Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 30, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Registration of assessee's entity u/s 12AA - assessee institution is run under the provisions of the Juvenile Act - the genuineness or otherwise of the functioning of the assessee cannot be easily doubted, in view of the certification issued by the Directorate of Social Defence, Government of Tamil Nadu - HC
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Allowance of expenditure incurred on issue of Foreign Currency Convertible Bonds (FCCB) - even if the FCCB are convertible into equity at a later date, yet on the date of its issue, it is a loan. Therefore, expenditure incurred thereon is revenue in nature - HC
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MAT - Computation of book profit u/s 115JB - the excise duty subsidy and interest subsidy in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act - AT
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Depreciation @ 10% on landscaping & development charges which is capitalized in nature of land allowed - AT
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Disallowance on account of forfeiture of shares warrants - loss claimed by assessee has not been offered to tax by ECL - what will be the tax treatment of the forfeited amount in the hands of ECL is not the concern of the AO whether it is taxable receipt or revenue receipt. The AO has to see the transactions and its effect in the hands of the assessee. - AT
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Chargeability of tax @ 20% as royalty under the Indian Italy DTAA, the amounts recovered towards reimbursement of expenses - Such reimbursement of expenses without any mark up does not justify its taxability in the hands of assessee being royalty @ 20%. - AT
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Rate of tax to be applied on the royalty received under the royalty agreement - Under section 115A of the Act, it is provided that in case any new royalty agreement is entered into after first day of June, 2005, the applicable tax rates on the royalty income would be 10% plus surcharge and education cess- AT
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Income accrued and arise u/s.5(2) read with section 9(1)(i) - actual freight beneficiary of the vessel - DTAA - the ships operated in International Traffic and therefore, the income from ship shall not be taxed in India as per Article 9 of the Treaty. - AT
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Levy of penalty - assessee made an attempt to show the non agricultural income as agricultural income and because of scrutiny, the AO is able to find out the claim as false and the same was considered for income from other sources - penalty u/s 271(1)(c) confirmed - AT
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Addition of bogus purchases - allegation made by the VAT Department that the suppliers are Hawala operators - The grievance of the VAT authorities was on non-payment of VAT on purchases happened. Thus, purchases made cannot be denied on the basis of aforesaid allegation. - AT
Corporate Law
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Permission of substitution of petitioner - allegation of huge mismanagement against the company - the petition was validly filed by the original petitioners and therefore, only for applicants not having requisite share qualification to file the petition on their own on the date of filing of application under consideration, the applicants cannot be debarred from having their names substituted in place of deceased petitioner No. 1 in the company petition. - Tri
Service Tax
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Constitutional validity - whether the transactions in buying and selling lottery tickets are not liable to Service tax under the provisions of the FA, 1994 as amended by the FA, 2016? - The amendments carried out by the Finance Act, 2016, are not capable to being implemented for imposition and levy of the service tax - Consequently, the impugned letter dated 10.06.2016 issued by respondent No.3, the circular dated 29.02.2016 and Notification No. 18/2016-ST are quashed. - HC
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Refund claim - Rule 5 of CCR read with N/N. 27/2012-CE(NT) dt. 18/06/2012 - rejection on the ground that the appellant had not taken registration - Registration not compulsory for refund - the rejection of refund is unjustified - AT
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Challenge to the Show Cause Notice (SCN) - it cannot be said that the authorities had acted without any basis in issuing a SCN. The SCN was issued on the basis of materials - The petitioners have not been able to establish that, the department had violated any law in issuing the SCN or that the SCN contains any charges which is contrary to any law. - HC
Central Excise
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CENVAT credit - appellant is entitle to avail the Cenvat Credit as these prefabricated structures have been used by the appellant for fabrication of cold room which is a capital goods - AT
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Valuation - inclusion of charges for after Sales Service - Pre-Delivery Inspection (PDI) - expenses incurred by the dealer for PDI and said services has nothing to do with the term servicing mentioned in the transaction value and as such, the said expenses cannot be added to assessable value - AT
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Benefit of N/N. 3/2001 and 6/2002 - Maaza Orange drink - Maaza Pineapple drink - The test for determining classification of the goods under Tariff Heading 2202.40 is that the basis of the drink ought to be fruit pulp or fruit juice. The appellant having used the concentrate imported to manufacture its drinks, not entitled for availing the benefit of exemption - AT
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Classification of goods - NIDO Nutritious milk for growing kid - Where flavouring agent of 0.03% of the total composition is added, which does not change the basic characteristic of the product and the product remains a nutritious milk drink only - to be classified under Chapter tariff item 0404 90 00- AT
Case Laws:
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Income Tax
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2017 (3) TMI 1391
Revision u/s 263 - Claim of deduction under Chapter VIA of the I.T. Act 1961 - whether claim not made in the original return of income can be allowed as deduction otherwise than by revised return of income” -assessee is a Cooperative Credit Society - Held that:- Tribunal has clearly recorded a finding of fact that the hard copy of the return of income was filed with the Assessing Officer and an acknowledgement of the same was also given by the Assessing Officer. This acknowledgement did indicate the respondent assessee's claim for deduction under Section 80P of the Act was claimed in the return of income. The impugned order also records the fact that there was a malfunctioning of the software as the tax liability could not have been 'Nil' in the absence of the deduction under Section 80P of the Act being taken into account as the income declared by the respondent assessee is ₹ 1.26 crores before deduction under Section 80 of the Act. The malfunctioning of the software under which the return of income was electronically uploaded is also not disputed before us, nor is it shown that the finding of the Tribunal on the above account is in any manner perverse. So far as the nonconsideration by the Assessing Officer of the merits of the claim for deduction under Section 80P of the Act is concerned, we find that the Assessing Officer had considered the claim for deduction under Section 80P of the Act. The Revenue has neither before the Tribunal nor before us demonstrated how and in what manner the consideration of the claim under Section 80P of the Act as reflected in order is erroneous so as to enable him to exercise his powers under Section 263 of the Act. - Decided in favour of assessee
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2017 (3) TMI 1390
Allowing a new claim of deduction, being expenses incurred on issue of Foreign Currency Convertible Bonds - amount not claimed in the return of income filed by the assessee nor any revised return of income was filed by it for claiming the same - Held that:- The issue arising herein stands concluded against the Revenue and in favour of the Respondent-Assessee by the decision of this Court in CIT v/s. Pruthvi Brokers and Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT ] as held that The appellate authorities have the discretion whether or not to permit such additional claims to be raised. - Decided in favour of assessee Allowance of expenditure incurred on issue of Foreign Currency Convertible Bonds (FCCB) - Held that:- FCCBs expenditure incurred by it on the issue of bonds as on the date of its issue is expenditure incurred to obtain a loan. In such circumstances, even if the FCCB are convertible into equity at a later date, yet on the date of its issue, it is a loan. Therefore, expenditure incurred thereon is revenue in nature. See CIT v/s. Secure Meters Ltd. [2008 (11) TMI 66 - HIGH COURT RAJASTHAN ] - Decided in favour of assessee
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2017 (3) TMI 1389
Reopening of assessment - denial of natural justice - Held that:- In the present case, arguendo, the reassessments were upheld, nevertheless the ITAT, in this Court’s opinion was justified in deleting the addition. This is because the materials which the assessee had relied upon in the course of appeal to the CIT(A) did not receive any matter of scrutiny, superficial or detailed. Even for a moment, if the Revenue is correct that the information which is sourced through Investigation Wing to justify a reassessment, ipso facto that was not sufficient to conclude assessment under Section 144. The AO was granted opportunity, not merely at the stage of reassessment but also during the appellate proceedings in the remand when it was possible to verify whether the investments were genuine and whether the credits claimed were genuine given that the amounts were received through normal banking channels, in the context of the assessee’s claim that it needed funds for expansion. No question of law arises
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2017 (3) TMI 1388
Validity of block assessment notice u/s 158BD - open to the assessing officer to include the income of the assessee, which is not disclosed for assessment for the block period though the transaction relating to such income is reflected in the account books of the respective years - Held that:- Given the nature of the material seized in the facts of this case, the ITAT’s findings that block assessment notice under Section 158BD of the Act was unwarranted, cannot be sustained. Undoubtedly, the A38 and A97 of the panchnama were fresh materials unearthed during the course of search, albeit in a third party premises, but they clearly related to the assessee. In these circumstances, the notice issued under Section 158BD of the Act and the consequential block assessment proceedings were warranted. Although this Court has answered the question framed, at the same time the facts are that such answer does not dispose of the appeal or the matter. For an addition under Section 68 of the Act, it is now well settled [CIT vs Lovely Exports (P) Ltd. (2008 (1) TMI 575 - SUPREME COURT OF INDIA) ] that the AO has to be satisfied about the identity of the share application, the genuineness of the transaction, and the credit worthiness of the investor. Whilst the inquiry in this case – i.e. the seizure of materials from the searched party, were entirely justified, a notice of final assessment with the additions that were ultimately made, could have been justified only after a proper finding in that regard. Here, the AO’s actions were lacking inasmuch as he did not diligently perform the task required of him. It was quite possible for the AO to have inquired from the assessee and also found for himself, on the basis of inquiries into the bank accounts of the share applicants, as to whether the transactions were in fact as suspect as he concluded. The addition under Section 68 of the Act can be justified only if the AO also discharges the onus which is cast on him after the initial material is disclosed. The order nowhere reveals that the AO ever bothered to make such inquiry. Although the question of law is answered in favour of the Revenue, the appeal has to fail.
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2017 (3) TMI 1387
Registration of assessee's entity under section 12AA denied - Held that:- In so far as the genuinity and functioning of the assessee's institution as trust is concerned, the learned counsel appearing for the assessee has produced documents to show that the assessee's institute in the name and style of that Hosanna Children's home (Girls) had been functioning with proper registration in the Directorate of Social Defence, State of Tamil Nadu, especially after the coming into effect of Juvenile Justice (Care and Protection of Children) Act 2015 (for short Juvenile Act). Every such children home had necessarily to be registered under the said Act and without such registration, no institute or home dealing with children can function.Therefore, from the said proceedings, it becomes obvious that the assessee institution is run under the provisions of the Juvenile Act after having been duly registered under the said Act. Therefore, the additional reason given by the Tribunal in the order impugned to say that the assessee was not engaging in activities in accordance with the objects specified in the trust deed, may not be backed by any materials. Delay in filling appeal by assessee against rejection - Held that:- No doubt, the delay of 1902 days is a huge and enormous delay. But, when we look at the reasons given by the assessee for such a delay, it shows that it is not attributable to any lame excuses on medical grounds or otherwise. But, it is only the reason of either non advise on the part of the professional, who has been engaged by the assessee or the ignorance of law by the assessee itself. Assessee knew well that if a plea of ignorance of law is taken, that would be, on the face of it, rejected by the court/Tribunal, nevertheless, such a plea alone had been taken by the assessee and that itself would show the inherent genuineness attached with the reason cited by the assessee for such huge delay. The order impugned of the Tribunal rejecting the appeal of the assessee mainly on the ground of delay, is liable to be interfered with. In addition, we also feel that the further reason given by the Tribunal for arriving at such a conclusion that the assessee was not engaging in activities in accordance with the objects specified in the trust deed also is not supported by materials as we are satisfied that the assessee has been functioning after proper registration with the authorities concerned under the Juvenile Act and a recent certification issued dated 14.12.2016 of the authorities concerned as referred to above would be valid for next five years. Therefore, the genuineness or otherwise of the functioning of the assessee cannot be easily doubted, in view of the certification issued by the Directorate of Social Defence, Government of Tamil Nadu. Therefore, even that reason given by the Tribunal for its conclusion in the order impugned cannot stand in the legal scrutiny. Therefore in our view, both the reasons cited in the impugned order of the Tribunal are liable to be interfered with and accordingly, the impugned Judgment is set aside. We allow the appeal remitting the matter to the Tribunal for taking decision on merits on the issue raised by the assessee.
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2017 (3) TMI 1386
Revision u/s 263 - mere registration under Section 12-A would not preclude Assessing Authority from examining allowability under Section 11 - Held that:- Assessment order dated 28.12.2010 stood merged with C.I.T.(A)'s order dated 21.11.2013. Order dated 01.12.2011 was not an independent order but a partial revision of assessment order dated 28.12.2010. This was passed by Assessing Authority in order to give effect to Tribunal's order dated 21.06.2011 whereby C.I.T.'s order dated 08.03.2010 cancelling registration was set aside and registration was restored. The issue of applicability of Sections 11 to 13 of Act, 1961 having been examined by C.I.T.(A) and decided in favour of Assessee, it was not open to C.I.T. to exercise power under Section 263 to re-agitate the same as it was beyond its jurisdiction. Any issue, if, has already been decided in appeal preferred by Assessee, to that extent C.I.T. will stand denuded of its power under Section 263.- Decided in favour of assessee
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2017 (3) TMI 1385
Penalty u/s 271(1)(c) - provision debited to Profit & Loss account in respect of the debt due from Madhavpura Mercantile Co-op Bank Limited - Held that:- The assessee’s claim was not allowable because assessee had not reduced the figure of advances in which the impugned amount was included, rather kept the said balance intact and made corresponding provision which was claimed as deduction. This treatment in account could not be said to be write off of the impugned amount and, therefore, the assessee’s claim was not allowable. However, it cannot be disputed that assessee had furnished all the necessary details in regard to FDR of ₹ 4,20,47,179/- placed with Madhavpura Mercantile Co-op Bank Limited which included the impugned amount. Assessee’s explanation that the amount was kept intact in the books is quite reasonable and bonafied considering the overall facts. At best, this can be said to be a claim not sustainable in law. However, that automatically does not lead to levy of penalty. - Decided in favour of assessee Disallowance of Reserve for schedule assets - Held that:- The assessee’s claim was based on RBI’s directive, however, admittedly RBI’s directive do not govern the provisions of Income Tax Act. The Ld.CIT(A) has also pointed out that in the case of Southern Technologies Ltd. Vs. JCIT [2010 (1) TMI 5 - SUPREME COURT OF INDIA ], the Hon'ble Supreme Court has also upheld this view. He further pointed out that the return of income was filed by assessee on 39.9.2008 and the issue got settled on 11.01.2010. Thus, prior to this date the issue was highly debatable. We do not find any reason to interfere with the order of the Ld.CIT(A) because assessee had disclosed all necessary facts in regard to its claim and at best, it could be said to be a claim not sustainable in law. - Decided in favour of assessee
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2017 (3) TMI 1384
Disallowance on account of forfeiture of shares warrants - loss claimed by assessee has not been offered to tax by ECL - Held that:- Firstly, the profit amount was not offered to tax by ECL. Secondly, the demand was raised by ECL to the original allottee of share warrant i.e. MDCPL by ECL. Admittedly, the loss incurred by assessee which was admitted by AO but the same was rejected on the ground that ECL has not offered to tax. Here, it is pertinent to note that what will be the tax treatment of the forfeited amount in the hands of ECL is not the concern of the AO whether it is taxable receipt or revenue receipt. The AO has to see the transactions and its effect in the hands of the assessee. Therefore, the tax treatment in the hands of ECL cannot be a deciding factor for the loss incurred and subsequently claimed by assessee. Therefore, the allegation framed by AO against the assessee is baseless and it was also seen that a notice was issued by the AO u/s 133(6) of the Act to ECL for the verification of loss incurred and claimed by assessee. The ECL in response thereto as clearly submitted that the original allottee was MDCPL but subsequently it was transferred to assessee. The copy of the letter is placed on page 6 and 7 of the paper book. Besides the above, ECL has duly recorded in its record the transfer of 50 lakh convertible warrants from MDCPL to assessee and the confirmation of the same is placed on pages 9 to 10 of the paper book. In view of the above, we are of the view that the impugned finding of Ld. CIT(A) that the letter has not been issued to the assessee but to MDCPL for the balance payment is not a valid reason for the impugned disallowance. Thus, after considering all the facts in totality, we are inclined to reverse the orders of authorities below. The assessee gets the relief accordingly.
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2017 (3) TMI 1383
Disallowing deduction of leave encashment claimed on provision basis - Held that:- The parties before us agreed that in view of the pendency of the constitutional validity of section 43B(f) of the Act before the Hon’ble Supreme Court, it would be just and proper to direct the AO to follow the ultimate decision that might be taken in the said proceedings and decide the grievance projected by the assessee in Gr.No.1. Thus Gr.No.1 is treated as allowed for statistical purposes. Addition u/s 14A - Held that:- The Hon’ble Calcutta High Court in the case of CIT Vs. M/S.R.R.Sen & Brothers Pvt.Ltd. [2013 (7) TMI 260 - Calcutta High Court] held that computation of 1% of exempt income as disallowance u/s.14A of the Act was proper. In view of the aforesaid decisions, we are of the view that the order of CIT(A) does not call for any interference. MAT - Computation of book profit u/s 115JB - assessee excluded excise duty exemption - Held that:- Hon’ble Jammu & Kashmir High Court in the case of Balaji Alloys (2011 (1) TMI 394 - Jammu and Kashmir High Court ) on identical facts held that excise duty subsidy and interest subsidy were capital receipts not chargeable to tax.. The admitted factual and legal position in the present case is that subsidies in question is not in the nature of income. Therefore they cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act. Depreciation @ 10% on landscaping & development charges which is capitalized in nature of land: - Assessee has incurred the landscape expenses on the leasehold land situated at Sikkim Unit to level the uneven land for construction of factory building. Since the same has been disallowed as capital in nature, the same should be included in the block of building and the assessee would be entitled for depreciation @10%. The said expenditure has been incurred to level the land and make it suitable of construction of factory. Expenditure incurred on land development is a separate thing as compared to the cost of the land. Reliance is placed in the decision of CIT -vs.- Herdilia Chemicals Ltd. (1983 (6) TMI 1 - BOMBAY High Court ) wherein held that expenditure incurred on levelling and development of land for erection of machinery and building formed part of cost of machinery and building and is therefore entitled for depreciation.
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2017 (3) TMI 1382
Reopening of assessment - addition u/s 41 - Held that:- As per the settled principles of taxation if the loan is of capital nature the provisions of section 41(1) are not applicable. Secondly for invoking the said provision the assessee should have claim direction/allowance in the earlier assessment years. The FAA has given a categorical finding of fact that loans extended by various concerns were capital in nature and that there was no deduction/allowance for any of the expenditure in any of the year. Nothing has been brought to our notice that the finding given by the F AA is perverse or is suffering from any factual of legal infirmity. - Decided against AO
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2017 (3) TMI 1381
TPA - selection of comparable - Held that:- Companies functionally different as that of assessee company which is a routine BPO service provider need to be exluded fro final list of comparability. Deduction under section 10A - Held that:- Assessee stands eligible for claim of deduction u/s 10A, therein remand the matter to the file of the A.O for the limited purpose of determining the quantum of deduction so raised by the assessee u/s 10A in its return of income. That as regards the contention of the Ld. A.R that the A.O had erred in excluding the ‘Miscellaneous income’ from the eligible profits for the purpose of computing deduction u/s 10A, we are of the considered view that the entitlement of an assessee towards claim of such deduction, as had clearly been spelt out in Sec. 10A(4), is restricted only as regards the ‘Profits derived from export of articles or things or computer software’, however, as neither from the orders of the lower authorities, nor from the records available before us it can be gathered as to what is the nature of ‘Miscellaneous income’ nor anything as regards the same had been submitted before us by either of the parties during the course of hearing of the appeal, we therefore keeping in view the fact that as the issue as regards determining the quantum of deduction u/s 10A, as claimed by the assessee in its return of income had been restored by us to the file of the A.O, therefore restore this issue also to the file of the A.O. That in case if the ‘Miscellaneous income" falls within the bracket of ‘‘Profits derived from export of articles or things or computer software”, then the A.O shall be precluded from excluding the same from the scope of the profits eligible for claim of deduction u/s 10A.
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2017 (3) TMI 1380
Levy of fees under section 234E in intimation issued under section 200A(1) - default in furnishing the TDS statements - Held that:- As decided in Maharashtra Cricket Association Vs. DCIT(CPC)-TDS, Ghaziabad [2016 (10) TMI 104 - ITAT PUNE] the amendment to section 200A(1) of the Act is procedural in nature and in view thereof, the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Hence, the intimation issued by the Assessing Officer under section 200A of the Act in all these appeals does not stand and the demand raised by way of charging the fees under section 234E of the Act is not valid and the same is deleted. The intimation issued by the Assessing Officer was beyond the scope of adjustment provided under section 200A of the Act and such adjustment could not stand in the eye of law. - Decided in favour of assessee
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2017 (3) TMI 1379
Rate of tax to be applied on the royalty received under the royalty agreement - whether the said agreement executed on 01.04.2008 is an extension of earlier agreement dated 08.01.1998? - Held that:- New royalty agreement is not an extension of old agreement but an independent legally enforceable agreement. As per Contract law, the parties are bound by the terms and conditions of new agreement which are at variance with old agreement and hence, it is held that on the expiry of term of old agreement, the rights and obligations between the parties were extinguished and the assessee entered into a fresh agreement with fresh rights and obligations which may also called as revised but the same culminates into execution of new royalty agreement. Even if some of the terms and conditions in earlier agreement continued to govern the parties does not mean that a new agreement has not been executed between the parties. On the expiry of earlier agreement, new understanding has been culminated into a new agreement. Where the terms of new agreement shall now govern the rights and obligations of the parties, then we hold that the said agreement between the parties is a new royalty agreement and not an extension of old agreement. Under section 115A of the Act, it is provided that in case any new royalty agreement is entered into after first day of June, 2005, the applicable tax rates on the royalty income would be 10% plus surcharge and education cess. - Decided in favour of assessee Tax rate to be applied on the amount recovered by the assessee for recharge of supply of SAP software - case of the Revenue was that the same is to be taxed @ 20% in view of DTAA between India and Italy, whereas the case of assessee was that the provisions of section 115A of the Act were to be applied and the same is to be taxed @ 10% plus surcharge plus education cess - Held that:- In the succeeding year, the assessee had entered into an agreement with recipient company. The DRP while passing the order relating to assessment year 2011-12 had held the receipts to be royalty but by an order of rectification under section 154 of the Act, the same is held to be taxable @ 10% plus surcharge plus education cess. Even in assessment year 2012-13, similar receipts have been taxed by the Assessing Officer himself @ 10% plus surcharge plus education cess. The nature of receipts in the year under consideration are admittedly, same and following the same parity of reasoning, we hold that the receipts are to be taxed under the provisions of section 115A @ 10% plus surcharge plus education cess Chargeability of tax @ 20% as royalty under the Indian Italy DTAA, the amounts recovered towards reimbursement of expenses - Held that:- We find merit in the claim of assessee since in the facts of the case, it is a case of reimbursement of expenses incurred by the assessee, which in turn, were allocated to the entities. Such reimbursement of expenses without any mark up does not justify its taxability in the hands of assessee being royalty @ 20%. We reverse the order of Assessing Officer in this regard and allow the ground of appeal No.5 raised by the assessee. Amount received towards consultancy fees - charged by the Assessing Officer to tax @ 20% under India Italy DTAA as against 10.55% offered by the assessee - Held that:- The conditions prescribed under section 115A r.w.s. 9(1)(vii) of the Act are wide enough to include reimbursement of consultancy fees as fees for technical services in the hands of assessee. Accordingly, we hold that the amount received towards consultancy fees is to be taxed @ 10% plus applicable surcharge and education cess. Charging of interest under section 234B - Held that:- addition made in the hands of assessee is deleted, then no further interest is chargeable under section 234B of the Act. The assessee has also pleaded that it is foreign company and it is not liable to levy of interest under section 234B of the Act. We find that the rate of taxes to be applied is being decided in favour of the assessee and consequently, no interest is chargeable under section 234B of the Act.
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2017 (3) TMI 1378
Registration u/s 12AA rejected - activity of the trust are not charitable nature, as it is running technical course - Held that:- One of the object of the assessee’s trust is that to establishment of training and schooling development centre and institutions for professional education and training. As per the assessee it has been providing vocational courses which cannot be equated with any coaching institute. The assessee is also imparting professional courses. We notice that, the assessee has also other objectives as per the trust deed. Therefore, after considering the totality of the facts and in the light of the decision of the Co-ordinate Bench rendered in the case of Additional Director of Income Tax(E) vs. Samudra Institute of Maritime Studies Trust [2014 (6) TMI 359 - ITAT MUMBAI ] where of the view that CIT should reconsidered application of the assessee for registration after considering the case laws as relied by the assessee. In view of the above discussion the application of the asseessee is restored to the file of the ld. CIT for decision afresh. - Decided in favour of assessee for statistical purposes.
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2017 (3) TMI 1377
Disallowance of proportionate interest on unsecured loans - Held that:- We find that the A.O has simply computed the disallowance of interest in proportion to the amount of interest bearing unsecured loans obtained amounting to ₹ 502.69 crore and interest free advances given amounting to ₹ 172.59 crore. The fact that the assessee did pay interest on such unsecured loans has not been disputed. In view of the fact that the assessee paid interest on unsecured loans and did not earn any interest on advances given, we cannot disallow proportionate interest genuinely paid on unsecured loans taken for business purpose. Section 36(1)(iii) simply provides that deduction is allowable for `the amount of interest paid in respect of capital borrowed for the purpose of business.’ As the assessee paid interest on capital borrowed for the business purpose and it is not the case of the AO that the assessee diverted such unsecured loans for a nonbusiness purpose, the disallowance of interest cannot be countenanced. We, therefore, allow deduction of ₹ 23.60 crore. TDS u/s 195 - Disallowance u/s 40(a)(i) - assessee paid the sum to ICC without deducting tax at source - AO formed a view that such payment is in the nature of Royalty or Fees for technical services requiring deduction of tax at source - DRP held that 'the benefits availed by the assessee from ICC did not fall within the ambit of Royalty or FTS’ and accordingly no disallowance was called for - Held that:- Disallowance u/s 40(a)(i) is made when the assessee fails to deduct tax at source etc. in terms of section 195 before making payment to a non-resident. This section, in turn, provides that no payment should be made to non-resident without deduction of tax at source which is chargeable to tax in his hands. Thus, chargeability of income to tax in the hands of a non-resident is a condition precedent. In other words, if such receipt is not chargeable to tax in the hands of the non-resident, there will be no liability on the part of the payer to withhold tax and consequently, there can be no question of disallowance u/s 40(a)(i). We have noted from Appendix 2 that the assessee was to pay `Rights fee’ to ICC even during the preceding year. Taking this factor into consideration, the ld. DR was directed to inform the Bench if the payment by the assessee to ICC during the instant year or in earlier years was subjected to tax in the hands of the latter. Despite allowing time, the ld. DR failed to point out if the amount in question has been subjected to tax in the assessment of ICC. Obligation to deduct tax at source u/s 195 in the hands of a payer is a natural consequence of chargeability to tax of the receipt in the hands of payee. Failure of the Revenue to bring on record any evidence of such payment having been subjected to tax in the hands of ICC also casts shadow on the liability of the assessee to deduct tax at source. We, ergo, hold that the payment made by the assessee to ICC amounting to ₹ 4.56 crore as `Rights fee’ is not in the nature of `Royalty’ or `Fees for technical services’ covered u/s 9(1)(vi) or 9(1(vii) of the Act and as such the assessee was not obliged to deduct tax at source on this payment. Ex consequenti, the provisions of section 40(a)(i) are not attracted. This ground of revenue is not allowed - Decided in favour of assessee
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2017 (3) TMI 1376
Income accrued and arise u/s.5(2) read with section 9(1)(i) - actual freight beneficiary of the vessel - DTAA - Held that:- Appellant has proved the place of effective control and management of the appellant by furnishing several documents including declaration by director of company that it is completely 100% owned by Mr. Jens Faber Anderson, Copy of Passport of Director to prove that the nationality of director and company has been operating from Denmark. It can be concluded that the Director Mr. Jens Faber Anderson resides in Denmark is resident of Denmark and have been operating business wholly from Denmark, all the important decisions are taken from Denmark in the form of meeting and therefore, the place of effective management and control is Denmark only. The principal company is also engaged in international traffic and residence is Denmark. Therefore, on the basis of Article 9 of the DTAA between India and Denmark, the income on account of operation of ship in International Traffic shall be taxable in the state in which the place of effective management is situated i.e. in this case Denmark. Therefore, in view of the above discussion and considering Article-9 of the Treaty between India and Denmark and also the decision taken by the Department in earlier cases of the assessee, we hold that the ships operated in International Traffic and therefore, the income from ship shall not be taxed in India as per Article 9 of the Treaty. Therefore, on account of foregoing observation, appeal of the assessee/appellant is allowed.
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2017 (3) TMI 1375
Disallowance towards exhibition of films taken on minimum guarantee basis on advertisement and other related expenses - Held that:- The claim of assessee cannot be allowed in view of the Explanation below the Rule 9B(1) of the Income Tax Rules, 1962. The assessee incurred expenses in connection with advertisement of film where the film rights have been acquired on a minimum guarantee basis by a film distributor. Further, it is also brought on record that as per the agreement entered between film producers and the assessee, the expenses related to the advertisement has to be incurred by the producers, therefore, it was rightly disallowed by the lower authorities, and there is no liability as the assessee is not liable to incur any such expenditure on this count and it is the duty of the producer to incur the expenditure. Accordingly, we upheld the order of the lower authorities. Hence, this ground raised by the assessee is rejected. Disallowance of agricultural income - assessee did not produce any evidence for its nature of being an agricultural income, and that income is treated by the Revenue as ‘income from other sources’- Held that:- In this case, the assessee stated that he owns vast area of agricultural land, there was no iota of evidence regarding cultivation carried on by the assessee with reference to nature of crop grown, labourers employed, or any details of expenditure incurred or products sold. In the absence of these particulars, it is not possible for Department to give benefit of agricultural income to the assessee. Since the assessee placed no evidence regarding agricultural income, the burden cast upon the assessee, not shifted to the Revenue authority as to prove that there is no agricultural income. Accordingly, we upheld the order of lower authorities. Therefore, this ground raised by the assessee is dismissed. Levy of penalty under section 271(1)(c) - disallowance of expenditure claimed by the assessee towards advertisement - Held that:- The assessee claimed an expenditure towards advertisement for the assessee is not entitled. In respect of this, the assessee made an effort to claim that expenditure. As rightly pointed out by the ld.D.R, had it been no scrutiny, the assessee would have escaped and would have got deduction towards this expenditure and in our opinion this is a false claim by the assessee and it is not a wrong claim so as to apply that ratio laid down by the Supreme Court in the case of Relaince Petroproductgs (P.) Ltd.(2010 (3) TMI 80 - SUPREME COURT ). Accordingly, we confirm the order of Ld.CIT(A) and the restore the order of the AO and confirm the levy of penalty on this issue. Regarding agricultural income if the assessee carried on agricultural operations, at least there would have been certain receipts of sale of agricultural products or evidence regarding expenditure incurred. With reference to expenses relating to agricultural activities, the assessee is not having any evidence, we are of the opinion that assessee made an attempt to show the non agricultural income as agricultural income and because of scrutiny, the AO is able to find out the claim as false and the same was considered for income from other sources. Accordingly, this kind of conduct of the assessee warrants levy of penalty under section 271(1)(c) of the Act, which is nothing but furnishing inaccurate particulars of income and levy of penalty under section 271(1)(c) of the Act is confirmed. Non deduction of TDS on film distribution commission - addition u/s 40(a)(ia) - contention of the ld.A.R is that net collection from the distribution of film was handed over to the assessee by M/s.Geetha Films after retaining 5% of the collections as distribution commission for their services and therefore the provisions of the Sec.40(a)(ia) of the Act is not applicable as there was no ‘payer’ and ‘payee’ relationship - Held that:- In our opinion, the argument of assessee is devoid of merits. Whenever, the assessee has claimed any expenses as commission in terms of Sec.40(a)(ia) of the Act, the assessee is duty bound to deduct the TDS and paid the TDS to the Government exchequrer before the due date of filing the return of income. The assessee is not in a position to place any evidence with this respect and the ld.A.R argued that there is no relation between the payee and payer, between the the Geetha Film distribution and the assessee. This argument holds no water. However, we are inclined to remit the issue to the file of AO in view of the judgement of Special Bench in the case of Merilyn Shipping and Transport Vs. ACIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM ] to examine whether the payment is already made and it is not outstanding at the end of the close of this financial year relevant to assessment year 2010-11 and be already paid, no disallowance is warranted under Sec.40(a)(ia) of the Act Disallowance being 20% of the distribution expenses claimed - Held that:- Admittedly, the assessee had not produced the bills, vouchers and other related supporting evidences. In our opinion, the disallowance of distribution expenses @ 20% made by the AO is on higher side. Considering the nature of distribution, we are inclined to arrive at allowing 10% of the distribution expenses against 20% made by the ld. Assessing Officer as not supported by the vouchers.
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2017 (3) TMI 1374
Registration u/s 12A denied - non affording due opportunity of hearing on the basis of sole ground that the trust has not been registered under M.P. Registration Act, 1951 - Held that:- The appellant was not provided due opportunity of hearing to place its case which resulted into dismissal of application. We are satisfied that the appellant was not provided due opportunity of hearing during the proceedings. Therefore, the order has been passed violating the principles of natural justice and thus the same is not sustainable in law. In view of our above-noted factual position, we find it appropriate to set aside the impugned order and restore the issue to the file of the learned CIT-II, Indore, for fresh adjudication, after providing due opportunity of hearing to the assessee and without being prejudiced from the earlier order passed by him. - Decided in favour of assessee for statistical purposes
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2017 (3) TMI 1373
Unaccounted sale/receipts added as voluntarily surrendered by the assessee - Held that:- This fact has not been controverted by the learned DR that the assessee submitted all the sale bills which were prepared on very next date of survey i.e. 25.2.2010 to ensure that the impugned amount should be included in the trading results/income of the assessee. When the impugned amount which was picked up by the Assessing Officer for making the addition, has been shown as receipt in the accounts of the assessee and such receipts of ₹ 45,18,389/- were actually included in the total turnover shown by the assessee in the books of accounts and the same were also offered to tax then in our opinion the Assessing Officer was not justified in making the addition of the same amount on the ground of retraction by the assessee. Assessing Officer has prompted to make double addition by ignoring the fact that the amounts surrendered during the course of survey have been included by the assessee in the books of accounts and financial results of the assessee which obviously amounts to double addition which is not permitted as per the provisions of the Act. In this situation, the learned CIT(A) was quite correct in deleting the impugned baseless addition and we are not able to see any valid reason to interfere with the order of the learned CIT(A) in this regard and, hence, we uphold the same.- Decided in favour of assessee.
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2017 (3) TMI 1372
Addition of bogus purchases - allegation made by the VAT Department that the suppliers are Hawala operators - Held that:- We note that the assessee has produced the bills and bank statement showing payment against the supplies received. The amount of VAT collected by the suppliers from the assessee was not paid to VAT Department. This has probably provoked the VAT Department to dub the impugned suppliers as Hawala operators. The VAT Department has finally collected the taxes from the purchaser of the goods, i.e. the assessee. Therefore, it is ostensible that the purchases are not found to be bogus per se by VAT Department. In the case of non-existing purchases, as understood by the IT Department based on the reference made by the VAT authorities, there was no occasion for the VAT authorities to collect VAT thereon. The collection of VAT tantamount to existence of transaction of purchases. The grievance of the VAT authorities was on non-payment of VAT on purchases happened. Thus, purchases made cannot be denied on the basis of aforesaid allegation. Neither has the Assessing Officer challenged the book results claimed to be reasonable by the assessee. No result of any other enquiry, if any, is recorded. There is no finding on facts adverse to the assessee except non-descript reference made by the VAT Department which, in our view, is not adequate to implicate the assessee with the charge of bogus purchase. It is pertinent herein to note that that, in the case of assessee-HUF (assessment order in file), the gross profit has been estimated by tax authorities at 11% of the Hawala purchases. In the instant case, the assessee has already declared 13% gross profit. Thus, semblance of reasonableness in book results also cannot be denied. - Decided in favour of assessee
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Customs
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2017 (3) TMI 1400
Maintainability of appeal - Effective date of amendment to Section 129E of CA, 1962 - mandatory pre-deposit - The only argument canvased before us is that the tribunal could not have taken recourse to the second proviso because the order-in-original, from which the appeal arose, is dated 24th June, 2014. That is prior to 6th August, 2014, on which date section 129-E as quoted above, as amended, came into force - Held that: - reliance placed in the case of M/s. Ganesh Yadav Versus Union of India And 3 Others [2015 (7) TMI 304 - ALLAHABAD HIGH COURT], where it was held that by virtue of the opening words of Section 35F(1) of the Act as well as by the second proviso to the provision, it is clear that appeals which are filed on and after the enforcement of the amended provision on 6 August 2014 shall be governed by the requirement of pre-deposit as stipulated therein - the tribunal was right in applying the amended provision. There is no legal infirmity or perversity in the order impugned before us - the tribunal was right in applying the amended provision - appeal dismissed - decided against appellant.
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2017 (3) TMI 1399
Jurisdiction - denial of deemed export benefit - Recovery of duty drawback granted earlier - Revenue denied the benefit on the ground that the proceedings are pending before the Hon'ble Supreme Court of India - Held that: - the issue raised in this petition is fully covered by the Division Bench Judgment of this Court in the case of Patel Engineering [2015 (2) TMI 173 - BOMBAY HIGH COURT]. Though the Revenue would submit that it has approached the Hon'ble Supreme Court of India challenging the same, nothing has been pointed out which would indicate that either the Judgment is quashed or set aside or no effect can be given to it in future cases. In such circumstances, we are bound by our Judgment delivered in Patel Engineering - petition allowed - decided in favor of petitioner.
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2017 (3) TMI 1398
Provisional release of confiscated goods - validity of SCN - there is no reference to the duty amount which the respondents propose to levy on the petitioner - it is the claim of the petitioner that the condition mentioned in the impugned order is onerous - Held that: - in the issuance of SCN, the provisions of Section 28 of the Act will have to borne in mind, in particular, the provisions of sub-Section (1)(a) of the said Section - A perusal of the Section 28(1)(a) would demonstrate that the proper officer is required to indicate in the SCN the amount which the noticee is called upon to pay. This is crucial for various reasons including an instance, where the noticee may not wish to contest the SCN. There could also be other instances, where, while the substance of the charge is accepted, the quantification of duty is disputed by the noticee. Accordingly, the noticee needs to be informed as to the amount which the customs seeks to recover by way of duty. The failure to mention the amount of duty that the petitioner would have to pay, according to me, impregnates the SCN with a fatal weakness - Therefore, insofar as the second condition for provisional release of subject goods is concerned, the same cannot be sustained. The reason being, as indicated above, that there is no duty amount mentioned in the SCN - the only condition which can be sustained and qua which no issue is raised by the petitioner is the first condition prescribed in the impugned order, whereby, execution of PD Bond equivalent to 100% of the value of goods is sought. Goods will be released to petitioner on fulfillment of modified conditions. Petition allowed - decided in favor of petitioner.
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2017 (3) TMI 1397
Issuance of a direction that assessment proceedings be concluded - it is the petitioner's case that most of the documents have already been furnished and that, the bill of entries, however, are untraceable - Held that: - the petitioner is aggrieved by the fact that, the assessment has not taken place resulting in an alert being put out against him in the EDI system - the prayer made by the petitioner for issuance of a direction that assessment proceedings be concluded, albeit, in accordance with law, appears to be reasonable - Respondent Nos.2 and 3 shall conclude the assessment proceedings as expeditiously as possible, after affording an opportunity of a personal hearing to the petitioner/authorised representative - petition allowed - decided in favor of petitioner.
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Corporate Laws
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2017 (3) TMI 1393
Permission of substitution of petitioner - allegation of huge mismanagement against the company - allegation of huge mismanagement - need for having requisite shareholding - Held that:- No difficulty in holding that the proceeding under consideration does not abate on the death of petitioner No. 1 in 2013. Rather, this court has a duty cast upon it to ensure that such a representative proceeding is carried forward to its logical conclusion and if necessary, same needs to be done by impleading Parties who are similarly situated with the petitioner in such proceeding. In that view of the matter, three cannot be any abatement of the petition on the death of the petitioner No. 1. In such a scenario, other questions, viz. whether the applicants could show sufficient ground for not preferring substitution petition in time or whether the right to sue survive in favour of surviving petitioners etc. become wholly redundant. But then, on the face of (he materials on record, it needs to be concluded that conduct of the surviving petitioners in seeking substitution of the deceased petitioner by his legal representatives is found to be far from satisfactory. In those factual backgrounds, let us consider the contention that the petition seeking substitution is required to be rejected since on the date of filing of substitution application, the applicants did not have requisite share qualification to file the company petition in terms of law laid down in Sec. 399 of the Act of 1956. In that connection, we can peruse gainfully the decision in Rajahmundry Electric Supply Corporation Ltd. (1955 (12) TMI 21 - SUPREME COURT OF INDIA)as held that validity of the petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, cease to be maintainable by reason of events subsequent to its presentation. Coming back to our present case, we have found that the shareholding of the predecessor of applicants in the company was in decimals. But then, the materials on record prima facie show that the original petitioners had the requisite share qualification to file the petition u/s. 397/398 of the Act, 1956. This prima facie shows that the petition was validly filed by the original petitioners and therefore, only for applicants not having requisite share qualification to file the petition on their own on the date of filing of application under consideration, the applicants cannot be debarred from having their names substituted in place of deceased petitioner No. 1 in the company petition. Resultantly, the application is allowed.
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Service Tax
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2017 (3) TMI 1418
Condonation of delay - delay with explanation which is certainly less satisfying than required by law - Held that: - for that reason the claim of the State shall not be defeated as the claim is huge (about Rupees Sixty Six Crores approximately) and it would be against the larger public interest to reject the examination of the correctness of the judgment under appeal - we deem it appropriate to condone the delay subject to the condition that the appellant pays costs quantified at ₹ 2,00,000/- to the respondent - We also deem it appropriate to direct the appellant to identify the officers who are responsible for such inordinate delay and recover the amount of costs from them - delay condoned - appeal allowed.
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2017 (3) TMI 1417
Constitutional validity of amendments made in the FA, 1994 (Service Tax) by the FA, 2016, whereunder the Section 65B was amended, as being ultra vires the Constitution of India under Entry 34 and Entry 62 of List II of the Seventh Schedule of the Constitution of India - lottery - whether the transactions in buying and selling lottery tickets are not liable to Service tax under the provisions of the FA, 1994 as amended by the FA, 2016? - N/N. 18/2016-ST dated 01.03.2016. Held that: - it is evident that the service tax was intended on promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner. By the impugned amendment a cosmetic change has been made in the Amendment Act, 2010, as initially the words “any person or any other person” was used. In 2015, it was modified to the extent that any activity carried out, for a consideration, in relation to or for facilitation of, a transaction in money except an actionable claim excluding the activity carried out (a) by a lottery distributor or selling agent in relation to promotion, marketing, organizing, selling of lottery or facilitating in organizing lottery of any kind, in any other manner. The lottery distributor or selling agent is a person appointed or authorized by a State for the purpose of some activities. Article 268A, which was incorporated by the Constitution (Eighty-eighth Amendment) Act of 2003, has recently been omitted by the Constitution (One Hundred and First Amendment) Act, 2016. Entry 92C was inserted by the same constitutional amendment, but admittedly never notified, as pleaded by the learned counsel appearing for the parties and the same has also been omitted by the Constitution (One Hundred and First Amendment) Act, 2016. Thus, reliance can be placed on Entry 97 invoking competence to impose service tax. However, Article 268C confers power and competence on the Union-Parliament to levy service tax on the service providers for consideration. Union- Parliament is conferred with the power and competence under Article 268A read with Entry 97, List I (Union List) to impose and levy service tax on other related activities, as aforestated. The impugned amendment brought in Finance Act, 2016 is not unconstitutional. When consideration is unascertainable for the services rendered by a distributor or selling agent, the service tax is not imposable and liable to be set aside. The amendments carried out by the Finance Act, 2016, are not capable to being implemented for imposition and levy of the service tax on the services allegedly provided by the petitioners - petition allowed - decided partly in favor of petitioner.
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2017 (3) TMI 1416
Challenge to the Show Cause Notice (SCN) - Maintainability of petition - statutory remedy of appeal - it was submitted that the SCN is vague and has been issued on the basis of assumption. It does not contain any allegation that, the first petitioner is liable to pay Service Tax - manpower recruitment or agent service - providing services without obtaining registration - Held that: - Existence of a statutory alternative remedy is not a complete bar to the maintainability of a writ petition. The rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion - While examining an order passed by a statutory authority in a quasi judicial proceeding, the Writ Court is not called upon to sit in appeal over such order, reappraise the evidence and substitute the findings arrived at by the deciding authority with its own findings, unless it is substantiated that, the impugned findings are perverse or are contrary to public policy. In the present case, it cannot be said that the authorities had acted without any basis in issuing a SCN. The SCN was issued on the basis of materials as narrated above. It is detailed. The department has valid reasons to issue the same. The charges are based on cogent materials and evidence. It does not violate any law. The petitioners have not been able to establish that, the department had violated any law in issuing the SCN or that the SCN contains any charges which is contrary to any law. Petition dismissed - decided against petitioner.
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2017 (3) TMI 1415
Restoration of appeal - dismissal of appeal due to non-deposit of the outstanding service tax amount of ₹ 23,12,868/- within a period of eight weeks therefrom as pre-deposit - appellant submitted that the present pre-deposit requirement is 7.5% of the demand. The demand could not be said to be more than ₹ 23,12,868/- and, after the amendment, 7.5% of that could only be insisted upon as predeposit for the purposes of hearing of the appeal - Held that: - the appellant was ready and willing to put in the deposit of 7.5% of ₹ 23,12,868/- as pre-deposit for the purposes of hearing of the appeal - appeal restored with direction upon the appellant to deposit 7.5% of ₹ 23,12,868/- being the sum of ₹ 1,73,465/- within two weeks - appeal allowed - decided partly in favor of assessee.
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2017 (3) TMI 1414
Refund claim - Rule 5 of CCR read with N/N. 27/2012-CE(NT) dt. 18/06/2012 - rejection on the ground that the appellant had not taken registration - Held that: - The issue whether service tax registration is mandatory for refund of accumulated CENVAT credit of service tax has been finalised in the judgments mPortal India Wireless Solutions (P.) Ltd. Versus Commissioner of Service Tax [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - the rejection of refund is unjustified - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1413
Liability of tax - reimbursable amounts which have been collected on the items like Security Guards, Videography Police, Escorts, DM/CMM charges etc. - Invoking expended period of limitation Difference of opinion - Matter referred to larger bench.
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Central Excise
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2017 (3) TMI 1412
CENVAT credit - input services - The tribunal initially thought that this was a matter requiring detailed consideration. Suddenly, it took it up and without indicating in any manner whether both sides concede that it is covered by a judgment of this court in the case of Commissioner of Central Excise, Nagpur vs. Ultratech Cement Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT] allowed it, without any further clarification - Held that: - instead of this court rendering any final decision, interest of justice would be served if we quash and set aside the unreasoned order of the tribunal. We restore the appeal back to the file of the tribunal for a decision afresh in accordance with law uninfluenced by any earlier conclusion. We also clarify that we have not expressed any opinion on the rival contentions - appeal allowed.
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2017 (3) TMI 1411
Short payment of tax - BED - excess payment under Education Cess and SHE Cess - whether for the excess paid tax, adjusted with the short paid tax, the assessee is required to pay interest for short paid duty under BED? - Held that: - considering the provision of Section 11AB of the Act, it is required to be noted that interest is leviable on the amount of duty due and payable - Admittedly, ₹ 12,21,639/- was due and payable by the appellant under the BED. At the same time, the appellant shall also be entitled to interest on the refund on the amount of ₹ 12,21,639/- paid under the head of Education Cess and SHE Cess - no error has been committed by the learned Tribunal while passing the impugned order - appeal dismissed - decided against appellant-assessee.
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2017 (3) TMI 1410
Benefit of N/N. 3/2001 and 6/2002 - Maaza Orange drink - Maaza Pineapple drink - assessee had claimed the exemption of the drinks under N/N. 3/2001 and 6/2002 claiming that they have been manufacturing the same out of fruit juice and fruit concentrate - Revenue Authority was of the view that although Orange fruit juice or Pineapple fruit juice were added to make aforesaid drinks the imported Authentic Aseptic Orange juice concentrate and Authentic Aseptic Pine Apple Concentrate were used in the manufacture of Maaza Orange Drink and Maaza Pine Apple drink - Held that: - The import of an authentic aseptic pineapple concentrate and orange concentrate was not disclosed to the department. The use of the above ingredients in the manufacture of the drinks was not controverted in the adjudication. Nor that was controverted before Tribunal. Appellant established that without need of the above concentrates, no one shall import. Therefore that fact alone is enough to hold that concentrates were indispensable for use in manufacture of drink by the appellant - The appellant failed to show purchase of fruit pulp or fruit juice to use the same in the manufacture of drinks. There was no fruit pulp or fruit juice used in the manufacture of drinks in absence of any purchase record produced before any of the Authority to prove purchase of fruit pulp or fruit juice was made by appellant for that purpose. Accordingly, the appellant is disentitled to the benefit of the exemption notification having subscribed its goods to Tariff Heading 2202.99 - The test for determining classification of the goods under Tariff Heading 2202.40 is that the basis of the drink ought to be fruit pulp or fruit juice. The appellant having used the concentrate imported to manufacture its drinks and was deliberately classifying the same under a wrong entry, failed to meet the condition of the notification. Appeal dismissed - decided against appellant-assessee.
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2017 (3) TMI 1409
Classification of goods - NIDO Nutritious milk for growing kids - classified under CTH 0404 90 90 attracting ‘nil’ rate of duty or under CTH 1901 90 90, attracting 16% rate of duty? - the adjudicating authority held that the item which is added (Maltodextrine) is in the nature of sweetening matter whose addition is permissible under 0404. However, he held that addition of artificial flavouring substance is an item which is not permitted to be added to natural milk constituent in 0404 - Held that: - The disputed product, ‘NIDO Nutritious milk for growing kids’ is made up of milk predominantly but is added with a few additional ingredients - addition of stabilizer while making the aforesaid preparation would not take it out from Heading 04.01. Thus, it needs to be determined as to whether the addition of artificial flavour would make it a food preparation and therefore, it would no more remain diary produce and would be covered under heading 19.01. Where flavouring agent of 0.03% of the total composition is added, which does not change the basic characteristic of the product and the product remains a nutritious milk drink only - the appropriate classification for the impugned product will be under Chapter tariff item 0404 90 00 of the Central Excise Tariff Act, 1985, as contended by the appellant - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1408
Interest - payment of appropriate interest on the outstanding amount of duty for the month June 1998 in terms of Clause (i) of the Third Proviso to Sub-Rule (3) of Rule 96ZO of the CER, 1944 - Held that: - similar issue decided in the case of M/s. Shree Bhagwati Steel Rolling Mills Versus Commissioner of Central Excise & Another [2015 (11) TMI 1172 - SUPREME COURT], where it was held that since Section 3A which provides for a separate scheme for availing facilities under a compound levy scheme does not itself provide for the levying of interest, Rules 96ZO, 96ZP and 96ZQ cannot do so - demand set aside - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1407
Valuation - inclusion of charges for after Sales Service - Pre-Delivery Inspection (PDI) - Held that: - an identical issue has come up in the case of CCE, Mysore v. TVS Motors Co.Ltd. [2015 (12) TMI 874 - SUPREME COURT], where the Hon ble Supreme Court has endorsed the view laid down in the case of Tata Motors Ltd. v. Union of India [2012 (9) TMI 244 - BOMBAY HIGH COURT] and held that the expenses incurred by the dealer for PDI and said services has nothing to do with the term servicing mentioned in the transaction value and as such, the said expenses cannot be added to assessable value - demand set aside - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1406
CENVAT credit - supplementary invoices issued by the vendor - Held that: - As the allegation of suppression is not sustainable against the vendors, therefore, the appellant cannot be denied cenvat credit on additional duty paid by the vendors on account of increase in the amortization cost of moulds and dies - credit rightly availed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1405
Recovery of CENVAT credit with interest and penalty - it is alleged that the appellant had reduced the value of closing stock of the raw materials to the extent of ₹ 1,63,28,010/- by amortizing in their Balance Sheet(2002-03) but had not reversed the CENVAT credit of ₹ 26,12,481/- @ 16% of the said value - Held that: - There is no contrary evidence produced by the Revenue by which it could be concluded that the entire value of ₹ 1,63,28,010/- is attributable to inputs on which credit has been availed - certificates submitted by chartered accountants proof the bonafideness of assessee - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1404
CENVAT credit - forged invoices - the dimension of the materials shown in the delivery challans issued by M/s. Sheetal Steels to the registered dealer did not match with the dimensions specified in the CENVAT invoices issued by the registered dealer to the respondent - Held that: - irregular/offence/lapses if any is on the dealer. However no proceedings have been initiated against the dealer. The respondent has availed credit on the invoices issued by the dealer. The Department has no case that they have not used the materials supplied on the invoices in the production of final products. So also there is no case that respondents did not pay duty on the inputs - if passing on the credit by the dealer was irregular, it is the dealer who has to be proceeded against and not the respondent since the respondent has availed credit on the invoices which have been issued by the dealer - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1403
CENVAT credit - prefabricated construction for cold storage rooms - denial on the premise that the said prefabricated structure are not capital goods as same are classifiable under Chapter 39 of CETA, 1985 - Held that: - these prefabricated structures have been used by the appellant for fabrication of cold room which is classifiable under Chapter 84 of the Central Excise Tariff Act - reliance placed on the decision of the CCE Vs. Rane Brake Lining Ltd. [2011 (2) TMI 415 - CESTAT, CHENNAI] - appellant is entitle to avail the Cenvat Credit as these prefabricated structures have been used by the appellant for fabrication of cold room which is a capital goods - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1402
Recovery of credit availed on education cess and higher education cess - appellant availed credit of the duty paid in accordance with the formula prescribed u/r 3(7)(a) of CCR 2004, Alleging that inclusion of Education Cess and S&H Education Cess in calculating the eligibility amount of CENVAT Credit, is contrary to the Rule 3(7)(a) of CCR, 2004, SCN was issued - Held that: - the issue is no more res integra and is covered by the decision of the Tribunal in the case of Metaclad Industries [2012 (11) TMI 244 - CESTAT MUMBAI], taking into account the amendment to the said Rule 3(7)(a) of CENVAT Credit Rules 2004, by issuance of N/N. .22/2009-CE(NT), dt.07.09.2009, even for the earlier period, held that the appellants are rightly entitled for the credit of all the additional duties of customs paid by the EOU u/s 3 of the CTA even for the period prior to 7-9-2009 - while calculating admissible CENVAT credit u/r 3(7)(a) of CCR, 2004, appellant has correctly factored Education Cess and Higher Education Cess as CVD paid - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1401
CENVAT credit - manufacture of dutiable as well as exempted goods - non-maintenance of separate set of books - recovery of 10% of the value of the clearances of the exempted products - Held that: - the Chartered Accountant certificate shows that the respondent has used commonly only security services and telephone services amounting to ₹ 1,46,680/- for both dutiable and exempted products. The proportionate credit availed on these services to the tune of ₹ 4,312/- has been reversed by the respondents. That therefore the demand of 10% of the value of the exempted goods is not proper - reliance placed in the case of Chandrapur Magnet Wires (P) Ltd. Vs. CCE, Nagpur [1995 (12) TMI 72 - SUPREME COURT OF INDIA] - appeal dismissed - decided in favor of assessee.
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CST, VAT & Sales Tax
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2017 (3) TMI 1396
Prosecution - tampering with statutory documents - Held that: - it is evidently clear that the vehicles, which transported the goods from the State of Kerala, did not carry the goods, when going out of the State. That apart, vehicle numbers in Form-IV issued by the Rubber Board have been tampered. Further, the time schedule fixed in the transit passes have not been adhered to and the goods did not pass through the designated check posts as mentioned in the transit passes - petition dismissed - decided against petitioner.
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2017 (3) TMI 1395
Jurisdiction - Whether the penalizing officer u/s 51(7)(b) of the Act has the jurisdiction to determine the issues on which the matter was remanded by the Tribunal? - penalty - Held that: - issue is regarding determination of nature of transactions. The proceedings u/s 51 of the VAT Act are summary in nature. The officer at the check post can not determine the nature of transaction, that being the job of the regular assessing authority. Accordingly, the proceedings initiated for levy penalty u/s 51 of the VAT Act are quashed - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1394
Security for registration as a transporter - Tripura VAT - the petitioner-firm applied for registration under the category of couriers and hence, as stated, the petitioner-firm was liable to pay the security deposit to the extent of ₹ 3.60 lacs. Though the application was made on 22.04.2014, the respondents, the respondent No.2 in particular, did not take any decision on the application filed by the petitioner firm for registration till 22.04.2015 when approval for registration was accorded - whether the Memorandum dated 20.07.2015 would apply in the case of the petitioner for purpose of raising additional security deposit or whether such exercise would imply the retrospective operation of the said memorandum dated 20.07.2015? Held that: - In the records as produced by the respondents or in the counter-affidavit no explanation has been given as to why the application for registration which was filed on 24.04.2014 was kept pending till 22.04.2015 when the petitioner-firm was asked to deposit the security for registration. When after inquiry, the petitioner-firm was found competent to have the registration certificate as the transporter (courier), though belatedly on 22.04.2015, the demand for security deposit was made and as such the relevant date for purpose of determining the rate of security deposit shall invariably be 22.04.2015, not 31.07.2015. By way of applying the new rate in the case of the petitioner-firm, we have no doubt in our mind that the respondents have given retrospective effect of the memorandum dated 20.07.2015, which according to us, in the context of this case, cannot be sustained. Hence, the impugned decision/order as reflected in the communication dated 16.10.2015 is interfered with and set aside - petition allowed - decided in favor of petitioner.
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Wealth tax
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2017 (3) TMI 1419
Penalty imposed under s.18(1)(c) of Wealth Tax Act - concealment of any ‘particulars’ of wealth per se - CWT(A) directed the AO to cancel the penalty - Held that:- No infirmity in the reasoning of the CWT(A). The CWT(A), in our view, has appreciated the facts in perspective. It is not a case where any wealth was kept hidden from the knowledge of the Department. It is merely a case where the assessee has initially agitated the taxability of cash in hand after making a proper disclosure of the facts thereon and later shifted his stand on the same voluntarily prior to any discussion on the point. Under these circumstances, the conclusion reached by the CWT(A) cannot be faulted.- Decided in favour of assessee
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Indian Laws
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2017 (3) TMI 1392
Denial of bail pending trial/appeal where appellants have been in custody for a long period - Held that:- We do consider it necessary to direct that steps be taken forthwith by all concerned to effectuate the mandate of the fundamental right under Article 21 especially with regard to persons in custody in view of the directions already issued by this Court. It is desirable that each High Court frames its annual action plan fixing a tentative time limit for subordinate courts for deciding criminal trials of persons in custody and other long pending cases and monitors implementation of such timelines periodically. The High Courts may issue directions to subordinate courts that – (a) Bail applications be disposed of normally within one week; (b) Magisterial trials, where accused are in custody, be normally concluded within six months and sessions trials where accused are in custody be normally concluded within two years; (c) Efforts be made to dispose of all cases which are five years old by the end of the year; (d) As a supplement to Section 436A, but consistent with the spirit thereof, if an undertrial has completed period of custody in excess of the sentence likely to be awarded if conviction is recorded such undertrial must be released on personal bond. Such an assessment must be made by the concerned trial courts from time to time; (e) The above timelines may be the touchstone for assessment of judicial performance in annual confidential reports. (emphasis added) (ii) The High Courts are requested to ensure that bail applications filed before them are decided as far as possible within one month and criminal appeals where accused are in custody for more than five years are concluded at the earliest; (iii) The High Courts may prepare, issue and monitor appropriate action plans for the subordinate courts; (iv) The High Courts may monitor steps for speedy investigation and trials on administrative and judicial side from time to time; (v) The High Courts may take such stringent measures as may be found necessary in the light of judgment of this Court in Ex. Captain Harish Uppal (2002 (12) TMI 562 - SUPREME COURT OF INDIA) .
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