TMI Tax Updates - e-Newsletter
April 17, 2015

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• Renting of immovable property -Service tax would apply on services rendered by a State Government if not falling under the negative list -HC

  ---

Articles

• NATIONAL COMPANY LAW APPELLATE TRIBUNAL

News

• RBI Reference Rate for US $

  ---

• Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, others – Palm Oil, Crude Palmolein, RBD Palmolein, others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

  ---

Notifications

Customs

• 37/2015-CUSTOMS (N. T.) - dated 15-4-2015 - Cus (NT)
  Amends Notification No. 36/2001-Customs (N.T.), dated the 3rd August, 2001

  ---

Income Tax

• 41/2015 - dated 15-4-2015 - IT
  Income-tax Rules, 1962 - Several Changes

  ---

• 40/2015 - dated 15-4-2015 - IT
  Approval of Indian Institute of Technology Samantapuri Bhubaneswar for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961, read with Rules 5C and 5E of the Income-tax Rules, 1962

  ---

Highlights / Catch Notes

Income Tax

• Consideration for Not to compete and non solicitation - Capital receipt or Revenue receipt - the amount receive is covered by the provisions of Section 28(va) of the Act. - HC
  Visit to Get Source

  ---

• Compensation received on surrender of tenancy rights - Taxability in the hands or in the hands of Firm - who is the owner of tenancy right - Payment of rent by Firm and claimed as expenditure - the tenancy of the rental premises belonged to the individual partners and not to the Firm - HC
  Visit to Get Source

  ---

• Income derived through operations as Liaison office in India - purchase of goods in India for the purpose of export - Entitlement of exemption provided in explanation 1(b)to section 9(1)(i) - Income not taxable - HC
  Visit to Get Source

  ---

• Fees for technical services covered under section 9(1)(vii) or covered in DTAA between India and Thailand - transfer of know-how - technical advice / training - Since the said income does not fall as miscellaneous income, the same cannot be brought under art. 22. - HC
  Visit to Get Source

  ---

• TPA - Capital assets - The application of the ALP, if required, will give rise to the recomputation of the revised value of the purchase of fixed assets. Such an increase in the value of the fixed assets, being a capital transaction in itself, will not give rise to any addition towards transfer pricing adjustment, but the depreciation on such assets, being a revenue offshoot of the capital transaction, will be required to be recomputed on such revised value. - AT
  Visit to Get Source

  ---

Customs

• EPCG - Notification No. 110/95-Cus. - Goods exported and counted towards fulfilment of export obligation were not manufactured in the factory where the capital goods imported under EPCG Scheme were installed - Exemption denied due to Violation of condition of Notifications - AT
  Visit to Get Source

  ---

• Eligibility for customs duty exemption under Notification No. 21/2002-Cus. dated 01.03.2002 - Since the Essentiality Certificate covers both HSD and LDO, the appellant is eligible for the benefit. - AT
  Visit to Get Source

  ---

VAT

• Classification of transaction - sale or Lease Transaction - tripartite agreement - aforesaid transaction is sale of Empty Gas Cylinders (EGC) is inter State Sale transaction and not at all in the nature of inter-State Lease Transaction. - HC
  Visit to Get Source

  ---

• Levy of sales tax on chemical used in development of photographs - it had to be destroyed or could not have been re-used after certain processes. One cannot hold that chemical has been sold to the consumers. - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2015 (4) TMI 533
  Unverifiable purchases - assessee is in trading of the precious and semi precious stones - Assessing Officer held that closing stock of assessee had been shown on estimate basis, which partly included cost mentioned in bogus bills also and as such no realistic verification could be possible - CIT(A) confirmed the disallowance made by the Assessing Officer @ 25% on unverifiable purchases - Held that:- The material available on record established that in Jaipur, a rampant practice is in vogue to get and issue accommodation bills of purchases to deflate the profit. The learned Assessing Officer made disallowance @ 25% of such bogus purchases on the basis of decision in the case of Sanjay Oil Cake Industries [2008 (3) TMI 323 - GUJARAT HIGH COURT] and Vijay Protein Ltd. (1996 (1) TMI 144 - ITAT AHMEDABAD-C ). In our view the 25% disallowance appears to be higher side, therefore, keeping in view of the facts of the assessee's case as well as other cases as discussed above, we feel that 15% disallowance out of bogus purchases is reasonable on unverifiable purchases and will meet the ends of justice. The rejection of books of account is justified. The assessee gets relief partly. - Decided partly in favour of assessee. Disallowance of business expenses @ 20% - Held that:- There is no past history in this case that such disallowance was made by the Assessing Officer on estimation basis but it is a fact that these expenditures were incurred mostly in cash and it is difficult to collect the third party evidence in each and every item of expenses. Therefore, we confirm this disallowance @ 10%. The assessee gets relief partly on this ground. - Decided partly in favour of assessee. Trading addition - CIT(A) deleted part addition - Held that:- Filing of some confirmation with PAN and TIN number are not sufficient to prove the purchases are genuine as they are to be supported by other facts including delivery of goods, as held by the various courts. The appellant cannot directly or indirectly put blinkers on investigations of the Assessing Officer to compel him to do it as per sweet will of the assessee. It is not permissible that the assessee will direct the Assessing Officer to enquire his case at his own way, which is not required by law. The assessee wanted to shift his onus on the Assessing Officer on flimsy ground. It is rampant practice in gems and jewellery business in Jaipur that the assessee has been getting accommodation bills to reduce the profitability which has been established by the department. The Hon'ble Rajasthan High Court recently in the case of Venus Arts & Gems Vs. ITO [2015 (2) TMI 721 - RAJASTHAN HIGH COURT] has also confirmed the addition on unverifiable purchases @ 21.96% and also found order of the ITAT being purely a finding of fact by the two appellate authorities as to what should be a reasonable G.P. rate after rejection of books of account and various infirmities noticed by the lower authorities and in their view no question of law much less substantial question of law can be said to emerge out of the order of the Tribunal.The Assessing Officer disallowed 25% of bogus purchases in Unit-1. However, looking at the entirety of facts, competition in trade, possibility of advantage, derived a lenient view as plead by lawyers by alternate please, deserves to be considered while arriving at the estimate. We are of the conscious view that 15% disallowance out of unverifiable purchase is reasonable in keeping in view the facts and circumstances of the case for both the units on unverifiable purchases of ₹ 69,71,080/- in Unit-I and ₹ 2,07,73,625/- in Unit-II. Accordingly, the revenue's appeal is partly allowed. Disallowance u/s 40(a)(ia) - payments are nothing but commission as defined in Section 194H as held by CIT(A) - Held that:- Section 194H is applicable where any commission has been paid by the Principal to the commission agent. This is not a case of commission agent as assessee sold its goods through credit card and on presentation of bill issued against credit card, the bank makes payment to the assessee after deducting agreed fees as per terms and conditions in case of credit card. This is not a commission payment but a fees deducted by the bank. If there is an agreement, that is agreement between the credit cardholder and the bank. Bank is a Principal and to spread over its business, a scheme is floated by bank i.e. issuance of credit cards. Therefore, in our considered view, there is no such relation between the bank and the shop keeper which establishes the relationship of a Principal and Commission Agent. Technically it may be written that bank will charge certain percentage of commission but this is not a commission because assessee sells its goods against credit cards, and on presentation of bills, the bank has to make the payment. It is not the case that bank has advised the assessee to sell their goods to its customers then he will pay the commission. It is reversed in a situation as bank issued credit cards to the credit card holders on certain fees or whatever the case may be and the card holder purchases material from the market through his credit card without making any payment and that shop keeper presents the bill to the bank against whose credit card the goods were sold and on presentation of bill as stated above the bank makes the payment. Therefore, in our considered view, provisions of section 194H are not attracted in this type of transaction. - Decided in favour of assessee. Disallowance of telephone expenses - Held that:- 10% disallowance reasonable out of total telephone expenses at ₹ 93,433/-. Thus, the assessee gets part relief. - Decided partly in favour of assessee. Capital gain arising from transfer of business of the assessee to its group company - short term capital gain on account slump sale - Held that:- The learned CIT(A) had accepted the actual date of transfer of business on 21/8/2007 whereas learned Assessing Officer had concluded that date of allotment of the shares was November, 2007 and February, 2008 and value has been taken by the assessee as on 31/3/2007. The learned CIT(A) has not given specific finding why she has accepted date of transfer i.e. 21/8/2007. It has not been come out from the order of the learned CIT(A) and submission made before her that Rule 11U(a) of the Rules has been applied meticulously. The valuation date defines in Rule 11U(j) of the Rules i.e. valuation date means the date on which the property or consideration as the case may received by the assessee, which was amended w.e.f. 29/11/2012 prior to its substitution clause (j) read as "Valuation date means the date on which the respective property is received by the assessee." It is immaterial whether transferee company has supported its business or not or having any income from the trading of gems and jewellery, which has not been excluded or explained in rule itself. Therefore, this issue is set aside to the Assessing Officer and he is directed to compute fair market value of unquoted share as per the Rule 11U(a) of the I.T. Rules on the valuation date. - Decided in favour of revenue for statistical purposes. Disallowance of deduction U/s 80HHC on trading addition - Held that:- The assessee has not claimed deduction U/s 80HHC of the Act before the Assessing Officer in prescribed proforma as mentioned by the learned DR alongwith the return. There is no evidence alongwith paper book, which shows that the assessee calculated deduction U/s 80HHC of the Act in computation of income. Even there is no note in the computation in case of addition made on account of any reasons, the deduction would be allowed. Addition u/s 69B on account of "on money" interest earned - CIT(A) deleted addition - Held that:- The Coordinate Bench in assessee's own case for A.Y. 2007-08 wherein held that the information contained in the statement recorded during the course of survey can be used but it cannot be conclusive evidence against the assessee. The A.O. has not collected any material from the purchaser of the shops to show that the assessee has received on money. The sale of shop is evidenced by the sale deed. There is no documentary evidence in respect of sale price of the shops . according to the provisions of the Indian Evidence Act, 1872 when terms of a contract, grant or other disposition of property have been reduced to the form of a document then no evidence is permissible to be given in proof of any such term or such grant or disposition of the property except the document itself and no oral agreement contradicting/varying the terms of a document could be offered. Once the assessee contended before the A.O. during the course of assessment proceedings that he has not received on money then the A.O. should have collected evidence to hold that assessee has received on money - Decided against revenue. Disallowance of traveling expenses - Held that:- The total turnover was ₹ 12,14,550/- as compared to preceding year. The assessee's sale has gone down substantially from ₹ 2.88 crores to 12 lacs. In absence of any evidence, foreign travelling expenses cannot be allowed. Therefore, we confirm the order of the learned CIT(A) for disallowance made on travelling expenses. - Decided against assessee. Disallowance of prior period expenses - Held that:- As evident from the date of bills of purchases as well as custom duty clearance and goods received, it proves that liability was crystallized during the year. The assessee has not revised the income for the assessment year 2006-07. The genuineness of the expenses has not been doubted by the lower authorities. Therefore, we allow the prior period expenses during the year under consideration. Decided in favour of assessee.

  ---

• 2015 (4) TMI 516
  Consideration for Not to compete and non solicitation - Capital receipt or Revenue receipt - Held that:- It is only vide the Finance Act, 2002 which came into effect from 1st April, 2003 the said capital receipt was now taxable under section 28(va). It is clarified by the Supreme Court in the case of Guffic Chem (P) Ltd. [2011 (3) TMI 6 - Supreme Court] that section 28(va) of the Act was amendatory and not clarificatory and, therefore, the amount received before the said date was not taxable under Section 28(va) of the Act. In the present case, it is evident that had the assessee not entered into an agreement of non-compete, he would have earned the amount from the business carried on out of the division which was sold to Thermo Electron LLS India Pvt. Ltd. It is the sale of the said division that has deprived him of the income and part of the sale consideration itself, he was required to execute an agreement of non-compete and the compensation received under the said agreement was relatable on a consideration for sale of the business of the division and, therefore, for these reasons also, we are of the view that the amount is taxable under Section 28(va). Furthermore, in the present case, both the assessee have received the amount pursuant to the agreement dated 2nd June, 2008 that is well after 1st April, 2003 and would be covered by the provisions of Section 28(va) of the Act. We are accordingly of the view that no relief can be granted to the appellants. - Decided against the assessee.

  ---

• 2015 (4) TMI 515
  Taxability of Transport subsidy - method of accounting - accrual of income - ITAT has fallen in error in holding that the transport subsidy amounting to ₹ 16,11,477/- which was never received by the assessee and for which merely a claim was lodged with the Jammu & Kashmir Government could be treated as income accrued and taxed in the hand of the assessee? - Held that:- Tribunal allowed the appeal of the revenue whereby the CIT had given the benefit of ₹ 16,11,480/- on account of the fact that the assessee had not filed any documentary evidence supporting its claim for the concerned assessment year and had adopted the mercantile system of accounting. It had credited subsidy receivable on 21.3.2002 and therefore, it was considered to be received on the said date. Accordingly, the appeal of the revenue was allowed. Thus, it would be apparent that the assessee apart from adopting mercantile system of accounting had chosen to take benefit of Section 80-IB of the Act and sought exemption. It had never taken the plea before the authorities below which is now sought to be raised that it was only liable to be assessed to the tune of ₹ 5,17,123/- which was actually received in the year concerned. As noticed neither was the certificate filed from the concerned General Manager, District Industries Centre when the return was filed on 31.3.2002. The certificate was only obtained for the subsequent period and therefore, it was never only the case of the assessee from day one that it could take benefit of Clause 6 (vii) of the Scheme which has been reproduced above on the ground that actual freight paid would be the income. Once that was not the specific case before the assessing authority and neither the same material had been placed before the Tribunal, we are of the view that the substantial question of law which is now sought to be raised on the strength of aforesaid clause of the Scheme is not permissible. - Appeal dismissed.

  ---

• 2015 (4) TMI 514
  Jurisdiction to continue reassessment u/s 147 - There was No reply to notice u/s 142(1) to file return - The petitioner pointed out that the jurisdiction to assess a non-resident company is determined either on the basis of the location of the “permanent establishment” (PE) of the non-resident company or the location of a source of income accruing to the company in India and that the petitioner did not have any source of income in Noida as none of its clients in India were located there, nor did the petitioner have a PE in India. It was accordingly submitted that the notice issued by the Noida officer was without jurisdiction - Supreme Court after hearing the parties dismissed the appeal of the assessee filed against order of High Court [2014 (4) TMI 29 - DELHI HIGH COURT] wherein High Court held that petitioner, not having made the Noida officer aware that no income chargeable to tax had escaped assessment and having merely told him that he has no jurisdiction to issue reassessment notices, was not acting strictly in accordance with law - The writ remedy being a discretionary remedy, the discretion can be exercised in favour of the writ petitioner only if his conduct has been in conformity with law.

  ---

• 2015 (4) TMI 513
  Validity of notice issued u/s 158BC - Whether the notice issued u/s 158BC is invalid for non-mentioning of the block period in respect of which the said notice is issued – Supreme Court after condoning the delay found no ground for interference with the order of high court [2014 (9) TMI 689 - KARNATAKA HIGH COURT] wherein High Court held that In the notice issued u/s 158BC, the time granted to the assessee to file return, was less than 15 days - when the statute specifically prescribes 15 days’ time as the minimum and 45 days as the maximum, if the requirement of law is not complied with, the notice is defective and it is not curable one u/s 292B of the Act. However, assessee had no doubt in his mind what he is expected to do in law and there was no breach to any extent in non-mentioning of the block period in the notice issued to him - it is not the requirement of law that in a notice issued u/s 158BC, the period of block period is to be specifically mentioned by the authorities - If it is not mentioned, it would not invalidate the notice. Therefore Supreme Court dismissed the appeal filed.

  ---

• 2015 (4) TMI 512
  Entitlement to benefit under section 10(20) - Commissioner rejected claim for exemption under section 11 mainly for the reason that this claim was not made in the original return and that Form 10 and audit report in support of this claim are not filed before the Assessing Officer - AO directed by ITAT to take into account the registration granted under section 12AA with effect from 1st April, 2003, and the audit reports as well as the other documents filed in support thereof - Held that:- Case of the assessee is peculiar. It was not the assessee's fault inasmuch as it got into a legal tangle. Upto assessment year 2002-03, it was enjoying a benefit under section 10(20) of the IT Act by a local authority. Later on it decided to avail of the benefit of section 11 and applied for registration. The chequered history of the case pertaining to registration has been noted by us. It is that which enabled the Tribunal to conclude that the rigors of the section have been somewhat diluted by the Revenue's understanding and the issuance of a circular. Thus, the circular contemplates condonation of delay in filing the above documents and which would enable the assessee to avail of the benefit. Filing of Form No.10 is not dispensed with. The Commissioner is only vested with powers to accept it after the specified period. This circular No.273 dated 3rd June, 1980 which has been relied upon to hold that the assessee's claim for benefit of exemption under section 11 of the Act deserved acceptance. It is in these circumstances and when the objects of the trust were found to be genuine that the Assessing Officer was directed to carry out a de novo assessment in terms of the Tribunal's observations. We do not find such conclusion to be perverse or vitiated by any error of law apparent on the face of the record. No larger question or wider controversy needs to be decided. - Appeal dismissed.

  ---

• 2015 (4) TMI 511
  Appeal against order of dis allowance of Depreciation on the windmill - Commissioned within and before due date - Certificate issued by statutory authority - Held that:- The Commissioner may have undertaken an exercise and as alleged by Mr. Toprani but what the Tribunal found from the Commissioner's conclusion that the certificates which were relied upon by the Commissioner and purportedly of site inspection do not remove the essential discrepancy nor does it take care of the fact that the windmill was commissioned on 31st March, 2006. The certificate issued by the other entity M/s. Suzlon (pertinently this was a joint-venture project) indicate that the material supplied to the assessee against the invoice number set out in the Tribunal's order at paragraph 10 dated 27th March, 2006 was dispatched from their works at Puducherry. In such circumstances, it was physically impossible for the consignment to cover a distance of 800 kilometers and reach a site which was earlier proposed in Nandurbar District and later on in Sangli District. Therefore, the perversity in the Commissioner's order enabled the Tribunal to interfere with the findings and uphold that of the Assessing Officer. We do not see any substantial question of law emerging from an exercise of this nature undertaken by the Tribunal. This is not a case where any expert opinion was produced or relied upon and that expert was not made available for cross-examination. We do not see how, therefore, a reliance on the judgment of the Hon'ble Supreme Court in Saraswati Industrial Syndicate Ltd. [1999 (3) TMI 3 - SUPREME Court] would assist the assessee. That judgment is clearly distinguishable on facts.- Decided against the assessee.

  ---

• 2015 (4) TMI 510
  Provisions of Section 80-HHC of the Income Tax Act, 1961 - Deduction for commission received from Indian parties on transfer of export orders - Held that:- At the outset this Court notices that the impugned order has relied upon a special bench decision of the ITAT - International Research Park Laboratories Ltd. [1994 (7) TMI 304 - ITAT DELHI].The view expressed in that order of the Tribunal by the special bench was that the income derived by the assessee towards commission/brokerage for procuring export orders for others is eligible for benefit under Section 80HHC(3) of the Income Tax Act. The said view has been in effect approved by the judgment of the Supreme Court in P.R. Prabhakar [2006 (7) TMI 121 - SUPREME Court]. This Court also notices that view expressed in P.R. Prabhakar and International Research Park Laboratories has been noticed and approved subsequently in two Division Bench judgments - Lotus Trans Travels Pvt. Ltd. [2010 (12) TMI 126 - DELHI HIGH COURT] and Anil Chanana [2012 (9) TMI 17 - DELHI HIGH COURT].For the above mentioned reasons the appeal is answered against the revenue and in favour of the assessee. -Decided against the revenue.

  ---

• 2015 (4) TMI 509
  Penalty under section 271D - Tribunal confirmed penalty levy - Held that:- The fact that money was withdrawn on 6th May, 1998 from the bank account of the lender and the fact that the money was deposited in the bank account of the borrower on 6th May, 1998 itself is a pointer to show that the assessee was under a belief that there was a great urgency. True that he could have achieved the object by obtaining an account payee cheque from the lender but the same would have taken time for the purpose of clearance. Having booked the vehicle on 29.04.1998 and demand by the financier to make immediate payment, the appellant was apprehensive of getting his, booking cancelled are also of non-availability of truck due to heavy demand in the market. The appellant was not sure whether the payments will be lump sum or through installments. He was driven by a sense of urgency for which he took loan from his brother in cash and deposited the same in his bank account. It was his judgement regarding the urgency in the prevailing circumstances and according to him the urgency existed for making payment.The observation of CIT (A) is a pointer to show that the case is clearly covered by Section 273B of the Income Tax Act. It is elementary that an appellate authority interferes with an order not because the impugned order is not right but because the impugned order is shown to be wrong. Our attention was not drawn to any finding of the learned Tribunal indicating that the order of CIT (A) was wrong. Therefore, the interference was not only wrong but also perverse. - Decided in favour of the assessee.

  ---

• 2015 (4) TMI 508
  Revision u/s 263 on the ground TDS Certificate receipts showed discrepancy - prejudicial and erroneous order - Notice u/s 263 on some ground - Final order u/s 263 is on different ground - Held that:- The show cause notice alleges debiting of expenses on account of stationary and auditor's remuneration to the extent of ₹ 14,725/-, which has not been examined by the Assessing Officer. It is only on these two grounds that the Assessing Officer's order was proposed to be set aside by terming it as erroneous and prejudicial to the interest of the Revenue. However, in the final order of the Commissioner, something which is not forming part of the show cause notice, has been referred and conclusion thereon is rendered. That is in relation to alleged system of accounting adopted by the Assessee, which is stated to be the mercantile system and that is why there is disclosure of lesser income. Nowhere in the show cause notice any system of accounting has been referred nor disclosure of any lesser income over and above what has been referred by us. In such circumstances, the Tribunal rightly came to a conclusion that there is a vital discrepancy in the show cause notice issued under section 263 of the Income Tax Act and the final order of the Commissioner and impugned in the Appeal before the Tribunal. This discrepancy cannot be termed as technical. If the Assessee had no notice of the issue proposed to be examined by the Commissioner, then, he should not have proceeded without the Assessee being given sufficient opportunity and prior in point of time. In the given facts and circumstances, the order of the Commissioner has been set aside on the ground of violation of the principles of natural justice. - Decided against the revenue.

  ---

• 2015 (4) TMI 507
  Applicability of provisions of the said Section 80P(4)- difference between the Co-operative Bank and Co-operative Society - whether the assessee is not a co-operative bank but only a cooperative society engaged in providing credit facilities to its members? - Held that:- As decided in CIT vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT] if a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a cooperative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society. - Decided in favour of assessee.

  ---

• 2015 (4) TMI 506
  Compensation received on surrender of tenancy rights - Taxability in the hands or in the hands of Firm - who is the owner of tenancy right - Payment of rent by Firm - Partners claimed exemption under Section 54EC out such receipt - Held that - We find that the Respondent Assessee had in fact before Assessing Officer pointed out that the Tripartite Agreement was entered into, making Respondent Assessee party thereto was on the insistence of the builders so as to take care of builders apprehension in respect of the said property. It was also pointed out that sale consideration was received by the individual partners and not by the firm from the builders. So far as payment of the rent by the firm is concerned, it was a normal allowable business expenditure of the firm. Thus, both the CIT(A) and the Tribunal have come to a concurrent finding of the fact on examination of evidence that the tenancy of the rental premises belonged to the individual partners and not to the Respondent Assessee. It is also noticed that the amounts received by the partners in the individual capacity, was disclosed in their return of income claiming the benefit of Section 54EC of the Act. - Decided against the revenue.

  ---

• 2015 (4) TMI 505
  Income derived through operations as Liaison office in India - purchase of goods in India for the purpose of export - Entitlement of exemption provided in explanation 1(b)to section 9(1)(i) of the Act - AO observed that the activities of the assessee relate to supply chain management activities for Tesco International Sourcing Ltd., Hongkong Company and is not covered in the exception provided in Explanation 1(b) to Section 9(1)(i) of the Act. - Held that:- The Tribunal at Para No.7.2 has clearly set out the facts of the Nike case as well as in this case and after applying the law laid down in the aforesaid case has granted the relief to the assessee. The factual positions are not disputed. Therefore, it is the judgment rendered by this Court in Nike's case [2013 (8) TMI 194 - KARNATAKA HIGH COURT] which is applicable to the facts of this case and the Tribunal has relied upon the said judgment and followed the same. No case is made out for interference as rightly pointed out by the Tribunal. - In that view of the matter, the substantial question of law raised is answered in favour of the assessee and against the revenue. - Decided against the revenue.

  ---

• 2015 (4) TMI 504
  Claim of revenue expenditure in the course of assessment proceedings without revising the return of income (a) - Claim of Lease rent paid during the period in which production not commenced (b) - Allowance of interest on hire purchase (c) - Held that:- Following judgment of Arvind Products Ltd.[2010 (3) TMI 828 - Gujarat High Court] , we answer question (A) in affirmative and held that the Appellate Tribunal was right in law in confirming the order of the CIT(A) allowing the claim of ₹ 2,38,77,468/as revenue expenditure made for the first time in the course of assessment proceedings by filing a letter dated 01.02.1994 without revising the return of income. Following judgment of Nirma Ltd.[2014 (10) TMI 388 - GUJARAT HIGH COURT], We, therefore, answer question (B) in affirmative and in favour of the assessee and against the Revenue, holding that the Appellate Tribunal was right in law in holding that lease rent paid under an arrangement with Gujarat Lease and Financials Ltd. for imported machinery and equipments for establishing a new Soda Ash Plant by the assessee, manufacturing caustic soda, for the period the new plant had not commenced production, was revenue expenditure. Following judment of Gujarat Alkalies and Chemicals Ltd. [2008 (2) TMI 11 - SUPREME COURT OF INDIA], We, therefore, answer question (C) in affirmative and in favour of the assessee and against the Revenue and held that the Appellate Tribunal was right in law in confirming the order of the CIT(A), whereby he had deleted the disallowance of interest on hire purchase in relation to new Soda Ash Plant and interest and commitment charges in relation to expansion of Chloromethane Plant. - Decided against the revenue.

  ---

• 2015 (4) TMI 503
  Fees for technical services covered under section 9(1)(vii) or covered in DTAA between India and Thailand - transfer of know-how - technical advice in transferring all its present methods of manufacture relating to packing materials and containers - Treatment of consideration received under the DTAA as royalty or as business profits - Taxability of royalty u/s 115(1)(b) - Held that:- tribunal hold that art. 22 was concerned about miscellaneous income not covered under any of the provisions of DTAA. Thus holding that royalty and fee for technical services contemplated under the agreement were taxable under art. 12 and art. 7 respectively, the Tribunal held that art. 22 could not be invoked. Having stated so, surprisingly, in para 9 of the order, the Tribunal once again considered art. 22 only to hold that the portion of fee for technical services arising in India was to be taxed in accordance with section 115(1)(b). On going through arts. 2 and 3 of the agreement between the assessee and the Indian company, we agree with the view of the CIT(A) that the entirety of the payment cannot be considered as one falling for consideration under art. 12. Further, taking note of the fact that the assessee company was also involved in training Indian personnel in India and abroad and taking note of the clauses in the agreement as regards the payment and the additional payment depending on the period of training, over and above what was to be paid under the agreement for the duration specified therein, the CIT(A) rightly came to the conclusion that the component of technical services in India included the extra months of training, so too the training abroad. In computing the said amount, rightly the CIT(A) arrived at a finding that a sum of 1,12,500 USD and 69,750 USD would be the amount which would be treated as received for technical services rendered by the assessee and the amount of 4,79,640 USD relates to royalty payment, assessable as per art. 12. As far as the order in art. 22 is concerned, we do not find any justifiable ground to uphold this portion of the order after the discussion on the extent of income falling for consideration under royalty as defined under art. 12 and the amount paid as towards technical services falling for consideration under art. 7. Since the said income does not fall as miscellaneous income, the same cannot be brought under art. 22. Even though learned standing counsel made a submission that the fee paid towards technical services cannot be brought towards business income, yet in the absence of any material to show that the same is not related to the business of the assessee, we have no hesitation in rejecting the said contention. Even assuming for a moment that the assessee is an Indian company, given the nature of business of the assessee, if the income earned would qualify for consideration on the normal computation as business income, we do not find that the said character would undergo a change merely on the score that the assessee is not an Indian company. - Decided in favour of asessee.

  ---

• 2015 (4) TMI 502
  Transfer pricing adjustment - most appropriate method - CUP method OR TNMM - Held that:- assessee chose CUP as the most appropriate method in respect of twelve international transactions, but, the TPO simply brushed aside the assessee's choice of the most appropriate method and proceeded to determine the arm's length price of all the fourteen transactions under the TNMM, without giving any reason whatsoever, much less any cogent and rational reasons, for discarding the assessee's choice of method. Such a course of action adopted by the TPO is unknown to the law. Without expressly rejecting the assessee's contention about the applicability of the CUP as the most appropriate method in respect of twelve international transactions, the TPO could not have proceeded to determine the ALP of these twelve international transactions also under the TNMM. Under such circumstances, we have no option but to set aside the impugned order and remit the matter to the file of AO/TPO for determining the ALP of the twelve international transactions, firstly, under the CUP method as was substantively chosen by the assessee as the most appropriate method. Determination of the operating profit margin of the assessee - not allowing of deduction for the abnormal operating costs for the three months period of strike - Held that:- the net operating profit margin realized by the assessee from its international transaction is to be computed as such, without adjusting it on account of differences between its international transactions and the comparable uncontrolled transactions. The adjustment, if any, is required to be made only in the profit margin of the comparables, and that too, by demonstrating some difference between international transaction of the assessee and comparable uncontrolled transactions. The assessee in the instant case has failed to bring on record any material to show that the profit of the comparable companies was not hit by any untoward incident. Such southwards adjustment in the assessee's own operating costs and the resultant northwards movement in its own profit rate, is impermissible under the law. In view of the foregoing reasons, we uphold the view taken by the TPO in rejecting the claim of the assessee for reduction of the so-called abnormal operating costs from the total operating costs. Adjustment to the operating profits of the assessee by the amount of depreciation - Held that:- The amount of depreciation of the comparable companies on their assets shall be recomputed under straight line method alone as per the rates at which the assessee has provided depreciation. To clarify, if the comparables have charged depreciation at a higher rate in comparison with the assessee on some of its assets, then suitable reduction should be made in the amount of their depreciation. The TPO should not equally hesitate to make adverse adjustment, if warranted, which means that if the comparable companies have charged depreciation at a lower rate in comparison with the assessee, then suitable increase should be made to their amount of depreciation. In doing so, the TPO should see if he can correctly deduce the amount of depreciation on the above lines. If due to one reason or the other, such precise calculation is not possible or the assessee fails to place it before him, then no adjustment should be carried out in the calculation of the operating profits of the comparable companies. We, therefore, sum up our conclusion on this aspect of the matter by holding that if the assessee as well as the comparable companies are using the SLM and there is some difference in the rates of depreciation charged by them vis-à-vis the assessee, then suitable adjustment should be made to the profits of the comparables. Selection of comparables - Held that:- The assessee itself treated Bajaj Auto Ltd., as comparable for the preceding year and the contention about the predominant sale of this company in the three wheeler segment has turned out to be incorrect, we see no justifiable reasons in overruling the view taken by the TPO in considering Bajaj Auto Ltd. as comparable, which is hereby affirmed. This contention of the ld. AR on this aspect is repelled. International transaction of Purchase of fixed asset - Held that:- International transaction of purchase of fixed assets is required to be benchmarked as per the most appropriate method. The application of the ALP, if required, will give rise to the recomputation of the revised value of the purchase of fixed assets. Such an increase in the value of the fixed assets, being a capital transaction in itself, will not give rise to any addition towards transfer pricing adjustment, but the depreciation on such assets, being a revenue offshoot of the capital transaction, will be required to be recomputed on such revised value. Ergo, we set aside the addition made by the TPO due to the determination of the ALP of the international transaction of purchase of fixed assets and direct that the depreciation on such fixed assets be computed on the adjusted value, if permissible, as per the relevant provisions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Depreciation on Moulds used in plastic goods factory - Held that:- AO reduced the depreciation rate on plastic moulds by following the view taken by him in the preceding years. Neither the ld. AR nor the ld. DR could specifically point out the fate of such addition in the earlier years, inasmuch as whether the assessee accepted such addition or if assailed, then the final view taken by the Tribunal in the preceding years on this issue. As such, we set aside the impugned order on this issue and remit the matter to the file of AO for deciding it in conformity with the final view taken in the earlier year. - Appeal decided in favour of assessee for statistical purposes.

  ---

• 2015 (4) TMI 501
  Unaccounted money received as share application money - Held that:- CIT(A) deleted the addition - Held that:- Keeping in view of the findings given so Assessing Officer as well as the Ld. First Appellate Authority and the documentary finding by the assessee before us. We are of the considered view that Ld. First Appellate Authority has deleted the addition in dispute on the basis of various documentary evidence filed by the assessee before the Assessing Officer as well as before him. Hon’ble Supreme Court of India in the case of CIT VS. Export Lovely (2008 (1) TMI 575 - SUPREME COURT OF INDIA) which has confirmed the order of Hon’ble Delhi High Court has held that once the identity of the share holder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of company unless any adverse evidence is not on record. Ld. First Appellate Authority has examined the documentary evidence filed by the Assessing Officer as well as before him and held that the assessee has provided confirmations from all the parties as well as various evidences to establish the genuineness of the transaction assessee has also relied upon the judgment of Nemi Chand Kothari Vs. CIT (2003 (9) TMI 62 - GAUHATI High Court ) wherein it has held that it is a certain law that the of the assessee is to prove the genuineness of transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of assessee to find out the source of money of creditors. Similar observation has also been given in the case of Hon’ble Supreme Court of India in the case of Hastimal (1962 (12) TMI 60 - MADRAS HIGH COURT) and Daulatram Rawatmal (1972 (9) TMI 9 - SUPREME Court). Ld. First Appellate Authority has cited various decisions rendered by the Hon’ble Supreme Court of India as well as the Hon’ble Jurisdiction High Court in the impugned order and finally has held that the assessee has substantiated the transaction regarding share application money received by it was genuine transaction and the same were not accommodation entries he did not find any evidence collected by the AO which could prove otherwise and deleted the additions in dispute. - Decided in favour of assessee.

  ---

• 2015 (4) TMI 500
  Transfer pricing adjustment - Deduction u/s 10A - Held that:- DRP in the case of the assessee has not decided this preliminary issue vide its order dated 21.11.2013 in spite of the fact that the same was specifically and separately raised by the assessee in the objections filed before the DRP. We, therefore, consider it fair and proper and in the interest of justice to set aside the impugned order passed by the A.O. under section 143(3) as per the directions issued by the DRP under section 144C(5) of the Act and restore the matter to the file of the DRP for the limited purpose of deciding the preliminary issue raised by the assessee company in its cross objections challenging the validity of the assessment. As this issue, which is being restored to the file of DRP, goes to the root of the matter, we keep the other issue raised by the assessee challenging the addition made on account of T.P. adjustment open with a liberty to the assessee to raise the same again if it fails to succeed on the preliminary issue before the DRP. - Matter remanded back - Decided in favour of assessee.

  ---

• 2015 (4) TMI 499
  Rejection of books of account - Disallowance of purchases - Held that:- Following decision of Shri Anuj Kumar Varshney & Ors. Vs. ITO & Ors. [2015 (4) TMI 533 - ITAT JAIPUR] - No merit in the written submission of the assessee to restrict the disallowance to 15%, rejection of books of account is upheld. Thus we hold that the addition qua these unverified purchases shall be restricted to 15%, accordingly, we direct the Assessing Officer to work out the disallowance. - Apropos the remaining expenditures i.e. telephone, travelling and conveyance, we find no infirmity in the orders of lower authorities, which are supported by the above mentioned judicial precedents. Except oral contention assessee could not demonstrate absence of personal element in these expenditures besides the books of account of the assessee remained rejected - Decided partly in favour of assessee.

  ---

• 2015 (4) TMI 498
  Application of stay of demand - Transfer pricing adjustment - AMP expenses - TPO has included the discount and free samples given by the assessee to the distributors - Held that:- TPO while determining the AMP expenses which in view of the TPO are to be reimbursed by the owner of the brand intangible has included various expenses - It is apparent from the details of expenses included by the TPO that for the purpose of determining the AMP expenses, the TPO apart from sales promotion and without prejudice AMP expenses admitted by the assessee of ₹ 5,770,313/- has also included the various amounts of free samples to distributors, additional discount to distributors, trade discount etc. Thus the inclusion of free samples to distributors, additional discount to distributors and buyers prima facie supports the case of the assessee. Accordingly, in view of the facts and circumstances of the matter, we find that the assessee has good prima facie case for grant of stay - Stay granted.

  ---

• Customs

• 2015 (4) TMI 520
  Denial of Benefit of Notification No. 110/95-Cus. - Violation of condition of Notifications - Demand of differential duty - Held that:- Goods exported and counted towards fulfilment of export obligation were not manufactured in the factory where the capital goods imported under EPCG Scheme were installed: It is seen from the exemption notification 110/95-Cus. that "export obligation" in relation to importers other than those rendering services, means export to a place outside India of products manufactured with the use of capital goods imported, assembled or manufactured in terms of this notification. Thus it is evident that the condition of the exemption notification has been clearly violated rendering the appellant ineligible for the benefit of the said notification and as a consequence they become liable to pay differential duty. - no infirmity in the impugned order - Decided against assessee.

  ---

• 2015 (4) TMI 519
  Penalty u/s 112 - Penalty on partner - Misdeclaration of goods - Held that:- there was doubt and confusion not only by the importer but also with the department. That is why the matter was referred for the clarification of DGFT and DGFT has clarified what is the dried garlic and garlic other than dried garlic. The identical issue came up before the Larger Bench of the Tribunal in the case of DAB Exports (2004 (3) TMI 103 - CESTAT, NEW DELHI), wherein the Larger Bench referring the Apex Court judgment in case[2007 (1) TMI 4 - SUPREME COURT OF INDIA] Suchitra Components Ltd has held that very circular dated 17/9/1999 is prospective and not retrospective therefore whatever goods imported prior to issuance of this Circular was held to be legal. Therefore in the present case also the import was made prior to issuance of circular i.e. on 3/8/1999. In the present case imposition of penalty on the partner and in the case of partnership firm, wherein confiscation of goods were ordered, the appeal of the partnership firm was allowed in previous order. Since a main proceeding against partnership firm has been dropped the penalty on partner cannot be sustained. - Decided in favour of assessee.

  ---

• 2015 (4) TMI 518
  Eligibility for customs duty exemption under Notification No. 21/2002-Cus. dated 01.03.2002 - exemption has been denied on the ground that the appellants have imported Marine Gas Oil but it has the specification of the LDO and therefore benefit is not available - Held that:- Since the Essentiality Certificate covers both HSD and LDO, the appellant is eligible for the benefit. Accordingly the impugned order is set aside - Decided in favour of assessee.

  ---

• Corporate Laws

• 2015 (4) TMI 517
  Recovery certificate issued by SEBI on the basis of provisional liability - Notice to NSE to adjust from the deposit of the appellant - Held that:- Basic grievance of the appellant is that the recovery certificate has been issued on the basis of provisional liability statement dated August 25, 2004 and without considering the auditors certificate furnished on April 5, 2002 and again on April 30, 2004. Since SEBI has issued fee liability statement on March 14, 2005 and April 20, 2005 subsequent to the appellant furnishing auditors certificate, it is evident that the said fee liability statements dated March 14, 2005 and April 20, 2005 constitute final fee liability statement. Moreover, it is relevant to note that challenging the provisional fee liability statement dated August 25, 2004 (served on September 2, 2004) as also the final fee liability statement drawn up by SEBI on March 14, 2005 and April 20, 2005, appellant had filed Appeal No. 158 of 2012 with Misc. Application seeking condonation of delay before this Tribunal inter alia alleging that the fee liability statement has been issued without considering the arguments raised on behalf of the appellant. On August 22, 2012 this Tribunal declined to condone the delay and accordingly the appeal filed by the appellant was dismissed. Thereupon, appellant filed Civil Appeal Nos. 8472-8474 of 2012 before the Apex Court which was dismissed as withdrawn on January 14, 2013. Thus, the fee liability of appellant as per fee liability statement attained finality. The appellant has filed the present appeal in gross abuse of the process of law. The recovery certificate was issued based on the fee liability statement dated August 25, 2004, March 14, 2005 and April 20, 2005 which were all served on the appellant. Moreover, appellant had repeatedly challenged those fee liability statements of SEBI by initiating proceedings one after the other and all those proceedings have been either dismissed or allowed to be withdrawn by this Tribunal / Apex Court. - Decided against the appellant.

  ---

• Service Tax

• 2015 (4) TMI 532
  Commercial or Industrial Construction service - penalty under section 76, 77 and 78 - Held that:- Appellant is not disputing the levy of service tax and payment thereof alongwith interest and they also not disputed the penalty of 25% under Section 78 and penalty of ₹ 10,000/- imposed for non obtaining the service tax registration. From the facts I find that the appellant admittedly paid service tax and interest before issuance of show cause notice and 25% penalty within the stipulated time period of 1 month - quantum of penalty i.e. ₹ 20,000/- is not a fixed amount of penalty provided for not filing the return. The amount of the said penalty is not mandatory. Considering the quantum of the penalty and overall facts and circumstances of the case, I am of the view that appellant certainly deserve for relief in the penalty imposed by the lower authority - Decided partly in favour of assessee.

  ---

• 2015 (4) TMI 531
  Classification of service - Consulting Engineering Service or Survey and Map Making Service - activity of detailed Route Survey, Geotechnical Investigation, Soil Investigation, Receptivity and Cadastral Survey, Geochemical Survey etc., on the basis of engineering survey work of the proposed new location, pipe line route survey work, detailed route survey, bore holes - Held that:- activity relating to surveying the projects of M/s GAIL and ONGC would cover the definition of 'Survey and Road Mapping'. - No reason to interfere findings of the Commissioner (Appeal). - Decided against Revenue.

  ---

• 2015 (4) TMI 530
  Demand for interest under Section 75 - Held that:- Adjudicating authority have gone into the details and have not admitted the claim of cum duty only on the basis of Chartered Accountant's Certificate but have also got the claim verified by the Jurisdictional Superintendent and thereafter have accepted the same. Further, no error has been pointed out in the reports of the Superintendent or any other contrary evidence having been brought on record by the Revenue that the claim of cum duty is wrong or contrary to the facts on records. Following decision of Star India Pvt. Ltd. Versus CCE, Mumbai & Goa [2005 (3) TMI 10 - Supreme Court] - Decided against Revenue.

  ---

• Central Excise

• 2015 (4) TMI 534
  Waiver of pre deposit - Manufacture of gutkha and pan masala - if one machine was used for packaging of pan masala having two RSP and the appellant have to pay double duty by treating the machine as being two machines - Bar of limitation - Held that:- Rule 8 of Pan Masala Packaging Machines (Capacity Determination and Collection of Duty) Rules, 2008 would be applicable only when pan masalas with two RSPs falling under two different slabs are manufactured. As long as the slab remains only one and both the RSPs fall under the same slab, the machine has to be treated as one packing machine only - Following decision of Phool Chand Sales Corporation vs. CCE, Lucknow reported in [2012 (11) TMI 476 - CESTAT, NEW DELHI] - Stay granted.

  ---

• 2015 (4) TMI 525
  Denial of CENVAT Credit - Capital goods - goods not mentioned in declaration - Held that:- So far as the the Modvat Credit in respect of Steel items, namely, MS Angles, HR Coils, Black Steel Tubes, ER Wire Steel Plates etc., is concerned, the appellants claim backened by the certificate given by their Chief Engineer is that these items have been used either as parts of the Sugar Mill Machinery or as supporting Structure for the machinery and that in both the cases during period prior to 23.07.1996, the capital goods cenvat credit would be admissible as during period prior to 23.07.1996, the definition of capital goods also covered plant and the Tribunal in the case of Shakumbari Sugar and Allied Industries Ltd. vs CCE Meerut-I reported in [2013 (9) TMI 316 - CESTAT NEW DELHI] has held that since for the period prior to 23.07.1996, the definition of capital goods, as given in Rule 57 Q of the Central Excise Rules, 1944 covered plant, MS Angles, Channels, Section, Bars etc., used for making supporting structures for machinery would also be covered by the definition of capital goods and would be admissible for cenvat credit. However, as regards denial of Modvat Credit from period January 1997 to March 1997 in appeal E/2015/09, since during this period the definition of capital goods, as it existed during period prior to 23.07.1996 has been substituted by a new definition which covered the goods of certain specified chapter headings and as such for this period the iron and steel items would be eligible for credit as inputs only if the same had been used for manufacture of capital goods or their parts and would not be eligible for credit if the same had been used as foundation or supporting structure for machinery, the matter would have to be remanded to the Original Adjudicating Authority after examining the appellants' plea on the question regarding their usage. The cenvat credit for this period would be admissible only in respect of that quantity of iron and steel which had been used for fabricating sugar mill machinery or its components. As regards denial of cenvat credit in respect of nickel screen and denial of cenvat credit in respect of gunny bags, the credit has been denied only on the ground that the same are not covered by the declaration. However, on going through the records, it is seen that this ground for denial is not factually correct as both the items are covered by the declarations filed by the appellant. Therefore, the denial of Modvat credit in respect of these items is set aside. As regards denial of the Modvat Credit in respect of Steel items for the period prior to 23.07.1996 and in respect of nickel screen and gunny bags is set aside. The part of the order denying the Modvat Credit in respect of Steel Items for period January 1997 to March 1997 is also set aside and this matter is remanded to Original Adjudicating Authority for de novo decision after hearing the appellant regarding the use of steel items. - Decided in favour of assessee.

  ---

• 2015 (4) TMI 524
  100% EOU - Denial of refund claim - various input services - Refund pf unutilized CENVAT Credit - Held that:- Following decision of assessee's own previous case [2015 (4) TMI 131 - CESTAT AHMEDABAD] - Matter remanded back - Decided in favour of assessee.

  ---

• 2015 (4) TMI 523
  Waiver of pre deposit - Valuation - Demand of differential duty - Held that:- Applicant cleared the goods in reel form to the cutting centers on payment of excise duty at value which is lower than the value of goods sold in sheet form from the cutting centers. While clearing the goods from the factory of the applicant, the transaction was not of sale whereas the same was transfer of goods to cutting centers. After cutting the goods in the sheet form were actually sold by the same i.e. applicant from the place of cutting centers. As per Section 4 of Central Excise Act read with Rule 6 of Valuation of Rules, it is the value at which the goods is sold from the place of sale of goods shall be the transaction value. Therefore in the present case, we are of the prima facie view that both the lower authorities have correctly and legally confirmed and upheld the differential duty. - Partial stay granted.

  ---

• 2015 (4) TMI 522
  Denial of CENVAT Credit - Bogus invoices - issuance of invoices without actual supply of goods - Held that:- Entire case of the Revenue is based upon the financial calculation of profit and loss of the manufacturing unit. Infact, Commissioner (Appeals) has observed that circumstantial evidence produced on record leads to inevitable fact that M/s. ASRM was only selling cenvatable invoices without supply of the goods. Inasmuch as no retailer can survive if more than 80% of its final product were held to be defective/ rejected / scrap. As regards the present appellant, they have shown receipt and utilization of raw material in their factory and have taken the benefit of Cenvat credit based upon the cenvatable invoices issued by registered dealer. Statements of authorised representative of the appellant as also of the dealer are to the effect that inputs stand supplied to them under the cover of proper cenvatable invoices. Statement of representative of the M/s. ASRM is to the effect that during the relevant period lot of their product came out to be defective and rejected and as such, same was sold after discharging the central excise duty leviable thereon. Admittedly, the appellants need the raw material for the production of their final product and if, as per the Revenue, such material has not been received by them from M/s. ASRM, they were not in a position to manufacture the final product. Revenue has not shown any alternative source of such procurement of raw material. - Impugned order is set aside - Decided in favour of assessee.

  ---

• 2015 (4) TMI 521
  Request for early hearing of appeal - Rule 4(4) of Central Excise Rules, 2002 - Held that:- Rule 4(4) of the Central Excise Rules provides that the Commissioner may in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer, where the goods are made, permit manufacturer to store his goods in any other place out side such premises, without payment of duty subject to such condition as he may specify. Since the Commissioner has passed the order under the said rule, in our view this Tribunal is competent to hear an appeal against the said decision of the Commissioner and we accordingly, hold that the appeal is maintainable. We also find that the applicant has also filed early hearing application. Keeping in view the nature of the dispute, early hearing application is allowed - Decied in favour of assessee.

  ---

• CST, VAT & Sales Tax

• 2015 (4) TMI 537
  Detention of goods - Held that:- in similar circumstances this court by order disposed of the writ petitions in [2015 (4) TMI 535 - MADRAS HIGH COURT], by directing the respondent to release the goods on payment of tax. - following the order passed the respondent is directed to release the goods on payment of tax. - Decided conditionally in favour of assessee.

  ---

• 2015 (4) TMI 536
  Detention of goods - Held that:- Court in a series of writ petition, directed the goods to be released on payment of the tax component. respondent directed to release the goods on payment of one time tax component to be decided by the respondent. - Decided conditionally in favour of assessee.

  ---

• 2015 (4) TMI 535
  Detention of goods - Held that:- petitioners submit that subject to payment of tax, the goods be directed to be released. - writ petitions are disposed of by directing the respondent to release the goods on payment of tax. - Decided conditionally in favour of assessee.

  ---

• 2015 (4) TMI 529
  Reopening of assessment - Whether the Assessing Officer is justified in insisting production of books of account before supplying certified copies of the seized documents and reason for reopening the assessment. - Held that:- petitioner did not produce its regular books of account at the time of inspection in its premises on 20.05.2011. It may be relevant to mention here that Section 61(2) of the OVAT Act requires the dealer to keep all its books of account in its place of business. Thereafter, the Inspecting Officer also allowed sufficient time to the petitioner for production of the books of account for the purpose of examination of the same with reference to the seized documents and for this purpose fixed the date to 18.06.2011 and 15.07.2011 on which dates the dealer-petitioner did not produce the same. - So far as supply of reason for reopening of assessment is concerned, it may be noted here that vide notice dated 28.03.2012 in Form VAT-307 issued under Sub-rule (1) of Rule 50 for initiating reassessment proceeding, the petitioner was intimated that it appeared to the Assessing Officer that its whole/a part of turnover of sales/purchases for the tax period 01.04.2008 to 20.05.2011 has (i) escaped assessment, (ii) has been under assessed. Needless to say that the petitioner is entitled to be intimated the detailed reason as to why it appeared to the Assessing Office that its turnover of sales/purchases for the aforesaid tax period has escaped assessment and/or has been under assessed. Such detailed reason is nothing but the contents of the seized documents which were seized in course of inspection. - The same reason is applicable as to why before production of the regular books of account the detailed reason for initiating reassessment proceeding cannot be supplied to the dealer petitioner. It needs to be noted that production of the books of account is not dependent on the receipt of copies of seized documents and/or knowing of reasons for reopening the assessment. The regular books of account are required to be maintained statutorily and to be in custody of the petitioner. The Assessing Officer had issued notice for production of the regular books of account in the custody of the petitioner. Issuance of copies and supply of reasons are wholly unconnected with production of the regular books of account. As noted there is ample scope for manipulation. It was open to the petitioner to contend that all transactions noted in seized documents are entered in the regular the books of account. - Assessing Officer is justified in insisting upon the production of the books of account before supplying certified copy of the seized documents and reason for reopening the assessment and the action of petitioner-dealer in not producing the books of account pursuant to the statutory notice and subsequent intimation on the plea that the same would be produced after receipt of copies of the seized documents is contrary to law and mala fide. Whether reasonable opportunity of hearing has been afforded to the petitioner and thereby principle of natural justice has been complied with before utilizing the incriminating materials seized from its business premises against the petitioner and Assessing Officer is justified in passing the impugned order ex parte. - Held that:- When a proceeding under Section 43 of the OVAT Act is initiated on the basis of a report submitted by any agency, the assessee is entitled to be heard at two stages, i.e., (i) in course of inspection of the business premises till submission of the report by the inspecting officer, (ii) after commencement of the re-assessment proceeding by issuance of notice for assessment of tax on escaped turnover till order under Section 43 of the OVAT Act is passed. - inspecting team found ten sets of written documents indicating materials received and dispatched and stock etc. Since the Asst. General Manager (Commercial) of the Company, on the date of visit did not produce the regular books of account and failed to explain the contents of the said documents, the Inspecting Officer seized those documents, in exercise of power under Section 73(6) of the OVAT Act and the dealer was issued with a notice in Form VAT 401 requiring it to produce the books of account. It may be relevant to mention here that Section 61(2) of the OVAT Act provides that every registered dealer shall keep, at his place of business as recorded in the certificate of registration, all accounts, registers and documents maintained in the course of business: provided that if any such dealer has established branch offices of the business at different places of the State other than the principal place of his business, the relevant accounts, registers and documents in respect of each such branch shall be kept by him at the concerned branch. Notice for assessment of tax on escaped turnover in Form VAT 307 was issued to the petitioner on 28.03.2012 through process server fixing the date to 10.05.2012. Pursuant to the said letter, the petitioner filed a time petition and the case was adjourned and posted to 06.06.2012. Since the petitioner did not turn up on the date fixed, one more intimation was issued to the petitioner. On 18.07.2012, the petitioner again moved a time petition. Thereafter, two more intimations were issued to the petitioner. On those dates, the dealer did not produce the books of account. However, in response to notice dated 11.10.2012, the petitioner filed a petition to intimate him the reasons of reopening the case. On 27.06.2013, another intimation was issued to the dealer fixing the date to 16.07.2013. On that date, the dealer failed to appear before the Assessing Officer to produce the books of account. Thereafter, the impugned ex parte assessment order was passed. - Thus, it may be seen that though several opportunities were given by the Assessing Officer for hearing, the petitioner-dealer did not produce the books of account on some plea or other, which is not legally sustainable and/or contrary to law. - that reasonable opportunity of hearing has been afforded to the petitioner and thereby principle of natural justice has been duly complied with before passing the impugned assessment order and the Assessing Officer is fully justified in passing the said order ex parte. Whether any basis/reason has been assigned for determination of the escaped turnover and levy of tax thereon in the impugned assessment order and the Assessing Officer is justified in accepting the allegations raised in the report - Held that:- Assessing Officer has given the basis/reasons in support of determination of the escaped turnover and tax due thereon. - petitioner failed to explain 10 sets of documents found by the inspecting team in its place of business. After the inspection, though opportunities were afforded to the petitioner to produce the books of account for verification, the dealer did not produce the books of account. Further, the petitioner-dealer also failed to produce the books of account before the Assessing Officer though several opportunities were afforded to it. In the assessment order, the Assessing Officer has reproduced various allegations/ conclusions of the Investigating Officer against the petitioner and calculation of the amount of tax alleged to have been evaded by the petitioner during the tax period. Perusal of the assessment order reveals that the amount of tax alleged to have been evaded is based on the transaction of sales and purchases noted in the seized documents and physical stock found on the date of inspection. - it cannot be said that the Assessing Officer without assigning any reason has passed the impugned order of assessment in violation of Rule 50(4) of the OVAT Rules and principles of natural justice has not been duly complied with and the Assessing Officer has committed any wrong in accepting the allegations raised in the report of the Investigation Officer. Whether in the facts and in the circumstances of the case, it would be appropriate/legally permissible to set aside the ex parte assessment order and direct the Assessing Officer to return the seized documents of the petitioner and after granting an opportunity of hearing to the petitioner and examining the regular books of account with reference to the seized documents to redo the assessment and by that no prejudice will be caused to the interest of the State. - Held that:- There are certain cases where if ex parte orders are set aside to give an opportunity of hearing to the aggrieved parties that may amount to granting a boon to such parties, as they would be able to achieve their unholy purpose and in that case the very purpose of passing ex parte order is frustrated. The obvious reason for putting forward such a pre-condition is that the petitioner wanted to know the contents of seized documents before production of regular books of account so that he could be able to manipulate/prepare its regular books of account, in line with contents of the seized document. Despite a number of opportunities being allowed to produce the regular books of account, the dealer-petitioner did not produce the same and thereby the Assessing Officer was compelled to pass the assessment order ex parte disclosing the contents of the seized documents in the assessment order. If the said ex parte order is set aside and the dealer would be given an opportunity to produce its regular books of account before the Assessing Officer, the dealer could easily incorporate in its regular books of account the entries recorded in seized documents and thereafter produce the manipulated/ prepared books of account. In that event, the very purpose of conducting surprise visit to the place of business of a dealer to find out as to whether all the business transactions are recorded in regular books of account and tax due thereon has been paid shall be frustrated and a dealer who was indulged in clandestine business will be benefited due to setting aside of an ex parte order to give him a further opportunity, to produce his regular books of account for the purpose of examining those with reference to seized documents. Serious prejudice shall be caused to the interest of the State, if after disclosure of the entries made in the seized documents in the ex parte assessment order, the said order will be set aside and an opportunity would thereafter be given to the petitioner-dealer to produce its regular books of account for the purpose of examination of the said accounts with reference to the seized documents. - Decided against assessee.

  ---

• 2015 (4) TMI 528
  Denial of interest claim u/s 54 on the refund arising from the appellate order - Held that:- the interest provided under the statute, which may be claimed by the Assessee from the Revenue would be available and interest on such statutory interest would not be available - Following decision of State of Gujarat Versus Doshi Printing Press [2015 (3) TMI 211 - GUJARAT HIGH COURT] Decided against Revenue.

  ---

• 2015 (4) TMI 527
  Classification of transaction - inter State Sale transaction or inter-State Lease Transaction - sale of Empty Gas Cylinders against the assessee to Reliance Industrial Infrastructure Limited on the basis of a tripartite agreement by which on one hand the RIIL was purchaser (buyer) of the EGC. On the basis of the tripartite agreement, the cylinders were to be sent to Reliance Petroleum Limited - Held that:- Admittedly, the assessee is only a supplier/seller of EGC to one RIIL/purchaser (buyer/lessor) who had an agreement of lease with one RPL (consignee/lessee) and agreement has been entered by the two Reliance Companies where certain lease money was required to be paid by the lessee RPL to lessor RIIL on the terms and conditions entered into by and between those two Reliance Companies. However, merely because the assessee has been shown to be a party who supplied the EGC in the lease agreement, in my view, cannot claim any benefit out of the two lease agreements which were basically in between RIIL and RPL Ltd.. It would be appropriate and fruitful to quote Section 3 of the CST Act, which is the bone of contention between the parties. Admittedly, the entire sale consideration on the basis of the so called lease agreement having supplied EGC to RPL on behalf of RIIL was received by the assessee as per the terms and conditions and no amount, over and above, was received or receivable in terms of the lease agreement in between the parties. The Tax Board, in the impugned order, has gone into the terms and conditions in between the two Reliance Companies vis-a-vis the assessee and it would be appropriate to observe that the terms and conditions specifically provided that the purchase order for the procurement of the EGC, to be provided on lease by the RIIL to RPL, would be given by RIIL (lessor) only to those suppliers of the EGC which would be selected by both i.e. the lessor and lessee on the basis of their mutual consultation and on such terms as were agreed to by and between them. It was not that entire purchases were required to be made from the assessee and there could be several suppliers but the supplier was also to be selected by lessor (RIIL) in consultation with RPL (lessee). Both the contracts despite being mutually inter-dependent were exclusive in seeking the fulfillment of different objectives for which these were entered. The RIIL, in pursuance of the contract of sale, placed the order with the assessee for the supply of goods on behalf of the RPL (lessee) in compliance of which the assessee sent goods to RPL (lessor) after raising invoices in favour of RIIL (lessor). Therefore, in my view, the justification of the Tax Board and the Revenue Authorities appears to be just and proper that the inter-State movement of the goods was the result of the purchase order placed by the RIIL and in pursuance thereof, the assessee supplied goods which occasioned the movement of the goods and not the lease agreement. Subsequent leasing after having goods purchased from the assessee by the two Reliance Companies does not take the entire transaction as contended by counsel for the assessee that it is a lease agreement in between the assessee RIIL and RPL, as the case may be. The goods were delivered and title passed. If under the agreement, the movement of goods was because of a clause in the contract of sale (purchase order placed by RIIL to the assessee) or as an incident of contract of sale (leasing of goods under the agreement between RIIL and RPL) , the same shall be deemed to have taken place in the course of inter-State trade and commerce. On perusal of clauses of the agreement, it is crystal clear that the movement of goods took place in fulfillment of the purchase order which was in the nature of the contract of sale between the assessee and RIIL. Therefore, I have no hesitation in holding that the transaction in between the assessee and the RIIL was certainly in the nature of inter-State sale within the meaning of Section 3(a) of the CST Act, no matter whether the purchase order was incidental to the lease agreement between the RIIL and RPL. - there is no hesitation in holding that the aforesaid transaction is sale of Empty Gas Cylinders (EGC) is inter State Sale transaction and not at all in the nature of inter-State Lease Transaction. - Decided against assessee.

  ---

• 2015 (4) TMI 526
  Levy of sales tax on chemical used in development of photographs - whether the chemical which is being used for developing photos by processing the chemical is not transferred through which the resultant photos came into existence and it is not a sale - Held that:- Tax Board has rightly come to the conclusion that there is no justification in levy of sales tax on the two items namely; (i) chemical (ii) photographic paper left over/cuttings of photographic paper. In so far as the chemical is concerned, it has rightly been held that whatever chemical was purchased, was duly tax paid and the chemicals having been used in the printing/developing the photograph cannot be said that it was a sale as such to the consumer of chemicals and what was sale, was a photograph duly developed and not chemical. It is an admitted fact that the photographs are developed primarily on account of the chemicals being used and either it was used in entirety or if some chemical remained after certain time, it had to be destroyed or could not have been re-used after certain processes. One cannot hold that chemical has been sold to the consumers. Similarly the paper cuttings which remained after proper sizing as such no new item came to existence, a paper would remain a paper whether after cutting of the corners or otherwise and thus no new item can be said to be produced merely because photographs are prepared in different shapes and sizes according to the direction of the consumer. - The contract is to be seen as one of work and labour and in my view, whatever chemical has been used, cannot be said to be sale directly or indirectly to the customers by the assessee. Paper cuttings even after the paper being cut to size, remain a paper may be out of a full sized paper only some cuttings remain after the photograph being cut according to size. Therefore, a paper would remain a paper even after making into different sizes and it is also an admitted fact that on both the items, the assessee has paid due tax, therefore, even if the paper cuttings have been sold to a third party when due tax has been paid, in my view, sales tax is not liable to be paid again. - Decided against Revenue.

  ---