powers, as also corresponding duty, to examine that aspect of the matter or have that aspect of the matter is examined. We may also add that no doubt the application of second limb of Section 9(1)(vii)(c) was not examined in sufficient detail by the Assessing Officer but then as long as the subject matter of assessment remains the same as was dealt with by the Assessing Officer, the Tribunal is duty bound to deal with all the related legal aspects of the matter. It is in this light that it is necessary to examine whether the use of patents, for which the impugned payments have been made by the OEMs to the assessee, was in manufacturing process of the handsets or in the use of the patented technology embedded in the CDMA handsets. However, as this aspect of the matter, no matter how fundamental it is, is a highly technical aspect which may also need benefit of expert advice, we deem it fit and proper to remit it to the file of the Assessing Officer for recording necessary factual findings after obtaining technical reports on the same, collecting such details, as may be necessary, and after giving due opportunity of hearing to the assessee and confronting the assessee with all such material as he may use against the assessee, by way of a speaking order. - Decided in favour of assesse for statistical purposes. Revenues received under the BREW Operator Agreement and BREW Carrier Agreement - whether is taxable as royalty income in India under section 9(1)(vi) of the Act and Article 12 of the India -USA tax treaty? - sale of ‘Copyrighted Article’ v/s ‘Copyright’ - Held that:- What is transferred is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. The right that is transferred is not a right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty income and would be business income. Right to make a copy of the software and storing the same in the hard disk of the designated computer and taking backup copy would not amount to copyright work under section 14(1) of the Copyright Act and the payment made for the grant of the licence for the said purpose would constitute royalty. The license granted to the licensee permitting him to download the computer programme and storing it in the computer for his own use was only incidental to the facility extended to the licensee to make use of the copyrighted product for his internal business purpose. In view of the above we accordingly hold that what has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income. Learned Departmental Representative, even as he vehemently relied upon and supported the stand of the authorities below, could not point out any distinguishing feature in this case. - Decided in favour of assessee.
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2015 (3) TMI 363
Disallowance of alleged bogus purchases - case setup by the Assessing Officer that the purchase of steel, etc. made from the said 11 parties was in-genuine - CIT(A) accepted purchases made from five parties - Held that:- Confirmation of the structural engineer, a copy of which has been placed in Paper Book at page 79 does not elaborate as to the time period in which the consumption of steel has taken place. Moreover, at the relevant point of time, multiple projects of the assessee were under construction and there is no material to co-relate as to whether at the time when the impugned purchases were effected any projects were being carried out. Therefore, the action of the CIT(A) in holding the purchases effected from six parties as bogus is affirmed. For remaining purchases made from five parties accepted by CIT(A)we find that the Assessing Officer did not carry out any third party verification as he had undertaken with respect to the six parties discussed earlier. It was only on the basis of the documents put-forth by the assessee that purchases from the said parties have been held to be bogus. Notably, assessee had furnished the invoices raised by the said parties and had also explained that all the payments were made by the cheques. Assessee had also furnished their sales-tax numbers. With respect to the transportation, assessee had explained that the responsibility of transportation was of the supplier and therefore assessee could not produce the transport receipts. The explanations put-forth by the assessee were not subject to any enquiry or verification by the Assessing Officer but have been merely disbelieved. The Assessing Officer, in our view, was influenced by the outcome of enquiries made with respect to the other six parties. However, in the absence of any material on record to negate the position canvassed by the assessee with respect to the said five parties, the explanation of the assessee could not be disbelieved. - Decided partly in favour of assessee. Disallowance of deduction u/s 80IA(4) - profits derived from the Industrial Park 'Giga Space' - Held that:-considering the amendment of rule 18C of the Rules made w.e.f. 01.08.2008 where an undertaking begins to develop an Industrial Park is also eligible for the deduction so long as the development is otherwise complete within the period specified in the Scheme as well as it fulfills the conditions envisaged in the Scheme. Therefore, in our view, there is no justification for the denial of deduction nu/s 80-IA(4)(iii) of the Act in the instant assessment year with regard to the profits earned by the assessee from Industrial Park - Giga Space of ₹ 33,59,56,749/-. Thus we set-aside the order of the CIT(A) and direct the Assessing Officer to allow the deduction made u/s 80-IA(4)(iii) of the Act of ₹ 33,59,56,749/-. - Decided in favour of assessee. Unrecorded payments - Held that:- Seized documents reflected investments made by the assessee for purchase of lands over and above the amounts declared in the regular books of account. Before us, assessee has reiterated the submissions made before the lower authorities, however, the income-tax authorities have co-related the amounts recorded in the seized material with the transactions of land at Jambhe and therefore, the unexplained investment stands established. Therefore, in-principle, we uphold the stand of the income-tax authorities in making an addition of ₹ 99,00,000/- u/s 69C of the Act. - Decided in favour of revenue. Eligibility of Industrial Park and Special Economic zones for benefits under section 80-IA(4)(iii) - Held that:- In the present case also, when assessee filed an application with the Central Government for registration of its Industrial Park under the Industrial Park Scheme, 2002, the said scheme had come to an end as it was applicable only upto March 31, 2006. It is also an admitted fact that the Industrial Park setup by the assessee was not operational/functional by March 31, 2006, as the date of completion of the said Industrial Park is stated to be 25.04.2007. Therefore, in our considered opinion, assessee cannot claim the benefit of the Industrial Park Scheme, 2002. In the absence of the notification mandated by section 80-IA(4)(iii) of the Act, the claim of the assessee for deduction u/s 80-IA of the Act in relation to its project E - Space has been rightly denied by the incometax authorities. The aforesaid action of the lower authorities is hereby affirmed and assessee fails on this Ground - Decided against assessee. Disallowance of brokerage paid - Held that:- The assessee has also paid service tax on the brokerage paid therefore, if the action of the assessee is to reduce the tax liability by paying brokerage to Regenesis PMCPL then such company would not have paid tax on the huge income declared nor the assessee would have paid service tax to the Government Account. Therefore, the allegation of the revenue that Regenesis PMCPL has offered NIL to nominal income and the assessee claimed the brokerage to reduce the capital gain tax also does not find much force.Expenditure on payment of brokerage to M/s Regencies PMCPL was an allowable expenditure - Decided in favour of assessee.
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2015 (3) TMI 362
Disallowance payment made for surrendering rights in the lands - Acquisition of cost of right of land - Compensation payment - Held that:- In this case, the assessee is engaged in the aggregation of land. As per the modus operandi of the assessee, she hunts big chunk of land to sale the same to the big builders or corporate groups. Accordingly, she identified the land in Navlakumbhare and entered into MOU with the representatives of the farmers as well as land owners.It is seen that as per the said agreement/MOU the assessee agreed to pay the compensation of ₹ 25,25,000/- per acre if the farmers or their representatives agreed to consolidate and make available the land to the extent of 110 acres and ₹ 25,50,000/- per acre if it is more than 111 acres. On perusal of the said agreement it is seen that the total land area was contemplated to extend of 180 acres. We have examined the original agreement with the copy obtained from the Assessing Officer, Mumbai and prima-facie we agree that there is no tampering in the copy of agreement produced by the assessee after comparing copy of MOU obtained from the Assessing Officer, Mumbai. The law is also well settled that whatever an inference is drawn while deciding rights or liabilities of any person, it should be based on some evidence and not merely on presumptions and doubts. So far as M/s. Aanchal Properties Pvt. Ltd. is concerned the only reservation of the Assessing Officer is that the said company was not impleaded as a consenting party. In our opinion as the said company has not made any changes in the Revenue record after entering into agreement with the farmers, there was no necessity to implead said company as a consenting party. Same way so far as M/s. New Planet Trading Co. Pvt. Ltd. is concerned also there was no change in the Revenue record and hence there was no necessity to implead said company as a consenting party. We, accordingly, hold that in the case of M/s. Aanchal Properties Pvt. Ltd. the amount of compensation paid by the assessee to the said company is allowable expenditure in respect of M/s. New Planet Trading Co. Pvt. Ltd., we hold that so far as both the authorities below have not at all referred the documents to any expert for finding out whether any tampering is done by the assessee or M/s. New Planet Trading Co. Pvt. Ltd., entire inference and conclusion is based on only presumption and hence the same is erroneous.We, accordingly, hold that the conclusion drawn by both the authorities below is only on the presumption that there is a forgery or tampering in the contents of the MOU by the assessee. We, accordingly, allow the claim of the assessee at entirety. In the result, the grounds taken by the assessee are allowed on the issue of compensation paid to M/s. New Planet Trading Co. Pvt. Ltd. and M/s. Aanchal Properties Pvt. Ltd. and grounds taken by the Revenue are dismissed. - Decided in favour of assessee. Payment made to M/s. Otswal Trading Co. Pvt. Ltd. - We find that the said company entered into agreement with the farmers (copy placed in the Compilation in Marathi). We also find entire payment is rooted through the banking channel. The Assessing Officer himself admitted in the assessment order all three companies are independent companies and the assessee is not at all related to any of the companies. The only reason given by the Assessing Officer for making the disallowance in respect of compensation paid to the said company, it is not impleaded as a party in the final sale deed. We have already noted in the A.Y. 2008- 09 that unless there is a variation in the Revenue’s record then only for protecting the interest of the buyer, the entity which names in the revenue records appear is normally impleaded. After giving our anxious consideration to the evidence before us and considering the doubt raised by the Assessing Officer for making the disallowance, in our opinion the Assessing Officer was not justified disallowing the said expenditure. - Decided in favour of assessee. Additional compensation paid to the farmers - CIT(A) sustained the disallowance to the extent of 50% of the said amount - Held that:- As per the MOU dated 30-06-2007 with the farmers there is a provisions by way of Clause 4 and timely completion of deal was the important condition and if the deal was not completed in time then the farmers were given the rights to demand additional compensation. Even if the specific amount of additional compensation is not mentioned but there was a ceiling that it should not be more than ₹ 2 Lakhs per acre. The Ld. CIT(A) has restricted the provisions to 50%. We, therefore, hold that the provisions made by the assessee cannot be said to be contingent in nature as it is as per agreed terms of contract between the assessee and the farmers. At the same time we concur with the finding of the Ld. CIT(A) that the provision is excessive and no details are filed. We do not consider to interfere in the relief given by the Ld. CIT(A) by holding that the reasonable provision is to the extent of ₹ 90 Lakhs. In respect of addition sustained by the Ld. CIT(A) of ₹ 90 Lakhs, we consider it fit to remit this issue to the file of the Assessing Officer to decide whether the balance additional compensation of ₹ 90 Lakhs provided by the assessee is excessive - Decided in favour of assessee for statistical purposes. Development expenses disallowed - Held that:- We have to examine any claim of expenditure in the back drop of the commercial expediency. In this case the assessee is engaged in the aggregation of land and she has to deal with the many farmers and local villagers. It is not uncommon that even a single villager or farmers can create trouble for aggregation of land. The assessee has also produced the photographs in the Compilation. It is also notice that the assessee made the payment through the banking channel. In our opinion the expenditure of the assessee is towards the commercial expediency as maintaining the good relations of the villagers is also very much important in the process of aggregation of the land. Now, the next issue is whether the entire claim is allowable. The assesse has not produced the relevant record before us. We, therefore, of the opinion that if the expenditure of ₹ 15 Lacs is allowed that will meet the ends of the justice. We, accordingly, allow ₹ 15 Lacs out of ₹ 22,00,056/-. - Decided partly in favour of assessee.
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2015 (3) TMI 361
Penalty levied u/s. 271(1)(c) - CIT(A) deleted the levy - Held that:- In this case admittedly the search has taken place after 01.06.2007 and the return of income for the A.Y. 2008-09 had fallen due much before the date of search. In the return of income filed prior to the date of search, the income of ₹ 49,21,666/- was not included by the assessee. The additional income which has been declared after the date of search was in the return of income filed u/s 153A and not earlier. Thus in our view Explanation-5A is clearly attracted and the penalty levied by the AO u/s 271(1)(c) has rightly been confirmed by the Ld.CIT(A). Accordingly, the grounds raised by the assessee is dismissed and the assessee’s appeal for A.Y. 2008-09 is dismissed. Penalty levied u/s. 271AAA - CIT(A) deleted the levy - Held that:- No finding by the ld. CIT(A) in respect of substantiation of the manner of deriving the undisclosed income, which stipulation, while missing in section 271(1)(c), stands incorporated in section 271AAA. The A.O. clearly records a finding, both in respect of the assessee having failed to specify the manner in which the undisclosed income is derived as well as of the assessee having failed to substantiate the same, and which in fact the ld. CIT(A) notes vide para 6.5.2 of his order. Clearly, these findings of fact would need to be addressed by the ld. CIT(A), either endorsing or reversing or otherwise modifying the same, i.e., based on his reappraisal of the materials found from the possession of, or otherwise furnished by, the assessee, or even the evidences led by it before him for the first time, of-course by and upon observing the due process of law (refer r. 46A). The onus to satisfy the conditions of the provision though, would only be on the assessee. In fact, all this would precisely be the purview of the first appellate authority in the set aside proceedings. - Decided in favour of revenue for statistical purposes
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2015 (3) TMI 360
Disallowance of general expenses on ad-hoc basis - Held that:- Evidences were not furnished to the Assessing Officer by the assessee as the Assessing Officer did not call for such details. Otherwise, it is a fact that the assessee only submitted the breakup of the expenses and not evidences. The very nature of the expenses does not appear very is an essential expenditure; but it is likely some of the expenditure may not be wholly and exclusively for the purpose of business. In principle, we are of the opinion that some disallowance has to be done in the assessment if not 1/5th of the claim of the assessee as done by the Assessing Officer. As such, there is no basis for adopting 1/5th as a factor for computing the disallowance. Therefore, in our opinion, some ad-hoc disallowance should meet the ends of the justice. Thus, we are of the opinion, considering the facts of the present case for the year under consideration disallowance of a sum of ₹ 3 lakhs should meet the requirement of law. - Decided partly in favour of assessee. Treatment of gains arising on cancellation of forward contracts in foreign exchange - AO denied the claim of deduction u/s 80HHC on the said income - Held that:- The issues relating to the “independent income” are required to be adjudicated by the lower authorities after granting a reasonable opportunity of being heard to the assessee. Further, regarding the cancellation of forward contracts, the Tribunal has explained the relevant provisions in its order in the case of London Star Diamond Company (I) Pvt Ltd (2013 (11) TMI 424 - ITAT MUMBAI), where one of us (AM) is a party and the same should also be considered by the Assessing Officer in the remanding proceedings. There is a need for giving definite finding of fact if the impugned profits are „independent income‟ or part of the normal business profits of the assessee. In any case, speculative nature of profit is ruled out by the Tribunal in the assessee's own case in earlier years. Assessing Officer shall make use of the explanation given by the jurisdictional High Court in the case of Pfizer Ltd (2010 (6) TMI 433 - Bombay High Court ) after analyzing the dates of the contracts, connection to the invoices and also the reasons for conclusion. We also find that the judgment of the Bombay High Court in the case of Shah Originals (supra) delivered in the context of different facts i.e, gain on account of exchange rate fluctuations and EEFC account and the same was relied upon by the Tribunal in the case of K. Mohan & Co. (Exports) (2011 (4) TMI 1278 - ITAT MUMBAI). Of course, the other orders of the Tribunal relied upon by the Ld DR must also be considered. - Decided in favour of assessee for statistical purpose. Gain arising on revaluation of foreign currency borrowings - Held that:- It is not a “receipt” of any amount but only resulted in reduction of liability, the said amount cannot be excluded as specified in clause (baa) of Explanation to section 80HHC of the Act. Thus, the impugned gains does not constitute "independent income" as discussed by the Hon'ble Supreme Court in the case of Ravindranathan Nair (2007 (11) TMI 10 - Supreme Court of India). On perusal of the order, we find the Revenue Authorities have not examined the above stated contention of the assessee. Therefore, we remand this issue to the file of the Assessing Officer for fresh adjudication. In the remanding proceedings, Assessing Officer is directed to apply the principles relating to "independent income" as mandated by the above cited relevant judgment of the Hon'ble High Court and also speak on how this kind of gains on revaluation of the balance in foreign currency at the end of the FY constitutes “receipts” as expressed in clause (baa) of Explanation to section 80HHC of the Act. Assessing Officer is directed to give a reasonable opportunity of being heard to the assessee in the remanding proceedings. - Decided in favour of assessee for statistical purpose. Denial of deduction u/s 80HHC of the Act in respect of interest on fixed deposits - Held that:- The said income has to be now treated as per the provisions of the said clause (baa) of Explanation to section 80HHC of the Act. It is the prayer of the assessee before us that while applying the said provisions of clause (baa) of Explanation to section 80HHC of the Act, the net interest income may be considered as. For this, Ld Counsel for the assessee relied on the judgment of the Hon'ble Supreme Court in the case of ACG Associated Capsules Pvt Ltd vs. CIT [ 2012 (2) TMI 101 - SUPREME COURT OF INDIA]. We find merit in the same. Therefore, alternative submissions made by the assessee are found not required to be entertained. Assessing Officer is directed to give an opportunity of being heard to the assessee and decide the issue applying the said judgment of the Apex Court. - Decided in favour of assessee for statistical purpose.
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2015 (3) TMI 359
Revision u/s 263 - Ld. Commissioner invoking in the provisions of Sec.2(22)(e) - whether d. Commissioner ought to have considered that the liability created in the books of one of the divisions is an artificial one which cannot be equated as any loan or advance to cover U/s.2(22)(e) of the Act? - Held that:- when it is a fact on record that both the addl. CIT while granting approval u/s 153D as well as Assessing Officer in course of assessment proceeding have examined the issue of deemed dividend u/s 2(22)(e) of the Act at the hands of assessee in relation to the advance shown in his name in the books of M/s VCPL and the view taken by Assessing Officer as well as addl. CIT can be considered as one of the possible views, assessment order cannot be treated as erroneous. More so, when assessment order has been passed in terms with section 153D of the Act and ld. CIT has not revised the directions of addl. CIT. In these circumstances, as one of the conditions of section 263 is not satisfied, the impugned order passed u/s 263 is not valid. Accordingly, we set aside the impugned order of learned CIT and restored the assessment order passed. - Decided in favour of assessee.
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2015 (3) TMI 358
Non issuance of notice u/s 143(2) - Reassessment u/s 147 - Revenue contended that ground of non-issuance of notice u/s 143(2) by the A.O. was not raised either before the AO or before the Ld.CIT(A) - Held that:- In the instant case, admittedly, the notice under section 143(2) has been issued beyond the period of one year from the date of filing of the return. Further, it may be mentioned that omission on the part of the assessing officer to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable, and, therefore, the requirement of notice under section 143(2) cannot be dispensed with as already observed in Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA). Thus no other alternative but to hold that, the AO has wrongly assumed jurisdiction under the Act, for all these Assessment Years. We also hold that, this defect in the assumption of jurisdiction by the Assessing Officer cannot be cured by taking recourse to the deeming fiction u/s 292 BB of the Act. With respect to the argument of the Ld.D.R. that, this contention has not been raised by the assessee, before the A.O. or the Ld.CIT(A), we hold that this is a legal issue and as all the facts are on record, this contention can be raised before us, by the assessee for the first time, as this is a jurisdictional issue. Thus we dismiss this contention of the Ld.D.R. as devoid on merit. - Decided in favour of assessee.
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2015 (3) TMI 357
Inflated cost of products claimed - excessive cost of production - by first claiming it as a part of cost of production of manufactured goods and also as raw material removed as such, shown under the head "sales" - CIT(A) deleted the addition Held that:- There is no difference between the figures of consumption of raw material as well as sales between different schedules, as referred to above. Therefore, the learned Commissioner of Income-tax (Appeals) has very rightly observed that the Assessing Officer without bringing any material on record, purely on the basis of conjectures and surmises, gave a finding which had no basis. The assessee had claimed Cenvat credit on the raw material removed as such and no Cenvat had been claimed on the sale of other manufactured goods as per the Cenvat credit rules. At page 110 of the paper book the assessee has given extract of Cenvat credit rules, in which it is pointed out that Cenvat credit may be utilised for payment of an amount equal to Cenvat credit taken on inputs if such inputs are removed as such or after being partially processed. Learned counsel also referred to various invoices to demonstrate that all the invoices contained inputs sold as such without processing, which entitled the assessee to claim Cenvat credits. We find that no discrepancy has been pointed out by the Assessing Officer in these documents filed by the assessee. The findings of the learned Commissioner of Income-tax (Appeals) have not been controverted. - Decided against revenue.
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2015 (3) TMI 356
Deduction under section 801A - CIT(A) restricting the deduction under section 801A to ₹ 26,10,28,391 instead of the ₹ 68,48,02,132, as claimed - whether "Market Value" as stated in Sec. 80IA (8) will be the same as the "Sale Price" of the State Electricity Board when the assessee is not incurring any transmission/line losses or administrative or any other charge which the State Electricity Board? - Held that:- An analogy that can be safely deduced is that the market value cannot be the result of a transaction which has been entered into between a buyer and a seller in a situation where one of the parties is carrying the compulsive mandate of the Legislature. The situation before us is such where the aforesaid analogy can be usefully applied. As we have seen earlier, the price at which the power is supplied by the assessee to the Board is determined entirely by the Board in terms of the statutory regulations. Such a price cannot be equated with the market value as understood for the purposes of section 80IA(8) of the Act. The stand of the Revenue to the aforesaid effect cannot be approved. As stated earlier, order of the FAA in the case of Jindal Steel & Power Ltd (2007 (6) TMI 308 - ITAT DELHI ) has been reversed by the Tribunal wherein identical issue was involved. Besides, similar issue had been decided against the department by the Hon'ble Chhattisgarh High Court in the matter of Godavari Power and Ispat Ltd. [2013 (10) TMI 5 - CHHATTISGARH HIGH COURT ]Other cases relied upon by the assessee also support the stand taken by the FAA. Therefore, if she had followed the orders of the Tribunal for the earlier assessment year in respect of proceedings initiated u/s.263 of the Act, in our opinion she has chosen a legal, just and reasonable path.Confirming the orders of the FAA, we decide effective ground of appeal against the AO. - Decided in favour of assessee. Disallowance of sum paid to arrive at a settlement of dispute under the provisions of Factories Act, 1948 - Held that:- AO or the FAA has not mentioned the penal provisions of the Factory Act that were violated by the assessee, that they have not discussed anything about the penalty order passed by the labour law authorities. In absence of the basic fact of payment of penalty by the assessee, it cannot be held that there was infringement of law. Payment made to the workers who had met an accident cannot be termed penalty. Therefore, treating it an allowable business expenditure, we decide ground in favour of the assessee.
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2015 (3) TMI 355
Legality of notice issued u/s 153C - Held that:- Since there was no satisfaction in the case of the searched person. The assessment framed u/s 153C of the Act in the case of the assessee was not valid. As relying on case of M/s Tanvir Collections Pvt. Ltd. Vs ACIT [2015 (3) TMI 345 - ITAT DELHI] information under RTI Act was sought by the searched person and it was informed by the department that there was no “satisfaction note” available/recorded in respect of other entities. legal issue is decided in favour of the assessee and accordingly, it is held that the initiations of the proceedings u/s 153C of the Act are set aside on the ensuing assessment on the assessee is void ab initio. - Decided in favour of assessee.
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2015 (3) TMI 354
Payment of employees contribution towards provident fund disallowed - Held that:- The payment has been made within due date of filing of return of income i.e. 30/9/2008 and there is a judgment in favour of the assessee in the case of CIT vs. Ghatge Patil Transport (2014 (10) TMI 402 - BOMBAY HIGH COURT) wherein, it was held that when the payments of employees contribution to the PF, employees state insurance and pension fund within due date of filing of return of income to be allowed as deduction while computing income of the assessee and amendment to section 43B w.e.f. 1/4/2004 wherein two changes were made in section 43B, firstly, by deleting the 2nd proviso and further amendment in the first proviso and thereby, this amendment provided by Finance Act 2003, put on par the benefit of deduction of tax, duty, cess and fee on the one hand with contribution to various employees welfare fund on the other. - Decided in favour of assessee. Disallowance under section 41(1) - sundry creditors outstanding for more than 3 years - CIT(A) deleted addition - Held that:- The AO treated these liabilities as cessation liabilities as since there was no response to the notice issued to these parties under section 133(6) of the Act. Just because the parties did not appear personally before the AO it cannot be deemed that liabilities ceased to exist. There is no positive material brought on record to suggest that this liability ceased to exist. More so, when the assessee itself offered as income in respect of sl.no.4 of the above item and payments were made in respect of sr.no.2,3, and 5 and in respect of s.no.1 the amount is still shown as outstanding in the books of account of the assessee it is pre-postrous to treat these credits as non-existing in the assessment year under consideration by AO. Accordingly, in our opinion the deletion in addition made by the AO under section 41(1) by CIT(A) is justified - Decided in favour of assessee. Undervaluation of closing stock - CIT(A) deleted the addition - assessee follows FIFO method of valuation of closing stock - AO taken value of purchases made during last week of the month - Held that:- In this case the assessee consistently valuing closing stock based on the weighted average purchase of last three months for the last several years. Same method was followed for this assessment year. Contrary to this the AO has taken the purchase value only for the month of March 2008. He has disregarded/disturbed the method followed by the assessee consistently which is not proper with the method followed by the AO to value the closing stock giving the distorted picture of assessee’s financial position which is to be avoided. Section 145A stipulates that valuation of inventory should be done in accordance with the method of accounting regularly employed by the assessee. As such, the AO is precluded from disturbing the method of valuation followed by the assessee consistently. In our opinion CIT(A) has taken an appropriate view in this case and has deleted the addition and the same is upheld. We find that the finding of ld. CIT(A) is in conformity with the judgment in the case of ACIT vs. Torrent Cables Ltd. (2012 (11) TMI 190 - SUPREME COURT ) wherein it was held that where the assessee is following net method of valuation of closing stock, and included excise duty at the time of removal of goods. - Decided in favour of assessee. Disallowance u/s. 40(a)(ia) - Section 194C is applicable to the sums paid by M/s. Vishal Shipping Agency P. Ltd. and no TDS had been deducted as held by AO - CIT(A) deleted the disallowance - Held that:- Similar issue was considered in the case of CIT vs. Gujarat Narmada Valley Fertilizer Co. Ltd. (2014 (4) TMI 235 - GUJARAT HIGH COURT), wherein it was held that the expenses were incurred by the agent on behalf of the assessee for transportation and other charges, which has been spelt out in the bill itself including the commission to the agent. The relation between the assessee and the agent was principal. The obligation to deduct tax at source from the payment of transport charges and other charges was complied with by the agent, who had made payment on its behalf. In such circumstances no disallowance can be made u/s. 40(a)(ia) of the Act, on the amount reimbursed where obligation to deduct tax at source for payment was complied with by the agent. - Decided in favour of assessee. Disallowance made u/s. 40(a)(ia) - amount of ₹ 2,60,846/- was paid by Tri-lad to Kuehne Negel P. Ltd. who was a foreign freight agent - income accrues or arises in India to the NRI transport agent - CIT(A) deleted the disallowance - Held that:- In this case the respondent is having no business connection in India and no income accrued to it in India. The respondent is also not having any permanent establishment in India. Thus the provisions of section 9(1)(i) is not applicable and the said amount is not taxable in India. Being so CIT(A) is justified in deleting the addition made by the AO - Decided in favour of assessee.
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2015 (3) TMI 353
Denial of deduction under section 10A - eight separate undertakings being considered as one undertaking and not separate undertaking - Held that:- Claim of deduction cannot be denied unless claim is withdrawn right from the initial assessment year. Respectfully following the decisions of the CIT vs. Paul Brothers [1992 (10) TMI 5 - BOMBAY High Court] and case of Saurashtra Cement & Chemical Industries Ltd [1979 (2) TMI 21 - GUJARAT High Court], we set aside the findings of Ld. CIT(A) and direct the AO to allow the claim of deduction as made by the assessee under section 10A of the Act. - Decided in favour of assessee. Disallowance u/s 40(a)(i) - depreciation claim on software purchased by the assessee - AO found that no TDS has been made on this amount on the ground that the purchases are outside India for outside India - CIT(A) held that AO is incorrect in holding that the assessee has claimed the entire expenditure of ₹ 20,59,671/- as a revenue and restricted the disallowance only to the claim of depreciation of ₹ 6,17,901/- - Held that:- It is an undisputed fact that the assessee has only claimed depreciation and not the entire expenditure. The Tribunal Delhi Bench in the case of SMG Demag (P) (2010 (1) TMI 624 - ITAT, DELHI ) has held that provisions of section 40(a)are not applicable for claim of deduction of depreciation under section 32 of the Act. Payments for purchase of software without deduction tax will not be subject to the provisions of Section 40(a)(i) of the Act.Further, if a similar domestic transaction was made during the year under consideration, it would not have attracted the liability for TDS. Therefore, in the light of the non-discriminatory clause in the Treaty a similar international transaction would also not attract liability of the TDS. - Decided in favour of assessee. Addition on account of arbitration settlement claim - CIT(A) deleted addition - Held that:- It is an undisputed fact that the liability of ₹ 15 lacs Britain Pounds is based on arbitration award dated 10/3/2006. Only a time table has been given for making the payment but the liability has been crystallized during the year under consideration itself and, therefore, the assessee is entitlted for the claim of deduction of the full liability during the year itself. We, therefore, do not find any reason to interfere with the findings of Ld. CIT(A). - Decided against revenue. Addition in respect of unbilled software income - CIT(A) deleted addition - Held that:- . As the Ld. CIT(A) has followed the decision of the Tribunal in assessee’s own case for A.Y 2002-03 no interference is called for.- Decided against revenue.
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2015 (3) TMI 352
Bogus accommodation entry received from entry operator - addition u/s 68 deleted by CIT(A) - Held that:- In the present case it is an admitted fact that the assessee furnished the evidences to prove the identity of the creditors/share applicants by furnishing their PAN number and copy of acknowledgment of Income-tax Return. The amount on account of share application was received through banking channel, copies of the confirmation alongwith affidavit of the parties were furnished. The assessee also furnished the copy of share application forms, copy of Form no. 2 filed with Register of Companies (ROC), showing allotment of shares to the applicants. Therefore, the assessee discharged the onus cast upon it, as such the ld. CIT(A) was fully justified in deleting the impugned addition made by the AO. Furthermore the ld. CIT(A) while deciding the issue in favour of the assessee relied upon the judgment of CIT Vs Dwarkadhish Investment Pvt. Ltd. (2010 (8) TMI 23 - DELHI HIGH COURT) and CIT Vs Lovely Exports (P) Ltd. (2008 (1) TMI 575 - SUPREME COURT OF INDIA), therefore, we do not see any infirmity in the order of the ld. CIT(A) and accordingly do not see any merit in this appeal of the department. - Decided against revenue.
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2015 (3) TMI 351
Reopening of assessment - unexplained share capital - non-service of the notice u/s. 143(2)- Held that:- AO has not issued notice u/s. 143(2) of the I.T. Act which is mandatory. We are also of the view that in completing the assessment u/s. 148 of the Act, compliance of the procedure laid down u/s. 142 and 143(2) is mandatory. As per record, we find that there was no notice issued u/s. 143(2) of the I.T. Act which is very much essential for reassessment and it is a failure on the part of the AO for not complying with the procedure laid down in section 143(2) of the I.T. Act. If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of law and deserve to be cancelled. - Decided in favour of assessee.
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2015 (3) TMI 350
Deduction u/s 80IB - audit report in Form No. 10CCB was not filed along with the Income Tax Return - Assessment pursuance of research u/s 153A - CIT(A) allowed the deduction - Held that:- When the profits of the eligible project have increased then the consequential statutory impact will be on the amount of deduction u/s 80IB. so when the profits increase, the deduction/ incentive envisaged u/s 80IB increases. On one hand when the revenue has accepted the increase in profit though surfaced due to the search, the impact of the said increase in profit has to be also on the deduction allowable under Section 80IB of the Act, more particularly when the mandate on AO u/s 153A is to compute the total income of assessee. In the light of the aforesaid distinguishable facts, the ratio of Jai Steel cited (2013 (6) TMI 161 - RAJASTHAN HIGH COURT) by the revenue is of no help to the department. In that case, the deduction claimed by the assessee was not in the original return at all and it was made for the first time u/s 153A, which is not the case in hand. It may reemphasized that the assessee’s claim was not a new claim but it was only an enhanced claim which is statutorily linked to the eligible profits which get enhanced as result of search. Therefore we do not find any legal infirmity on the finding of the ld CIT(A) and so confirm the same. We also concur with the conclusion of the ld CIT(A) wherein it is observed that if the disallowance u/s 40A(3) is directly relatable to the profit of the eligible projects, then the deduction u/s 80IB be accordingly recomputed, subject to verification of the records including the seized records.In the result the grounds raised by the revenue for Assessment Year 2005-06 stands dismissed. - decided in favour of assessee. Payments in excess of ₹ 20,000/- disallowed - payment made on the dates when banks were closed due to holiday - Held that:- The facts are not clear as to whether the payments were made on the holidays when the banks were closed. We therefore set aside the impugned order on this issue and remand the same back to the file of AO for fresh adjudication, in accordance with law after providing due and reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Notional interest on the temporary advance given to then director Sh. Arun Kumar Gupta disallowed - Held that:- Issue should also be examined by the AO, as the facts are not clear particularly when it is the contention of the ld AR for the assessee that it was allowed in the original assessment by the AO by considering this fact that the advance was given to the Director for business purpose only.- Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 349
Validity of notice u/s 148 - notice issued against ONGC as the representative assessee of the non-resident company - whether notice issued in this case beyond the statutory limit and that the provisions of section 149(3) were applicable for determining the time limit for the issue of the notice - Held that:- As per conduct of the assessee and decision of the Special Bench Mumbai ITAT in the case of J.M. Baxi (2010 (2) TMI 884 - ITAT, Mumbai ) the provisions of section 149(3) of the Act and limit prescribed therein for issuance of notice u/s 148 of the Act is not applicable to the present case. Finally, we reach to a conclusion that the CIT(A) was not justified in holding that since the assessment has been framed on M/s ONGC by treating it as a representative assessee of non-resident M/s Foster Wheeler Energy Ltd., therefore the limitation for issuance of notice u/s 148 of the Act beyond two years to the representative assessee u/s 163 of the Act from the end of assessment year. Thus the conclusion of the CIT(A) in the impugned order is not only perverse but also carries ambiguity and misinterpretation of legal provisions of the Act and inconsistent with the ratio of the decision of Special Bench in the case of J.M. Baxi (supra) and, therefore, we set aside the same by holding that the notice issued to the assessee was well within the period prescribed under the Act. - Decided in favour of revenue. Assessment of income of the assessee - whether was in the nature of Technical Services being rendered and taxable as per provisions of the section 115A r/w section 9(1)(vii) of the Act ? - Held that:- since by the earlier part of this order, we have decided the issue of limitation in favour of the Revenue and thus, it has been held that the CIT(A) was not correct in holding that the notice u/s 148 of the Act was issued beyond prescribed limitation period and the impugned order of the CIT(A) has been set aside, therefore, we deem it appropriate to restore the other issues on merits to the file of the first appellate authority i.e. CIT(A) for adjudication on merits. - Decided in favour of revenue for statistical purposes.
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Customs
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2015 (3) TMI 377
Denial of the benefit of Notification No. 20/99 dated 28/02/1999 - Failure to obtain end-use certificate for use/consumption of steel melting scrap in the manner prescribed in the said Notification from the jurisdictional Assistant Commissioner - Held that:- There is no doubt that the eligibility to duty exemption under Notification 20/99-Cus will depend upon submission of end-use certificate issued by the jurisdictional Assistant Commissioner. The jurisdictional Assistant Commissioner has rejected the application of the appellant and the matter has been taken in appeal and is presently pending before the Zonal Bench at Chennai. Inasmuch as eligibility to customs duty exemption under Notification 20/99 is dependent upon the eligibility to end-use certificate, it would be appropriate if both these appeals are heard by the same bench. - Matter referred to President CESTAT.
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2015 (3) TMI 376
Benefit of exemption from CVD in terms of Central Excise Notification No. 4/2005 (S.No.2) as well as Notification No. 6/2002 (S.No. 246) - Demand of differential duty - Held that:- There is no dispute that prior to restructuring the Tariff, the goods were classifiable under sub-heading 1508.90 and the benefit of exemption was available to the applicant. After restructuring of the Tariff, the goods were classifiable under sub-heading 15171022. Both the sides admitted that the goods are classifiable under sub-heading 15171022, which indicates ‘Sal fat (processed or refined)’. On a plain reading of the wording of the notification, we find that the benefit of the exemption extended all goods except Margarine and other similar edible preparations. Prima facie, we find that the impugned goods are not margarine or other similar preparations. In view of that, we are of the prima facie view, the applicants are eligible for exemption notification. Hence, we waive the requirement of predeposit of duty and stay its recovery till the disposal of the appeals - Stay granted.
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2015 (3) TMI 375
Imposition of duty and penalty - Levy of duties and penalties on all the applicants jointly and severely - Held that:- Duties cannot be confirmed jointly and severally against more than one person and penalty cannot be imposed jointly and severely on various persons. As such, by following the decision in [2013 (12) TMI 1233 - CESTAT NEW DELHI], we set aside the impugned order and remand the matter to Joint Commissioner for fresh decision, after making up his mind as to against which assessee the duty is to be confirmed. - Matter remanded back - Decided in favour of assesse.
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2015 (3) TMI 374
Confiscation of E-rickshaws - non-production of 'type approval' certificate from the Auto Mobile Research Association of India or any other agency in terms of Rule 126 or Central Motor Vehicle Rules - Held that:- as the E-rickshaw are imported by the appellant in CKD condition and without battery and have to be assembled it in India; they cannot be treated as new vehicle. If that be so, the provisions of Rule 126 of Motor Vehicle Rules which are applicable only to import of new vehicles would not apply. Commissioner (Appeals) has already remanded the matter to original adjudicating authority, we convert the said remand as open remand and direct the original adjudicating authority to examine the above issue, in the light of Chapter Note 2 of Chapter 87 of Import Export Policy read with provisions of Rule 126 of the Motor Vehicle Act without any bindings with the directions of the Commissioner (Appeals). - Appeal disposed of.
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2015 (3) TMI 373
Rectification of mistake - Appellant contends that section of RG-23D register and various invoices substantiating the appellant's claim in regard to stock transfer of the goods which were subsequently sold to the consumer and detailing the total 34MT of the goods and not just 16 MT - Held that:- On a query from the Bench, the learned advocate could not show any evidence that these documents were produced either before the original authority or the first appellate authority or even before this Tribunal while filing the appeal or before the order was passed. Even from the documents now produced, it is not easily coming out that the objections raised earlier are met. The learned advocate for the appellant fairly concedes that the case was not represented properly before the Commissioner (Appeals) or represented properly before the Commissioner (Appeals) or the lower authority. On asking what exactly is wrong in the Commissioner (Appeals)'s order, he could not say anything except that the case was not handled by knowledgeable person. - documents now produced were not before this Tribunal while passing the earlier order, there is no mistake in the order passed by this Tribunal - Rectification denied.
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Corporate Laws
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2015 (3) TMI 372
Company in liquidation - Disclaimer of the property - Ground of estoppel - Held that:- In equity, a person drawing benefit from a transaction is not permitted to escape from the disadvantage, if any flowing from it. In the instant case the appellant is estopped from challenging the said order dated May 14, 2013 as it accepted the benefit of the sale notice containing the stipulation fixed by the learned Company Judge that the successful purchaser shall have to vacate the said property within May 31, 2014.In view of the reasons for our finding that the appellant is estopped from challenging the first impugned order, we also reject the contention of the appellant that by purchasing the business of SST Media they are entitled to carry on the said business from said property. In the instant case, from the conduct of the appellant it is evident that it was all along interested to wrongfully continue to occupy the said property and we find total lack of bona fide on the part of the appellant to file these appeals. It is further interesting to note, while in the Memo of Appeal filed in the second appeal, the appellant states that they are looking for a new accommodation to carry on their business, still they strenuously urged the first appeal challenging the decision of the leaned Company Judge for disclaimer of the said property. At the same time, we are also disturbed with the conduct of the official liquidator. In spite of the fact that it had sold the business of SST Media property, in terms of the said order dated May 14, 2013, with the express stipulation that the appellant had to vacate the said property on or before May 31, 2014, the Official Liquidator took no step to comply with the said order dated May 14, 2013 passed by the learned Company Judge to disclaim of the said property and hand over possession of the said property, if required with the police assistance, to the respondent no. 2. The Official Liquidator, belatedly issued a letter dated September 8, 2014 requesting the appellant to vacate the said property, but the appellant refused to vacate the said property. Still the Official Liquidator took no step. Thus, the learned Company Judge had to pass the order dated May 30, 2014. We direct the Official Liquidator to have the said property vacated by the appellant, if necessary with police help within January 31, 2015 and make over vacant possession of the said property to the respondent no. 2 within February 07, 2015. The appellant shall cause payment of the monthly occupation charges at the rate of ₹ 6,14,000/- to the Official Liquidator for the period till the month of January, 2015. All such monthly occupation charges, including the arrear amount, if any, shall be paid by the appellant to the Official Liquidator within January 07, 2015 and the Official Liquidator shall in turn pay the said sum to the respondent no.2.
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2015 (3) TMI 371
Winding up application - Loss of substratum of the company- Cancellation of 2G licenses - Held that:- On the issue of loss of substratum, the order of the Appeal Court inter alia observes that the Unified Access Services Licenses (“UASLs”) were the most valuable assets of the Company and that the commercial existence of the Company depended on UASLs. It is also observed that the UASLs were undoubtedly the basis on which the Petitioner was persuaded to invest a sum of ₹ 3,500 crores in the Company (paragraph 34). The Appeal Court also observed that the indebtedness of the Company as on 8th April, 2014, is over ₹ 4,500/crores (Paragraph 40) and that the Respondent No.2 has not denied the averment in the Petition that a minimum amount of US $ 18 million was required to continue the operation of the Company (Paragraph 42). In paragraph 44, the Appeal Court observed that the UASLs having been cancelled, the object for which the Company was incorporated and in any event the object on the basis of which the Petitioner had invested over ₹ 3,500 crores has not merely substantially, but had entirely failed. Further, that there was lack of any prospect of revival of the Company and that it was established beyond doubt that the existing and probable assets are insufficient to meet the existing liability. The Appeal Court also observed that the “purported scheme” proposed by the Respondent No. 2 for revival of the Company inspired no confidence. Accordingly, the Appeal Court concluded that, “ it has been established that the substratum of the company has gone. There is no prospect of money being brought in by anyone to make it a commercially viable enterprise.” In paragraph 51, the Appeal Court further observed that the Company “would be unable to do any business even unrelated to the 2G licenses for it does not have the financial capacity to do so. Any attempt to do any other business, including related to the three subsisting licenses would only result in disastrous consequences plunging the company to a situation far worse than it is today.” The Appeal Court dismissed the Respondent No.2's “purported scheme” by stating that, “the Scheme inspires little, if any, confidence. It is vague and without material particulars.” and in paragraph 61 concluded that they were in entire agreement with the Single Judge that the Company had lost its substratum and that any revival was unrealistic. As regards the submission of the Respondent No. 2 that the PMLA proceedings are a subsequent event and that subsequent events cannot be a ground for winding up, as set out here in above and in paragraph 100 of the order of the Appeal Court, the subsequent facts can be relied upon by the Company Court while considering a Petition under Section 433 (f) of the Act on just and equitable ground. The subsequent events may be pleaded either by amending the Petition or by filing further affidavits. In any case, the events mentioned in the said charge-sheet are events which in fact took place prior to the filing of the present Petition. The charge-sheet was however filed after the Petition was filed as stated above. In my view, invocation of the Put Option is a contractual right available to Respondent No.2. The exercise of the right under the Put Option Deed would not disentitle Respondent No. 2 from resisting the Petition unless the Petitioner accepts the option exercised by the Respondent No.2. I have independent of the issue qua the Respondent No. 2 unconditionally withdrawing the CLB proceedings and once again reiterating the same in defence to the above Petition, held hereinabove that the said allegations are not acceptable. In any event, from a perusal of the contents of the said letter I am of the view that the Petitioner is correct in its submission that the allegations made in the Petition which were unconditionally withdrawn, were without any substance, since Mr. Balwa has in the said letter attributed the fate meted by Etisalat to other authorities who allegedly had a sinister design to drive away Etisalat from this country. In view of the above facts and circumstances, I am satisfied that the Company has lost its substratum; there exits a deadlock between the main shareholders of the Company; there is complete lack of faith and probity resulting in irretrievable breakdown between the major shareholders of the Company; the liabilities of the Company have far exceeded its assets; the scheme propounded by Respondent No. 2 is unrealistic, speculative and unworkable and therefore a case is made out by the Petitioner to wind up the Company under Section 433 (f) of the Act. The Company Petition is allowed. - Winding up application accepted.
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Service Tax
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2015 (3) TMI 391
Constitutional validity of levy of service tax on renting of immovable property - Section 65 (105)(zzzz) and 65(90a) of the Finance Act, 1994 - Held that:- Of course, reference made to the Larger Bench in the decision Mineral Area Development Authority and Others vs. Steel Authority of India and Others [2011 (3) TMI 1554 - SUPREME COURT], was not brought to the knowledge of the Full Bench of Delhi High Court in Home Solutions-II case. But, the fact remains that the validity of Section 65(105)zzzz and 65(90-a) of the Finance Act, 1994, has been upheld by a number of High Courts as stated above and since the very same arguments which have been addressed, have been considered and dealt with, more particularly, in Home Solutions-II case [2011 (9) TMI 46 - DELHI HIGH COURT], this Court is not persuaded to take any different view from that decision and as already pointed out, in the Special Leave Petition preferred as against the said decision, leave has been granted and the matter is pending adjudication before the Hon'ble Supreme Court of India. Therefore, the challenge made to Section 65(105)(zzzz) and 65(90-a) of the Finance Act, 1994, as amended by the Finance Act, 2010 and Section 77 of the Finance Act, 2010, fails. Renting of premises by IRCTC/Railways - it is argued that when the Railways is an essential public utility service for carriage of goods and transport of passengers throughout the country, a portion of the Railway premises is being used for the Railways for running refreshment stalls and the said part of the railway station premises and catering services through eating joints is nothing but part of essential passenger amenity to enable the travelling public to find easy access to eateries and the said catering service is not done by the railway administration with any profit motive - Held that:- Tehre is no valid arugment - further for want of alternate remedy, writ petition dismissed.
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Central Excise
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2015 (3) TMI 386
Denial of CENVAT Credit - credit availed on Tarpaulin - Held that:- During the material period, the appellant paid duty on Tarpaulin under chapter Heading 39 of ₹ 66,58,896/-. It is also seen from the impugned order, demand of duty would be under chapter 63 of ₹ 32,56,316/-. The adjudicating authority observed that the show cause notice is silent as to whether duty is leviable on double side coated fabrics captively consumed in final product classifiable under Chapter 39. The main contention of the learned advocate is that they have paid duty of ₹ 66,58,896/- and the total demand would be only ₹ 32,56,316/. Thus it is clearly evident that they have paid excess duty. There is no material available that any demand was raised on double side coated fabrics captively consumed in the final product. In view of that, we find that they paid duty of ₹ 66,58,896.00 against the demand of ₹ 32,56,316/- and therefore denial of modvat credit of ₹ 12,24,357/- is not justifiable. - Decided in favour of assessee.
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2015 (3) TMI 385
Valuation of goods - Appellant is also taking CENVAT Credit of the valves used in the maintenance & repairs - whether appellant is required to add the value of the valve supplied during repairs & maintenance of the gas cylinders - Held that:- After perusal of the representative invoices produced by the Ld.Advocate it is not coming out whether VAT is paid on the sale of valves as claimed by the appellant. Even if it is accepted that while providing the services there is sale of valves the same will amount to clearing of inputs as such on which CENVAT Credit is required to be reversed at the time of clearance as per CENVAT Credit Rules 2004. As the factum of payment of VAT/Sales Tax is not coming out of the copies of invoices relied upon by the appellant, the matter is required to be remanded to the adjudicating authority for such verification. Appellant is required to produce all the records before the adjudicating authority that VAT/Sales Tax is paid on the valves sold to the customers during the course of providing services. - Matter remanded back - Decided in favour of assesse.
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2015 (3) TMI 384
Waiver of pre deposit - valuation - sale to related parties - mutuality of interest - Held that:- There is no dispute that the applicant cleared the goods to the related persons. It is seen that there is a wide difference in prices for rods of similar strength and width as could be evident from the sale invoices of the transaction with the above two dealers and the sale invoice for the transaction made on the same days to the other buyers. It has been observed that the applicant has not placed evidence that they have sold the excisable good to unrelated buyers at lower value at which they sold the goods to the two dealers. In the case of Jai Balaji Jyoti Steel Ltd. Vs. CCE - [2014 (8) TMI 749 - CESTAT KOLKATA] whereby unconditional stay was granted in an identical situation. Tribunal granted stay on the ground that merely because there is a common director between the assessee and the other two units. It is observed that there is no material available that there is mutuality of interest between the two parties. In the present case, there is evidence placed by the Revenue that the transaction price between the assessee and the two dealers are much lower than the transaction value of other buyers. So, the case law relied upon by the applicant would not be applicable in the present case. - there is mutuality of interest on the basis of evidence placed by the Revenue that the transaction value of the two dealers is much lower than the transaction value of other buyers and therefore the applicant failed to make out a prima facie case for waiver of predeposit of entire dues. The learned consultant has not pleaded any financial hardship. - Partial stay granted.
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2015 (3) TMI 383
CENVAT Credit - absence of any machinery provisions in the Act or the Rules for the recovery - Rule 57CC - Held that:- Appellants have made an offer to reverse the actual modvat credit taken on the inputs which have been used in the manufacture of exempted product in terms of Rule 57C. It is seen that they have also deposited an amount of ₹ 35,000/- towards such reversal. Keeping in view the Tribunal's decision and the appellants offer to reverse the credit, we set aside the impugned order and remand the matter to the original adjudicating authority for quantification of the actual modvat credit availed by the appellants on the inputs used in the manufacture of exempted product. Penalty of ₹ 25,000/- imposed upon the appellants is also set aside - Decided in favour of assesse.
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2015 (3) TMI 382
Manufacturing activity or not - activity of cutting the plastic films and sheets into required shape as per customer's requirement - Held that:- The activity undertaken by the appellant is cutting of plastic sheets/films purchased from the market into required shapes and sizes such as annular foam ring, rounds and squares as required by the customers. Merely cutting a sheet or film into required shape of size does not result in bringing into existence any new product and therefore, there is merit in the contention of the respondent that the activity undertaken by them did not amount to "manufacture". The lower appellate authority has also come to the same conclusion. - No infirmity in the order passed by the lower appellate authority - Decided against Revenue.
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2015 (3) TMI 381
Refund claim - Wrong classification of goods - Demand of differential duty - Unjust enrichment - Payment of duty under protest - Held that:- The fact that the respondent has paid the differential duty under protest after clearance of the goods, these are not in dispute. The case law relied by the ld. AR are not relevant to the facts of the case as in Maharashtra Cylinder Ltd. (2003 (8) TMI 96 - CESTAT, MUMBAI) there was a price variation in the agreement. In the case of Gujarat State Fertilizers & Chem. Ltd. (2004 (1) TMI 143 - CESTAT, NEW DELHI), the duty was paid at the time of clearance of the goods. But in this case, the duty in dispute has been paid after the clearance of the goods. Further, facts of the case are very much similar to the case of Easter Industries Ltd (1999 (8) TMI 915 - CEGAT, NEW DELHI), wherein the Tribunal held that the duty has been paid by making debit entry is made subsequent to the clearance of the goods to the effects that the incidence of duty has not been passed on the buyers. Therefore, I do not find any infirmity in the impugned order, same is upheld as revenue has not produced any evidence on record that duty incidence has been passed on to the buyers. - Decided against Revenue.
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2015 (3) TMI 380
Denial of input credit - denial on the premise that the process of repairing, reconditioning etc. cannot be treated as manufacturing activities - Denial of input service credit - service availed beyond the place of removal - Held that:- It is not disputed that the Rubber Conveyor Belts in question have been cleared by the appellant on payment of duty. Therefore, the duty paid at the time of clearance amounts to reversal of CENVAT Credit on inputs cleared "as such" or the activity of repairing, reconditioning etc. does not amounts to manufacture as per the decision in the case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT). Therefore, I hold that the appellants are entitled to avail input credit on the Rubber Conveyor Belts in question. Further, I hold that in case of export, the place of removal is the port from where the goods have been exported. Therefore, the appellants are entitled to take input service credit on the CHA service. Accordingly, I hold that the appellants are entitled to take credit on input service in question. - Decided in favour of assesse.
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2015 (3) TMI 379
Denial of CENVAT Credit - Held that:- There is no dispute about the fact that the manufacturers of the inputs raised the cenvatable invoices, giving all the details, including duty payment particulars. The inputs were received by the appellants, who took the credit based upon the declaration made by the manufacturer. The question which arise as to when the manufacturer has given wrong declaration as regards duty payments in the invoices raised by them, whether the credit can be denied to the input recipient or the Revenue's remedy lies at the manufacturer end for the demand of duty. - issue is no more res integra and stands settled by the Board Circular No.766/82/2003-CX, dated 15.12.2003 as also by various decisions of the Tribunal [2006 (11) TMI 494 - CESTAT, MUMBAI] laying down that in such scenario, the input recipient cannot be denied the credit. Demand is hit by bar of limitation. Admittedly, the appellants had taken the credit by reflecting the same in their records. When the invoices received by them are showing duty payment, the input recipient cannot be expected to know that the manufacturer has not actually discharged the duty burden. Accordingly, I hold that the demand is also barred by limitation. - Impugned order is set aside - Decided in favour of assessee.
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2015 (3) TMI 378
Imposition of duty on manufacture of shawls - Held that:- In the present case, the shawls have been woven directly from the yarn in running length and dividing lines have been provided between shawls so that, they can be cut, packed and marketed. There is no evidence of any fabric having emerged at the intermediate stage. Therefore, the ratio of the decision in the case of Amristar Swadeshi Woollen Mills (2004 (3) TMI 624 - CESTAT, NEW DELHI) would squarely apply. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (3) TMI 392
Violation of principles of natural justice - Opportunity of hearing not provided - Held that:- As per Section 27 of Tamil Nadu Value Added Tax, 2006 (hereinafter referred to as the 2006 Act), an opportunity ought to have been given to the dealer before passing an order. Since the issue in question is an escaped turnover to be assessed under Section 27 of the 2006 Act, the petitioner ought to have been given a reasonable opportunity. However, having received the documentary evidence, without affording an opportunity of personal hearing, the authority passed the impugned orders dated 28.11.2014 relating to the assessment years 2007-2008 to 2013-2014, which are almost verbatim. In the assessment of the escaped turnover, the documentary evidence submitted by the petitioner has escaped the attention of the officer. Hence, I find force in the contention of the learned Senior Counsel for the petitioner that the impugned orders are passed without giving an opportunity to the petitioner. - Matter remanded back - Decided in favour of assessee.
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2015 (3) TMI 390
Waiver of pre-deposit - Hawala dealer or genuine businessman - Dealer declared as such by referring to a list which has been published on the website of the department listing certain dealers and some transactions - Order of pre deposit - Mismatch of documents - Lack of opportunity - Held that:- If the proof has been produced and not looked into or the documents are rejected without any application of mind, then the Tribunal will definitely look into this grievance of the petitioner. We have no doubt in our mind that merely because the basic tax is secured by deposit, the petitioner will not get adequate and reasonable opportunity to prove its case. - It is the Tribunal's prima facie finding and which will definitely not bind it when it hears the appeal on merits. All that we hold is that if the prima facie finding is that there was a mismatch in the documents then prima facie they have been looked into and that prima facie conclusion reached is not to the satisfaction of the petitioner, will not enable it to claim total dispensation of the condition of pre deposit of the tax liability and to claim an unconditional stay of recovery pending appeal. The appeal is the second appeal now. The appeal against conditional order right upto the Tribunal and now a writ petition in this Court is only prolonging the compliance with the condition. We have no doubt in our mind that if the First Appellate Authority is furnished proof of compliance with the above condition, it will decide the appeal uninfluenced by any prima facie conclusions and tentative findings. - This will be done on the basis of pre deposit - Decided conditionally in favour of assessee.
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2015 (3) TMI 389
Interest on refund claim - Whether the Tribunal has erred in holding that dealer is entitled to interest under Section 54(1)(aa) on refund arising from appellate order - Held that:- there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest. - Following decision of DOSHI PRINTING PRESS versus STATE OF GUJARAT [2015 (3) TMI 211 - GUJARAT HIGH COURT] - question is already covered by the decision of this Court, it cannot be said that any substantial question of law would arise for consideration. No interference would be called for to the order passed by the Tribunal - Decided against Revenue.
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2015 (3) TMI 388
Return of cheques collected illegally and without authority of law - Held that:- according to the petitioner, even if there is a violation, before an assessment order, there cannot be a collection of tax amount at the time of inspection, which is fortified by this Court in the judgment reported in (1992 (9) TMI 309 - MADRAS HIGH COURT) followed by this Court in an unreported judgment in M/s.Arun Engineering Industries Vs. The Commercial Tax Officer (Enf), for the proposition that without assessment order or without giving an opportunity of personal hearing, there cannot be collection of tax, at the time of inspection. - In view of the settled principles of law, the petitioner's legal right has to be safeguarded, but, at the same time, liberty should be given to the Department to take action in accordance with law. Accordingly, the writ petition is disposed of with a direction to the respondents to return the cheques in question to the petitioner within a period of four weeks from the date of receipt of a copy of this order. - Decided in favour of Petitioner.
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2015 (3) TMI 387
Valuation of goods - quantity of Calcium Carbide of a value of rupees three lacs was oversized and, therefore, it was sent back in 110 drums to the manufacturer for breaking into appropriate size, this amount of the raw material was not found recorded in the books of the assessee and he has been taxed on it - Held that:- It is the contention of the assessee that in the appeal filed by the manufacturer M/s V.K.Carbide and Gases Private Limited the department reckoned with this fact and did record the fact that some oversized raw material had been sent back to it for breakage and despite this the Tribunal has not given any relief to the assessee and has assessed it in the hands of the assessee as a purchase. The Tribunal has discussed the matter. Insofar as this question is concerned, there is no doubt that they may have a practice of making raw material into a certain shape and size but for the given year the quantity has not been assessed and the quantity, which has been referred to by the assessee is not identifiable in that year as a return as it was not found on the books. It has rightly been assessed to tax. The contention of the learned Counsel for the assessee is that concessions were given to the manufacturer are not borne out from the facts and findings of this case. The second issue argued by the assessee is that sum 110 drums were sold empty to various parties and the assessee produced photostat bills at the stage of Tribunal to establish, for an example ten drums sold to M/s Chawla Traders Kanpur for a price of ₹ 300, stands to reasons that a drum was full of material will not be sold for a price of thirty rupees. The Tribunal is the last fact finding authority. It could have asked the assessee to produce the original bills and it could have examined the matter. - This aspect of the matter needs reconsideration - Matter remanded back - Decided in favour of assesee.
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Indian Laws
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2015 (3) TMI 370
Possession of asset by bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFASI)Act, 2002 - Taking shelter under the Protection of Women from Domestic Violence Act, 2005 - Held that:- The respondent bank has taken possession of the secured asset pursuant to orders obtained and by procedure established by law. It appears that at least one partner of the principal borrower firm had instituted proceedings in this Court which culminated in the bank being permitted to take steps in accordance with the orders passed by the Magistrate under Section 14 of the said Act of 2002. No law nor any fact of any relevance has been cited in this petition for the Court to depart from the procedure recognised by the said Act of 2002 or interdict the steps taken by the bank. - Decided against the appellant.
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2015 (3) TMI 369
Circular issued by SEBI for extending time of Limitation for invoking the arbitration - Detrimental to the interest of the investors - Held that:- A plain reading of the impugned circular also indicates that the increase in the period of limitation is available to both parties and is not limited only to claims made by brokers against their clients. Thus, no mala fides can be attributed to SEBI in framing the impugned circular. In this view, the impugned circular issued by SEBI which advises the recognised stock exchanges to make amendments in their relevant byelaws, rules and regulations only ensures that the period for invoking the arbitration clause is in conformity with the settled law. I, thus, find no infirmity with the impugned circular. The writ petition is, accordingly dismissed. - Decided against the appellant.
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