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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter April 24, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax TMI SMS VAT - Works Contract - the value of immovable property & any other thing done prior to the date of agreement of sale is to be excluded - HC Articles Major Relief to Developers in Haryana on VAT libaility and Valuation of Goods for impsition of VAT in Works Contract clarified by High Court of Punjab & Haryana in the case of CHD Developers. CENVAT CREDIT - STTG Certificate - INDIAN RAILWAYS Transit Sale - Excise Dealer Registration of Unregistered Trader is not mandatory News Government Allows NHAI to Issue Tax Free Infrastructure Bonds RBI Reference Rate for US $ Proposal to permit Reserve Bank of India to enter into Currency Swap Agreement with the central bank of Sri Lanka Notifications Customs 16/2015 - dated 22-4-2015 - ADD Seeks to to extend the validity of Notification No 36/2011- Customs (ADD) dated 18.04.2011 for a further period of one year 15/2015 - dated 22-4-2015 - ADD Seeks to further amend Notification No 6/2011 - Customs dated 7/2/2011 Income Tax 42/2015 - dated 16-4-2015 - IT Notification u/s 35(1) (ii) - Approved organization - Institute of Chemical Technology, Mumbai Highlights / Catch Notes Income Tax TDS u/s 194H - Supply of SIM card and recharge coupon - expenditure claimed under the head "dealer's scheme and incentives" - The amount is in the nature of commission and discount to distributors and exigible to tax deduction at source under section 194H - AT Visit to Get Source Addition of Income u/s 68 - no notice issued u/s. 143(2) which is very much essential for reassessment u/s 147 - If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of law and deserves to be cancelled - AT Visit to Get Source Reopening of assessment - the claim of deduction under section 80-IB(10) of the Act have been thoroughly examined by the Assessing Officer as well as the appellate authorities - reassessment is not valid - AT Visit to Get Source Rejection of books of account - the way in which the books of accounts the appellant had been written, it is impossible to either determine purchases or the sales or the expenses. The books are not amenable any sort of verification and the entries mentioned are wrong - rejection sustained - AT Visit to Get Source Reopening of assessment - assessee cannot be considered to be carrying on NBFC business - If the interest income is assessed under the head income from other sources, then the assessee would not be entitled to set off the brought forward business loss against the income declared under the head Income from other sources - reopening sustained - AT Visit to Get Source Unexplained share application money - The inquiry for arriving at a proper conclusion is a sine qua non and that cannot be dispensed with by making general observations. - AT Visit to Get Source Deletion of addition u/s 68 - We fail to understand that whether small raw hide suppliers can afford to provide this long credit and hence, this claim cannot be accepted in the absence of confirmation from supplier and their addresses - Additions confirmed - AT Visit to Get Source Deletion of penalty levied u/s 271AAA - post search assessment - AO had accepted the disclosed income declared by the assessee and no addition on account of undisclosed income has been made by the AO - No penalty - AT Visit to Get Source Treatment of rental income by giving counters/spaces/shops in Retail Mall - property was shown as “capital work in progress” and not as “stock in trade” - Taxable as income from House property - AT Visit to Get Source Customs Benefit of Notification No.64/88-Cus - medical equipment imported without payment of duty on the basis of customs duty exemption certificate issued by DGHS - The said exemption certificate was withdrawn by DGHS vide letter dated 30.8.2000 for non-fulfilment of the conditions of grant thereof - exemption rightly denied - AT Visit to Get Source Duty drawback claim - Revenue's contention that appellant acted deliberately cannot be ruled out for the reason that an exporter who has not remitted higher amount of foreign exchange to this country does not expect higher quantity of goods with higher value - AT Visit to Get Source Service Tax Availment of CENVAT Credit - Material fact of invoices without name of the appellant does not rule out abuse of law. Appellant was claiming to be beneficiary of service tax paid by a concern other than the appellant- AT Visit to Get Source Denial of Refund claim - Exemption claim - services availed by SEZ unit - Since the appellant had paid the duty, no reasoning has been given by the first appellate authority as to why refund under Notification No. 17/2009 ST, as amended, will not be admissible - AT Visit to Get Source Central Excise Manufacturing activity or not - Crushing of fabrics - in view of Chapter Note 4 of the Chapter 55, this process would have to be treated as amounting to manufacture - since the product is marketable as admitted, demand confirmed - however benefit of period of limitation extended - AT Visit to Get Source Clandestine removal of goods - difference between the sales declared in the ER-1 returns and sales figures as reflected in their books of accounts - merely on the basis of this difference, it cannot be presumed that the same represents either the value of the clandestinely cleared goods - AT Visit to Get Source Determination of assessable value of the halogen capsules cleared by the 100% EOU (Unit-I) to the DTA unit - ontemporaneous import price of identical goods or similar goods into India - the import price of gold coated Halogen Capsules was not relevant as the 100% EOU (Unit-I) was not manufacturing such halogen capsules. - AT Visit to Get Source VAT Major Relief to Developers in Haryana on VAT libaility and Valuation of Goods for impsition of VAT in Works Contract clarified by High Court of Punjab & Haryana in the case of CHD Developers. - Value Added Tax - VAT and CST Visit to Get Source Inclusion of value of land for charging Value Added Tax - the value of immovable property and any other thing done prior to the date of entering of the agreement of sale is to be excluded from the agreement value / taxable value - HC Visit to Get Source Merely because while submitting the Form No.108 the assessee/dealer submitted the claim of Input Tax Credit more than which is held to be admissible on assessment may be original assessment or even audit assessment or even reassessment, by that itself is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit against its output tax liability of VAT Act of the current year under consideration - HC Visit to Get Source Transaction of exchange of goods during the Warranty Period of motor cars amounts to sale and consequent levy of VAT under the provisions of the Gujarat Value Added Tax Act, 2003 - Order of AO sustained - HC Visit to Get Source Rejection of application for issuance of Form-C - So far as the assessments made after the date of the application and the recovery of tax thereon are concerned, the same stand on entirely different footings and they cannot be used for the purpose of denying of issuance of Form-C and Form-F - HC Visit to Get Source Case Laws: Income Tax 2015 (4) TMI 767 Addition on account of Undisclosed income - Addition on account of Inflated expenditure - Addition on account of unexplained foreign travels expenses - Addition on account of income surrender during search - Held that:- In the case of Mr. B. Srinivas [2013 (11) TMI 826 - ITAT HYDERABAD], it was held that A.O. as per the scheme of the Act and as per section 153A of the Act, no doubt, shall initiate the assessments for all the six years prior to the assessment year in which the search had taken place, but he will get the free hand only in respect of those assessments which had not attained finality on the date of search. It was held that the pending assessments in such cases will abate and the A.O. while framing the assessment under section 153A/153C of the Act will get free hand through abatement and will frame the assessment afresh. It was held that where proceedings have reached finality, the assessment under section 153A read with 143(3) however has to be made as was originally made/assessed and further addition should be restricted only to the extent they are supported/justified by any material found during the course of search. In this context, when it was pointed out to the Ld. Counsel for the assessee at the time of hearing that the search having been conducted in the case of the assessee on 12.12.2007, the assessment proceedings only up to A.Y. 2006- 2007 had become final and the assessment proceedings for A.Y. 2007-2008 being pending on the date of search, the scope of assessment for A.Y. 2007-2008 was wide akin to the regular assessment, he has not disputed this position. We, therefore, uphold the impugned order of the Ld. CIT(A) deleting the addition made by the A.O. on account of undisclosed income from the alleged suppression of catering receipts for A.Ys. 2002-2003 to 2006-2007 as there was no material found during the course of search to support and substantiate the said addition and this position has not been disputed even by the learned D.R. We however, do not find ourselves in agreement with the Ld. CIT(A) giving similar relief to the assessee for A.Y. 2007-2008 as the assessment for that year was pending as on the date of search and the scope of the said assessment therefore was wide and not restricted to make addition only on the basis of material found during the course of search. We, therefore, uphold the impugned order of the Ld. CIT(A) on this issue for A.Y. 2002-2003 to A.Y. 2006-2007, but set aside the same for A.Y. 2007-2008 restoring the matter back to A.O. with a direction to decide the same afresh after giving an opportunity of being heard to the assessee. In so far as A.Y. 2008-2009 is concerned, there is no dispute that relevant material found during the course of search revealed the fact that catering receipts to the extent of ₹ 56,17,750 were suppressed by the assessee. On such receipts, the A.O. estimated the undisclosed income of the assessee by applying the average G.P. rate of 52.58% at ₹ 29,53,813 and made the addition to that extent ignoring completely that income of ₹ 50 lakhs surrendered during the course of search on account of suppression of catering receipts etc., was claimed to be offered by the assessee in the return of income filed for A.Y. 2008-2009. The Ld. CIT(A) however, rightly took note of this additional income declared by the assessee on account of suppression of catering receipts etc., and held that the addition of ₹ 29,53,813 separately made by the A.O. was not sustainable. Having regard to all the facts and circumstances of the case including the additional income declared by the assessee, we find no infirmity in the impugned order of the Ld. CIT(A) deleting the addition made by the A.O. on account of undisclosed income from suppression of catering receipts for A.Y. 2008-2009. Accordingly, the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue for A.Y. 2002-2003 to 2006-2007 and 2008-2009 is upheld while the same is set aside for A.Y. 2007-08. Addition on account of Inflated expenditure - As rightly submitted on behalf of the assessee before us as well as before the authorities below, it was not a case of any expenditure inflated by the assessee as alleged by the A.O. as the expenditure in question was in the nature of regular expenditure that is required to be incurred in the ordinary course of assessee’s catering business. The defects/ deficiencies pointed out by the A.O. in the relevant vouchers were sufficient to show that the expenditure claimed by the assessee was not fully verifiable, but there was no reason for the A.O. to allege that the same represented expenditure inflated by the assessee. Having regard to all these facts and circumstances of the case, we are of the view that the Ld. CIT(A) was fully justified in directing the A.O. to restrict the disallowance made on this issue to the extent of 5% of the relevant expenses for unverifiable element involved therein and his impugned order on this issue, in our opinion, does not call for any interference. It is pertinent to note here that the addition made on this issue although was supported by the evidence found during the course of survey for A.Ys. 2007- 2008 and 2008-2009, there was no such evidence to support this addition for A.Ys. 2002-2003 to 2006-2007. The assessee however, has not filed any appeal or cross objection disputing the disallowance confirmed by the Ld. CIT(A) to the extent of 5% of the relevant expenditure in these years apparently because of the smallness of the amounts involved. Ground Nos. 4 and 5 of the Revenue’s appeal for all the seven years under consideration are accordingly dismissed. Addition on account of unexplained Foreign travel expenses - It is observed that the additions made by the A.O. in the relevant four years i.e., A.Ys. 2005-2006, 2006-2007, 2007-2008 and 2008-2009 on account of expenses incurred on the foreign travels of the assessee are deleted by the Ld. CIT(A) inter alia on the ground that there was no material found during the course of search to support and substantiate the same. As already held by us in this context, the assessments for A.Ys. 2005-2006 and 2006- 2007 having been already completed on the date of search, the addition, if any, can be made to the total income of the assessee for the said years only on the basis of material found during the course of search. Since there was no such material found during the course of search, we uphold the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue for A.Ys. 2005-2006 and 2006-2007. As regards A.Ys. 2007- 2008 and 2008-2009, the position, however, is different inasmuch as the scope of the assessments made under section 147(3) read with section 153A is wide and akin to a regular assessment. In these two years, the claim of the assessee as made before the Ld. CIT(A) relying on the additional evidence filed before him for the first time in the form of copies of bank statements, loan account of M/s. Nimantran Caterers etc., was that the expenditure incurred on account of expenses during the foreign trips was out of explained source. It appears from the impugned order of the Ld. CIT(A) that this claim made by the assessee was accepted by him relying on the additional evidence filed by the assessee without giving any opportunity to the A.O. to verify the same. We, therefore, find merit in the contention of the learned D.R. that this issue for A.Ys. 2007- 2008 and 2008-2009 should be restored to the file of A.O. for giving him an opportunity to verify the said additional evidence. Accordingly, we set aside the impugned order of Ld. CIT(A) on this issue for A.Ys. 2007-2008 and 2008-2009 and restore the matter to the file of the A.O. for deciding the same afresh in the light of additional evidence filed by the assessee before the Ld. CIT(A) after giving the assessee an opportunity of being heard. Ground Nos. 6 to 9 of Revenue’s appeals for A.Ys. 2005-2006 and 2006-2007 are dismissed and for A.Ys. 2007- 2008 and 2008-2009 are treated as allowed for statistical purposes. Addition on account of income surrender during search - At the time of hearing before us, the Ld. Counsel for the assessee has invited our attention to the copy of computation of total income placed at page-3 of the paper book as well as copy of Trading and Profit and Loss Account placed at page-4 of the paper book and submitted that although additional income of ₹ 30 lakhs only was offered in the computation of total income, the sum of ₹ 20 lakhs was separately offered by crediting the same as other income to the P & L Account. As rightly contended by the learned D.R. in this regard, this explanation was not offered by the assessee during the course of appellate proceedings before the Ld. CIT(A) in spite of specific opportunity afforded in this regard. She has contended that an opportunity may therefore be given to the A.O. to verify the explanation of the assessee. We find merit in this contention of the D.R. Accordingly, the impugned order of the Ld. CIT(A) on this issue is set aside and the matter is restored to the file of the A.O. with a direction to decide the same after verifying the claim of the assessee that the amount of ₹ 20 lakhs credited to P & L account as other income represented the part amount of ₹ 50 lakhs surrendered during the course of search. The A.O. shall decide this issue after giving the assessee proper and sufficient opportunity of being heard. The appeal of the assessee is treated as allowed for statistical purposes. - Decided against the assessee except in A.Y.2008-09 and revenue's appeals are partly allowed. 2015 (4) TMI 766 Dis-allowance u/s section 40(a)(i) - Non deduction of TDS u/s 194E - Payment made to Association of Tennis Professionals, a non-resident sports association - Addition on account of unclaimed liability - Dis-allowance of payment made to Tamil Nadu Tennis Association on account of non deduction of TDS - Disallowance u/s 40(a)(i) - Dis-allowance of expenses - reimbursement of expenses - Held that:- It is evident that section 194E read with section 115 BBA apply to payments made to a non-resident sports association or an institution. In the instant case, ATP is undisputedly a governing body of the world wide men’s professional Tennis Circuit responsible for ranking of its players and co-ordinating the Tennis tournament in the world. In such circumstances we are of the opinion that ATP is a non-resident sports institution and therefore Section 194E applies to the payments made by the assessee to the ATP. In the light of the above, the order of the ld CIT(A) is reversed and the order of the AO is restored. Unclaimed liability - At no stage it has been established that the liability to pay the above surplus has extinguished. Even if the amount cannot be repatriated to Canada, the amount belongs to IMG Canada and it can be spent or utilized in India as per the directions of IMG Canada.s the facts and circumstances of the present case are pari materia with the case of the appellant in A. Y .2001-02, and there being no change in the facts during the year under consideration vis-a-vis the facts of AY 2001-02 with respect to the amount/liability involved in this matter, for the reasons as discussed in the aforesaid order of the CIT(A)-XXIX, New Delhi this ground of appeal is allowed. Disallowance of payment made to Tamil Nadu Tennis Association on account of non deduction of TDS - The argument of the revenue, that the disallowance is warranted u/s 40(a)(i) of the Act is misplaced as payment is made to a resident and within India and not to a non-resident or a foreign company, which is a condition precedent to invoke section 40 (a)(i) of the Act. As such the AO had not even correctly invoked section 40(a)(i) of the Act. Thus the specific ground of the revenue is that the ld CIT(A) has erred in ignoring the fact that the provision of section 40(a)(i) of the Act talks not only talks about interests, royalty Fee For Technical Services but ‘other sum’ chargeable under the Act, is misconceived because section 40(a)(i) is neither been invoked nor can be invoked because payments are admittedly paid to a resident and even if disallowance can be invoked, it is only u/s 40(a)(ia) of the Act, wherein the expression ‘other sum’ is absent. Therefore we do not find any infirmity in the impugned order of the ld CIT(A) and so we dismiss the same. Disallowance of payment to All India Tennis Association on account of non submission of any proof of tax exemption - We find that the payment made to AITA a resident is to obtain necessary sanction/ approval for conducting Chennai Open Tournament is not covered under any of the specific TDS provisions under Chapter XVIIB of the Act. The AO in the order has not stated any of the section under which the assessee should have withheld taxes. Therefore for the reason stated with regard to similar payment to TNTA the sum paid to AITA cannot be disallowed u/s 40(a)(ia) or even u/s 40(a)(i) of the Act and so we do not find any infirmity in the order impugned in this respect and so the appeal of revenue on this ground is dismissed. Disallowance u/s 40(a)(i) - We have already held while deciding the appeal for Assessment Year 2005-06 that the disallowance made u/s 40(a)(ia) of the Act and now challenged u/s 40(a)(i) in Assessment Year 2006-07 is misconceived, we further hold that expenditure so incurred is not in the nature of royalty or fees for technical services. The payments have been made to TNTA for granting permission to conduct the tournament organized by the assessee. The said payments were of 20% share of income generated by sale of tickets. In such circumstances it cannot be said that such payments were for the use of logo of TNTA on the contrary the logo is used is that of ATP (U.S.A.). In the light of the above we had rejected the additional grounds preferred by the Revenue in Assessment Year 2006-07 and direct to delete the disallowances made in Assessment Year 2007-08 and Assessment Year 2009-10. As a result the grounds raised by the assessee in the appeal for Assessment Year 2007-08 and 2009-10 are allowed. Dis-allowance of expenses - reimbursement of expenses - We find that the AO has disallowed the expenditure on the ground that necessary evidences have not been produced on record. Whereas, the ld CIT(A) has followed the order for Assessment Year 2005-06 and sustained the disallowance. However, the ld AR has placed on record before us certain evidences to support the claim that expenses reimbursed were incurred wholly and exclusively for the purpose of the business of the assessee. The aforesaid evidence has not been specifically examined by any of the authorities below, therefore we consider it appropriate to remit the matter back to the file of AO, who shall decide the issue de-novo, after granting adequate opportunity to the assessee. Lest, it be stated here that such fresh examination be made, without being influenced by the disallowance made in Assessment Year 2005-06, as an independent year and the eligibility and allowability of the expenditure has to be thus examined independently in accordance with law. The ground raised by the assessee is allowed for statistical purposes. - In net, appeals are partly allowed in favour of assessee. 2015 (4) TMI 765 Allowability of expenditure claimed under the head "dealer's scheme and incentives" - TDS not deducted u/s 194H - Payment made to distributors of SIM card / recharge coupon on activation of SIM - Held that:- We find that the nature of payment made to the distributors of SIM card/recharge coupon on activation of SIMs arose before the hon'ble Delhi High Court in CIT v. Idea Cellular Ltd. [2010 (2) TMI 24 - DELHI HIGH COURT] and it was held that the same was in the nature of commission and was subject to TDS under section 194 of the Act. Further, the hon'ble Kerala High Court in Vodafone Essar Cellular Ltd. [2010 (8) TMI 691 - KERALA HIGH COURT]observed that the SIM cards/ recharge coupons were only for the purpose of rendering service to the subscriber of the mobile phone and the distributor was only a middleman arranging customers or subscribers for the service provider and payment made on account thereof for the supply of SIM card and recharge coupon was in the nature of commission and discount to distributors and exigible to tax deduction at source under section 194H of the Act. In the entirety of the facts and circumstances of the case, we find no merit in the plea of the assessee in this regard. Reliance placed by the learned authorised representative for the assessee on the relationship of principal to principal is misplaced in view of the ratio laid down on identical issue as in the present appeal by the hon'ble Delhi High Court in Idea Cellular Ltd. [[2010 (2) TMI 24 - DELHI HIGH COURT], the hon'ble Kerala High Court in Vodafone Essar Cellular Ltd. [2010 (8) TMI 691 - KERALA HIGH COURT] and the hon'ble Calcutta High Court in Bharti Cellular Ltd.[2011 (5) TMI 590 - CALCUTTA HIGH COURT]. In view thereof, we reverse the findings of the Commissioner of Income-tax (Appeals) and disallow the expenditure of ₹ 46,48,960 booked under the head "dealer's scheme and incentives" as not being an allowable expenditure for failure to deduct tax at source in view of the provisions of section 40(a)(ia) of the Act. - Decided against the assessee. 2015 (4) TMI 764 Admissibility of additional ground - Non-service of the notice u/s 143(2) for making reassessment u/s 147 - Addition of Income u/s 68 of Income Tax Act, 1961 - Held that:- We have heard both the parties and perused the relevant records especially the order passed by the Revenue Authorities along with the documentary evidence filed by the assessee attaching therewith the various documentary evidence supporting the claim of the assessee as well as the various decisions rendered by the Hon’ble Supreme Court on the legal issue in dispute. Regarding admission of this additional ground before us, which is challenging the very jurisdiction of the AO to pass the reassessment order, is no longer res-integra and it is well settled that an assessee can raise a legal ground at any stage of the proceedings as held by Apex Court in the case of Varas International [2006 (3) TMI 74 - SUPREME Court] and National Thermal Power Co. Ltd. [1996 (12) TMI 7 - SUPREME Court] and the Special Bench decision in the case of DHL operators [2007 (3) TMI 420 - ITAT MUMBAI]. Keeping in view the facts and circumstances of the present case and the arguments raised by the ld. counsel, we are of the view that the issue raised in additional ground regarding the non-issuance of notice u/s. 143(2) of the Act which goes to the root of the matter, needs to be admitted. We are of the view that the AO has not issued notice u/s. 143(2) of the Act which is mandatory. We are also of the view that in completing the assessment u/s. 148 of the Act, compliance of the procedure laid down u/s. 142 and 143(2) is mandatory. As per record, we find that there was no notice issued u/s. 143(2) of the Act which is very much essential for reassessment and it is a failure on the part of the AO for not complying with the procedure laid down in section 143(2) of the Act. If the notice is not issued to the assessee before completion of the assessment, then the reassessment is not sustainable in the eyes of law and deserves to be cancelled. In view of above facts and circumstances of the present case, the issue in dispute raised in additional ground relating to non issue of the mandatory notice u/s. 143(2) of the Act is decided in favour of the assessee and we hold that the impugned assessment order dated 31.12.2009 passed u/s. 147/143(3) of the Act by the AO as invalid. Our view is supported by the various judgments of the Hon’ble Supreme Court, and Hon’ble Jurisdictional High Court. Refer cases are Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA], M/s Silver Line [2014 (10) TMI 141 - ITAT DELHI], Aligarh Auto Centre [2013 (9) TMI 332 - ITAT AGRA]. In the result, the Cross Objection filed by the Assessee is allowed. Since the assessment order is held to be void abnitio, the other grounds raised by the assessee in the Cross Objection have become academic in nature, hence, the same are not being adjudicated upon. - Decided in favour of assessee. 2015 (4) TMI 763 Reopening of assessment - Certain requisite conditions for claiming deduction not examined by the Ao - Held that:- In the initial assessment when the matter has gone upto the Tribunal on the issue of claim of deduction under section 80- IB(10) of the Act, it cannot be assumed that the issue of requisite conditions for claiming deduction under section 80-IB(10) of the Act was not examined by the appellate authorities including the Tribunal. Therefore, once the appellate authorities have applied their mind to a particular issue, the order of the Assessing Officer will merge with the orders of the appellate authorities. We have also carefully examined the second proviso to section 147 of the Act, according to which the Assessing Officer cannot assess or re-assess such income which is subject matter of appeal, reference or revision. Since the claim of deduction under section 80-IB(10) of the Act is sub-judice before the Hon'ble High Court in the Revenue’s appeal, the reopening of the same issue is not possible. Since the issue of claim of deduction under section 80-IB(10) of the Act was thoroughly examined during the course of initial assessment, the reopening of assessment on the same issue on a plea that certain requisite conditions for claiming deduction under section 80-IB (10) of the Act was not examined by the Assessing Officer, cannot be called to be a valid reopening, as the claim of deduction under section 80-IB(10) of the Act have been thoroughly examined by the Assessing Officer as well as the appellate authorities. We, therefore, find ourselves in agreement with the order of the ld. CIT(A) and we confirm the same. We accordingly confirm the orders of the ld. CIT(A) in both the assessment years i.e. 2005-06 and 2004-05 and dismiss the appeals of the Revenue. - Decided against the revenue. 2015 (4) TMI 762 Rejection of books of account - Discrepancies in purchases and sales - Estimation of Income - Dis-allowance of depreciation - Assessee argued that its books of accounts had been properly audited' and nofault has been found with the audit - Held that:- the way in which the books of accounts the appellant had been written, it is impossible to either determine purchases or the sales or the expenses. The books are not amenable any sort of verification and the entries mentioned are wrong - rejection of books of accounts is absolutely in order.. Estimation of income - Held that:- Following the case of M/s Sujana Towers Ltd. [2014 (7) TMI 805 - ITAT HYDERABAD] and considering totality of facts and circumstances of the present case and the specific plea of the assessee, in the interests of justice in this case also, we are inclined to set aside the impugned order of the CIT(A) and restore the matter to the file of the Assessing Officer with similar directions. We do so and direct the Assessing Officer to re-examine the matter, after giving reasonable opportunity to the assessee to produce the books of account and other information, and re-determine the income accordingly. The directions given in the order of this Tribunal in the case of M/s Sujana Universal Industries Ltd. and M/s Sujana Metal Products Ltd. [2015 (4) TMI 580 - ITAT HYDERABAD] dated 13.8.2013, extracted above, apply mutatis mutandis to this case as well. Assessee is directed to cooperate with the Assessing Officer and comply with the notices, and the Assessing Officer is directed to complete the assessment afresh in accordance with law after giving reasonable opportunity of hearing to the assessee.” As the issue under consideration is materially identical to the one decided by the coordinate bench in case of M/s Sujana Towers Ltd. [2014 (7) TMI 805 - ITAT HYDERABAD], we set aside the order of the CIT(A) and restore the matter to the file of AO with a direction to decide the same in the light of the said decision of the coordinate bench. The ground raised by assessee as well as by the revenue are allowed for statistical purposes. We have heard the submissions of the parties and perused the material on record as well as orders of the revenue authorities. Since the CIT(A) has given a finding that the assets were non-existent, we set aside the issue to the file of the AO to verify the existence of the computers and allow the claim of depreciation. Accordingly, this ground is allowed for statistical purposes. 2015 (4) TMI 761 Reopening of assessment - Treatment of Interest income before and after cancellation of NBFC certificate - Dis-allowance under section 14A of the Income Tax Act,1961 - Held that:- We notice that the NBFC certificate has been cancelled only on 7.3.2005. Hence in the financial year relating to the AY 2004-05 and in the substantial part of financial year relating to the AY 2005-06, the assessee was holding NBFC certificate. Hence, the reason of the Assessing Officer for reopening of the assessment, in our view, fails in these two years. Accordingly, we are of the view that the re-opening of assessment of AY 2004-05 and 2005-06 are bad in law. The re-opening of assessment of AY 2004-05 is also liable to be cancelled in view of the first proviso to sec. 147 of the Act, since the assessment has been reopened after the expiry of four years from the end of the assessment year after completion of assessment u/s 143(3) of the Act. There is no allegation on the assessee that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Accordingly, we set aside the order of Ld CIT(Appeals) on the issue of re-opening of assessment for AY 2004-05 and 2005-06 and accordingly quash the assessment orders passed for the above said two years. We further notice that the assessee has received interest income only from M/s South India Investments & Associates during the financial years relevant to the assessment years 2006-07 and 2007-08. Thus, it is seen that the assessee has deposited money with only one company, which happens to be a group company. Hence, on merits also, it is seen that the assessee cannot be considered to be carrying on NBFC business. Hence, in our view, there is no justification for the assessee to claim the interest income as its “business income”. As submitted by Ld D.R, the assessee has set off brought forward loss against the interest income, by offering the interest income as its business income. If the interest income is assessed under the head income from other sources, then the assessee would not be entitled to set off the brought forward business loss against the income declared under the head Income from other sources. In that case, the total income of the assessee would go up by the amount so set off. Hence, in our view, there was reason with the AO to believe about escapement of income in AY 2006-07. Accordingly we uphold the re-opening of assessment of that year. In AY 2009-10, the assessee has also urged one more ground relating to the computation of disallowance to be made under Rule 8D(2)(iii) of the I.T Rules. The Ld A.R contended that the average value of investments should have been computed by considering only those investments that have actually yielded dividend income. However, when it was pointed out that the relevant rules uses the expression “does not or shall not”, meaning thereby the relevant provision has intended to include all investments, the Ld A.R agreed to the same. Accordingly, this ground of the assessee is also dismissed. - Appeals filed by the assessee for Assessment years 2004-05 and 2005-06 are allowed and the appeals filed for AY 2006-07 and 2009-10 are dismissed. 2015 (4) TMI 760 Addition on account of accrued interest on loan classified as Non performing Assets - RBI prudential norms restricts accrual of interest on NPAs - Cooperative banks are covered under provisions of sec.43D - Held that:- In the case of Karnataka High Court in Canfin Homes Ltd. [2011 (8) TMI 178 - KARNATAKA HIGH COURT], it was held that the definition of non-performing asset shows an asset becomes non-performing when it ceases to yield income. Non-performing asset is an asset in respect of which interest has remained unpaid and has become past due. Once a particular asset is shown to be a non-performing asset, then the assumption is it is not yielding any revenue. When it is not yielding any revenue, the question of showing that revenue and paying tax would not arise. As is clear from the policy guidelines issued by the National Housing Bank, the income from non-performing asset should be recognised only when it is actually received. That is what, the Tribunal held in the instant case. Therefore, the contention of the revenue that in respect, of non-performing assets even though it does not yield any income as the assessee has adopted a mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. In Karnavati Co-op. Bank Ltd.[2011 (11) TMI 367 - ITAT AHMEDABAD], the ITAT Ahmedabad Bench held that provisions of Sec.43D of the Act are applicable to Cooperative Banks also. In view of the same, respectfully following the decision of the Hon’ble Jurisdictional High Court in Canfin Homes Ltd., the Revenue’s appeal is dismissed. - Decided against the revenue. 2015 (4) TMI 759 Deduction available to Co-operative society - Deduction not available to Co-operative bank - Credit co-operative bank vs credit co-operative society - Held that:- From the clarification issued by CBDT, it can be gathered that sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift & Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a cooperative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenue’s contention that section 80P(4) would exclude not only the co-operative banks other than those fulfilling the description contained therein but also credit societies, which are not cooperative banks. In the present case, respondent assessee is admittedly not a credit co-operative bank but a credit co-operative society. Exclusion clause of subsection( 4) of section 80P, therefore, would not apply. - Decided against the revenue. 2015 (4) TMI 758 Revision of assessment order - Denial of exemption under Section 54EC - Prospective amendment in Section 54EC w.e.f. 01-4-2015 - Held that:- Section 54EC has been amended by the Finance Act, 2014 w.e.f. 01-4-2015 to provide that the Investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. Also explanatory memorandum to Finance Bill, 2014 explains that the wordings of the proviso have created an ambiguity. As a result the capital gains arising during the year after the month of September were invested in the specified asset in such a manner so as to split the investment in two years i.e., one within the year and second in the next year but before the expiry of six months. This resulted in the claim for relief of one crore rupees as against the intended limit for relief of fifty lakh rupees. It can be seen from the above statutory amendment and the explanatory memorandum to Finance (No.2) Bill, 2014 that the legislature has accepted the ambiguity in the language of the proviso, but has amended the law with prospective effect i.e., from A.Y. 2015-16. It is therefore clear that for AY prior to AY 2015-16, on interpretation of the provisions it is possible for an Assessee claim deduction of ₹ 1 Crore by investing ₹ 50 lacs in each of the financial years, but within 6 months from the date of transfer. In the given circumstances, it cannot be said that the view entertained by the AO was not a possible view. In the circumstances, the jurisdiction u/s.263 of the Act could not have been exercised by the CIT. - Decided in favour of assessee. 2015 (4) TMI 757 Addition on account of unexplained credit u/s 68 - Concealment penalty u/s 271(1)(c) of the Income Tax Act, 1961 - Non substantiation explanation submitted during the assessment proceedings - School fees paid by close relatives i.e. Mother-In-Law - Held that:- We have heard both the parties and their contentions have carefully been considered. It is a case where the assessee had submitted the explanation during the assessment proceeding itself and the source of payment of school fee was mentioned to be payments made by mother-in-law of the assessee. Thus, the persons who has paid the money is closely related to the family of the assessee. The AO has confirmed this addition for the reason that assessee failed to prove the genuineness of the source of payment. However, it is not the case of AO that the contention of the assessee that the source of payment was mother-in-law is not correct. The Tribunal also upheld the addition by relying upon assessment year 2005-06 and the addition has been confirmed for the reason that source and genuineness of the transaction was not accepted in A.Y 2005-06. It is also observed that assessee did not file corroborating evidence. Considering these facts and circumstances of the case, though the non-substantiation of explanation during the course of assessment proceedings may be a good ground for making the addition but while levying the penalty, there should be some material on record to suggest that the source which was explained by the assessee was not true or correct. It is not a case where any their person not related to the assessee has paid the school fee of the children, but a very close relation has paid the said amount. Therefore, we are of the opinion that it is not a very fit case for levy of concealment penalty. Moreover, as per decision of Hon’ble Bombay High Court in the case of Nayan Builders & Developers [2011 (3) TMI 46 - ITAT MUMBAI] when a question of law has been admitted on the impugned addition, then no case is made out for imposition of penalty. - Decided in favour of assessee. 2015 (4) TMI 756 Treatment of gain on sale of shares - Business income or Capital gains - No borrowings to fund investment - Held that:- On going through the order of the CIT(A) and the material placed on record, we find that the CIT(A) has taken into consideration the facts as well as legal position and the circulars of the CBDT, but did not interpret the same judiciously, as per the apparent facts of the case. Since the number of transactions were 48 in the entire year, this according to the CIT(A) was high in the case of the investor. This view by the CIT(A) baldly sustaining the observation of the AO. When we look into the facts, we find that the assessee is neither holding any SIT portfolio, nor was he indulging into sale and purchase on a regular interval basis. We also find that the department has accepted the status of the assessee as that of an investor in the preceding years as well as in the subsequent years. This shows the consistency of the approach by the assessee as well as by the department. However, in the instant years, the revenue authorities did not specify anything to suggest that somehow the facts were different, or conduct of the assessee was so different, to hold differently. We find ourselves gainfully supported by the decision of Special Bench of the ITAT at Mumbai in the case of Gopal Purohit [2009 (2) TMI 233 - ITAT BOMBAY-G] , which has since been approved by the Hon’ble Bombay High Court, dismissing the appeal filed by the department u/s 260A, reported in [2010 (1) TMI 7 - BOMBAY HIGH COURT], wherein the basic ratio as laid down was in the case of consistent approach to be adopted in case of separate portfolios maintained by the assessee. In such a circumstance, it would be erroneous to sustain the orders of the revenue authorities. In the course of proceedings before us, the AR had pointed out that the assessee had neither taken any loans nor it had any employees nor it conducted its activities in an organized and in any continuity. Besides this one of the most important factors is the intention the assessee. The intention has to be seen at the time of acquisition of shares, i.e. whether to hold or dispose off. This has to be gathered from the actual conduct of the assessee while dealing with the shares, We are supported by the decision of the Hon’ble Supreme Court in the case of CIT vs Madangopal Radheylal [1968 (9) TMI 14 - SUPREME Court]. In the instant case the holding period is shown to be 86 days in STCG and in excess of 16 months in LTCG, this by itself shows the intention of the assessee at the time of acquisition of shares and subsequent conduct of the assessee. Taking into the surrounding circumstances as well, we are of the opinion that the revenue authorities committed an error to treat the gains as business income instead of capital gains. - Decided in favour of assessees. 2015 (4) TMI 755 Unexplained share application money - Ao makes addition on general basis, no detailed enquiry undertaken by him - Profits from share trading - Business income or Short term capital gain - Held that:- No inquiries were conducted by AO to find out the genuineness of the transactions and creditworthiness of the companies who had applied for the share application money in the assessee company. We find considerable merit in the argument of ld. counsel for the assessee that merely because the directors were not produced the addition could not be made in view of the decision of Hon’ble Delhi High Court in the case of Victor Electrodes Ltd. [2010 (5) TMI 62 - DELHI HIGH COURT] and also in the case of Nova Promoters [2012 (2) TMI 194 - DELHI HIGH COURT] Hon’ble Delhi High Court had clearly distinguished between the cases where AO had carried out detailed inquiry and then arrived at a finding regarding accommodation entries and those cases where AO did not carry out any inquiry and merely made addition on general basis. The inquiry for arriving at a proper conclusion is a sine qua non and that cannot be dispensed with by making general observations. We find that the decision in the case of Goel Sons Golden Estate P. Ltd. [2013 (4) TMI 571 - DELHI HIGH COURT] is squarely applicable to the facts of the present case. Also refereed case - Fair Invest LTd. [2012 (12) TMI 170 - DELHI HIGH COURT]. Profits from share trading - The AO has categorically observed that assessee had not given any reply. However, at page 23 of the PB, the assessee refers to the reply filed by it before the AO. We find that before ld. CIT(A) the assessee had advanced detailed submissions, but there is no reference to the reply filed before AO dated 15-7-2008. Ld. CIT(A) has also not recorded any finding on this aspect. Therefore, we restore this issue to the file of AO to decide the issue de novo after considering the assessee’s submissions. Ground is allowed for statistical purposes. - Decided partly in favour of revenue. 2015 (4) TMI 754 Apportionment of software development expenses in ad hoc manner in export and domestic sales - Held that:- The assessee challenges apportionment of the impugned software development expenditure into domestic and export divisions @ 50:50 each by the Assessing Officer and affirmed in the lower appellate order. It files a correspondence from Software Technology Parks of India dated 29.03.2000 granting 100% export oriented permission under STP Scheme, its letter dated 16.12.2008, details of salary costs in the two divisions for financial year ended 31.03.2002 and its working, Auditors’ Report comprising balance sheet of the impugned assessment year, trading and Profit & Loss Account of the sales with accounting policies, notes on accounts, entries in export and domestic divisions and seeks to reverse the impugned allocation. The Revenue supports the lower authorities orders. The case file reveals that these documents have nowhere been specifically discussed in reassessment or in the lower appellate order. The dispute before us is essentially a factual one, i.e. whether or not the impugned allocation of software development expenditure in export and domestic sales division is justified. The Assessing Officer has based his findings on the sales quantities of the software to observe that the very software has been sold in domestic and export market. The assessee’s books treating the impugned expenditure only for domestic division have nowhere been rejected. Therefore, we deem it appropriate that the Assessing Officer needs to re-examine the entire issue afresh as per law. The assessee shall be at liberty to produce all its relevant details within three effective opportunities of hearing. We find that a lot of water has flown downstream since the end of the relevant assessment year 2001-02. It would be appreciated if the learned Assessing Officer passes his consequential order within a period of four months from getting copy of this order. - Matter remanded back. 2015 (4) TMI 753 Treatment of income from trading in shares - Business income or Capital gain - Principle of res judicata - Held that:- The AO has not brought out anything to controvert this fact that the sale and purchase of shares by the assessee was not a regular business activity and therefore profit derived by the assessee from the same cannot be treated to be business income from profit. From Paper book page no. 13 to 15, we note that the assessee has shown investment in shares as in AY 2005-06, 2006- 07 and 2007-08 and the same has been shown at cost and not as stock-intrade which is valued at cost or market price whichever is lower. From balance sheet page no. 13, we also note that in AY 2007-08, the capital brought forward by the assessee was ₹ 1,19,66,247 whereas investment in shares was of ₹ 59,94,734. At the same time from Paper book page no. 3 to 6, we also observe that short term capital gain of ₹ 79 lakh was earned from 25 scrips only and the profit declared as capital gain was earned from delivery based purchase and sale of shares and delivery was taken after making full payment for such transaction. We also note that as per Paper Book page no. 3 and 5 of the assessee, short term capital gain was earned out of 3 scrips which only comes to 93.62% of the total profit from purchase and sale of shares and major part of the capital gain was earned from the shares held by the assessee for more than 30 days. The AO has not brought out any fact or material to controvert or to demolish above facts supporting the case of the assessee. We are in agreement with this legal contention of the ld. DR that principle of res judicata does not apply to the taxation proceedings but at the same time, we cannot ignore this legal proposition that the rule of consistency has to be followed in good conscience and bona fide until and unless changed facts and circumstances are found in the subsequent assessment yeas. As we have noted earlier that the assessee has shown shares in its balance sheet during the preceding assessment years as an investment and the same has been valued at cost of purchase. We are inclined to hold that the AO was not justified in treating the income from purchase and sale of shares as business income ignoring the treatment given by the assessee in his books of accounts and financial statement filed along with the return of income and in the light of above noted facts, the CIT(A) was right in following the principle of consistency and reach to a logical conclusion that the income accrued to the assessee from purchase and sale of shares was capital gains. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the impugned order and we uphold the same. Accordingly, sole ground in both the appeals of the revenue being devoid of merits is dismissed. - Decided against the revenue. 2015 (4) TMI 752 Determination of Arm length Price (ALP) in International transactions - Rejection of comparables, resulting determination of higher operating profit - Comparable should be similar to the tested party's function - Held that:- We have considered the rival submissions and have perused the record of the case. There is no gain saying that unless the comparable is functionally similar to the tested party’s function, the same cannot be included in the list of comparables for computing ALP as per the provisions of Rule 10B(2)(b). Ld. DRP while considering the comparable Wapcos, inter alia, observed that neither the department nor the assessee has found any consultancy comparables in the tourism sector. Therefore, it becomes imperative that only those comparables should be taken into consideration which have close similarity with the functions carried out by tested party. Accordingly, in view of above discussion, we direct the AO to exclude the above three comparables from the list of comparables selected by him. Ld. counsel pointed out that after exclusion of above three comparables from the list of comparables, the PLI would come within (+)(-) 5% range and, therefore, this ground has become academic. - Relating to levy of penalty, is premature and stands rejected accordingly.he charging of interest u/s 234A/B/C is consequential. The AO shall recalculate the charging of interest, if any, while giving effect to appellate order. - Decided partly in favour of assessee. 2015 (4) TMI 751 Dis-allowance of expenditure related to raw material discarded, miscellaneous expenses , expenses related to manufacturing, production and event management expenses, administrative expenses etc. on adhoc basis - Held that:- We have considered the rival contentions and found that assessee has not furnished any detail with regard to claim of deduction on account of raw material discarded. The ld. CIT(A) has also given opportunity to the assessee during remand proceedings but the assessee could not furnish any detail to the satisfaction of A.O. After considering the remand report, the ld. CIT(A) has confirmed the disallowance vide para 14.5 of his appellate order which has not been controverted by the ld. A.R. by bringing any positive material on record. Accordingly we do not find any reason to interfere with the orders of ld. CIT(A) confirming the disallowance of ₹ 55,43,439/- on account of raw material discarded. Accordingly ground No. 1 of assessee’s appeal is dismissed. We have considered the rival contentions and found from record that out of total claim of ₹ 28.91 lacs on account of miscellaneous expenses, the A.O. has disallowed an adhoc sum of ₹ 10 lacs out of which the ld. CIT(A) has confirmed the disallowance of ₹ 5 lacs. However, while sustaining the disallowance, the ld. CIT(A) observed that the A.O. has not pointed out any specific requirement because of which he has doubted the genuineness of expenditure, therefore, keeping in view the fact that the expenditure was not supported by necessary supporting evidence, the ld. CIT(A) has confirmed the disallowance to 50%. We do not find any infirmity in the order of ld. CIT(A), accordingly, the disallowance of ₹ 5 lacs confirmed by the ld. CIT(A) is hereby upheld. Accordingly ground raised by assessee & Revenue are dismissed. We have considered the rival contention and found that a categorical finding has been recorded by the ld. CIT(A) to the effect that at no stage the A.O. had any material on record or any verification report for quantification of probable cash expenditure above ₹ 20,000/- which would be hit by mischief of section 40A(3) of the Act. The ld. CIT(A) further found that even the tax audit report did not include any list of cases where there was expenditure above ₹ 20,000/- which attracts provisions of section 40A(3) of the Act. Since the findings recorded by the ld. CIT(A) has not been controverted by the ld. D.R. by bringing any positive material on record, we do not find any reason to interfere with the order of ld. CIT(A) deleting the disallowance made u/s 40A(3) of the Act. It was argued by the ld. A.R that the assessee has filed return at a loss of ₹ 38.33 crores, therefore there is no reason for claiming any bogus expenditure. He further contended that full details of expenditure along with books of account and supporting bills/vouchers were placed before the A.O. during remand proceedings, wherein no specific instance was pointed out by A.O. regarding non-genuineness of expenses or non-availability of supporting bills and vouchers. Accordingly it was submitted that no disallowance should be sustained. In respect of manufacturing expenses, following the same reason mentioned above, restrict the disallowance out of manufacturing expenses at ₹ 15 lacs. - Revenue appeal dismissed and appeal of the assessee is partly allowed. 2015 (4) TMI 750 Deletion of addition u/s 68 of Income Tax Act, 1961 - Preceding year decision was in favour of assessee - Treatment of expenditure on Land development - Disallowance of expenses - Held that:- The assessee has failed to establish that the goods were in fact purchased on credit in respect of the alleged credit of ₹ 1,05,01,948/- for which addition was made by the Assessing Officer because the assessee could not even furnish the confirmation from them or their addresses or the party wise outstanding amount with period, we are of the considered opinion that the Tribunal decision in assessee’s own case for assessment year 2005-06 [2015 (4) TMI 747 - ITAT LUCKNOW] and the judgment of Hon'ble Allahabad High Court followed therein having been rendered in the case of Pancham Das [2006 (8) TMI 582 - ALLAHABAD HIGH COURT] are not applicable and therefore, the assessee do not get any help from these judgments in the facts of the present case. We also find that it is noted by CIT(A) in Para 5.5.2 of his order that the creditors outstanding as on 31/03/2006 were paid at the end of the financial year, which means that even after the end of the present accounting year i.e. financial year 2005-06, the creditors were admittedly outstanding for one full year and it may be that the creditors were outstanding for a very long period of time. We fail to understand that whether small raw hide suppliers can afford to provide this long credit and hence, this claim cannot be accepted in the absence of confirmation from supplier and their addresses. We, therefore, reverse the order of CIT(A) on this issue and restore that of the Assessing Officer. - Decided in favor revenue. Expenditure on Land development - We find that a clear finding is given by CIT(A) that the disallowance was made by the Assessing Officer on estimated basis without pointing out any specific item of purchase or expenditure of unverifiable nature or without proper supporting bills and vouchers. This finding of CIT(A) could not be controverted by Learned D.R. of the Revenue and therefore, we do not find any reason to interfere in the order of CIT(A). Accordingly, these grounds are rejected. - Decided partly in favour of revenue. 2015 (4) TMI 749 Deletion of penalty levied u/s 271AAA - post search assessment - undisclosed income - disclosure made by the assessee for undisclosed income - Conditions for waiver of penalty fulfilled - AO accepted the disclosed income & Assessee paid the tax with interest - Held that:- We find that CIT(A) while deleting the penalty has noted that the conditions provided u/s. 271AAA(2) are required to be fulfilled so as to grant immunity to the asssessee from penalty. He has further noted that all the three conditions have been fulfilled by the assessee and further relying on the decision of Hon’ble Gujarat High Court in the case of Mahendra C Shah [2008 (2) TMI 32 - GUJARAT HIGH COURT] and Radha Krishna Goel [2005 (4) TMI 47 - ALLAHABAD High Court] had held that assessee had made disclosure of unaccounted income while recording statements u/s. 132(4) of the Act and had also paid the tax with interest. He has further given a finding that the AO in the assessment order passed u/s. 143(3) of the Act had accepted the disclosed income declared by the assessee and no addition on account of undisclosed income has been made by the AO. He has further given a finding that AO was satisfied about the disclosed income offered in the return of income and the manner in which the income was derived. We thus find that Ld. CIT(A) by a detailed and reasoned order deleted the penalty, Revenue has not brought any material on record to controvert the findings of the CIT(A) or how the ratio of decisions relied by ld. CIT(A) not applicable to the present facts. In view of the aforesaid facts, we find no reason to interfere with the order of Ld. CIT(A). - Decided against the revenue. 2015 (4) TMI 748 Treatment of rental income by giving counters/spaces/shops in Retail Mall - Income from House Property vs Profits & Gains of Business - Dis-allowance of various expenses - Allowability of interest paid to partners u/s 24(b) - Additional ground submitted before ITAT- Held that:- The issue in the present case is as to whether the income earned from letting out of counters, spaces is to be considered as “business income” or “Income from house property”. We find that ld. CIT(A) after considering the detailed submissions of the Assessee has reached to a conclusion that the activity of giving counters/spaces/shops was never taken up as a business venture but was to earn rent. With respect to the allowability of interest paid to partners as interest allowable u/s. 24(b), we find that ld. CIT(A) has noted that interest allowable u/s. 24(b) cannot be equated with interest allowable u/s. 36(1)(iii) of the Act. Before us, ld. A.R. has relied on the decision in the case of Neha Builders Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT]. However, we find that the ratio of the aforesaid decision is not applicable to the facts of the case because the rental income which was earned from the property in case of Neha Builders was held as “stock in trade” whereas in the case of Assessee, A.O has noted that the property was shown as “capital work in progress” and not as “stock in trade” - Taxable as income from House property - Decided against the assessee. In the case of Sane and Doshi Enterprises [2015 (4) TMI 707 - ITAT MUMBAI], we find that expenditure for claim of deduction u/s. 24(b) was allowed by following the decision of the Tribunal in assessee’s own case for earlier years. Considering the aforesaid facts, we are of the view that the decisions cited and relied upon by the ld. A.R. are not applicable to the present case. Further deduction u/s. 24(b) is allowable when the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital. In the present case no material has been brought on record to demonstrate that the borrowed capital has been used for the acquisition of property. Considering the totality of the aforesaid facts, we find that no reason to interfere with the order of ld. CIT(A) and thus the grounds are dismissed. - Deduction of interest not allowed - Decided against the assessee. Set off of brought forward business loss - With respect to the additional ground we find that this ground has been taken before us for the first time and was not taken before ld. CIT(A) and therefore ld. CIT(A) had no occasion to examine the issue. In view of these facts, we are of the view that the additional ground taken by the Assessee needs to be examined at the end of ld.CIT(A). We therefore remit the issue to the file of ld. CIT(A) to decide the ground on merits after considering the submissions of the Assessee and in accordance with law. Needless to state ld. CIT(A) shall adequate opportunity of hearing to both the parties. Before the CIT(A), the assessee shall be free to produce additional documents, if so desired, subject to the fulfillment of the requirement under Rule 46A of the Income Tax Act. In the result, the ground of Assessee is allowed for statistical purposes. - Decided partly in favour of assessee. Customs 2015 (4) TMI 771 Benefit of Notification No.64/88-Cus. dated 1.3.88 - medical equipment imported without payment of duty on the basis of customs duty exemption certificate issued by DGHS - The said exemption certificate was withdrawn by DGHS vide letter dated 30.8.2000 for non-fulfilment of the conditions of grant thereof - Scope of paragraph 1 and / or paragraph 2 - Held that:- For hospitals covered under paragraph 2 of the said Table if the duty exemption certificate is withdrawn by the DGHS, then on account of the continuing liability in the wake of Supreme Court s judgement in the case of Mediwell Hospital & Health Care Pvt. Ltd. (1996 (12) TMI 51 - SUPREME COURT OF INDIA), the duty liability would arise. We have perused the impugned order-in-appeal. The Commissioner (Appeals) has recorded a finding that the appellants are a charitable hospital run by a charitable trust and substantially run and funded by charitable organisation in the name of Moradabad Charitable Trust Health Research Centre as recognised by the DGHS to the Government of India and that this fact is clearly admitted in the Show Cause Notice as well as in the impugned order. It is nowhere admitted therein that M/s Moradabad Charitable Trust & Health Research Centre has been so certified/approved by the Ministry of Health and Family Welfare. Thus, the said observation of the Commissioner (Appeals) is devoid of any sustainable basis. Quite to the contrary, the letter of DGHS dated 30.8.2000 in terms of which the CDEC issued to the appellants was withdrawn as cancelled specifically noted that the appellants were issued CDEC as a hospital falling under para 2 of the Table attached to notification No. 64/88-Cus and that such hospital were required to fulfil the conditions contained in paras 2 (a), (b) & (c) of the Table in the said notification. - Thus, it is evident that DGHS had given the respondents CDEC treating their hospital as falling under paragraph 2 of the Table and not under the paragraph 1 thereof. - no hesitation to hold the impugned order in appeal as unsustainable and accordingly set aside the same - Decided in favour of Revenue. 2015 (4) TMI 770 Duty drawback claim - Misdeclaration of quantity and value of goods - Held that:- There was violation of provision of section 113(i) and 113(ii) of Customs Act, 1962 since there was a misdeclaration of the quantity and value of the goods with material departure to the particulars relating to quantity and value of the goods being attempted to be exported under drawback claim not corresponding in material particular with the information furnished in the export documents. Revenue s contention that appellant acted deliberately cannot be ruled out for the reason that an exporter who has not remitted higher amount of foreign exchange to this country does not expect higher quantity of goods with higher value. Accordingly, confiscation of the goods was justified. Since the goods were under drawback claim, imposition of redemption fine is also warranted under law. - Commissioner did not record his finding on redemption fine - Therefore it is desirable to work out the same in the interest of justice. He has not recorded what was the difference in value between original shipping bill and revised shipping bill. Therefore, to determine appropriate quantum of redemption fine and penalty imposable, matter is remanded to him. - Decided partly in favour of assessee. 2015 (4) TMI 769 Waiver of pre deposit - 100% EOU - Diversion of inputs to domestic market - Held that:- EOP granted to the Appellant is extended upto 31/03/2009 which is further extended to another six months. In the meantime, the company became sick and got registered with BIFR and their application for further extension of EOP is pending before the DGFT. As these facts were not before the Ld. Commissioner and the plea of the applicant/appellant that the entire fact was in the knowledge of DGFT and it is not necessary to meet the export obligation out of the inputs procured against the license issued to them, require verification and further deliberation. - Matter remanded back - Decided in favour of assessee. Corporate Laws 2015 (4) TMI 768 Issue and allotment of equity shares - Charges of Oppression and mis-management u/s 397 & 398 of the Companies Act, 1956 - Held that:- Fact of the matter is Sajal moved writ after writ to stall kamal getting shares issued to the medical equipment, and he has remained successful in halting shares going to Kamal to the equipment till date from 1996. I should not now say separately when the Honorable Supreme Court itself held that Hospital was inaugurated with the equipment come from Kamal, in fact, the company started making profits with the same equipment that come from Kamal. The capital that has come into the company in the form of equipment is subsumed in rendering services and bringing in profits to the company. One thing is clear that the value of the equipment could not be converted simultaneously into capital for only one reason that is for want of RBI approval. That approval in no time came to the company for conversion of ₹ 3.5 crores into capital on non-repatriation basis. But by that time, Sajal already played his cards well by ousting Kamal from the company and made allotments to himself making himself as majority, not only that, though RBI approved issual of 30,55, 329 shares to Kamal in consideration to the secondhand equipment supplied to the Company on non repatriate basis, till date shares were not issued to Kamal, Since the Honorable Supreme Court held that Sajal acted prejudicial to the interest of Kamal and his acts are oppressive against Kamal, since Kamal is allowed to continue to act as MD of the Company, and pass resolution within 21 days in accordance with law. Kamal, in pursuance of it, passed a resolution on 16-9-2006 allotting shares to him in consideration to the equipment he supplied to the company in the years 1994 and 1995. This is what the truth is. As to miscellaneous allegations leveled by Sajal, I believe all these allegations were made so as to say that allotment is not a solitary act prejudicial to the interest of Sajal, there are other acts prejudicial to the interest of the company, but on seeing the allegations and counter allegations i don't find any of them worth to be considered as allegations to be tested on the fulcrum of 397 and 398 of the Act, therefore they have not been separately discussed, but on seeing the pleadings and defense to them, this Bench hereby held there is no merit in the allegations to label them as allegations falling under sections 397 & 398 of the Act 1956, therefore those issues were not considered for discussion. I must say that courts are under no obligation to discuss the allegations not directly relevant to be taken up as issues for discussion; hence, the miscellaneous allegations are held as issues not worth for discussion under section 397 & 398 of the Companies Act 1956.For there being no stay in WP 1157/2004 pending before Honorable High Court of Calcutta, on seeing several years passed, especially for having Honorable High Court already dismissed writ petition against the Company, I believe this Bench has jurisdiction to decide the issue of allotment subject to the outcome of writ petition, accordingly I have decided it. So, the allotment of 30,55,329 shares to Dr. Kamal Kumar Datta on 16-9-2006 is valid subject to the outcome of WP 1157/2004 pending before the Honorable High Court of Calcutta. Money brought in by Mr. Sajal Datta towards allotment of shares on 12-3-1996 and 24-7-1996, shown as 'disputed liability' in the books of the company shall be returned to Mr. Sajal Datta along with whatever interest accrued upon it till date since 11-8-2006 within 90 days from the date of this order. - Accordingly petition disposed of. Service Tax 2015 (4) TMI 783 Rejection of refund claim - Notification No. 9/09 - Bar of limitation - CHA and scientific and engineering services - Held that:- Tribunal allowed the refund claim holding that section 11 B of the Act, the appellant is entitled to claim the refund of services received in SEZ. I further find that for the subsequent period in appellant's own case refund claim was allowed holding refund claim filed within the time and the services received in SEZ is entitled to claim refund as the service tax has been paid. In view of this observation, I hold that appellant is entitled to refund claim on both the issues relying on the decisions of this Tribunal in the case of Tata Consultancy Service Ltd. (2012 (8) TMI 500 - CESTAT, MUMBAI) - Accordingly, the impugned order is set aside - Decided in favour of assessee. 2015 (4) TMI 782 Availment of CENVAT Credit - Input Service Distributor - Availment of credit on invoices pertaining to others - Held that:- Regulatory measure of registration is one of the essential condition for input service distribution to prevent wrongful claim of Cenvat credit by a third party in respect of the invoices issued by the service provider in the name of another Unit of the appellant. Prima facie , no substantial evidence was led by appellant to demonstrate integral connection between the services provided and job working. Similarly, invoices which were used as a basis for claiming Cenvat credit remained in doubt as to multiple claim thereon. Prima facie , when the genuinety of the claim became doubtful, it would not be possible to extend any benefit to the appellant, at this stage, but to direct pre-deposit to protect interest of Revenue. Material fact of invoices without name of the appellant does not rule out abuse of law. Appellant was claiming to be beneficiary of service tax paid by a concern other than the appellant. That crippled the appellant at this stage to advance its claim to Cenvat credit. Therefore, appellant is directed to deposit ₹ 4 crores (Rupees Four Crores only) in three instalments. - Decided against assessee. 2015 (4) TMI 781 Denial of Refund claim - Exemption claim - services availed by SEZ unit - Non fulfillment of conditions of notification - Notification No. 17/2009 ST dated 07.7.2009 as amended by Notification No. 40/2009 ST dated 30.9.2009 - held that:- Exemption is admissible to the exporters of goods with respect to specified services received and used by the appellant for export of goods. It is observed from the case records that services were received by the SEZ unit of the appellant under invoice dated 30.01.2010 dated 31.12.2009 when the Services for transport of export of goods through national waterways inland water and Coastal Shipping were provided by M/s. Essar Logistics Limited. The said service stand included at Sr. No. 17 of Notification No. 17/2009 ST dated 07.7.2009 as per Notification No. 40/2009 ST dated 30.9.2009. Since the appellant had paid the duty, no reasoning has been given by the first appellate authority as to why refund under Notification No. 17/2009 ST, as amended, will not be admissible. - It is not denied by the Revenue that both the SEZ unit and the DTA unit were Later merged and the appellant therefore, become rightful claimant of the refund of Services availed by the SEZ unit of the appellant. Appellant can not be asked to fulfil the condition of Notification No. 9/2009-ST dated 03.3.2009 which he has not claimed. - Decided in favour of assessee. 2015 (4) TMI 780 Levy of simultaneous penalty u/s 76 & 78 - Packing service - Held that:- With effect from 16.05.2008, penalties under Sections 76 and 78 ibid were made mutually exclusive in-as-much-as if the penalty under Section 78 was imposed, the penalty under Section 76 was made unimposable. This amendment with effect from 16.05.2008 in a way reflected the refinement of penal provisions. Indeed it has been held by Punjab and Haryana High Court in the case of CCE Vs. M/s. Pannu Property Dealers, Ludhiana [2010 (7) TMI 255 - PUNJAB AND HARYANA HIGH COURT] that even if technically, scope of sections 76 and 78 of the Act may be different, as submitted on behalf of the revenue, the fact that penalty has been levied under section 78 could be taken into account for levying or not levying penalty under section 76 of the Act. In such situation, even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time. Further in the case of CCE Vs. First Flight Courier [2011 (1) TMI 52 - High Court of Punjab and Haryana] Punjab & Haryana High Court held that penalty under Section 76 may not be justified if penalty under Section 78 has been imposed even if technically penalties under both sections could be imposed and that the appellate authority was well within its jurisdiction not to levy penalty under Section 76 having regard to the fact that penalty under Section 78 has been imposed. - Decided against Revenue. Central Excise 2015 (4) TMI 775 Clandestine removal of goods - Denial of cross examination request - principle of ejusdem genris and harmonious construction - arbitrarily rejection of the report of Institute of Paper Technology - Held that:- In this case charge of clandestine removal has been alleged against the appellants on the basis of certain records and statements of some persons relied upon were not allowed to be cross examined remained unproved. Moreover, report of the Institute of Paper Technology to determine the production capacity by the appellant was rejected by the adjudicating authority on the premise that the said report could not be applied to past period. The adjudicating authority is not an expert to determine the production capacity but an expert from the Institute of Paper Technology examined the production capacity of the appellant and after inspection of the factory of the appellants and collecting necessary data for production capacity, the expert determined the production capacity for working plant during the period 1996-97 and 1997-98. Therefore, without tangible evidence or without being obtaining expert s opinion on the issue the said report determining the production capacity cannot be rejected by the adjudicating authority. Moreover, machine log sheets were specifically directed by the Tribunal to examine in depth but the adjudicating authority rejected those machine log sheets on the ground that the same are manipulated and afterthought. In these circumstances, I hold that the adjudicating authority has not considered any defence taken by the appellant in remand proceedings. But pass the order by confirming the demand against the appellants and imposition of penalty in mechanical manner. - Impugne order is set aside - Decided in favour of assessee. 2015 (4) TMI 774 Manufacturing activity or not - Crushing of fabrics - Marketability of product - Imposition of penalty - Held that:- Process of crushing results in permanent change in the fabrics and, hence, in view of Chapter Note 4 of the Chapter 55, this process would have to be treated as amounting to manufacture, as according to the Note 4 of the Chapter 55 in relation to the products of heading 5511, 5512, 5513 and 5514 the process of bleaching, dyeing, printing, shrink briefing, stentering, heat setting, crease resistance, processing or any other process or any one or more of these processes shall amount to manufacture and in our view the process of crushing would be covered by the expression any other process. In view of this, we do not find any infirmity in the impugned order holding that the process of crushing would amount to manufacture. Marketability - Held that:- Proprietors of the assessee firms themselves have accepted that the crush fabrics are saleable as such and are known in the market as crushed fabrics. Moreover there are number of internet websites of several manufacturers of crush fabrics which offer different verities of crushed fabrics for sale. Extended period of limitation - Held that:- Since the dispute in this case pertains to interpretation, no malafide can be attached to non-payment of duty by the assessees on the crush fabrics being cleared by them. In view of this, the penalty on both the assessees is set aside. - Decided partly in favour of assessee. 2015 (4) TMI 773 Clandestine removal of goods - Bogus transactions - Department was of the view that the transactions of commodity trading shown by the respondent are bogus transactions and represent clandestine removal of manufactured goods - difference between the sales declared in the ER-1 returns and sales figures as reflected in their books of accounts - Held that:- Moreover merely on the basis that the respondent had shown some bogus transactions regarding trading in commodities through commodity exchange and had shown an income of ₹ 35,05,614/- from these transactions, it cannot be presumed that this income was from their manufacturing activity. Merely because their electricity consumption for production of per M.T. of their finished products MS Flats, MS Squares, MS Rounds etc. had varied from 150 units per M.T. to 786 units per M.T. it cannot be presumed that they have under reported their production. In view of this, the duty demand of ₹ 5,77,725/- has been correctly set aside by the Commissioner (Appeals). As regards, duty demand of ₹ 1,05,611/- based on the difference between the value of sales as reflected in their ER-1 returns for 2006-2007 and as reflected in their books of accounts, we have find that the Commissioner (Appals) has discussed this matter in detail and we agree with the findings of the Commissioner (Appeals) that merely on the basis of this difference, it cannot be presumed that the same represents either the value of the clandestinely cleared goods or the value of the goods cleared under the invoices which has been received over and above the invoice amount. - Decided against Revenue. 2015 (4) TMI 772 Determination of assessable value of the halogen capsules cleared by the 100% EOU (Unit-I) to the DTA unit - Held that:- In terms of the provisions of proviso to section 3(1) of Central Excise Act, 1944, while the duty payable in respect of the goods cleared by a 100% EOU into DTA is the aggregate value of duties of customs on import of like goods into India, the assessable value for this purpose is to be determined under section 14 of the Customs Act, 1962. Therefore, the assessable value of the goods cleared into DTA must be comparable with the contemporaneous import price of identical goods or similar goods into India in comparable quantity. Department was not correct in adopting the price at which the unit-I had imported 200 to 500 halogen capsules as sample as the quantum of DTA sales being made by the 100% EOU was much larger and in this regard, the import price of gold coated Halogen Capsules was not relevant as the 100% EOU (Unit-I) was not manufacturing such halogen capsules. Moreover, in terms of the information furnished by the appellant, contemporaneous import of similar goods in comparable quantity had been made at the prices which were comparable with the DTA sale price adopted by the appellant unit. However, we find that the Commissioner has not given any finding on this plea. We are, therefore, of the view that the impugned order rejecting the DTA sale price of the appellant unit is not correct and the same has to be set aside and the matter has to be remanded to the Commissioner for de novo adjudicated after considering the appellant s plea that during the period of dispute, other importers had imported similar goods in comparable quantities at the prices which were comparable with the DTA prices adopted by them and if this is so, there would be no justification for rejecting the DTA sale price on which the duty had been paid by the appellant. As regards the duty demand of ₹ 14,46,613/- against the unit-I based on the allegation of clandestine removal, this demand is based on entries in the diary recovered from the store keeper, Sh. Satyanarayan, of the DTA Unit. The grievance of the appellant is that the photocopy of this diary has not been supplied to them. In view of this, we hold that this duty demand is also not sustainable and the matter has to be remanded to the Commissioner for de novo adjudication after supplying a copy of this diary to the appellant, and taken into account their submissions in respect of the same. - Matter remanded back - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (4) TMI 784 Inclusion of value of land for charging Value Added Tax - development and sale of apartments/flats/units - Constitutional validity of Explanation (i) to Section 2(1)(zg) of the Haryana Value Added Tax Act, 2003 and Rule 25 (2) of the Haryana Value Added Tax Rules, 2003 - Violation of Article 246 of the Constitution of India read with Schedule VII, List II, Entry 54 - Claim of refund the tax already paid in so far as it related to the value of materials sought to be charged to VAT. Held that:- Once it is concluded that the developer/builder/promoter are covered under the works contract while entering into an agreement between them and the flat purchaser to construct a flat and ultimately to sell the flat with the fraction of land, we proceed to examine the broad principles for determining the taxable turnover relating to transfer of goods involved in the execution of such works contract Explanation (i) to Section 2(1)(zg) of the Act which defines “sales price” provides for deduction on account of labour, material and services related charges from the gross turnover as defined under Section 2(1)(u) of the Act while arriving at the “sale price” in a works contract. It is not a charging provision which creates any liability for assessing VAT in a “works contract”. It is in the definition clause of the Act and the provision does not embrace within its ambit something which is otherwise prohibited by law. Thus, the said provision does not suffer from any vice or defect of unconstitutionality. Rule 25(2) of the Rules provides for deduction of charges towards labour, services and other like charges and where they are not ascertainable from the books of accounts maintained by a developer etc., the percentage rates are prescribed in the table provided in the said rule. It is necessarily required to provide mechanism to tax only the value addition made to the goods transferred after the agreement is entered into with the flat purchaser. The 'deductive method' thereunder does not provide for any deduction which relate to the value of the immovable property. The legislature has not made any express provision for exclusion of value of immovable property from the works contract and its method of valuation has been left to the discretion of the rule making authority to prescribe. Apex Court in M/s. Larsen & Toubro Limited & Another Versus State of Karnataka & Another [2013 (9) TMI 853 - SUPREME COURT] while considering the legality of Rule 58 of the Maharasthra Value Added Tax Rules, 2005 (MVAT) has held that, "the value of the goods which can constitute the measure of the levy of the tax has to be the value of the goods at the time of incorporation of goods in the works even though property in goods passes later. Taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property." In case the provisions of law are seeking to charge sales tax on any amount other than the value of goods transferred in course of execution of works contract, the provisions would be ultra vires the Constitution of India. The tax is to be computed on a value not exceeding the value of transfer of property in goods on and after the date of entering into agreement for sale with the buyers. However, the 'deductive method' requires all the deductions to be made therefrom to be specifically provided for to ensure that tax is charged only on the value of transfer of property in goods on and after the date of entering into agreement for sale with the buyers. Where 'deductive method' has been prescribed under the rules for ascertaining the taxable turnover, ordinarily it should include a residuary clause in consonance with the mandate of law so as to cover all situations which can be envisaged. Essentially, the value of immovable property and any other thing done prior to the date of entering of the agreement of sale is to be excluded from the agreement value. The value of goods in a works contract in the case of a developer etc. on the basis of which VAT is levied would be the value of the goods at the time of incorporation in the works even where property in goods passes later. Further, VAT is to be directed on the value of the goods at the time of incorporation and it should not purport to tax the transfer of immovable property. Consequently, Rule 25(2) of the Rules is held to be valid by reading it down to the extent indicated hereinbefore and subject to the State Government remaining bound by its affidavit dated 24.4.2014 The State Government shall bring necessary changes in the Rules in consonance with the above observations. Under sub-section (1) of Section 42 of the Act, where the works contractor gets the construction work executed through a subcontractor, whether in whole or in part, it shall be the joint and several liability of the contractor and the sub-contractor. Sub-section (2) of Section 42 thereof clarifies that a contractor shall not be under any liability to pay tax in respect of a “works contract”, if the same has been paid by a sub-contractor and that his assessment has become final. This provision only safeguards the interest of the revenue in the event of failure on the part of the sub contractor to discharge his liability of tax in respect of transaction entered by the sub contractor with the contractor. The provision, thus, cannot be said to be arbitrary, discriminatory or unreasonable in any manner. The provision wherein the tax was to be assessed in the hands of the developers even where the property was transferred by the sub-contractor was clearly untenable in law and was liable to be quashed. Under sub-section (1) of Section 42 of the Act, where the works contractor gets the construction work executed through a subcontractor, whether in whole or in part, it shall be the joint and several liability of the contractor and the sub-contractor. Sub-section (2) of Section 42 thereof clarifies that a contractor shall not be under any liability to pay tax in respect of a “works contract”, if the same has been paid by a sub-contractor and that his assessment has become final. This provision only safeguards the interest of the revenue in the event of failure on the part of the sub contractor to discharge his liability of tax in respect of transaction entered by the sub contractor with the contractor. The provision, thus, cannot be said to be arbitrary, discriminatory or unreasonable in any manner. Once a dealer opts for composition scheme which is optional, he gets various advantages and privileges which otherwise are not available to ordinary VAT dealers. In such a situation, in view of the judgment of the Apex Court in Koothattukulam Liguous v. Deputy Commissioner of Sales Tax [2014 (3) TMI 782 - SUPREME COURT], the method of determining tax liability under these provisions could not be questioned by such a dealer. In view of the above, circular dated 10.2.2014 cannot be faulted. The assessment orders and revisional orders passed by the concerned authorities are liable to be set aside with liberty to the appropriate authority to pass fresh orders in the light of the legal principles enunciated - Decided partly in favour of assessee. 2015 (4) TMI 779 Adjustment of carried forward input tax credit - Whether the learned Tribunal has committed any error in declaring and holding that an assessee/dealer is entitled to the Input Tax Credit adjustment against its output tax liability under the VAT Act under the current year under consideration and whether the learned Tribunal has committed any error in quashing and setting aside the order passed by the Assessing Officer as well as the first Appellate Authority in directing to carry forward such Input Tax Credit to the next subsequent year - Held that:- Section 11 of the VAT Act provides for an Input Tax Credit admissible and Rule 18 of the Rules, 2006 provides for calculation of the Input Tax Credit. It cannot be disputed that for the purpose of claiming Input Tax Credit, an assessee/dealer is required to submit its claim in the required format i.e. in Form No.108 and on that the assessment order is required to be passed and on assessment the Input Tax Credit admissible to an assessee/dealer is determined. Once on assessment it is found that dealer is entitled to a particular Input Tax Credit, in that case, Rule 18 of the Rules, 2006 which provides for calculation of tax would come into play. On conjoint reading of section 11 of the VAT Act read with Rule 18 of the Rules, 2006, a dealer is entitled to adjust its output tax liability against its admissible Input Tax Credit in the current year under consideration. When on assessment the assessee / dealer is held to be entitled to a particular Input Tax Credit, in that case, the assessee/dealer is entitled to the benefit of Rule 18 of the Rules, 2006 and is entitled to adjust such Input Tax Credit against its output tax liability under the VAT Act of the current year under consideration. Merely because while submitting the Form No.108 the assessee/dealer submitted the claim of Input Tax Credit more than which is held to be admissible on assessment may be original assessment or even audit assessment or even reassessment, by that itself is no ground to deny the assessee/dealer to adjust the admissible Input Tax Credit against its output tax liability of VAT Act of the current year under consideration. - assessee/dealer is entitled to adjust the Input Tax Credit against its output tax liability of the VAT Act of the current year under consideration and after adjusting the same the liability of interest on the balance amount due is required to be considered. - Following decision of State of Gujarat vs. Dashmesh Hydraulic Machinery [2015 (3) TMI 134 - GUJARAT HIGH COURT] - Decided against Revenue. 2015 (4) TMI 778 Cancellation of registration - exercise of the powers under section 27 - no show cause notice had been issued - held that:- Even, section 27(5)(i) of the Act provides that before cancelling the registration certificate ab initio, an opportunity of hearing is required to be given to the concerned person whose registration certificate is sought to be cancelled ab initio. Under the circumstances, the order passed by the first authority cancelling the registration certificate ab initio can be said to be in breach of principles of natural justice and even in breach of section 27(5)(i) of the VAT Act. - Matter remanded back - Decided in favour of assessee. 2015 (4) TMI 777 Whether in the facts and circumstances of the case, the Appellate Tribunal erred in holding that the transaction of exchange of goods by the Appellate to the consumers during the Warranty Period amounts to sale and consequent levy of VAT under the provisions of the Gujarat Value Added Tax Act, 2003 - Held that:- Tribunal has confirmed the imposition of tax and interest on sales of parts during the warranty period of motor cars and tax element is to be deducted from the credit notes received for the spare parts. It is the case on behalf of appellant that during the case of transaction / transactions the assessee who is motor car dealer only replaced the defective parts during the warranty period of motor cars and manufacturer used to issue credit notes for the same and therefore, the appellant-assessee- dealer is not liable to pay tax on the sales of parts during the warranty period of the motor cars. However, it is required to be noted and it is not in dispute that as such the appellant - assesseedealer is purchasing the parts from the open market and is replacing the same in place of defective parts during the warranty period of motor cars and for which manufacturer is issuing credit notes. - as manufacturer would have paid taxes if he brought defective parts from market, the position would not be different in case of assessee who supplied parts and received price for it. - Tribunal has not committed any error in dismissing the appeals and confirming the imposition of tax and interest on sale of parts during the warranty period of motor cars. No substantial question of law arise as sought to be suggested - Decided against assessee. 2015 (4) TMI 776 Rejection of application for issuance of Form-C filed electronically - Held that:- The issuance of Form-C and Form-F is required under the provisions of the Central Sales Tax Act so that the dealer may be entitled to the benefit of the lower rate of tax with respect to sales made in the course of inter-State trade or commerce with regard to goods, which have been declared to be of special importance in the inter-State trade or commerce under the provisions of the Central Sales Tax Act. Under Section 8 (4) of the Central sales Tax Act as also Central Sales Tax (Bihar) Rules, the requirement was only to see that the dealer has filed all the returns and had paid the tax as admitted in the said returns filed. Tax payable would not be what the authorities of the Commercial Taxes Department considered to be fit. They have not prior to the said date exercised their powers of scrutiny in the matter under Section 25 of the VAT Act and demanded any additional tax to be paid by the petitioner. So far as the assessments made after the date of the application and the recovery of tax thereon are concerned, the same stand on entirely different footings and they cannot be used for the purpose of denying of issuance of Form-C and Form-F, as efficacious mode of recovery of tax is available to the respondent authorities under the provisions of the Central Sales Tax Act read with Bihar Value Added Act and Rules. - Impugned order is set aside - Decided in favour of assessee.
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