TMI Tax Updates - e-Newsletter
April 19, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Amount paid as penalty for breach of commercial contract is not penal in nature, but compensatory in nature - expenditure u/s 37 allowed -HC

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• Classification of Filters - show cause notice is admittedly based on circular - If the circular is quashed, the SCN automatically goes - HC

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Articles

1. Why pressing dispute on an issue which was settled by Constitutional Bench of the Supreme Court on 11.05.1999? Senior Counsels must try to avoid un-necessarily litigation to avoid brain drain and wastage of money and time of all concerned.

   By: DEVKUMAR KOTHARI

2. INFRASTRUCTURE CESS ON VEHICLES (PART-II)

   By: Dr. Sanjiv Agarwal

News

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

2. India’s Foreign Trade: March, 2016

3. RBI Reference Rate for US $

4. Text of the Union Finance Minister Shri Arun Jaitley’s Speech at the Development Committee of the World Bank in Washington D.C.

5. Text of the Union Finance Minister Shri Arun Jaitley’s Speech at the IMFC Plenary Session in Washington D.C.

6. FM: Calls for the need to further strengthen the role of IMF by increased access to resources to enable it to play an effective role in fostering global economic and financial stability; Participates in International Monetary and Finance Committee (IMFC) and the Plenary Session of World Economic Leaders (IMFC Plenary) and Plenary Meeting of the Development Committee (DC) in Washington D.C. yesterday

Notifications

Customs

1. 53/2016 - dated 13-4-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

2. 52/2016 - dated 13-4-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

3. 51/2016 - dated 13-4-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

4. 50/2016 - dated 13-4-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

5. 49/2016 - dated 13-4-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

FEMA

6. G.S.R. 417(E) - dated 12-4-2016 - FEMA

Corrigendum – Notification No. 362/2016-RB, dated February 15, 2016

Circulars / Instructions / Orders

Income Tax

1. PRESS RELEASE - dated 18-4-2016

Draft rules for grant of Foreign Tax Credit

2. F.NO.142/24/2015-TPL - dated 18-4-2016

Under Section 90/90A/91 of IT Act 1961 - Draft Rules for Granting Relief or Deduction

Highlights / Catch Notes

Income Tax

• Joint Development Agreement Property Transfer Taxable Only with Performance or Intent u/s 2(47)(v) for LTCG.

  Case-Laws - AT : Deemed Transfer u/s 2(47)(v) - LTCG - transfer of property through Joint Development Agreement (JDA) - if there is no performance or intention to act upon, the transaction will not become taxable - AT
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• Assessees can retain sale proceeds for personal use without full deposit; no additions u/s 69A IT Act.

  Case-Laws - AT : Cash deposit into bank - No requirement under the law that assessee has to deposit the entire sale consideration into his bank account immediately. The assessee may retain some amount for his personal or business needs - No Addition u/s 69A - AT
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• Cooperative societies in banking exempt from tax deduction at source on member deposit interest u/s 194A.

  Case-Laws - AT : Co-operative society carrying on banking business need not to deduct tax at source u/s 194A in respect of the interest paid to members on deposits - AT
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• Court Affirms Bad Debt Deduction Rights u/s 36(1)(vii) for Irrecoverable Advances in Income Tax Act Case.

  Case-Laws - HC : Allowance of of bad debts - advances given by the assessee had become actually bad - deduction u/s 36(1)(vii) cannot be denied - HC
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• Payment for Breaching Contract Deemed Compensatory, Eligible for Deduction u/s 37(1) of Income Tax Act.

  Case-Laws - HC : Amount paid towards penalty for breach of commercial contract by the assessee is not penal in nature, but compensatory in nature - deduction u/s 37(1) allowed - HC
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• Society's Fees for Admissions and Subscriptions Exempt from Tax u/s 11 of Income Tax Act.

  Case-Laws - AT : Fees charged by way of admission fee, monthly subscription, admission and registration fee etc., are utilized only for the promotion of the aims and objects of the Society - Exemption u/s. 11 allowed - AT
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• New Rule: Bad and Doubtful Debt Provisions Limited to Recorded Amounts in Financial Accounts for the Year.

  Case-Laws - AT : Provisions for bad and doubtful debt should be restricted to the amount of such provision which are actually created in the books of account in the relevant year - AT
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• Assessee Allowed Deduction for Interest Income from Surplus Fund Investments u/s 80P(2)(a)(i.

  Case-Laws - AT : Deduction u/s.80P(2)(a)(i) - Assessee is entitled for deduction of interest income derived from investment of surplus funds with banks also.- AT
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• Interest Paid Within Year Not Disallowed u/s 40(a)(ia) of Income Tax Act.

  Case-Laws - AT : The assessee paid all the interest during the year, which was not payable on 31st March, 2007 no disallowance u/s 40(a)(ia) - AT
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• Taxpayer Denied Deduction u/s 80IB(10) for Not Submitting Mandatory Auditor's Report with Income Return.

  Case-Laws - AT : Default in submitting the auditor’s report mandatorily required to be furnished along with the return of income - deduction u/s 80IB(10) denied - AT
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• Capital Gains Taxable in Year of Development Agreement Execution, Impacting Tax Timing for Parties Involved.

  Case-Laws - AT : Capital gain - Year of chargeability in the case of Development Agreements is the year in which the contract was executed - AT
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• Sale Proceeds Surpassing Asset Costs Are Capital Receipts, Not Business Income, Per Commercial Principles.

  Case-Laws - AT : Sale proceeds realized over and above the cost of asset cannot be categorized as business income under commercial principles rather it represents capital receipt - AT
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• Offset Bad Debts Against "Provision for Bad Debts" Account per Income Tax Act, Sections 36(1)(viia) & 36(1)(vii.

  Case-Laws - AT : Bad debts claimed should be set off against the opening balance available in the “Provision for bad and doubtful debts” account created u/s. 36(1)(viia) and the balance shall be allowable as deduction u/s 36(1)(vii) supported by the Instruction No. 17 of 2008 dated 26.11.2008 issued by CBDT - AT
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Customs

• High Court to Decide on Legality of Circular Affecting Classification of Blood Filtering Devices 'Dialyzer' and 'Microbarrier'.

  Case-Laws - HC : Legality/validity of Circular - classification of Filters referred to as 'Disposable Sterilized Dialyzer' and 'Microbarrier' for filtering blood - The said show cause notice is admittedly based on the impugned circular. If the circular is quashed, the show cause notice automatically goes - HC
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• License Revocation Overturned: Chemical Import Requires Lab Testing for True Nature Verification, Not Just Document Review.

  Case-Laws - AT : Revocation of licence and forfeiture of security deposit - Import of chemical - Only on test by a competent laboratory the actual nature of the chemical could be found when the appellant obtained all the documents and filed the bill of entry based on the documents submitted by the importer - Licence cannot be revoked - AT
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FEMA

• Reserve Bank of India Reviews License Grant or Revocation for Company and Principal Shareholders.

  Case-Laws - HC : Both the company and its principal shareholders had an interest in the grant of the licence or revocation of it, by the Reserve Bank of India. - HC
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Indian Laws

• High Court Emphasizes Exhaustion of Alternative Remedies in Commercial Disputes for Efficient Resolution.

  Case-Laws - HC : In the matters involving commercial dispute, rule of alternative remedy is adhered to and applied steadfast - HC
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Wealth-tax

• Agricultural Lands Exempt from Wealth Tax: Key Case Laws Highlight Exclusion for Farming Properties Under Wealth Tax Regulations.

  Case-Laws - AT : The lands being agricultural lands have been excluded from the wealth tax - AT
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Service Tax

• Milk Pasteurization and Packaging Not Subject to Service Tax as Business Auxiliary Service.

  Case-Laws - AT : Business auxiliary service - Pasteurizing of milk, converting some of it into butter milk/curd and then packing these products including milk in plastic pouches clearly amount to manufacture, hence not liable for service tax - AT
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Central Excise

• Cenvat Credit Rule 3(1): Credit Allowed for Duty "Paid" by Input Manufacturer, Not Just "Payable" Duty.

  Case-Laws - AT : Rule 3(1) of the Cenvat Credit Rule allows credit of duty “paid” by the input manufacturer and not the duty payable by the said manufacturer - AT
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• Mineral Oil Sludge Excluded from Central Excise Tariff Act Schedule, 1985 per Recent Case Law Updates.

  Case-Laws - AT : Mineral oil sludge is not classifiable under Schedule to the Central Excise Tariff Act, 1985 - AT
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• Railway Wagon Saddles for HR Coils Classified as Excisable Goods, Subject to Central Excise Duty.

  Case-Laws - AT : Saddles (used in the railway wagons for carrying HR coils) are excisable goods and accordingly chargeable to duty - AT
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VAT

• Doctrine of Merger: Limitation Period Doesn't Hinder Revisional Authority in VAT and Sales Tax Cases.

  Case-Laws - HC : Period of limitation - as per the principles of doctrine of merger, the limitation period should not operate as a bar to the revisional authority in exercise of the power - HC
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Case Laws:

• Income Tax

• 2016 (4) TMI 653
  Claim for deduction under section 37(1) - payment to Exide Technologies by way of reimbursement as Exide Technologies was required to pay such amount to Deramic Group on account of the default on the part of the assessee - Held that:- As what the assessee had paid to Exide Technologies was with a view to compensate the holding company for the amount which it was required to pay to Deramic Group on account of the breach committed by the assessee of the conditions of the agreement between Exide Technologies and Deramic Group. The amount paid by the assessee is not penal in nature, but compensatory in nature and hence, the above decision of the Supreme Court in the case of Prakash Cotton Mills P. Ltd. v. Commissioner of Income Tax, (1993 (4) TMI 3 - SUPREME Court], on the contrary, supports the case of the respondent assessee. - Decided in favour of assessee

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• 2016 (4) TMI 652
  Claim of bad debts - ITAT confirming CIT (A)’s order by allowing the claim as bad debts, the advances for other than regular business of the assessee whose corresponding income or sales were not offered in the previous year - Held that:- Tribunal has recorded concurrent findings of fact to the effect that advances given by the assessee had become actually bad and such findings had remained uncontroverted. It is not the case of the appellant that the Tribunal has placed reliance upon any irrelevant material or that any relevant material has been ignored, nor is the learned counsel for the appellant in a position to point out any material to the contrary to dislodge the concurrent findings of fact recorded by the Tribunal. In the aforesaid premises, the conclusion arrived at by the Tribunal being based upon the findings of fact recorded by it upon appreciation of the evidence on record, does not give rise to any question of law, much less, a substantial question of law, warranting interference. - Decided against revenue

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• 2016 (4) TMI 651
  Exemption u/s. 11 denied - Activity carried on by assesse charitable or not u/s 2(15) - Held that:- As find that the assessee trust is registered with the DIT(E), Mumbai u/s. 12A of the Act as charitable institution. The assessee falls under the definition of charitable purposes under the last limb of definition to charitable purposes u/s. 2(15) of the act i.e. “the advancement of any other object of general public utility”. We find that the case of assessee is covered by the orders of coordinate benches of the ITAT in the case of Japanese Chamber of Commerce & Industry [2013 (10) TMI 1126 - ITAT CHENNAI ] and Indian Chamber of Commerce [2014 (12) TMI 256 - ITAT KOLKATA ], wherein held that the assessee is not charging any fee for the services rendered by it. The fees charged by way of admission fee, monthly subscription, admission and registration fee etc., are utilized only for the promotion of the aims and objects of the Society. Clause-1 of the aims and objects put complete embargo on earning profit from any of the activities of the Society. Profit is the essence of trade, commerce or business. When services are rendered without profit motive, the element of trade, commerce or business disappears from such activities. Therefore, it can be safely construed that the activities of the assessee are not hit by the newly added proviso to Section 2(15) of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 650
  Addition u/s 69A - sum was deposited after a period of two months from the date of agreement of sale - Held that:- There is no requirement under the law that under the Act assessee has to deposit the entire sale consideration into his bank account immediately. The assessee may retain some amount for his personal or business needs and can subsequently make the deposit as per his convenience. Therefore, the reason on which the Ld. CIT(A) has made the disallowance is, in our opinion, not sustainable. The Hon’ble jurisdictional High Court in the case of D.Yasodamma vs. CIT reported in (1966 (9) TMI 28 - ANDHRA PRADESH High Court ) was seized of a similar issue and has held that the amount withdrawn by the assessee therein two months back must be considered to be available with her for deposit subsequently. Thus, the contention of the assessee is sustainable - Decided in favour of assessee Disallowance of interest on the loans taken by the assessee from three persons - Held that:- The assessee has claimed the interest portion as against the income from other sources and has never claimed under section 24 of the Act. Since the assessee has also not filed any evidence whatsoever in support of its claim before the authorities below or before this Tribunal, we do not see any reason to interfere with the order of the Ld. CIT(A).

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• 2016 (4) TMI 649
  Benefit of deduction u/s.80P(2)(a)(i) - Held that:- Assessee is entitled for deduction of interest income derived from investment of surplus funds with banks also. - Decided in favour of assessee

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• 2016 (4) TMI 648
  Disallowance of claim of bad debts - Held that:- Bad debts claimed by the assessee should be set off against the opening balance available in the “Provision for bad and doubtful debts” account created u/s. 36(1)(viia) of the Act and the balance shall be allowable as deduction u/s 36(1)(vii) of the Act supported by the Instruction No. 17 of 2008 dated 26.11.2008 issued by CBDT and case of CIT Vs. UTI Bank Ltd. [2013 (1) TMI 209 - GUJARAT HIGH COURT] Disallowance of interest expenditure relating to tax free income, apparently u/s 14A - Held that:- the claim of the assessee with regard to availability of interest free funds requires examination at the end of the Assessing Officer. Accordingly we set aside the order of learned CIT(A) on this issue and direct the Assessing Officer to examine this issue afresh by considering the funds position of the assessee and take appropriate decision by following the ratio laid down by Hon'ble Jurisdictional Bombay High Court in the case of HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ). Disallowance of depreciation on leased assets - Held that:- By following the decision rendered in the case of ICDS vs. CIT [2013 (1) TMI 344 - SUPREME COURT] as well as Coordinate Benches of the Tribunal in assessee’s own case, we set aside the order of learned CIT(A) on this issue and direct the Assessing Officer to allow the claim of depreciation on leased assets

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• 2016 (4) TMI 647
  Assessment of amount received on sale of premises as “Short Term Capital Gain” (STCG) - assessee declared STCG on sale of property u/s 50 - claim of the assessee is that the entire amount of STCG should be considered as business income and accordingly set off of brought forward business loss should be allowed against it. - Held that:- In the instant case, the sale proceeds realized over and above the cost of asset, in our view, cannot be categorized as business income under commercial principles; rather it represents capital receipt realized on sale of a capital asset as per the commercial principles. Hence, in our view, the assessing officer was justified in restricting the claim to the extent of Rs. 81,32,684/-. Accordingly, we uphold the order of Ld CIT(A) on this issue. - Decided against assessee

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• 2016 (4) TMI 646
  Capital gain - selection of assessment year - whether the “transfer” of property took place in the year relevant to the assessment year 2003-04 and hence the capital gains assessed in AY 2007-08 was not in accordance with the law? - Held that:- The factors such as “date of possession, substantial compliance of the contract etc.” are not relevant in the case of development agreements. The aim of the builder under the development agreement was to make profits by completing the building and therefore, no interest in the land stands created in their favour under such agreements. Thus the said agreements are only a mode of remunerating the builder for his services of constructing the building. The assessees were entering into development agreements with the builders by conferring privileges of ownership to them and were claiming that the capital gains would arise only after registering the conveyance deed. Accordingly the section 2(47)(v) was brought into the statute to plug this kind of loop hole. Thus by considering the object of the Development Agreements and also the purpose of introduction of section 2(47)(v) of the Act,finally held that the year of chargeability in the case of Development Agreements is the year in which the contract was executed. In view of the foregoing discussions, we are of the view that the assessees herein succeed in the additional ground urged by them. Accordingly we hold that the capital gain arising on entering of development agreement is not taxable in the assessment year 2007-08, but taxable in AY 2003-04. - Decided in favour of assessee

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• 2016 (4) TMI 645
  Disallowance of deduction u/s 80IB(10) - audit report required u/s 44AB - Held that:- In section 80IB(13) of the Act it has been provided that the provisions of section 80IA(5) and 80IA (7) to (12) shall apply to the eligible business mentioned in section 80IB(10) of the Act. Now further going through the section 80IA(7) of the Act we find that the deduction for profits and gains arrived from such eligible business shall not be admissible unless the account of the undertaking for the previous year relevant to assessment year for which the deduction is claimed have been audited by Accountant as defined in the Explanation below subsec.( 2) of section 388 of the Act and the assessee furnishes along with his return of income, the report of such audit in the prescribed form and duly signed and verified by such Accountant. The relevant prescribed form is form no.10CCB which is provided in Rule 18BBB of IT Rules which has been reproduced above. From going through the records carefully we find that report in form no.10CCB which was mandatorily required has not been furnished along with the return of income and this is further supported by the report of auditors in form no.3CD relating to audit report required u/s 44AB wherein the auditor has made a remark that “as advised to us by assessee claim u/s 80IB(10) is available and we have been disclosing the same as a reply to point 26 of the form 3CD. The assessee has requested us to continue with the same disclosure till to the date of finalization & disposal of appeal of the Income-tax Department with ITAT, Ahmedabad. Therefore we have continued to show that claim is admissible, but the same should be viewed in the light of above. As assessee has defaulted in submitting the auditor’s report mandatorily required to be furnished along with the return of income we are of the view that assessee cannot claim deduction u/s 80IB(10) of the Act and, therefore, we find no reason to interfere with the order of ld. CIT(A). - Decided against assessee.

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• 2016 (4) TMI 644
  TDS u/s 194A - payment of interest by the assessee to its members and to the other co-operative societies for want of deduction of tax at source - invoking provisions of sections 201(1) and 201(1A) - Held that:- Identical issue was considered and decided by the co-ordinate bench of this Tribunal vide order dt.30.5.2014 in the case of Bagalkot Central District Co-operative Society (2015 (1) TMI 1005 - ITAT BANGALORE ) wherein the Bench has held that co-operative society carrying on banking business need not to deduct tax at source under Section 194A in respect of the interest paid to members on deposits by virtue of exemption granted vide clause (v) of the sub-section (3) of the said section. - Decided in favour of assessee

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• 2016 (4) TMI 643
  Disallowance of expenses - Held that:- The lower authorities had not pointed out specific defects in claiming of expenses under all the heads. They made general observations. It is also a fact that under these heads, full bills cannot be obtained from the service provider, which is not verifiable. Therefore, in the interest of the justice, we restrict this addition @ 5%. - Decided in favour of assessee partly Disallowance u/s 40(a)(ia) - Held that:- It is undisputed fact that the assessee paid all the interest during the year, which was not payable on 31st March, 2007, therefore, by following the Hon'ble Allahabad High Court decision in the case CIT Vs. M/s Vector Shipping Services Pvt. Ltd.(2013 (7) TMI 622 - ALLAHABAD HIGH COURT ) and this Bench decision in various cases we delete the disallowance - Decided in favour of assessee

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• 2016 (4) TMI 642
  Restriction of claim of deduction under section 36(1)(viia) - Held that:- From the bare perusal of the provisions, it is clear that the statute has provided that the provision for bad debt is required to be made by the scheduled Bank. Further, it is also provided in the section under consideration that the rate of 7.5% and 10% was dependent on the aggregate advances made. Thus the focal point of the section is made. The assessee is required to made the provision in the computation about the bad and doubtful debts, is dependent upon the aggregate average advances made in the relevant year. The language of the statute is clear and unambiguous and is not capable of any other interpretation. In view of the above, we are of the view that the provisions for bad and doubtful debt should be restricted to the amount of such provision which are actually created in the books of account in the relevant year. - Decided against assessee Entitlement to claim to Bad and Doubtful Debts - Held that:- The assessee is entitled to Bad and Doubtful Debts as claimed in the Balance Sheet for the relevant year. The AO is, therefore, directed to verify the Bad and Doubtful Debts claimed by the assessee in the revised computation of income. The assessee is also directed to produce all the documents to substantiate Bad and Doubtful Debts made by it either in the computation of total income or under Profit & Loss account. The AO shall decide the matter on merit without being influenced by the arithmetical calculation mentioned herein above. However, the AO shall be guided by the law stated herein above i.e. that the assessee is entitled to the benefit of Bad and Doubtful Debts made by it during the relevant year.

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• 2016 (4) TMI 641
  Registration under section 12A withdrawn - ITAT allowed the claim - whether ITAT was justified in allowing the appeal of the assessee brushing aside the provisions of Section 11 (4A) ? - Held that:- It is well settled principle of law that the test to determine as to what would be a charitable purpose within the meaning of section 2 (15) of the Act, is to ascertain what is the dominant object of the activity; whether it is to carry out a charitable purpose or to earn profit. If the predominant object is to carry-out a charitable purpose and not to earn profit the purpose would not lose its charitable character merely because the some profit arises from the activity. The revenue's contention that the tribunal has overlooked the provisions of section 11(4A) is unfounded. We have noted above that the service charges received in respect of 6th and 7th floor were clearly on account of educational purpose. Letting out was incidental and not the principle activity of the assessee-trust. Thus, in our opinion, section 11(4A) which require separate account to be maintained would not be attracted in view of our conclusion that the said amounts as received by the assessee for the assessment year have been received from educational activity which is the dominant activity of the assessee-trust. In our opinion, if this be the case, separate books of accounts cannot be insisted upon as the said activity becomes part and parcel of the educational activities carried out by the assessee-trust. In such a case, the benefit of exemption under section 11 (4A) cannot be denied. An interpretation as urged on behalf of the revenue would render nugatory the very spirit, rationale and the object of the exemption provisions making the same unworkable - Decided in favour of assessee

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• 2016 (4) TMI 640
  Computation of capital gain - CIT(A) has opined that the capital gains have to be computed under section 2(42C) r.w.s. 50B whereas as per assessee capital gains have to be computed on the basis of section 2(11) read with section 50 - Held that:- It is unable to conclude as to why and how can the sale be treated as a slump sale. It is unable to dispute that in the assessment year 2002-03, the plant and machinery of all the gardens had a written down value of Rs. 2,77,34,222/-. For the year under consideration, a separate standard could not have been insisted upon. That would not also be in accordance with the concept of block of assets. Once the fact that the block of assets computed at a sum of Rs. 2,77,3,222/- for the assessment year 2002-03 is admitted, there remains no further controversy as regards the fact that during the year under consideration there was an addition of a sum of Rs. 4.41 crores approximately. The opening balance and the addition during the year aggregate to a sum of Rs. 7,18,62,306/-. The sale took place at a sum of Rs. 8,23,75,000/-. The difference between the two would be a sum of Rs. 1,05,12,694/- as computed by the assessee.We find that the computation made by the assessee is a correct computation - Decided in favour of assessee Interest free loans or advances to its sister concerns - disallowance u/s 36 - Held that:- It is not in dispute that the assessee had advanced interest free loans or advances to its sister concerns whereas the assessee had borrowed money in respect whereof the assessee was liable to pay interest. Mr. Khaitan's submission that the loans or advances made to the sister conccerns were from out of the own funds of the assessee and the money was borrowed for the purpose of business unable to be accepted. The question essentially is a question of fact. Both the CIT(A) and the Tribunal have come to a concurrent finding that the amount of interest spent by the assessee could not allowed to be deducted in the facts and circumstances of the case. We cannot interfere with the aforesaid finding of fact. - Decided against assessee.

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• 2016 (4) TMI 639
  Reopening of assessment - Held that:- Once a process of reassessment or the like has been initiated upon the issuance of a notice under Section 148(1) of the said Act, the reasons recorded prior to the issuance of the notice are the only reasons that can be looked into and no further reasons may be added thereto by any subsequent officer who may have received the case upon its transfer. As to the reasons indicated, there does not appear to be any occasion for the petitioners to complain at this stage. It is common knowledge that dirty money is circulated in the economy and one of the ways of laundering such money without attracting the provisions of the relevant statute is by parking the same in obscure companies with little business activities by investing in shares therein at a huge premium. It is such aspect of the matter which has, quite appropriately, attracted the attention of income tax authorities qua the petitioning assessee. It is most desirable that the exercise be completed by taking the matter to its logical conclusion.

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• 2016 (4) TMI 638
  Cash credit entry - addition on liability towards the suppliers - Held that:- The Assessing Officer has accepted purchases of Rs. 1,09,67,551/- out of which Rs. 1,00,49,705/- stood paid during the relevant assessment year. Therefore, the remaining amount is a liability which the assessee has to discharge, which he discharged in the next financial year. How the said amount can be treated to be a cash credit entry after the purchase amount accepted by the Assessing Officer, could not be explained by the learned counsel for the Revenue. We find that the very basis of the order passed by the Assessing Officer and as affirmed by the learned Commissioner and the Tribunal is erroneous. Such amount is the liability towards the suppliers and could not be added as a cash credit entry, when the purchase of the material including the price of the material supplied by the 15 suppliers is admitted. Thus, the addition of Rs. 9,17,846/- as cash credit entry is not sustainable. Consequently said finding is set aside and the question of law is answered in negative and in favour of the assessee and against the Revenue.

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• 2016 (4) TMI 637
  Addition u/s 40A(3) - Held that:- Submission of the Revenue suffers from a fallacy as it does not take into account the fact that the assessment involved in the present matter is for the year 2007-08, whereas sub-section (3) of Section 40A of the Act has undergone an amendment with effect from 01.04.2009, i.e., for the assessment year 2009-10 onwards, under which it is now provided that no deduction shall be allowed in respect of an expenditure incurred by the assessee in which aggregate payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds Rs. 20,000/-. Prior to that the provision in existence merely provided for expenditure in respect of which payment exceeding Rs. 20,000/- was made and there was no provision regarding aggregate of payments to a person in a day. It is not in dispute that in the present matter not a single payment has been made through any voucher exceeding Rs. 20,000/-. Thus, it was not open to the Assessing Officer to have aggregated the said payment. Moreover, the extant provision for the said assessment year also had a proviso by which even if the payment in cash exceeded Rs. 20,000/-, then in such cases and under such circumstances as may have been prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors, the disallowance may not have been made. In the present matter, the Tribunal and the CIT (Appeals) have also considered the further explanation made by the assessee with regard to multiple payments to the same person, including the fact that subsequent payment in most of the cases was made after mid night of the day but wrongly recorded by the employees of the assessee as the same day since in the course of working day after mid night the lorry has to be loaded and the Tribunal and CIT (Appeals) have accepted the said explanations also. - Decided in favour of assessee

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• 2016 (4) TMI 636
  Unexplained/undisclosed payment - Held that:- In the present case, there is nothing on record to suggest that the Revenue Authorities could unearth any evidence/tangible material against the assessee, either during the course of assessment proceedings or appellate proceedings, to show that the assessee has paid the money of Rs. 18 lakhs to Ms. Zahira Sheikh. It is only the version of DVD which is the basis for making the addition in question, on which the enquiry officer gave his finding that there was no acceptable material to establish that the assessee had paid money to Ms. Zahira Sheikh. In these facts and circumstances, the addition of Rs. 18 lakhs, claimed to be paid by the assessee to Ms. Zahira Sheikh, as unexplained/undisclosed payment is not justified and same is directed to be deleted. - Decided in favour of assessee. Unexplained cash credit u/s 68 - Held that:- In appeal before the CIT(A), the CIT(A) observed that six out of nine creditors, i.e., Shri Dipak Patel, Shri Sudeep Shrivastav, Shri Naresh Shrivastav, Shri Ramesh Shrivastav, Shri Jagdishbhai Patel and Shri Vivek Shrivastav have filed returns of income and also have PAN and have also filed the confirmation letters. In the case of Shri Anil Kale, it was claimed that he was doing electrical repair work and his income was below taxable limit; and that the loan was advanced out of his savings. In the case of Smt. Santaben Patel, there was a balance of more than Rs. 7 lakhs in her bank account before advancement of loan and she had also stated that the amount was out of savings of 7-8 years out of her agricultural income; however, according to CIT(A), no proof of any agricultural activity such as 7/12 records or sale receipts etc. could be produced to establish the credit worthiness. The CIT(A) also noted that Shri Jayendra Zala could not appear before the Assessing Officer and no details such as confirmation or his creditworthiness could be filed. The CIT(A) also held that the payment received by account payee cheque by itself does not fulfill the requirement of section 68 of the Act. In this background, the CIT(A) rightly held that the creditworthiness was not established in respect of loans of Rs. 3,19,500/- in respect of Mrs. Santaben Patel and Shri Jayendra Zala and accordingly confirmed this addition. These reasoned findings of the CIT(A) do not require any interference from our side; we uphold the same. - Decided against assessee.

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• 2016 (4) TMI 635
  Income from unexplained /undisclosed sources - Held that:- It is a classical case where various additions have been made by the AO without proper application of mind and has no distant connection with the material on record. We find that the third party transactions were added in the hands of the assessee without without any basis or material and thus, the AO framed the assessment in a hypothetical way putting the assessee to enormous harassment and inconvenience . Similarly, the ld. CIT(A) confirmed the addition without looking into the merits and facts of the cases which are very clear and apparent from the records produced. Therefore, in view of these facts, the additions on account of unexplained/undisclosed income are ordered to be deleted by reversing the order of First Appellate Authority. AO is directed accordingly. - Decided in favour of assessee

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• 2016 (4) TMI 634
  Reopening of assessment - receipts earned by the assessee from provision of satellite transmission services are liable to tax in India as royalties for use of process as well as equipment falling within the ambit of section 9(1)(vi) of the Act and article 12 of the India-USA DTAA - Held that:- We concur with the ld. CIT (A) that there is no whisper / allegation that there was any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. The AO himself admits that while perusing the records of the relevant assessment year, he came across the date of execution of agreement with the PE and that he has not taken into consideration that fact while deciding the original assessment u/s 143(3) r.w.s. 263 of the Act, that means assessee had disclosed everything during the original assessment proceedings. Thus, there was no failure on the part of the assessee not to disclose fully and truly all material facts necessary for the original assessment. We take note of the fact that while passing the order u/s 263 r.w.s. 143(3) of the Act, the clauses of the agreement with the customer was examined in detail to hold that the revenues earned under the said agreement falls within the taxable ambit of royalty as defined under section 9(1)(vi) of the Act as well as Article 12 of the India USA DTAA. Therefore, such royalty income was subject to tax @ 15% and even though PE was also alleged and Article 7 read with section 44D was not invoked. This fact in itself makes it clear that it was well within the knowledge of the Ld. AO that the said agreement has been entered before 31.03.2003 for invoking section 44D of the Act. For this reason alone, initiation of reopening of assessment U/S 147 of the Act for this assessment year beyond four years is not found to be sustainable both in facts and law as the case falls within the first proviso to section 147 of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 633
  Disallowance on account of entertainment expenses and traveling expenses - CTI(A) restricted the disallowance - Held that:- In the present case, it is noticed that the assessee had been associated with two firms i.e. M/s AZB & Partners and M/s Ajay Bahl & Co. to render consultancy services and advice on the matters relating to his field of expertise. The AO asked the aforesaid firms u/s 133(6) of the Act about the involvement of the assessee and in response the above said two firms did not deny the facts that the services were rendered by the assessee. In the present case, the incurring of expenses was not doubted. However, the AO was of the view that those expenses could have been recovered from the clients and accordingly made the disallowance of the entire expenses incurred under the head ‘entertainment’ and ‘travelling’. In the present case, it appears that the AO did not appreciate this fact that the assessee had incurred approximate 3% of the personal fee for entertainment expenses and incurred about 17% of the professional fee on account of travelling expenses which cannot be considered to be unreasonable. At the same time, the assessee had not produced the vouchers for all the expenses incurred, moreover, in such type of cases, involvement of personal element cannot be ruled out. In our opinion, the ld. CIT(A) was justified in restricting the disallowance to the extent of 20% instead of whole amount disallowed by the AO. We do not see any infirmity in the impugned order of the ld. CIT(A) and accordingly do not see any merit in this appeal of the department. - Decided against revenue

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• 2016 (4) TMI 632
  Addition on account of unexplained investment in jewellery - Validity of a search - Held that:- Validity of a search and seizure u/s 132 has to have a clear cut nexus with the warrant of authorization, which is the main foundation of entire proceedings on search and seizure. In the present appeal, the warrant of search was in the name of Shri Harish Ashumal Keshwani whereas the locker in which the jewellery was found (Locker No. 270) was in the name of Smt. Poonam H. Keshwani as the first holder and her husband Shri Harish Ashumal Keshwani was only the second holder. Further, the search warrant in the name of the assessee Shri Harish Ashumal Keshwani for the search of residential premises at 14, Triveni Park, Behind Akota Stadium, Baroda as per ‘Panchnama’ dated 23rd October, 2002 cannot cover search for locker no. 270, UTI Bank, Gotri Road, Baroda and belonging to Smt. Poonam H. Keshwani and Shri Harish A. Keshwani in the joint names. Therefore, since there was no authorization for search for Locker No. 270 situated in altogether different premises and the locker being in the name of Smt. Ponam H. Keshwani as the first holder, the said jewellery cannot be considered in the block assessment of Shri Harish A. Keshwani, the assessee. We, accordingly, order deletion of Rs. 2,21,782/- on account of jewellery and silver utensils found in locker no. 270.- Decided in favour of assessee Addition on account of household goods - Held that:- Without any material found during the course of search to show that the assessee had made unexplained investment or had incurred unexplained expenditure, it could not be held that the assessee has earned any undisclosed income which was spent for making such investment or expenditure. In the case of Pooja Bhatt v. Assistant Commissioner (1999 (5) TMI 603 - ITAT MUMBAI ), the Mumbai Bench of the Tribunal has held that block assessment is separate and distinct from regular assessment and in the block assessment, addition can be made only on the basis of material found during the course of search. As such, considering the facts of the case and keeping in view the legal position emanating from the aforesaid judicial pronouncements, we are of the view that the additions made by the assessing officer were outside the purview of the block assessment and the learned Commissioner (Appeals) was not justified in confirming the same. - Decided in favour of assessee

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• 2016 (4) TMI 631
  Deemed Transfer u/s 2(47)(v) - LTCG - transfer of property through Joint Development Agreement (JDA) - Held that:- It is clear that 'willingness to perform' for the purposes of Section 53A is something more than a statement of intent; it is the unqualified and unconditional willingness on the part of the vendee to perform its obligations. Unless the party has performed or is willing to perform its obligations under the contract, and in the same sequence in which these are to be performed, it cannot be said that the provisions of Section 53A of the Transfer of Property Act will come into play on the facts of that case. It is only elementary that, unless provisions of Section 53A of the Transfer of Property Act are satisfied on the facts of a case, the transaction in question cannot fall within the scope of deemed transfer under Section 2(47)(v) of the IT Act. The developer had failed to get the approval of the plan or perform its obligations under the JDA. Even otherwise, the assessing authorities has not brought on record the actual position of the project even as on the date of assessment and he has not recorded the findings whether the developer started the construction work at any time during the assessment year 2006-07. The condition laid down under Section 53A of the Transfer of Property Act was not satisfied in the assessment year 2006-07. - . When time is essence of the contract, and the time schedule is not adhered to, it cannot be said that such a contract confers any rights on the vendor/landlord to seek redressal under Section 53A of the Transfer of Property Act. This agreement of JDA cannot, therefore, be said to be in the nature of a contract referred to in Section 53A of the Transfer of Property Act. It cannot, therefore, be said that the provisions of Section 2(47)(v) will apply in the situation before us. - no capital gain arises in the hands of the assessee for the asst. year 2006-07 and the appeal of the assessee for the asst. year is to be allowed. - Decided in favor of assessee. Denial of cost of improvement the assessee has not produced anything to prove the cost of construction. It is the duty of the assessee to produce necessary evidence to show that the assessee actually incurred towards improvement of capital asset. However, the assessee asked one more opportunity to see the document collected by the A.O., which was relied upon by him, at the back of the assessee. In view of this, we remit this issue to the file of the AO for fresh consideration and the assessee is directed to produce necessary evidence in support of the claim of the assessee, as the AO used the report collected from the Commercial Department, Maharashtra viz. MahaVat without providing the same to the assessee. Accordingly, in the asst. Year 2009-10, long term capital gains on the sale of that portion of the land corresponding to the flats allotted to the assessee’s share and sale of flats constructed thereon to be assessed as long term capital gains in sale of land and short term capital gains in sale of flats. Decided partly in favor of assessee.

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• 2016 (4) TMI 630
  Addition u/s 40A(3) - Held that:- Since the ld. CIT(A) has not applied his mind to these provisions and has not examined the nature of payment whether it was made on account of business exigencies or under any exceptional clause, we are of the view that let the matter should go back to the ld. CIT(A) for adjudication of the issue in the light of the provisions of section 40A(3A) of the Act. Accordingly, the order of the ld. CIT(A) is set aside and the matter is restored to his file for re-adjudication of the issue. Disallowance u/s 43B as unpaid bonus liability - Held that:- CIT(A) has examined the details of payment and was of the view that there is no unpaid liability before filing the return of income concerning to the assessment year. Since the ld. CIT(A) has properly examined the issue, we find no infirmity in his order and we accordingly confirm the same. Disallowance of payments made invoking the provisions of section 40A(3) - CIT(A) has deleted the addition - Held that:- Assessing Officer has not examined the complete facts of the case whereas the ld. CIT(A) has appreciated the explanations furnished by the assessee. Since the assessee was simply a facilitator for the purchase of medicines from M/s Agrima Medicos for the patients and the payments were made by the patients, the disallowance, if any, can only be made in the hands of the patients, if the payments exceed the limit, but not in the hands of the assessee. Since the ld. CIT(A) has properly examined the issue in the light of the detailed submissions of the assessee, we find no infirmity in his order on this issue and we accordingly confirm the same. Disallowance of 1/5th of salary and wages debited the profit and loss account - Held that:- Assessing Officer has made ad hoc disallowance of 1/5th of total claim without pointing out any specific defect in a particular payment or in the cash book. The ld. CIT(A) has re-examined the details furnished by the assessee and he deleted the addition. He, however, has confirmed the addition of Rs. 2 lakhs on account of certain expenditures, which were not proved to have been incurred for business purposes. Since no specific infirmity has been pointed out in the order of the ld. CIT(A), we confirm his order.

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• 2016 (3) TMI 1071
  Claim deduction u/s 80IA - initial assessment year - whether the assessee is entitled to deduction under Section 80IA without setting off the losses/unabsorbed depreciation pertaining to the windmill, which were set off in the earlier year against other business income of the assessee following the decision of M/s.Velayudhaswamy Spinning Mills (2010 (3) TMI 860 - Madras High Court) - Held that:- Interestingly, on the basis of the decision in Velayudhaswamy Spinning Mills, the Central Board of Direct Taxes has issued Circular No.1/ 2016 dated 15.2.2016 stating that it is abundantly clear from Sub-Section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that Sub-Section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 801A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 801A. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. Allow deduction u/s 801A in accordance with this clarification.

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• Customs

• 2016 (4) TMI 621
  Legality/validity of Circular No. 19/2013-CUS dated 9th May, 2013 - classification of Filters referred to as 'Disposable Sterilized Dialyzer' and 'Microbarrier' for filtering blood - Originally the goods being Dialysers were classified under CTH 90189031 which pertain to "Renal dialysis equipment (artificial kidneys, kidney machines and dialysers)" but after the circular dated 9th May, 2013, classified as above under Tariff Item 84212900, attracting a higher rate of customs duty Held that:- CTH 90189031 specifically provides for dialysers whereas CTH 84212900 provides for generic description of articles. Heading 9018 under Chapter 90 pertains to medical instruments whereas heading 8421 under Chapter 84 pertains to goods which are generally used for industrial purposes and do not appear to have any medical use. Hence, the natural classification of dialysers should be under CTH 90189031 as it was prior to issuance of the impugned circular. When a specific tariff heading for classification is available, the goods concerned cannot be classified under a generic tariff heading. In the instant case, the onus was on the department to justify the change of classification sought to be made by the impugned circular, which onus, in my opinion, has not been discharged by the Department. Thus, it is evident that the impugned circular is blatantly contrary to the said Rule and is thus, not sustainable. Challenge to circular - Department contended that once agreed to the assessment made by the Department, the petitioner cannot be permitted to challenge the said assessment or the impugned circular on the basis whereof the assessment was made - Held that:- non-mentioning of any and every fact does not amount to suppression of material facts. A material fact is one that would have a bearing on the decision of the court. Even if the petitioner mentioned in the writ petition about the factum of he having initially agreed with the Department's assessment, my decision would not have been any different. This is so because there can be no estoppel against the statute. S. 11A of the Customs Tariff Act does not countenance amendment of the First Schedule to the said Act by issuance of a mere departmental circular. The method in which the First Schedule has been sought to be amended is contrary to the method prescribed by S. 11A and as such the circular cannot be sustained. Hence, the fact that the petitioner initially agreed with the Department's assessment is not a material fact and accordingly the respondent's first point is rejected. Validity of Show cause notice - Department contended that the petitioner has not challenged the show cause cum demand notice dated 21 April, 2014 - Held that:- this is a point without any substance. The said show cause notice is admittedly based on the impugned circular. If the circular is quashed, the show cause notice automatically goes. Hence, the impugned circular is bad in law being without jurisdiction and cannot be sustained. The Circular No. 19/2013-CUS dated 9 May, 2013 is quashed and set aside. - Decided in favour of applicant

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• 2016 (4) TMI 620
  Revocation of licence and forfeiture of security deposit - Import of 'tetrahydroxybenzophenone' chemical - Appellant did not advice their client that the chemicals are to be properly described/classified and supported by proper documents - Non-fulfilment of obligation of a Custom House Agent required under Regulation 13 of CHALR, 2004 i.e. failed to verify antecedents, identity of their client and functioning of their client at the declared address by using reliable, independent, authentic documents, data or information. Held that:- the CHA was found responsible for all acts or omission. It is found that apart from mere reproduction of the wordings of the provisions of CHALR substantial portion of the conclusion in the enquiry report is totally contrary to the finding of the Original Authority. To the extent that the appellant has not complied with the KYC norms with reference to client stands resolved by a clear finding by the Adjudicating Authority. A contrary conclusion drawn in the enquiry report prepared after the said adjudication order is not sustainable. Validity of impugned order - Revocation of licence and forfeiture of security deposit - Import of 'tetrahydroxybenzophenone' chemical - Appellant did not advice their client properly relating to importation of chemicals - Held that:- the appellant obtained all the documents and filed the bill of entry based on the documents submitted by the importer. It is only on test by a competent laboratory the actual nature of the chemical could be found. It is found that the appellant followed normal business practice in verifying the client's background like address, IEC Code etc. and filed the bill of entry based on documents submitted by the importer. Therefore, the appellant cannot be put to extreme action, like revocation of licence in the absence of evidence of misdemeanor on their part. - Decided in favour of appellant

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• Corporate Laws

• 2016 (4) TMI 616
  Scheme of Amalgamation - Held that:- The observations made by the Regional Director, Ministry of Corporate Affairs, have been redressed satisfactorily. It can, therefore, be concluded that the present Scheme of Arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest and the same deserves to be sanctioned. The Scheme is, therefore, sanctioned. The prayers in terms of paragraph16( a) of the Company Petition No.55 of 2016 and paragraph15( a) of the Company Petition No.56 of 2016 are hereby granted. The Petitioner companies are directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with INC28 in addition to physical copy as per relevant provisions of the Act.

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• FEMA

• 2016 (4) TMI 615
  Issue of grant or revocation of grant of licence - Held that:- The licence to import was vitally connected with the shareholding of Kamal Kr. Datta and the percentage shareholding of his brother Sajal Datta. If the number of shares issued to Kamal increased on the basis of importation of those items, the percentage shareholding of Sajal was likely to fall. Therefore, both the company and its principal shareholders Kamal and Sajal had an interest in the grant of the licence or revocation of it, by the Reserve Bank of India. As far as the decision Life Insurance Corporation of India v. Escorts Ltd. [1985 (12) TMI 289 - SUPREME COURT OF INDIA ] and others is concerned, none doubts the authority of the Reserve Bank of India to grant the licence. But it should be remembered that the Reserve Bank of India, like other creatures of the Constitution and the Statutes is amenable to a writ of mandamus commanding it to do its duty. In the two previous writ applications orders were passed by this court directing the Reserve Bank of India to consider the issue of grant or revocation of grant of licence upon hearing Kamal and Sajal. Therefore, both the brothers had the right to approach the court complaining of failure on the part of the Reserve Bank of India to discharge this duty, by refusing to pass an order or by passing a wrong order. Applicability of res judicata - Held that:- The shares had been allotted to Kamal subject to the outcome of the writ. No, doubt, the Hon’ble Judge had expressed his utter disgust at Kamal in preferring the writ applications to nullify the allotment of shares in favour of Kamal but nowhere it confirmed the said allotments. It certainly held oppression of Kamal by Sajal and set aside the order of this High Court in the Company Law Board appeal dated 31st March, 2005 and also all resolutions of the board from 19th April, 1995 onwards. It reversed the decision of the Board of Directors alloting additional shares of Rs. 40 lakhs and so on. But not even for a moment did the court even make any comment with regard to the 30,55,329 equity shares issued to Kamal provisionally pending the writ. The passing observation of the Court is not even obiter dicta. Therefore, the point of res judicata raised by Mr. Kapur also fails Neither adjudication of penalty nor criminal prosecution can be undertaken as the period of two years from the date of commencement of the 1999 Act has long elapsed. Either a civil proceeding for penalty had to be started by issuance of a show cause notice or cognizance of the offence should have been taken by a criminal court within two years of commencement of the Act, 1999, under Section 49 of FEMA, 1999. Since it came into effect on 1st June, 2000 any action should have been taken by 31st May, 2002. The preservation of old rights and liabilities under the FERA, 1973 was restricted for this period and to this extent only. At this point of time, even if it is assumed that the importation was wrongful, no action can be taken, by operation of law. If a new statute after repeal of an Act does not contemplate any action in relation a past illegal act under the repealed statute, then the new statute has the effect of legitimising that illegality. Lastly, the importation was made more than 20 years ago. These capital goods have spent their life. Their value, now after depreciation is nil. At the time of their importation their declared value was Rs. 3,05,53,290/-. Against this value, shares were allotted to Kamal. Even if Sajal now succeeds, the equipments, cannot be returned to Kamal. The monetary value has to be refunded with interest from the other assets of the Company. That is plainly not permissible or feasible. W.P. fails

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• Service Tax

• 2016 (4) TMI 628
  Service tax liability - External commercial borrowings (ECB) are raised in the form of foreign currency convertible bonds - Amount paid by the appellant to M/s Jefferies International Ltd. for the services rendered for raising ECB for the appellant - Held that:- in view of majority of decisions held in the case of Tata Steel Limited vs. Commissioner of Service Tax, Mumbai -I [2015 (11) TMI 1049 - CESTAT MUMBAI (LB)], service tax liability under reverse charge mechanism arises on the person making the payment for the services rendered by an intermediary who helps in raising the ECB. Therefore, the service tax liability arise on the appellant in respect of the amounts paid to M/s Jefferies International Ltd. for raising the ECB. Imposition of interest - Held that:- Since the amount of service tax liability gets fastened, consequential interest liability also arise on the appellant. Accordingly,the appellant is liable to pay interest on such amount of service tax liability. Imposition of penalty - Held that:- appellant has not paid the entire amount of the service tax liability and the interest thereof but has only paid 50% of the amount of service tax liability. It is found that the provisions of Section 80 cannot be invoked, as there being no discharge of service tax liability and interest thereof and the penalty imposed on the appellant needs to be upheld as there is no justifiable reason or cause shown for setting aside the penalties. - Decided against the appellant

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• 2016 (4) TMI 627
  Waiver of pre-deposit - Demand of Service tax alongwith interest and penalties - Business auxiliary service to BANAS Dairy - Appellant contended that labelling or re-labelling of containers and re-packaging from bulk packs to retail packs or adoption of any other treatment to render the product marketable to the consumer shall amount to manufacture and hence not liable to service tax - Held that:- the payment has received on the basis of per liter of the products packed in pouches and it is not possible nor is there any mechanism to identity the payments as would relate to each component of service enumerated earlier. Prima facie the essential activity is that of pasteurizing of milk, converting some of it into butter milk/curd and then packing these products including milk in plastic pouches and these activities clearly amount to manufacture in terms of Chapter Note 6 to Chapter 4 of Central Excise Tariff. It is pointed out that under section 2(f) of Central Excise Act, 1944 manufacture includes any process which is specified in relation to any goods in the Section or Chapter Notes to the Central Excise Tariff as amounting to manufacture. therefore, complete waiver granted. - Stay granted

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• Central Excise

• 2016 (4) TMI 626
  Rejection of of value adopted by appellant and imposition of penalty under Rule 26 & 27 of Central Excise Rules 2002 - valuation adopted for removal of finished goods viz., M.S. Ingots was rejected on the ground that the appellant has not paid duty on CAS-4 value but paid duty on the market value which was slightly on the higher side - Held that:- Rules entitled the recipient manufacturer to avail of benefit of duty paid by supplier manufacturer and the quantum of duty already determined by jurisdictional officers of supplier unit cannot be contested or challenged by officers in charge of recipient unit. Even though Unit II and Unit I have the same jurisdictional officer, there was no proposal to reassess the clearance of Unit II and therefore, the Department has erred in denying the credit to Unit I. In view of the above, Rule 3(1) of the Cenvat Credit Rule allows credit of duty “paid” by the input manufacturer and not the duty payable by the said manufacturer. As such, the entire amount of duty, which the Appellant has taken credit, having been paid by the manufacturer/ supplier, who has not subsequently claimed any refund on account of reduction of assessable value of the inputs, the Appellant would be entitled to the entire Cenvat credit. Therefore, the impugned order is liable to be set aside. When the demand itself is not sustainable as brought out above, the question of payment of interest does not arise. Therefore, demand of interest in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944 is not sustainable. Since the duty demand is set aside, the various penalties viz. penalty under Rule 15(2) of CER, 2004 read with see 11 AC, Rule 26 & Rule 27 is set aside.

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• 2016 (4) TMI 625
  Manufacture - fabrication of saddles - whether the appellant or the fabricators are the manufacturer of the saddles? - Held that:- “Saddle” is a common name known to the market and the fact that it is not brought and sold in the market could not in any manner diminish its capability of being marketable which is evident from the fact that the appellant themselves use the said saddle in the railway wagons for carrying HR coils, and for such use they consider it as marketable commodity and discharge duty accordingly. There is no doubt that the saddles are excisable goods and accordingly chargeable to duty. For fabrication of similar saddles, when fitted to the railway wagons, the appellant had considered themselves as “manufacturer” and discharged duty even though the said saddles were also fabricated in their own premises from the raw materials supplied by the Appellant to the fabricators against same terms and conditions except that in one case the saddles were fitted in the Railway wagons and in another it were grouted to earth but with the common objective to place the HR coils on the said saddles. Thus, the circumstances in their earlier case decided by this Tribunal earlier is quite different from the present one, therefore, the judgement delivered in connection with fabrication of ladders and staircases at site, would not be comparable to the facts of the present case, accordingly, not applicable. Therefore, we have no hesitation to hold that the appellant are the manufacturer of the saddles. Benefit of Notification NO.61/90-CE dated 20.03.1990 and Notification No.41/94-CE dated 01.03.1994 - Held that:- The sole object for which saddles were fabricated was for its use in storage of the HR coils in the factory premises and grouting has been done by fixing with nuts and bolts only for the purpose of making it stationery, hence, such grouting cannot be considered as construction work. In the result, the appellant also failed to substantiate their claim on exemption from duty on the saddles under the above two Notifications. Invoked extended period - Held that:- We find substance in the argument of the Revenue inasmuch as the appellant is required to disclose the true description of the goods and its classification would be determined on the basis of said declaration vis-`-vis the entries of the respective chapter headings/sub-headings etc. The reverse is not true. Besides, we find that the saddles when manufactured and fitted to Railway wagons appropriate duty was paid but when used in the factory for same purpose treated as non dutiable without any valid reason. Therefore, we are of the view that the fact of manufacture and use of saddles in the factory premises were not disclosed in the respective classification list, therefore the claim of the appellant that all facts were within the knowledge of the department and no facts were suppressed cannot be sustained. Consequently, extended period of limitation is applicable to the facts and circumstances of the present case. Appellant are eligible to the Modvat credit, but, to ascertain the exact quantum of credit, it needs to be remitted to the Ld. Commissioner for verification/scrutiny. Since we have observed that the appellant are eligible to the MODVAT Credit on the duty paid inputs used in the manufacture of 240 no. of saddles and for determination of the exact amount of credit, the matter is remitted to the ld. Commissioner; thus, in our opinion, the penalty and fine be accordingly determined thereafter, but, in any case the respective amount cannot exceed the amount of fine and penalty imposed in the first order dated 16.02.1999.

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• 2016 (4) TMI 624
  Exisibility on mineral oil sludge - whether the appellants are required to reverse proportional credit on furnace oil received by them which is equivalent to sludge which gets settled in the tank during storage of oil? - Held that:- This issue has been decided in favour of the appellant in two of their own cases. Further, even the Board circular no. 84/2/86-CX.3 dated 23. 025 .1987 informing the field formation that sludge is not classifiable under Tariff heading i.e. sludge is different from oil is also to that effect. The provision of Rule 3(3) of CENVAT Credit Rules, 2002 invoked by the Revenue are not applicable to the facts of this present case as it is not an input removed by the assessee as such. It is the sludge which gets settled at the bottom of the storage tank which is considered as waste by them and removed as waste. Therefore,sludge is not classifiable under Schedule to the Central Excise Tariff Act, 1985 - Decided in favour of assessee

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• 2016 (4) TMI 623
  Clandestine removals - Evasion of duty - unaccounted raw materials and finished goods causing evasion of duty - Duty demand - Held that:- The appellant in one hand admitted the fraud committed against Revenue involving duty evasion of Rs. 67,03,159/- but on the other hand pleaded adjustment of credit of Rs. 30,61,782/- against such liability committing further fraud of fabrication of spurious invoices. That was done against illicit transactions. The incriminating evidence in File A and the spurious documents in File B were termed by the appellant as Annexure C2 and C3 giving rise to the demand of Rs. 67,03,159/- and Rs. 30,61,782/- respectively. That speak the premeditated design of the appellant to defraud Revenue. Therefore, extending any set off of duty under Annexure-C3 will be bonus to evasion. Although there were several opportunities granted, by Tribunal, M/s. Vijay Aqua did not lay any cogent and credible evidence to prove that the materials contained in File A (which were according to the appellant the Annexure C2 documents) giving rise to the demand of Rs. 67,03,159/- is unsustainable. That became admitted fact without controverting. The allegations of investigation and adjudication findings could not be defended. Therefore the demand on that count is to be sustained. It is ordered accordingly. There was no argument at all made by the appellant for M/s. Vijay Aqua on other consequence of adjudication. Therefore that part of adjudication remain untouched by this order. Accordingly those consequences stand confirmed and its appeal is dismissed. It was prayer of the Appellant M/s. Vijay Aqua that the Tribunal may send back the matter to Settlement Commission for their reconsideration. Without any provision in law in this regard, such prayer is dismissed. So far as penalty on Shri Thiagarajan, Managing Director and on Shri S. Nainar, Director of M/s. Vijay Aqua is concerned, there was no evidence led by them to prove their innocence. Investigation result revealed their active and conscious involvement in dealing with unaccounted raw materials and finished goods causing evasion of duty. Both of them colluded to defraud Revenue. Investigation substantiated its result with full proof leading incriminating evidence against all the appellants which remained uncontroverted. Therefore, penalty imposed on both the appellant is confirmed and their appeals dismissed. So far as duty demand on M/s.Mathura Polymers is concerned, it is an established fact from the evidence on record that this concern was involved in removal of unaccounted job worked goods to Vijay Aqua and was an abettor to commit fraud against Revenue. Accordingly entire demand of duty of Rs. 5,95,721/- levied on this concern is confirmed having been engaged in manufacture of duty evaded goods. So also the other consequences of law as adjudicated by the adjudication order remain untouched by this order except to the extent hereinafter dealt separately. Interest if any, payable, shall be recovered. So far as imposition of penalty on M/s. Mathura Polymers, under Rule 173Q of Central Excise Rules, 1944 is concerned, that is not desirable to be levied in view of penalty of Rs. 5,95,721/- confirmed against that appellant imposed under section 11AC of Central Excise Act, 1944. The penalty levied on Shri V. Natarajan does not appear to be reasonable for no incriminating evidence recovered in the course of search against him. He rather brought out the fraud committed against Revenue brining out involvement of Shri Rama Rao who was in-charge of manufacture in Mathura Polymers and further corroborated by the statement of truck driver of Shri Govindarajan. Therefore his appeal is allowed waiving penalty levied on him. It is made clear that apart from the specific order passed as above, the other consequences of law flowing from the adjudication order passed against M/s. Vijay Aqua and M/s. Mathura Polymers are confirmed.

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• 2016 (4) TMI 622
  Absence of examination in chief - whether the deponents whose statements have been relied upon by the adjudicating authority were not put to examination-in-chief before providing an opportunity of cross examination? - misuse of brand name - Held that:- As during adjudication, the adjudicating authority is required to first examine the witness in chief and also to form an opinion that having regard to the facts and circumstances of the case, the statements of the witness are admissible in evidence. Thereafter, the witness is offered to be cross examined. In the absence of examination in chief, allowing the cross examination, is a futile exercise. We further find that the appellant have challenged the impugned order on the ground that the evidence in the form of statements gathered have no link of the appellant to the activities took at Sandeep Poultry Farm which is required to be examined on the basis of records available during the course of adjudication and the same has not been considered judicially. In view of the above, the impugned order is set aside. The adjudicating authority shall be at liberty to re-adjudicate the matter after following the procedure laid down under section 9D of the Act

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• CST, VAT & Sales Tax

• 2016 (4) TMI 619
  Interpretation of Section 62(5) of the Act - Waiver of pre-deposit - Engaged in import and trading of ferrous and non-ferrous metals and metal scrap - Held that:- by applying the decision of this court in the case of Punjab State Power Corporation Limited v. The State of Punjab and others [2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT], the order passed by DETC (A) and Tribunal are set aside. - Appeal disposed of

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• 2016 (4) TMI 618
  Period of limitation - Order passed by First Appellate Authority - Appellant submitted that the date for the purpose of exercise of the revisional power should be counted from the date of reassessment made by the assessing authority and not the First Appellate Authority - Held that:- the respondent was fully conscious about the point of limitation taken by the appellant in response to the show cause notice. However, in the reasoning recorded by the respondent while passing the impugned order, there is no discussion whatsoever on the issue of limitation. Also the respondent is also unable to show any discussion dealing with the point of limitation, the only submission was that as per the principles of doctrine of merger, the limitation period should not operate as a bar to the revisional authority in exercise of the power. Hence, it was required for the respondent to examine and deal with the point of limitation which was expressly raised by the appellant. The aforesaid aspects of limitation, would be one of the vital aspects and it would completely change the basis of the order, in the event the point of limitation is accepted. - Matter remanded back

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• 2016 (4) TMI 617
  Rejection of claim of sales return - Period of limitation and non production of documents - Goods returned for the respective tax period of July 2006 - Held that:- if the person to whom the goods were sold has confirmed that the goods were dispatched by way of return of goods, since the material as per them was found to be of inferior quality, the said aspect could not have been ignored or in any case the application of mind on the part of the Commissioner was required before reaching the conclusion that the say of the appellant for return of the sales cannot be accepted. - Matter remanded back

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• Wealth tax

• 2016 (4) TMI 629
  Revision u/s 25(2) of the Wealth Tax Act, 1957 - Assessing Officer revalued some properties by adopting a higher value and many other properties were revalued by enhancing the values by 25% of the values declared - Commissioner was of the view that, the assessments framed in these cases were erroneous and prejudicial to the interests of the Revenue, and accordingly issued notices for revision under S.25(2) - Held that:- As decided in assessee's own case as the impugned lands are also being agricultural lands, they have been excluded from the wealth tax by the Ld. CIT(A) in earlier years. In view of this, we do not find any justification in invoking the provisions of Section 25(2) and setting aside the orders of AO. Consequently, we are of the opinion that the orders of AO are neither erroneous nor prejudicial to the interest of Revenue. Accordingly, the orders of Pr. CWT u/s. 25(2) in these appeals are set aside and the orders of AO are restored - Decided in favour of assessee

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• Indian Laws

• 2016 (4) TMI 614
  E-auction notice challenged - Held that:- Stage obtained in the process of auction by the respondent under the SARFAESI Act is a post-13(4) stage. The petitioner therefore has an alternative statutory remedy of filing an appeal under Section 17 of the Act before the Debts Recovery Tribunal. It is trite that in the matters involving commercial dispute, rule of alternative remedy is adhered to and applied steadfast. Present petition is not entertained. The petitioner is at liberty to approach the Debts Recovery Tribunal in accordance with law.

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