TMI Tax Updates - e-Newsletter
April 13, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax CST, VAT & Sales Tax Wealth tax

Articles

1. ABATEMENT UNDER SERVICE TAX PROVISIONS – AN UPDATE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Repayment of Government of India Floating Rate Bonds (FRB) 2016

2. As a measure towards improving the ease of doing business, procedure for Establishment of Branch Office (BO)/Liaison Office (LO)/Project Offices (PO) in India by Foreign entities simplified

3. Simplification of procedure to deal with audit objections raised in indirect taxes by the office of by CAG

4. RBI Reference Rate for US $

5. Auction for Sale (Re-issue) of Government Stocks

6. Finance Minister: Asks the States to follow the path of fiscal discipline; Addresses the 2nd Conference of State Finance Secretaries; asked the States to spend more on development of infrastructure, social and rural sector which deserve more attention of the Government today

7. Government of India and the Republic of Maldives Sign two Agreements for the Exchange of Information with respect to taxes and for the Avoidance of Double Taxation of Income Derived from International Air Transport

8. Finance Minister to leave for United States tomorrow on a 7-Day Official Visit; to attend Spring Meetings of World Bank and IMF; To participate in Institutional Investors Meet and Long term and pension funds for making investment in India

Notifications

DGFT

1. 2/2015-20 - dated 11-4-2016 - FTP

Introduction of definition of e-commerce in foreign Trade Policy (2015-2020)

Circulars / Instructions / Orders

Income Tax

1. EFS INSTRUCTION NO. 55 - dated 22-3-2016

U/s 276CC of Income Tax Act 1961 - Identify the potential cases for prosecution

2. F.NO.01/02/2015-CY.I - dated 29-2-2016

Guidelines for the promotion of payments through cards and digital means

3. F. NO.1(153)/DIT(R)/I.T. DEMAND CATE./2015-16/170-4 - dated 15-2-2016

Guidelines for Seeking Information from Financial Intelligence Unit-India (FIU-IND) and Confidentiality to be Maintained in Handling Such Information

DGFT

4. 01/2016 - dated 6-4-2016

Open House Meeting at office of Addl.DGFT(CLA)

Customs

5. 18/2016 - dated 12-4-2016

23rd report of PAC (16th Lok Sabha) on ICES 1.5 based on C&AG Report No. 11 of 2014

6. F.No.450/179/2015-Cus.IV - dated 11-4-2016

Import/Export of Gifts by Courier

Central Excise

7. 1024/12/2016–CX - dated 11-4-2016

Clarification regarding re-refined used or waste-oil

Highlights / Catch Notes

Income Tax

• Lesser TDS Deduction Due to Honest Mistake Not Grounds for Disallowance u/s 40(a)(ia) of Income Tax Act.

  Case-Laws - HC : Lesser deduction of tds - in case of bona fide wrong impression, if the deduction is at a lesser rate, the same cannot be a ground for disallowance by invoking the provisions of Section 40(a)(ia). - HC
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• Commodity Losses Offset Speculative Gains: Normal Business Losses Permitted Under Tax Regulations.

  Case-Laws - AT : Loss on commodity transactions is a normal business loss and allowed to be set off against the speculative income - AT
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• Purchaser's flat combination exceeding 1000 sq ft doesn't disqualify assessee from Section 80IB(10) tax benefits.

  Case-Laws - AT : Merely because the purchaser has joined the flats and the built-up area of the flat is exceeded more than 1000 Sq. ft., the assessee cannot be denied benefit u/s. 80IB(10)- AT
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• Company Without Permanent Establishment in India Gets Tax Benefits u/s 115A; Taxed at 20% Rate.

  Case-Laws - AT : Entitlement to the benefit of the provisions of section 115A of the Act to the assessee company having no PE in India in the form of fixed place of business - grossing up such receipts have to be taxed at 20% - AT
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• Cranes Hiring Payments Governed by Section 194C, Not Section 194I of Income Tax Act.

  Case-Laws - AT : Payments made for hiring of cranes, the provisions of section 194C would apply and not 194I - AT
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• Section 115JB Exempts Banking Companies from Minimum Alternate Tax (MAT) Requirements.

  Case-Laws - AT : MAT applicability - Provisions of sec.115JB are not applicable to the banking company - AT
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• Bank Investments as Business Assets or Stock-in-Trade Affect Tax and Financial Reporting for Banks.

  Case-Laws - AT : investments made by the banking company should be treated as a business asset of the banking company or stock-in-trade - AT
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• High Court Grants Tax Exemption for Surat Land Compensation u/s 10(37) of Income Tax Act.

  Case-Laws - HC : Exemption u/s 10(37) allowed on compensation received from the Surat Municipal Corporation for acquisition of lands - HC
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• Section 263 of Income Tax Act: Revision not justified by differing opinion without clear error or lack of enquiry.

  Case-Laws - AT : Revision u/s 263 - even if there was any enquiry, even inadequate, that would not by itself give any occasion to the Commissioner to pass orders u/s. 263 of the Act, merely because he has a different opinion in the matter - AT
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• Payment Not Subject to TDS: No Managerial Services Rendered u/ss 194H or 194J of Income Tax Act.

  Case-Laws - AT : No rendering of any services and the payment is not made for any managerial services to RCDF, therefore, payment can neither be held as liable for TDS U/s 194H of the Act as commission/ brokerage as held by the AO nor u/s 194J for rendering any managerial services - AT
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• Tin, iron scrap, and plastic drums sold as scrap not liable for TCS under Income Tax Act Section 206C.

  Case-Laws - AT : Item sold in scrap i.e. Tin, iron scrap, plastic drum etc. is not scrap generated from manufacturing process - No liability to deduct TCS U/s 206C - AT
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• Income Tax Commissioner Appeals Limited to Issues Reviewed by Assessing Officer; Section 263 Revisions Clarified.

  Case-Laws - AT : Revision u/s 263 - CIT(A) does not have any jurisdiction over those issues which have not been considered by the AO. - AT
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• Court Rules Cash Discounts Exempt from TDS u/s 194H, Not Considered Commission on Sales.

  Case-Laws - AT : No TDS u/s 194H as nature of expenditure in the nature of cash discount and not in the nature of commission on sales - AT
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• Prior Losses Can't Offset Profits of Eligible Business u/s 80IA Deductions if Already Absorbed Against Other Profits.

  Case-Laws - AT : Losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against the profits of other business cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA - AT
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• Losses from Speculative Transactions u/s 43(5) Classified as Speculative, Not Business Losses.

  Case-Laws - AT : When the speculative transactions were covered under sec.43(5) of the Act and the loss incurred in those transactions was liable to treated as speculative loss and not business loss - AT
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• Tax Assessment Invalid if Issued to Non-Existent Company: Ensure Entity Legality for Validity.

  Case-Laws - AT : Assessment against a company which was non-existent is invalid - AT
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• Court Highlights Consistency in Section 10A Deductions for Accurate Tax Computation in Export and Forex Earnings Context.

  Case-Laws - AT : Computation of deduction u/s 10A - uniformity in the ingredients of both the numerator and the denominator of the formula - AT
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• Entities Cannot Claim Exemption and Depreciation Simultaneously Under Income Tax Act Sections 11 and 32.

  Case-Laws - AT : If the assessee claims exemption u/s 11 under Chapter III of the Act, it cannot claim depreciation u/s 32 - AT
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• Income Tax Act Section 80IB(10) Clause (d) Amendment Applies Prospectively from April 1, 2005, Not Retroactively.

  Case-Laws - AT : Section 80IB(10) Clause (d) amended with effect from April 1, 2005, is prospective and not retrospective and hence could not be applied for the period prior to April 1, 2005 - AT
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• Section 44AD Sets 8% Net Profit Rate for Retail Businesses with Turnover Up to Rs. 60 Lakhs.

  Case-Laws - AT : Net profit rate of the eight percent is most appropriate as provided under section 44AD for retail business having business turnover not exceeding ₹ 60 lacs - AT
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• Section 153A Assessments Invalid Due to Lack of Incriminating Material; All Additions Deleted.

  Case-Laws - AT : Assessment u/s 153A - as the assessments in both these cases passed u/s. 153A r.w.s. 143(3) were not made, based on any incriminating material found or seized during the course of search of thereafter, all the additions made deleted - AT
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• City Civil Court's Valuation Accepted by AO as Closing Work in Progress for Tax Assessment.

  Case-Laws - AT : Value determined by the City Civil court considered by the AO as the closing WIP acceptable - AT
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• Interest on Loans from Indian Government for Business is Tax-Deductible u/s 36(1) of Income Tax Act.

  Case-Laws - AT : Loan from Govt. of India and UP Government, for the purpose of business, hence the interest in question is allowable u/s 36(1) - AT
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• Assessee Must Deposit PF and ESIC Contributions by Due Date, Not by Income Tax Return Filing Date.

  Case-Laws - AT : Assessee was required to deposit the employees PF and ESIC contribution into the government account within the due date, including grace period allowed by the respective Acts and not before the due date of filing the return of income as contended by the assessee. - AT
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Customs

• Penalty Not Imposed Under Customs Act Section 114A Due to Lack of Proof of Collusion or Misstatement.

  Case-Laws - AT : Penalty - under Section 114A of the Customs Act - to impose penalty u/s 114A act of collusion, willful mis-statement or mis-representation needs to be proved - as not proved, penalty not imposable - AT
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• Fraudulent Document Submission Nullifies Legal Existence, Triggers Extended Limitation Period under Notification No. 84/97-CUS.

  Case-Laws - AT : Submission of fraud document - for claiming exemption under Notification No. 84/97-CUS dated 11/11/1997 - If fraud is involved, in the eye of law such documents had no existence, therefore, extend period of limitation applicable - AT
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• Court Orders Release of Seized Goods if No Adjudication in One Year, Despite Waiver u/s 110(2.

  Case-Laws - HC : Release of seized goods - Despite the waiver of right to be given a SCN u/s 110(2), if no adjudication order was passed for a period of one year after the seizure, the petitioner could not be bound by such waiver after the expiry of the time limit u/s 110(2) - Goods to be released - HC
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• Show Cause Notice Required for Recovering Excess Drawback u/r 16; Proper Officer Must Issue Notice First.

  Case-Laws - AT : No Recovery of erroneously granted excess draw back in terms of Rule 16 can be made without issuance of show cause notice by the proper officer - AT
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Wealth-tax

• WDV of Cars Accepted as Market Value in Wealth Tax Assessments Due to Lack of Revenue Evidence Challenging It.

  Case-Laws - AT : Valuation for the purpose of Wealth tax - WDV of cars was held as basis of market value in the absence of any material produced by the Revenue to show that WDV didn’t represent the market value of the vehicle. - AT
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Service Tax

• Revenue's Document Request Overruled; Refund Granted Without Original Filing Requirement; Limitation Period Maintained.

  Case-Laws - AT : Period of limitation - Refund claim - Additional documents sought by Revenue to satisfy themselves that service provider has paid 100% Service Tax cannot be said that required documents were not filed alongwith original refund application - Refund allowed - AT
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• High Court Allows Cenvat Credit for IT Software Services Taxable Under Clause (zzzze) of Section 65(105) Since 2008.

  Case-Laws - HC : Cenvat credit - Information Technology software services - Such services are made taxable by Clause (zzzze) of Sec. 65(105) of Finance Act, 1994 with effect from 16.5.2008 - Credit allowed - HC
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• Service Tax Payment by Senior Advocates Temporarily Halted; Fee Memorandum Basis Addressed. Relevant Notifications Stayed.

  Case-Laws - HC : Amendment relating to Payment of service tax by Senior Advocates on the basis of issue of memorandum of fees - notifications will remain stayed insofar as such notifications pertain to the levy of service tax on Senior Advocates
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• Service Tax Applies to Pandal or Shamiana Services Regardless of Venue; Includes Lighting for Government Buildings and Temples.

  Case-Laws - AT : Pandal or Shamiana services - Nature of premises has no relevance on tax liability - Lighting up of Government buildings and temples cannot be excluded from the scope of taxable services - AT
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• Main Contractor Not Liable for Subcontractor's Tax if Compliant with Legal Requirements: Subcontractor Remains Responsible.

  Case-Laws - AT : If tax liability is discharged by the main contractor as per the applicable legal provisions, it cannot be said that the main contractor is acting as an gent to discharge the tax liability of sub-contractor - Sub-contractor liable to service tax - AT
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• Supply of Lights for Pandals Classified as Taxable Service Under Service Tax Regulations.

  Case-Laws - AT : Pandal or Shamiana contractor service - appellant’s activity of providing lights and light fittings in connection with decoration of such place are correctly classifiable under taxable service - AT
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Central Excise

• Excise Duty on Re-Refined Waste Oil Hinges on Processes in Chapter Note 4, Chapter 27 Clarification.

  Circulars : Clarification regarding re-refined used or waste-oil - for a re-refining unit, the test for levy of Central Excise duty is whether the lubricating oil (produced from the waste oil) has undergone any of the process listed in chapter note 4 of chapter 27 - Circular
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VAT

• Denial of 'C' Forms Unjustified for Inter-State Sales if Goods Movement Specified in Lease Agreement u/s 3(a) CST Act.

  Case-Laws - HC : Denial of ‘C’ Forms - Inter-state sale - If movement of goods is occasioned in the lease agreement and pre-conditions viz. registered dealer and goods mentioned in registration certificate are fulfilled, the said transaction is deemed to be an inter-state sale within the meaning of Section 3(a) of CST Act - 'C' Forms cannot be denied - HC
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• Amnesty Scheme: Waiver of Penalties for Partial Tax Payment; No Waiver if Penalty Contested Post-Payment.

  Case-Laws - HC : Waiver of penalty - under Amnesty Scheme - Person who pays part tax and interest would be entitled, while calculating the tax dues, under clause 3 of the Amnesty Scheme to seek waiver of penalty whereas the person who paid the tax and interest and challenged the levy of penalty would not be entitled to seek waiver - HC
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Case Laws:

• Income Tax

• 2016 (4) TMI 431
  Exemption u/s 10(37) - compensation received from the Surat Municipal Corporation for acquisition of its lands - Held that:- Tribunal upon appreciation of the evidence on record has concurred with the findings of fact recorded by the Commissioner (Appeals) and has found as a matter of fact that the assessee was carrying on agricultural activity on the land in question being Survey No.192, Block No.305 in village Dindoli. The Tribunal has also concurred with the finding recorded by the Commissioner (Appeals) that the land in question is situated within the municipal limits of SMC in terms of item (a) of sub-clause (iii) of clause (14) of section 2 of the Act. Insofar as the land in question having been acquired by way of compulsory acquisition is concerned, that is an undisputed position. The fourth condition, namely, that the income arising out of the acquisition in relation to such transfer should have been received on or after 1.4.2004 is also an undisputed position. Thus, the Tribunal, after appreciation of the evidence on record, has recorded a concurrent finding of fact to the effect that the assessee fulfills all the requisites for the purpose of being entitled to exemption under section 10(37) of the Act and has based its conclusion thereon. It is not the case of the appellant that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor is the learned counsel for the appellant in a position to dislodge the concurrent findings recorded by the Tribunal by pointing out any material to the contrary. Except for the contention that in the sale deed, the subject land is not shown to an agricultural land, no other contention has been raised. Under the circumstances, it is not possible to state that the impugned order suffers from any legal infirmity warranting interference. - Decided in favour of assessee

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• 2016 (4) TMI 430
  Disallowance u/s 40(a)(ia) - lesser deduction of tds - ITAT allowed the claim - Held that:- There are two angles to the matter: The first is, whether it was a case of `no deduction’ or not in the present case. The answer would be in the negative because, the deduction was already made at the rate of 1%. The second angle would be as to whether it was under a bona fide wrong impression that only 1% was deducted instead of 2%. The contention of the assessee was that, having realized that deduction was 2% instead of 1%, the amount of TDS has been paid with interest. It is also a matter of fact that, two separate rate of deductions have been provided for the same work of contractor, one is at the rate of 1% if the contractor is individual or HUF, whereas, it is 2% if the contractor is other than individual or HUF. The Tribunal, in view of facts and circumstances, found that, it is a bona fide wrong impression. As such, on the aspects of the bona fide wrong impression keeping in view the contention of the assessee that in the middle of year, there is change of law about the deduction, as well as on the non-availability of the provisions of Section 40(a)(ia), when the issue is covered by the Calcutta High Court Judgment in case of S.K.Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT ], we do not find that any substantial question of law would arise for consideration as sought to be canvassed. - Decided against revenue

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• 2016 (4) TMI 429
  Addition made u/s 36(1)(viia) - manner of computation of the amount of deduction - Held that:- The amount of deduction is to be calculated with reference to income computed under the head ‘profits and gains of business or profession’. The provisions governing the brought forward and set off business loss are not part of the provisions governing the computation of profits under the head ‘profits and gains of business’. Hence, we hold that the method of calculation adopted by the AO is in accordance with the provisions of the Act and the reasoning adopted by the CIT(A) is also in consonance with the clear provisions of the Act. Hence, we confirm the addition made by the AO. - Decided against assessee Addition made on account of depreciation in the value of Held to Maturity (HTM) category of investments - Held that:- From the reading of the circular No.18/2015 it is clear that investments held by the banking concern are treated as a part of business of the banking company and therefore, the income arising from such investments is treated as part of business income falling under the head ‘profits and gains of business’. Though the circular was issued in the provisions of sec.80P of the Act, the said principle was equally made applicable to other banks and commercial banks to which Banking Regulation Act, 1949 applies. Therefore, by virtue of the above said circular, investments made by the banking company should be treated as a business asset of the banking company or stock-in-trade. It is well settled in law that CBDT circulars are binding upon the officers who are entrusted with the responsibility of executing the provisions of the Act. Having regard to the spirit of the circular cited supra and the fact that investments are shown as stock-in-trade in the books of account, loss/depreciation on account of fall in value of securities held by the assessee-bank should be allowed as deduction. Therefore, income arising therefrom should also be treated as business income. The provisions of section 45(2) cannot be applied to the facts of the present case, as in the earlier years, for the purpose of income-tax proceedings, the investments were treated as stock-in-trade. Addition made on account of write off of investments - Held that:- The submission of the learned counsel for the assesseebank that securities of M/s Pennar Aluminium Ltd., were acquired during the normal course of business of assessee-bank are not borne out of record. On the other hand, evidence on record clearly shows that these assets are shown as investments up to earlier assessment year and treated it as stock-in-trade during the previous year relevant to assessment year under consideration. Therefore, in such a situation, provisions of section 45(2) shall come into play. The fall in value of securities should be allowed as a capital loss in the year of sale of such securities as supported under the said provisions of the Act. Therefore, it is only a capital loss and cannot be allowed as a deduction. We uphold the order of the ld.CIT(A) and the ground of appeal filed by the assessee is dismissed. Deduction on account of bad debts - Held that:- Similar issue had come up before the Hon’ble Apex Court in the case of Vijaya Bank vs. CIT (2010 (4) TMI 46 - SUPREME COURT ) wherein it was held that debiting the profit and loss account by an amount of provision for bad debts, reducing provision for bad and doubtful debts from debtors account in balance-sheet amounts to write off. In the present case, it is undisputed fact that provision for bad and doubtful debts was reduced from sundry debtors account in the balance-sheet. Therefore, it satisfies the law laid down by the Hon’ble Apex Court in Vijaya Bank (supra). The same reasoning was followed in the decisions cited by the learned counsel for the assessee-bank. The ld.CIT(A) also, after considering the law and the precedents on the issue, had come to the conclusion that it amounts to write off and the claim was allowed. - Decided against revenue Disallowance u/s 14A - Held that:- The AO had not given any finding as to how the claim of the assessee-bank that no expenditure was incurred to earn exempt income was incorrect. In the absence of such finding, resort cannot be had to the provisions of sub-rule(2) of rule 8D. a. Furthermore, it is undisputed fact that exempt income is earned from securities which are held as a part of stock-in-trade. The Hon’ble Bombay High Court in the case of India Advantage Securities Ltd (2015 (6) TMI 140 - BOMBAY HIGH COURT ) held that provisions of sec.14A have no application in case assets are held as stock-in-trade. Therefore, provisions of sec.14A cannot be applied in the present case. Furthermore, in the assessee’s own case, the Hon’ble High Court of Karnataka held that no notional expenditure can be attributed to exempt income.Accordingly, we hold that no disallowance can be made u/s 14A of the Act. - Decided in favour of assessee Disallowance of contribution made to Disability Trust - Held that:- Undisputedly, impugned contribution was made by the assessee-bank pursuant to the order passed by the Hon’ble Supreme Court in the case of Devkala Consultancy Service (2004 (4) TMI 73 - SUPREME Court ). Needless to say, breach of the directions of the Hon’ble Supreme Court is not in the business interest of the assesseebank. Furthermore, what is paid in the form of contribution to the trust is only excess interest collected from borrowers and such excess interest was offered to tax in the year in which it was collected. Therefore, the AO, in all fairness, should have allowed the same as deduction.- Decided in favour of assessee Addition made on realization of assets of erstwhile Lakshmi Commercial Bank (LCB) Ltd. - Held that:- It is undisputed fact that in the year of merger of LCB with assessee-bank, excess of liabilities over assets was not allowed as deduction while computing profits and gains of business. In such an event, any subsequent realization out of assets of erstwhile LCB cannot be brought to tax. We do not find any fault with the reasoning of the ld.CIT(A) in deleting the addition.- Decided in favour of assessee MAT applicability - Held that:- Provisions of sec.115JB are not applicable to the banking company

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• 2016 (4) TMI 428
  Business loss - treated as speculation loss in stead of loss in foreign currency transactions - Held that:- In the present case, it is admitted that the transaction carried out by the assessee does not fall in any exceptions provided above and it is not at all carried out through any recognized stock exchange. The claim of the assessee is rightly denied by the AO as well as by CIT (Appeals) as business loss, as there is no relationship with term loan availed by the assessee or interest payable on the said term loan with loss incurred by the assessee and in view of the judgment of the Bombay High Court in the case of CIT v. Shri Bharat R. Ruia(HUF) [2011 (4) TMI 37 - BOMBAY HIGH COURT ], wherein it was held that when the speculative transactions were covered under sec.43(5) of the Act and the loss incurred in those transactions was liable to treated as speculative loss and not business loss. In our opinion, various decisions relied on by the assessee in earlier para were delivered on different set of facts and those transactions fall under the exceptions provided in sec.43(5) of the Act - Decided against assessee Additions made towards gratuity payment - Held that:- CIT(Appeals) observed that the assessee has applied to the Commissioner of Income-tax, Circle-I, seeking approval for group gratuity scheme on 19.3.2007 and the similar claim was allowed in the asst. year 2007-08, 2008-09 and 2009-10. On this basis, the CIT(Appeals) allowed the claim of the assessee in the asst. years under consideration. However, there is mandatory requirement of approval of gratuity scheme by the CIT, but no such approval was produced by the assessee, before us. In view of this, we remit this issue to the file of AO with a direction to decide the issue after examining whether there is mandatory requirement of approval of gratuity scheme by the competent authority. Allowability of deduction u/s.80IA - Held that:- Madras High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT (2010 (3) TMI 860 - Madras High Court ), wherein it was held that losses and depreciation of the years earlier to the initial assessment year which have already been absorbed against the profits of other business cannot be notionally brought forward and set off against the profits of the eligible business for computing the deduction u/s.80IA of the Act and there is no mandate in sec.80IA(5), claim of deduction u/s. 80IA of the Act is to be allowed to the assessee. In our opinion, the findings of the Commissioner of Income-tax(Appeals) on this issue is based on the judgment of Jurisdictional High Court in the case of Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT(supra), the same is confirmed Allowability of expenditure incurred towards sales commission - no deduction of TDS by the assessee on the payment - Held that:- Similar issue was considered by the Tribunal in the case of ACIT v. Euro Leder Fashions Ltd [2016 (1) TMI 75 - ITAT CHENNAI ] the assessee had not established that the non-resident had rendered services abroad and there was no business connection in India by producing relevant records, viz., either agreement entered into by the assessee with them or correspondence took between the parties. Without examining these details, one is not in a position to decide the nature of services rendered by the non-resident agent.Therefore, it is appropriate to remit the entire issue back to the file of the Assessing Officer with direction to the assessee to prove that it was sales commission towards procurement of orders from abroad.

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• 2016 (4) TMI 427
  Loss from commodity trading business disallowed - refusal to allow to be set off against any other income or to be allowed to be carried forward for future set off against the income from speculation business - Held that:- We hold that without carrying out requisite enquiries as provided in the Act, merely treating the loss claimed to be a fictitious loss based on surmise and suspicion and by making general baseless allegations without bringing any evidence on record, the action of the Learned CIT(A) is unjustified. Hence the only point to be addressed in this issue is as to whether the activity of trading in commodity transactions by the assessee could be construed as speculation activity in the facts and circumstances of the case in the context of section 73 of the Act read with its Explanation thereon. We find that the Learned AO had treated the assessee’s activity of share trading to be normal business as according to him the principal business of assessee is granting of loans and advances. He had reached this conclusion on the ground that interest income on loans of Rs. 35,21,584/- is more than the income from share trading of Rs. 13,62,106/-. Accordingly he held that the assessee’s case falls under the exception to Explanation to Section 73 of the Act. Having concluded so, he ought to have treated the loss on commodity transactions as a normal business loss and allowed to be set off against the speculative income as admittedly in the instant case the profit from trading in shares has been accepted as arising from speculative business. Hence there was no need to make any addition towards loss on commodity transactions. - Decided in favour of assessee

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• 2016 (4) TMI 426
  TDS u/s 194C - Whether on the payments made for hiring of machinery, cranes etc., the tax at source is to be deducted under the provisions of section 194C or section 194I? - Held that:- Tribunal in the case of Bharat Forge Ltd. Vs. Addl. CIT (2013 (11) TMI 1263 - ITAT PUNE ) in a similar case has held that on the payments made for hiring of cranes, the provisions of section 194C would apply. In the said case contractor was to bear the expenses for petrol, operator day to day repair and maintenance of the cranes. CIT(A) was correct in holding that the provisions of section 194I are not applicable in respect of crane hire charges - Decided against revenue

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• 2016 (4) TMI 425
  Claim deduction u/s.80IB(10) - Held that:- Clause (d) inserted to section 80IB(10) with effect from April 1, 2005, is prospective and not retrospective and hence could not be applied for the period prior to April 1, 2005. Since deduction u/s.80IB(10) were on the profits derived from the housing projects approved by the local authority as a whole, the Tribunal was not justified in restricting the section 80IB(10) deduction only to a part of the project. However, in the present case, since the assessee had accepted the decision of the Tribunal in allowing section 80IB(10) deduction to a part of the project, the findings of the Tribunal in that behalf could not be disturbed. Since the AO following the order for preceding assessment years has denied the claim of deduction u/s.80IB(10) and since the CIT(A) following the order of the Tribunal in assessee’s own case for the preceding assessment years have allowed the claim of deduction u/s.80IB(10) and since the jurisdictional High Court has also decided the issue in favour of the assessee in assessee’s own case for A.Y. 2003-04, therefore, in absence of any contrary material brought to our notice the order of the CIT(A) has to be upheld. Merely because the revenue has filed an SLP before the Hon’ble Apex Court, the same cannot be a basis to take a contrary view than the view taken by the jurisdictional High Court in absence of any contrary material - Decided in favour of assessee

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• 2016 (4) TMI 424
  Validity of assessment against a company which was non-existent - Held that:- We set-aside the action of the Assessing Officer in framing the assessment against ITICL on 19.12.2008 as the said company was non-existent as it stood amalgamated with IHL w.e.f. 1.4.2007, following the scheme of amalgamation approved by the Hon'ble Bombay High Court on 14.12.2007.

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• 2016 (4) TMI 423
  Addition u/s 40A(2b) - cash discounts - TDS liability u/s 194H - Held that:- The amount that has been allowed by the assessee was in the nature of cash discounts and it was in line with the practice prevailing in trade and that A.O. has not made out any case of the cash discount paid to two parties to be excessive or unreasonable in terms of Section 40A(2b) of the Act, ld. CIT(A) has deleted the addition. We further find that ld. CIT(A) has given a finding that the nature of expenditure was in the nature of cash discount and not in the nature of commission on sales and therefore, assessee was not liable to deduct tax at source u/s. 194H of the Act. Before us, Revenue has not brought on record any material to controvert the aforesaid findings of ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of ld CIT(A) - Decided against revenue Disallowance of overhead expenses - Held that:- While deleting the addition made by A.O., ld. CIT(A) has given finding that the expenses aggregating to Rs. 12,36,224/- were genuine, having incurred wholly and exclusively for the purpose of business and the genuineness of the expenses have not been doubted. He has also given a finding that the aggregate amount of Rs. 12,36,224/- had been paid full in subsequent previous year. Before us, Revenue has not brought on record any material to controvert the aforesaid findings of ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - Decided against revenue Addition on account of household withdrawals - Held that:- While deleting the addition made by A.O., ld. CIT(A) has given finding that family members’ cash withdrawals of household expenses were to the tune of Rs. 8,74,006/- over and above other expenses which have been incurred by the assessee that assessee stayed in a joint family under one roof. He has further held that provisions of Section 69 of the Act cannot be invoked when addition is made on estimated basis. Before us, Revenue has not brought on record any material to controvert the aforesaid findings of ld. CIT(A) - Decided against revenue

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• 2016 (4) TMI 422
  Undeclared cash deposits - treated as business receipts - Held that:- All the sales of the assessee are made in cash, and the assessee failed to substantiate why cash deposit of Rs. 19,93,152/- were only sales of the business receipts and not entire cash deposits. The explanation of the assessee that the withdrawals were re-deposited was not accepted by the AO as well as by the CIT(A) in absence of any evidence in support of its claim that withdrawals were re-deposited in bank account. We find that the ratio of the cases cited by the assessee is not applicable over the facts of the case as the assessee himself has failed to support its claim of re-deposit of withdrawals and its normal human behavior that no prudent person will withdraw the money and re-deposit into banks without any justified reasons. In view of the circumstances of unverified purchases, cash sales and expenses of the business activity etc, we don’t find any justification in submissions of the assessee in this regard, and in our opinion , the CIT(A) has rightly held entire cash deposits as business receipts of the assessee. - Decided against assessee N.P. percentage selection - Held that:- We agree with the contention of the ld. AR that when the AO has already rejected the sales figure of the assessee declared in the original letter as being on estimate and without any evidence, there is no justification on the part of the Assessing Officer to adopt the net profit rate of 20 percent. shown on the basis of estimate and without any evidences. Further neither the Assessing Officer nor the ld. CIT(A) has brought on record any comparable case having 20 percent net profit rate in the retail business similar to the business carried on by the assessee. In such circumstances, we are of the opinion that the adopting the net profit rate of the eight percent. is most appropriate , which has been provided under section 44AD of Act for retail business having business turnover not exceeding Rs. 60 lacs. As the assessee has also declared its profit from the business under presumptive taxation under section 44AD of the Act, we hold that net profit rate of 8% is appropriate net profit rate and direct the Assessing Officer to apply the net profit rate of 8%, on the business receipt of Rs. 36,05,497/- and compute the net profit of the assessee from business accordingly.

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• 2016 (4) TMI 421
  Disallowance u/s 801B(10) - Held that:- The statement given by one of the partners stating during survey proceedings that there is wrong claim made u/s. 80IB of the Act and offering the same for taxation has no evidentiary value unless there is corroborative evidence on record suggesting that the claim of the assessee is wrong. In the absence of any evidence on record, these statements cannot be a conclusive piece of evidence for withdrawing the deduction. In so far as the disallowance u/s. 80IB(10) of the Act in respect of Bldg. No. 23 & 24 of Samartha Angan is concerned, the Addl CIT directed the AO to disallow the claim solely on the basis of the statement of Shri Abhiram Bhattacharjee, one of the buyer who gave statement at the time of survey, who bought the residential unit in 2007. This statement was also retracted later on by Mr. Abhiram Bhattacharjee stating that the statement was taken in the course of survey was on a spur of moment when he visited the builders office for personal work. The statement was given under tension on account of office related work. By letter dated 23.12.2007, Shri Abhiram Bhattacharjee alongwith his wife Sucharita Bhattacharjee and Shri Ajit Bhattacharjee have stated that they have purchased three different residential flats bearing flat Nos. 1407, 1408 & 1409 from the assessee in the year 2007. The flat was purchased in the joined names. It was stated that three flats were purchased by separate sale deeds and was registered separately as separate residential unit. It was stated that the three units were purchased by the family members in joint names and possession was taken as per sale deeds separately in respect of flats. They have further stated that three units were amalgamated and joined together after their purchase. We find that except the statement given by Mr.Abhiram Bhattacharjee in the course of survey that he had purchased the residential unit having more than 1000 Sq. ft, there is nothing on record to suggest that assessee has sold flats with built-up area of more than 1000 Sq. ft. Mr.Abhiram Bhattacharjee himself later on said that the flats were purchased by separate sale deeds and subsequently they have joined the flats on their own at their own cost. There is no evidence on record to suggest that the builder has constructed the residential unit with a built-up area of more than 1000 Sq. ft. in violation of the master plan and sold to the purchasers. There is no dispute infact that as per the approved plans built up area of each residential unit is less than 1000 Sq. ft, and the residential units were sold by executing separate sale deeds. In such circumstances, merely because the purchaser has joined the flats and the built-up area of the flat is exceeded more than 1000 Sq. ft., the assessee cannot be denied benefit u/s. 80IB(10) of the Act. Thus we uphold the order of the Ld. CIT(A) in deleting the disallowance made u/s. 80IB(10) of the Act both in respect of Bldg. No. 23 & 24 of Samartha Angan and Samartha Krupa. - Decided in favour of assessee.

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• 2016 (4) TMI 420
  Computation of deduction u/s 10A - exclusion of expenditure incurred in foreign currency towards tour and travel expenses from the export turnover as well as total turnover - Held that:- This issue is covered by the judgment of Hon'ble jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT ] there should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different. Formula will be Profits of the business of the undertaking × Export turn over / (Export turnover + domestic turn over) Total Turn Over

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• 2016 (4) TMI 419
  Deemed dividend u/s 2(22)(e) - revision u/s 263 - Held that:- We are of the considered view that Ld. CIT(A) have made these addition u/s 2(22)(e) and 56(2)(vi) of the I.T. Act, 1961 under different heads which has not been discussed / adjudicated by the AO in the assessment order which is not sustainable in the eyes of law. The AO has not considered any of these issues pertaining to these sections. In our view Ld. CIT(A) did not have any jurisdiction to make any such additions on the issues which were never considered by the Assessing Officer in the assessment order. Although the powers of the CIT(A) are co-terminus with the powers of the AO, yet the Ld. CIT(A) has jurisdiction only on those issues which have been considered by the AO irrespective of the fact that whether the issue is subject matter of the Appeal or not. The Ld. CIT(A) does not have any jurisdiction over those issues which have not been considered by the AO. This may be subject matter of revision u/s. 263 of the I.T. Act or reassessment u/s. 148 of the I.T. Act. If the Ld. CIT(A) tries to examine those issues which have not been considered by the AO, then the provisions of section 147 as well as section 263 of the I.T. Act will become redundant and the condition for their operation will be nullified. Thus we hold that Ld. CIT(A) did not have any jurisdiction to make such additions on the issues which were never considered by the AO as has been done in the present case. - Decided in favour of assessee Addition on a/c of insufficient withdrawals for household expenses - Held that:- No doubt the appellant is living jointly with his parents and, therefore, withdrawal of all the members of the family living together have to be considered while estimating house hold expenditure. In the capital account of the appellant as on 31.3.2008 drawings of Rs. 2,92,77,983/- have been shown. This fact has been ignored by the AO and also not highlighted in the submission filed on behalf of the appellant. With such large drawings, the question of any addition on account of low house hold expenses does not arise. - Decided in favour of assessee

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• 2016 (4) TMI 418
  TDS u/s 194H - payment of cess made to RCDF is in the nature of technical and professional service - charging interest U/s 201(1A) - Held that:- Payment to RCDF cess, it has not been demonstrated by the Department that any managerial services in this connection have been rendered to assessee by RCDF qua this amount. RCDF is an apex cooperative body and cess is paid to it by virtue of federal structure in Rajasthan cooperative set up. Thus as far as assessee's business is concerned, there is no rendering of any managerial services by RCDF as alleged by the AO u/s 194H and upheld Id. C1T(A) u/s 194J. Since there is no rendering of any services and the payment is not made for any managerial services to RCDF, therefore, payment can neither be held as liable for TDS U/s 194H of the Act as commission/ brokerage as held by the AO nor u/s 194J for rendering any managerial services as held by the Id. CIT(A) - Decided in favour of assessee Conversion charges and audit fees liable to be deducted TDS - Held that:- The conversion charges were paid on cost to cost basis and no profit has been charged as claimed by the assessee. When there is no element of profit, the TDS provisions are not applicable. The case law referred by the assessee i.e. ITO Vs. Dr. Willmar Schwabe India (P) Ltd. (2005 (3) TMI 398 - ITAT DELHI-D ) is squarely applicable. Therefore, we delete the addition confirmed by the ld CIT(A) under the head conversion charges. Audit fees is also paid on monthly basis to G.M. Gupta & Company, which is also below Rs. 20,000/- as well as also below the specified limit as per the TDS provisions, therefore, the same is not liable to be deducted TDS. Interest on TDS deductible on legal fees paid to Shri Bharat Vyas has been set aside by the ld CIT(A) for verification, if the recipient has paid advance tax and fulfill the condition of Hon'ble Supreme Court decision of Hindustan Coca Cola Beverages Pvt. Ltd. [2007 (8) TMI 12 - SUPREME COURT OF INDIA ] then no interest is to be charged from the assessee U/s 201(1A) as the assessee claimed that on legal fees Shri Bharat Vyas, advocate had paid tax already by disclosing this income being nominal amount of interest, therefore, we delete the addition confirmed by the ld CIT(A).- Decided in favour of assessee Non deducting TCS - demand U/s 206C(6A) and levy of interest U/s 206C(7) - Held that:- As per this definition, the item sold by the assessee in scrap i.e. Tin, iron scrap, plastic drum etc. is not scrap generated from manufacturing process. Therefore, it is not liable to be deducted TCS U/s 206C of the Act. - Decided in favour of assessee TDS u/s 194H - demand raised U/s 201(1) and interest U/s 201(1A) - Held that:- The assessee’s transaction with distributor is sale. The risk and reward is with the distributor. The transaction is principal to principal basis. The distributor is not agent of the assessee. From the side of assessee, no amount has been paid in form of commission or brokerage. The case laws referred by the assessee are squarely applicable, therefore, we uphold the order of the ld CIT(A).- Decided in favour of assessee Non deducting TDS U/s 194H on payment of milk purchase price difference to milk societies - disallowance U/s 40(a)(ia) - Held that:- The assessee purchased milk from the primary society not from the cattle owners. The payments are made to the primary society. The price of the milk is decided on the basis of fats by the assessee, the milk is processed in the plant of the assessee but at the stage of testing, the risk and reward is with the primary society. The assessee paid 3% on cost of the purchase price of milk to the primary society. The relationship between the assessee and primary society is principal to principal basis. It is undisputed fact that the purchase price and purchase difference has been claimed by the assessee under two heads but expenses debited under the purchase difference is cost of goods purchased. By respectfully following the Coordinate Bench decision in assessee’s own case for A.Y. 2008-09 we hold that the assessee is not liable to deduction TDS U/s 194H of the Act - Decided in favour of assessee

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• 2016 (4) TMI 417
  Disallowance of expenses - 1/6th of total expenses comprises of telephone expenses, travelling expenses, Vehicle expenses and depreciation on car - Held that:- AO made these disallowance mainly on the ground that most of the bills and vouchers for the expenses claimed were self-supporting and not fully verifiable and the assessee was not maintaining any log book for the use of vehicle, no registers were maintained for telephone and also for the fact that the assessee had not made any disallowance while computing its income for personal use of vehicle and telephone expenses. Taking into consideration all facts and circumstances of the case, in our opinion, it would meet the ends of justice if these disallowances are restricted to Rs. 4,00,000/-. - Decided partly in favour of assessee Disallowance of PF and ESIC - delay in deposits - Held that:- Assessee was required to deposit the employees PF and ESIC contribution into the government account within the due date, including grace period allowed by the respective Acts and not before the due date of filing the return of income as contended by the assessee. Therefore, in our opinion, the CIT(A) has rightly upheld the disallowance made by the Assessing Officer amounting to Rs. 3,77,546/- [Rs.3,51,103/- and ESIC of Rs. 54,187/-] on account of late payment of employee's PF and ESIC to the government account. - Decided against assessee

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• 2016 (4) TMI 416
  Revision u/s 263 - non invoking the provisions of section 194C - Held that:- In the present case, the ld. CIT has not brought on record any material to point out that some specific payment on account of labour charges has been made on which TDS u/s. 194C has not been deducted at source and therefore, the decision of the ld. CIT cannot be based on the whims and caprice being a revisionary authority. As held by the Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. (2009 (9) TMI 633 - Delhi High Court ) even if there was any enquiry, even inadequate, that would not by itself give any occasion to the Commissioner to pass orders u/s. 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of lack of enquiry that such a course of action would be open. In the present case, there is no lack of enquiry on the part of the Assessing officer and in such circumstances and facts of the case, the order of the Ld. CIT in revising the assessment u/s. 263 is a bad order and is liable to be quashed. - Decided in favour of assessee

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• 2016 (4) TMI 415
  Valuation of WIP - Held that:- When the value determined by the City Civil court has been considered by the AO as the closing WIP, therefore, in absence of any contrary material brought to our notice we do not find any infirmity in the order of the CIT(A) upholding the order of the AO. - Decided against assessee.

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• 2016 (4) TMI 414
  Taxability of unutilized accumulated amount - selection of assessment year - Held that:- The returns of income filed by the assesseee for the A.Ys. 2005-06 & 2006-07 marked as 'E' & 'F', (which is enclosed) that the assesseee carried forward the accumulation as unutilized funds for the AY 1999-00, which was not at all spent. However, before the CIT(Appeals), it was taken a plea that it was spent in AY 2005-06 and 2006-07 as per the revised computation filed before the AO. Further, it was taken a plea that it was an inadvertent mistake and submitted that in view of change of circumstances of the case, it was invested in land allotted by CMDA vide its letter dated 19.3.2009. When the department vide a letter dated 10.1.2013 raised a question on application of income, the letter dated 6.2.2013 from CMDA was filed by the assessee to prove that the assessee is intending to purchase the land. However, if the assesseee is bona fide, the assessee should have produced the order issued from the CMDA on 19.3.2009 and the reason for delay in filing the said letter for such a long period till the Assessing Officer making the assessment for the assessment year 2010-11 is not acceptable. There exists no reason for such delay. We are not in a position to accept the submission of the assesseee. Accordingly, we are inclined to reverse the order of the CIT(Appeals) and restore that of the AO. - Decided in favour of revenue Allowance of depreciation when the costs of acquisition of assets were treated as application of income for the purpose of claiming exemption u/s.11 - Held that:- In this case, the cost of the asset was allowed u/s 11 of the Act as application income since the assessee is a charitable institution entitled for exemption u/s 11. Therefore, the cost of the asset becomes NIL. When the cost of the asset becomes NIL, there is no question of allowing any depreciation. If the depreciation is allowed then it would amount to double deduction. Therefore, this Tribunal is of the considered pinion that provisions of section 11 of the Act will override section 32. In other words, if the assessee claims exemption u/s 11 under Chapter III of the Act, it cannot claim depreciation u/s 32 of the Act. Therefore, we are unable to uphold the order of the CIT(A). Accordingly, the order of the CIT(A) is set aside and that of the Assessing Officer is restore - Decided in favour of revenue

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• 2016 (4) TMI 413
  TDS u/s 194J - disallowance under section 40(a)(ia) as payments made to the Indian sub consultants, for delay in deposit of TDS effected on such payments - existence of PE in India - Held that:- Requirement of Article 5(1) of the DTAA is not satisfied in the present case. Carrying on of business involves the carrying on in a country of virtually any activity related to the business of the enterprise. As we have already seen the availability of office space for use by the Assessee at the premises of GRSE was for the limited purpose of rendering of services agreed between the Assessee and GRSE. The commentaries of Philip Baker on Treaties and OECD guidelines and decisions referred to by the learned counsel for the Assessee support the plea of the Assessee that it had no PE in India. The Revenue came to the conclusion that the Assessee had a PE in India mainly on the basis of existence of an office at GRSE’s shipyard. That alone was not sufficient to come to such a conclusion. The fact that the Assessee filed a return of income including all receipts from the contract with GRSE cannot be the basis to come to a conclusion that there was an admission by the Assessee that it had a PE in India. Existence of PE in India has to be established on the basis of evidence and by application of the requirements as contemplated in DTAA. On the question whether the Assessee having filed a return of income admitting income on the basis that it had a PE in India can thereafter make a claim that there was no PE of the Assessee in India without filing a revised return of income we are of the view that the action of the ld. AO of not allowing the claim of the Assessee due to failure to file the revised return, is bad in law. We therefore agree with the contention of the Assessee that there was no PE in India during the previous year. This conclusion will hold good even for AY 2005-06. As already held that there was no PE in India in the form of fixed place of business through which the business of the Assessee was wholly or partly carried on in India. As such, the Assessee would be entitled to the benefit of the provisions of section 115A of the Act and be taxed at 20% of the Gross receipts. We also hold that tax liability borne by GRSE will also need to be grossed up for arriving at Gross receipts of the Assessee and after such grossing up such receipts have to be taxed at 20%. Levy of interest u/s.234-B & 234-C - Held that:- Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy-less and therefore can take action against the payer under the provisions of Sec.201 of the Income Tax Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. The provisions of Sec.209(1)(d) have been amended by the Finance Act, 2012 but those amendments are not relevant for the present case which relates to AY 2007-08. We therefore hold that the assessee was not liable to pay any interest under sec.234-B.

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• 2016 (4) TMI 403
  Maintenance charges - AO adding a sum received as maintenance charges to the income of assessee for the reason that the agreement entered into for providing the services was a collusive agreement with a view to divert the rental income because the maintenance charges are an integral part of the licence agreement - CIT(A) and ITAT deleted the addition - Held that:- The CIT(A) as well as the Income Tax Appellate Tribunal have recorded a concurrent finding of fact that both the Companies are separate and the respondent assessee company is the service provider and has installed various equipments including lift, generators for the building in question and a separate agreement was entered with the tenant for providing the maintenance. No reason to include the income of maintenance charges earned by M/s. IHDP Home Interiors Exports Parks Pvt. Ltd. who is a separate assessee, in the hands of the assessee-company. - Decided against revenue

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• 2016 (4) TMI 402
  Reopening of assessment - Held that:- All that the reasons refers to is the material already on record before the AO at the time that the original assessment order was passed under Section 143(3) of the Act. There is not a whisper that there has been a failure by the Assessee to fully and truly disclose the material facts. Consequently, the Court has no hesitation in holding that the order dated 18th March 2002, recording the reasons for the reopening of the assessment for AY 1994-95, is not in conformity with the mandatory requirement under Section 147 of the Act and therefore is unsustainable in law. - Decided in favour of assessee

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• 2016 (4) TMI 401
  Jurisdiction of tribunal - Held that:- Tribunal was not correct in entertaining the appeal without considering the issue of limitation and without condoning the alleged delay. That being the position since there was an application for condonation of delay, which has not been considered by the Tribunal and the final order has been passed allowing the appeal of the Revenue and the order of the Tribunal being couched in a manner that the appeal of the assessee cannot be separated from the appeal of the Revenue, the order dated 25.2.2001 has to be and is quashed in its entirety and the matter is remitted to the Tribunal to proceed in the matter after first considering the application for condonation of delay filed on behalf of the Revenue.

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• 2016 (4) TMI 400
  Transfer pricing adjustment - impact of amendment in section 92B, by the virtue of Finance Act 2012 - Held that:- No ALP adjustments can be made, on the facts of this case, in respect of delay in realization of sale proceeds. The amendment in Section 92B, at least to the extent it dealt with the question of issuance of corporate guarantees, is effective from 1st April 2012. The assessment year before us being an assessment year prior to that date, the amended provisions of Section 92 B have no application in the matter. - Decided in favour of assessee

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• 2016 (4) TMI 391
  Stay petition - Held that:- Onus placed upon the assessee of being ready to argue has been discharged as the adjournments moved, we find were so necessitated for reasons beyond the control of the assessee as in the circumstances brought out by the Ld.AR judicial propriety demanded that the firm engaged by the assessee does not argue before the Constitution of the Bench on the specific dates. Thus where for reasons beyond its control, the Ld.AR was required to move the adjournment it cannot be said to be a case of willful default to appear or unnecessary dragging on or delaying the hearing after having sought stay. Being satisfied with the explanation offered and being of the considered view that the assessee cannot be burdened for no fault of his, the stay is extended for a further period of 6 months or disposal of appeal whichever is earlier. We make it clear that no adjournment for any unreasonable ground shall be sought by the assessee on the date of hearing which we find is fixed on 22.03.2016. In the result the stay petition of the assessee is allowed.

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• Customs

• 2016 (4) TMI 408
  seeking release of seized goods - Waiver of right to be given a SCN under Section 124(a) of the Act - Non-issuance of SCN under Section 110(2) of the Customs Act 1962 for over six months and also no adjudication order passed in next six months - Department contended that petitioner made a statement that “I do not want any show cause notice and any personal hearing and matter may be decided on merit in my absence”, therefore, it is contended that there was no requirement to give a SCN to the petitioner within six months - Held that:- despite the waiver by the petitioner of the right to be given a SCN in terms of Section 110(2) of the Act, no adjudication order was passed for a period of one year after the seizure. The Petitioner could, therefore, not be bound by such waiver after the expiry of the time limit under Section 110(2) of the Act. In such circumstances, there was no justification for the respondents to continue to detain the goods seized - Therefore, it is directed that the goods seized be forthwith released unconditionally to the petitioner and this will, however, not preclude the respondents from proceeding under Section 124 of the Act ad passing an adjudication order in accordance with law. - Decided in favour of petitioner

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• 2016 (4) TMI 407
  Demand of duty - Time barred - Denial of exemption under Notification No. 84/97-CUS dated 11/11/1997 - Import of goods for setting up of a co-generation power plant - Goods are not eligible for concession under the said notification as the certificates are not proper and genuine bearing forged signature of the competent officer - Held that:- on being informed by the Investigating Officer about forgery and illicit nature of import, OCIL deposited the full duty liability before even the adjudication of the case. The concession on the goods cannot be claimed based on forged documents irrespective of who is responsible for such forgery. Submission of such forged document for claiming exemption is a clear case of mis-statement. OCIL’s plea that they are not involved in the forgery and hence, there is no willful mis-statement on their part cannot be accepted in so far as the correct duty liability on the imported goods are concerned. Therefore, by referring Hon’ble Supreme Court’s decision in CC (Preventive) vs. Aafloat Textiles (I) P. Ltd. [2009 (2) TMI 75 - SUPREME COURT], since fraud was involved, in the eye of law such documents had no existence. Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation. Confiscation of goods in lieu of redemption fine - Impugned goods were neither seized nor released on provisional basis in terms of bond executed by the importer - Held that:- No redemption fine can be imposed in the above situation. Hence, imposition of redemption fine on the goods which were never available for confiscation is not legally sustainable. Imposition of penalty - Section 112 of the Customs Act - Goods liable for confiscation in view of irregular claim for exemption - Held that:- while the goods were found to be not eligible for concession, in view of forged certificate, the role of the importer has to be seen in the factual context. Since, wrong claim of exemption will attract provisions for confiscation of goods, penalty under Section 112 will get attracted on OCIL. Imposition of penalty - Section 112(a) & 114A of the Customs Act - Held that:- act of collusion, willful mis-statement or mis-representation are not proven so the penalty under Section 114A cannot be imposed on the importer (OCIL). ICICI Bank Ltd as are not involved in the act of forgery and have not knowingly abetted any illegal act and hence are not liable for penalty under Section 112. - Appeals disposed of

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• 2016 (4) TMI 406
  Disallowance of drawback claim - Exporter of bicycle parts to Iran, Tehran and Egypt - Jurisdiction - Whether DRI officer is a proper officer to issue show cause notice - recovery of erroneously granted excess draw back in terms of Rule 16 - Held that:- as per circular, show cause notices are required to be issued in terms of provisions of Rule 16 of the Customs, Central Excise Duties and Service Tax Draw back Rules, 1995 within the monetary limit laid down in the said circular, before any recovery can be initiated. As such, though there is lacuna in the said Rule 16 inasmuch as the same does not specifically provide for issuance of show cause notice and only refers to the demand made by the proper officer, but the said demand has to be made by the Proper Officer by way of issuance of show cause notice, as per the understanding of the Board also in the relevant portion of the Circular No. 24/11-Cus. By applying the ratio of law, declared by the Hon'ble Supreme Court in the case of Commissioner of Customs vs. Syed Ali [2011 (2) TMI 5 - Supreme Court] and subsequently followed by various other High Court, it has to be held that DRI officer was not the proper officer for issuance of show cause notice for the purpose of demand of allegedly erroneously granted excess draw back. Therefore, the show cause notice having been issued by ADG, DRI Delhi, is without jurisdiction and consequently the impugned order become void ab initio and cannot be upheld. The same is liable to be set aside on the ground of jurisdiction itself. Merits - Mis-declaration of goods - Value of goods as also port of discharge are contrary to even the procedure adopted by the Customs authorities - As per report of Consulate General of India at Dubai, only small fraction of iron was auctioned by Dubai DHS 31000 equivalent to Rs. 3,10,000/- - Revenue alleged that goods are overvalued as the goods have been examined at the end of supplier also, therefore, it cannot be alleged that goods were undervalued in the absence of contemporaneous price for the purpose of like kind of goods. Held that:- It was also found that out of 3 merchants/financiers only one company was not found at the address. Further it is found that the Revenue is heavily relied on the statement of Shri Navdeep Goyal representative of shipping agency but he was not made available for cross examination. Therefore, the said statement cannot be relied on. During the course of investigation, it was found that the appellant exported bicycles parts which were procured from various suppliers who processed the bicycles parts. There is no single evidence on record to show that the appellant has manufactured/ used sub-standard raw materials and all the suppliers have admitted that they have provided goods to the appellants. The appellant is a regular supplier/exported various other consignments of bicycles parts of similar nature. No departmental officers were alleged that having conspiracy with the appellants and there is verification report is on record. Therefore, in the absence of any supportive evidence except the report from the Consulate General of India at Dubai which is also not conclusive. In the absence of any such supportive evidence, it cannot be alleged that the appellant has availed excess drawback claim erroneously. Therefore, the demand is set aside on merits. - Decided in favour of appellant with consequential relief

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• 2016 (4) TMI 397
  Valuation of imported goods involving transaction between related persons - Applicability of Rule 3(3)(a) of the Valuation Rules - Import of components, spare parts, capital goods etc. from foreign supplier - Valuation to be done by Special Valuation Branch - Held that:- the Revenue has not brought forward any material to allege a change in the fact or circumstances as applicable to the past and upheld for the future imports by the Original Authority. Also the Original Authority as well as the first Appellate Authority have examined and gave categorical findings regarding the acceptance of transaction value. On perusal of the grounds of appeal, no ground is found to interfere with the orders of the lower Authorities. - Decided against the revenue

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• 2016 (4) TMI 396
  Seeking modification of conviction order - Possession of 90kg Ganja - No fair investigation carried out and also no independent public witness was associated at any stage - Held that:- mere denial of recovery of the Ganja from the truck is not enough to exonerate A-1. Once physical possession of the contraband has been proved, Section 35 of the NDPS Act comes into play and the burden shifts on the appellant to prove that he was in conscious possession of it. In such a situation, the accused is presumed to be in conscious possession as has been held in Ram Singh v. Central Bureau of Narcotics [2011 (4) TMI 1286 - SUPREME COURT]. If the accused takes a stand that he was not in conscious possession, he has to establish the same. As has been held in Dharampal Singh v. State of Punjab[2010 (9) TMI 1005 - SUPREME COURT]. As the materials brought on record would show, A-1 was found sitting in the truck, his presence in the truck has been clearly established. It is proven that A-1 was in control of articles in the truck. Possession in a given case need not be physical possession but can be constructive, having power and control over the articles. Therefore, there can be no iota of doubt that he was in conscious possession of the same. A-2’s conviction is primarily based only upon his disclosure statement. He disclosed that when they were taking tea at Peepra Kothi, an individual Lallan met A-1 and informed that he had loaded three plastic kattas containing Ganja in the truck and it would be collected by someone at Delhi. He further disclosed that Lallan had assured to pay Rs. 8,000/- for the deal. The Investigating Agency did not examine any tea shopkeeper from where the appellants had taken tea or the plastic kattas were allegedly loaded. Nothing has come on record to show if A-2 was acquainted with the said Lallan or the individual to whom the Ganja was to be delivered at Delhi. The prosecution has thus failed to prove if A-2 was in exclusive and conscious possession of the contraband. He deserves benefit of doubt. Therefore, conviction and sentence recorded by the Trial Court qua him cannot be sustained and A-2 shall be released forthwith if not required to be detained in any other case. - Appeal disposed of

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• Corporate Laws

• 2016 (4) TMI 393
  Scheme of Amalgamation - Held that:- The amalgamation under the proposed Scheme appears to be in the interest of the companies and their members and creditors, this Court is of the view that the Scheme deserves to be sanctioned. The Arrangement otherwise seems to be appropriate and hence, it is required to be sanctioned with a specific observation that the sanctioning of the Scheme would not absolve anyone who is otherwise liable for any responsibility or liability, only on account of this sanctioning. In view of the above, the Scheme of Amalgamation is sanctioned. It is, however, directed that the petitioner shall preserve its books of accounts, papers and records and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act,1956.

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• 2016 (4) TMI 392
  Scheme of Amalgamation - Held that:- In view of the approval accorded to the scheme by the shareholders of the petitioners and creditors of the transferee company, and, given the fact, that the RD and the OL have not articulated any objections qua the scheme, in my opinion, there appears to be no impediment in the grant of sanction to the scheme. Consequently, sanction is granted to the scheme in terms of Section 391 and 394 of the Act. Consequently, the investment held by the transferor company, to the extent of 11.86%, in the transferee company, shall stand cancelled. The shares of the transferor company, which are in dematerialized form, shall stand extinguished on or from the date of issuance and allotment of new equity shares as envisaged under clause 5.4 of the sanctioned scheme. The aforesaid order shall, therefore, be deemed to be an order under Section 100 and 103 of the Act, as well, and thus, result in confirmation of reduction in capital. Consequently, the provision made in the scheme, in clause 5.5, to the effect that there shall be no requirement of the transferee company, post amalgamation, that is, for amalgamating company, to add the words, “and reduced” as a suffix to its name post reduction in capital will also get triggered. The petitioners will, however, comply with all statutory requirements, as mandated in law.

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• Service Tax

• 2016 (4) TMI 411
  Classification - Pandal or Shamiana services - Section 65 (77a)&(77b) of the Finance Act, 1994 - Appellant contended that supply of light and light fittings to a building or a place which is not a Pandal or Shamiana cannot be covered under “Pandal or Shamiana contractor service”, therefore, not covered under taxable service - Held that:- considering the definition of Pandal or Shamiana it is clear any place prepared or arranged for organizing an official, social or business function will become a Pandal or Shamiana. An open ground or a garden or a already existing building can also be categorized under this. Keeping this definition in mind it is clear that the appellant’s activity of providing lights and light fittings in connection with decoration of such place are correctly classifiable under taxable service. Classification - Appellant contended that they were working as a sub-contractors to a main contractor who have been discharging service tax including the amount of bill raised by them as sub-contractor, therefore, again the liability cannot be raised against them - Held that:- the tax liability discharged by the main contractor is as per the applicable legal provisions and it cannot be said that the main contractor is acting as an gent to discharge the tax liability of sub-contractor. The tax liability of the appellants are to be decided as per the applicable provisions of law during the relevant time. The admitted position is that the appellants could not state any legal provisions to support the claim that they need not pay service tax even if they provide taxable service when the value of such service is included in the output service of the main contractor. Such proposition will go against from principle of Cenvat Credit Rules and make the credit flow as mandated by these Rules as redundant. After the introduction of Cenvat Credit Rules and various changes in the legal provisions, the CBEC issued a master Circular on 23/08/2007. One of the points clarified therein is the service tax liability of sub-contractors if tax is paid by main contractor. It is noted that the question of double taxation will not apply to the present situation as the Cenvat Credit Rules provides for the situation where, subject to satisfaction of all the conditions, the tax paid on the input services are eligible as credit for the output service provider. As such, there is no merit in the appellant’s claim in this regard. Nature of Functions - The appellants also contended that as in certain cases the services are rendered in connection with lighting up of Government buildings and temples, it cannot be covered under the tax liability. As examined by the lower Authorities, it is found that the nature of premises has no relevance on tax liability. As per the definition of 'Pandal or Shamiana' any place specially prepared or arranged for organizing an official, social or business function is covered. The point to be considered is whether the function falls under any one of these three categories. Apparently religious function will not be covered for taxation. A social function even if held in a religious place may not be excluded for tax liability. From the nature of functions as examined in detail and presented in the appeal, no categorical evidence have been submitted to claim exclusion from the category of these functions in relation to which the appellants provided service either directly or indirectly. Therefore, the services so provided are correctly categorized under 'Pandal or Shamiana contractor' in terms of sub-Section (77b) of Section 65 of Finance Act, 1994. - Decided against the appellant

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• 2016 (4) TMI 410
  Period of limitation - Refund claim - First filed within a period of one year as per Section 11B of Central Excise Act, 1944 but was returned back for required documents and again filed by respondent after a period of one year - Held that:- from the Order-in-Original, it is observed that refund claim first filed was complete in all respects. The department was asking for proof of Service Tax paid by M/s. Indu APS CDS Synergy Drilling engaged by the Respondent . The documents being asked for were thus additional documents sought by Revenue to satisfy themselves that service provider has paid 100% Service Tax. Therefore, it cannot be said that required documents were not filed by the Respondent alongwith original refund application. Hence, refund claim was not time barred. Bar of unjust enrichment - no C.A. certificate was produced by the Respondent before the lower authorities - Held that:- the first appellate authority in Order-in-Appeal has held that Respondent herein has not taken CENVAT credit of 50% tax paid on reverse charge basis and has also shown this amount as advances in the books of account for which an affidavit is filed. It is observed from show cause notice that issue of unjust enrichment was nowhere the subject matter of show cause notice. However, in the Order-in-Original, Adjudicating authority discussed the issue of unjust enrichment at length and also made observations that Respondent herein did not produce any documentary evidence to the effect that burden of proof has not been passed on to any other person. In the interest of justice, on the issue of unjust enrichment the matter is required to be remanded back to the Adjudicating authority. Respondent should produce all the documentary evidences, including a C.A.'s certificate, before the Adjudicating authority to establish that refund sought for has not been recovered from any person and was shown in their books of accounts as an amount receivable and that the same has not been built into the expenditure of services being provided by Respondent. - Decided partly in favour of revenue

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• 2016 (4) TMI 409
  Cenvat credit - Information Technology software services - Held that:- it is true that such services are made taxable by Clause (zzzze) of Sec. 65(105) of Finance Act, 1994 with effect from 16.5.2008 but thereby it is not possible to accept the contention that, they were no service at all. Further, such a contention has never been raised by appellant before the Tribunal. - Decided against the revenue

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• 2016 (4) TMI 399
  Demand of Service tax - period from 2006-07 till 2011 - Maintenance of immovable property, GTA service, works contract service, maintenance and repair services and supply of tangible goods services - Held that:- the defence taken before us are of legal / factual in nature and same are required to be examined by the Adjudicating Authority. In these circumstances, the impugned order is set aside and remand the matter back to the adjudicating authority for denovo adjudicating of the case in the light of the defence taken by the appellant before us with a direction to the appellant to appear before the Adjudicating authority. - Appeal disposed of

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• 2016 (4) TMI 398
  Challenge to notifications bearing nos.9/2016, 18/2016 and 19/2016, all dated March 1, 2016 - Seeking amendment in previous notifications of June 30, 2012 pertaining to service tax - Payment of service tax by Senior Advocates on the basis of issue of memorandum of fees - Petitioner complains that though the Finance Bill, 2016 has not yet been passed and proposals are contained in such bill to alter the position pertaining to Senior Advocates, the impugned notifications seek to bring in the changes with effect from April 1, 2016 without affording the Parliament an opportunity to discuss the matters covered by the Finance Bill. Held that:- Prima facie, it appears that the changes sought to be brought about may unreasonably prejudice Senior Advocates. The impugned notifications will remain stayed insofar as such notifications pertain to the levy of service tax on Senior Advocates. Leave is granted for the petitioner to sue in a representative capacity. The petitioner will cause the gist of this petition to be advertised within a fortnight from date in two leading English dailies having national circulation. The advertisements will call upon Senior Advocates interested to oppose the cause to apply to be impleaded. Senior Advocates supporting the cause need not apply for being added as parties, unless it is perceived that the petitioner is not diligent in pursuing the same. - Petition disposed of

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• CST, VAT & Sales Tax

• 2016 (4) TMI 405
  Denial of ‘C’ Forms for the years 2002-03 and 2003-04 - Whether the transfer of right to use equipment under the impugned transaction was not an interstate sale even though the goods moved from Maharashtra to Delhi and whether the only pre-condition for issuance of C-Form is that the buyer is a registered dealer and the goods are mentioned in his registration certificate as required for use in electricity generation and distribution - AT concluded that since the situs of the sale was Delhi and the agreement transferring the right to use the equipment was executed at New Delhi between RASL and DVB, the said transaction could not be said to be an inter-state sale - Held that:- the lease agreement entered into between RASL and DVB has occasioned the movement of goods from Maharashtra to Delhi. The said transaction is deemed to be an inter-state sale within the meaning of that expression in Section 3 (a) of the CST Act. As the appellant is a registered dealer and the goods in question find mention in the registration certificate as required for the use in the electricity generation and distribution. Consequently, there was no valid ground to deny the Appellant ‘C’ Forms in relation to the lease transactions undertaken with RASL during the years 2002-03 and 2003-04. Therefore, the VAT Officer is directed to issue ‘C’ Forms as requested by the Appellant for the transactions of the years 2002-03 and 2003-04. - Appeal disposed of

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• 2016 (4) TMI 404
  Waiver of penalty for the quarters II, III and IV for the year 2006-07 - under the Amnesty Scheme of the Department of Trade & Taxes and Government of National Capital Territory of Delhi - Already paid demand of tax and interest in terms of the rectification orders - Interpretation sought to be placed by the Respondents on the relevant clause is not consistent with the overall purpose of the Amnesty Scheme and the main purpose was to incentivise self-compliance by the dealer with the tax demand - Held that:- While it is true that the Petitioner had paid tax and interest for the period in question even prior to the Amnesty Scheme, the fact remains that the Petitioner had challenged the levy of penalty for the same period and the said challenge is pending in the appeal before the AT. It is anomalous that the person who pays part tax and interest would be entitled, while calculating the tax dues, under clause 3 of the Amnesty Scheme to seek waiver of penalty whereas the person who paid the tax and interest and challenged the levy of penalty would not be entitled to seek waiver. In other words the Scheme is sought to be interpreted in such a manner that compliance with part of the demand, i.e., payment of tax and interest but not penalty, would make a person ineligible to the Amnesty Scheme qua the penalty amount under challenge whereas a person who defaults in paying the tax and interest as well as penalty would be entitled to be benefit of the Amnesty Scheme and claim waiver of penalty. As no reasons have been given by Respondent No. 2 in the so-called order dated 23rd July 2014 in DSC Form 3 for rejecting the claim of the Petitioner, the impugned order is set aside and the petitioner is entitled to claim the benefit of the said Amnesty Scheme. - Decided in favour of appellant

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• 2016 (4) TMI 395
  Seeking extension of time to produce statutory forms - Interstate sale of goods - Held that:- the petitioner has already filed several applications seeking extension of time, produced statutory forms as it is apparently beyond its control. The second respondent shall consider the grant of additional time which shall be atleast of 60 days to produce the necessary statutory forms instead of those amounts which have not been supported by statutory forms. The respondent shall take into account the statutory forms uploaded on 05.02.2016 and such other statutory forms which may be uploaded now and in so far as the balance amount which are not supported by the statutory forms are concerned and the petitioner shall furnish a bank guarantee within two weeks. Petition disposed of

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• 2016 (4) TMI 394
  Revision petition under Section 86 of the Rajasthan Sales Tax Act, 1994 - Liability of turn over tax - In respect of business transactions for the year 2000-2001 - Held that:- the issue is squarely covered by the decision of this Court in the case of Assistant Commissioner, Special Circle, Udaipur Vs. M/s H.E.G. Limited, Rishav Textiles, Rishavdev, Udaipur, therefore, the revision petition is dismissed. - Decided against the revenue

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• Wealth tax

• 2016 (4) TMI 412
  Computation of WDV of the Motor Cars under section 32 or as per rule 20 of the Wealth tax Rules - CIT(A) deleted the addition made by the A.O. in the valuation of the motor cars - Held that:- We agree with the contention of of ld AR that the assessee could not gather the information in respect of the insured value of the vehicles being large number of leased out vehicles. The value of motor cars adopted by the assessee has been upheld by the CWT(A) in view of the judgment of case of T.V. Sundaram Iyenger and Sons Ltd. (2006 (1) TMI 45 - HIGH COURT, MADRAS). wherein the WDV of cars was held as basis of market value in the absence of any material produced by the Revenue to show that WDV didn’t represent the market value of the vehicle. - Decided against revenue Debt claimed by the assessee in relation to taxable assets - Held that:- We find that the assigning of debt on proportionate basis towards assets liable for wealth tax is a more reasonable and judicious method rather than making a arbitrary estimate by the Assessing officer. The CWT(A) has given a reasoned findings on the issue in dispute and, therefore, no interference is required in his findings on the issue discarding the estimate of debt made by the A.O. and accepting the assessee’s estimate holding it to be scientific without elucidating the reasons for the same.- Decided against revenue

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