TMI Tax Updates - e-Newsletter
April 16, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

News

1. Finance Minister Shri Arun Jaitley participates in the Sixth Annual Ministerial Meeting of India- US Economic and Financial Partnership (EFP) in Washington D.C.; Emphasized that Financial Action Task Force (FATF) must ensure effective implementation of legislation in various countries relating to terrorist financing and take concrete action against countries sponsoring terrorism and hosting terrorist infrastructure;

2. Intervention by the Union Finance Minister Shri Arun Jaitley at the G20 Finance Ministers and Central Bank Governors Meeting on ‘Global Economy and Framework for Strong, Sustainable and Balanced Growth’ as Lead Speaker in Washington D.C. yesterday;

3. Text of the Joint Statement on Sixth Annual India-US Economic and Financial Partnership

Highlights / Catch Notes

Income Tax

• Late Filing Does Not Justify Denial of Section 80IC Income Tax Claims.

  Case-Laws - AT : No reason to denial of claim u/s 80IC on the ground of filing the return belatedly - AT
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• MAT Liability Under Sec 115JB: Deduction Under Sec 80HHC Allowed After Offsetting Export Trading Losses.

  Case-Laws - AT : Computing MAT liability under the provisions of sec.115JB, deduction u/s 80HHC shall be allowed after setting off losses suffered on export of trading goods - AT
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• Assessee Must Prove Nature and Source of Credit u/s 68: Identity, Creditworthiness, and Transaction Genuineness Required.

  Case-Laws - AT : Degree of burden under section 68 upon the assessee is to prima facie prove the nature of credit and then source which has to be proved by showing the identity, creditworthiness and genuineness of the transaction - AT
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• TDS Credit Law: Assessee Not Required to Personally Execute Works in Large-Scale Contracts Under Current Regulations.

  Case-Laws - AT : TDS credit - there is no requirement in the law that the assessee itself should execute the works and it is not possible for any person, leave alone, a legal entity like a consortium, to physically execute mammoth contracts running into cores on its own - AT
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• Assessee's Advances Presumed from Own Funds, Not Borrowed; Deductions Allowed u/s 36(1)(iii) for Business Purposes.

  Case-Laws - AT : Where the assessee has own and borrowed funds, a presumption can be made that advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose - Deduction u/s 36(1)(iii)allowed - AT
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• Long-term capital gain claims require substantive evidence; DDIT information alone is insufficient for disallowance.

  Case-Laws - AT : No justification to disallow the claim in respect of long term capital gain merely on the basis of information received from DDIT - AT
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• Paying Commission to Non-Resident? No Need to Deduct TDS from Payment Under Current Tax Rules.

  Case-Laws - AT : If a person pays commission to the non-resident no TDS deduced from the payment - AT
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• The assessee is not obligated to deduct tax at source from Pay Channel Charges.

  Case-Laws - AT : Assessee cannot be held to be liable to deduct tax at source from the Pay Channel Charges - AT
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• Advances from producers are not taxable income for the taxpayer, according to tax guidelines.

  Case-Laws - AT : Amounts received by the assessee from various producers towards advances cannot be assessed as income of the assessee. - AT
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Customs

• Department Must Accept Second Test Report; Cannot Disregard Without Reserving Right to Reference First Report.

  Case-Laws - HC : Once the Department had agreed to a second test report without reserving any right to rely upon the first test report, it is not open to the Department to contend that the second test report ought to be dumped - HC
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Indian Laws

• Supreme Court affirms accountability u/s 138: Companies and responsible individuals both guilty for cheque offences.

  Case-Laws - SC : Person who commits an offence under Section 138 of the N.I. Act is a company, the company as well as other person in charge of or responsible to the company for the conduct of the business of the company at the time of commission of the offence is deemed to be guilty of the offence - SC
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Wealth-tax

• Warehouse for Business Use Exempt from Wealth Tax u/s 2(ea)(i)(3) of the Wealth Tax Act.

  Case-Laws - AT : Warehouse utilized for business purposes by the assessee hence exempt u/s 2(ea)(i)(3) of the Wealth Tax Act - AT
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Service Tax

• Service recipients can claim CENVAT Credit for government services using a challan as proof of Service Tax payment.

  Circulars : On basis of which documents can CENVAT Credit be availed in respect of services provided by Government or a local authority. - CENVAT Credit may be availed on the basis of challan evidencing payment of Service Tax by the Service recipient
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• Allottees can claim CENVAT Credit for Service Tax on natural resource rights as per circular, see paragraph 14.

  Circulars : When and how will the allottee of the right to use natural resource be entitled to take CENVAT Credit of Service Tax paid for such assignment of right. - See para 14 of the circular
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• Government Applies Service Tax on Interest for Deferred Payment on Natural Resource Assignments.

  Circulars : Whether Service Tax is payable on the interest charged by Government or a local authority where the payment for assignment of natural resources is allowed to be made under deferred payment option. - Yes
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• Spectrum User Charges and License Fees Exempt from Service Tax for Fiscal Year 2015-16 Post April 1, 2016.

  Circulars : Whether Service Tax is leviable on spectrum user charges and license fee payable after 1.4.2016 for the year 2015-16. - the same have been specifically exempted
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• Payment Due Date for Government Services Tied to Invoice or Bill Issued by Authority.

  Circulars : How to determine the date on which payment in respect of any service provided by Government or a local authority becomes due for determination of point of taxation - The date on which such payment becomes due shall be determined on the basis of invoice, bill, challan, or any other document issued by the Government or a local authority demanding such payment
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• Service Tax Liability on Natural Resource Rights Arises When Payment is Due or Made for Post-April 2016 Assignments.

  Circulars : When does the liability to pay Service Tax arise upon assignment of right to use natural resource where the payment of auction price is made in 10 (or any number of) yearly (or periodic) instalments under deferred payment option for rights assigned after 1.4.2016.? - the date on which any payment, including deferred payments, in respect of such assignment becomes due or when such payment is made, whichever is earlier.
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• Service Tax Exemption on One-Time Spectrum Charges After April 1, 2016, Does Not Apply to Ongoing Payments Like Royalties.

  Circulars : Whether Service Tax is payable on yearly installments due after 1.4.2016 in respect of spectrum assigned before 1.4.2016? - Exempted with specific conditions - The exemption shall apply only to Service Tax payable on one time charge, payable in full upfront or in installments, for assignment of right to use any natural resource and not to any periodic payment required to be made by the assignee, such as Spectrum User Charges, license fee in respect of spectrum, or monthly payments with respect to the coal extracted from the coal mine or royalty payable on extracted coal which shall be taxable.
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• Government Services Under Article 243G Exempt from Service Tax for Panchayat Functions.

  Circulars : Services provided by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution shall be exempted.
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• Government Services for Land Use Change and Building Approval Exempt from Service Tax per Latest Regulations.

  Circulars : Services in the nature of change of land use, commercial building approval, utility services provided by Government or a local authority shall be exempted.
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• Government Allocation of Natural Resources to Farmers Exempt from Service Tax; Other Allocations Subject to Tax.

  Circulars : Services in the nature of allocation of natural resources by Government or a local authority to individual farmers shall be exempted - Such allocations/auctions to categories of persons other than individual farmers would be leviable to Service Tax.
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• Government Services Exempt from Service Tax if Charges Do Not Exceed Rs. 5000.

  Circulars : Services provided by Government or a local authority where the gross amount charged for such service does not exceed ₹ 5000/-have been exempted
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• Government Services for Registration, Safety, and Certification Exempt from Service Tax Under New Rule.

  Circulars : Services provided by the Government or a local authority by way of (i) registration required under the law; - (ii) testing, , calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law, have been exempted
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• Government Services Now Subject to Service Tax with Specific Exemptions for Clarity and Uniformity in Tax Regulations.

  Circulars : Services provided in lieu of fee charged by Government or a local authority shall be liable to service tax (with certain exceptions)
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• Government Contract Penalties Exempt from Service Tax for Non-Performance Payments to Authorities.

  Circulars : Fines and liquidated damages payable to Government or a local authority for non-performance of contract entered into with Government or local authority have been exempted from service tax
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• Government Services and Penalties to Businesses Exempt from Service Tax Under Statutory Violations.

  Circulars : Services provided by Government or a local authority to business entities - fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to Service Tax.
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• Government Services Exempt from Service Tax: Taxes, Cesses, and Duties Not Considered Specific Services.

  Circulars : Services provided by Government or a local authority - Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax.
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• Government-to-Government Services Exempt from Service Tax u/s 66D of Finance Act 1994.

  Circulars : Services provided by Government or a local authority to another Government or a local authority shall be exempted
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• Government Services like Passports and Licenses Exempt from Service Tax for Professionals and Businesses.

  Circulars : Services provided by Government or a local authority to an individual who may be carrying out a profession or business. - Services by way of grant of passport, visa, driving license, birth or death certificates have been exempted - Circular
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• Commissioner (A) cannot remand cases to Original Authority for de-novo adjudication u/s 35A(3) of the Central Excise Act.

  Case-Laws - AT : Commissioner (A) has no power to remand the matter back to Original Authority for de-novo adjudication in terms of Section 35A(3) of Central Excise Act, 1944 w.e.f. 11.05.2011 - AT
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• Commission from space trade as principal-to-principal transaction exempt from service tax u/s 65(19).

  Case-Laws - AT : BAS - Commission received - Notional surplus earned from purchases and sale of space and not by acting for a client who has space or slot on a vessel comes under principal-to-principal transactions, not addressable u/s 65(19) - AT
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• Issuing Two Show Cause Notices for Same Period is Legally Impermissible, Causes Double Assessment.

  Case-Laws - HC : Issuance of two show cause notice for the same period is not permissible in law as there cannot be double assessment for the period - HC
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• Willful Suppression Allegations Require Detailed Facts to Evade Service Tax; Mere Assertions Insufficient Under Law.

  Case-Laws - HC : Notice must contain particulars of facts and circumstance in support of an allegation of willfull suppression of material facts with intent to evade payment of service tax as mere ipse dixit is not sufficient - Extended period of limitation cannot be invoked - HC
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• High Court Rules Writ Petition Non-Maintainable Due to Incorrectly Assumed Facts; Authority Lacks Jurisdiction Basis.

  Case-Laws - HC : Maintainability of Writ petition - as per law an authority cannot confer on itself jurisdiction to do a particular thing by wrongly assuming the existence of a certain set of facts, existence whereof is a sine qua non for exercise of jurisdiction by such authority - Petition non maintainable - HC
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Central Excise

• Brass Granules with Predominant Copper Content to be Classified as Copper for Tax and Excise Duties.

  Case-Laws - AT : Classification - Brass granules - If copper predominates by weight, the brass granules has to be treated as copper granules - AT
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• Cenvat Credit Available for Service Tax on Insurance, Vehicle Repairs, and Catering Services.

  Case-Laws - AT : Service tax paid on Group Personal Accident Insurance (GPA) policy, General Insurance, Repair and Maintenance of Vehicles used for providing the taxable service, Vehicle Insurance Charges, Worksmen Compensation Insurance (WC) Policy and Outdoor catering service are entitled for Cenvat credit - AT
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• Party Claiming Cenvat Credit Must Prove Goods Received in Factory as per Central Excise Rules.

  Case-Laws - AT : Cenvat credit - Goods not received in the factory - As per Rule, the onus of establishing that the goods have been received in the factory is on the person who has taken the credit - AT
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VAT

• New Industrial Units Must Qualify for Exemption Under Notification N/N FD.11.CET.93(3) for VAT and Sales Tax Benefits.

  Case-Laws - SC : Benefit of exemption notification - Essential requirement for claiming exemption under N/N FD.11.CET.93(3) dated 31.03.1993, a unit should fall within the ambit of “new industrial unit” - SC
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Case Laws:

• Income Tax

• 2016 (4) TMI 572
  Disallowance of draft payable more than 3 years - Held that:- Respectfully following the above decision of the Hon'ble Kerala High Court in the case of Catholic Syrian Bank ltd. v. Addl. CIT (2013 (4) TMI 140 - Kerala High Court), we are of the opinion that the amount of stale drafts found in the hands of the assessee cannot be treated as liability or provision for liability and it cannot be carried on for indefinite period and it has to be treated as income of the assessee. However, we make it clear that whenever the assessee has to make payment against the stale drafts at any time in future, the same has to be claimed as expenditure. Addition made towards payment of donation - Held that:- The assessee bank has debited to the profit and loss account an amount of Rs. 5,51,690/- towards donation. The assessee bank has produced receipt to the extent of Rs. 3,00,000/- only. The Assessing Officer has observed that deduction on account of donation is allowed at 50% i.e., Rs. 1,50,000/- only. He also observed that since the deduction is required to be considered under Chapter VIA separately, the entire amount of Rs. 5,51,690/- is required to be added back and Rs. 1,50,000/- to be allowed as deduction. Since the assessee bank itself has added Rs. 3,00,000/- only in the computation memo, the Assessing Officer has added back the balance amount of Rs. 2,51,690/-. On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer. Before us, the ld. Counsel for the assessee has submitted that the amount was actually paid for advertisement charges in the Souvenirs and treated it as donation and contended that the advertisement charges in souvenirs are deductible in view of the CBDT circular. If it is so, what prevented the assessee bank to claim the same under 'advertisement charges' rather than claiming it as 'donation'. The ld. Counsel for the assessee has not able to give any convincing reply to the specific query raised by the Bench. In view of the above, we find no infirmity in the order passed by the authorities below and accordingly, the ground raised by the assessee is dismissed. Disallowance u/s 36 - working out of allowable deduction - treatment to amount advanced by the rural branches of the bank - Held that:- Intention behind the introduction of section 36(1)(viia) was to encourage rural advances and to aid creation of the provision for bad debts in relation to such rural branches. In the case of provision made towards non-rural debts, no deduction can be allowed as there is no specific provision in the Income Tax Act to allow the same. This indicates that the provision made towards urban debt should be added back and allowed only when bad debts are really written off. The question of double deduction being allowed does not arise therein at all, because it is allowed only on actual write off. The Hon'ble Apex Court has also held that the proviso to section 36(1)(vii) apply only in respect of rural debts. in view of the option exercised by the assessee that it can claims deduction on doubtful debts as per option (b) i.e. 7.5% of Gross Total Income and 10% of aggregate average rural advances, the Assessing Officer has rightly worked out the allowable deduction, which is less than that of the provision made by the assessee as doubtful debts, allowed the deduction of bad debts for all assessment years and remaining balance was brought to tax. Accordingly, we reverse the order of the ld. CIT(A) and confirm the addition made by the Assessing Officer for all the above assessment years Addition made towards payment made to SEBI - Held that:- Registration with SEBI is mandatory for the purpose of dealing in securities and stocks. The payment made to SEBI is in the nature of fee for the purpose of enabling the assessee to carry out its business. The payment of rernewal fee is only for the purpose of continuing the business as a merchant banker. Registering with SEBI is only to identify the person who is dealing in securities. Therefore, in our opinion, the subscription to SEBI will not give any enduring benefit to the assessee. In our opinion, the fee paid by the assessee is only a fee paid to a regulatory authority, therefore, it is a revenue expenditure. By the payment of fee to SEBI, the assessee is not getting any capital asset. Therefore, in our opinion, the subscription made to SEBI has to be allowed as revenue expenditure.

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• 2016 (4) TMI 571
  Bogus gifts - assessment u/s 153A - Held that:- As apparent from the order of the CIT(A) that the statement u/s 132(4) has been recorded in the case of the husband of the assessee and not in the assessee’s case. The husband of the assessee has admitted the gifts received by him to be bogus. However, there has been no such statement of the assessee that has been recorded during the search proceedings. Further it is observed that the ld. AO had not seized any documents/incriminating material, to substantiate the addition made. The addition was based on the income declared in the return of income filed u/s 153A which is very clear from the questionnaire raised by the ld. AO on 18/12/2009. To our mind the ld. AO has completed the assessment and crossed his jurisdiction by way of involving himself into a reassessment proceedings rather than completing the assessment on seized material, if any, thereby making the entire proceedings as invalid and beyond the scope of sec. 153A of the Act. Following the jurisdictional High Court in the case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ] set aside the assessment made by the ld. AO u/s 153A of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 570
  MAT computation - Excess deduction u/s 80HHC without setting off losses incurred by the assessee on export of trading goods - revision u/s 263 - Held that:- Computing MAT liability under the provisions of sec.115JB, deduction u/s 80HHC shall be allowed after setting off losses suffered on export of trading goods. Therefore, there was no issue on the point of allowing deduction at 100% instead of 30% while computing MAT liability u/s 115JB. There is no quarrel as far as the judgment of Hon’ble Supreme Court in the case of Ajanta Pharma Ltd (2010 (9) TMI 8 - SUPREME COURT) that deduction u/s 80HHC has to be allowed on the full amount of export profits instead of on the reduced rate of 30% in the case of the assessee. We find that the assessee itself has computed deduction u/s 80HHC even on the book profit without applying the decision of the Hon’ble Supreme Court in the case of Ajanta Pharma Ltd (2010 (9) TMI 8 - SUPREME COURT ). When the revision proceedings /s 263 were initiated only on the point of setting off of loss suffered in export of trading goods while computing deduction us 80HHC, then the claim of the assessee that while computing MAT liability of the assessee u/s 115JB deduction u/s 80HHC shall be allowed on the full amount instead of 30% of the profit derived from export of goods cannot be taken into consideration because the revision proceedings u/s 263 of the Act cannot be used for the benefit of the assessee but it is only meant for revision of the assessment order if the same is found erroneous and prejudicial to the interest of revenue. Thus the pre-requisite conditions for invoking provisions of section 263 are the order of the AO is erroneous and prejudicial to the interest of the revenue, and therefore these proceedings cannot be used for the benefit of the assessee. Even if the assessee has committed a mistake in filing return, remedy available with the assessee is under other relevant provisions of the Act and not u/s 263. We do not find any merit or substance in the appeal of the assessee. Consequently, we uphold the impugned order revision order of the CIT. - Decided against assessee.

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• 2016 (4) TMI 569
  TDS credit to the assessee - CIT(A) allowed the claim - Held that:- CIT(A) by considering Income Tax (8th Amendment) Rules, 2011, observed that in the case of the assessee, the payment for work contract was made to the assessee by Bangalore Metro Railway Corporation(deductee); the assessee recorded the receipts of Rs. 69,97,50,697 in its books as its turnover; that what is relevant for purposes of S.199 and Rule 37B(2)(i) is whether the contract receipts formed part of the income computation of the assessee; and that the fact that the contract receipts were given credit in the Profit & Loss Account of the assessee. He further observed that there is no requirement in the law that the assessee itself should execute the works and it is not possible for any person, leave alone, a legal entity like a consortium, to physically execute mammoth contracts running into cores on its own. He also observed that the very fact that the assessee engaged IVRCL to execute the works does not take away the fact that the contract receipts constitute its turnover and the income therefrom was assessable in the hands of the assessee. It is also observed by the learned CIT(A) that it is irrelevant whether the project resulted in a profit for the assessee or whether the assessee chose to sub-contract it to IVRCL on a no-margin basis. With these observations and also by following the decision of the jurisdictional High Court in the case of CIT V/s. Bhooratnam & Co.(2013 (1) TMI 478 - ANDHRA PRADESH HIGH COURT ), the CIT(A) directed the Assessing Officer to give credit for the TDS to the assessees. We concur with the reasoning given by the CIT(A) for allowing the claims of the assessees for TDS credit. - Decided in favour of assessee

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• 2016 (4) TMI 568
  Addition made towards the professional receipts - Held that:- The amounts received by the assessee from various producers towards advances cannot be assessed as income of the assessee. Therefore, we set aside the orders of the lower authorities and delete the additions in respect of the advances treated as income of the assessee - Decided against revenue Addition made on interest on OD as personal expenditure in nature - CIT(A) observed that when the assessee himself disallowed 25% of total interest expenditure there is no basis for AO to disallow arbitrarily 75% of total interest expenditure - Held that:- AO had not brought on record any material to show that the interest expenditure incurred to the extent of 75% on his personal purpose. Had it been any material to suggest that the so called borrowed amount was used by the assessee for his personal benefit, not for the professional business, the AO would justified. In the absence of any material brought by the AO, we are not in a position to uphold his order. Accordingly, we do not interfere with the order of the Ld.CIT(A) and the same is confirmed.- Decided against revenue

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• 2016 (4) TMI 567
  TDS u/s 194J - Payments made to pay channels (Royalties & Commission) - Held that:- The view entertained by the assessee that the pay channel charges cannot be considered as royalty is in fact gets support from the decision rendered by Hon'ble Delhi High Court in the' case of Asia Satellite Telecommunication Co. Ltd (2011 (1) TMI 47 - DELHI HIGH COURT ). Though the Explanation 6 to sec. 9(1)(vi) inserted by Finance Act, 2012 is clarificatory in nature, yet in view of the fact that the view entertained by the assessee gets support from the decision of Delhi High Court, referred above, we are of the view that the assessee cannot be held to be liable to deduct tax at source from the Pay Channel Charges. Hence, we are of the view that the assessing officer was not justified in disallowing the claim of pay channel charges by invoking the provisions of sec. 40(a)(ia) Payments to cable operators, Programme & News Expenses, Legal & Professional charges, Rent,Consumables & Cable Laying Charges and Advertisement - TDS liability - Held that:- The disallowance can only be restricted to the out standing amount at the end of the year. To verify the outstanding amount at the end of year the issue is restored to the file of AO for necessary examination and to quantify the disallowance if any. Disallowance of provision of expenses - Held that:- AO’s remand report as extracted by Ld. CIT(A) in para (iv) in page 6 of the order indicate that assessee has not furnished any objections or information regarding the said addition even during the remand proceedings. On what basis, Ld. CIT(A) has restricted the amount only to statutory disallowance u/s. 43B is not known. Unless one examine the nature of expenses, the crystallisation of liability and payment at a later point of time, the same cannot be allowed. Since no details are on record, we have no option than to set aside the order of Ld. CIT(A) on this and restore the same to AO for fresh examination. Needless to say that assessee should be given due opportunity.

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• 2016 (4) TMI 566
  TDS u/s 195 - Addition made by the AO u/s 40(a)(i) - non deduction of tds - neither the assessee obtained TDS certificate from the department u/s 195(2) nor the TDS was deducted - Held that:- We find that the assessee has paid commission to a person who is non-resident. As per the CBDT Circular 786 dated 7.2.2000, if a person pays commission to the non-resident no tax be deduced from the payment - Decided in favour of assessee.

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• 2016 (4) TMI 565
  Addition on LTCG - additions only on the basis of information received from DDIT (investigation) Bombay in respect of search action - Held that:- In the present case by virtue of independent documents as referred in paper book the assessee has proved the genuineness of the share transaction and there was no justification to disallow the claim of the assessee in respect of long term capital gain merely on the basis of information received from DDIT which is based on admission of Shri Mukesh Chokshi. Therefore accordingly, we direct the AO to assess the long term capital gain declared by assessee as such and accept the same - Decided in favour of assessee

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• 2016 (4) TMI 564
  Disallowance u/s.36(1)(iii) - Held that:- Amount borrowed for the purpose of business was partly disallowed by the AO on the plea that interest cannot be allowed to the extent of interest free advances/loans. As per the details furnished before the lower authorities, we found that advances were made in the regular course of business for purchase of property, which cannot be treated as not related to the business. Further we found that the reserve and surplus of assessee company was much more higher than the alleged advances on which the AO has disallowed the interest. In view of the jurisdictional High Court decision in the case of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ), wherein it was held that where the assessee has own and borrowed funds, a presumption can be made that advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. Applying the proposition of law laid down by the jurisdictional High Court, we do not find any merit in the disallowance so made by the AO u/s.36(1)(iii) of the I.T.Act, where reserves and surplus of assessee was much more than the advances. - Decided in favour of assessee.

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• 2016 (4) TMI 563
  Penalty under section 271(1)(c) - addition on share application money received from five companies - Held that:- during the course of penalty proceedings, the assessee vide letter dated 19th March, 2012 has again furnished the entire details and submitted that, assessee has discharged its onus by submitting the evidences to substantiate its claim; like, copy of confirmation letters from these companies; copies of Bank statement showing the transaction of share subscription money; copies of audited Balance Sheet as on 31st March, 2007 reflecting the share application money applied; Copies of income-tax return filed for the same assessment year along with PAN; return of allotment filed with the ROC; allotment of shares to the respective allottees. All these evidences filed by the assessee has not been rebutted or disputed by the AO. Penalty proceedings are separate and distinct from the assessment proceedings and even if in the quantum proceedings, the matter has attained finality, however in the penalty proceedings, assessee may chose to rely upon the same material to prove that he has not guilty of furnishing of concealment of income. The Explanation 1 to section 271(1)(c) raises rebuttable presumption and once the assessee has furnished all the evidences in support of its explanation and has substantiated his claim then the onus cost upon him is discharged and onus then shifts upon the AO to prove that such an explanation or evidence is false. Here in this case the AO has failed to rebut the assessee’s explanation regarding nature and source of credit by conducting any enquiry or brining any material on record. The degree of burden under section 68 upon the assessee is to prima facie prove the nature of credit and then source which has to be proved by showing the identity, creditworthiness and genuineness of the transaction. Here all these primary ingredient has been discharged. Therefore penalty deleted - Decided in favour of assessee

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• 2016 (4) TMI 562
  Deduction u/s 80IC - DR in course of her arguments submitted that there was no substantial investment in fixed assets at the premises so as to enable one to conclude that assessee was carrying out manufacturing activity - Held that:- We do not find any substance in this plea of ld. DR because the requirement of investment depends on the nature of activity being carried out by assessee. It is not the case of revenue that with the investment at site the activities could not be carried out by assessee. The assessee has also referred to the tender documents and the third party inspection carried out at the vender’s premises. From these documents it is evident that the third party inspection was carried out at Sitarganj Unit and, therefore, it cannot be said that no activity was carried out at the said premises. The submissions of ld. DR to the contrary are not correct when the entire report is considered. Assessee has also relied on the decision in the case of Faith Biotech Pvt. Ltd. (2014 (9) TMI 724 - DELHI HIGH COURT), where even though assessee was carrying out assembling and manufacturing of air purifier by using sample tools and testing equipments. It was held that assessee would be entitled to deduction u/s 80IC.This decision clearly counters the claim of revenue that the value of fixed asset is one of the deciding criteria for arriving at a finding whether assessee was carrying out manufacturing or not. The assessee has filed copies of invoices in the paper book from which it is evident that the raw material was purchased at Sitarganj unit during the relevant year under consideration and the fabricated items were transported from the Sitarganj to the site of contratees. We do not find any reason to doubt the credentials of these invoices particularly when ld. CIT(A) has not referred to the specific invoices to which she has referred in her order in para no. 5.4.2 reproduced earlier. The next objection is regarding employees, the details of which have been referred to by ld. counsel for the assessee, noted in his arguments. From those details it is evident that keeping in view the nature of activity carried out by assessee, the number of employees and their qualifications could not be disputed. As far as the objection regarding ESI and PF is concerned, we do not find much substance in the same because that is no where the criteria for concluding whether assessee had actually carried out activity or not. If there is any default on the part of assessee in regard to ESI and PF provision, then under the relevant Act it would be liable for action, but on that count deduction u/s 80IC cannot be denied. 48. Further it is noticeable from the observation of ld. CIT(A), reproduced earlier, that she has in the alternative accepted that assessee would be entitled to 25% deduction u/s 80IC. This also cannot be accepted particularly when assessee had produced separate ledgers for the activities carried out at Sitarganj unit. First issue stands answered in favour of assessee and on the alleged ground that no activity was carried out at Sitarganj unit, deduction u/s 80IC cannot be denied.- Decided in favour of assessee Whether the activity carried out by assessee amounted to manufacture or production of any article or thing as contemplated u/s 80IC or not? - Held that:- Assessee was primarily carrying out the process of procurement, fabrication and installation of the retail visual identity (RVI), which can be subdivided into following activities: - i) Procurement of material, both imported and indigenous, ii) Fabrication of structural as per drawings given in the tender for each item, iii) Galvanising, powder coating of painting of the structural members in the workshop of vendor, Cutting, bending to shape and fabrication ACM as per given drawings .All these activities definitely culminate into producing of an article, which has different utility in commercial sense. The fabricated item cannot be said to be the same as was the raw material for producing the same. The raw material may not be undergoing any chemical changes but nonetheless the same is fabricated in a manner so as to create an article which is of use to assessee’s customer as per their specifications. - Decided in favour of assessee Whether in view of the provision of section 80AC, the assessee is entitled to deduction u/s 80IC on account of late filing of return. ? - Held that:- the legislature itself has allowed the assessee to file return belatedly subject to fulfillment of conditions written in the said section. Therefore, once those conditions are met, then return filed by the assessee would for all technical purposes be considered being filed u/s 139(1). Thus, keeping in view the various decisions noted earlier, we do not find any reason to deny the claim of assessee on the ground of filing the return belatedly. - Decided in favour of assessee

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• 2016 (4) TMI 561
  Reopening of assessment - petitioner's grievance is that the impugned notice dated 27th March, 2015 is completely without jurisdiction particularly on the ground that the impugned notice is issued beyond the period of 4 years from the end of the relevant Assessment Year 2008-09 - Held that:- The Assessing Officer has proceeded on a fundamentally erroneous assumption that the notice under Section 148 of the Act cannot be a subject matter of challenge disregarding the binding decision of the Apex Court in G.K.N. Driveshaft Ltd. Vs. Income Tax Officer, [2002 (11) TMI 7 - SUPREME Court]. In fact, the entire procedure of an assessee objecting to the reasons in support of the impugned notice recorded by the Assessing Officer is to ensure that the Assessing Officer has second look at the reasons recorded by him on consideration of the objections. In view of the fact that the Assessing Officer has completely misunderstood the scope of an order disposing of the objections to the reopening notice, we set aside the order dated 8th February, 2015. However, we restore the petitioner's objections to the impugned notice dated 27th March, 2015 for fresh disposal to the Assessing Officer to pass a final order after due consideration of the objections filed by the petitioner in accordance with law. Mr. Mohanty, learned Counsel for the Revenue states that the objections would be disposed of within a period of 4 weeks from today.

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• 2016 (4) TMI 560
  Penalty u/s 271(1)(c) - non deduction of tds - Held that:- The assessee has made a claim of expenditure in relation to the payments made, which he may not have been entitled to claim in view of the provisions of section 40(a)(ia) of the Act, as tax on part of such amount had not been deducted at source and deposited in the Government account before the due date for filing return income. However,merely submitting an incorrect claim in law for the expenditure would not amount to furnishing inaccurate particulars of income. See Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., (2010 (3) TMI 80 - SUPREME COURT ) - Decided in favour of assessee.

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• 2016 (4) TMI 559
  Reopening of assessment - petitioner had produced misguiding valuation report of the Registered Valuer which resulted in under-assessment of long term capital gain - Held that:- On a perusal of the reasons recorded for reopening the assessment, it is amply clear that the only reason for stating that the assessee had submitted an incorrect/misguiding valuation report is that the Assessing Officer in the case of the co-owner did not accept such report. In the case of the petitioner, the Assessing Officer while framing assessment under section 143(3) of the Act had, after considering the material produced by the petitioner, accepted the valuation report and computed long term capital gain accordingly. Now in view of a contrary opinion of the Assessing Officer in the case of the co-owner, the Assessing Officer seeks to reopen the assessment of the petitioner on the ground that the assessment order passed by another Assessing Officer in the case of the co-owner is tangible material for the purpose of reopening the assessment under section 147. In the opinion of this court, the fact that the Assessing Officer in the case of the petitioner accepted the valuation report, whereas another Assessing Officer, in the case of the co-owner took a different view and did not accept the valuation of the Registered Valuer which resulted in assessment of higher income, would not constitute fresh tangible material to reopen the assessment. The view taken by the Assessing Officer in the case of the coowner, being just one of two possible views, is merely another opinion on the same set of facts. Clearly, therefore, the reopening of assessment based upon the assessment order made in the case of the co-owner is clearly a change of opinion. Having second thoughts on the same material does not warrant the initiation of a proceeding under section 147 of the Act. Excessive deduction under section 54EC claimed - Held that:- From the reasons recorded, it appears that the ground for reopening is that according to the Assessing Officer the assessee is entitled to deduction of only Rs. 50,00,000/- under section 54EC of the Act and that against the decision of the Tribunal in the above case, an appeal is pending consideration before the High Court. Thus, it appears that the present Assessing Officer now believes that the Assessing Officer who had framed the assessment under section 143(3) of the Act had made a mistake in allowing deduction in excess of Rs. 50,00,000/- and now wants to correct the mistake. From the facts as emerging from the record, it appears that the Assessing Officer while allowing deduction in excess of Rs. 50,00,000/- under section 54EC of the Act has placed reliance upon a decision of the jurisdictional Tribunal, under the circumstances, the view adopted by the Assessing Officer cannot be said to be erroneous. Moreover, assuming that the Assessing Officer made a mistake, section 147 of the Act cannot be availed of for the purpose of correcting a mistake. In effect and substance, therefore, the present Assessing Officer wants to sit in appeal over the decision of his predecessor Assessing Officer, who has examined the claim and allowed the claim of deduction of Rs. 81,00,000/- under section 54EC of the Act, on the ground that the assessee was eligible for deduction only to the extent of Rs. 50,00,000/- for the year under consideration. Thus, the reopening of assessment is not sustainable on either of the two grounds. - Decided in favour of assessee.

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• 2016 (4) TMI 558
  Disallowance of excavation charges - Held that:- It is clear that only 30% of the diesel expenses of Rs. 27,00,090/- are attributable to the excavation activity and to that extent, the assessee would get relief. However, the CIT(A) has deleted the entire addition without considering the fact that addition of about Rs. 8 lakhs would be sustained, even if a proportionate 30% of diesel expenses is attributable towards excavation activity. Accordingly, we modify the order of the CIT(A) qua this issue and direct the AO to re-work the addition by allocating the diesel expenses between excavation activity and transportation activity in the ratio of 30:70.- Decided partly in favour of assessee Unexplained cash credit u/s 68 - CIT(A) deleted the addition - Held that:- It is clear that the CIT(A) examined and verified the books of account and found that this amount was offered to tax on accrual basis in the earlier year. Even the said amount was shown as receivable from M/s Svs & Dvs (HUF), Goa in the balance sheet as on 1/4/2008 cannot be taxed because it was already offered to tax on accrual basis in the earlier year. Accordingly, we do not find any error or illegality in the impugned order of the CIT(A) qua this issue. - Decided in favour of assessee Disallowance made u/s 40(a)(ia)- Held that:- TDS which was deducted by the assessee from the transport payment was deposited before the due date as per section 139(1). The CIT(A) has also placed reliance on the judgment of the Hon’ble Calcutta High Court in the case of CIT vs. Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT ) as well as the decision of the coordinate bench of this Tribunal in the case of ACIT vs. M.K.Gurumurthy (2012 (6) TMI 293 - ITAT, Bangalore ). The revenue has not disputed the fact that TDS deducted by the assessee on transportation charges was paid along with interest within due date on filing of return of income u/s 139(1).- Decided in favour of assessee Addition u/s 68 - CIT(A) deleted the addition by nothing the fact that the assessee produced confirmation from the party - Held that:- It is clear from the finding of the CIT(A) that the alleged confirmation was neither examined nor verified by the AO nor by the CIT(A). Once a document was available on record and it was not examined by the AO, it was incumbent upon the CIT(A) to get the said document verified from the AO by issuing remand order or examine by himself in the appellate proceedings. In the absence of examination and verification of the alleged certificate, we are not able to concur with the view of the CIT(A) on this issue. Accordingly, we set aside this issue to the record of the AO for proper verification of the confirmation from the creditor and then decide the same as per law.- Decided in favour of revenue for statistical purposes.

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• 2016 (4) TMI 557
  Revision u/s 263 - Held that:- For Brokerage expenses the case was selected for scrutiny to verify the admissible of the said expenses, but no enquiry appeared to have been made as to the purpose and basic of payment of brokerage, its connection with the business and whether the payment commensurate to the benefit derived by the Company. However, a complete list of the agents alongwith addresses was available on records, but no attempt apparently was made to verify even one of these persons. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue to the file of the AO for making enquiries and arrive at conclusion about admissibility of business expenses Difference in sales and purchases as per the purchase/sales register vis-a-vis the VAT returns and the purchases and sales disclosed in the profit and loss account is concerned, we find that VAT return and purchase and sales registers in order to reconcile the figure of sales and purchases as disclosed in the P&L A/c are yet to be reconciled. It was seen that the reconciliation statement shows addition of credit note to Purchases in order to reconcile the figure of total purchases. Similarly, sales have been reconciled by adding a figure under the nomenclature “Sale High Seas” (not part of VAT return) and no reason whatsoever for such addition has been given nor any evidence was produced. Reconciliation of bank balance as on 31.3.2010 as per the Bank Statement the book of account as there appeared to be a huge difference in respect of assesse’s bank account in HDFC Bank and State Bank of Patiala is concerned, we find that in a Bank reconciliation statement various cheques issued by the assessee but not presented in bank as well as cheques received but not encashed by the assessee, these entries requires verification from the bank account of the assessee in various banks, however, AO has not made any attempt to verify/examine the same.CIT has rightly set aside the issue in dispute to the file of the AO to examine the same afresh Various loans amounting to Rs. 9 crores is concerned, we find that the same was also not enquired into and verified by the AO during the assessment proceedings. On this issue, the assessee has furnished copies of bank account of the lenders as well as their assessment details, but the same was not verified entry wise from the books of account as well as bank account of the assessee. CIT has rightly set aside the issue in dispute to the file of the AO to examine the same afresh. For purchases from M/s Star Wire India Ltd. is concerned, we find that the same has also not been examined from the angle of provision of section 40A(2)(b) of the I.T. Act, 1961. On this issue assessee has submitted that transaction with associate concern was made at the prevailing rates. However, it was noticed from the documents furnished by the assessee as against purchase @ of Rs. 33,000/- per MT from M/s Star Wire India Ltd., on 3.6.2009 in respect of goods described as “round”, another seller M/s Narayan & Company has sold the same to another person @Rs.32,330/- per MT on the same date. This reveals that purchases from related parties have been shown by the assessee at inflated price. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue in dispute to the file of the AO to examine the same afresh - Decided against assessee

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• 2016 (4) TMI 556
  Addition on account of long term capital gain - taxability - Held that:- Entire capital gain i.e. short term and long term capital gain has been taxed in the hands of two co-owners namely Harjibhai Parsottambhai Vastarpara and Becharbhai Jivrajbhai Vastarpara and by the four confirming parties by way of showing total sale consideration of Rs. 1,11,25,000/- bifurcated amongst their returns of income and after reducing the cost of acquisition which has been duly accepted by the revenue authorities, the remaining gain has been offered to tax. We further find that the co-owners who made agreement with the four confirming parties have shed their rights at the very moment they entered into the agreement and the value of sale consideration for these co-owners was fixed at Rs. 11,51,000/- and they were duty bound to sign the documents relating to sale deed irrespective of the fact that the sale deed which they were going to execute was in between the confirming parties and co-owners or with a third party. We find that four confirming parties further entered into an agreement for sale of land for Rs. 1,11,25,000/- of M/s Dhara Construction and Dhirajlal PopatlaiTejani and therefore, sale deed was registered by the signatures of two co-owners who received Rs. 11,51,000/- and the sale deed was further counter-signed by the confirming parties who received the balance amount of Rs. 99,74,000/-. In other words there was no loss to the revenue and also the capital gains have been rightly offered by the concerned parties in their returns of income. We therefore, find no reason to interfere with the findings of ld. CIT(A). - Decided against revenue

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• 2016 (4) TMI 555
  Rectification of mistake - judgement of the Hon’ble High Court of Delhi in the case of Ansal Land Mark Township (P) Ltd.[2015 (9) TMI 79 - DELHI HIGH COURT ] was cited and relied upon by the assessee(s) which was not recorded by the Tribunal while deciding the appeals of the assessees - disallowance u/s 40(a)(ia) - Held that:- Rectification allowed - Looking to the totality of the facts of the case, we deem it proper to modify our order passed as below: "We find that the AO has made disallowance on the basis that the expenditure, like spare-parts expenses of Rs. 1,17,237/- and tyre & tube expenses of Rs. 5,23,119/- are separately debited in the profit & loss account. Therefore, it can be assumed that the repairs and maintenance expenses of Rs. 4,58,971/- debited to the profit & loss account was purely in the nature of labour charges for repairs and maintenance and did not include any expenditure on account of purchase of any components/parts. We find that the AO has not made any enquiry with regard to the nature of expenditure. However, before the ld.CIT(A), the assessee has given separate account of replacement of spares and labour charges. The assessee has relied on the judgement of the Hon’ble High Court of Delhi in the case of CIT vs. Ansal Land Mark Township (P) Ltd. reported at (supra), wherein it has been held that the amendment in the Finance Act, 2012, dated 01/04/2013 being curative to be treated as retrospective in nature. Accordingly we direct the AO to decide the issue in the light of the judgement of the Hon’ble High Court of Delhi in the case of Ansal Land Mark Township (P) Ltd. The rationale behind the insertion of the second proviso to section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from April 1, 2005, merits acceptance.” Needless to say that the Assessing Officer will afford reasonable opportunity of being heard to the assessee(s) and then decide the issue afresh"

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• 2016 (4) TMI 554
  Presumptive computation of profits for taxation for business - taxing the peak amount - presumptive profit u/s 44AD/44AF - Held that:- A sum equal to 8% of gross receipts can be shown by assessee for being engaged in the work of exhibition of work contract (civil construction work) and as per the provisions of section 44AF when assessee is engaged in a retail business then a sum equal to 5% of the total turnover can be shown as income if the total income as per the books of accounts is less than the presumptive profit u/s 44AD/44AF of the Act. We find that the assessee is having some income from jari labour having total receipts of Rs. 4,10,560/-. Work of jari labour involves the work performed by labourers doing work on sarees putting jari meaning thereby that there is some element of contractual work which is performed by the assessee on behalf of the dealer who gives sarees/raw materials to the assessee and in turn assessee performs the contractual work with the help of labourers on the sarees. On the other hand, the undisclosed credit of Rs. 16,87,380/- have been pleaded by the assessee to have been carried on in the course of business of trading in sarees and dress materials and such type of business comes within the purview of provisions of section 44AF relating to profits and gains on retain business. In total the turnover of the assessee at Rs. 20,97,940/- (Rs.4,10,560/- + 16,87,380/-) has been accepted by both the lower authorities. Ld. CIT(A) has applied the net profit rate shown by the assessee on his labour contract income i.e. 47% on the total undisclosed credits of Rs. 16,87,380/-.by replacing the two additions made by the Assessing Officer including one related to peak credit. Thus when separate provisions are available for estimation of profits u/s 44AD and 44AF of the Act then it will not be proper to apply exhorbitant net profits rate on the total undisclosed credit which too have been accepted by both the lower authorities as business receipts. Once the business has been established and there is a special provisions for a businessman having turnover less than Rs. 60 lacs for applying net profit @ 5%/8% of the gross turnover as the case may be then we do not find the action of ld. CIT(A) to be proper in applying 47% rate of profit. However, looking to the facts that assessee has not disclosed the turnover routed through State Bank of India, Surat in its regular books of account then it will be justifiable to apply the higher of the two rates i.e. out of 5% and 8% which is 8% in this case on the total turnover of Rs. 16,87,380/- which works out at 1.34.990/- and also sustaining addition of peak credit at Rs. 82,690/- because assessee has not given any satisfactory explanation about the source of investment made towards this business and also we do not find any basis in the submissions of assessee that some amounts were debited in the capital account and has been invested in this account for the very reason that the impugned bank account was not disclosed in the return of income filed. We, therefore, quash the order of ld. CIT(A) and sustain the additions made by the Assessing Officer at Rs. 2,18,249/-.- Decided partly in favour of assessee

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• 2016 (4) TMI 553
  Penalty u/s 271(1)(c) - deemed income is assessed u/s 115JB - rebate u/s 88E - whether penalty is time barred? - Held that:- It is apparent that the Tribunal passed order on 23.12.2011 which was received by the Commissioner [Judicial] dated 23.4.2012 and the penalty order has been passed on 30.10.2012 i.e. within six months from the end of the month in which the Commissioner received copy of the order of the Tribunal which provoked the AO to initiate penalty proceedings. Thus, we are unable to agree with the legal contention of the ld. AR that the impugned penalty is time barred. There was concealment but that had its repercussions only when the assessment was done under normal provisions and procedure of the Act which were not acted upon. Their Lordships further held that in a situation when the deemed income is assessed u/s 115JB of the Act which has become the basis of assessment as it was higher of the two i.e. income calculated under normal provisions and income assessed u/s 115JB of the Act and thus tax has been paid on the income assessed u/s 115JB of the Act which is higher of the two, then concealment had no role to play and becomes totally irrelevant for imposing penalty u/s 271(1)(c) of the Act as concealment did not lead to tax evasion at all. In the present case also the assessee had paid tax on the income calculated u/s 115JB of the Act which was higher than the income calculated under normal provisions of the Act and as per the dicta laid down in the case of CIT Vs. Nalwa Sons [2010 (8) TMI 40 - DELHI HIGH COURT] in this situation penalty u/s 271(1)(c) of the Act is not leviable and thus we concur with the conclusion of the ld. CIT(A). - Decided in favour of assessee.

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• 2016 (4) TMI 552
  Penalty u/s 271(1)(c) - Held that:- Penalty levied u/s 271(1)(c) of the Act is liable to be cancelled on the ground that there was no proper recording of satisfaction in the order of assessment and that the show cause notice u/s 274 of the Act does not satisfy the specific charge against the assessee. Consequently the orders imposing penalty for all the four assessment years are held to be invalid and illegal and are hereby cancelled. - Decided in favour of assessee

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• 2016 (4) TMI 551
  Purchases doubtful - Estimation of commission income @1% of total purchases - as per AO the assessee was not running regular business but only providing accommodation entries since assessee failed to substantiate sales - CIT(A) deleted the addition - Held that:- The assessee has furnished VAT return and VAT audit report. The total turnover declared before the VAT authorities are tallied with the turnover declared in the Income-tax return. The assessee has taken cash credit loan from PNB, Punjabi Bagh, New Delhi against hypothecation of stock. As per submissions, he has fulfilled the requirement of bank against cash credit loan taken. Therefore, the purchase and stock declared before the bank cannot be questioned. After going through the AO’s order and the paper book submitted, we observe that the Inspector has submitted wrong report. Regarding very low amount of depreciation, the assessee was carrying his business since last many years, therefore, their WDV has gone down. The AO has computed 1% income on total purchases on estimate basis whereas the accounts of the assessee have been audited by the Chartered Accountant and submitted the tax audit report in appropriate form and the Assessing Officer has not disturbed the financial results. The sales and purchase invoices were produced before the AO, but he did not reject any single paper and accepted the same. He issued notice u/s. 133(6) to the creditors, bankers and all have responded to the AO. The major part of the purchases was from Anshika jewellers, the sister concern and payments were made directly to the MMTC Ltd., which is a government organization. Therefore, no interference is called for in the well reasoned order passed by the ld. CIT(A). - Decided against revenue

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• Customs

• 2016 (4) TMI 539
  Correctness of High Court order - No order passed by High Court against the order passed by the Competent Authority in exercise of its power under Section 68-I of the NDPS Act, 1985 confiscating the property in respect of which the claim is preferred by the husband of the appellant (since deceased) - Respondent submitted that the issuance of notice is in accordance with the law laid down by this Court and, thereafter, the Competent Authority determined the lis between the parties with regard to the confiscation and the Tribunal has confirmed it and the same is the subject matter of writ petition before the High Court. The High Court has observed that order stands revoked as being similar. Held that:- the confiscation order passed by the Competent Authority and confirmed by the Tribunal requires to be considered in the Writ Petition filed by the appellant herein. Hence, the matter requires remand to the High Court to re-examine the claim and counter claim of the parties. - Apex Court remitted the matter

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• 2016 (4) TMI 538
  Seeking modification in rigorous imprisonment and payment of fine order - Possession of 1 kg of opium without any permit or licence - Search was conducted in the presence of and on the instructions of Gazetted officer - Held that:- the extracts of depositions of other prosecution witnesses show that it was not Satbir Singh alone who was involved in the investigation. Therefore, relevant to the note that this was not even a ground projected in support of the case of appellant and does not find any reference in the judgment under appeal, the submission is rejected. Therefore, there is no reason to differ from the view taken by the High Court. - Apex Court decided against the appellant

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• 2016 (4) TMI 537
  Confiscation and imposition of redemption fine as well as penalty u/s 112A & 114AA of the Act - Seizure of imported high end luxury car - Mis-declared as new car and evasion of payment of customs duty as under-invoiced - Held that:- the Court is not persuaded to come to a different conclusion from adjudication order as well as the impugned order of the CESTAT where the CESTAT has come to a definite finding that the respondent was a bonafide purchaser of the car and had no role in its importation. - Decided against the revenue

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• 2016 (4) TMI 536
  Payment of redemption fine and anti-dumping duty - Confiscation of mulberry raw silk yarn of 3A grade of Chinese origin - second test report produced as the goods were of 3A Grade - Department itself agreed to a second test report - Held that:- once the Department had agreed to a second test report without reserving any right to rely upon the first test report, it is not open to the Department to contend that the second test report ought to be dumped. The samples sent for the second test had also been drawn from the very same consignment. The samples were actually available with the Department. Therefore, no confiscation of goods required. - Decided against the revenue

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• Service Tax

• 2016 (4) TMI 549
  Availment of Cenvat credit - Towers and shelters - Held that:- by applying the decision of larger bench of this Tribunal in the case of M/s Tower Vision India Pvt. Ltd. [2016 (3) TMI 165 - CESTAT NEW DELHI (LB)], the appellant is not entitled to avail the cenvat credit on towers and shelters. Availment of Cenvat credit - HDPE telecom duct etc. - Appellant contended that these items are not in the nature of immovable property after being affixed with the tower and shelters, therefore, entitled to avail Cenvat credit - Held that:- this fact needs to be examined by the adjudicated authority whether the items in question are in nature of moveable or immovable, after their utilisation thereof. Therefore, remanded back to the adjudicated authority. Demand of Service tax - Invokation of extended period of limitation - Held that:- as the issue of availment of Cenvat credit on tower and shelter was disputed and is settled by the larger bench in the case of M/s Vodafone Essar Mobile Services Ltd. on 03.03.2016 therefore, the extended period of limitation is not invokable and the demand pertaining to extended period of limitation are set aside. - Appeal disposed of

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• 2016 (4) TMI 548
  Maintainability of Writ petition - Show cause notice issued without jurisdiction - Held that:- it is trite law that an authority cannot confer on itself jurisdiction to do a particular thing by wrongly assuming the existence of a certain set of facts, existence whereof is a sine qua non for exercise of jurisdiction by such authority. An authority cannot assume jurisdiction to do a particular thing by erroneously deciding a point of fact or law. Here, since the petitioner has challenged the jurisdiction of the authority to issue the impugned show cause notice, the Writ Petition cannot be rejected at the threshold. Whether or not the petitioner will ultimately succeed on merits is a different question altogether. However, it cannot be said that the Writ Petition is not maintainable at all and should not be entertained for adjudication. Period of limitation - Suppression of facts - Whether Department was justified in invoking extended period of limitation for the purpose of issuing impugned show cause notice - Held that:- a mere mechanical reproduction of the language of the proviso to Section 73(1) of the Finance Act, 1994 does not per se justify invocation of the extended period of limitation. A mere ipse dixit that the noticee wilfully suppressed the material facts with intent to evade payment of service tax is not sufficient. The notice must contain particulars of facts and circumstance in support of such allegation. Even if such particulars are not included in the notice, the Department should be in a position to justify and/or substantiate its allegation of suppression of material facts on the part of the noticee. Any suppression on the part of the Petitioner as would entitle the Department to invoke the extended period of limitation was not found. Petitioner was diligent in responding to all the notices issued by the Department and in its replies, the Petitioner clearly explained the nature and scope of its business. Specimen copies of contracts entered into by the petitioner when its clients were also made available to the Department. So, there was full and sufficient disclosure of the nature of petitioner’s business to the Department and it cannot be said that the Petitioner suppressed material facts to keep the Department in the dark with an intent to evade payment of service tax. Also it is stated in the impugned show cause notice itself that the same has been issued on the basis of the records submitted by the Petitioner. Hence, there appears to be no basis in the Department’s contention that the Petitioner suppressed material facts with an intent to evade payment of service tax. The Petitioner suppressed nothing and maintained all through out that it did not carry on business as consulting engineer and as such was not liable to pay service tax under that head. The Petitioner furnished all information that was called for by the Department from time to time. Once the information is supplied pursuant to the directions of the revenue authority and information so supplied has not been questioned, a belated demand has to be held to be barred by limitation. Therefore, the impugned show cause notice is hopelessly barred by limitation. There was absolutely no ground or justification for issuing such notice by invoking the extended period of limitation. None of the preconditions necessary for taking recourse to the extended period of limitation exists in the facts of this case and by wrongfully invoking the extended period of limitation the Commissioner conferred on himself a jurisdiction which he otherwise did not have. Hence, the impugned show cause notice and consequently, the impugned notice of hearing are unsustainable. Sustainability of two show cause notice for same period - Show cause notice dated 21st April, 2006 pertains to the period 1st October, 2000 to 31st September, 2009. Subsequently, the department issued another show cause notice dated 7th September, 2009 covering the period 10th September, 2004 to 15th June, 2005 - Held that:- there cannot be double assessment for the period, overlapped to an appreciable extent. This is not permissible in law as held by this court in the case of Avery India Ltd. vs. Union of India [2010 (3) TMI 778 - CALCUTTA HIGH COURT] following the decision of the Hon’ble Supreme Court in the case of Dankan Industries Ltd. vs. Commissioner of Central Excise, New Delhi [2006 (8) TMI 185 - SUPREME COURT OF INDIA]. Therefore, two show cause notices could not have been issued in relation to the same period and the impugned show cause notice cannot be sustained. Demand of Service tax - Consulting engineering service and architect service - Held that:- the language of the notice suggests that the demand raised therein is per-determined. It is quite evident that the Commissioner issued the impugned show cause notice at the instance of CERA without any independent application of mind and, thereby, abdicated his powers and duty, which is not permissible in law. Service contracts simpliciter and not composite works contracts come within the service tax net under the provisions of the Finance Act. The petitioner is involved in performance of composite works contracts and vivisection of such contracts to segregate the service element and impose service tax on the same is not permissible. - Decided in favour of petitioner

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• 2016 (4) TMI 547
  Demand of Service tax - Business auxiliary service - Commission received from shipping line for slots that were booked on ships according to instructions from exporters - Appellant contended that this amount is a profit from trading and the Finance Act, 1994 taxes certain services and not profits - Held that:- the appellant has admitted to receiving commission from shipping lines on account of freight and discharge of tax liability on the same. However, there is no justification for fastening the same liability on all other receipts of the appellant. Each source of income must, therefore, be looked at independently. The appellant takes responsibility for safety of goods and issues a document of title which is a multi-modal bill of lading and commits to delivery at the consignee's end. To ensure such safe delivery, appellant contracts with carriers, by land, sea or air, without diluting its contractual responsibility to the consignor. Such contracting does not involve a transaction between the shipper and the carrier and the shipper is not privy to the minutiae of such contract for carriage. The appellant often, even in the absence of shippers, contract for space or slots in vessels in anticipation of demand and as a distinct business activity. Such a contract forecloses the allotment of such space by the shipping line or steamer agent with the risk of non-usage of the procured space devolving on the appellant. It is nothing but a principal-to-principal transaction and the freight charges are consideration for space procured from shipping line. Correspondingly, allotment of procured space to shippers at negotiated rates within the total consideration in a multi-modal transportation contract with a consignor is another distinct principal-to-principal transaction. Therefore, it is found that freight is paid to the shipping line and freight is collected from client-shippers in two independent transactions. The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65(19) ibid will not address these independent principal-to-principal transactions of the appellant and, with the space so purchased being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed. Therefore, the demands, with interest thereon, and penalties are set aside. - Decided in favour of appellant

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• 2016 (4) TMI 546
  Whether the Commissioner (A) has power to remand the matter back to Original Authority for de-novo adjudication in terms of Section 35A(3) of Central Excise Act, 1944 - Held that:- Section 35 A(3) ibid prior to its amendment (upto 10.05.2001) empowered the Commissioner (A) for referring the case back to the Adjudicating Authority. However, the said statutory provision was amended w.e.f. 11.05.2011, specifically curtailing the power of the Appellate Commissioner for sending back the case to the adjudicating authority. Therefore, in view of the settled position of law, the impugned order remanding the matter back to the Original Authority is not in conformity with the statutory provisions and hence set aside and the matter is remanded to the Commissioner (A) for deciding the issue by himself. - Decided in favour of appllant

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• 2016 (4) TMI 545
  Entitlement of Cenvat credit - Service tax paid on Group Personal Accident Insurance (GPA) policy, General Insurance, Repair and Maintenance of Vehicles used for providing the taxable service, Vehicle Insurance Charges, Worksmen Compensation Insurance (WC) Policy and Outdoor catering service. - Held that:- since the amount of disputed Cenvat credit of Rs. 6,76,214/- is prior to 01.04.2011, and in view of the fact that the phrase “activity relating to business” was specifically finding a place in the definition clause of “input service”, so, the appellant shall be eligible for Cenvat benefit on the disputed services. Since the appellant is not disputing the Cenvat credit of Rs. 3,14,172/- for the reason that as per the amended definition of input service, the disputed service shall not be eligible for Cenvat credit, no opinion is expressed on entitlement of Cenvat credit on the services covered under the definition after 01.04.2011. Therefore, the appellant is entitled for Cenvat credit of service tax paid on the disputed services prior to 01.04.2011. - Decided in favour of appellant

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• Central Excise

• 2016 (4) TMI 544
  Clandestine removal of goods - Tribunal held that there is no evidence to prove clandestine removal without going into the various corroborative evidences submitted by Revenue - Held that:- the record is fully examined by the Tribunal and thereafter appreciated and ultimately has found that the Revenue has failed to discharge the burden and under the circumstances the appeal of the Revenue was dismissed. As such, whether there was any clandestine removal of the goods, is essentially a question of fact. - Decided against the revenue

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• 2016 (4) TMI 543
  Demand of differential duty - Clandestine removal of goods - Whether the Mill Scale Scrap / burning losses, claimed by the Respondent with respect to conversion of M.S. Ingots to M.S. bars got done from the job workers, is correct or the same should be in the range of 1 to 3% - Held that:- There is no evidence on record that any consignment of M.S. Bars, got manufactured from the job workers, was clandestinely diverted by the Respondent. The % age of Mill Scale Scrap / Loss has been clearly reflected in the Job work challans & the same has not been always claimed at more than 10%. Further no authority / study has been quoted by the Revenue to indicate that such Mill Scale Scrap / loss has invariably to be in the range of 1 to 3 %. This has been discussed by the first appellate authority. In the absence of any such evidence contrary to the claim of the appellant Mill Scale Scrap generated during job work can not be held as an evidence of clandestine manufacture & clearance of M.S. Bars. The same can also not be considered as sufficient evidence to demand differential duty from the Respondent. As per the above observation and by relying upon the decision of this bench in the case of CCE Calcutta-II Vs. Murttiwyn Industrial corp. [1995 (5) TMI 152 - CEGAT, CALCUTTA], a charge of clandestine removal can not be said to be established merely on the basis of presumption that normal Mill Scale Scrap / loss is in the range of 1 to 3%. In the absence of any such positive evidence regarding clandestine removal appeal filed by the Revenue is required to dismissed. Bench has not gone into the time barred aspect of the demand as on merits the appeal of the Revenue is not sustainable. - Decided against the revenue

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• 2016 (4) TMI 542
  Recovery of incorrectly taken cenvat Credit - Shortages found in the stock of certain static converters - Non addition of 15% to the input value & making adjustment of the excess quantity of LG static converter found during stock - Held that:- Adjudicating authority while deciding the issue in remand proceeding, allowed appellants contention on 15% value addition & reduced the duty & penalty amount to Rs. 2,39,474/-. First appellate authority while deciding the issue further gave relief to the appellant with respect to penalty imposed by the Adjudicating authority. So for as adjustments of excess quantity of LG static converters is concerned Adjudicating authority has clearly brought out that the type of converter, where quantity was excess, had different marks & numbers than the type of converters where shortage was found. This aspect has been clearly brought out by the first appellate authority also. In the field of taking Cenvat Credit the onus is on the appellant to establish that excess quantity of the static converters was the same type where shortage was found. The stock taking was jointly done in the presence of Authorized representation & Sh. D.K. Dugar Prop. of the appellant on 23/3/2001, as is evident from the brief facts of demand cum- show cause notice dt 29/12/2008. Appellant now can not turn around and say that stock taking was defective or deficient. Therefore, in view of the above observations & settled proposition of law appeal filed by the appellant has no merit. - Decided against the appellant

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• 2016 (4) TMI 541
  Admissibility of Cenvat credit - Goods not received in the factory - Revenue contended that it is not the responsibility of the Revenue to establish that the goods were not received but the responsibility of petitioner - Held that:- it is clear from the text of the Rule that the onus of establishing that the goods have been received is on the person who has taken the credit. The show-cause notice invoked the said rule and produced certain evidence in the shape of statements and documents. Some statements have been retracted, however, there has been no effort on the part of respondents to fulfill the requirement of Rule 9(5) by proving the receipt of goods by them in terms of Rule 9(5) of the Cenvat Credit Rules. The Commissioner (Appeals) has wrongly placed the onus on the Revenue to establish that the goods have not been received. Therefore, the impugned order to that extent is set aside and for establishing the receipt of goods in terms of Rule 9(5) of the Cenvat Credit Rules , the matter is remanded back. Imposition of penalty - Rule 15/15(2) of the CCR, 2004 read with Section 11AC of the Central Excise Act, 1944 - Held that:- by following the decision of Hon'ble Bombay High Court in the case of Ashok Kumar H Fulwadhya [2010 (1) TMI 229 - BOMBAY HIGH COURT], the penalties imposed under Rule 15/15(2) of CCR on other respondents are set aside. - Appeal disposed of

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• 2016 (4) TMI 540
  Classification - Brass granules - Whether to be classified under CETH 7403.21 or under CETH 74.06 - Held that:- it is observed that first appellate authority has relied upon HSN explanatory notes for chapter heading 74.06, according to which bronze powder is also classifiable under 74.06. It is also observed that as per Section Note 7 of Section-XV of the CETA composite articles are to be classified on the basis of the base metal that predominates by weight over each of the other metal. In the present case copper predominates by weight and brass granules has to be treated as copper granules on the basis of predominance criteria. It is further observed that CETH 74.07 also pertains to copper bars, rods and profiles' but it also covers alloys of copper under CETH 7407.12. Accordingly, non mention of copper alloys or Brass in CETH 74.06 does not mean that it will not contain copper alloys in its ambit Section note-6 to Section-XV of CETA also confirms this interpretation. Accordingly, the order passed by first appellate authority is upheld. Classification - Cast form of Copper - Whether to be classified as 'billets' or as 'Ingot' and eligible for exemption under notification - Held that:- if the definitions of 'Ingot' and 'Billets' were uniform for all base metal then the same could have been placed as Section notes under Section XV of CETA. In view of the definitions given in Indian Standard for Copper and copper alloys will be more appropriate and the definitions of 'Billets & Ingot' given in chapter notes under Chapter 72 of the CETA cannot be applied to Interpret entries of Chapter-74, as these notes are not existing as Section notes under Section XV of CETA. Therefore, the cast articles manufactured by the Respondents for further working are appropriately classifiable as 'billets' and will be eligible to exemption under Notification No. 9/2003-CE dated 1/3/2003, as amended. - Decided against the revenue

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• CST, VAT & Sales Tax

• 2016 (4) TMI 535
  Entitlement for benefit of exemption - Notification No. FD.11.CET.93(3) dated 31.03.1993 - Entry tax - Whether the appellant falls within the ambit of “new industrial unit”, essential requirement of exemption notification - Held that:- a Unit has to be certified to be eligible for exemption under the notification dated 21.06.1991. That is an essential requirement for a Unit to fall within the definition of “A New Industrial Unit” under the notification dated 31.03.1993 as it is assigned the same meaning as contained in the notification dated 21.06.1991. Notification dated 31.03.1993 further makes it clear that this notification is not to apply to a Unit to which notification dated 19.06.1991 does not apply. So much so, the procedure prescribed in the notification dated 19.06.1991 for claiming exemption is also made applicable to the Industrial Units seeking exemption under the notification dated 31.03.1993. It was admitted by the appellant itself that the Department of Industries and Commerce issued eligibility certificate in terms of industrial policy G.O. No. CI 30 SPC 96 dated 15.03.1996 and notification dated 15.11.1996 issued under Section 19-C of the KST Act. Such eligibility certificate would not be of any consequence in as much as, in order to get the benefit of the notification dated 31.03.1993, the appellant was required to get certification under the notification dated 19.06.1991. Obviously, therefore, the appellant does not fulfill the requirement of the notification dated 31.03.1993 as well. It is trite that exemption notifications require strict interpretation. In order to get benefit of any exemption notification, assessee has to satisfy that it fulfills all the conditions contained in the notification. It is a different matter that once the conditions contained in the exemption notification are satisfied and the assessee gets covered by the exemption notification, for the purpose of giving benefit notification has to be construed liberally. However, in the present case, the appellant has not been able to cross the threshold and to find entry under notification dated 31.03.1993. Therefore, the appellant was not entitled to exemption from entry tax. - Decided against the appellant

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• 2016 (4) TMI 534
  Validity of High Court order - reversed the order of the VAT Tribunal and of other lower authorities on the basis of its conclusion that the inter-State movement of goods was in pursuance of and incidental to the contract for the supply of goods used in the execution of the works contract between the respondent-assessee and the DMRC. The High Court further came to hold that claimed sales should be deemed to have taken place in course of imports of the goods or inter-state trade and that such import/movement of goods was integrally connected with the contract for their supply to DMRC. On the basis of such twin findings the High Court has held that the transactions constituting inter-State trade and those constituting sale or purchase in the course of import were covered by Section 3(a) and Section 5(2) respectively of the CST Act, 1956 and, therefore, exempt from taxation under the DVAT Act, 2004. Held that:- there was no attempt to assail the aforesaid features and to even remotely suggest any factual error on the part of the High Court in noting those features. The salient features flowing out as conditions in the contract and the entire conspectus of law on the issues as notice earlier, leave us with no option but to hold that the movement of goods by way of imports or by way of inter-state trade in this case was in pursuance of the conditions and/or as an incident of the contract between the assessee and DMRC. The goods were of specific quality and description for being used in the works contract awarded on turn key basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose. Hence the law laid down in M/s. K.G. Khosla & Co. v. Deputy Commissioner of Commercial Taxes, Madras [1966 (1) TMI 54 - SUPREME COURT OF INDIA] has rightly been applied to this case by the High Court. Therefore, no reasons found to take a different view. - Apex Court decided against the revenue

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• 2016 (4) TMI 533
  Levy of penalty u/s 12(3)(b) in TNGST Act and CST Act - Respondent levied higher rate of tax on sale made to Government Department and also levied penalty u/s 12(3)(b) as the same were not covered by Certificate. Similarly, in CST Assessment Order, the respondent levied higher rate of tax on inter-state sale instead of concessional rate of tax, levied tax on transit sale instead of exemption and also levied maximum penalty u/s 9(2-A) of CST Act r/w Sec.12(3)(b) of TNGST Act as the same were not covered by statutory declaration forms - Held that:- the levy of the penalty, made by the respondent, is set aside. Seeking grant of concessional rate of tax - Sales made to State Transport Corporation - Opportunity of personal hearing not provided - Petitioner submitted that it is willing to pay 25% of the demand, in each case, made by the respondent - Held that:- Since the petitioner was not given an opportunity of personal hearing and could not produce the "C" and "E" forms before the respondent, in the interest of justice, the impugned orders dated 29.09.2006 and 05.10.2006 are set aside on condition that the petitioner paying 25% of the demand, made by the petitioner, in each case. The respondent is directed to decide the matter afresh, after taking note of the duplicate "C" and "E" forms, to be produced by the petitioner and also after affording due opportunity of personal hearing to the petitioner. The petitioner is directed to produce duplicate Forms "C" and "E" within a period of two weeks from the date of making the payment of 25% of demand, in each case, made by the respondent. - Writ petitions disposed of

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• Wealth tax

• 2016 (4) TMI 550
  Exemption u/s 2(ea)(i)(5) of the Wealth Tax Act - CWTA bringing the warehouse to wealth tax by not treating the same as a commercial establishment warranting exemption u/s 2(ea)(i)(5) of the Act - Held that:- In the instant case, it is not in dispute that the Learned AO had accepted the rental income derived from letting out of the warehouse as income from business. It is not in dispute that the assessee had indeed derived income from handling and transportation of food grains and claiming deduction u/s 80IB of the IT Act, 1961 which is also granted by the Learned AO in scrutiny assessment proceedings. Hence it can be safely concluded that the warehouse at Kandla Port has been utilsied for business purposes by the assessee and hence exempt u/s 2(ea)(i)(3) of the Act . It is also in the nature of commercial establishments and hence exempt u/s 2(ea)(i)(5) of the Act . Thus we have no hesitation in deleting the addition made by the Learned AO in bringing the warehouse at Kandla Port to wealth tax. - Decided in favour of assessee

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• Indian Laws

• 2016 (4) TMI 532
  Validity of issuance of summons under Section 138 of the Negotiable Instruments Act, 1881 - Held that:- Person who commits an offence under Section 138 of the Act is a company, the company as well as other person in charge of or responsible to the company for the conduct of the business of the company at the time of commission of the offence is deemed to be guilty of the offence. Thus, it creates a constructive liability on the persons responsible for the conduct of the business of the company. It is apt to mention here that there are seven accused persons. Accused No.1 is the Company, accused Nos.2 and 3 are the Chairman and Managing Director respectively and accused Nos.6 and 7 were signatory to the cheques. As far as the accused Nos.4 and 5 were concerned, they were whole-time Directors and the assertion is that they were in charge of day to day business of the Company and all of them had with active connivance, mischievously and intentionally issued the cheques in question. Thus, considering the totality of assertions made in the complaint and also taking note of the averments put forth relating to the respondent Nos. 2 and 3 herein that they are whole-time Director and Executive Director and they were in charge of day to day affairs of the Company, we are of the considered opinion that the High Court has fallen into grave error by coming to the conclusion that there are no specific averments in the complaint for issuance of summons against the said accused persons. We unhesitatingly hold so as the asseverations made in the complaint meet the test laid down in Gunmala Sales Pvt. Ltd. (2014 (12) TMI 1116 - SUPREME COURT ).

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