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TMI Tax Updates - e-Newsletter
April 25, 2017
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
Indian Laws
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition u/s 68 - the names of the companies have been struck off for non filing of returns with the Registrar of Companies. However, such as act does not have any implications in the Income Tax proceedings where the companies have made investment. - AT
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TPA - it is not appropriate to ignore the extraordinary items of expenditure in the form of employee salary cost and consultancy charges incurred by the assessee in the assessment year under consideration. Hence, we are of the opinion that an adjustment has to be given towards this, while computing the ALP - AT
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Non deduction of tax on salaries paid outside India - AO has picked up only one of the conditions enumerated u/s. 40(a)(iii) for making disallowance, choosing to completely ignore the basic condition required to be fulfilled, which is taxability of the said salary in India. - AT
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Prior period expenses - payment of interest on unspent subsidy - the expenditure which is a compensation of the earning made by the assessee on account of funds of government of India being used by the assessee for intermittent period, becomes an expenditure which is allowable u/s 37(1) of the assessee during the current year - AT
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Unexplained source of the cash deposits - The advance paid for acquiring asset, whether stock in trade or not, has to appear in balance sheet and if it does not appear it only means that there was no such advance given by the company - AT
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Disallowance of writing off loans and advances - As per the scheme sanctioned by the BIFR - Only those assets and liabilities were shown, which were recoverable and payable respectively by the new management and loans and advances which are not recoverable were written off in the line of the sanctioned scheme - claim allowed - AT
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Forex derivative loss - speculative and notional loss - The losses on account of foreign exchange contracts are bonafide expenses incurred in furtherance of legitimate business interests of the assessee and are to be allowed as deduction under section 37(1) as such - AT
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Source of making donations - AO merely changed the head of income from ‘agricultural income’ to ‘income from other sources’. By changing the head of income alone, it cannot be said that the assessee was not having sufficient source of funds for making donations. - AT
Corporate Law
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Company petition for winding up - allegation that company failed to make the payment against dues - The disputed questions cannot be gone into in this winding up petition. - HC
Service Tax
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Levy of interest - the levy on renting of property against the previous levy on services relating to renting of property prior to 01.07.2010 was created retrospectively and therefore, the demand for the extended period is highly irregular - interest cannot be demanded for the demands made on the basis of retrospective amendments. - AT
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Demand of service tax from Sub-contractor - Management, Maintenance or Repair Services - the sub contractor is absolved from the liability when the main contractor has discharged the liability on the same services - demand unsustainable. - AT
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Management, Maintenance or Repair Services - appellant has to manage and operate the plant, machinery and other assets - the activity undertaken by appellant is not covered by the definition of MMR services - demand set aside - AT
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Outdoor catering service - in the case of restaurant, the customer's choice of food is limited to the menu card - Sales Tax have been paid on the sale of food items in the restaurant and service tax is not leviable as Sales Tax and Service Tax are mutually exclusive - AT
Central Excise
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Extended period of limitation - suppression of facts - The department has no case that the appellants did not furnish details when required for - appellant cannot be saddled with allegation of suppression of facts with intend to evade payment of duty. Therefore, the SCN issued invoking the extended period of limitation cannot sustain - AT
Case Laws:
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Income Tax
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2017 (4) TMI 1015
Reopening of assessment - depreciation at the higher rate claimed - Held that:- The assessment for A.Y 2010-2011 is sought to be reopened on the ground that the petitioner had claimed depreciation at the higher rate ie., 30% instead of eligible normal rate of depreciation ie., 15%. However, it is required to be noted that the entire aspect with respect to the depreciation claimed by the assessee at the rate of 30% was gone into by the Assessing Officer at the time of scrutiny assessment. A specific query was raised by the Assessing Officer in the notice under Section 142 [1] of the Act; more particularly, in Item No. 28 thereof. Item No. 28 was with respect to the claim of 30% depreciation, as against the regular depreciation claimed by the assessee. The assessee replied to the same and thereafter, the Assessing Officer dealt with the said issue and while passing the scrutiny assessment, accepted the claim of the petitioner. Under the circumstances, the subsequent reopening of the assessment on the aforesaid ground can be said to be a change of opinion by the subsequent Assessing Officer. As per the catena of decisions of Hon’ble Supreme Court as well as of this Court, merely on the change of opinion of the subsequent officer, reopening of assessment is not permissible. Under the circumstances, on the aforesaid ground alone, the impugned Notice under Section 148 of the Act and the impugned reopening of the assessment for A.Y 2010- 2011 deserves to be quashed and set-aside. - Decided in favour of assessee
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2017 (4) TMI 1014
Special audit - validity of order of the AO in exercise of powers u/s 142(2A) - Held that:- Before recording the satisfaction requiring special audit and before making proposal to the Commissioner for its approval, the petitioner has not been given an opportunity inasmuch as the communication dated 07/11/2016 granting final opportunity to the petitioner up to 11/11/2016 was received by the petitioner–assessee only on 15/11/2016. Under the circumstances, on the aforesaid ground alone and without further entering into other questions on merits, the impugned order deserves to be quashed and set aside and the matter is to be remanded to the Assessing Officer to pass a fresh order in accordance with law and on its own merits and after considering the objections raised by the petitioner dated 25/11/2016 and after following the due procedure as required. - Matter remanded back.
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2017 (4) TMI 1013
Addition under Section 7(4) and the interest charged thereon under Section 14 Expenditure Tax Act 1987 on bills not yet raised, although the expenditure had been incurred - Held that: Chargeable expenditure would be incurred only upon raising of a composite bill upon conclusion of hotel stay and not earlier. The substantial question of law is answered in favour of the Assessee and against the Revenue.
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2017 (4) TMI 1012
Unexplained source of the cash deposits - Held that:- The initial stand of the assessee was that deposits made in M/s. City Union Bank were out of the withdrawals made from the company for purchase of the property. If what Mr. Ganapathy stated is true, the advance of ₹ 30,00,000/- given by him to Shri. Dhanasekar, on behalf of the company would have found a place in the assets of the company as on 31.03.2005. The advance paid for acquiring asset, whether stock in trade or not, has to appear in balance sheet and if it does not appear it only means that there was no such advance given by the company. Just because assessee produced Mr. Ganapathy would not convert whatever he stated as true. Ld. Assessing Officer also specifically noted that Mr. Ganapathy had given vague answers regarding date of receipt of advance back from Mr. Dhanasekar and payment of the money back to assessee or M/s. Tamil Nadu Air Travels Pvt Ltd. Nothing of what has been stated by Mr. Ganapathy was supported by any evidence. The balance sheet of M/s. Tamil Nadu Air Travels Pvt Ltd did not reflect any transaction which assessee claimed. Assessee was unable to substantiate the source of the cash deposits made by him in his bank account.- Decided against assessee.
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2017 (4) TMI 1011
Transfer pricing adjustment - payment of royalty made by the assessee to its Associated Enterprise (AE) - Held that:- In our considered opinion the rates of payment of royalty approved by the RBI or by the FIPB (relying upon the rates allowed by RBI under automatic route) would not become per se or conclusively or ipsofacto ‘ALP’ rates. In our opinion both the legislation operate into different fields. The rates allowed under the automatic route by the RBI or FIPB are meant to achieve objectives in different areas. The whole thrust of the income tax proceedings and transfer pricing regulations is to ensure that taxable profit earned by an entity India are not shifted to foreign tax jurisdiction without payment of legitimate share of tax due in India. Therefore, in our considered opinion, independent exercise of determination of ‘ALP’ is needed to be done to find out if payment of royalty has been dome in line with ‘Arm’s Length Price’ or not. It has become all the more necessary now in view of Press Note No.8 (2009 series) dated 16.12.2009 brought on record before us, since restriction on the rates of payment of royalty has been waived by concerned authorities. Therefore, the ‘ALP’ of the royalty needs to be determined in accordance with the Transfer Pricing Regulations. However, we also find force in the contention raised by the Ld. Counsel that if an authority by way of any specific approval has allowed a particular rate of payment, then it does carry persuasive value and can of course act as one of the supportive tools for carrying out bench marking of transaction of payment of royalty. Thus, under these circumstances and in view of aforesaid discussion, we find it appropriate to send this issue back to the file of the AO, as has been done by Tribunal in AY 2010-11 in assessee’s own case. The assessee shall be free to carry out fresh transfer pricing study and independently bench mark its aforesaid international transaction with independent comparables for establishing the payment made by it at Arm’s Length Price. The AO/TPO shall also be free and duty bound to take on record and consider all the evidences as may be brought on record by assessee to justify ‘ALP’ of the impugned transaction. Thus, with these directions this issue is sent back to the file of the Assessing Officer/TPO and may be treated as allowed in favour of assessee for statistical purposes. Disallowance on account of late payment of employees contribution towards provident fund and ESIC - Held that:- The fact was shown to us that entire payment has been deposited within the financial year 2011-12, as has also been mentioned by the Assessing Officer in the assessment order itself. Under these circumstances, we find that the disallowance made by lower authorities is not sustainable and therefore same is hereby deleted. - Decided in favour of assessee
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2017 (4) TMI 1010
Disallowing the claim of depreciation on Plant and machinery and other assets due to closure of factory - Held that:- We find that the ld. Sr.DR was not able to controvert the finding given by the ld. CIT(A). The assessee’s factory was closed on the account of liquidity problem and the matter was pending before the BIFR for revival of the business. The Hon’ble Delhi High court in the case of CIT Vs. Laxmi Sugar Mills Ltd. [2013 (7) TMI 385 - DELHI HIGH COURT] held that in intervening period, plant was ready for use throughout and same could not be used for reasons beyond control of assessee and hence, there was passive user of plant and therefore, in view of facts that above claim of assessee regarding depreciation should be allowed - Decided in favour of assessee Disallowance of writing of Sundry debtors - Held that:- Writing off bad debt in the name of Nam Nam Dhaka is allowed and this ground of assessee’s appeal stands allowed. See Adea International Pvt. Ltd. Vs. ACIT [2011 (2) TMI 724 - ITAT, Bangalore] held that is a settled law that when the assessee arrives at a decision that certain debts have become bad and accordingly writes off the same in the books of accounts, section 36(1)(vii)of the Act provides for a deduction. Further, section 41(1) of the Act provides that if such bad debts written off is recovered during the subsequent assessment years, it shall be treated as income of that year. From the facts and circumstances of the case, we are of the considered view that the assessee is justified to claim deduction u/s. 36(1)(vii) of the Act with respect to the unrealized bills from export turnover - Decided in favour of assessee Disallowance of writing off loans and advances - This amount was written off by the BIFR - Held that:- BIFR, a scheme was sanctioned for rehabilitation of the scheme. As per scheme, assets and liabilities would be limited to what was shown in the sanctioned scheme. In view of this scheme, the balance sheet for financial year 1999- 2000 was recasted. Only those items were shown in recasted balance sheet, which were taken by the new management. Only those assets and liabilities were shown, which were recoverable and payable respectively by the new management and loans and advances which are not recoverable were written off in the line of the sanctioned scheme. Considering these facts, we find merit in the pleadings of the ld AR and therefore, we allow this ground of appeal. This issue is also covered by the decision of the Hon’ble Apex Court in the case of T.R.F. Limited Vs. CIT, Ranchi (2010 (2) TMI 211 - SUPREME COURT ). Disallowance of write off of fixed assets - these assets were found missing during the course of taking over of the operation of the company by the new management and the company has written off these assets - Held that:- We find that these were the assets missing and the same were written off in the books of account. In our considered view, this was not the proper way to deal with these missing assets as these assets were already forming part of the block assets. There was no need to writing off the same in the books of account as these were merged in block of assets and depreciation was allowed. Since no details are filed, hence, we find no merit in the ground. Therefore, we confirm the order of the ld. CIT(A) on this issue and dismiss this ground of appeal of the assessee. Disallowance of interest amount - Held that:- The loan as on 31/3/2000 from the bank was ₹ 2.00 crores as cash credit, export bills and packing credit ₹ 79.52 lacs and working capital term loan ₹ 2.38 crores. The part of the working capital loans were converted during the year as working capital term loan as per the scheme of the BIFR. Thus the total loan outstanding of bank towards the working capital was ₹ 5,17,52,067, which is verifiable from the balance sheet as on 31/3/2000. Further the assessee company has charged interest of ₹ 6.50 lacs only in the P&L account, which is a net effect of 90% of the interest payable. As per the scheme of the BIFR, the balance amount has been credited to extra ordinary income. Keeping in view of these facts and circumstances, we find no merit in this addition and direct to delete the same
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2017 (4) TMI 1009
ALP adjustment - addition to LIBOR plus 2% - Held that:- So far as the issue of ALP adjustment being required, in principle, is concerned, learned counsel for the assessee has fairly conceded that this issue must be decided against the assessee at this forum, and that he will carry the matter, if so advised, in further appeal before Hon’ble Courts above. Ground no. 1 and 2, therefore, have to be decided against the assessee Coming to the quantum of addition, we find that the approach adopted by the authorities below is not justified and cannot meet any judicial approval. The adjustment on account of guarantee fees, as made by the TPO, it is wholly unwarranted as no such guarantee is given and, as such, there is no such transaction for determination of arm’s length price. In any event, as regards the question as to whether an additional arm’s length price adjustment on account of higher risk of lending to a low rated subsidiary is required, this issue is now covered, in favour of the assessee, by a coordinate bench decision in the case of UFO Movies India Ltd Vs ACIT [2016 (2) TMI 196 - ITAT DELHI] Forex derivative loss - speculative and notional loss not allowable for set-off against taxable income - Held that:- All the derivate transactions are specific hedging transactions against foreign exchange transactions of the assessee and are to be treated as integral part of the business transactions of the assessee. These transactions, by no stretch of logic, cannot be treated as standalone transactions, and as such loss on these transactions cannot be treated as loss from speculation business ineligible for set off against normal business profits. As for the CBDT instruction relied upon by the Assessing Officer, such instructions do not bind the appellate authorities, and nothing, therefore, turns on the same- so far as our adjudication is concerned. The losses on account of foreign exchange contracts are bonafide expenses incurred in furtherance of legitimate business interests of the assessee and are to be allowed as deduction under section 37(1) as such - Decided in favour of assessee
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2017 (4) TMI 1008
Addition u/s 68 - assessment u/s 153A - contention of the assessee is that all these companies have been dissolved as the names of these companies have been struck off by the Registrar of Companies for non filing of their annual returns - Held that:- Argument of the assessee does not hold water as the search took place on 26.11.2009 and further the notice u/s 153C/ 153A was issued on 25.05.2011. At that particular time all the companies were in existence. Furthermore, the names of the companies have been struck off for non filing of returns with the Registrar of Companies. However, such as act does not have any implications in the Income Tax proceedings where the companies have made investment. If the argument of the ld AR before the ld CIT(A) is to be believed then when the name of the depositor company struck off the investment made by them in the company also becomes share issued in the hands of non existing person. In any way that is not the case of the assessee. With respect to all the four creditors the assessee has not produced their return of income, their balance sheets, and even the confirmation and the bank statements. In absence of all these things it is not correct on the part of the ld CIT(A) to delete the addition u/s 68 with respect to the above four companies amounting to ₹ 32123000/-. Therefore, we set aside the whole issue of addition u/s 68 with respect to above four companies amounting to ₹ 3.21 crores back to the file of the ld AO with a direction to grant one more opportunity to the assessee to prove the identity, creditworthiness and genuineness of the above transaction after granting assessee proper opportunity of hearing. In the result ground No. 1 of the appeal of the revenue is allowed with above direction. Proof of incriminating material found - Held that:- All the evidences gathered during the course of search coupled with the availability of the books of accounts of the assessee along with other documents at the office of Today Group and corroborated by statement of several persons during the course of the survey at the address of the investor company were not at all appreciated by the ld CIT (A) , In fact these are the material which has shown a link to the ld Ao to make addition on account of issue of share capital u/s 68 of the act. Therefore we find that the order of the ld CIT (A) has not appreciated the evidences and their gravity and has held that the addition has been made without the evidences unearthed during the course of search in spite of the facts that ld AO has pointed out all these materials such as books of accounts, other documents, statements of various persons, survey report on the investor companies, including the pre search inquires and post search inquires conducted by revenue over and above the modus operandi of the group discussed , which should have been considered in proper perspective. The ld AO has devoted substantial portion of his assessment order on that incriminating material only, which has not been appreciated by the ld CIT (A). In view of this we set aside this ground of appeal also before the ld CIT (A) with a direction to examine the material unearthed during the course of search on the group looking at the pancahnama including the statements of various persons ,survey reports on investing companies and then decide the issue that whether the addition has been made by the ld AO based on the incriminating material found during the course of search or not. In the result ground no 2 of the appeal of the revenue is allowed with above direction.
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2017 (4) TMI 1007
TPA - Adjustment made by the assessee for the non-operational expenses - Held that:- The assessee's business module cannot be straightway compared with other comparables, unless the extraordinary item of expenditure excluded while comparing so as to arrive at correct margin of profit. It was brought to our notice that TPO had accepted the pricing pattern of the assessee in the succeeding assessment year namely 2013-14 & 2014-15 and there was transfer pricing adjustment in these assessment years. It is also brought to our notice that there is a steady increase in revenue generated by the assessee in the subsequent assessment year on account of new project without any change in pricing pattern of the project with the same A.E. In such circumstances, it is not appropriate to ignore the extraordinary items of expenditure in the form of employee salary cost and consultancy charges incurred by the assessee in the assessment year under consideration. Hence, we are of the opinion that an adjustment has to be given towards this, while computing the ALP as once the adjustment is made, the PLI would be higher than that of comparable arrived at 26%. In our opinion there cannot be any upward adjustment of ₹ 2.64 crores to the value of international transaction in the assessment year under consideration. Accordingly, the ground taken by the assessee is allowed.
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2017 (4) TMI 1006
TPA - rejecting the foreign AE as the tested party is that no reliable data in respect of foreign comparables is available - Held that:- For determining the ALP of the international transactions relating to marketing services provided by IDS-A and IDS-UK also, we find, that the assessee had taken the foreign entities as the tested party. These were not rejected by the TPO. Clearly, therefore, there is inconsistency in the stand of the TPO rejecting the selection of foreign entity as a tested party for the purpose of IT enabled services while accepting the same for marketing support services. For this reason also, the rejection of the foreign entities as a tested party needs to be set aside. Also the assessee had taken IDS-A as its tested party, which was duly examined by the TPO. Submissions in this regard were also placed before the TPO, placed before us at Paper Book page Nos. 455-483. The TPO in the preceding year had accepted the same and made no adjustment in this regard. Thus, having accepted foreign entity as a tested party in the preceding year ,the Revenue cannot now take a different stand without pointing out any change in facts vis a vis the preceding year. Thus we hold that the action of the TPO, accepted by the Assessing Officer and Ld. CIT (Appeals), in rejecting the foreign entity in the controlled transaction i.e. IDS-A, as a tested party is wrong and is, therefore, set aside. We may add that with regard to the rejection of the foreign entity as the tested party, we have considered all the arguments raised before us and no other arguments were raised before us. The decision rendered by us is on the context of solely the arguments which were raised before us.- Decided in favour of assessee TDS u/s 195 - Disallowance made u/s. 40(a)(ia) - non deduction of TDS on commission, legal and professional charges, marketing and selling expenses and outsourcing and business development expenses - Held that:- In the present case are identical to that in the case of assessee for assessment year 2009-10, with the impugned disallowance of expenses having been made for the reason that the same were taxable in India since they were sourced from India on account of the agreement entered into with the assessee an Indian Company and also on account of the utilization of the services for the benefit of the assessee Indian Company. In the present case also we find that there is no finding of the lower authorities with regard to the fact that the income to the payees of the said expenses arose or was deemed to arise in India as per the provisions of section 9 of the Act. There is no finding regarding the existence of any business connection, as defined, under section 9(1) of the Act nor of any permanent establishment of the payees in India. Moreover in the present case also there is no finding that the payments in question were "fees for technical services". Therefore the decision laid down in the preceding year will squarely apply to the present case also, following which we delete the disallowance made u/s. 40(a)(ia) - Decided in favour of assessee Non deduction of tax u/s. 194-I applying the provisions of Section 40a(ia) - Held that:- It is evident from the said lease deeds, which was there even before the Assessing Officer, that there are several co-owners of the properties which have been taken on lease by the assessee and rent paid thereon. The income in such circumstances cannot, therefore, be said to be the income of the recipient of the rent only. When they have received the same only on behalf of other co-owners the rent paid constitutes the income of all the co-owners and the same is to be apportioned among them as per the method prescribed, if any, in the lease agreement or in proportion of their co-ownership and thereafter only if the rental income in the case of any co-owners exceeds the prescribed limit for the purpose of deduction of tax u/s. 194-I the tax is to be deducted at source. In the light of the above, we, therefore, restore the matter back to the Assessing Officer to apportion the rental income in the hands of the co-owners as per legally permissible, determine the rental income attributable to each co-owner and thereafter apply the provisions of section 194(I) of the Act to the same as also the provisions of section 40(a)(ia) of the Act for non deduction of tax, if found in any case. This ground of appeal of the assessee is, therefore, allowed for statistical purposes. Non deduction of tax on salaries paid outside India applying the provisions of Section 40a(iii) - Held that:- Going by the provisions of section 9(1)(ii), clearly and undisputedly the salary has not been earned in India. Having said so, the income of the non-residents on account of this salary is not deemed to have accrued or arisen in India and, therefore, was not chargeable to tax in India as salary. Thus, in such circumstances, section 192 was not applicable requiring the assessee to deduct tax at source on the said payment of salary and consequently, provisions of section 40(a)(iii) could also not be invoked to disallow the same. The contention of the Revenue all along we find, has been that section 40(a)(iii) is attracted because the payments have been made outside India to non-residents. The Revenue, we find, has picked up only one of the conditions enumerated u/s. 40(a)(iii) for making disallowance, choosing to completely ignore the basic condition required to be fulfilled, which is taxability of the said salary in India. Therefore, the disallowance, we hold, has been made on an incorrect interpretation of law. In view of the above, we hold that no disallowance u/s. 40(a)(iii) on account of non deduction of tax on salary paid outside India is warranted and the disallowance made is directed to be deleted - Decided in favour of assessee Disallowance of interest paid up by applying the provisions of section 36(1)(iii) - Held that:- The facts in the present case, we find are identical to that in assessment year 2009-10, wherein, disallowance has been made on account of investment made by the assessee company in wholly owned subsidiary. Since the ITAT in the preceding year has held the said investment to be for business purposes, being commercially expedient, following the same, we hold the identical investment in the impugned year also to be commercial expedient for the assessee company and having held so, there can be no case for making any disallowance u/s. 36(1)(iii) on account of making the aforesaid investment. In view of the same, the disallowance made u/s. 36(1)(iii) is therefore, deleted and the order of the CIT (A) on this ground is therefore, set aside. - Decided in favour of assessee Non declaration of receipts on sale of assets - Held that:- We find merit in the contention the Ld. counsel for the assessee. On perusal of the above documents produced before us, we find that the sale of Catia V5 licence of M/s. Aeromatrix Info Solutions Pvt. has been duly reflected in the ledger account of M/s. Aeromatrix Info Solutions Pvt., the software account, in the fixed asset chart shown by the assessee and depreciation on account of sale of the said asset has been also duly reversed in the ledger of depreciation. All books of account were produced before the lower authorities and it can, therefore, be safely concluded that all material was placed before the lower authorities to substantiate its claim. The disallowance having been made on account of the fact that the assessee had not reflected the said amount in its books, the same is directed to be deleted in view of our above observations in this regard.- Decided in favour of assessee
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2017 (4) TMI 1005
Sale of land - "Agricultural Land" OR "Capital Asset" - nature of land - Held that:- The land was sold to an agriculturist who later on converted the land for non-agricultural purposes after obtaining permission from the competent authority. Moreover, in the present case neither there is any cogent evidence to rebut the presumption of truth attached with the revenue record maintained by the department nor any verification was conducted by AO during assessment to rebut the documentary evidence placed on record by the assessee to falsify contention of the assessee. The authorities below have not given any cogent and convincing reason for disbelieving the documentary and circumstantial evidence discussed in the foregoing paras which, in our considered opinion, prima facie establish that the land in question was an agricultural land within the provisions of the Act at the time of sale to the purchaser. Since, in our considered opinion the assessee has been able to establish that the land in question at the time of its sale was an agricultural land and not a capital asset within the definition of section 2(14) of the Act, the Ld. CIT(A) has wrongly affirmed the findings of the AO. We, therefore, set aside the impugned order and allow this ground of appeal of the assessee.
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2017 (4) TMI 1004
Disallowance on account of prior period expenses on interest paid to government of India on unspent subsidy - Held that:- The moment the liability is admitted in the present case it accrues as an expenditure and therefore in the year of accrual the liability is required to be recorded for in the books of accounts and is liable in the year in which it is recorded therefore according to us it is not a prior period expenditure but expenditure pertaining to the current year as it crystallized during the year. Looking from the different angle, there was no stipulation originally for payment of any interest however the assessee and the government of India agreed on a certain terms and condition for compensation to the government of India based on the unspent subsidy lying with the appellant, the resultant expenditure which is a compensation of the earning made by the assessee on account of funds of government of India being used by the assessee for intermittent period, becomes an expenditure which is allowable under section 37 (1) of the assessee during the current year as it is incurred wholly and exclusively for the purposes of the business. In view of this we reverse the finding of the CIT (A) disallowing a sum on account of interest paid by the appellant to the government of India on unspent subsidy received by it - Decided in favour of assessee. Addition on account of loans pending reconsideration of excess or additional interest - Held that:- It is not the case of the revenue that excess interest shown by the assessee has not been shown as an income in subsequent years when it has become due. In view of this we are of the opinion that the amount of excess interest received by the assessee which has become due in the subsequent year and in the subsequent year that assessee has recorded it as its income there is no reason that why this income should be chargeable to tax in this year when it has not become due. Further it is not been denied by the revenue that this method of accounting is followed by the assessee from year to year and revenue has accepted this method in the past years and not disturbed the returned income of the assessee on this account. In view of this we reverse the finding of the Ld. CIT appeal confirming the addition of ₹ 1.20 crores as income on account of excess interest received reduced from the debtors subject to reconciliation. - Decided in favour of assessee. Disallowance on account of financial charges paid for issue of bonds etc held as capital expenditure - Held that:- Set aside back to the file of the assessing officer with a direction to adjudicate the matter afresh in accordance with the law after granting assessee appropriate opportunity of hearing as relying on previous year in assessee's own case.
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2017 (4) TMI 1003
Addition on account of loan unexplained - Held that:- A perusal of the order of Tribunal in the case of Shri J.H. Muniyar [2012 (11) TMI 1210 - ITAT NAGPUR] shows that export of software carried out by him was genuine. The assertions of the Revenue casting doubt over the software export business and creditworthiness of Shri J.H. Muniyar is without any basis. We find no merit in the grounds raised by the Revenue against deleting of addition by Commissioner of Income Tax (Appeals) on account of loan of ₹ 20 lakhs from Shri J.H. Muniyar. - Decided against revenue Addition to donations to Tirupathi Devasthan - AO held that the assessee is not having sufficient agriculture income for making donations to Tirupathi Devasthan - Held that:- Assessing Officer re-casted cash flow of the assessee and transferred part of the agricultural income to the income from other sources. The exercise done by the Assessing Officer in recasting the cash flow, however, did not change the total income of the assessee. The Assessing Officer merely changed the head of income from ‘agricultural income’ to ‘income from other sources’. By changing the head of income alone, it cannot be said that the assessee was not having sufficient source of funds for making donations. The Commissioner of Income Tax (Appeals) has deleted the addition on the basis that the entire income has to be taken for the purpose of cash flow, whether income is assessed as agricultural income or it is assessed as income from other sources. We do not find any infirmity in the order of Commissioner of Income Tax (Appeals) in deleting the addition. - Decided against revenue
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Corporate Laws
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2017 (4) TMI 1019
Company petition for winding up - allegation that company failed to make the payment against dues - Held that:- Insofar as the submission of the learned counsel that the petitioner has already filed the company petition in the year 2012 but the same was required to be withdrawn in view of the petitioner not having been issued a statutory notice at the registered office of the respondent company is concerned, in my view the said petition which was filed without issuing a statutory notice at the registered office of the respondent would not save limitation. The letter dated 23rd February, 2012 addressed by the respondent calling upon the petitioner to furnish certain details would also not extend the period of limitation. It is held in catena of judgments that the correspondence does not extend the period of limitation unless there is acknowledgement of liability. Insofar as the issue raised by the learned counsel for the respondent that the notice was not served upon the registered office of the respondent and the packet containing such notice was returned unserved with the remark “left” is concerned, a perusal of the said registered AD indicates that the Postman has made an endorsement on the said envelope “Left company. Return to the sender”. It is not the case of the petitioner that the petitioner made any efforts thereafter to serve the notice personally at the registered office of the respondent. A perusal of the affidavit in reply indicates that it is the case of the respondent that the registered office address of the respondent continues even till today and that the respondent company is carrying on business from the said address. No rejoinder is filed to controvert this averment. In my view, Dr.Chandrachud is right in his submission that the statutory notice not having been served at the registered office of the respondent company, the petition for winding up was not maintainable on that ground also. Insofar as the last submission of the learned counsel for the respondent that there are duplicate invoices is concerned, a perusal of the documents annexed to the petition indicates that there is some duplication of invoices. The explanation of the learned counsel for the petitioner on this issue that they are not duplicate invoices but were issued for various works executed by the petitioner for the respondent from time to time is not convincing. This disputed fact cannot be gone into by this Court in the company petition. Thus the defences raised by the respondent in the affidavit in reply to which there is no rejoinder, are bonafide and are not moonshine. The disputed questions cannot be gone into in this winding up petition.
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Service Tax
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2017 (4) TMI 1026
Outdoor catering service - whether the appellant is providing the service of outdoor catering as contended by the Department or involved in trading, that is running a restaurant as contended by the appellant? - Held that: - the activity of the appellant is running a restaurant - in the case of restaurant, the customer's choice of food is limited to the menu card - Sales Tax have been paid on the sale of food items in the restaurant and service tax is not leviable as Sales Tax and Service Tax are mutually exclusive - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1025
Refund claim - Courier charges - GTA services - Held that: - On going through the Sample invoices, it is found that courier charges have been incurred in the process of export of the goods manufactured by the appellant and as such ‘Courier charges’ to be allowable service for the purpose of refund under N/N. 41/2007. As regards GTA services, the appellant is entitled to refund being an eligible service. The appellant is entitled to refund of tax paid on such services received in the course of export - refund allowed - decided in favor of appellant.
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2017 (4) TMI 1024
Sub-contract - Management, Maintenance or Repair Services - Manpower Recruitment & Supply Agency Services - The Department entertained a view that as per CBEC Circular No. 96/7/2007-ST dated 23.08.2007 the sub contractor is also liable to pay service tax even though main contractor has paid the tax - Held that: - In the case of Nana Lal Suthar Vs. CCE, Jaipur-I [2015 (9) TMI 1446 - CESTAT NEW DELHI] the Tribunal had analyzed a similar issue and held that the sub contractor is absolved from the liability when the main contractor has discharged the liability on the same services - demand unsustainable. Renting of Immovable Property Service - The first contention put forward by the appellant is that they would fall within the exemption limit of ₹ 10,00,000/- if RIPS is solely considered to be the taxable service provided by them - Held that: - The services provided by the appellant as sub-contractor are also taxable services, though the liability is discharged by main contractor. Where a taxable service provider provides one or more taxable service from one or more premises, the exemption under notification No. 06/2005-ST dated 01.03.2005 shall not apply if the aggregate of all such services is more than ₹ 10,00,000/-. The MRA and MMR services provided by appellant also being taxable services, the appellant cannot get the exemption of threshold limit of ₹ 10 lakhs. The renting of immovable property service came into force w.e.f. 01.06.2007 in terms of N/N. 23/2007-ST dated 22.05.2007. Thus the levy on renting of property against the previous levy on services relating to renting of property prior to 01.07.2010 was created retrospectively and therefore, the demand for the extended period is highly irregular - interest cannot be demanded for the demands made on the basis of retrospective amendments. Appeal allowed - decided partly in favor of assessee.
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2017 (4) TMI 1023
Management, Maintenance or Repair Services - appellant has to manage and operate the plant, machinery and other assets - whether the appellant herein is required to discharge the service tax on the amount received by them under the category of ‘Management, Maintenance or Repair Services’ or otherwise? - Held that: - On perusal of the definition of ‘Management, Maintenance or Repair Services’ for the period involved, it is found that the said definition will not cover the activity undertaken by appellant as the said activities were in the nature of managing the power plant and not providing services under the category of ‘Management, Maintenance or Repair Services’ - demand set aside - appeal allowed - decided in favor of assessee.
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Central Excise
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2017 (4) TMI 1022
Reversal of CENVAT credit - Rule 6 (3A) of CCR - demand on the ground that appellant has not maintained separate accounts for common input services used for manufacture of exempted and dutiable products for the period 2008-2009 and 2009-2010 - Held that: - appellant having reversed the proportionate credit the confirmation of demand of entire credit of input services is unsustainable - The impugned order to the extent of confirming the entire credit on input services is set aside and modified to the extent of sustaining the proportionate credit of ₹ 5,10,346/- along with interest which has been already reversed by the appellant - appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 1021
CENVAT credit - MS items - appellant claims that these items are used in fabrication of capital goods - Department has denied the credit on such items observing that after fabrication the capital goods when attached to the earth become immovable property - Held that: - In the case of M/s Sanghvi Forging & Engineering Ltd. [2013 (11) TMI 743 - CESTAT AHMEDABAD], the Tribunal has held that although the credit is availed under the category of capital goods, the same cannot be denied under the category of inputs if the same is eligible - disallowance of credit on MS items is unjustified. CENVAT credit - various input services - rent-a-cab service - manpower service - House Keeping service - gardening services - accommodation services - erection & commissioning services - insurance services - PF reimbursement services - services received for construction of compound wall - Held that: - The services of Rent-A-Cab is availed by the appellant prior to 01.04.2011, except for an amount of ₹ 498/-. Therefore, the credit on the said services except for an amount of ₹ 498/- is allowed - The services for manpower is received for the purpose of railway track maintenance which was held to be admissible - House Keeping services were used for keeping the premises clean. Similarly, gardening services, accommodation services, erection & commissioning services, insurance services and PF reimbursement services were held to be eligible. Out of the total amount of ₹ 6,04,875/- in regard to services received for construction of compound wall, it is submitted by the appellant that ₹ 84,587/- pertains to the credit availed after 01.04.2011. In the case of M/s Nirma Ltd. Vs. CCE & ST, Vadodara-I [2013 (7) TMI 46 - CESTAT AHMEDABAD], the Tribunal discussed the eligibility for the period prior to 01.04.2011 and has held that credit on services relating to construction of compound wall is eligible - except for the amount of ₹ 84,587/- the credit in respect of the services relating to construction of compound wall is eligible for credit. Appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 1020
CENVAT credit - case of Revenue is that the appellant availed irregular CENVAT credit of inputs and input services used in the manufacture of pegfilgrastim, an exempted product cleared during the period March, 2011 to December, 2012 - Held that: - it is proved that even after entertaining reasonable doubt as to the dutiable nature of the products, they continued to pay duty and avail credit till December, 2012. They have stopped payment of duty only from January 2013. It has taken another 8 months for the department to wake up from their peaceful slumber and issue a letter calling for the details of the credit availed. The department has no case that the appellants did not furnish details when required for - appellant cannot be saddled with allegation of suppression of facts with intend to evade payment of duty. Therefore, the SCN issued invoking the extended period of limitation cannot sustain - the penalty also cannot be imposed for the reason that the appellant had paid the duty on the genuine belief that the product is dutiable - some part of the period covered in the SCN lies within the normal period, for which demand is sustained. Appeal allowed - decided partly in favor of appellant.
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Indian Laws
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2017 (4) TMI 1018
Order of acquittal - offence under Sections 8(c) r/w 21 and 29 of NDPS Act 1985 - Held that:- In the instant case, the prosecution has established that through the confessional statement of A1 and A2 that both were conspired along with A-3 to commit the offence. The Court below considered the confessional statements of A-1 and A-2 under Section 67 of the NDPS Act and held that it is voluntary and admissible in evidence and based on the same convicted the accused for other offences. But, acquitted the accused on the ground that there is no further investigation based on the statement given by the accused. The Hon'ble Supreme Court in KANHAIYALAL case reported in (2008 (1) TMI 828 - SUPREME COURT) has held that the confessional statement recorded by the officer in the course of investigation of a person accused of an offence under the NDPS Act is admissible in evidence against him and also held that the conviction can be maintained solely on the basis of confession given under Section 67 of the NDPS Act. The confessional statement of the accused made under Section 67 of the NDPS Act is admissible in evidence. In the above circumstances, the prosecution has clearly established the conspiracy between the accused to commit the offence. Hence, the findings of the Court below that a further investigation is required in respect of the confessional statement given by the accused to prove the conspiracy is not correct. Hence, it is liable to be set aside. In the result, the Criminal Appeal is allowed and the order of acquittal of respondents for the offence under Section 8(c) r/w 29 of the NDPS Act is set aside and both the accused are convicted for the offence under Section 8(c) r/w 29 of the NDPS Act.The Registry is directed to issue notice to the respondents/accused for questioning them regarding sentence, and post the matter on 05.06.2017 for questioning the respondents.
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2017 (4) TMI 1017
Complaint filed under Section 138 of the Negotiable Instruments Act - liability of non-executive and independent Directors of the company by virtue of Section 141 of the Negotiable Instruments Ac - Held that:- Section 141 of the Act makes the Directors incharge and responsible to Company "for the conduct of the business of the Company" within the mischief of Section 138 of the Act and not particular business for which the cheque was issued. If there are basic averments in the complaint supported by some other evidence on record, then the burden would shift upon the accused to show that he had nothing to do with the daytoday affairs and working of the company at the time of the commission of the offence. As observed the accused will have to furnish some sterling uncontrovertible material or acceptable circumstances to substantiate such contention. The accused cannot get the complaint quashed merely on the ground that apart from the basic averments, no particulars are given in the complaint about his role, because ordinarily the basic averment would be sufficient to send him to trial and it could be argued that his further role could be brought out in the trial. I do not propose to close the doors of the applicants at this stage. It will be still open for the applicants to adduce sufficient and necessary materials in the course of the trial to establish that they, being nonexecutive and independent Directors, had no role to play in the daytoday affairs and management of the company. The Trial Court shall consider such evidence that may be led by the parties in the course of the trial and then take an appropriate decision before fastening vicarious liability under Section 141 of the Negotiable Instruments Act. While deciding or fixing the vicarious liability of the applicants herein, the Trial Court shall not be influenced by any of the observations made by this Court in this judgment, except the position of law.
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2017 (4) TMI 1016
Sentences awarded under Section 138 Negotiable Instruments Act - release from custody seeked - dispute was primarily between the two same parties - Held that:- Judgment of hon’ble Supreme Court in ‘Shyam Pal vs. Dayawati Besoya & Anr.’ [2017 (4) TMI 955 - SUPREME COURT] is fully applicable to the facts and circumstances of this case. The facts pleaded and proved do unassailably demonstrate that the loans advanced had been in the course of a series of transactions between the same parties on same terms and conditions. There is, thus, an overwhelming identicalness in the features of the three cases permitting the three transactions though undertaken at different points of time, to be deemed as a singular transaction or two segments of one transaction. The petitioner is in custody since 26.02.2016. He has undergone around fourteen months incarceration besides emission. Considering the duration of the appellant’s custody, the nature of offence involved and the nature of transactions between the parties thereto, the petitioner is entitled to the benefit of the discretion contained under Section The substantive sentence of SI for six months each awarded to the petitioner in the three complaint cases referred to hereinabove would run concurrently. Needless to say, the petitioner would have to serve the default sentences, if the fine, as imposed, has not been paid by him. The petition is allowed in the above terms. The petitioner would be entitled to all consequential reliefs with regard to his release from custody as available in law based on this determination.
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