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TMI Tax Updates - e-Newsletter
March 4, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Order 142(2A) appointing Special Auditor by AO - when it is stated in the order that looking to the complexity and the multiplicity of transactions, account are required to be verified by the Special Auditor, no reason to interfere in the order of appointing special auditor - HC
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Penalty u/s. 271(1)(c) - bonafide mistake - assessee could not be said to have filed "false" returns when it did not include the amount of interest and notional house property income in the taxable income - no penalty - AT
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Penalty U/S 271B - delay in filing the Tax Audit Report before the specified date - delay in appointment of auditors by the co-operative department for statutory audit - This appointment is not in the control of the assessee - it is not a fit case to impose the penalty u/s. 271B - AT
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Levy of penalty u/s 271(1)(c) - disclosure of additional income consequent to survey operation - the explanations of the assessee that he has declared additional income to buy peace and to come out of vexed litigation could be treated as bonafide and penalty u/s 271(1)(c) cannot be levied - AT
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Nature of expenditure - revenue or capital in nature - assessee had engaged a professional interior designer to plan temporary access and exit from the Five Star Hotel and for which an amount of ₹ 22.44 lakhs was paid - this expenditure is allowable as deduction u/s 37(1) as revenue expenditure - HC
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Satisfaction Note u/s. 153C - cash seized belonged to the third party, i.e., the assesse in the present case. Such statement also constitutes as material because it is made in the course of the search under Section 132(4) - HC
Service Tax
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Rejection of refund claim - N/N. 41/2007-ST - there is no dispute about export of goods and charges collected by the bank for realization of export proceeds. Thus, refund claim is not deniable for the procedural lapses, if any and same should be allowed. - AT
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Transaction with International Financial Corporation (IFC) - whether liable to service tax? - IFC Act 1958 clearly provides for immunity of all transactions and operations of IFC. - there is no separate exemptions required as the transaction of IFC were made immune to tax in terms of IFC Act - AT
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Import of services - Section 66A of FA, 1994 - the appellants received mainly legal consultancy service and not management or business consultant service - The finding that the said legal firm did not represent the appellant in any Court or legal proceeding and, hence, the service is not legal consultancy, is fallacious. - AT
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The service tax demand sought to be confirmed on translation fee itself supports the case of the appellant that translation is one of the gainful employment that can be availed by the trainee of the institute - Even on general principle such work of translation, without even the knowledge of the client's, business, cannot be considered as BSS - AT
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Service tax liability - the target incentives received by the authorized dealer cannot be subjected to service tax under the category of "BAS" - AT
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Service tax liability - Publicity Expenses - the amount shown in the show cause notice was taken from the expense entry made by the appellant in their annual P&L Account - no evidence that assessee has provided marketing services - demand of service tax set aside - AT
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The service tax liability on the amount paid as reimbursable to the professionals will not includable as gross value of services and not taxable under Rule 5(1) and also the Rule 7 of the Service Tax Valuation Rules which categorically rules out the reimbursable expenses. - AT
VAT
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Input tax credit - reversal on the ground that there was mismatch in information which was available on the departmental website, as against that, which was reflected in the monthly returns filed by the petitioner - mere mismatch in information could not have formed the basis of reversal of ITC - HC
Case Laws:
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Income Tax
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2017 (3) TMI 114
Reopening of assessment - accrual of income - unexplained cash received - difference between sale deed and sauda chitthi as received by the assessee in cash - Held that:- There is no tangible material available with the AO to form a reasonable belief that the amount of ₹ 18,23,19,011/- has been received by the respective petitioners assessee in cash. As observed herein above, as such there is no material whatsoever with the AO that any amount of sale consideration has been received by the respective petitioners assessee. The formation of opinion by the AO thus seems to be on surmise and conjecture, which cannot be the basis for reopening the assessment of concluded assessment, in exercise of powers under Section 147 of the Income Tax Act. Even as per the statement of Shri Rajesh Vaghani, the sauda chitthi was immediately cancelled. There is no tangible material along with the sauda chitthi that any sale consideration is received by the respective assessee. As observed herein above, subsequently the sale deeds have been executed by the original land owners in favour of one Shri Popat Kakadiya and the original land owners have received full sale consideration of ₹ 56,39,500/- . Under the circumstances, it cannot be said that any income had accrued to the assessee. Once no income had accrued to the assessee, the formation of opinion by the AO that the assessee have received ₹ 18,23,19,011/- in cash has been vitiated and as such, for which, there is no basis. Under the circumstances also, the impugned notice to reopen the assessment for AY 2009-10 deserves to be quashed and set aside. - Decided in favour of assessee.
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2017 (3) TMI 113
Order 142(2A) appointing Special Auditor by AO - Held that:- One of the requirement for exercising the powers under Section 142(2A) that the AO must be satisfied in interest of revenue, the account is required to be audited by the Special Auditor is concerned, it is required to be noted that considering the amended provision of Section 142(2A) of the Act which has come into force w.e.f. 1.6.2013, the special Auditor can be appointed if at any stage of the proceedings before him, the AO having regard to the nature and complexity of the account of the assessee and the interest of the revenue, is of the opinion that it is necessary so to do, he may direct the account to be verified by the Special Auditor. Therefore, having regard to the nature and complexity of the account, if the AO is satisfied and / or is of the opinion that accounts are required to be verified by the Special Auditor, he may pass such order. Therefore, on the aforesaid ground that the AO has not stated that the accounts are required to be audited by Special Auditor in the interest of Revenue, the impugned order is not required to be quashed and set aside, more particularly, when it is stated in the order that looking to the complexity and the multiplicity of transactions, account are required to be verified by the Special Auditor. Considering the object and purpose of Section 142(2A), it appears that the accounts are required to be audited by the Special Auditor under Section 142(2A) with a view to facilitate the AO in passing the impugned order. Thus no reason to interfere with the impugned order passed by the AO.
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2017 (3) TMI 112
Unexplained cash - cash seized during the course of search - Held that:- It is not in dispute that at the time of search, a sum of ₹ 2,89,000/- cash was in possession of the assessee, out of which ₹ 2,50,000/- was seized. Assessee is owning 4½ acres of agricultural land in HUF capacity and in the said account, book cash of ₹ 4,16,092/- has been reflected and this was also with the assessee. It was also noticed by CIT (Appeals) that an agreement to sell had been entered into by assessee and had received back ₹ 1,80,000/- as refund since said deal did not materialise or sale did not take place. Hence, CIT (Appeals) concluded that as on 25.03.2008 assessee possessed cash balance as per book a sum of ₹ 2,96,092/- and in that background, addition of ₹ 2,89,000/- came to be deleted. Since it was notice d after verification of books of account maintained by assessee that assessee had sufficient cash on hand, deletion made by CIT (Appeals) came to be affirmed by ITAT. Addition towards afforestation charges - Held that:- It came to be held by both the appellate authorities that though expenditure is financed by Sri Goutam Chand of M/s. Rajashree Minerals who had taken a mine on lease from assessee, they were recoverable from the assessee and their accounts also disclosed the same. In view of the fact that none of the parties other than the assessee has claimed said amount as expenditure and this aspect having not been questioned by the revenue, appeal of the revenue rightly came to be dismissed by the Tribunal. On appreciation of entire material on record, as noticed herein above, Tribunal has rejected the claim of the revenue and has affirmed the order passed by CIT (Appeals).
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2017 (3) TMI 111
Legal and professional fees - allowable business expenditure - Held that:- As during the period of construction of two additional floors, a temporary operational plan had to be prepared providing for alternative access to and exit from the Hotel. This without compromising on the high standard expected by customers in respect of ambiance and comforts in a Five Star Hotel. The respondent-assessee had engaged a professional interior designer to plan temporary access and exit from the Five Star Hotel and for which an amount of ₹ 22.44 lakhs was paid. This expenditure which was incurred by the respondent was necessary for carrying on business as it resulted in increased turnover in the subject Assessment year as compared to the earlier years. Therefore, this expenditure is allowable as deduction under Section 37(1) of the Act as revenue expenditure. The balance of ₹ 23.99 lakhs has been held by the Tribunal to be expenses incurred in normal / regular running of its business and therefore allowable as revenue expenditure under Section 37(1) of the Act. Amounts incurred for repairs of Hotel Building - Held that:- We find that the Tribunal, on examination of nature of expenditure and result of the expenditure in the context of the respondent-assessee's activity of running Five Star Hotel has determined which expenses could be considered as revenue and which as capital in nature. After giving a finding on principle on each of the items of expenditure, the impugned order has restored the issue to the Assessing Officer to pass appropriate orders.The entire exercise carried out by the Tribunal results in a finding of fact and this is not shown to us to be perverse in any manner.
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2017 (3) TMI 110
Validity of reopening of assessment - eligibility to claim exemption under Section 10 - Held that:- The assessee has placed on record the replies made to the queries on each of the aspects as well as the documentary evidence spanning several Annexures to the letter. It is quite evident that the AOs, upon proper inquiry and investigation into these materials, were satisfied as to the nature of the petitioner‟s activities and it was eligible to claim exemption under Section 10 of the Act. It has been repeatedly held in several decisions, both before and after the ruling of the Supreme Court in Commissioner of Income Tax v. Kelvinator of India Ltd (2010 (1) TMI 11 - SUPREME COURT OF INDIA) that a notice for re-opening the assessment is permissible only when it: (i) does not amount to “change of opinion”; (ii) is based on tangible material/evidence but is not opposed to the existing record and (iii) points to suppression of material facts by the assessee in the original return. In the present case, none of these elements ex facie exist to justify the impugned notice. It is therefore quashed as are all proceedings emanating from the impugned notice. - Decided in favor of assessee.
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2017 (3) TMI 109
Reopening of assessment - Held that:- The “Reasons to Believe” extracted by this Court in the previous part of this judgment clearly shows that specific information with respect to the nature of the credits received by the assessee from known entry operators had been shown to the AO while recording his satisfaction in the issuance of notice under Sections 147/148. In these circumstances, the reassessment notice could not have been questioned. As to the merits, we notice that in the reassessment proceedings, the assessee was unable to satisfactorily explain the correctness of the entries in question. The share applicants appeared to be not in existence and did not answer summons issued under Section 131 of the Act. Furthermore, given that the findings are concurrent by three lower authorities and relate to questions of fact, this Court is of the opinion that no question of law arises.
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2017 (3) TMI 108
Satisfaction Note u/s. 153C - assessment of third party - cash found during search - Held that:- In the present case too Jatinder Pal Singh was one of the Directors of the assessee. In the course of the search of his residential and other premises, he clearly stated that some cash seized in those premises belonged to the assesse. For the purposes of Section 153C, the satisfaction of the AO recorded was, in this Court’s opinion sufficient. Like in Super Malls [2016 (11) TMI 1370 - DELHI HIGH COURT] the AO considered the totality of the statement to conclude - undoubtedly facially, that the cash seized belonged to the third party, i.e., the assesse in the present case. Such statement also constitutes as material because it is made in the course of the search under Section 132 (4) and is also in consonance with the ruling of this Court in Dayawanti (2016 (11) TMI 211 - DELHI HIGH COURT ). - Decided in favour of revenue
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2017 (3) TMI 107
Attachment orders - Notice under Section 226(3) - Held that:- Admittedly, 15% of the disputed amount has already been recovered by the respondent- Revenue and such amount is covered by the Office Memorandum dated 29th February, 2016 issued by the CBDT. In such circumstances, we find that the respondents were not justified to pass the impugned attachment Notices under Section 226(3) of the Act. The claim of the petitioner, at this stage, seeking refund of the amounts attached pursuant to such directions, is not at all justified and cannot be granted in the present petition. Petitioner has placed on record a Memo showing the actual amount in dispute for the subject assessment years, as well as the amounts recovered based on refund orders, which figures are not disputed by the learned Counsel appearing for the respondents. The said Memo is marked “X” for identification. In view of the above, the impugned notices dated 16th January, 2017 and 17th January, 2017 issued to the State Bank of India, ICICI Bank Ltd., and HDFC Bank under Section 226(3) of the Act in respect of the Assessment Years 2011-12 and 2012-13 are quashed and set aside. - Decided n favour of assessee
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2017 (3) TMI 106
Transfer pricing adjustments to royalty payment - Held that:- Once it is admitted by the Revenue that the assessee entered into a royalty agreement with the AE and the assessee claimed benefit from such agreement, in the form of quantum increase in sales with no apparent increase in production, minimal product recalls and low after sales maintenance cost, and consequently paid royalty in terms thereof, it was not for the TPO to determine as to what could be the other reasons for increase in the assessee's sales and profit. Above all, there is no explanation forthcoming as to why the TPO decided upon 2% instead of the contractual rate of 3% for payment of royalty. No reason is offered by the TPO for picking on 2%. This whimsical fixation by the TPO amounts to an arbitrary and unbridled exercise of power. In consequence, we find that the TPO, having rejected the comparables cited by the assessee, did not take the trouble to examine alternate comparables so as to justify reduction of the rate for payment of royalty and by applying a wholly inapplicable methodology of determining the benefit from payment of such royalty, he capriciously reduced the rate for payment of such royalty from 3% to 2%.
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2017 (3) TMI 105
Deduction of contribution to EPF under section 43B - amount paid before the due date for filing the return of income - Held that:- Respectfully following the decision of the Hon'ble Bombay High Court in the case of CIT vs. Hindustan Organics Chemicals Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT) we reverse the orders of the learned CIT(A) on this issue and direct the authorities below to allow the assessee’s claim for deduction on account of contributions to employees provident fund (EPF) under section 43B which, admittedly, have been paid before the due date for filing the return of income for A.Y. 2012-13. Consequently, assessee’s grounds of appeal allowed.
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2017 (3) TMI 104
Penalty u/sec. 271(1)(c) - incidence of taxation on account of unaccounted receipts - assessee contended that the income additionally offered by the assessee did not accrue during the two years under consideration - Held that:- There is no dispute with regard to the fact that the assessee is following project completion method for offering income from the building projects. There is also no dispute with regard to the fact that both the building projects, viz., “Sai Radha Paradise” and “Achu Nandana Apartments” have not been completed during the years under consideration, i.e., they have been completed in the year relevant to AY 2008-09. Hence there is merit in the contentions of the Ld A.R, the incidence of taxation on account of unaccounted receipts, if any, shall arise only in AY 2008-09 and not during the years under consideration. It is well established proposition of law that the income pertaining to one year cannot be assessed in another year. We notice that the assessing officer has accepted the additional income offered by the assessee only on the basis of offer made in the statement taken from the partner of the firm u/s 132(4) of the Act, i.e., the assessing officer did not examine the aspect whether the alleged unaccounted receipts are taxable in the two years under consideration. Further he did not also examine the question as to whether the entire amount can be taken as the income of the assessee. It is noticed that the assessee also declared additional income on the strength of the offer made u/s 132(4). Thus we are of the view that the additional income offered by the assessee can be considered as a voluntary offer only and it cannot be considered as an offer made after detection by the revenue. In any case, we notice that the explanation of the assessee was not found to be false in terms of Explanation 1 to sec. 271(1)(c) of the Act. - Decided in favour of assessee
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2017 (3) TMI 103
Cancellation of registration granted u/s 12AA - carrying on activities in the nature of trade, commerce or business etc., and the gross receipts from the same were in excess of the stipulated limit of ₹ 10 lac as stood contemplated under the first proviso of Sec. 2(15) - Held that:- As it is neither the case of the revenue that the assessee which after verification of the genuineness of its objects and activities had been granted registration by the department u/s Sec.12AA(1)(b)(i), had during the year embarked on to any such new activities, which can safely be characterized as non-genuine activities, nor is it the claim of the revenue that the assessee subsequent to its registration is found to be carrying out activities which are not in accordance with its objects, therefore in the absence of satisfaction by the assessee of either of the aforesaid preconditions which forms the very foundation for exercising of the jurisdiction by the DIT(Exemption) for cancelling the registration of the assessee under Sec. 12AA(3), it can safely be concluded that the DIT(Exemption) had wrongly cancelled the registration of the assessee vide his order passed u/s 12AA(3) of the ‘Act’. We thus set aside the order passed by the DIT(Exemption) u/s 12AA(3) and therein restore the registration granted to the assessee u/s Sec.12AA(1)(b)(i). - Decided in favour of assessee
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2017 (3) TMI 102
Penalty u/s. 271(1)(c) - assessee offered the questioned amount in his revised return filed in response to notice issued u/s. 148 and paid taxes thereon - Held that:- As per the provision of Explanation 1 to section 271 (1), the onus to establish that the explanation offered was bona fide and all facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment. The explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation; it should not be a fantastic or fanciful one. As indicated the consequence follows as a matter of law. The burden is on the assessee. If he fails to discharge that burden, the presumption that he had concealed the income or furnished inaccurate particulars thereof is available to be drawn. However in the instant case the assessee has explained the reasons for not including the particulars of income as discussed above which appears to be bonafide considering the facts and circumstances of the case. We are, therefore, of the view that the assessee could not be said to have filed "false" returns when it did not include the amount of interest and notional house property income in the taxable income in the above facts & circumstances. we also find force in the submissions of the Ld.AR that the assessee is old aged and disclosure of amounts in revised and payment of taxes thereon and taking into consideration the submissions, facts and circumstances of the case and we cancel the impugned penalty imposed by the AO and confirmed by the CIT-A. Therefore, this ground of assessee is allowed.
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2017 (3) TMI 101
Penalty U/S 271B - delay in filing the Tax Audit Report before the specified date - Held that:- The assessee could not obtain and file the tax audit report as required u/s. 44AB of the Act due to delay in appointment of auditors by the co-operative department for statutory audit. This appointment is not in the control of the assessee. It is only then after that the assessee appoints tax auditor. The assessee filed the tax audit report immediately after obtaining the same from its Tax Auditor in Form No.3CA on 14-09-2009. Thus it is not a fit case to impose the penalty u/s. 271B of the Act. - Decided in favour of assessee.
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2017 (3) TMI 100
Rejection of books of accounts - substantial increase in the amount of wastage as compared to previous year - Held that:- On perusal of documents available on record, it is noted that the percentage of wastage during the year is 8.93% as against 15.8% in A.Y. 2010-11. The detailed working thereof has been reproduced above. Further, the turnover has, in fact, decreased from ₹ 21.85 crore to ₹ 16.59 crore during the year. Therefore, on both account, there is clearly an actual inaccuracy which has crept in or wrongly appreciated by the Assessing Officer which has resulted in rejection of books of accounts. Other reason mentioned for rejecting the books of accounts has been the decrease in the GP rate vis-à-vis last year and non-maintenance of quantitative details in terms of raw material and finished goods account. On perusal of the record, it is noted that the fall in GP rate has been reasonably explained by the assessee through facts and figures and as far as the quantitative details of raw material and finished goods are concerned, the same have been appropriately disclosed in the Tax Audit Report and therefore, details have been submitted during the course of assessment and the appellate proceedings. In the light of above, we do not see any justifiable reason for rejection of books of accounts in the instant case. Further, no reasonable basis has been given for estimating the GP rate by the lower authorities. Taking into consideration the fact that in the previous years as well as in the subsequent years, the books of accounts have been accepted by the Revenue, we do not see any justifiable basis for rejection of books of accounts in the instant year. - Decided in favour of assessee. Disallowance of office expenses - Held that:- No specific expenditure has been identified by the Assessing officer which calls for disallowance either in terms of the said expenditure being bogus in nature or not incurred for the purposes of business carried on by the assessee. There is no basis for disallowance on adhoc basis in the eyes of law. In the result, the disallowance made by the Assessing officer and sustained by the ld CIT(A) is deleted.- Decided in favour of assessee.
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2017 (3) TMI 99
Calculation of disallowance under section 14A - Held that:- We are of the view that once it is held that disallowances are to be made under section 14A of the Act, the disallowances are to be calculated as per Rule 8D of the Income Tax Rule. Rule 8D takes care of all types of direct and indirect expenses incurred to earn an exempted income. After the insertion of Rule 8D, the AO has no other option but to calculate the disallowances under section 14A as per Rule 8D of the Income Tax Rules. Having carefully examined the order of the lower authorities, we find that disallowances are not calculated correctly as per Rule 8D. Therefore, we set aside the order of the CIT(A) and restore the matter to the file of the AO with the direction to calculate the disallowances under section 14A of the Act as per Rule 8D, after affording an opportunity of being heard to the assessee. Disallowances of financial charges - assessee has given the interest free advances to its subsidiary - Held that:- We find that as per judgment of the Apex Court in the case of S. A. Builders[2006 (12) TMI 82 - SUPREME COURT] the onus is upon the assessee to prove that the interest free advances to its sister concern was given on account of commercial expediency. If the assessee is not able to establish these facts, the expenditure on disallowance of interest payment on the borrowed funds can be made. During the course of hearing, a specific query was raised to place some evidence that the interest free advances were given on account of business expediency, but nothing has been placed before us. Under these circumstances, we are constrained to hold that the interest free advances were not given to subsidiary on account of business expediency. Therefore, the AO has rightly made 12% as disallowance out of interest free advances. Disallowance of rent paid under section 37 - Held that:- This ground is covered by the order of the Tribunal in the case of assessee’s sister concern wherein held that the expenditure incurred as rent on maintenance of guest house at Delhi is allowable. Disallowance of claim of goodwill, license fee under the head “legal and professional charges” paid to its Director - Held that:- Undisputedly, during the AY 2007-08, the AO has made disallowance of the payment of ₹ 45 lakhs on account of goodwill, license fee after invoking the provisions under section 40A(2) and the Tribunal has restored the matter back to the AO with the direction to examine all aspects and pass a speaking order, whereas in the impugned AY, the disallowance was made under section 37 of the Act. The revenue has taken a contrary stand while making the disallowance in the different AY whereas the nature of payment is same. Under these circumstances, we are of the view that the revenue cannot take a different stand for making the disallowance in different AY. They should take one constant stand in all the years.Therefore, we are of the view that in the present year, the matter should go back to the AO for adjudicating the issue afresh Disallowance u/s 37 - Held that:- We find that if any payments are made by the assessee, the onus is upon him to establish that the payments made on the expenditure incurred was on account of business expediency. The assessee failed to establish these facts. In the instant case also, the learned AR of the assessee could not establish that the expenditure was incurred on account of business expediency. Therefore, we find ourselves in agreement with the order of the CIT(A), who has rightly confirmed the disallowances made by the AO.
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2017 (3) TMI 98
Levy of penalty u/s 271(1)(c) - disclosure of additional income consequent to survey operation - Held that:- The assessee has admitted additional income to cover up the deficiencies found during the course of survey. The assessee also filed revised returns in pursuance of survey admitting additional income disclosed during the course of survey. We do not find any merits in the findings of the A.O. that the assessee would not have disclosed true and correct income, unless survey had taken place. When the assessee has filed revised return disclosing income admitted during the course of survey, even though the said surrender of additional income was after persistent queries by the A.O., once the revised returns found regularized by the revenue, the explanations of the assessee that he has declared additional income to buy peace and to come out of vexed litigation could be treated as bonafide and penalty u/s 271(1)(c) of the Act cannot be levied. - Decided in favour of assessee
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2017 (3) TMI 97
Revision u/s 263 - addition u/s 68 - Held that:- As during the course of assessment proceedings specific details were called for by the Assessing Officer about the bank statement and source of cash deposits in the bank which has been duly replied by the assessee with the total figure of cash withdrawal and cash deposits to justify that the sources of cash deposits were out of the cash withdrawal made prior to it. Even copies of cash book and bank statements were available on record for perusal. Commissioner of Income Tax u/s 263 has mentioned that the assessee has explained that the deposits made in the banks are out of the cash withdrawals during the year. However, the assessee has not explained as to why he has kept withdrawing the cash from the bank and then depositing it again throughout during the year. He has accepted that assessee had explained about the source of deposits but Assessing Officer had failed to examine these aspects which seems to us very contradictory. Once when CIT has accepted that proper explanation has been given by the assessee to the Assessing Officer then he cannot take the basis of inadequate inquiry and can direct the Assessing Officer to perform. Thus as when the Assessing Officer has conducted proper enquiry and has examined the relevant records before taking the final decision or framing the assessment order then in such circumstances ld. Commissioner of Income Tax cannot invoke the power u/s 263 of the Act for directing to frame assessment afresh. The assessment order u/s 143(3) dated 23.12.2010 is neither erroneous nor prejudicial to the interest of Revenue and accordingly we set aside the impugned order passed by ld. Commissioner of Income Tax u/s 263 of the Act - Decided in favour of assessee
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2017 (3) TMI 96
Revision u/s 263 - correctness of the labour expenses - Held that:- There is no dispute that CIT-A has exercised his jurisdiction vested u/s.263 in issuing the stated directions for the reason that the Assessing Officer did not conduct the relevant enquiries/verifications qua the abovestated labour expenses of the two assessee's in course of framing the respective regular assessments. We find this reason to be factually incorrect. It emerges that the Assessing Officer had issued Section 142(1) notices in both cases on 29.08.2011 seeking details of the impugned labour expenses. These two assessees filed their respective replies on 14.09.2011 in respect to the said questionnaire alongwith the copy of schedule 7 –notes to accounts forming part of the balance sheet regarding TDS on labour payments in question. The same culminated in the impugned regular assessments wherein the Assessing Officer did not make any disallowance in both the cases. We appreciate the fair stand and accept assessees’ arguments challenging correctness of CIT’s orders under challenge in these two cases thereby restoring the abovestated regular assessments in their respective cases. - Decided in favour of assessee
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2017 (3) TMI 95
Addition of unexplained money - Held that:- Assessee reiterates his stand adopted throughout that the impugned cash deposits of ₹ 15.34lacs represent sale price of the gold and diamond jewellery items as inherited from his late father by way of a will. He stresses the point that his father had declared the very jewellery item in wealth tax return as well. We find no force in this argument as the instant plea admittedly does not raise an issue of jewellery items in question since we are concerned with assessee’s source of cash deposits only. It is an admitted fact that the assessee has not filed a single detail at all qua the so called purchasers of jwellery in question. Learned Departmental Representative seeks to invite our attention to the fact that the assessee’s bank account has seen various cash deposits instances not containing the relevant details even relevant to a single occasion. We thus find no reason to interfere with the learned CIT(A)’s conclusion hereinabove in restricting the impugned addition of unexplained money from ₹ 24,08,001/- to ₹ 15.34 lacs. - Decided in favour of assessee Unexplained investment addition - Held that:- The assessee has carried out his share transactions through M/s. Sushil Finance Securities Pvt. Ltd. And also that he has sold his investment and credited the same to his ledger account directly. The Revenue further fails to dispute the fact that the assessee has made cheque payments from his co-operative bank account whose deposits stood added forming subject matter of adjudication in his cross appeal decided hereinabove. It can thus be concluded that the assessee’s cash deposits/credits added u/s.68 of the Act as well as the opening balance of the said account form source of his impugned investments. We accordingly do not see any reason to interfere in the CIT(A)’s conclusion deleting the impugned addition on account of Revenue’s failure to rebut the same - Decided in favour of assessee
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Customs
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2017 (3) TMI 130
Valuation - goods imported from supplier being a shareholder in the parent company - parties are related or not? - Held that: - the adjudicating authority did not take up the adjudication despite submission of all documents - this callous attitude of lower authorities leads to miscarriage of justice as is seen in this case, thus, adjudicating authority needs to be reprimanded for delaying the denovo adjudication despite the documents being produced - matter remanded back to adjudicating authority to reconsider the issue afresh after following principles of natural justice - appeal allowed by way of remand.
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2017 (3) TMI 129
Revocation of CHA Licence - Jurisdiction - whether the Department have jurisdiction to re-open the case which has been decided in the favour of CHA after the due process of law? - Held that: - reopening the case against the appellant CHA after completion of the Original proceedings is not contemplated under CBLR. Commissioner having passed the original order in favour of the appellants cannot reopen the issue with a fresh Show Cause Notice and pass fresh orders revoking the licence. With a passing of the first order, Commissioner becomes Functus Officio and will not enjoy the power to decide the matter afresh - the proprietorship firm terminates with the death of the proprietor and the proceedings against the proprietor would stand abated, no fresh SCN can be issued to the new proprietor - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 128
Extended period of limitation - recovery of duty foregone at the time of import - Held that: - appellant had procured the advance licence after the condition of export obligation had been fulfilled by the original holder and utilised for import of goods without payment of duty - As appellant was neither the manufacturer nor the exporter, the conditions under which export obligation was fulfilled, and particularly compliance of conditions thereof, would, in the normal course be not within the knowledge of the appellant - the allegation and finding that appellant suppressed this vital fact at the time of import is without any basis - extended period cannot be invoked - appeal allowed - decided in favor of appellant.
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Service Tax
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2017 (3) TMI 122
Rejection of refund claim - N/N. 41/2007-ST dated 06.10.2007 - various services - rejection on the ground that the services are not port services and non-submission of proof of payment and proper invoices and description of goods not mentioned in invoices - Held that: - the grounds of rejection have been found to be untenable - reliance was placed in various decisions Shivam Exports & Ors. Vs. CCE, Jaipur [2016 (2) TMI 259 - CESTAT NEW DELHI] and SRF Ltd. vs. CCE, Jaipur [2015 (9) TMI 1281 - CESTAT NEW DELHI]. Rejection of service tax paid on services relating to collection of foreign exchanges - rejection on the ground that debit notes/vouchers issued by bank from which it is not evident that services were used for the exported goods - Held that: - the service tax was collected by the bank for realization of export proceeds and vouchers were issued by the bank. Therefore, there is no dispute about export of goods and charges collected by the bank for realization of export proceeds. Thus, refund claim is not deniable for the procedural lapses, if any and same should be allowed. Rejection of refund of service tax paid on cleaning/fumigation of containers services - rejection on the ground that condition of exemption notification not fulfilled - Held that: - since the appellant is not pressing for refund on this ground, the same is rejected. Rejection of refund of service tax paid on technical testing and analysis services - rejection on the ground that condition of exemption notification not fulfilled - Held that: - the consultant is not pressing for the same, therefore, refund is rejected. Appeal disposed off - decided partly in favor of appellants.
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2017 (3) TMI 121
Levy of tax - Tour Operator Services - demand on the ground that the buses had contract carriage permit - Held that: - the levy of Service Tax on such contract carriage under "Tour Operator" has been settled in the case of COMMR. OF SERVICE TAX, AHMEDABAD Versus PATEL TOURS & TRAVELS [2010 (7) TMI 298 - CESTAT, AHMEDABAD], where it was held that unless the vehicle of the contract carriage permit holder fulfills the requirement as mentioned in Central Motor Vehicles Rules of a "tourist vehicle", merely because he is holding the contract carriage permit, he does not become liable to tour operator service - demand in this case is for the period prior to 11.05.2008 and hence the demand cannot be sustained and is required to be set aside. Business Auxiliary Service - commission received for booking of tickets - Held that: - Business Auxiliary Service comprises of a set of services. It is important to classify the activity under the specific sub clause before confirming the demand - In the Tribunal's decision in the case of United Telecom Ltd [2010 (10) TMI 348 - CESTAT, BANGALORE], the Tribunal has held that Service Tax liability cannot be confirmed without mentioning the specific sub clause under which the activities are covered - demand cannot be sustained. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 120
Services received from foreign entities - Section 66A of FA, 1994 - reverse charge mechanism - appellants engaged M/s Baker Bott of U.S.A. in connection with extension project of their LNG terminal - Held that: - the law firm engaged by the appellant rendered service including advisory, legal opinion, documents and correspondence, reviewing etc. All these are in the field of contract law - the appellants received mainly legal consultancy service and not management or business consultant service. The finding of the Original Authority that the said legal firm did not represent the appellant in any Court or legal proceeding and, hence, the service is not legal consultancy, is fallacious. Transaction with International Financial Corporation (IFC) - whether liable to tax? - Held that: - the appellants have approached IFC for a loan arrangement and in connection with the same expenditures were incurred by them directly with IFC and also with third party appointed by IFC for due diligence. We note that the IFC Act 1958 clearly provides for immunity of all transactions and operations of IFC. Apparently transaction will involve another person with IFC - there is no separate exemptions required as the transaction of IFC were made immune to tax in terms of IFC Act. Appeal allowed - decided in favor of appellants.
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2017 (3) TMI 119
Commercial Training or Coaching Services - appellant are specialized agency conducting French Language classes for a long time in India - whether service liable to tax? - Held that: - whether all participants do get employment or become self employed is not the test to determine the vocational nature of the training. Learning with some proficiency, a language which is not commonly spoken in a country, certainly provides employment opportunities or chance for self employment, if the said language is imparted for such potential. Incidentally, the service tax demand sought to be confirmed on translation fee itself supports the case of the appellant that translation is one of the gainful employment that can be availed by the trainee of the institute - Accordingly, the exemption claimed by the appellant is available to them and the reasoning for rejecting the claim as recorded in the original order is not sustainable. Club or Association Services - Held that: - the tax liability under the same has been set aside by the Hon'ble High Court of Jharkhand in the case of Ranchi Club Ltd. [2012 (6) TMI 636 - Jharkhand High Court] - demand set aside. Business Support Services - Held that: - the appellants are not even aware of the purposes and are not only dealing with business entities, they were translating documents for various individuals also. No tenable reason found to categorize their activity of translation under business support service. It is not a service rendered by the appellant on outsourcing basis - the Service tax liability cannot be legally fastened on the appellant under this category. Renting of Immovable Property Services - Held that: - assessee have discharged the service tax liability and written on the same to the lower authorities who did not take into account their submissions, as there is no contest of the service tax liability the payment is also claimed to have been made regularly, the jurisdictional authority can verify the same for reconciliation. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 118
Extending Corporate guarantee and LC to the respondent - classifiable under the category of Business Support Services or not? - penalty u/s 77 and 78 - Held that: - appellant-assessee could have had bonafide belief as to that the amounts paid for extending corporate guarantee to the Banks may not be a service rendered to the appellant as the banks extended loan facilities to the appellant-assessee - the provisions of Section 73(3) are applicable in this case as also the Section 80 of the Finance Act, 1994 can be applicable in the peculiar facts and circumstances of the case - penalty set aside. Reimbursible expenses - valuation - Held that: - the service tax liability on the amount paid as reimbursable to the professionals will not includable as gross value of services and not taxable under Rule 5(1) and also the Rule 7 of the Service Tax Valuation Rules which categorically rules out the reimbursable expenses. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 117
Service tax liability - "Publicity Expenses" and "Target Incentive" - Held that: - On the first issue regarding publicity expenses, we note that the amount shown in the show cause notice was taken from the expense entry made by the appellant in their annual P&L Account. There is no evidence of receipt of said amount from M/s. TVS Motors. There is no evidence of appellant's undertaking of publicity works for TVS Motors. In such situation, the expenses incurred by the appellant cannot be subjected to service tax under “BAS”. Regarding the tax liability for the consideration received as "Depot Expenses", it is clear that the same were paid by the manufacturer in pursuance of the declared policy for achieving the target in sales - It was held that the target incentives received by the authorized dealer cannot be subjected to service tax under the category of "BAS". Reference can be made to the decision in the case of M/s. Sharyu Motors Vs. CST, Mumbai - 2015 (11) TMI 229 CESTAT Mumbai.
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Central Excise
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2017 (3) TMI 127
MODVAT credit - Fuel Supply installation falling under Chapter 8424 - parts of conveyer falling under Chapter 8431 - accessories spraying station and guns hoses falling under Chapter 8424 - article of alloy steel falling under Chapter 7326 - denial on the ground that goods of chapter 8424 and 8431 were excluded from the definition of the capital goods - Held that: - From Sr. No. 2 of Table to Rule 57Q (1) it can be seen that as regard 8424.80 only fire extinguisher is excluded, therefore all goods other than fire extinguisher are included therefore credit is admissible on two items. As regard the credit on parts of conveyer, the board clarified vide Circular No. 276/110/96-TRU dated 2-12-1996 that for the purpose of parts chapter heading is immaterial if the parts accessories is of capital goods which are specified under Rule 57Q, the credit is admissible irrespective of any chapter heading therefore credit on parts of conveyor falling under chapter heading 8431 is admissible. As regard the non alloy steel, we find that this goods is not covered under any of the entry provided under Rule 57Q (1) therefore it is not capital goods, hence the credit is not admissible on this goods falling under Chapter 7326. Appeal disposed off - decided partly in favor of appellants.
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2017 (3) TMI 126
100% EOU - additional duty of excise - duty not paid on goods produced in an EOU and allowed to be sold in India - Held that: - against the same appellant on the identical issue this Tribunal has passed Order [2017 (1) TMI 546 - CESTAT MUMBAI] wherein it was held that The levy of duty under section 3 of Central Excise Act, 1944 on clearances effected domestically includes all duties leviable under all the statutes relevant to imported goods and, hence, domestic area clearance cannot be excused from leviability - demand upheld - appeal dismissed - decided against appellant.
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2017 (3) TMI 125
Pre-deposit - whether the mandatory deposit of 7.5% as per Section 35F (i) of the CEA is required to be made in cash or the same can be paid by utilizing CENVAT credit account maintained by the appellant? - Held that: - the view taken by the lower appellate authority that the deposit u/s 35F (i) cannot be made from CENVAT credit account, is not correct interpretation of law as long as the CENVAT credit is permitted for utilization under Rule 3 (4) of the CCR, 2004 - appeal remanded to decide the case on merits - appeal allowed by of remand.
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2017 (3) TMI 124
Valuation - Iron Castings - related party transaction - appellant sold 80% to 90% of their entire production of Iron Castings to their related manufacturing unit - whether in the facts and circumstances of the case the provisions of Rule 9 read with Rule 8 of Central Excise Valuation Rules, 2000, are applicable to the facts of this case or not? - Held that: - Provisions of Rule 10, Rule 9 and Rule 8 are applicable only in a situation where the appellant is clearing 100% of this production through the person who is related. Admittedly, the appellant is not clearing 100% of production through related person - the provisions of Rule 9 read with Rule 8 of Valuation Rules, 2000, are not applicable to the facts of this case - charge of under valuation is not sustainable against the appellant - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 123
CENVAT credit - inputs - denial on the ground that the inputs found short were not used in or relation to the manufacturer of final products, therefore, the cenvat credit of the duty paid on these goods is not admissible to the appellant - Held that: - there is no allegation against the appellant for diversion of inputs as such. Further, in some cases inputs were found excess and in some cases inputs were found short i.e. to the small variation of 0.22%/0.23% of the total inputs received - there is shortage of minor quantities i.e. 0.23%/ 0.22% of the total inputs which is within permissible limit, therefore, the cenvat credit cannot be denied to the appellant - appeal allowed - decided in favor of appellants.
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CST, VAT & Sales Tax
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2017 (3) TMI 116
Denial of exemptions - denial on the ground that C and F Forms, bill of lading were not legible - Held that: - those aspects could be examined by the respondent/assessing officer, if, a petition is moved, in that behalf u/s 84 of the TNVAT Act, 2006 - impugned order is set aside, with liberty to the respondent/assessing officer to redo the assessment - petition allowed by way of remand.
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2017 (3) TMI 115
Input tax credit - reversal on the ground that there was mismatch in information which was available on the departmental website, as against that, which was reflected in the monthly returns filed by the petitioner - whether mere mismatch in information could form the basis of reversal of ITC? - Held that: - mere mismatch in information could not have formed the basis of reversal of ITC - reliance placed in the case of Murugan Garments Versus The Assistant Commissioner (CT) (FAC) [2017 (3) TMI 47 - MADRAS HIGH COURT] - respondent is directed to re-work the assessment - petition allowed by way of remand.
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