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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 30, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Valuation - service tax on suspense account - associated enterprises -Amendment to section 67 will be prospective i.e. w.e.f. 10-5-2008 -Tri Articles Impact of Change of Service tax liability structure from partial reverse charge to full reverse charge on manpower Supply and Security Services in transition period SERVICE TAX: ANALYSIS OF AMENDMENTS APPLICABLE WITH EFFECT FROM 01ST APRIL 2015 INDIAN INSURANCE COMPANIES (FOREIGN INVESTMENT) RULES, 2015 – AN OVERVIEW Finance Bill 2015: Information relating to payment to non-resident and foreign companies- proposed sub-section (6) of S. 195- some lacunae, suggestions and requests. CA Dev Kumar Kothari Highlights / Catch Notes Income Tax The mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue’s interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction u/s 80-IB (10). - HC Visit to Get Source Admittedly the other charitable institutions to whom interest free loans were given by the assessee are registered under section 12A/12AA of the Act having similar objects. In such circumstances, there is no violation of the provisions of section 13(1)(d) read with section 11(5) - AT Visit to Get Source Income derived by the assessee from the production of foundation/basic seeds as well as hybrid seeds constituted income eligible for exemption under S.10(1) of the Act, being agricultural income - AT Visit to Get Source TDS on reimbursement of cost for providing access to system and management audit methodology updates, etc - these are reimbursement of expenses. Once these are reimbursement of expenses the assessee is not liable to deduct TDS u/s 195 - AT Visit to Get Source Disallowance of depreciation on de-capitalised assets as directed by DRP - When the assets are recapitalized at the nominal value at which it is decapitalised then there is no effect on the taxability of the assessee - AT Visit to Get Source Exemption u/s 10B - disallowance of claim by CIT(A) concluding that supplying of computer software solution to various shipping companies is not export income from sale of such softwares - exemption allowed - AT Visit to Get Source Disallowance of travelling expenses - AO while disallowing the expenses has noted that the expenses were incurred on account of trip by cruise ship by director and his family - disallowance confirmed - AT Visit to Get Source MAT - amount of capital subsidy to the book profits while computing the income u/s 115JB is not an appropriation of profits and there is no such debit to the profit and loss account for the alleged appropriation and, therefore, the same cannot be added while computing the income u/s 115JB - AT Visit to Get Source Computation of MAT - the contribution to the Molasses reserve fund can be viewed as a provision in nature and it is not an actual liability and the provision created for additional storage facility is obviously in the nature of provision for contingent liability, therefore, the impugned amount being contingent in nature deserves to be added back while computing income u/s 115JB - AT Visit to Get Source Treatment to loss - Where purchase and sale of shares were done through cheques, which were not encashed, so that there was no movement of funds, the transactions being as between these persons and the assessee company itself without any explanation as to the need for the circumstances of transactions, such transactions could only be considered suspicious and are to be treated as sham transactions - AT Visit to Get Source Cash Credit u/s 68 - The cash realized on making the cash sales was deposited into the bank accounts of other persons and cheques were received. Those cheques were credited against the debtors. In our view, the above said procedure would not give rise to any gain as assumed by the Ld CIT(A). - AT Visit to Get Source Fraudulent share transactions - the shares purchased by the assessee have been backdated to give it a colour of Long term capital gain by showing the period of holding for more than 12 months - HC Visit to Get Source Customs Denial of duty drawback claim - Since, in this case the licence fee was for right in India, the same cannot be realized in BRC as foreign exchange. Such non-realized amount cannot be claimed for export related benefit like drawback - CGOVT Visit to Get Source Service Tax Demand of service tax on suspense account - transaction with associated enterprises - Amendment to section 67 will be prospective i.e. w.e.f. 10.05.2008 or retrospective - Valuation - the addition to the Explanation (C) with effect from 10.05.2008 is prospective in nature - AT Visit to Get Source Denial of refund claim - whether the ticket issued by the appellant showing "Conducted Tour" shall ipso facto disentitle appellant to the exemption granted by Notification No. 20/2009-ST dated 7.7.2009 - refund to be allowed subject to unjust enrichment - AT Visit to Get Source Central Excise Denial of rebate claim - rebate claims rejected on the ground that respondent is not the proper claimant to file rebate claims - the original authority has not issued show cause notice in the matter and therefore decided the case without following the principles of natural justice - CGOVT Visit to Get Source Denial of rebate claims - Original documents not filed - the instant rebate claims are admissible to the applicants as the use of duty inputs in the manufacture of goods exported is not in dispute and export of goods stands established from customs certified relevant duplicate ARE-2 as well as shipping bills. - CGOVT Visit to Get Source VAT Existence of statutory alternative remedy does not always bar the exercise of power by this Court under Article 226 of the Constitution of India and in the given facts, it is a fit case for quashing and setting aside the order - HC Visit to Get Source Violation of Punjab Value Added Tax Act, 2005 - Allegation of theft of sales tax - Driver of the truck did not stop at check post - driver misbehaved and did not produce any document with regard to the goods being carried in the truck, thereby creating an obstruction in discharge of Government work - no question of the commission of offences punishable under Sections 186 and 353, IPC - HC Visit to Get Source Rate of tax - Levy of tax on aluminum powder - The Revenue is not permitted to levy the tax at 12.5 per cent on the ground that the petitioner has been selling aluminium granules - HC Visit to Get Source Case Laws: Income Tax 2015 (3) TMI 967 Entitlement to the benefit of section 11 - assessee advanced monies to other trusts and this is in violation of section 13(1)(d) of the Act - CIT(A) allowed the exemption - Held that:- The monies advanced by the assessee to the other trusts which are registered under section 12A and having similar objects cannot be said to be in violation of provisions of section 13(1) of the Act. Therefore, we direct the Assessing Officer to examine whether other organizations to whom the assessee has lent monies are registered under section 12A and in case, such organizations are registered under section 12A, the exemption under section 11 cannot be denied on this ground. Assessee deriving substantial income from letting out of its auditorium, Esplanade hall, rooms at Vepery and Royapettah ground as held by DR - violated provisions of section 11(4A) of the Act as no separate books of accounts were maintained by the assessee - Held that:- As far as violation under section 11(4A) is concerned, the same can be applied only in case the assessee is engaged in business activities. It is the contention of the assessee that income from letting out of the properties is income from house property and therefore such income is exempt under section 11 of the Act. Application of section 11(4A) arises only when the assessee carries on business. Therefore the question of maintaining separate books of accounts comes only when the assessee is carrying on business activity. Hence, it is the contention of the assessee that it is not carrying on any business activity and the income earned on letting out of property is only incidental and is income from property and exempt under section 11 of the Act. Therefore, the question of maintaining separate books of account does not arise when the assessee is earning income from letting out of property and when such income is exempt under section 11 of the Act, as income from house property. Since we have already directed the Assessing Officer to examine the nature of activity and its income i.e. whether the income is derived as incidental to the objects of the assessee or as a separate business, this can be examined by the Assessing Officer in the light of our above observations. - Decided in favour of revenue for statistical purposes. Enhancement of income - CIT(A) directing the Assessing Officer to treat the cash credits of ₹ 1.00 crore as income from other sources - Held that:- As could be seen from the order of the Commissioner of Income Tax (Appeals) that the assessee has introduced ₹ 1.00 crore in its books of accounts as credits from unknown persons. As the assessee could not explain the source for the said credits or the persons from whom the loans were taken, the same were treated as unexplained credits assessable under the head 'income from other sources'. The Commissioner of Income Tax (Appeals) also held that the said ₹ 1.00 crore introduced by the assessee as credits also cannot be considered as application of income since this amount is not received by the assessee by way of any donation. This income is treated as deemed income under section 68 of the Act.On going through the above observations of the Commissioner of Income Tax (Appeals), we find no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) in sustaining the addition. - Decided against assessee. Penalty levied under section 271D / 271E - CIT(A) deleted the levy - AO while completing the assessment assessed the cash loans as unexplained credit under section 68 - Held that:- On going through the submissions of the assessee and the order of the Commissioner of Income Tax (Appeals), we find there is no good reason to interfere with the order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D / 271E especially when the Assessing Officer has treated the cash loans as unexplained credits and at the same time, invoking the provisions of section 269SS / 269T of the Act. This view is also supported by the Hon'ble Delhi High Court in the case of CIT Vs. Standard Brands Ltd., (2006 (7) TMI 126 - DELHI High Court ), wherein the Hon'ble High Court has held that "when the cash deposits were treated as undisclosed income of the assessee, the Assessing Officer could not resort to proceedings under section 269SS read with section 271D of the Act." - Decided in favour of assessee. Penalty levied under section 271D - cash loan from Smt. Meenakshi - CIT(A) deleted the penalty - Held that:- The assessee has obtained cash loan from Smt. Meenakshi, who is an assessee, the identity is proved, the genuineness of the transaction is proved, therefore, it cannot be said that the loan amount of ₹ 25,00,000/- is unaccounted income of the assessee. We also notice from the assessment order that the cash loans introduced by the assessee from other than Smt. Meenakshi have been considered as unexplained credits by the Assessing Officer which shows that the cash loans obtained from Smt. Meenakshi is genuine loan and no such treatment was given to this loan of ₹ 25,00,000/- by the Assessing Officer while completing the assessment. We also find that the assessee was forced to avail cash loans in order to meet the requirements of payments to bank for reducing the credit limit and to honour the cheques already issued. The Department has not filed any evidence to rebut the findings of the Commissioner of Income Tax (Appeals). In the circumstances, we sustain the order of the Commissioner of Income Tax (Appeals) in deleting the penalty levied under section 271D of the Act and no interference is called for. - Decided in favour of assessee. 2015 (3) TMI 966 Exemption under Section 11 - whether payments made by the assessee to one M/s Sivaraja Ramalinga Trust was not hit by Section 13(1)(c)? - CIT(A) allowed the exemption - Held that:- There is no dispute that M/s Sivaraja Ramalinga Trust, to which assessee had given money, was a Trust registered under Section 12AA of the Act. The A.R. has placed a copy of order under Section 12AA of the Act granting registration to such Trust. Two things are very clear. One is that M/s Sivaraja Ramalinga Trust was a Trust and second is that some of the trustees were common. However, in our opinion, trustees hold the property of the Trust in a fiduciary capacity and not as owners. The owners of the Trust property were always its beneficiaries and trustees were holding the property and income therefrom for the benefit of beneficiaries and not for themselves. We cannot say that just because two Trusts are having common trustees, they are related concerns. Trust will not fall within the concept of "concern" mentioned in clause (e) of sub-section (3) of Section 13 of the Act. Invocation of Section 13(1), in such a situation, was not at all warranted. CIT(Appeals) was justified holding that assessee was eligible for exemption under Sections 11 and 12 of the Act. We find no reason to interfere with the order of CIT(Appeals). - Decided against revenue. 2015 (3) TMI 965 Income from undisclosed sources - transaction of sale & purchase of shares - CIT(A) upheld the action of the AO in treating the income from long term capital gain as income from undisclosed sources on the ground that the whole arrangement or scheme is a money laundering device to convert the unaccounted money and to bring the same into the regular books of account in the garb of exempted long term capital gain on sale of shares - Held that:- Considering the totality of the facts of the case and relying on the decision of this Bench of the Tribunal in the case of Surendra Peety and others (2015 (3) TMI 921 - ITAT PUNE) and considering the fact that assessee has filed the relevant details before the Assessing Officer which have not been proved to be false or untrue and further considering the fact that the broker has not taken the name of the present assessee specifically we find no reason to reject the claim of long term capital gain as claimed by the assessee on account of sale of shares of Database Finance Ltd. We accordingly set-aside the order of the CIT(A) and direct the Assessing Officer to allow the claim of long term capital gain on account of sale of shares of Database Finance Ltd. - Decided in favour of assessee. 2015 (3) TMI 941 Entitlement to deduction under Section 80-IB(10) - AO declined the claim as assessee company did not develop and build any housing project of its own but merely executed the contract work awarded to it by the principals, i.e DDA and IRWO - ITAT allowed the assessee’s claim - Held that:- In the facts of this case, it is evident that the assessee was awarded both contracts as turnkey projects. The conceptualization, overall planning and execution, oversight of entire execution, deployment of personnel at various stages, etc. was with the assessee. In almost similar circumstances, the Gujarat High Court in Katira Construction Co Ltd v Union of India [2013 (3) TMI 416 - GUJARAT HIGH COURT] held the assessee to have engaged in the development and construction of a housing project. Since the assessee developed an infrastructure facility/project and was not required to maintain or operate, it was entitled to cost, plus the margin of income or profit; not to expect this treatment would render one who develops an infrastructure facility project, unable to realise its cost. If the infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Therefore, the mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue’s interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IB (10). The conclusions of the ITAT in this context were rendered after a detailed analysis of the facts and the contracts entered into by the assessee with IRWO and DDA. The narrow ground on which the AO concluded that the projects were “owned” by IRWO or DDA and that the assessee was only a works contracts, was unwarranted. - Decided in favour of assessee. 2015 (3) TMI 940 Interest on payment qua the license fee - whether could not be amortised in view of Section 35ABB - whether the licence fee payable by telecom service providers to the Department of Telecommunications is to be treated as capital or revenue expenditure? - Held that:- As decided Commissioner of Income Tax V. Bharti Hexacom [2013 (12) TMI 1115 - DELHI HIGH COURT] in the licence fee payable on or before 31st July, 1999 should be treated as capital expenditure and the licence fee payable thereafter should be treated as revenue expenditure. In view of the aforesaid position, the question of law admitted for hearing in this appeal as recorded in the order dated 21st August, 2013, has to be answered in favour of the revenue and against the respondent assessee.Capital expenditure will qualify for deduction as per Section 35ABB of the Act. - Decided in favour of revenue. 2015 (3) TMI 939 Interest under Section 234B - non-payment of advance tax - non deduction of tds - Held that:- As relying on DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION Versus GE PACKAGED POWER INC. AND OTHERS [2015 (1) TMI 1168 - DELHI HIGH COURT] no interest is leviable on the respondent assessees under Section 234B, even though they filed returns declaring NIL income at the stage of reassessment. The payers were obliged to determine whether the assessees were liable to tax under Section 195(1), and to what extent, by taking recourse to the mechanism provided in Section 195(2) of the Act. The failure of the payers to do so does not leave the Revenue without remedy; the payer may be regarded an assessee-in-default under Section 201, and the consequences delineated in that provision will visit the payer. - Decided in favour of assessee. 2015 (3) TMI 938 Qualify the income as exempt u/s. 10(1) - whether the assessee does not fall under agricultural operations? - Whether the assessee has departed from the basic agricultural operation and indulged into production of parent seeds by planned scientific and specialized procedures? - Held that:- If we examine the operations carried out by the assessee in the previous year relevant to the assessment year in appeal, we find that the production of basic seeds as well as hybrid seeds are the' results of basic agricultural operations carried on by the assessee-company in its own land as well as in leasehold land. The method of contract farming does not take away the character of the basic operations carried out by the assessee-company which are agricultural in nature. The assessee-company procures germ plasm and sows it in its own fields, and carries on all agricultural operations and produces the basic seeds. The basic seeds so harvested are again put through agricultural operations intimately connected with leasehold land for finally bringing out the hybrid seeds. Only for the reason that the basic seeds are sown in leasehold land and the manpower required is arranged through contract farming, it does not mean that the operations carried out by the assessee-company are not agricultural operations. As a matter of fact, it is to be seen that the assessee-company has carried out basic as well as secondary agricultural operations. Therefore, without any fear of contradiction, it is possible for us to hold that such entire income of the assessee is agricultural in nature which is to be excluded from the nature of total income. A similar issue again was decided by the Bangalore Bench of the Tribunal in favour of the assessee following assessee’s own case for assessment year 2002-03, holding that the income derived by the assessee from the production of foundation/basic seeds as well as hybrid seeds constituted income eligible for exemption under S.10(1) of the Act, being agricultural income. - Decided in favour of assessee. Disallowance under S.14A rwr 8D - CIT(A) deleted the disallowance - Held that:- As held in the case of Reliance Utilities Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY), if it is a case of mixed funds maintained by the assessee, there is a presumption that the own funds of the assessee are utilised for making the investment which has fetched the tax free income. Following this ratio and keeping in view the facts of the assessee, we are of the view that the investment of ₹ 20.30 crores having been presumably made by the assessee out of its own funds, no disallowance on account of interest expenditure under S.14A can justifiably be made. We therefore, uphold the impugned order of the learned CIT(A) deleting the disallowance of ₹ 1,48,00,979 made by the Assessing Officer on account of interest under S.14A read with Rule 8D. As regards the balance disallowance of ₹ 5,07,695 made by the Assessing Officer on account of other common expenses by applying clause (iii) of Rule 8D, we are of the view that the common expenses incurred by the assessee such as office and administrative expenses etc. can reasonably be attributed to some extent to the activity of making investment and the same therefore, are liable to be disallowed by applying the formula given in clause (iii) of Rule 8D. As such, the CIT(A), in our opinion, is not justified in deleting the disallowance made by the Assessing Officer in this behalf. We, therefore, modify the impugned order of the learned CIT(A) on this issue and restore the disallowance made by the Assessing Officer under Rule 14A read with Rule 8D to the extent of ₹ 5,07,695 - Decided partly in favour of revenue. 2015 (3) TMI 937 Transfer pricing adjustment - addition made to the total income consequent to determination of Arm’s Length Price - improper application of the RPT filter by the CIT(A)- Held that:- It is not in dispute before us that this Tribunal, in the cases of 24/7 Customer Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE ] and and Sony India Private Ltd. [2008 (9) TMI 420 - ITAT DELHI-H] as taken a view that comparables having RPT of upto 15% of total revenues can be considered. In view thereof, the Revenue’s grievance on this issue as projected in ground has to be allowed. It is held that the CIT(A) ought to have adopted a threshold limit of 15% of the total revenue attributable to related party transaction as ground for rejecting comparable companies. Consequently it is held that comparable companies having RPT upto 15% of the total revenues alone can be included. Selection of comparable - CIT(A) holding that profit on cost of more than 50% of the comparable company(ies) is abnormal - Held that:- The filter of companies dealing in software products and abnormal profits owing to amalgamation of the companies during the relevant period thereby showing abnormal profits was applied to exclude Exensys Software solutions Ltd. Infosys Technologies Ltd., was excluded for reasons of high turnover and high risk profile. Satyam Computer Services Ltd., has to be excluded from the comparable companies for non-reliability of financial data as it was involved in financial scam. Standard deduction of 5% of the arm’s length price allowed to the Appellant by the CIT(A) - Held that:- If the difference between the arithmetic mean of the profit margins comparable companies ultimately retained and the profit margin of the Assessee is more than 5% than no deduction under the proviso to Sec.92C(2) of the Act could be allowed to an Assessee. Although 12 comparable which were rejected on the basis of RPT being more than zero percent, one comparable viz., Four Soft Ltd., will have to be excluded since the RPT is at 19.89% and thus in excess of 15%. Sathyam Computers Ltd., and Infosys Technologies Ltd., will get excluded for the reason that the financial results are not reliable in the case of Sathyam Computers Ltd., and for the reason that the high turnover, brand value, high risks etc. The remaining 9 comparable companies which were excluded by the CIT(A) by applying the Related Party Transaction filter of 0% related party transaction will now have to be included. Also Foursoft Ltd., and Thirdware Solutions Ltd., should be excluded from the list of comparable companies. TATA Elxsi Ltd., should also be excluded from the list of comparable companies as is not functionally comparable with that of a software development service provider such as the Assessee. Appeal by the Revenue and the cross objection by the assessee is partly allowed. 2015 (3) TMI 936 Interest accrued - interest accounted as income by the assessee - sticky loans & advances - CIT(A) deleting the disallowance on account of accrued interest which is not credited to the P and L account treating it as double taxation - Held that:- The order of the CIT(A) is not clear as to how the interest receivable which are overdue have been accounted for by the assessee in its books of account. Admittedly, the assets side of balance sheet as on 31.3.2006 showed a sum of ₹ 6,61,50,558 as overdue interest. The overdue interest as on 31.3.2007 was ₹ 8,16,25,582. The difference between the two was a sum of ₹ 1,54,78,024. This interest ought to have been accounted by the assessee in its books of account, as admittedly, as per mercantile system of accounting, interest income to this extent is deemed to have accrued to the assessee. In the computation of total income, the assessee had only added a sum of ₹ 60,71,459. The remaining interest income of ₹ 94,06,565 ought to have been accounted as interest income. The explanation of the assessee before the AO was by placing reliance on the decision of UCO Bank (1999 (5) TMI 3 - SUPREME Court). It is thus clear that the claim of the assessee before the AO was that interest accrued not accounted for in its books of account are in relation to sticky loans & advances. The assessee has not furnished any explanation as to how the loans on which interest income was not offered to tax had become sticky? It was for this reason that the AO had made the impugned addition. We are of the view that the reference to the provisions of section 43D and its non-applicability to a cooperative bank is not relevant, because section 43D of the Act only statutorily recognizes the right of certain categories of assessees to account for interest on sticky loans, either in the year in which they choose to do so by credit the P&L account or the year of receipt. The said provisions will not affect any other assessee who is otherwise able to show that the interest income relates to loans which have become doubtful of recovery need not be accounted for as income. We therefore set aside the order of CIT(A) and remand the issue to the AO for fresh consideration - Decided in favour of revenue for statistical purposes. Disallowance of deductions for creation “BAD AND DOUBTFUL RESERVE” U/s 36(1) (viia) - whether the appellant bank does not come under the definition of “SCHEDULED BANK” or “NONSCHEDULED BANK” as per explanation (ia) of section 36(1) (viia)? - Held that:- As rightly contended by assessee as per law as it prevailed as on 1.4.2007 applicable to A.Y. 2007-08, the assessee which is a cooperative bank was entitled to deduction on account of provision for bad and doubtful debts. The AO as well as CIT(Appeals) have overlooked this aspect. We are, however, of the view that quantum of deduction to be allowed has to be worked out by the AO afresh, after affording opportunity of being heard to the assessee. We may also clarify that the deduction has to be computed in the manner laid down in the provisions and to the extent the provision is created in the books of account of the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of deduction on Interest on loans - Held that:- The AO has proceeded on the basis that since interest has to be accounted on receipt basis under the Karnataka Cooperative Societies Rules, 1960, the loans in question were sticky loans. In our view, such conclusions cannot be sustained. The claim made by the assessee in this regard about the nature of interest income and its time of accrual has to be accepted. The conclusions of the CIT(A) is again based on surmises and cannot be sustained. Neither the AO nor the CIT(A) called upon the Assessee to explain as to whether the interest income in question is interest on sticky loans which was accounted for as income only on receipt basis. As we have already observed, accounting entries in the books of the assessee regarding interest income assumed significance only after A.Y. 2006-07 when interest income became taxable in view of insertion of section 80P(4) to the Act w.e.f. 1.4.2007. Therefore, there is no merit in the observations of the CIT(A) regarding lack of entries in the books of account of the assessee for A.Y. 2005-06 and 2006-07. We are therefore of the view that it would it would just and proper to direct the Assessee to furnish evidence before the AO to show as to how the interest income in question is not interest on sticky loans which was accounted for as income only on receipt basis. For the reasons stated above, we set aside the order of the CIT(A) on this issue and remand the issue with regard to taxing the sum of ₹ 1,65,96,812 to the AO for fresh consideration - Decided in favour of assessee for statistical purposes. Disallowance of deduction being amount transferred from NPA Reserve, which represents the accumulated income of earlier years - Held that:- the assessee has started the computation of total income with profit as per P&L account and added and reduced certain sums. One such sum so reduced is ₹ 80 lakhs on account of amount transferred from NPA reserve created out of earlier year profits. The net loss for the year after such additions and reductions is a loss of ₹ 61,14,560. The AO has computed total income in the order of assessment fro the loss declared in the computation of total income of (-) ₹ 61,14,560. There is no further addition of ₹ 80 lakhs in the order of assessment. Therefore, the claim of the assessee for deduction of ₹ 80 lakhs has been accepted by the AO. Since the sum of ₹ 80 lakhs was already allowed as deduction by the AO, there can be no grievance by the assessee and the ground of appeal raised by the assessee before the CIT(A) in this regard is also held to be not arising out of the order of the AO - Decided against assessee. 2015 (3) TMI 935 Capital gains - assessee have entered into a development agreement with M/s. Sun Mark Builders on 04-11-2003 for development of property for construction of residential flats sharing the built up area in the ratio of 39:61 - Year of Taxability - Held that:- There is no dispute with the fact that before entering in to this agreement with M/s. Sun Mark Builders, assessees have entered into many agreements which did not fructify. However, that does not mean that this agreement also had the same fate. Considering the judgment of the jurisdictional High Court in the case of Potla Nageswara Rao vs. DCIT [2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT] and the facts of the case, we are of the opinion that the agreement entered into by assessees also satisfies the provisions of Section 53A of Transfer of Property Act, and therefore, the said transaction attracts the provisions of Section 2(47) ie. definition of transfer so as to attract capital gains during the impugned year. Sale Consideration to be adopted - A.O. while considering the sale consideration has taken two amounts for consideration, one amount is ‘sale consideration received under the guise of refundable deposit’ and other ‘value of constructed area of flats received in lieu of asset given for development’ in each case. - Held that:- A.O. cannot take both the amounts into consideration as it will be a double addition. To that extent, A.O. action cannot be upheld. It is also assessee’s contention that value of constructed area adopted by the A.O. is on the basis of the sale price of certain apartments and assessee’s were not given any opportunity to place their submissions. Since most of the orders are exparte, the assessee’s contentions that cost of construction of the builder should be adopted has not been examined at all. Therefore, in the interest of justice, we set aside this issue to the file of A.O. with a direction to adopt value of constructed area of flats in view land parted with, after giving due opportunity to the assessee. Assessees contention should be considered in its correct perspective and should not be brushed aside without any valid reason. With this direction, the issue of adopting value of sale consideration is restored to the file of A.O. - Decided in favour of assessee for statistical purposes. Cost of Acquisition - Held that:- Assessing Officer adopted amount of ₹ 1,18,835 in each case as cost of acquisition. It was the contention of the assessee that there were buildings on the said land which were demolished and the cost of which was also to be adopted. Therefore, cost of land alone cannot be adopted. Cost of buildings at the time of entering into agreement should be considered. In addition, assessee also claims to have paid lot of amounts to the tenants, unauthorized hutment dwellers as part of clearing the title along with litigation expenses. This expenditure also will form part of cost of acquisition. Subject to verification and furnishing necessary evidences, the A.O. is directed to examine, assessees contentions and allow the indexed cost of acquisition on the basis of facts and law. This issue also accordingly restored to the file of A.O. for fresh consideration.- Decided in favour of assessee for statistical purposes. Claim of deduction under section 54 and 54F - Held that:- Since assessees have entered into a development agreement of constructing residential properties in lieu of parting with the residential building, they are eligible for deduction under section 54/54F as the case may be. The A.O. had no occasion to examine this aspect as the assessment was completed exparte. Before the Ld. CIT(A), assessee made this claim which Ld. CIT(A) rejected on the reason that provisions of section 54F are not applicable. Ld. CIT(A) ignored the fact that alternate contention under section 54 is eligible to the assessee. Since we are setting aside the entire computation of capital gains to the file of Assessing Officer, he is directed to examine the aspect of claim of deduction under section 54/54F.- Decided in favour of assessee for statistical purposes. Assessment exparte - Failure of filing return of income itself will call for best judgment assessment - Held that:- Since no returns of income were filed by these assessees summons under section 131 dated 15.11.2011 were issued and served on the assessees. Assessees did appear on 22.11.2011 and while recording the statement they were asked why capital gain should not be assessed. Assessee have admitted that they will obtain the PAN and file returns of income. However, they have not filed returns of income as promised. Since the A.O. issued notice under section 148 calling for return and issued a show cause notice on 30.03.2011 and further also summons under section 131 but, there is no compliance by the assessees in filing the returns of income. We are of the opinion that A.O. is well within his rights to complete assessment exparte. Assessee was informed that capital gain will be levied and asked to explain under the provisions of Sec.131 itself. Eventhough a separateshow cause was not issued giving final opportunity this may at best be a procedural lapse. Since we are setting aside the assessments to the A.O. for redoing it, on the issue of computation of capital gains on merits, we are of the opinion that there is no merit in these contentions, as assessee themselves have not filed returns of income in spite of so many notices issued to the assessee. Accordingly, this issue is rejected. 2015 (3) TMI 934 Undisclosed stock - CIT(A) deleted the addition - Held that:- No difference in quantity of stock is reported by the Revenue. The AO has not made any enquiry in respect of the explanation of the assessee that the stock belonging to other entity was included into the stock statement submitted to its banker. The AO has observed that even if the stock of Auto Agency has been considered while submitting the stock statement of the company, then the stock statement ought to have exceeded the value as declared by the assessee before its banker. The claim of the assessee is that it was distributor of M/s.Eicher Motors Ltd., who subsequently appointed other entity, through which the assessee was making purchases. Undisputedly, the AO has not made any enquiry from M/s.Eicher Motors Ltd. with regard to purchases made by the assessee. No evidence is brought on record that apart from M/s.Eicher Motors Ltd. the assessee was also making purchases from third parties which has not been recorded by the assessee in its books of account. In the absence of such specific finding, we do not see any reason to interfere with the order of the ld.CIT(A). Therefore, respectfully following the ratio laid down in the judgement of the Hon’ble Jurisdictional High Court in the case of CIT vs. Veerdip Rollers P.Ltd.(2007 (10) TMI 376 - GUJARAT HIGH COURT), this ground of Revenue’s appeal is rejected. - Decided in favour of assessee. 2015 (3) TMI 933 Treatment of income from lease rent - Profits & Gains of Business or Profession OR Income from House Property - assessee reiterated its alternative claim that the income should be taxed under the head ‘Other Sources’- Held that:- Ld. CIT(A) has very categorically and correctly stated that provisions of Sec. 56(2)(iii) are not applicable on the facts of the case. In the light of the decision of the Hon’ble Supreme Court in the case of Shambu Investment wherein held that where prime object of the assessee under the agreement was to let out the portion of the said property to various occupants by giving them additional right of using the furniture and fixtures and other common facilities for which rent was being paid month by month. Income derived from the said property is an income from property and should be assessed as such - Decided against assessee. Computation of deduction u/s. 10A - CIT(A) reduced the allocation to 25% as pertaining to incurred for the purpose of providing technical services outside India and accordingly directed the AO to recomputed the deduction u/s. 10A of the Act - Held that:- It can be seen that the expenditures considered in the immediately preceding assessment years are identical to the expenditure considered during the year under consideration. A similar issue was considered in the case of Patni Telecom (P) Ltd. Vs ITO (2008 (1) TMI 452 - ITAT HYDERABAD-A ) wherein the issue was that the assessee had incurred certain expenditure on account of travelling allowance for the purpose of development of Software at clients cited outside India and had also incurred certain expenditure on the delivery of software booked under Internet Service Provider (ISP), since it got leased ISP line exclusively. It was explained by the Tribunal that if the quoted price is inclusive of such expenses, then consolidated value of the goods is only mentioned in the invoice. In a case where only value of goods is quoted, expense is borne by the supplier. The logic and reason behind this have been explained by the CBDT vide its Circular No. 564 dt. 5.7.1990 that the delivery of the goods should be free on Board. In respect of expenses incurred in foreign exchange in providing technical services outside India, the Tribunal observed that on reading of clause (iv) of Explanation -2 to Sec. 10A, it is evident that all expenses need not be reduced from consideration received in convertible foreign exchange for the purpose of calculation of ‘export turnover’ u/s. 10A of the Act. Only those expenses which are incurred in foreign exchange in providing technical services outside India are required to be reduced. Considering the facts of the case in hand, in the light of the decision of the Tribunal discussed hereinabove, we set aside the findings of the Ld. CIT(A) and direct the AO to allow the claim of deduction u/s. 10A as computed by the assessee. - Decided in favour of assessee. Deduction u/s. 10A on the profits in respect of Units I & II - loss of Unit-III be set off against the income computed under the head “Profits & Gains of Business or Profession” - Held that:- We find force in the contention of the Ld. Counsel wherein the Hon’ble High Court in case of Hindustan Unilever Ltd. Vs DCIT & Another [2010 (4) TMI 206 - BOMBAY HIGH COURT] has held that all the four units of the assessee were eligible u/s. 10B of the Act. Three units had returned a profit during the course of the assessment year, while one unit had returned a loss. Hon’ble High Court held that the assessee was entitled to deduction in respect of the profits of the three eligible units while the loss sustained by the fourth units could be set off against the normal business income. Facts being identical to the facts of the case in hand, respectfully following the decision of the Honb’ble jurisdictional High Court, we set aside the findings of the Ld. CIT(A) and direct the AO not to set off eligible unit with the profits of the ineligible unit - Decided in favour of assessee. Disallowance made u/s. 14A of the Act r.w. Rule 8D. - Held that:- A perusal of the assessment record shows that the AO has computed the disallowance u/s. 14A r.w. Rule 8D of the Act. It is a settled proposition of law that application of Rule 8D is w.e.f 2008-09 as held by the Hon’ble High Court of Bombay in the case of Godrej & Boyce Manufacturing Co. Ltd. Vs DCIT [ [2010 (8) TMI 77 - BOMBAY HIGH COURT] ]. Therefore, the action of the AO is not as per the settled position of the law. In our considered opinion, disallowance of ₹ 1,00,000/- would meet the ends of justice. We, accordingly direct the AO to restrict the disallowance u/s. 14A of the Act at ₹ 1,00,000/- - Decided Partly in favour of assessee. 2015 (3) TMI 932 Disallowance of depreciation on de-capitalised assets as directed by DRP - Held that:- The assessee is engaged in the business of trading of Xerographic Equipments, Printers, Scanners, Faxes, Multi Functional Devices and consumables parts thereof. The assessee leased out the equipments to the customers on an operating lease basis and these equipments are capitalised and depreciation is claimed for tax purposes in accordance with the provisions of the Act. These operating leased assets were returned to the assessee either on the termination of the lease or otherwise after a period of six months, then the assessee is following a practice to convert these assets into stock-in-trade at a nominal value of ₹ 1/- as these used assets are not having any readymade market for further leasing. This nominal value is reduced from the block of assets. In some of the cases, these assets are again leased out then they are recapitalized in the block of assets at the nominal value at which these were decapitalised. However, certain used assets remained in stock-in-trade and whenever these are sold, the profit is offered for taxation. This method of accounting is being followed consistently by the assessee. When the assets are recapitalized at the nominal value at which it is decapitalised then there is no effect on the taxability of the assessee. Similarly, whenever these used assets are converted into stock-in-trade and sold subsequently and the surplus on the sale is offered for taxation then there is no harm to the revenue. Considering all these facts, we allow this ground of assessee’s appeal. - Decided in favour of assessee. Disallowance of depreciation on the fixed assets which has been written off in the books of account and where the assets ceased to exist - Held that:- This issue is covered in favour of the assessee by the decision of Hon’ble Delhi High Court in assessee’s own case in assessment year 2008-09 to held that tax authorities were not justified in working out the depreciation on block of assets by reducing the value of assets which have either to be discarded or destroyed or sold or written off. - Decided in favour of assessee. Addition on changing the accounting policy - recognising the sale on completion of installation and acceptance by the customers as against on delivery followed in earlier years - Held that:- Assessee has adopted this accounting policy as per Standard 9 of Institute of Chartered Accountants of India. It has been constantly followed thereafter. Revenue is recognised on installation and acceptance of goods at the premises of the customers. In view of this factual matrix, we hold that this issue is covered in favour of the assessee by the decision of Hon’ble Supreme Court in CIT vs. M/s. Excel Industries Ltd. [2013 (10) TMI 324 - SUPREME COURT] wherein held that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party from whom the income becomes due to pay that amount. Hon’ble Supreme Court has also held that income accrued when it becomes due but it must also be accompanied by a corresponding liability of other party to pay the amount, only then can it be said that for the purpose of liability that the income is not hypothetical and really accrued to the assessee. - Decided in favour of assessee. 2015 (3) TMI 931 Interest under section 244A on interest granted - whether while issuing refund interest amount will take priority before principal amount? - CIT(A) allowed claim - Held that:- The learned Commissioner of Income-tax-Departmental representative stated that the computation of the Commissioner of Income-tax (Appeals) is wrong but he could not point out which part of the Commissioner of Income-tax (Appeals)'s order is wrong and how. He could not identify mistake in allowing interest under section 244A of the Act. Despite the entire facts available in the order of the Commissioner of Income-tax (Appeals), the learned Commissioner of Income-tax-Departmental representative could not point out any error, we feel that the directions of the Commissioner of Income-tax (Appeals) are as per law and we uphold the same - Decided against revenue. Non-deduction of TDS on reimbursement of cost for providing access to system and management audit methodology updates, etc. - CIT(A) deleted disallowance u/s 40(a)(ia) - Held that:- We find the factual position that the assessee-company is a member of the international organisation of Ernst and Young and its several associate concerns worldwide. Ernst and Young Global Services LLP and Ernst and Young U. K. LLP provide administrative and management support services in connection with technology updates, system and methodology and upgrades, training through webs, etc. to the assessee and to other associate concerns of the group. The assessee and its other associate concerns share the costs. A sum of ₹ 6,88,12,554 was reimbursed to Ernst and Young Global Services LLP and a sum of ₹ 23,78,781 to Ernst and Young U. K. LLP by the assessee during the current assessment year on account of its share of costs for such services. Accordingly, arrangement was arrived at for such services to be developed in a pool by the said two concerns to which the member firms would have access to it and reimbursing their respective shares of cost incurred therefor. Such reimbursement was agreed on the basis of respective turnover of the member firms. These facts are not denied by the Revenue even now before us and these are reimbursement of expenses. Once these are reimbursement of expenses the assessee is not liable to deduct TDS under section 195 of the Act. - Decided against revenue. Disallowance invoking the provisions of section 14A read with rule 8D - Held that:- Exempted income is to the extent of ₹ 76,34,047 in assessment year 2006-07. Rule 8D of the Rules is not applicable in this assessment year in the assessee's case as held by the hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] being prospective. We direct the Assessing Officer to restrict the disallowance at one per cent. of the exempted income. - Decided partly in favour of assessee. Disallowance of provision for leave encashment - Held that:- According to assessee this amount was added back in the computation of income filed with original return of income in pursuance to section 43B(f) of the Act. The hon'ble apex court in the case of Exide Industries Ltd. [2009 (5) TMI 894 - SUPREME COURT] has stayed the operation of the judgment of the hon'ble Calcutta High Court [2007 (6) TMI 175 - CALCUTTA High Court] who stuck down the provisions of section 43B(f) of the Act as being arbitrary and ultra vires. Once this is the position, we restore back this issue to the file of the Assessing Officer to adjudicate the same afresh - Decided in favour of assessee for statistical purposes. 2015 (3) TMI 930 Exemption under section 10B - disallowance of claim by CIT(A) concluding that supplying of computer software solution to various shipping companies is not export income from sale of such softwares - Held that:- Software is generally developed by the software company and then the same is sold to various customers. The normal procedure for such sale is through a licence agreement by which the customer get to use the software. But the source code is normally not provided because that will enable the customer to make any number of copies and the developer would lose the premium which it can receive by selling it to various customers. We are of the opinion that example of selling of a book would clarify the situation. Whenever a person buys a book, he gets the right to read but he does not get the copyright to produce the copies or any content of such books which does not mean that the books seller has not sold the books or customers has not purchased the books. Similarly it can be said about the usage of law journals which are being sold or purchased on licence basis. From the case of Tata Consultancy Services v. State of Andhra Pradesh [2004 (11) TMI 11 - Supreme Court] it is clear that transfer of right to use the software in media form, i.e., in the form of compact disc, etc., was held to be sale of goods. Thus even the usage of the rights in a product would amount to export, therefore, in our opinion when the assessee has developed and sold the software on licence basis, the same would amount to sale for the purpose of deduction under section 10B, accordingly we set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow the deduction under section 10B of the Act. - Decided in favour of assessee. Benefit of exemption under section 10B - CIT(A) allowed the claim as the company is doing data entry work as per agreement and does not fulfil the condition laid down under section 10B? - Held that:- As relying on case of Bebo Technologies P. Ltd. [2011 (4) TMI 870 - ITAT, Chandigarh ] wherein objection of the Assessing Officer regarding non-availability of production data has no merit as the assessee is carrying out back office operations for its clients which is a project of service industry for which production data is not required - Further, finding of the Assessing Officer that there was restructuring of business already in existence as the assessee was found to be operating from three different places and no new computers were purchased by the asses see for carrying on its business is also not correct - Assessee was carrying on its business in two units at Chandigarh while its registered office is located in Mohali where no business activity was carried out-There was no restructuring of business-assessee has carried out its work on loaned equipments and evidence in this regard has been considered by Commissioner of Income-tax (Appeals)-There is no merit in the observation of the Assessing Officer that non-mentioning of the location from where invoices were issued disentitled the assessee to the claim of exemption under section 10B-There is no requirement to furnish the addresses of the individual places from where services were rendered as against mention of registered office on the invoices-Assessee has furnished the registration under the STPI as a 100 per cent. export-oriented unit. Therefore, the assessee is entitled to deduction under section 10B - Decided in favour of assessee. 2015 (3) TMI 929 Entitlement to the benefit under section 11 - AO while completing the assessment noticed that the assessee-trust advanced interest-free loans to certain other trusts treating such advances are in violation of the provisions of section 13(1)(d) read with section 11(5) - CIT(A) allowed the benefit - Held that:- Respectively following cases of Mamallan Educational Trust [2015 (3) TMI 966 - ITAT CHENNAI] and Young Men's Christian Association [2015 (3) TMI 967 - ITAT CHENNAI] we hold that advancement of interest free loans to other charitable institutions registered under section 12A of the Act having similar objects are not in violation of the provisions of section 13(1)(d) read with section 11(5) of the Act. In this case, admittedly the other charitable institutions to whom interest free loans were given by the assessee are registered under section 12A/12AA of the Act having similar objects. In such circumstances, there is no violation of the provisions of section 13(1)(d) read with section 11(5) of the Act in the case of the assessee by advancement of such interest free loans to such charitable institutions, we sustain the order of the Commissioner of Income-tax (Appeals) on this issue. - Decided against revenue. Disallowance of depreciation - Held that:- As relying on ITO v. Coimbatore Stock Exchange Ltd. [2013 (6) TMI 903 - ITAT CHENNAI] we allow the grounds of appeal of the assessee on this issue in allowing the claim of depreciation as a part of utilisation of the assessee. - Decided against revenue. Corpus donations - whether the corpus donations shall not be included in the total income as per the provisions of section 11(1)(d) of the Act? - Held that:- The Commissioner of Income- tax (Appeals) was of the view that since ₹ 82,70,000 out of corpus donations there is no specific directions/purposes for which it has to be used he has construed that it should form part of income though they are corpus donations. This finding of the Commissioner of Income-tax (Appeals) appears to be not correct. Section 11(1)(d) stipulates that voluntary contributions made with a specific direction that it shall form part of corpus of trust should not be treated as income of the previous year. The provision did not say that the purpose for which such donation is given should be specified. The requirement of the section will be satisfied once the donation is specifically for the corpus fund. In the circumstances, we hold that the entire corpus donations of ₹ 1,77,70,000 received by the assessee shall not form part of the income of the assessee as they are given towards the corpus fund. - Decided in favour of assessee. 2015 (3) TMI 928 Mine closure obligation - whether it is not an ascertained liability and if at all any expenditure is to be allowed, it should be spread over evenly for all the years since the date of commencement of mining operations till the date of closure of mining activities? - Held that:- mine closure obligation is not a contingent liability but ascertain liability. However, it has to be verified that whether assessee has made the claim on the mines which are in working condition which are being operated or not. If the assessee has made the claim on mines which have not started operations, the same cannot be allowed. As rightly held by the CIT(A) in A.Y. 2008- 09, ascertainability of liability is to be ascertained year-wise. Therefore, to that extent, following the Coordinate Bench decision, we direct the assessee to furnish the relevant data to the A.O. towards the mines closure obligation and A.O. is directed to verify and allow the amount accordingly. - Decided in favour of revenue for statistical purposes. Depreciation on intangible assets - CIT(A) allowed the claim holding that the leasehold land is an intangible asset and depreciation on such asset is allowable when intangible assets are such assets which cannot be touched or can be seen - Held that:- Issue is squarely covered by the decisions of the coordinate benches of ITAT, Hyderabad in assessee’s own case for AYs 2008-09 and 2010-11, allowing the assessee’s claim of depreciation - All expenses are incurred for the purpose of business and are incidental to the holding of rights were claimed u/s.32(1)(ii) being the license to carry out the mining therefore could not be denied insofar as the Government and the lessee are in control of the asset. The definition of depreciation therefore has been misconstrued for the purpose of allowing deduction by the Assessing Officer and the learned CIT(A) in holding a view on the promulgation of Section 32(1)(ii) with effect from the year 1998-99 which has been further amended w.e.f. Assessment Year 2003- 04. In this view of the mater, we are inclined to hold that the assessee is entitled to depreciation as charged to the P & L account in accordance with its business exigencies. - Decided against revenue. Expenses incurred towards corporate social responsibility disallowed - Assessee incurred an amount of ₹ 37,33,00,000 towards flood relief, payments made to various collectorates etc. and claimed that these payments were in the nature of business expenditure and hence allowable as deduction - CIT(A) directed the AO to allow the said expenditure - Held that:- The issue in dispute is squarely covered by the decision of coordinate bench in assessee’s own case for AY 2005-06 wherein held as the contribution of ₹ 5 crores is only a welfare measure for the upliftment of the Adivasis in the locality where the mining unit was situated and also for the welfare of the employees of the assessee. This contribution would definitely go a long way in conducting the assessee’s mining business in a profitable manner. When the assessee is having a mining unit in a remote corner of the country, the cooperation of the villagers is very much required for conducting the business. More particularly, the cooperation of the people who are affected by the mining operation of the assessee is required. Merely because the hospital and medical college are situated 16 kms away from the unit, that will not deter the medical institution in giving treatment to the affected people. Moreover, admission was given to the children of the assessee’s employees in the medical college. Therefore, indirectly the contribution made by the assessee takes care of the education of the employees’ children. This would certainly be a welfare measure on the part of the assessee for carrying out the business in an effective and efficient manner. Therefore, in our opinion, the contribution has to be treated as revenue expenditure for the purpose of the business. - Decided against revenue. 2015 (3) TMI 927 Inclusion of CENVAT credit for valuing the closing stock - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that if adjustment on account of CENVAT credit is made to the closing stock then corresponding adjustment will have to be made to the opening stock, purchases and sales and on the basis of statement annexed to the tax audit report, he has given a finding that there would be no impact on the final profit. CIT(A) has further relied on the decisions in the case of Bharat Bijlee vs. ACIT [2011 (3) TMI 1012 - ITAT MUMBAI] and Ashwin Shah vs. ACIT [2009 (12) TMI 708 - ITAT AHMEDABAD]. Before us, Revenue has not brought any material on record to controvert the findings of the CIT(A) nor has brought any contrary binding decision in its support. We therefore find no reason to interfere with the order of CIT(A) - Decided against revenue. Disallowance of employee’s contribution to ESIC - CIT(A) deleted disallowance - Held that:- In view of the undisputed fact that the Employees share of contribution of ESIC was paid after the prescribed due date, and following the decision of Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation (2014 (1) TMI 502 - GUJARAT HIGH COURT), and in the absence of any contrary binding decision, we are of the view that the AO was justified in disallowing the belated payments - Decided in favour of revenue. Disallowance made u/s. 14A r.w.r. 8D - Held that:- Considering the fact that the Assessee has stated that investments have been made in earlier years and the disallowance u/s. 14A is in excess of the tax free income. We therefore set aside the issue to the file of AO to re-examine the issue as relying on Joint Investments Pvt Ltd Versus Commissioner of Income Tax [2015 (3) TMI 155 - DELHI HIGH COURT] and thereafter decide the issue in accordance with law and after giving reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of travelling expenses - AO while disallowing the expenses has noted that the expenses were incurred on account of trip by cruise ship by director and his family. The aforesaid finding of AO has not been contorverted by ld. A.R. We find that CIT(A) while restricting the addition has noted that AO while disallowing the expenses had not even mentioned the countries visited by the directors nor had analyzed the expenses. At the same time, he also noted that assessee has failed to establish that the entire expenditure was wholly and exclusively incurred for the purpose of business - Held that:- Before us, ld AR has submitted that the disallowance in the year under consideration is on a higher side and be restricted to 25% as made by AO in subsequent years. On perusing the orders passed by AO u/s. 143(3) of subsequent years, we find that the issue of trip by cruise was not in those years and therefore we do not find force in the submission of ld. AR to restrict the disallowance at 25%. It is also a fact that against the partial relief given by ld. CIT(A), Revenue is not in appeal. Before us, Ld. AR has not brought any material to controvert the findings of CIT(A) and therefore we find no reason to interfere with his order and thus this ground is dismissed. - Decided against assessee. 2015 (3) TMI 926 Contribution under U.P. Sheera Niyantran Adhiniyam - whether is required to be added for the purposes of computing 'Book Profit' under section 115JB of the Act as the same is in the nature of reserve not specified under section 33AC of the Act? - whether the assessee has no right over the amount transferred to Molasses Reserve Fund due to overriding title - Held that:- The assessee company has transferred impugned amount to a reserve which has not been specified u/s 33AC of the Act, therefore, as per Explanation 1 attached to provisions of section 115JB of the Act, the book profit is required to be increased by the amount carried to any reserve account. We also note that the AO has rightly relied on the decision of Hon’ble Apex Court in the case of State Bank of Patiala reported as (1996 (3) TMI 128 - SUPREME Court) wherein it was clearly held that the issue of what construes “reserve” and “provision” and the ratio laid down in these decisions clearly enlighten us that to constitute a reserve, a particular amount set aside out of the profit and other surpluses, should be such as not designated to meet a liability, contingency, commitment or diminution in the value of assets known to at the date of balance sheet. Hence, the reserve can be set aside out of the profits and surpluses and the same cannot be claimed as deduction because it is not an expense laid out for the purpose of business. Coming to the facts of the present case, the contribution to the Molasses reserve fund can be viewed as a provision in nature and it is not an actual liability and the provision created for additional storage facility is obviously in the nature of provision for contingent liability, therefore, the impugned amount being contingent in nature deserves to be added back while computing income u/s 115JB of the Act. Finally, we reach to a conclusion that the action of the AO as well as order of the CIT(A) is well founded and justified and we are unable to see any perversity, infirmity or any other valid reason to interfere with the same on this issue. - Decided against assessee. Addition of capital subsidy to the book profits while computing income under the section 115JB of the Act - Held that:- t has already been accepted by the Hon’ble High Court in assessee’s own case for AY 1990-91 that the subsidy received by the assessee is in the nature of capital subsidy, hence, the same cannot be treated as revenue and thus, the income approach of accounting for capital subsidy received as government grant is not applicable in this case as per AS-12 where in para 5.2 it has been made clear that the capital approach is to be followed in respect of government grants and it is inappropriate to recognise government grants in profit and loss statements because they are not earned to represent an incentive provided by the government. Accordingly, conclusion of the CIT(A) on this issue is not found to be sustainable and we demolish the same by directing the AO that the amount of capital subsidy to the book profits while computing the income u/s 115JB of the Act is not an appropriation of profits and there is no such debit to the profit and loss account for the alleged appropriation and, therefore, the same cannot be added while computing the income u/s 115JB of the Act - Decided in favour of assessee. Depreciation disallowed - Held that:- As relying on CIT vs Yamaha Motor India Pvt. Ltd. [2009 (8) TMI 27 - DELHI HIGH COURT] we are inclined to hold that the AO was not justified in disallowing the depreciation to the assessee on the assets which were discarded and transferred to the stores and spares during the financial year under consideration. The CIT(A) was not correct in confirming the order of the AO on this issue and thus, we dismiss the same and direct the AO to allow the depreciation to the assessee on discarded assets in the light of our foregoing discussion on this issue - Decided in favour of assessee. Disallowance of miscellaneous receipts - Held that:- CIT(A) enhanced the addition without issuing any notice and affording due opportunity of hearing for the assessee, therefore, the order of enhancement is not sustainable as per provisions of the Act and well-accepted principles of jurisprudence. In this situation, we are of the considered view that the ends of justice would be met if the issue is restored to the file of the CIT(A) for a fresh adjudication after affording due opportunity of hearing for the assessee for this limited purpose only. - Decided in favour of assessee for statistical purposes . 2015 (3) TMI 925 Treatment to loss - business loss v/s speculation loss - Held that:- Ld. Counsel for the assessee has demonstrated that one of the objects of the assessee-company is financing and major portion of the capital is deployed for the purpose of advancing loan. Even in the balance-sheet, the interest income is shown as ₹ 64,98,590/-. Therefore, we do not find any good reason to interfere into the order of the ld. CIT(A) directing the Assessing Officer to treat the loss of ₹ 68,49,965/- as business loss instead of treating the same as speculation loss. - Decided against revenue. Sham transaction - CIT(A) confirming the transaction entered with related parties as sham transaction in respect of loss incurred in share & securities - Held that:- The assessee sold the shares prior to purchases. The assessee sold shares at lower rates and within a day or two days purchased at higher rates and claimed losses on such transactions. The assessee could not offer explanation as to why such transactions were required to be executed between the family members leading into artificial losses.All transactions were off market transactions and were not executed through stock exchange.Shares were not actually delivered between the assessee and the concerned persons. All the transactions were only paper transactions, i.e. no delivery was effected for sales/purchases of shares.Bank pass book reveals that the assessee company had paid the difference (loss amount) on such transactions to these persons. No amount was received or paid by the assessee company on sales and purchases of such shares. The assessee has entered into speculation activities to avail the artificial loss created by such alleged transactions which were set off against the interest income. The gain arisen on such transactions have been shown by all these persons as income from other sources in their returns of income. Where purchase and sale of shares were done through cheques, which were not encashed, so that there was no movement of funds, the transactions being as between these persons and the assessee company itself without any explanation as to the need for the circumstances of transactions, such transactions could only be considered suspicious and are to be treated as sham transactions.Without prejudice to above, if at any stage it is held that the sham transactions are genuine, then also, the share transactions are in the nature of speculative transactions as per section 43(5) of the IT, Act, as no delivery was effected in this case on such transactions. These observations of the Assessing Officer have not been controverted by the assessee by bringing any contrary material on record. - Decided against assessee. 2015 (3) TMI 924 Revision u/s 263 - order passed by Assessing Officer is erroneous as he had not verified the credit of prior period expenditure which should have been considered under the provisions of Section 41(1) and also under the provisions of Section 115JB - Held that:- Coming to the issue of addition of prior period expenditure as income, Ld.CIT directed the Assessing Officer to examine and consider the amounts u/s.41(1). It was the contention of assessee that this amount has never been claimed as a deduction. As seen from the consequential order passed by Assessing Officer on the directions of the CIT, Assessing Officer without examining the amounts, added the entire amount as income u/s.41(1) on the pretext of assessee's failure to prove as the amount was not claimed as a deduction u/s.43B. We are surprised about the action of the Assessing Officer. Assessee is in a position to furnish the details and reconcile the amounts of how much was claimed as expenditure, how much was disallowed and amounts waived by the bank. Since these details are not considered by Assessing Officer and not examined in its correct perspective, we are of the opinion that these require reconciliation year-wise. Prima facie, we are of the opinion that assessee has not claimed any amount as deduction, therefore, addition u/s.41(1) may not arise. Since this issue was not examined by Assessing Officer in correct perspective, we are of the opinion that the Assessing Officer has to examine the same before considering any amount of disallowance. Therefore, reiterating the direction of the CIT we direct the Assessing Officer to examine and consider the same for addition, if any u/s.41(1). Decided in favour of assessee for statistical purposes. Direction of the CIT on the inclusion of prior period income under the provisions of Sec.115JB - Held that:- The computation has to start from the final figure of P&L A/c and necessary adjustments as provided in Explanation to Section 115JB has to be considered, while computing the book profit for the purpose of 115JB. The CIT also made a mistake in directing to take a different amount. There seems to be no inquiry under the provisions of Section 115JB while completing assessment u/s 143(3) therefore to that extent, order of the Assessing Officer is not only erroneous on the facts but also on the principles of law. We therefore uphold invoking the jurisdiction by CIT on the order of Assessing Officer. Since amounts adopted by CIT is not correct, while upholding the jurisdiction of the order of the CIT on 263, we set aside consequential order passed by Assessing Officer and restore the issue to the file of Assessing Officer to re-do the exercise of reconciliation of amounts of prior period income and computing the income u/s.115JB as per the provisions of the Act, after giving due opportunity to assessee to make submissions which should be examined and properly considered.- Decided partly in favour of assessee for statistical purposes. Direction of CIT on claiming of normal depreciation and additional depreciation - Held that:- This issue has been examined by Assessing Officer in the original assessment proceedings, therefore, the CIT direction to re-examine the issue does not arise, as it is contrary to the provisions of the Act. CIT cannot substitute his opinion and direct the Assessing Officer to re-examine the issue which was already examined and accepted by Assessing Officer. As seen from the consequential order passed by Assessing Officer also, he did not make any disallowance on this issue which indicate that there is no error in the original order passed - Decided in favour of assessee. 2015 (3) TMI 923 Estimation of gross profit on sale of almonds - assessee is aggrieved by the decision of Ld CIT(A) in enhancing the income by peak credit amount of ₹ 45,01,668/- and also in confirming the gross profit addition by ₹ 1,13,69,590/- - Held that:- There is merit in the contentions of the assessee. Before us, the assessee has furnished the order of assessment of tax made under MVAT Act (Value added Tax - Sales tax). We notice that the commercial tax authorities have accepted the turnover reported by the assessee. When the authorities who are mainly concerned with the amount of ‘turnover/ sales’ have accepted, then, prima facie, the accounts appear to be correct. AO has applied the average gross profit rate of 16.05% on the entire cost of purchase of almonds. However, the Ld CIT(A) has noticed that the assessee has incurred loss only on the purchases made to the extent of ₹ 14.21 crores. Thus, the remaining sales have been made above the purchase cost. Hence, the Ld CIT(A) has taken the view that the estimated gross profit rate should be applied only the above said purchases of ₹ 14.21 crores. In our opinion, this approach of the Ld CIT(A) appears to be reasonable one., i.e., when the AO is suspecting about the claim of loss on sale of almonds, there is no reason to disturb the sales made with profit. Hence, in our view, the AO was not justified in applying the gross profit rate on entire cost of purchase of almonds and to that extent the view of the Ld CIT(A) stands justified. - Decided in favour of assessee. Rejection of books of accounts - Held that:- AO has completely failed to disprove the claim of the assessee that it has to sell almonds at lower than the cost rate due to substandard quality. Under these set of facts, in our view, the AO has proceeded to reject the book results only on the basis of surmises and conjectures. It is a well settled proposition that the suspicion, howsoever strong it may be, cannot justify the action of the assessing officer. Hence, in our view, there is no enough material on record to warrant or justify the action of rejection of book results. Accordingly we are of the view that the Ld CIT(A) was not justified in upholding the action of rejection of book results.- Decided in favour of assessee. The view expressed by the AO on application of sec. 40A(2)(b), in our view, was not correct, since the assessing officer has not proved by way of any material that the purchase price paid by the assessee in excess of market rates.Since, we have set aside the decision of the tax authorities on rejection of book results, the consequent estimate of gross profit is also liable to rejected. Accordingly, we set aside the order of the Ld CIT(A) on the issue relating to addition of gross profit and direct the AO to delete the addition made on account of difference in Gross profit/sales amount. - Decided in favour of assessee. Assessment of peak credit balance in the bank accounts - Held that:- We have earlier noticed that the AO did not make any addition on this account, since he has accepted that the said deposits have been made out of cash sales only. We notice that the Ld CIT(A) has also accepted the said fact, but he has entertained the view that the assessee has made certain gains in routing the cash sales proceeds through the bank account. We have earlier noticed that the sales effected in cash was shown as credit sales in the books of account. The cash realized on making the cash sales was deposited into the bank accounts of other persons and cheques were received. Those cheques were credited against the debtors. In our view, the above said procedure would not give rise to any gain as assumed by the Ld CIT(A). Accordingly, we are of the view that there is no justification in treating the peak credit of bank accounts as income of the assessee. Accordingly we set aside the order of Ld CIT(A) on this issue. - Decided in favour of assessee. 2015 (3) TMI 922 Fraudulent share transactions - CIT(A) confirming sale consideration of ₹ 55,54,250/- claimed as giving rise to long term capital gains, as unexplained cash credit u/s. 68 - Held that:- The transaction about purchases of shares in physical form of such companies whose share prices have been rigged by some fraudulent operators cannot have any direct evidences. An inference about such a purchase connived with such companies have to be drawn on the basis of the circumstances available on the record. As pointed out, the shares have been transferred within 4 days of the date of purchases raises ample doubt about the credibility of the company. As pointed out in all probabilities, the company must have been involved in such fraudulent transactions. Post year 2000, it is improbable that any person would transact in shares by taking physical delivery of the shares. When many instances have been surfaced relating to bad delivery or bogus scrips, the regulatory authorities have made it compulsory to transact through Demat account. Having regard to the circumstances and the conduct of the assessee as disclosed in his statement u/s. 132(4) of the Act as well as other material on record , inference could be reasonably drawn that the shares purchased by the assessee have been backdated to give it a colour of Long term capital gain by showing the period of holding for more than 12 months. Needless to say that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities, therefore applying the test of preponderance of probabilities and considering the entire sequence of events, the revenue authorities have rightly concluded that the assessee’s claim about the long term capital gains from the sale of shares is not genuine.Therefore, it cannot be said that the explanation offered by the assessee in respect of the sale consideration has been rejected unreasonably and that the findings that the said amounts are income of the assessee from other sources is not based on evidence. Accordingly, findings of the Ld. CIT(A) are confirmed. - Decided against assessee. Estimation of expenditure at the rate of 5% of the sale consideration as unexplained expenditure u/s. 69C - Held that:- As we have decided ground No. 1 on preponderance of probabilities then taking leaf out of our findings, there is no doubt that such transactions involve certain money paid to the operators/arrangers of such fraudulent capital gains. The Revenue authorities have reasonably calculated 5% of the sale consideration. Therefore, no interference is called for. - Decided against assessee. 2015 (3) TMI 921 Genuity of transaction - contract notes, and broker's bills etc., found and seized in the course of search action and proved to be bogus by the statement of the brokers who issued these broker notes do not amount to be incriminating material as held by CIT(A) - CIT (A)holding that the income claimed as long term capital gains cannot be held as business income as adventure in nature of trade - Held that:- On the basis of the above factual discussion, not much reliance should be placed on statements made by the assessee during the course of search because no corresponding seized material was found in the course of search to justify the additions in question. The verbal statement of the assessee without any connection with the other materials found during the search cannot be considered to be materials found during the search. Relevant income tax returns for the past years were filed prior to the search in the normal course suo moto disclosing the particulars of subject additions which stood accepted u/s 143(l) of the Act. Assessment as contemplated u/s 153A is not a de novo assessment and additions made therein, has to be necessarily restricted to undisclosed income unearthed during search. There is nothing on record to suggest that any corroborative evidence was found to justify the addition in question. The first appellate authority held that the issue of genuineness of the claim of LTCG and STCG of assessee group should be judged independently on the strength and merit of documentary and other third party contemporary evidences, irrespective of the admission/retraction of the assessee. This exercise was carried out by the first appellate authority in the subsequent part of the order. In the light of the above the appellant submitted that in view of the voluminous documentary evidence and material on record and there being no material in the possession of the Assessing Officer to rebut the said evidence, the transactions of purchase and sale of shares were conclusively proved by the appellant. The same should not have been washed away by the revenue by indulging in assumptions and arbitrary conclusions, and by selectively referring to some stray pieces of so-called evidence. Drawing inferences which on the face of it is not tenable. The Assessing Officer failed to provide adequate opportunity to the appellant for cross-examination of brokers whose statements were recorded behind the back of the appellant and were used to the detriment of the appellant. The Assessing Officer did not refer to the various replies filed by the assessees to Assessing Officer's queries. All these have rendered the assessment order to be bad in law and absolutely unjustified.he objectives are kept in view of the context of framing assessments under new provisions - 153A, it would indicate that the basic structure of search assessments are retained and the new provisions aim at trust based, hassle free assessment. If these are the avowed objectives, the search related assessment should base on evidence found on search. In course of search, no such evidence was found indicating that the share transactions are bogus. Hence the assessment made by the Assessing Officer on surmises and presumptions is not sustainable. The assessee is not concerned with the modus operandi of the broker's trading with its other clients. As long as he had purchased and sold the shares of the assessee through known and accepted procedure, the broker's misdealing with others should not be a criteria to suspect the appellant's genuine share transactions and capital gain thereupon. If these brokers were suspended by SEBI subsequent to the assessee's company's dealing with them, it is the matter between SEBI and the broker and the assessee company is not concerned in any way unless action is based on transactions including assessee's transactions. There is nothing on record to suggest that transactions with assessee are also basis for SEBI's action against alleged brokers. The Hon'ble Kolkata High Court in the case of CIT vs. Korlay Trading Co. Ltd. (1998 (2) TMI 104 - CALCUTTA High Court) held that once the assessee has furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amount of sale money, etc., the assessee had discharged its initial burden and if the broker did not maintain any accounts, the transaction could not be doubted for no fault of the assessee. Considering the totality of the facts of the case and relying on various decisions cited supra and considering the elaborate discussion by the Ld. CIT(A) we find no infirmity in his order accepting the Long Term Capital Gains and Short Term Capital Gains declared by the assessee. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee. Customs 2015 (3) TMI 948 Denial of exemption claim - import of copper concentrates failing under CTH 2603 00 00 - benefit of Notification No. 24/2011-Cus. Dated 01/03/2011 - an assay certificate from the mining company is required to be furnished for getting deduction of the value of gold & silver content contained in the copper concentrate - Held that:- Notification No. 24/2011-cus dated 01/03/2011 does not contemplate an option to be given by an importer to either stick to provisional assay certificate percentage or final assay report. However, it is correctly pointed out by Learned AR that Notification No. 24/2011-cus only talks of an assay certificate from the mining company to specify separately the contents of silver & gold. There is no objection by the department for accepting final assay certificate when imports are directly from the mining company when Final assay certificate of the mining company is accepted both for finalising provisional assessments and for allowing exemption under Notification No. 24/2011-cus. However, it will be unfair if appellant is disallowed exemption when final assay certificate is given by an agency other than the mining company, but Notification No. 24/2011-cus does not provide for such acceptance. For a feasible solution it will be appropriate to take the value content of gold & silver, either in the provisional assay certificate or in the final assay certificate produced by the appellant, which ever is less, for allowing the benefit of Notification No. 24/2011-cus when final assay certificate is given by an agency other than the mining company. - Decided conditionally in favour of assessee. 2015 (3) TMI 947 Rectification of mistake - Sludge mistakenly charged to duty - Whether an error committed by the Adjudicating Authority in his order dated 25.05.2007 could have been rectified as per the provisions of Section 154 of the Customs Act, 1962 - Held that:- charging of duty on sludge in order dated 25.05.2007, which was not otherwise payable as per the prevailing practice, is definitely a case of rectification within the language of provisions contained in Section 154 of the Customs Act 1962. Lower authorities were not justified in saying that such a mistake/ error on the part of adjudicating authority cannot be rectified as per the provision of Section 154 of the Customs Act, 1962. Accordingly, appeal filed by the appellant is required to be allowed for carrying out suitable rectification in the order dated 25.05.2007. - Decided in favour of assessee. 2015 (3) TMI 946 Denial of duty drawback claim - licence fee was paid for right in India and the value of Licence Fee is neither paid nor payable at the time of export - Held that:- applicant sought to export goods under claim of drawback for value including value of Licence Fee of US $ 4000 against which duty was paid at the time of import. Government observes the applicant paid duty at the time of import under protest as the customs authorities at the time of import held that such licence fee should be chargeable to duty. When the applicant paid duty ‘under protest’, he ought to have sought the option of refund in terms of Section 27(1) of the Customs Act, 1962, which he failed to do in this case. Admissibility of drawback is governed by Section 74 of the Customs Act, 1962, which requires certain conditions to be fulfilled. Export goods should be identified w.r.t. goods which were imported. Such identification is possible only when such goods are tangible in nature. Identification as required under said Section 74(1)(a) cannot be established for intangible items. In this case ‘Licence Fee’ for the purpose of export cannot be treated as tangible items so that identity could be established. Government further finds observation of the original authority logical that value of ‘licence fee’ could be added for charging duty at the time of import as the same is payable at the time of import by exporter (i.e. applicant in this case) to supplier of imported goods. But, at the time of export, the value of such ‘licence fee’ is neither paid nor payable by the applicant to the consignee of impugned exported goods and hence, the same cannot be realized as foreign currency. The export related benefit are extended to promote the export to earn foreign exchange in lieu of such export. Since, in this case the licence fee was for right in India, the same cannot be realized in BRC as foreign exchange. Such non-realized amount cannot be claimed for export related benefit like drawback. No infirmity in order of Commissioner (Appeals) - Decided against assessee. Corporate Laws 2015 (3) TMI 944 Winding up company - Respondent company had failed and neglected to pay a sum alongwith interest, which was claimed as due and payable by the respondent company on account of the loan agreements - Held that:- where the respondent company has neither disputed, the debt owed to the petitioner bank nor the fact that it has been unable to discharge its debt, the present petition is liable to be admitted. The contention that the petitioner bank is liable to extend a rehabilitation package to the respondent company in terms of the RBI guidelines is disputed. I am also unable to readily accept that the petitioner bank can be compelled to provide further assistance contrary to its commercial wisdom.The question whether the respondent company ought to be finally would up would be considered at a subsequent stage. In the meanwhile, it is open for the respondent company to persuade its creditors to support a rehabilitation scheme or otherwise present a concrete plan for repayment of its debts. - Respondent company owes substantial amounts to the petitioner bank, which the respondent company has been unable to pay on account of its financial position. The claim of the respondent company, that it is entitled to be rehabilitated is an entirely separate controversy and is based on the substratal premise that the respondent company is unable to meet its current liabilities but has the potential to revive. It is implicit in this contention that the respondent company is unable to meet its liabilities and as such a substantial dispute with regard to the respondent company's liability towards the petitioner bank cannot be inferred. Disputes raised by the respondent company cannot be considered as a defence to proceedings under Section 433(e) of the Act. Undisputedly, the respondent company has been unable to meet its liabilities towards the petitioner bank. In this view, the petitioner bank is entitled to maintain the present petition. The reliance placed by respondents to the decision of the Supreme Court in IBA Health (India) (P.) Ltd.(2010 (9) TMI 229 - SUPREME COURT OF INDIA) is also mis-placed. In that case, the Supreme Court had explained that in a case where there is a bona fide dispute as to the liability, the creditor could not prefer a petition for winding up of the company. The Court further held that it is not the duty of the Company Court to hold a full trial in cases where there is a substantial dispute as to the liability owed by the company. Where the respondent company is stated to be making efforts for its revival, I am not inclined to appoint a provisional liquidator, as that may impede the respondent company in its efforts. However, the respondent company shall submit a weekly statement of receipts and expenditure to the Official Liquidaor. Further, the promoters/ directors would not draw any remuneration or incur any liability without the express consent of the petitioner bank. - Application disposed of. Service Tax 2015 (3) TMI 964 Demand of service tax on suspense account - Amendment to section 67 will be prospective i.e. w.e.f. 10.05.2008 or retrospective - addition reading as "any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name - amount relating to transaction with associated enterprises - Held that:- Law is well settled that amendment to law can be made retrospectively even bringing an amendment to an Explanation appearing in the statute. But the nature and character of the amendment decides whether such amendment is declaratory or clarificatory and accordingly whether retrospective or not. A declaratory law is always prospective while clarificatory law is retrospective in nature. It is also well settled law that statute making amendment to the effect of declaration of liability is not normally retrospective unless otherwise such intention expressed by legislature or by necessary implication intended to be so. Addition to the Explanation (C) to sub-section (4) of Section 67 with the proposition "and" throws light on the nature and character of both the clauses thereof. It categorically brings out that recording of transactions in two different pattern was enacted from two different dates. Therefore, the addition to the Explanation (C) with effect from 10.05.2008 is prospective in nature and that addition shall be applicable from the day that was enacted in the statute book. Accordingly, there shall be no liability to levy of interest on the gross value of taxable service relating to the period prior to that date. - Decided in favour of assessee. 2015 (3) TMI 963 Denial of refund claim - whether the ticket issued by the appellant showing "Conducted Tour" shall ipso facto disentitle appellant to the exemption granted by Notification No. 20/2009-ST dated 7.7.2009 read with the Corrigendum issued by MF (DR) F. No. 334/8/2009/TRU dated 31.8.2009 and statutory provisions enacted in section 75 of Finance Act, 2011 - Unjust enrichment - Held that:- Except interpreting the provisions of the Motor Vehicles Act, there is no material on record to show that appellant possessing the tourist vehicle permit had conducted tours issuing the ticket aforesaid. This does not deny the appellant to get the exemption granted by the notification and the statute. No doubt, conducted tour shall not get exemption under the notification but a point to point operation of the vehicle, even by the tourist vehicle is entitled to the exemption as envisaged by aforesaid notification. - In absence of any contrary evidence on record as to conduct of tour by the appellant in terms of the tickets aforesaid, the appeal succeeds. But the sub-section (3) of section 75 of Finance Act, 2011 read with the Explanation thereunder requires the eligible refund to meet the test of unjust enrichment. Therefore, the matter has to go back to the learned adjudicating authority on this limited point to examine whether the appellant has crossed the bar of unjust enrichment. If he is satisfied, he shall grant refund. - Matter remanded back - Decided in favour of assessee. 2015 (3) TMI 962 Waiver of pre deposit - Denial of benefit of exemption Notification No.18/2002-ST dated 16.12.2002 - R& D Cess was paid after making the payment to the overseas service provider - Penalty u/s 77 & 78 - Held that:- Major portion of the demand relates denial of the benefit of exemption Notification No. 18/2002/ST dt.16.12.2002. relating to the R& D Cess paid to Govt. of India under Section 3 of Research and Development Cess Act, 1986 on the amount paid to the overseas service provider. The demand has been confirmed on the ground that the R& D cess was paid subsequent to the payment made to the overseas service provider. Prima facie , we find the issue covered by the decision of this Tribunal in Jindal Praxair Oxygen Co. (2007 (8) TMI 177 - CESTAT, BANGALORE) - demand on other issues rests on appreciation of evidence and debatable. In these circumstances, the Applicant could able to make out a prima facie case for waiver of predeposit dues adjudged. Accordingly pre-deposit of dues adjudged is waived and its recovery stayed during the pendency of the Appeal. - Stay granted. Central Excise 2015 (3) TMI 956 Denial of CENVAT Credit - Input lost in fire - Held that:- Department has mainly relied on the statement of Shri S.K. Mishra, G.M. of the said assessee, recorded by the Range Superintendent, on 26.03.07. I have notices that in the said statement it has been deposed by Shri. S.K. Mishra, that out of total raw material 1315.934 MT, there was around 1000 MT of Sponge Iron was lying in different heaps. Out of this approximate 700 MT sponge iron, which was near to furnace burnt in the incident. However, the loss estimated by the SIB & Associates (Loss assessors) is 547.982 MT. I find no reason to deny the loss to the tune of 547.982 MT, as the said assessee has to record the actual loss in the proper records and the available balance qty. has to be shown in proper records, as they have to utilize the said balance qty. for the production, which ultimately will be removed on payment of C.EX. DUTY. Therefore, I hold that the qty. lost in fire is 547.982 MT. - order passed by the adjudicating authority is correct and I do not agree with the order passed by the Ld. Commissioner (Appeals). - Decided in favour of assessee. 2015 (3) TMI 955 Availment of CENVAT Credit - DTA Clearances - goods cleared to SEZ developers - Non maintenance of separate accounts - Held that:- Assessee had supplied goods from the domestic tariff area to a developer and it is to be treated as an export in view of sub-section 2(m) of the SEZ Act. In case it is treated to be export then all benefits as given to export under any other law should be given. - It is clear from the nature of the excise duty as it has been traditionally understood to be duty only on the manufacture of those goods that are to be consumed within the country and not on the goods to be exported. This is also framework of the Excise Act. As the supply of the goods to a developer of SEZ is treated to be export, there appears to be no reason why this benefit was not there, except that it was due to a mistake or inadvertence that the word developer was not initially included in the sub-rule 6(6)(i) of the 2004-Rules and the developers and units were not given same treatment. Appellants cleared the finished goods to SEZ developers by following ARE-I procedure prescribed under Rule (19) of CER, which is duly approved by the jurisdictional Central Excise authority and also accepted LUT executed by the appellants for this purpose. The Hon ble High Court in the [2013 (5) TMI 460 - CHATTISGARH HIGH COURT] decision also held that the amendment introduced in Rule 6(6) on 31.12.2008, substituting clause (i) by adding both the units of SEZ and developers is retrospective in nature. The Hon ble High Court of Andhra Pradesh has upheld the Tribunal Order in the case of Sujana Metals vide High Court Order (2015 (3) TMI 781 - ANDHRA PRADESH HIGH COURT), dismissed the Revenue appeal. - goods cleared to SEZ developers are treated as export as the appellants followed ARE-I provision. The amended provisions of Rule 6 (6) is applicable retrospectively as held by the Hon ble High Court The demand confirmed by the adjudicating authority is not sustainable. Accordingly, we set aside the impugned order - Decided in favour of assessee. 2015 (3) TMI 954 Waiver of pre deposit - Captive consumption - Denial of exemption under Notification No. 67/95-CE. - CENVAT Credit - Department s case against the appellant is that firstly while certain Cenvat credit availed input services have been used in or in relation to manufacture of their final products out of which while sugar and molasses are dutiable, and bagasse press mud/bio-compost and electricity are exempted final product - second objection of the Department is that while the appellant have cleared the in-house production of molasses for captive use to the distillery unit by availing duty exemption under Notification No. 67/95-CE, this exemption would not be admissible to the extent molasses has been used in the manufacture of non-excisable goods, namely extra neutral alcohol (ENA), which during the period of dispute was not figuring in the Central Excise Tariff and as such was non-excisabl - Held that:- duty exemption in respect of molasses manufactured in the appellant s factory and captively cleared to the distillery unit would not be admissible, to the extent the molasses was used in the manufactured of un-denatured ethyl alcohol. Duty demand of ₹ 6,35,38,125/- in respect of the clearances of molasses for captive use to the distillery unit appears to be on a strong footing. Since the un-denatured ethyl alcohol/extra neutral ethyl alcohol are non-excisable items, the molasses used for manufacture of these products would not be eligible for Cenvat credit and according to the Department Cenvat credit of ₹ 5,34,03,535/- has been availed in respect of molasses used for manufacture of non-excisable goods. Though the appellant plead that they had been reversing the Cenvat credit in respect of the quantity of molasses used for the manufacture of un-denatured ethyl alcohol/extra neutral ethyl alcohol by treating the same has exempted final product, this claim has to be examined in detail which can be done only at the stage of final hearing. - this is not the case for total waiver from the requirement of pre-deposit. - Partial stay granted. 2015 (3) TMI 953 Denial of rebate claim - rebate claims rejected on the ground that M/s Ess Dee Aluminium Ltd., Kolkata is not the proper claimant to file rebate claims - Commissioner held that' M/s IFL & M/s Ess Dee Aluminium Ltd (Claimant) are not two different companies but the same legal entity - Held that:- respondent has taken a contradictory stand. On the one hand they-'are contending that IFL ceased to exist legally and physically after 30.9.10, whereas, on the other hand the said IFL continued to a central excise registered assesse and continued to export the goods even after 30.9.10. They should have surrendered the Central Excise registration immediately after 30.9.10 but they did not do so for reasons known to them. - as pointed out by Commissioner (Appeals) the original authority has not issued show cause notice in the matter and therefore decided the case without following the principles of natural justice. The violation of principles of natural justice vitiates the whole proceedings. In these circumstances the case is required to be remanded back for fresh considerations in the light of above observations. - Matter remanded back - Decided in favour of Revenue. 2015 (3) TMI 952 Duty demand u/s 11A (1) - Penalty u/s 11AC - Failure to submit the proof of export in stipulated time in respect of the excisable goods cleared from the factory premises without payment of duty against letter of undertaking under DEPB Scheme - Held that:- Commissioner (Appeals) upheld the said orders-in-original mainly on the ground that the dates of shipping bills are prior to the dates of ARE-1, BRC do no bear the signature of the bank officer, copies of document were not legible and in case of ARE-1 No.25/6.2.09, the value shown in ARE-1 is. Euro 40886.80 whereas in export invoice, value is shown as Euro 37345.20. - customs have certified in the relevant shipping bills the export of said goods and also mentioned the relevant ARE-1 Nos. in the shipping bill. So it cannot be said that these shipping bills do not relate to the ARE-1 in question. As regards difference in ARE-1 & export invoice value in respect of ARE-1 No.25, applicant has that it was due to difference in foreign exchange rate. The reason is acceptable subject to verification of its correctness. Customs has certified the export of goods in ARE-1 & shipping bill. So this objection does not sustain. Applicant has now submitted a BRC bearing signature and stamp of Bank. The legible copies of all documents are claimed to be available with: them. As such proof of export can be considered for acceptance after verifying the authenticity of BRC, and the fact that difference in value was due to difference in exchange rates. - Matter remanded back - Decided in favour of assessee. 2015 (3) TMI 951 Denial of refund claim - Applicants had supplied LSHF/HS Diesel to Indian Navy from the duty paid stock and claimed refund on the ground that supplies to Indian Navy were exempt from payment of duty - Held that:- exports under [Rule] 18 or 19 are under two different schemes. Rule 18 governs the export of duty paid goods under rebate claim while Rule 19 governs the export of goods without payment of duty under Bond/UT-I. Both the schemes are altogether different from each other and are regulated by different procedure/conditions. Exporter has to carefully choose the scheme beneficial to him before hand and has to follow the applicable procedure and conditions. It is not permissible to amalgamate both the scheme at his sweet will. In this case applicant had opted for exports without payment of duty under UT-I in terms of Rule 19, so the exports will have to be governed with the provision of said rule. The said declaration of export without payment of duty under Rule 19 itself put prohibition on allowing rebate claim. The instant claim of applicant that he has exported duty paid goods is self-contradictory and also not found correct on verification by both the lower authority. Even applicant could not satisfy this authority also. - No infirmity in impugned orders - Decided against assessee. 2015 (3) TMI 950 Denial of rebate claim - non-compliance of the provisions of Rule 18 and stipulation of Notification No. 19/2004 ibid inasmuch as the term “duty paid” used in Rule 18 does not include that portion of duty which is subsequently refunded to the manufacturer - Held that:- Respondent procured the said goods from a manufacturing unit M/s. Hanny Fibre Pvt. Ltd. located in North-East who was availing area based exemption of Central Excise duty under Notifn. Nos. 32/2009-C.E., dated 8-7-1999 and 33/99-C.E., dated 8-7-1999 and cleared/ exported the same to SEZ Unit in Falta, West Bengal. Applicant department has contended that the manufacturing unit in North East area is getting refund of the portion of duty paid in cash and therefore in view of C.B.E. & C. clarification vide Circular dated 8-12-2006, M/s. Vedik Vanijya (P) Ltd. the respondent is entitled for rebate claim under Rule 18 of Central Excise Rules, 2002. In this regard, Government observes that C.B.E. & C. vide Circular dated 3-4-2007 has further clarified the instructions contained in Circular dated 8-12-2006. It is pertinent to mention here that as per Section 88 of Finance Act, 2008, Rule 18 of Central Excise Rules, 2002 was amended retrospectively to the effect that rebate of duty on excisable goods cleared from factory for export shall also be admissible for that portion of duty paid for which the refund has been granted in terms of the Notification No. 32/99-C.E., dated 8-7-1999 and 33/99-C.E., dated 8-7-1999 and other area based exemption notifications, during the period 1-3-2002 to 7-12-2006. - by inserting clause (h) in the Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 vide Notifn. No. 37/2007-C.E. (N.T.), dated 17-9-2007 in case of export of goods which are manufactured availing Notifications 32/99 and 33/99-C.E. both dated 8-7-1999 and other such notifications, the rebate shall not be admissible under this notification. Hon’ble High Court in [2010 (2) TMI 547 - GUJARAT HIGH COURT] has held that said notification is applicable prospectively and despite amendment made in Rule 18 as per Section 88 of Finance Act, 2008, the right vested in the exporter to claim rebate in respect of export of goods after 8-12-2006 till 17-9-2007 continued and its validity and enforceability could not be affected. Government notes that in view of said judgment the rebate claims were admissible up to 17-9-2007. - No infirmity in impugned order - Decided against Revenue. 2015 (3) TMI 949 Denial of rebate claims - Original documents not filed - Held that:- Applicant had been claiming right from beginning that original and duplicate ARE-2 forms duly endorsed by Customs were submitted along with the rebate claims. The forwarding letter clearly states that they have submitted original and duplicate copies of ARE-2 form. The rebate claims are found otherwise in order as the use of duty paid inputs in the manufacture of goods exported is not disputed by the department. The proof of export is available in the form of Customs endorsements on the shipping bills and duplicate ARE-2 in original forms certifying export of said goods. The photocopies of the original ARE-1 duly endorsed by Customs are also submitted. In these circumstances the pleadings of the applicant that they are entitled for said rebate claims merit acceptance. - Following decision of UM Cables Ltd. Versus Union of India And Others [2013 (5) TMI 459 - BOMBAY HIGH COURT] - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (3) TMI 961 Levy of tax liability - Imposition of penalty - non-production of declaration in Form IX-C on the date of assessment - Suppression and misrepresentation of facts - Maintainability of appeal - Availability of alternate remedy - Held that:- It has been repeatedly held by the Supreme Court and by this Court that the same does not absolutely bar the exercise of jurisdiction under Article 226 of the Constitution of India. It is true that under Section 79 of the Value Added Tax Act, 2005, even an order passed under the Bihar Finance Act, 1981, which has been repealed by Section 94 of the subsequent Act, would be appealable but the appeal can be heard only on the satisfaction that a substantial question of law is involved in the case. In the present matter, the issue is not related to the merit of the matter rather it relates to non-consideration of the basic point either by the Appellate Authority or by the Revisional Authority for whatever reason, which is whether in view of the fact that the declaration in Form IX-C had been issued by the Indian Oil Corporation to the petitioner after the assessment order was passed, there can be any liability to pay tax by the petitioner. It is not the purpose of any of the taxing statutes to saddle a person with tax beyond what is provided by the same. It is evident that if Form IX-C had been produced by the petitioner before the Assessing Authority, there was no question of levy of any tax or penalty upon the same. As the authorities of the Indian OIL Corporation had failed to issue the said Form IX-C to the petitioner which is dated 25.3.2004 and had reached the petitioner after the order dated 26.3.2004 was passed by the Commercial Tax Officer and even thereafter the same had required correction of mistake as it did not contain the signature of the authorized officer of the Indian OIL Corporation. In such circumstances, it is not the petitioner who can be blamed rather Form IX-C was delivered to the petitioner after passing of the assessment order and the Appellate Authority and the Revisional should have considered that aspect of the matter and not taken such harsh view as has been taken in the present matter. - existence of statutory alternative remedy does not always bar the exercise of power by this Court under Article 226 of the Constitution of India and in the given facts, it is a fit case for quashing and setting aside the order dated 17.7.2014, 24.2.2006 and 26.3.2004 passed by the Commercial Tax Tribunal, Joint Commissioner of Commercial Taxes (Appeal) and the Commercial Tax Officer respectively and remanding the matter before the Commercial Tax Officer, Sitamarhi for fresh order in accordance with law - Matter remnaded back - Decided in favour of assessee. 2015 (3) TMI 960 Violation of Punjab Value Added Tax Act, 2005 - Allegation of theft of sales tax - Driver of the truck did not stop at check post - driver misbehaved and did not produce any document with regard to the goods being carried in the truck, thereby creating an obstruction in discharge of Government work - Held that:- A perusal of the Section 51(4) and 51(7)(a) and (b) clearly shows that there is a provision of penalty to be imposed in case a goods vehicle is proceeding without the requisite documents or it is found on inquiry that there is an attempt to avoid or evade tax. The Act which is a complete code in itself, does not provide for initiation of criminal proceedings in the matter of evasion of tax. This court in (Annexure P-3) has held that the provisions of VAT Act, 2005 are sufficient and equipped to deal with the matters where an attempt is made to evade the tax and registration of the FIR is an abuse of the process of law. In the present case, no offence punishable under Section 420, IPC also is made out against the petitioner on the allegations levelled. Furthermore, admittedly entire amount due along with the penalty has been paid by the petitioner. - Petitioner was undoubtedly not present at the spot when the vehicle was apprehended. Therefore, there is no question of the commission of offences punishable under Sections 186 and 353, IPC qua the petitioner. - Decided against Petitioner. 2015 (3) TMI 959 Rate of tax - Levy of tax on aluminum powder - Held that:- It is clear that the residuary entry would not be applicable when a specific rate of tax has been prescribed on a particular commodity. In the present case, the rate of tax on aluminium has been prescribed as four per cent. The Revenue is not permitted to levy the tax at 12.5 per cent on the ground that the petitioner has been selling aluminium granules (aluminium powder) because nature of the product has not been changed. It is the aluminium granules which have been supplied by the petitioner to the railways. It is used as aluminium. There is no different use. Hence, in our opinion, the petitioners are liable to pay tax at four per cent. - question is of interpretation of aluminium mentioned in the entry. Hence, the petition is maintainable. - respondents are directed to re-assess the tax liability of the petitioner after calculating the payment of rate of tax payable by the petitioner at four per cent on aluminium granules (powder) - Petition disposed of. 2015 (3) TMI 958 Imposition of penalty u/s 78(5) - Non production of books of accounts - Held that:- Despite of ample opportunity having been granted by, the petitioner-assessing officer to the representative of the respondent-assessee, it did not produce the necessary bill books and books of accounts for satisfaction or verification of the petitioner-assessing officer and on the contrary, requested that the matter may be closed. The representative of the respondent-assessee admitted the mistake, requested for imposition of penalty then and there and requested for payment of even penalty amount and requested for release of the goods. On the face of it, when there was clear cut admission by the representative of the respondent-assessee, in my view, nothing more was required to be proved by the petitioner-assessing officer. Secondly, when ample opportunity was granted by the petitioner-assessing officer to satisfy him by production of books of accounts and supporting material and if such an opportunity was not availed of by the respondent-assessee, then the petitioner-assessing officer cannot be said to be faulted with. It was for the respondent-assessee to satisfy the petitioner-assessing officer about the discrepancy, if any. If the respondent-assessee objected, then possibly, in my view, the petitioner-assessing officer was duty-bound to get the things verified from the seller but in a case like this when the representative of the respondent-assessee accepts the mistake and requests for closing the case, then according to me, nothing remained to be proved by the petitioner-assessing officer. Even before the DC (A) only some photo copies have been produced and not even the supporting books, bills and other vouchers and even the DC (A) simply mentions by deleting the penalty that merely by not mentioning bill number on the bill, it does seem the intention of the respondent-assessee of evading the tax. In my view, nonmentioning of bill number on the bill is a major defect/discrepancy which cannot be simply brushed aside. If bill number is not there, then both, i.e., the purchaser as well as seller can manipulate the things the way they want. The DC (A) was not proper in deleting the penalty. I am also of the view that when on one hand, the imposition of penalty was agreed/admitted by the representative of the respondent-assessee, then how penalty could have been challenged even by the respondent-assessee. In my view, the Tax Board has also simply followed the order of the DC (A) without coming to a definite finding and has simply mentioned that there was no intention of evasion of tax, in my view, the Tax Board is also unjustified in arriving at a finding, that by not mentioning bill number on the bill, it does not prove evasion. The Tax Board is the final fact finding body and it ought to have come to a definite finding. Secondly, how the Tax Board agreed with the finding of the DC (A) that the photo copies of books produced by the respondent-assessee before the DC(A) were correct when before the petitioner-assessing officer, it was avoided to be produced. - petitioner-assessing officer was justified in imposing the penalty and the orders impugned passed by both the appellate authorities deserve to be reversed. - Decided in favour of Revenue. 2015 (3) TMI 957 Invocation of extended period - Revision of assessment - Held that:- Section 34(1) of the Act confers plenary power, upon a Commissioner, to call for the record of any case pending before or disposed of by any taxing authority and satisfy himself as to the legality or propriety of such order or proceeding, insofar as it may be prejudicial to the interest of the State. The first part of second proviso, to section 34(1) of the Act, prohibits exercise of this power after expiry of three years, from the date of supply of a copy of such order, to the assessee. The second part of second proviso, to section 34(1) of the Act, however, provides that power under section 34(1) of the Act may be exercised after expiry of the period of three years, in case of retrospective legislation, if an order is passed by the Tribunal, or an order is passed by the High Court or the Supreme Court of India. Admittedly, the order in Food Corporation of India's case [2009 (3) TMI 951 - PUNJAB AND HARYANA HIGH COURT] settled a controversy relating to incidental charges. The fact that the Department held a similar view or that similar orders were passed before the judgment in Food Corporation of India's case [2009 (3) TMI 951 - PUNJAB AND HARYANA HIGH COURT], is irrelevant. The controversy with respect to incidental charges was finally settled by the High Court and, therefore, entitled the Commissioner to exercise power to revise an assessment even after expiry of the period of three years. The Tribunal's finding that as order could have been revised without waiting for the High Court, is based upon a misreading of the nature of power, conferred by the second part of the second proviso to section 34(1) of the Act. It would, therefore, be necessary to reiterate that power under section 34(1) of the Act to revise an assessment order has to be exercised within three years but where there is, a change in law, a decision of a Tribunal in a similar case or a declaration of law by the High Court or the honourable Supreme Court of India the power may be exercised after expiry of the period of three years. The fact that the Department may have held a similar view, that has been upheld by the honourable Supreme Court or the High Court, shall not impede the exercise of this power. The power, however, has to be exercised within "reasonable time", which, depending upon the facts, would vary from case to case. - appeal is allowed, the impugned order is set aside and the matter is remitted to the Tribunal - Decided in favour of Revenue. Indian Laws 2015 (3) TMI 945 Non compliance of the order of Debt Recovery Appellate Tribunal (DRAT) for discovery and production of documents - Application under Sections 19(25), 22, 22 (2)(b) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - Held that:- Both DRT and DRAT have held in favour of the respondent bank on the said aspect. There is nothing to show and establish that the respondent bank had documents, but they are being withheld. Whether or not the claim of the respondent bank has merit or should be dismissed or whether the counter-claim of the petitioner has merit or should be dismissed is a matter for determination and adjudication. The legal and factual effect of the reply given by the respondent bank as an answer to the documents sought, is an aspect or fact which will be examined by the DRT and the appellate authority under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Whether or not any adverse inference could or should be or should not be drawn etc. is again the matter of merit and not an issue which can be prematurely decided at this interim stage and that too in a writ petition under Article 226 of the Constitution. We refrain and do not comment and observe on the said aspects. Lastly, we may note that the petitioner has invoked writ jurisdiction of this Court and the said jurisdiction is normally exercised only when injustice has been caused or legally unsustainable order has been passed. In the present case, interim orders have been passed and the petitioner herein seeks rejection and dismissal of the original claim and striking out of the defence. The authorities have held that this penal and punitive order/direction, in view of the facts on record is not required and justified. We do not see any good ground or reason to interfere and reverse the said finding. - Petition dismissed. 2015 (3) TMI 943 Qualification and selection of Chairman, Judicial Member and Technical Member of the Intellectual Property Appellate Board - Held that:- Supreme Court in Madras Bar Association Vs. Union of India (2014 (9) TMI 821 - SUPREME COURT), after taking note of the earlier decisions was pleased to hold that the role of a technical member is rather limited. Though the Legislature has got a power to appoint technical member, it has to decide its necessity first. Considering the nature of the Tribunal and the steps that are being dealt with, we do not find any error in the provisions, which require appointment of a technical member. - technical member takes part on equal terms along with a judicial member in the decision making process. The qualification is also prescribed as 12 years of practice at the bar or 12 years experience in a State Judicial Service with a Degree in Law. With the above said qualification, along with other qualifications, there cannot be any difficulty in appointing such a person as a technical member. However, the problem would possibly arise when a person sought to be appointed as a technical member merely because he works in the Legal Department of a State Government or Central Government or involved in the process of applications for registration filed under the Trade Marks Act or Geographical Indications Act or in teaching law in a recognised University or Institute. The matter can be looked at a very different angle as well. Even an experienced lawyer with specialised knowledge and expertise is treated only as a technical member under Section 85(4)(b). If that is the case, merely because someone holds the post in a Government Department he cannot be bestowed with the eligibility of being appointed as a Judicial Member sans experience. Also such a person cannot be treated on par with a Judicial Officer. We do not understand as to how an Officer working with the Executive would satisfy the requirement of legal training and experience. In other words, when such an Officer cannot become a judge, he cannot also act in the said capacity. We only reiterate the reasoning assigned by the Supreme Court in this regard. Therefore, we have no hesitation in holding that Section 85(3)(a) is unconstitutional, particularly, in the light of the directions (i) and (ii) rendered in Union of India Vs. R.Gandhi, President, Madras Bar Association, (2007 (5) TMI 336 - SUPREME COURT OF INDIA). In the light of the interpretation given by us on the technical member as well as Section 85(3)(a) having been struck down we do not find any impediment in considering such technical members and judicial members for the post of Chairman. With the said interpretation, we further come to the conclusion that such technical members, when they become Vice-Chairman, would also become judicial members. This is because the anomaly is being removed by the earlier part of our order. No hesitation in holding that the view of the Chief Justice of India on the choice of selection to the post of Chairman should be given due weightage. Thus, we hold that the procedure adopted in seeking ''approval'' by the appointment committee of Cabinet is illegal. From the counter affidavit it is seen that the word ''consultation'' has been taken as recommendations of the Chief Justice of India. Therefore, we can infer that the recommendations are being made by the Chief Justice of India. Thus, we hold that the recommendations of the Chief Justice of India should have primacy, subject to the approval of the President. Such a recommendation is required to be considered in its perspective in the normal circumstances. The learned Senior Counsel for the petitioner submitted that lawyers with experience and knowledge ought to be included as Judicial Members. We are afraid that we cannot take the role of the Legislature. Incidentally, we may also note that even a lawyer with experience in the specialised field has been treated as only a ''Technical Member" under Section 85(4)(b). The other submission made regarding the discrepancy under the patent Act as well as the Trade Marks Act qua the qualification also cannot be a ground to declare the provision as unconstitutional. Further, a Court of law will have to do the act of synchronising various enactments to avoid a possible conflict. 2015 (3) TMI 942 Refusal of information sought by appellants - Whether the Office of Attorney General of India is a 'public authority’ within the meaning of section 2(h) of the Right to Information Act, 2005 - Held that:- term "authority" as used in the opening sentence of Section 2(h) of the Act cannot be interpreted in a restrictive sense. The expression "authority" would also include all persons or bodies that have been conferred a power to perform the functions entrusted to them. Merely because the bulk of the duties of the AGI are advisory, the same would not render the office of the AGI any less authoritative than other constitutional functionaries. There are various bodies, which are entrusted with 'staff functions’ (i.e. which are advisory in nature) as distinct from 'line functions’. The expression "authority" as used in Section 2(h) cannot be read as a term to exclude bodies or entities which are, essentially, performing advisory functions. - there would be a practical difficulty as the office of the Attorney General is only a skeletal office which only consists of the appointee and the appointee’s is personal staff. In my view, this cannot be considered as a reason for excluding the applicability of the Act on a public authority. - impugned order is set aside and the matter is remanded to the CIC to consider the other contentions urged by the petitioners before the CIC. - Decided in favour of appellants.
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