TMI Tax Updates - e-Newsletter
April 28, 2016

Case Laws in this Newsletter:

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

TMI SMS

• If deductor is entitled for refund of excess TDS deposited u/s 195, then it has to be refunded with interest u/s 244A w.e.f date of payment

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Articles

1. SME....!!! A New Opportunity for Private Company..!

   By: MEETESH SHIROYA

2. GOVERNMENT SERVICES & NEGATIVE LIST – RECENT AMENDMENTS

   By: Dr. Sanjiv Agarwal

News

1. Clarification regarding Export Subsidies on Cotton

2. Multi-Disciplinary Team for Probing the Panama Papers Leaks

3. Tax Evasion by Indian Citizens Named in Panama Papers

4. Constitution of SIT on Panama Papers Leaks

5. The Measures taken by the Government to Curb Black Money in the Country

6. Recommendations of Kelkar committee on Public Private Partnership

7. Proposal for Organising Investor Awareness Programme

8. FM: Government has taken various measures to deal with the issue of Non Performing Assets (NPAs) in Banking Sector

9. Ease of Doing Business

10. Appointment of Nominee Directors on PSU Boards

11. Vacancies in Institutions Serious Fraud Investigation Office (SFIO) as well as Competition Commission of India (CCI)

12. RBI Reference Rate for US $

Notifications

Central Excise

1. 19/2016 - dated 26-4-2016 - CE

Seeks to amend notification No. 12/2012-Central Excise dated 17.03.2012 to prescribe simplified procedure for units engaged in Maintenance, Repair and Overhaul of aircrafts

Customs

2. 15/2016 - dated 26-4-2016 - ADD

Seeks to levy definitive anti-dumping duty on imports of Synchronous Digital Hierarchy Transmission Equipment originating in, or exported from China PR and Israel for a period of five years

3. 29/2016 - dated 26-4-2016 - Cus

Seeks to amend notification No. 12/2012-Customs dated 17.03.2012 to prescribe simplified procedure for units engaged in Maintenance, Repair and Overhaul of aircrafts

Indian Laws

4. G.S.R 340(E) - dated 26-3-2016 - Indian Law

Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (Attached and Subordinate Offices), Deputy Director (Official Language) Recruitment Rules, 2016

5. G.S.R 339(E) - dated 26-3-2016 - Indian Law

Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (Attached and Subordinate Offices), Assistant Director (Official Language) Recruitment Rules, 2016

Circulars / Instructions / Orders

Service Tax

1. 1/2016 - dated 25-4-2016

Extension of time till 29-4-2016 for filing ST-3 returns

Income Tax

2. 11/2016 - dated 26-4-2016

Payment of interest on refund under section 244A of excess TDS deposited under section 195 of the Income tax Act, 1961

3. 09/DV/2016 (Departmental View) - dated 26-4-2016

Commencement of limitation for penalty proceedings under sections 271D and 271E of the Income tax Act, 1961

4. F.NO.309/11/2016-OT - dated 22-4-2016

Report of the Committee for Recommending Standard Definition of Certain Terms

Customs

5. 13/2016 - dated 26-4-2016

Relaxation of Know Your Customer (KYC) norms

Highlights / Catch Notes

Income Tax

• Resident Deductor Entitled to Tax Refund with Interest from Payment Date u/ss 195 and 244A.

  Circulars : If a resident deductor is entitled for the refund of tax deposited u/s 195, then it has to be refunded with interest u/s 244A from the date of payment of such tax.
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• Retiring Partner's Extra Payment Not Taxed as Business Income Under Income Tax Act Section 28(va.

  Case-Laws - AT : Additional payment even if made to the retiring partner in excess of capital account is not in nature of any profit or income within the meaning of sec.28(va) of the Act and it cannot be brought to tax as business income. - AT
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• Income from Harvesting and Farming Not Classified as Agricultural u/s 2(1A) of Income Tax Act.

  Case-Laws - AT : Agricultural income as defined u/s 2(1A ) - The only explanation put forth by the assessee is that the income was generated by harvesting yield like natural grass or allowing seasonal farmer cum workmen to cultivate lands in shares is not sufficient enough to conclude the receipt as agricultural income - AT
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• Businesses Must Treat Entire Operation as Single Entity for Loss Offsetting to Accurately Calculate Taxable Income.

  Case-Laws - AT : For the purpose of setting off of losses, the whole business should be treated as one business - AT
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• Interest Income from Late Sale Proceeds Deemed Business Income, Qualifies for Deduction u/s 80IA.

  Case-Laws - AT : Interest income received by the assessee on late realization of its sale proceeds will be assessed as business income which will qualify for deduction under section 80IA, because, it is to be construed as income derived from industrial undertaking - AT
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• Assessee's Claim Allowed: No Evidence Found for Loan Misuse or Excessive Interest u/s 40A(2)(b) Income Tax Act.

  Case-Laws - AT : Addition u/s 40A(2)(b) - nothing is brought on record to substantiate that the loans raised by the assessee were not utilized for the business purposes or were diverted for any other purposes. It is also noticed that neither the AO nor the ld. CIT(A) brought any material on record to substantiate that the rate of interest paid by the assessee was excessive - claim allowed - AT
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• No Penalty for Write-Off of Unused Holograms u/s 271(1)(c) Due to Good Faith Belief by Assessee.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition made on account of writing off unused hologram - assessee was of bonafide belief that writing off of unused hologram is legal since it cannot be used next year, thus the claim of the assessee is not bogus. - No penalty imposed - AT
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• Hiring a Vehicle Without Goods Carriage Risk Not Subcontracting u/s 194C(2); No TDS Required on Payments.

  Case-Laws - AT : Non deduction of TDS u/s 194C on hire charges paid - Mere hiring of vehicle without any risk associated with the carriage of goods does not amount to carrying out any work or sub contract as defined u/s 194C(2) of the Act - No tds liability - AT
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• Cancellation of Income Tax registration u/s 12AA(3) valid only if initially granted u/s 12AA(1)(b).

  Case-Laws - AT : Cancellation of registration u/s. 12AA(3) - registration can be cancelled only in those cases where registration has been granted u/s. 12AA(1)(b) of the Act but it no where empowers DIT to cancel or withdraw the registration granted u/s. 12AA of the Act. - AT
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• Supreme Court: Wheeling Charges Not "Fees for Technical Services" u/s 194J; No TDS Liability.

  Case-Laws - SC : TDS liability on wheeling charges - "wheeling charges" did not amount to "fees for technical services" within the meaning of Section 194J - No tds liability - SC
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• Retiring Partner's Extra Payments Not Taxed as Business Income u/s 28(va) of the Income Tax Act.

  Case-Laws - AT : Additional payment even if made to the retiring partner in excess of capital account is not in nature of any profit or income within the meaning of sec.28(va) of the Act and it cannot be brought to tax as business income - AT
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• Exemption u/s 10A applies without offsetting past losses or depreciation from other units against export income.

  Case-Laws - AT : Exemption u/s.10A has to be allowed without setting off brought forward unabsorbed losses or depreciation from earlier assessment year or current assessment year either in the case of non STP or in the case of from some other undertakings, being so depreciation loss of other units cannot be set off against the income for the assessee from the export purpose.- AT
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• Retired Partner's Share Not Asset Interest Compensation: Important Tax Implications for Partnership Payouts.

  Case-Laws - AT : Extinguishment of partner's interest on retirement from the partnership firm - when a partner retires from partnership what he receives is his share in the partnership, which is worked out and realized and does not represent consideration received by him as a result of the extinguishment of his interest in partnership assets. - AT
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• Charitable Trusts Retain Tax-Exempt Status if Business is Incidental and Directly Related to Charitable Objectives.

  Case-Laws - AT : Charitable trust - if the business is incidental to the attainment of the objectives of the trust and separate books of accounts are maintained by such trust or institution in respect of such business then also the income is exempt so long as the business carried on by the trust; is incidental to the attainment of main object which is charitable in nature. - AT
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Customs

• Customs House Agent's license remains valid; no malafide intent found after DRI inquiry and physical verification request.

  Case-Laws - AT : Since bill of entry filed after the detention of goods for inquiry by the DRI Officers and request for physical verification of the cargo before assessment has been made in the form of first check bill of entry - CHA licence cannot be revoked as no malafide alleged - AT
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• Appeal Filing Deadline with Commissioner (Appeals) is 60 Days, Extendable by 30 Days Only u/s 128 of Customs Act 1962.

  Case-Laws - AT : Time limit for filing appeal with Commissioner(A) is 60 days which is extendable by 30 days as per Section 128 of the Customs Act 1962 - Commissioner(A) have no powers or authority to relax or condone the delay for more than 30 days - AT
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Corporate Law

• Court Rules Winding Up Petitions Not for Debt Recovery; Intended Only for Legitimate Company Dissolution.

  Case-Laws - HC : Winding up petition - machinery for winding up will not be allowed to utilize merely as a means for realizing its debts due from a company - HC
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Indian Laws

• Writ petitions against Debts Recovery Tribunal orders are usually not allowed unless exceptional circumstances exist under SARFAESI and RDDB Acts.

  Case-Laws - HC : Maintainability of writ petition against an order passed by the Debts Recovery Tribunal - Unless the Court is convinced that the case falls under the exceptional categories, the writ petition filed against the order of the Tribunal, passed in exercise of the jurisdiction under S.17 of the SARFAESI Act, on account of the legislative intent behind the enactment of the SARFAESI Act and RDDB Act cannot be entertained - HC
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Service Tax

• Assessee Provides Services Directly to Jet Airways, Not Authorized by Airport Authority.

  Case-Laws - AT : Assessee is providing the services directly to M/s. Jet Airways (I) bPvt. Ltd. which is not on behalf of Airport Authority - it cannot be said that Airport Authority has authorized the assesse to provide the services - AT
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• ST-3 Return Filing Deadline Extended to April 29, 2016, for Service Tax Compliance.

  Circulars : Due date for filing of ST-3 return extended from 25-04-2016 to 29-04-2016 - Order-Instruction
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• Supreme Court Rules Packing and Loading Contract Not Cargo Handling Service, Conditions Not Fulfilled.

  Case-Laws - SC : The Contract entered for the purpose of packing, loading and unloading etc. of the goods, for which labour was supplied by the assessee to M/s Birla Corporation Ltd. cannot be held as Cargo Handling Service as the two conditions are not satisfied - SC
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• Municipal Councils Must Pay Service Tax on Rent from Leasing Commercial Properties, Establishing Tax Liability for Such Income.

  Case-Laws - AT : No exemption is granted to any municipal council on the rent received by leasing the commercial properties - Liability to pay service tax - AT
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• Service Tax Calculation Excludes Reimbursable Expenses; Only Actual Service Value Counts for Taxation Purposes.

  Case-Laws - AT : Reimbursable expenses cannot be added to the gross value for discharge of services tax - AT
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Central Excise

• High Court Can Intervene in Show Cause Notices if Revenue Demands Are Time-Barred Under Relevant Act.

  Case-Laws - HC : When that demand mad eby the revenue itself is time barred under the Act, High Court can interfere at the stage of issuance of show cause notice - HC
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• Show cause notice u/s 11A(1) and duty determination under 11A(2) required before interest and penalties under 11AB, 11AC.

  Case-Laws - AT : Issuance of show cause notice u/s 11A(1) and determination of duty u/s 11A(2) are the main ingredients in order to demand interest and penalty under Section 11AB and 11AC respectively - AT
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• Clarification: Place of Removal for Exporters is ICD or Ports, Affecting Central Excise Tax Compliance and Duty Assessment.

  Case-Laws - AT : In respect of manufacturers exporters, the place of removal is ICD/ports - AT
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• No Penalty if Appellant's Conduct is Beyond Reproach in Central Excise Cases: Key Legal Principle.

  Case-Laws - AT : Preliminary statement when discloses unassailable conduct of the appellant, there should be no penalty at all - AT
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VAT

• High Court Confirms Dealers Meeting Section 19(1) Conditions Are Eligible for Input Tax Credit.

  Case-Laws - HC : If a dealer satisfies the essential conditions stipulated in Sub-Section (1) of Section 19, he is entitled to input tax credit - HC
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• Input Tax Credit Only Granted for Taxable Goods in First Schedule Purchases.

  Case-Laws - HC : Unless the claim for input tax credit relates to the tax paid or payable on the purchase of taxable goods specified in the First Schedule, it is not possible to grant credit - HC
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• State Government Cannot Tax Imported Goods; Re-assessment of Returns for Imports Not Required.

  Case-Laws - HC : Re-assessment of returns - Import from outside the country - The State Government has no legal competence to levy tax on goods which are imported from outside the State as well as outside the country - Re-assessment not required - HC
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Case Laws:

• Income Tax

• 2016 (4) TMI 1012
  Agricultural income as defined u/s 2(1A ) - CIT(A) denied agricultural income - Held that:- We are of the considered view that since the assessee has failed to furnish any details in respect of expenses incurred, agricultural produce taken, labour employed etc., and in this respect no evidence was furnished by the assessee before the assessing officer. Not only, this the assessee has also not been able to produce any document in order to show that there was any agricultural produce taken from such agricultural land and therefore the assessee could not establish that there was any generation of income there from. The only explanation put forth by the assesee is that the income was generated by harvesting yield like natural grass or allowing seasonal farmer cum workmen to cultivate lands in shares. The said explanation itself is not sufficient enough, therefore the ld. CIT(A) after considering the plea taken by the assessee has rightly held that the income so disclosed by the assessee in the return of income cannot be treated as agricultural income as defined u/s 2(1A ) of the Act. Even before us no details have been furnished by the ld. AR, therefore we see no reasons to deviate from or interfere in the findings recorded by the CIT(A). - Decided against assessee. Interest on delayed payment of TDS - allowance u/s 37 - Held that:- Amount was paid as interest on payment of TDS which was beyond due date and hence, the said payment was penal in nature and therefore the same is not allowable as per the provision of section 37(1) of the Act Disallowance of wages to labourers, miscellaneous expenses etc. - Held that:- Keeping in mind the nature of the business i.e. Civil Contractor, we are of the opinion that it would be just and fair to disallowed an amount of Rs. 50,000/- in place of 1,00,000/- as disallowed by the AO for want of verification and therefore, the AO is directed to re-compute the income after making disallowance of Rs. 50,000/- only.

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• 2016 (4) TMI 1011
  Nature of business - Treatment to part of the transactions of the business of the assessee as speculative in view of Explanation to section 73 and the other part as non-speculative, in view of u/s 43(5)(c) - Held that:- We find that issue before us is no more res-integra. In the case of ITO v. Snowtex Investment Ltd. (2015 (12) TMI 38 - ITAT KOLKATA ), Hon’ble Kolkata Bench has discussed the law in detail and held that in such kind of cases, aggregation of share trading transactions and derivative transactions should be done before applying explanation to section 73. Where the assessee is a dealer in shares, the entire business consists in sale purchase of shares, then, it should be treated as composite business. Similar view has been taken by Hon’ble Delhi High Court in the case of CIT vs. DLF Commercial Developers Ltd. (2013 (7) TMI 334 - DELHI HIGH COURT ). In the case of CIT vs. Baljit Securities P. Ltd. (2014 (6) TMI 475 - CALCUTTA HIGH COURT), it was held that in the case of an assessee who was a share broker dealing and buying shares for himself and also dealing in derivatives, the assessee shall be deemed to be carrying on speculative business and therefore, entire transactions carried out by the said assessee were within the umbrella of speculation transactions, and there was no bar in setting off the losses arising out of derivatives from the income arising out of buying and selling of shares. Similar view has been taken by another Coordinate Bench of the Tribunal in the case of Majestic Exports (2015 (7) TMI 936 - ITAT CHENNAI ). It is further noted by us that the assessee’s stand of treating the whole business as composite business has always been accepted by the revenue in earlier as well as subsequent years. Thus, keeping in view clear position of law as discussed above and history of the case, we find that for the purpose of setting off of losses, the whole business should be treated as one business. Both the parties agreed before us that the provisions of explanation to section 73 are applicable and therefore, it is directed that AO shall treat the entire business as speculative and shall assess the income as income from speculative business and shall grant the benefit of set off and carry forward of losses accordingly. Disallowance made u/s 14A - Held that:- Similar issue came up in appeal before the Tribunal in assessee’s own case for A.Y. 2007-08 wherein Hon’ble Tribunal decided the issue in its favour as held that no disallowance is called for when no actual expenditure has been incurred by the assessee for earning dividend income.

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• 2016 (4) TMI 1010
  Interest income received on late realization of sale proceeds - assessed as business income OR income from other sources - Held that:- Hon’ble Gujarat High Court in the case of Nirma Industries Ltd. DCIT, [2006 (2) TMI 92 - GUJARAT High Court ] where it is held that interest income received by the assessee on late realization of its sale proceeds will be assessed as business income which will qualify for deduction under section 80IA, because, it is to be construed as income derived from industrial undertaking. If that yardstick is applied here, then, this interest income is to be assessed as business income, and accordingly, the partners would get remuneration on this amount. Considering this aspects, we are of the view that the ld.CIT(A) has erred in excluding this amount for the purpose of calculation of remuneration of the partners under section 40(b). We allow the ground of appeal raised by the assessee, and delete the addition made by the ld.CIT(A) on this issue. This interest income be assessed as business income.

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• 2016 (4) TMI 1009
  Addition u/s 40A(2)(b) - Held that:- In the present case, it is noticed that neither the AO nor the ld. CIT(A) has given any basis for restricting the interest claimed by the assessee on the loans raised for the business purposes. In the instant case, nothing is brought on record to substantiate that the loans raised by the assessee were not utilized for the business purposes or were diverted for any other purposes. It is also noticed that neither the AO nor the ld. CIT(A) brought any material on record to substantiate that the rate of interest paid by the assessee was excessive. We, therefore, delete the addition sustained by the ld. CIT(A) and direct the AO to allow the claim of the assessee. - Decided in favour of assessee. Disallowance of various expenses - Held that:- In the present case, it is noticed that the assessee suo motu disallowed Rs. 24,200/- being 1/5th of vehicle running and maintenance expenses amounting to Rs. 1,21,200/-. However, the AO disallowed 1/5th of car insurance, car depreciation, telephone expenses, interest on car loan also. In the instant case, it is not in dispute that car insurance, car depreciation and interest on car loan was to be borne by the assessee even when the vehicles were not used for the personal purposes or remained idle. In the present case, nothing is brought on record that those vehicles were not used for the business purposes and were not the asset of the assessee. Therefore, disallowance of car insurance, car depreciation and interest on car loan was not justified. At the same time, the personal use of telephone cannot be ruled out in such type of cases but the disallowance of 1/5th of the telephone expenses appears to be excessive. We, therefore, restrict the disallowance to 10% of the telephone expenses and the disallowance out of vehicle running and maintenance expenses is sustained because the assessee itself suo motu disallowed the same. In view of the above and by keeping in view the peculiar facts of this case the disallowance out of car insurance, depreciation and interest on car loan is deleted.

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• 2016 (4) TMI 1008
  Penalty u/s 271(1)(c) - addition made on account of writing off unused hologram - Held that:- We note that the ld. AR's main argument against non-leviability of penalty u/s 27l (l)(c) on this addition is that as per UP Excise Rules, the holograms printed and issued for a particular year can only be consumed during the year and the Distilleries have to destroy the same after the end of the year as per rules and guidelines framed by Excise Department; and the unused hologram is of no use for business purpose, therefore, its market value is nil. Therefore, the assessee has written off unused hologram at the end of the year consistently. We find that during the instant assessment year, the AO has made addition and, at first appellate stage, the CIT(A) gave relief to the assessee. However, ITAT held that unless the hologram is destroyed, the same cannot be written off. We find that the ld. CIT (A) observed that at the time of filing Income Tax return, the decision of ITAT order was not there, hence, the assessee was of bonafide belief that writing off of unused hologram is legal since it cannot be used next year and we concur with the said view of the ld. CIT (A) and also of the view that the claim of the assessee is not bogus. Accordingly, we uphold the order of the CIT (A) deleting the penalty on this addition also. So, we uphold the order of the CIT (A) deleting the penalty levied u/s 271(1)(c) of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 1007
  TDS u/s 194C - non deduction of TDS on hire charges paid - disallowance u/s 40(a)(ia) - Held that:- Mere hiring of vehicle without any risk associated with the carriage of goods does not amount to carrying out any work or sub contract as defined u/s 194C(2) of the Act. Consequently, hire charges paid for hiring the vehicles are not liable for TDS u/s 194C(2) of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 1006
  Cancellation of registration u/s. 12AA(3) - cancellation of grant of certificate u/s. 80G(5)(vi) of the Act by DIT(E), Kolkata - Held that:- The amendment brought in section 12AA(3) by adding a proviso by Finance No. 2 Act, 2004 and by Finance Act, 2008 adding proviso to section 2(15) of the Act have been discussed in great detail and laid down the principles that registration granted u/s. 12A of the Act cannot be withdrawn or cancelled by DIT by invoking the provisions of section 12AA(3) of the Act. Section 12AA(3) of the Act empowers the DIT to cancel the registration granted u/s. 12AA(1)(b) of the Act if he is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the object of the trust or institution, as the case may be. The combined reading of both the sections of section 12AA(3) and 12AA(1)(b) of the Act makes it clear that registration can be cancelled only in those cases where registration has been granted u/s. 12AA(1)(b) of the Act but it no where empowers DIT to cancel or withdraw the registration granted u/s. 12AA of the Act. Similar is the position in respect to exemption/rejection u/s. 80G(5)(vi) of the Act in the present case in the given facts and circumstances. Accordingly, we quash the orders passed by DIT(E) cancelling the registration u/s. 12AA(3) and rejection/exemption granted u/s. 80G(5)(vi) of the Act dated 08.03.2011. - Decided in favour of assessee.

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• 2016 (4) TMI 1005
  TDS liability on "wheeling charges" - whether it did not amount to "fees for technical services" within the meaning of Section 194J? - Held that:- No reason to entertain this Special Leave Petition. HC order [2015 (8) TMI 378 - DELHI HIGH COURT ] confirmed as the "wheeling charges" paid by the Assessee, in the facts of this case, was deductable as it did not amount to "fees for technical services" within the meaning of Section 194J of the Act is therefore not erroneous. - Decided in favour of the Assessee.

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• 2016 (4) TMI 1004
  Capital gain computation - retirement from the partnership firm - extinguishment of partner's interest in partnership assets - transfer u/s 2(47) - Held that:- In Additional CIT Vs. Mohanbhai Pamabhai (1971 (9) TMI 56 - GUJARAT High Court) it was held that when a partner retires from partnership what he receives is his share in the partnership, which is worked out and realized and does not represent consideration received by him as a result of the extinguishment of his interest in partnership assets. Further, it was held that the extended definition of the term “transfer” u/s.2(47) of the Act, by which relinquishment or extinguishment of any right in a capital asset is considered as transfer would also not apply when a partner retires from the partnership and there would be no transfer of interest in the partnership assets. Interest of a partner in a partnership firm is not an interest in a specific item of partnership property. It is his right to obtain his share of profit from time to time during the subsistence of partnership, or on dissolution of a partnership firm, or on his retirement from partnership to get the valuation of his interest in the partnership asset which remains after debts and liabilities of partnership. On retirement share is determined on taking accounts of notional sale of partnership assets and given to him what he received is his share in the partnership and not any consideration for transfer of his interest in the partnership to the continuing partners. No element of transfer of interest in partnership assets by the retiring partners to the continuing partner no extinguishment of his interest in partnership assets. No transfer of his interest in the goodwill of the firm. Thus, no capital gains is chargeable u/s.45 of the Act. This decision was confirmed by the Hon’ble Supreme Court in the case of Additional CIT Vs. Mohanbhai Pamabhai (1987 (2) TMI 59 - SUPREME Court ) Regarding the applicability of provisions of the section 28(iv), there is no receipt of any value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession by present assessee. It is only by retirement from the partnership firm, the assessee received the impugned amount. Regarding the application of Sec.28(v) as discussed in earlier, what the assessee has received on retirement is his share in the value of the business carried on by the firm. The share in the value of the business is a capital asset which include goodwill and as such, such receipts are capital receipts in their hands as held by the Hon’ble Supreme Court in the case of Additional CIT Vs. Mohanbhai Pamabhai (supra) and that cannot be considered as business income of assessee u/s.28(v) of the Act and Sec.28(v) confined to any interest, salary, bonus, commission or remuneration, by whatever name called, due to or received by, partner of the firm, from such firm and it should be in revenue field. The receipt which is in the capital field cannot be brought u/s.28(v) of the Act This contention of the ld.D.R cannot have any merit. Additional payment even if made to the retiring partner in excess of capital account is not in nature of any profit or income within the meaning of sec.28(va) of the Act and it cannot be brought to tax as business income. There is a serious doubt in the minds of the AO as well as the ld.D.R regarding the taxability of the same in the hands of the assessee in terms of Sec.45(4) of the Act ,so that this argument has been addressed by the ld.D.R. In our opinion, when we have gone through the Memorandum of Agreement dated 06.02.2007, even if the amount of Rs. 27 crores is accrued to the assessee, it is not relating to the assessment year under consideration before us as the assessment year involved is 2008-09. How the transactions entered on 06.02.2007 would be brought to tax in the assessment year 2008-09, even it is admitted that income was accrued to the assessee on 06.02.2009 vide that Memorandum of agreement. More so, when the assessee is following Mercantile system of accounting as noted by the AO in its first page of assessment order at serial No.8, there is no force in the argument of the ld.D.R to hold that the said amount to be taxed in the assessment year 2008-09 - Decided in favour of assessee Re-computation of the deduction u/s.10B - setting off the depreciation loss of non-eligible units against the income of eligible units involved in the activity of export in the computation of taxable total income - Held that:- The facts are that in this ground the assessee wants not to set off depreciation loss of other units against the income of the assessee from the export business, which runs several units. This issue is squarely covered by the Decision of Karnataka High Court in the case of CIT v. YOKOGAWA INDIA LTD. reported in [2011 (8) TMI 845 - Karnataka High Court ] held that exemption u/s.10A has to be allowed without setting off brought forward unabsorbed losses or depreciation from earlier assessment year or current assessment year either in the case of non STP or in the case of from some other undertakings, being so depreciation loss of other units cannot be set off against the income for the assessee from the export purpose. - Decided in favour of assessee Reduction of miscellaneous receipts from the eligible profits in the computation of deduction u/s.10B - Held that:- The facts of the case are that the assessee’s claim that the said amount of receipts were earned in the course of carrying on the business of 100% EOU i.e receipts from the sale of scrap will also qualify for deduction is unacceptable. Sec.10B(4) clearly states that profits derived from export of articles should alone be considered. Needless to say that the income attributable to an activity is one step removed from the income derived. We are of the view that Ld.CIT(A) placing reliance on Supreme Court’s decision in the case of Liberty Liberty India Vs. CIT reported [2009 (8) TMI 63 - SUPREME COURT ], rejected this ground. We do not find any infirmity in the order of the Ld.CIT(A). MAT computation - computation of book profit by treating the receipt of Rs. 27.99 crores as short term capital gain - Held that:- This amount is straight away taken to General Reserve account and not appearing in the P&L A/c and there is no allegation that brought on loss account was not prepared in accordance with Part-II & III Schedules VI of Companies Act. Hence, the AO is precluded from disturbing the audited Accounts which is duly filed before the ROC as held by the Supreme Court in the case of Apollo Tyres Vs.CIT (2002 (5) TMI 5 - SUPREME Court) wherein held that the use of the words “in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act” in section 115J was made for the limited purpose of empowering the Assessing Officer to rely upon the authentic statement of accounts of the company. While so looking into the accounts of the company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provided by that Act and the same to be scrutinized and certified by statutory auditors and approved by the company in general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of account of the company. - Decided against revenue

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• 2016 (4) TMI 1003
  Object of Trust - scope of section 2(15) of the Income Tax Act – Addition on account of surplus generated from “Premwati Cafeteria” - Held that:- The pre-dominant objects and the vision make it clear that the main object of the assessee is to provide medical relief, impart education to the society at large and relief to the poor. Hence, the proviso to Section 2(15) does not apply to the facts of the assessee’s case. In our opinion, the proviso is an exception to the main section, the definition of the charitable purpose has been given in sub-Section (15) of Section 2 of the Act, which is an inclusive definition and includes relief to the poor, education and medical relief. The assessee is also providing medical relief to the society at large and the registration u/s 12A of the Act has been allowed to the assessee vide order of DIT(E) Delhi dated 28.07.2006, the assessee trust is also having approval u/s 80G(5)(vi) of the Act vide order dated 27.09.2006. In the present case, the AO was of the view that the sales of the Cafeteria ‘Premwati’ were in the nature of commercial receipts in the course of advancement of any other objects of public utility as laid down in the proviso to Section 2(15) of the Act and not were the receipts within the meaning of Section 11(4A) of the Act. However, nothing is brought on record to substantiate that the income generated from the said Cafeteria was not utilized by the assessee for achievement of the main objects i.e. to provide medical relief to the poor or to impart the education The property held under trust includes business undertaking, so held, and if the business is incidental to the attainment of the objectives of the trust and separate books of accounts are maintained by such trust or institution in respect of such business then also the income is exempt so long as the business carried on by the trust; is incidental to the attainment of main object which is charitable in nature. In the present case also nowhere it is established that the income earned by the assessee trust was not used for attainment of the main object or it was used elsewhere. Therefore, the addition made by the AO was not justified and the ld. CIT(A) rightly deleted the same. See Divya Yog Mandir Trust Vs JCIT [2013 (10) TMI 211 - ITAT DELHI ] - Decided in favour of assessee.

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• 2016 (4) TMI 1002
  Reopening of assessment - whether no income accrued or arose and no annual value which is taxable under Sections 22 and 23 of the Act was received or receivable by the assessee at any point of time during the previous year corresponding to the assessment year 1989-199? - Held that:- It is clear that no such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in the year 1994. The contention of the Revenue that the enhancement was with retrospective effect, in our considered view, does not alter the situation as retrospectivity is with regard to the right to receive rent with effect from an anterior date. The right, however, came to be vested only in the year 1994. In the light of the foregoing discussions, it has to be held that the notice seeking to reopen the assessment for the assessment year 1989-1990 is without jurisdiction and authority of law. The said notice, therefore, is liable to be interfered with and the order of the High Court set aside. - Decided in favour of assessee.

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• 2016 (4) TMI 1001
  Deduction under section 80P(2)(a)(i) in respect of interest income denied - Held that:- Assessee is entitled for deduction of interest income derived from investment of surplus funds with banks also. See M/s. The Totgars´ Cooperative Sale Society Limited Versus Income Tax Officer. Karnataka [2010 (2) TMI 3 - SUPREME COURT] - Decided in favour of assessee

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• 2016 (4) TMI 1000
  Disallowance u/s 40A(3) - Held that:- As per the proviso below sub section 3A of Section 40A, it is seen that no disallowance is called for under section 40A(3) if it is found that there is business expediency for making payment in violation to the mode of payment specified in Section 40A(3). We have seen above that in the facts of the present case, the assessee is able to establish that there was business expediency to make cash payment to these nine parties because the assessee is getting supply only after some days of making cash payment and assessee also gets some help from Clause-f or Clause J of Rule 6DD although the assessee is not able to bring cogent evidence about applicability of these clauses of Rule 6D. But since, the assessee is able to establish business expediency by showing that the cash payment was made first and the supplies were received after a gap of five to ten days from all these nine parties and in view of applicability of Rule 6DD as claimed although could not be substantiated, we are of the considered opinion that disallowances u/s 40A(3) is not justified - Decided in favour of assessee Adhoc disallowance out of labour charges @ 10% - Held that:- Regarding the objection that there is only self made vouchers, we are of the considered opinion that this objection is not valid because for making payment to labourers, there cannot be independent bill. Regarding non maintenance of the register or Muster Roll, it is explained by the assessee that labour were put to work at different locations or projects undertaken by the U.P. Nirman Nigam and the attendance and the wages roll were maintained by the project manager of different units of Nirman Nigam and the assessee has made payments to different labours as and when required by petty labour after withdrawing cash from its bank and the assessee has not paid more than Rs. 20,000/- in a day to any labour in cash. It is also submitted that the assessee has got due payments from U.P. Nirman Nigam after verifying the number of persons employed at different places of the project supervised by them. Hence, it is seen that the assessee has made payment for the labourers engaged at different locations and the assessee was getting payment after verification of the number of persons employed at different places and the projects supervised by the U.P. Nirman Nigam. Sample vouchers for labour payments are available on pages 171 to 209 and in the back of all these vouchers, the names, amount and thumb impression/signature of all the labours are available. Thus we are of the considered opinion that under these facts and in the absence of any adverse material, adhoc disallowance of 10% of labour charges is not justified, we, therefore, delete the same. - Decided in favour of assessee

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• 2016 (4) TMI 999
  Net profit determination - Held that:- We find that in Assessment Year 2008-09 also, the Assessing Officer applied net profit rate of 7% as against 8% in the present year and when the assessee carried the matter before the Ld. CIT(A), Ld. CIT(A) held that net profit rate of 4% should be applied subject to allowing of deduction for interest and salary paid to the partners. In this manner, Ld. CIT(A) reduced the assessed income to Rs. 16,01,949/- as against income computed by the Assessing Officer at Rs. 43,31,680/- in that year. Hence, we are of the considered opinion that regarding applicability of net profit rate of 4%, the issue is covered by the Tribunal’s order in assessee own case. Therefore, respectfully following the same, we hold that in the present year also, net profit of the assessee should be assessed at 4% of gross receipt as has been held by the Ld. CIT(A) because we do not find any reason to take a contrary view in the present year. In the present case, we find that initially the Assessing Officer issued notice u/s 142(1) of the Act but the same was not complied with and thereafter, the Assessing Officer issued notice u/s 142(1) again for which part compliance was made by the assessee by appearing before the Assessing Officer along with the copy of cash book and audit report of the assessee firm but the assessee firm did not comply fully to the questionnaire annexed to the notice u/s 142(1) of the Act. The assessee has not produced the copy of such questionnaire attached by the Assessing Officer along with notice issued u/s 142(1) and the letter submitted by the assessee before the Assessing Officer in compliance thereof. Hence, in the present case, it cannot be said that there is some non cooperation of the assessee making a difficult to determine the correct income but in the present case, there is substantial non compliance if not full non compliance by the assessee and therefore, in the facts of present case, this Tribunal’s order cited by Ld. AR of the assessee is not applicable. There is no other argument of the Ld. AR of the assessee as to why and how deduction should be allowed to the assessee in respect of interest and remuneration to the partners. Hence, on this issue, we find no reason to interfere in the order of Ld. CIT(A).

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• 2016 (4) TMI 998
  Penalty u/s 271(1)(c) - AO recomputed the deduction u/s 80IB(10) - reduction in the value of stock-in-trade to the tune of 10% on the ground that the building constructed were held as stock-in-trade and were leased out during the year - Held that:- CIT(A) had dealt with this issue in great detail and rightly deleted the penalty by accepting the contention of the assessee who relying on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts (2010 (3) TMI 80 - SUPREME COURT ). We also find that the ld. CIT(A) further found that the reduction in the value of stock-in-trade was tax neutral as ultimately in the year of sale of said stock in trade, the higher profit would be automatically accounted for and would be accruing to the assessee by claiming lower value of stock in trade. In the case of Reliance Petro products (supra), it has been held that mere making the claim which is not sustainable in law, itself would not amount to furnishing of inaccurate particulars of income. Thus we uphold the order of CIT(A) deleting the penalty levied by the AO by dismissing the appeal of the revenue. - Decided in favour of assessee

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• 2016 (4) TMI 997
  Rejection of books of accounts - GP determination - Held that:- As in absence of any latent, patent and serious defect in the books of account of the assessee it cannot be rejected. Furthermore as per office note attached with the order of the AO it is noted that confirmation of sundry creditors has been obtained by issuing notice u/s 133(6) of the Income Tax Act. This shows that all third party enquiries also confirms proper booking of purchases and maintenance of accounts. Subsequently, the month wise quantitative details along with opening and closing stock were also verified by the AO. The comparative chart of gross profit is submitted by the assessee at Page 133 of his Paper book wherein starting from Assessment Year 2003-04 to 2010-11 consistently the assessee has shown gross profit from 6.35% to 7.09% and for Assessment Year 2003-04 assessment has been made u/s 143(3) of the Act. Further, the nature of the business of the assessee is publication of the books and assessee submitted that it is not feasible for maintenance of regular stock account, this facts was not controverted by AO. Further merely non maintenance of stock register cannot be the basis of rejecting the books of accounts of the assessee when the complete details of purchases, sales and stock is available and on verification no defects are noticed. In view of the above facts, we do not any infirmity in the order of the ld.CIT (A) and confirm the deletion of addition of Rs. 51258801/- by rejecting the books of accounts and estimating GP ratio @ 35 %. - Decided in favour of assessee

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• 2016 (4) TMI 996
  Revision u.s 263 - Held that:- On two issues, one on the verification of the trade creditors and second on the issue of allowability of expenditure u/s 40a (ia) of the Act It is apparent that subsequent orders passed by the AO dated 28.02.2014 has accepted that all loan creditors are correct and there is a minor difference in case of only three trade creditors amounting to Rs. 36756 only which has arisen only on account of difference in accounts of those parties called for u/s 133(6) of the act by AO.. Therefore on these two counts subsequent orders speaks itself that there is no error in the original order made by the AO. Secondly during the original assessment proceedings on both these issues the AO has raised specific queries and they have been replied by the assessee therefore it may be a case of “inadequate enquiry” but it cannot be said to be a case of “lack of enquiry”. It may be possible that AO has not made an enquiry on these two aspects as expected by ld CIT. However even if that be the case, it does not give any power to ld. CIT to revise the assessment by invoking the provision of section 263 of the Act. On the issue of verification of gross profit and net profit disclosed by the assessee it is apparent that in the first two paragraph of assessment order itself it is mentioned by AO that he has made query on this issue. Further the gross profit chart and net profit chart produced by the assessee itself shows that the gross profit of the assessee in Assessment Year 2007-08 was 4.72%, whereas in Assessment Year 2008-09 it is 4.86%. Therefore the gross profit declared by the assessee is better than earlier year. It is also to be noted that earlier years assessment for Assessment Year 2007-08 was passed u/s 143(3) of the Act and later on the ld CIT attempted to revise by invoking provision of section 263 of the Act however later on the gross profit of the assessee was accepted. It is also noted that for Assessment Year 2009-10 the assessee has shows gross profit of 4.73% which is less than gross profit declared by the assessee for Assessment Year 2008-09 of 4.86%. Similarly gross profit for Assessment Year 2010-11 shown by the assessee is 4.16% which is less than gross profit disclosed by the assessee of 4.86% for Assessment Year 2008-09. It is interesting to note that for all Assessment Years 2007-08 to 2010-11 assessment orders have been passed u/s 143(3) of the Act after conducting enquiries on the adequacy of profitability of the assessee and it is interesting to note that assessment year 2008-09 as shown higher gross profit rate in all these four years even then Assessment Year 2008-09 is subjected to revision by ld CIT and addition of Rs. 15779481 has been made. This action of the ld CIT cannot be accepted in view of the past and subsequent years’ accepted assessment history of the assessee. CIT has gross erred in rejecting the books of accounts by applying provision of section 145 ( 3) of the act and making addition to the declared book result of the assessee. Therefore it is apparent that the original order u/s 143(3) of the act did not contain any error in accepting the book results declared by the assessee as the profitability disclosed by the assessee was in tune with past and subsequent assessment history of the assessee duly accepted by revenue after conducting scrutiny assessments. It was not a case of “no” inquiry but specific and pointed enquiries were made by the Assessing Officer. Therefore merely the statement of ld. CIT that order is erroneous does not give the powers to CIT to set aside the matter to the file of AO for fresh verification - Decided in favour of assessee

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• 2016 (4) TMI 995
  Reopening of assessment - Held that:- The reasons to believe recorded by the Assessing Officer in the present case to initiate the proceedings under sec. 147 of the Act without application of his own mind on the information received were not as per the requirement of the provisions of the law laid down under sec. 147 of the Act, hence, the initiation of the proceedings was not valid and nor the assessment made in furtherance to the said initiation of the proceedings. The assessment framed under sec. 147 read with 143(3) of the Act in the present case in question is thus held as void-ab-initio - Decided in favour of assessee

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• 2016 (4) TMI 994
  Disallowance of manufacturing loss - Held that:- The facts of the case discussed in the decision of co-ordinate bench in the case of Shukra Jewellery Ltd. vs. ACIT (2009 (4) TMI 949 - ITAT MUMBAI) are also similar to the facts of the case we are dealing in. We, therefore, respectfully following the decision of the co-ordinate bench referred above and also on the basis of our discussion made above, including wastage norms set by the Handbook of Procedures (Vol.I) 1st September 2004 – 31st March, 2009 issued by Ministry of Commerce and Industry, Department of Commerce, Government of India and also following consistent principle of manufacturing process by the assessee duly supported by audited financial statements and complete quantitative records, we are of the view that no disallowance is called for in manufacturing loss. - Decided in favour of assessee Addition for suppression of closing stock - Stock valuation method adopted by the assessee - Held that:- Looking to the fact that assessee has been maintaining method of accounting consistently and no change has been made in the opening stock by the Assessing Officer, weighted average cost has been calculated as per accounting standard issued by ICAI and even if the comparative working of valuation of stock on FIFO basis and weighted cost on average basis as given by the Assessing Officer during assessment proceedings then also the result will be in negative and nothing can be inferred that the appellant had derived any undue advantage. In these circumstances, we are of the view that stock valuation method adopted by the assessee in the year under appeal has been consistently followed since last many years, no defect in the books have been pointed out by the Assessing Officer nor books of account have been rejected and the valuation of closing stock by applying his own formula of weighted average cost without applying it to the opening stock of the assessee and, therefore, in our view this addition for suppression of closing stock is uncalled for and needs to be deleted. - Decided in favour of assessee Disallowance on account of office expenses - Held that:- CIT(A) has rightly deleted the addition because such kind of ad hoc disallowance are normally uncalled for in the case of assessees who are regularly maintaining books of account which are audited u/s 44AB of the Act and all the documents relating to expenses incurred are verified by the auditors and also looking to the magnitude of the turnover of the assessee which in this year is Rs. 17.36 crores, expenses incurred on account of office expenses, office maintenance, miscellaneous expenditure, printing & stationery expenditure aggregating to Rs. 4,59,911/-, cannot be said as unreasonable. Therefore, ld. CIT(A) has rightly deleted the ad hoc addition - Decided in favour of assessee

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• 2016 (4) TMI 993
  Addition u/s 40A - Held that:- The issue arising before us is identical to the issue before the Tribunal in Tata Johnson Controls Automotive Ltd. Vs. DCIT (2016 (4) TMI 963 - ITAT PUNE) and following the same parity of reasoning, we hold that the said expenditure is to be allowed in entirety in the hands of assessee being paid in accordance with the terms of the Agreement agreed upon between the parties and for the purpose of carrying on the business of assessee more efficiently. It may be pointed out herein that the assessee had initially entered into an Agreement with TACO in 1997 and the said expenditure had been allowed in the hands of assessee from year to year. However, the assessee renewed the Agreement in 2006 and the expenditure for the first time was not allowed in the hands of assessee in assessment year 2006-07. We find no merit in the orders of authorities below in this regard and accordingly, we modify the order of CIT(A) and direct the Assessing Officer to allow the expenditure in entirety in the hands of assessee. - Decided in favour of assessee. Disallowance of expenses incurred on engineering services - Held that:- Before the CIT(A), the assessee had explained the nature of expenses that the said expenses were incurred for testing of flow through heat exchangers manufactured by the assessee under computer aided simulated conditions. The said testing is called as CFD Analysis. The assessee had undertaken the said testing to find out whether the product manufactured by it complied with the parameters laid down by the customer of the assessee. The said testing was done by CSM Software Pvt. Ltd. In another reply, the assessee further explained that from the invoice itself it was clear that the said charges were purely in the nature of engineering services as testing charges and no software was acquired by the assessee. The perusal of the above said details reflects that while incurring the said expenditure of Rs. 26,50,000/-, the assessee has not acquired any software perse. However, engineering services were provided by CSM Software Pvt. Ltd. in order to carry out the CFD Analysis of hood components manufactured by the assessee. We find merit in the plea of the assessee in this regard. he Hon’ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court ) has laid down the ratio that where the software facilitates the assessee’s trading operations or enables the management to conduct its business more efficiently or more profitably, then such package software was not in the nature of profit making apparatus, and software expenditure was allowable as revenue expenditure. Though as mentioned by us in the paras hereinabove, the assessee had not acquired any software package, but had utilized the services of another concern, who in turn, has utilized its software to carry out the job work of the assessee. Following the principle laid down by the Hon’ble Bombay High Court, we hold that in the alternate, in case the expenditure is said to be on acquisition of software package by the assessee, then the same is allowable as expenditure in the hands of assessee.- Decided in favour of assessee. Disallowance of expenses on repairs to building - Held that:- The perusal of the details of the appellate order reflects that the total of Rs. 4,59,804/- is including VAT. As referred to by us in the paras hereinabove, the assessee has booked the expenditure under the respective heads and any other levies or taxes have been booked by the assessee under separate heads. During the course of hearing also, the learned Authorized Representative for the assessee was asked to explain in this regard. Where expenditure is being disallowed in the hands of assessee, then even the said levies i.e. including VAT, Education Cess, etc. is to be disall owed in the hands of assessee. Accordingly, we find no merit in the claim of the assessee in this regard and the same is dismissed - Decided against assessee. Disallowance of rent expenses - Held that:- The case of the assessee before the authorities below was that the said expenditure was crystallized during the year though relates to prior year, hence was booked as expenditure during the year. Both the authorities below have disallowed the claim of assessee since the expenditure did not relate to the year under consideration. The assessee before us has failed to furnish any evidence to establish that the said expenditure did crystallize during the year, which in turn, relates to prior year. Since the assessee is following mercantile system of accounting, we find no merit in the claim of assessee and the said expenditure on rent relating to prior years, is not allowable as expenditure during the year. Accordingly, we confirm the addition - Decided against assessee. Disallowance of sales tax expenses - Held that:- Admittedly, the demand was raised against the assessee for the year 2001-02 and the said demand was disputed. However, under protest, the assessee deposited sum of Rs. 7,01,572/- during the year under consideration. Once the amount has been deposited by the assessee during the year and no deduction on this account has been taken by the assessee in any of the earlier years, then under the provisions of section 43B of the Act, such Sales Tax payment is duly allowable as deduction in the hands of assessee. However, the assessee had furnished a challan of Sales Tax payment of only Rs. 1 lakh before the CIT(A) and no challan of payment of Rs. 6,01,572/- was filed. Even before us, the assessee has failed to furnish the said challan. Accordingly, we remit this issue back to the file of Assessing Officer to allow the claim of assessee on satisfaction that both the amounts have been paid by the assessee during the year under consideration, though the demand relates to the year 2001-02. - Decided in favour of assessee for statistical purposes. Disallowance of performance incentive - Held that:- It is provided under the said section 43B of the Act that notwithstanding anything contained in any other provisions of the Act, the deduction on account of the sums referred to thereunder, in various clauses is to be allowed as deduction in the hands of person claiming the same, only on payment of the same during the year. However, in the proviso, it is further provided that in case the said amount is paid on or before due date of filing the return of income, then the same may be allowed as deduction in the hands of assessee. Under section 36(1)(ii) of the Act, it is provided that deduction on account of sum paid to an employee as bonus or commission for services rendered is to be allowed as deduction while computing the income under section 28 of the Act. In the facts of the present case before us, the assessee claims to have paid performance incentive to the employees which is covered by the term commission for services rendered and hence, we find no merit in the claim of the assessee in this regard.- Decided against assessee. Disallowance of equated rent - Held that:- The assessee had accounted for lease equalization charges in accordance with Accounting Standards-19 issued by the Institute of Chartered Accountants of India. The details i.e. computation of equalized rent along with lease agreement between the assessee and the Lessor were filed before the CIT(A). The learned Authorized Representative for the assessee pointed out that though admittedly, the said issue is covered against the assessee by the Special Bench decision which was the case of Lessor, wherein it was held that the provisions of section 5 overrides the provisions of section 145 of the Act. Coming to the second aspect of the application of provisions of section 43B of the Act, we find that the CIT(A) has already directed the Assessing Officer to allow the claim of assessee after verification, in case the amount due to the employees has been paid by the assessee before due date of filing the return of income. The CIT(A) has directed the Assessing Officer to verify the said claim by seeing bank entries in the hands of assessee. We find no error in the said directions given by the CIT(A) and confirm the same.

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• 2016 (4) TMI 992
  Levy of penalty u/s 271(1)(c) - Held that:- Assessing Officer has not recorded satisfaction specifically for concealed particulars of income or furnished inaccurate particulars of income and on both. The various courts have held that this satisfaction can be for both the purposes i.e. for concealed particulars of income and furnishing of inaccurate particulars of income jointly as both the satisfaction are overlapping, which is also not found place in the case before us. The Assessing Officer even has not ticked specific satisfaction in notice U/s 274 of the Act. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be imposed to the assessee. Ticking of the penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law, therefore, we delete the penalty confirmed by the ld CIT(A). See CIT Vs M/s Manjunath Cotton & Ginning Factory & Ors [2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee

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• 2016 (4) TMI 991
  Refund of the tax deducted at source - Held that:- The petitioner does have a statutory alternative remedy of filing an appeal. It will, therefore, not be appropriate for the Court to examine the validity of the order passed by the Commissioner of Income Tax, Circle-1 (1) Aligarh. We, therefore, decline to entertain this writ petition.

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• 2016 (4) TMI 990
  Jurisdiction of Court - Exemption under section 12 allowed by ITAT - Held that:- The time of filing the income tax return for the assessment year 2008-09, the registered office of the assessee was at Dharamshala. The return was filed on 31.3.2008 at Dharamshala. The assessment order dated 27.12.2010, Annexure A.1 was passed by the Income Tax Officer, Dharamshala, HP. Even the appeal was filed by the assessee before the CIT(A) at Shimla. Since the initial process of assessment was started at Dharmashala and the final assessment was framed by the Assessing Officer at Dharamshala, this court lacks territorial jurisdiction to adjudicate the matter. In view of the above, this court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer, i.e. Income Tax Officer, Dharmashala (HP). Accordingly, the complete paper books of all the appeals are returned to the appellant-revenue for filing before the competent court of jurisdiction in accordance with law.

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• 2016 (4) TMI 989
  Assessment of sale of shares - “Short Term Capital Gain” or “Long Term Capital Gain” or under the head “Business Income” - Held that:- The assessee has emphasized that mode of acquisition would not be a factor to decide the nature of transaction. Under this alleged modus operandi, at the most, the assessee could procure large number of shares, but can that would change the character of transaction from investment to trader. There is no evidence with the Revenue to establish the nexus. The moment a cartel is being formed by number of persons to carry out an activity in an organized manner with profit motive and the activity is akin to business or trade as defined in section 2(13) of the Income Tax Act, then the arguments raised by the ld.counsel for the assessee would not stand. But the AO has neither recorded statement of the assessee nor collected any material which can demonstrate that the assessee has colluded with Smt. Rupal Naresh Panchal and Sugandh Estate and Investment Pvt. Ltd. in a manner that would indicate that shares were acquired for the purpose of trade. Such nexus has not been established. The observation of the CIT(A) is only inferential without any concrete material in the possession of the AO. Therefore, in our opinion, the activity of the assessee by virtue of mode of acquisition of shares cannot be segregated into two parts. The ld.CIT(A) has erred in creating an artificial distinction only on the basis of mode of acquisition. We allow the appeal of the assessee and direct the AO to tax the surplus on sale of shares under the head “short term capital/long term capital instead of “business income” treated by him. Penalty u/s 271(1)(c) - Held that:- We have already upheld that surplus on sale of shares is to be assessed as short term capital gain. Therefore, there cannot be any question to visit the assessee with penalty. Apart from above, we are of the view that the assessee has disclosed all the facts fully and completely. There is no change in the ultimate taxable income of the assessee. The AO has only changed the head of income, i.e. the assessee has claimed the surplus on sale of shares to be assessed under the head of capital gain. The AO has assessed it under the head “Business Income”. There cannot be any allegation against the assessee for concealment of income or furnishing inaccurate particulars to this extent. Thus, otherwise also no penalty on the first is issue is imposable.- Decided in favour of assessee Non addition of dividend stripping amount and levy imposed by the National Stock Exchange - Held that:- The assessee had made huge investment in shares. Some of the shares might have been sold, and it failed to keep track that dividend might have been declared. The CIT(A) has rightly observed that there was a bona fide human error in non-inclusion of dividend stripping amounts. As far as other ground is concerned, it is always a debatable issue whether levy imposed by the National Stock Exchange was penalty in nature or compensatory in nature. It was disallowed and not disputed by the assessee, but that would not goad the AO to visit the assessee with penalty. - Decided in favour of assessee

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• 2016 (4) TMI 988
  Penalty u/ s 271(1)(c) - error incurred in the filing of Tax Returns - Held that:- The conduct of the assessee was not mala-fide and contemptuous and the assessee had come forward by offering a bona-fide explanation about the error committed by the online tax return filing portal ‘Taxspanner’ and hence in our considered view, the assessee is not liable for penalty u/s 271(1)(c) of the Act as the case is covered by the exceptions as contained in the explanation 1(B) to Section 271(1)(c) of the Act. Even with respect to the discount as commission income received by the assessee, the assessee has purchased a flat from broker M/s Buniyad Retail Pvt. Ltd. and received discount as commission income of Rs. 85,270/- from M/s Buniyad Retail Pvt. Ltd. and the assessee submitted that the said discount as commission income received from broker M/s. Buniyad Retail Pvt. Ltd is capital receipt and the same was reduced by the assessee from the cost of the flat purchased through broker M/s. Buniyad Retail Pvt. Ltd in "Kensington Park" at Jaypee Greens Sector-133. The view adopted by the assessee is a plausible bona-fide view although the same did not found favour with the Revenue and the assessee chose not to file appeal against the said additions but that does not mean that every claim which is not sustained by the revenue will make the tax-payer liable to penalty u/s. 271(1)(c) of the Act. The claim of the assessee was plausible and bona-fide and we hold that no penalty can be imposed u/s 271(1)(c) of the Act on this count. With respect to the amount of Rs. 16,803/-, it was stated that inadvertently the assessee failed to declare the interest received on savings bank account amounting to Rs. 16,803/- and the omission was neither intentional nor willful.The amount involved is also trivial. Thus there is no deliberate attempt on the part of the assessee and it is not a fit case to impose penalty u/s 271(1)(c) of the Act on the assessee as the conduct of the assessee if seen in context of preceding and succeeding years as set-out above does not warrant imposition of the penalty u/s 271(1)(c) - Decided in favour of assessee.

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• Customs

• 2016 (4) TMI 971
  Revokation of CHA licence and forfeiture of security deposit - Non-declaration of retail sale price on auto parts imported for assessment under Section 4 A of the Central Excise Act, 1944 for CVD - Failure to verify the presence of the importers in the given address. Held that:- the bill of entry was filed by the appellant after the goods were detained by the officers of DRI. The said bill of entry was filed on first check basis for verification of the goods before assessment. In such a situation, we find that no malafide or intentional violation of any provisions of the Customs Act can be alleged on the part of the Customs broker. Regarding KYC norms and obligations under Regulation 11, we find that case as made out in the original order is neither convincing nor sustainable. The Tribunal also observed that it is a settled law that the punishment has to be commensurate and proportionate to the offence committed. In the present case, it is noticed that the punishment of revocation is not justifiable even if it is to be admitted that physical verification of the importer’s premises could have avoided the filing of bill of entry by the appellant. Even in such a situation, the violation in respect of the cargo viz. the non-declaration of the RSP on the auto parts, a debatable point of interpretation, cannot be held against the appellant to result in the revocation of their licence. Here, it is to be noted that the bill of entry was filed after the detention of the goods for inquiry by the DRI Officers and request for physical verification of the cargo before assessment has been made in the form of first check bill of entry. It is found that the impugned order passed on dis-agreement with the inquiry report has not brought out clear sustainable ground for such extreme action of revocation of licence. Violation of CBLR, 2013 has not been brought out as all the points have been elaborately discussed in the inquiry report and no sustainable ground for differing with the same could be made out. - Decided in favour of appellant

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• 2016 (4) TMI 970
  Imposition of penalty - Section 112(a) and 114 AA of the Customs Act, 1962 - Import of Measuring Tapes of Malaysian origin from Singapore by M/s. Western Impex - Held that:- there is no dispute about the fact that M/s. Western Impex being an actual importer, in terms of the definition of Importer as per the provisions of Section 2(26) of the Customs Act. By confirming the differential demands, as also by giving an option to M/s. Western Impex, Revenue has accepted the said fact. Revenue stand that by helping M/s. Western Impex in placing the orders on the foreign sellers as also by financing the imported consignments would lead to an inevitable conclusion that the appellant was the master mind in the entire export, thus making him liable them to penalties in terms of Section 112(a) or Section 114AA of the Customs Act, 1962 does not appeal to us. The Tribunal in the relied upon decision has clearly held that the appellant having no role to play as regards the declarations required to be made to the Customs Authorities, no penalties upon him can be called for, even if he was the financer of the consignments, since he cannot be said to have done any act or omitted to do as act which have rendered the goods liable to confiscation. In terms of the said decision, we find no justifiable reasons to impose penalty upon the present appellant. - Decided in favour of appellant with consequential relief

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• 2016 (4) TMI 969
  Maintainability - Commissioner (Appeals) dismissed appeal filed as not maintainable on the ground that he has powers to hear the appeals which are filed within 60 days extendable by 30 days only, as per Section 128 of the Customs Act 1962. Held that:- appellant had received the impugned Order in Original on 31.10.2012. However, he could not file the appeal within the prescribed time limit because of his personal pre-occupations. He prepared the appeal and sent the same to the Office of the Commissioner (Appeals) only on 22.2.2013. We find force in the argument of Revenue that time limit for filing appeal with Commissioner (Appeals) is 60 days which is extendable by 30 days as per Section 128 of the Customs Act 1962. It is found that the appeal filed by the appellant before the Commissioner (Appeals) is much beyond the prescribed time limit. The Commissioner (Appeals) have no powers or authority to relax or condone the delay for more than 30 days. Therefore, we find that the impugned Order in Appeal dismissing the appeal field by the appellant as not maintainable is proper and legally correct. - Decided against the appellant

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• Corporate Laws

• 2016 (4) TMI 966
  Winding up petition - Held that:- This Court has given anxious consideration to the case put up by the parties and is of the considered view that there is bona fide dispute as to the debts payable by the respondent-company. The defence of the respondent-company is a substantial one. It is now well settled that machinery for winding up will not be allowed to utilize merely as a means for realizing its debts due from a company. Therefore, there is no justification whatsoever for allowing the present winding up petition. Thus, winding up petition is dismissed.

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• 2016 (4) TMI 965
  Scheme of amalgamation - only opposition to the Scheme is by Securities and Exchange Board of India (“SEBI”) - Held that:- there is no merit in SEBI's contention that the Scheme violates the provisions of ICDR or the public policy behind ICDR or the related regulatory machinery. There is, as noted above, no bad faith vis-a-vis any stakeholder. On the whole, the scheme is not such as a prudent man of business would not accept as just, fair or reasonable. And lastly, there is no market abuse, wrongful artificiality or fraud, deceit or unfair trade practice, injuring public interest. If that is so, the Court cannot scrutinize the Scheme with the focus of a man of commerce to see if the consideration provided for therein is truly correct. That is for the businessman in the shareholder to decide. The Court merely preserves the sanctity of the laws, the commercial morality and public interest. And on these, the Scheme does pass muster. Company amalgamtion allowed. The Petitioner Companies to file a copy of this order and the Scheme duly authenticated by the Company Registrar, High Court (O.S.), Bombay, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of the Order. The Petitioners are directed to file a certified copy of the order along with a copy of the Scheme of Amalgamation with the concerned Registrar of Companies, electronically, along with E Form INC-28 in addition to physical copy as per the relevant provisions of the Companies Act, 1956/2013 whichever is applicable.

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• Service Tax

• 2016 (4) TMI 987
  Cargo Handling Service - Contract entered for the purpose of packing, loading and unloading etc. of the goods, for which labour was supplied by the respondent to M/s Birla Corporation Ltd. - Department contended that it was not appropriate for the High Court to deal with the said writ petition, bypassing the adjudicatory machinery provided under the Act, more so when the statutory appeals against the adjudication orders are also provided - Held that:- the High Court has simply gone by the contract, which was entered into between the respondent and M/s Birla Corporation Ltd. and taking into consideration all the averments, which were made in the show cause notice, on the basis of admitted facts, it has come to a conclusion that even when the allegations in the show cause notice are accepted, the said contract does not amount to providing any 'Cargo Handling Service' as defined under Entry 23 of Section 65 of the Act. Therefore, we are of the opinion that the High Court did not commit any mistake or illegality in entertaining the writ petition when no disputed questions of fact were involved and the legal issue was to be decided on the basis of the facts, as admitted by the parties, which were so specifically recorded by the High Court itself. Whether the contract could be treated as 'Cargo Handling Service' within the meaning of Entry 23 of Section 65 of the Act - Labour is supplied by the respondent to M/s Birla Corporation Ltd. - Respondent contended that no services were provided by the respondent by entering into the contract, as it was only supplying labour and the labour was not doing any work of packing, unpacking, loading and unloading of any cargo - Held that:- the High Court, on the interpretation of the Entry 23, has observed that two conditions for considering any service to be 'Cargo Handling Service' need to be satisfied, namely; (1) there must be a cargo i.e. a packed or unpacked commodity accepted by a transporter or carrier for carrying the same from one destination to another. It is only after the commodity becomes a cargo, its loading and unloading at the freight terminal for being transported by any mode becomes a cargo handling service, if it is provided by an independent agency and; (2) the service provider must independently be involved in loading-unloading or packing-unpacking of the cargo. On reading of the contract, coupled with the statement of Mr. Kailash Sharma, an officer of the respondent-Company, the High Court has rightly concluded that the aforesaid services would not fall within the definition of 'Cargo Handing Services'. We, therefore, uphold the conclusion of the High Court that services provided by the respondent-assessee did not amount to Cargo Handling Services and, therefore, no such service tax was leviable. - Decided against the revenue

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• 2016 (4) TMI 986
  Whether the manpower services rendered by the respondent are on behalf of the airport authority or not - providing services to M/s. Jet Airways (I) Pvt. Ltd. in the airport premises under a contract - Revenue contended that respondent is covered under Section 65(105)(zzm)(b) on the ground of providing services as per authorization by airport authority - Held that:- the terms ‘services provided to any person by any person who was authorized by Airport Authority' means the services which are otherwise to be undertaken by Airport Authority is out sourced by Airport Authority for provision of services in the airport shall be covered under "Airport Services", that means even a person is authorized to undertake the services in the airport, the service should be undertaken on behalf of Airport Authority. In the present case, the respondent is providing the services directly to M/s. Jet Airways (I) Pvt. Ltd. which is not on behalf of Airport Authority. The contract and terms thereof are decided by both i.e. by the respondent and M/s. Jet Airways (I) Pvt. Ltd., therefore it cannot be said that under this arrangement, Airport Authority has authorized the respondent to provide the services. Therefore, the Ld. Commissioner has correctly interpreted the definition of "Airport Services" and held that the services rendered by the respondent are not on behalf of the airport authority or authorized by airport authority. - Decided against the revenue

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• 2016 (4) TMI 985
  Service tax liability - Renting of Immovable Property Services - Section 65(105)(zzzz) of the Finance Act, 1994 - Amounts collected as rent by providing on lease various commercial and business properties to outsiders or otherwise - Held that:- there is no exemption granted to any municipal council on the rent received by leasing the commercial properties and accordingly, the main contention of the appellant that they are providing sovereign function while renting out property is rejected. The service tax liability and the interest thereof is upheld and should be calculated on the amounts received by the appellant as cum-tax amount. Imposition of penalties - Held that:- the appellant being municipal council could not have had any intention to evade service tax liability. Accordingly, by invoking the provisions of section 80 of the Finance Act, 1994, the penalties imposed are set aside. - Appeal disposed of

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• 2016 (4) TMI 984
  Service tax liability - Amount received as interest on discounting of bills and depository services - Chartered Accountant of the appellant bank has stated that commission received on exchange collected on in land bill purchased and discounted during the period includes value of interest on which tax liability, will not arise. Also the Chartered Accountant of the appellant has stated that service tax on the depositary charges collected by Nagpur branch, is discharged by the Mumbai depositary services branch and was remitted to the government treasury by Mumbai branch - Held that:- the order of the first appellate authority is incorrect in as much these evidences were over looked by the first appellate authority. Therefore, the impugned order is unsustainable and set aside. - Decided in favour of appellant

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• 2016 (4) TMI 983
  Reversal of Cenvat credit, payment and interest therefore - Business Auxiliary Service - Section 65 (19) of the Finance Act, 1994 - Misuse of facility of Cenvat credit by taking credit on input/input service used and input services not utilized for providing output services - Held that:- Ld. Commissioner has accepted the application dated 27.3.2009 submitted by the respondent under Section 73(3) of the Act, 1994 and dropped the proceedings of the show cause notice. In the result, the payment of Cenvat credit and interest stand confirmed and upheld, the only effect of dropping of the proceedings is no further penalty was imposed on the ground that under Section 73(3) no show cause notice could have been issued. On going through the nature of services and fact, it is found that Cenvat credit admissibility on the subject input services was contentious issue. The respondent could litigate the matter and they could have succeeded on merits. Moreover, it is beyond imagination that the entire Cenvat credit availed by them was liable to be disallowed. Taking into consideration of all these aspects, we are not interfering in the reversal of Cenvat credit, payment and interest thereof but respondent has clearly made out a fit case under Section 73(3) of Finance Act, 1994, according to which the department should not have issued show cause notice. Therefore, there could not be better case than the present case for allowing the application of the respondent filed under Section 73(3) of the Finance Act. - Decided against the revenue

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• 2016 (4) TMI 982
  Includability - Whether reimbursable expenses to be included in the gross value - Handling operations of regional mother warehouse - Held that:- the issue is no more res-integra. By referring to the ratio laid down by the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT], reimbursable expenses cannot be added to the value for discharge of services tax. - Decided in favour of assessee

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• Central Excise

• 2016 (4) TMI 981
  Demand of duty and imposition of penalty - Violation of provisions of Rules 13 and 14 of the Central Excise Rules, 1944 - Failure to produce the proof of export within six months from the date of exportation in terms of Rule 14A - Held that:- the assessee made very persuasive submissions on the basis of the question of burden of proof and the impropriety in calling upon the assessee to prove the negatives regarding the export that was covered by the documents, it is seen that a different conclusion could not have been arrived at by the authorities below on the basis of the materials on record. The version of the assessee was one which fundamentally stared at its non-managerial process. That by itself was insufficient to discharge the burden to show the reason for non-utilisation of documents relating to excise formalities, particularly when much before the show cause notice, there was no action taken by the assessee to inform the concerned authorities regarding non-availing and non-utilisation of the result of the formalities carried forward in anticipation of the export. The adjudicating authority, the first appellate authority and the CESTAT having concluded as aforenoted on the basis of the materials on record, we do not find any substantial question of law or any other material on the basis of which we could, through an appeal under Section 35G of the Central Excise Act, interfere at the instance of the assessee. - Decided against the assessee

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• 2016 (4) TMI 980
  Period of limitation - Demand of excise duty - clearance of grey and processed fabrics from the 100% EOU during the period 1994 to 1996 - Petitioner contended that SCN were issued beyond the period of five years from the relevant date, hence, liable to be set aside under Section 11A of the Central Excise Act. Held that:- normally, the Writ Court should not interfere at the stage of issuance of show cause notices by the authorities for the reason that the authorities should provide an ample opportunity to put forth their contentions before the authorities concerned and to satisfy the authorities about the absence of case for proceeding against the persons against whom the show cause notices have been issued. Where a show cause notice is issued either without jurisdiction or in an abuse of process of law, in that case, the writ Court can interfere even at the stage of issuance of show cause notice. It should be prima-facie established to be so. On the face of the show cause notices, it is clear that the demand made by the respondent is time barred under Section 11A of the Central Excise Act. When that demand made by the respondent itself is time barred under the Act, this Court can interfere at the stage of issuance of show cause notice. Therefore, show cause notices are liable to be set aside. - Decided in favour of petitioner

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• 2016 (4) TMI 979
  Imposition of penalty equivalent to the amount of credit passed - Purchase of only invoices from the manufacturer without actually buying inputs - Credit was sought to be passed on without invoices being accompanied by the goods - Held that:- it was noticed by the Tribunal that such an action is certainly a major violation of the provisions of law and being so, the question of exercise of any discretion in favour of the offender or showing any leniency to the offenders could not arise. This would not satisfy the test of being a speaking order which is a sine qua non for deciding the appeals. No legally justified reasons have been recorded by the Tribunal for dismissing the appeal of the assessee. The Tribunal being a final fact finding authority was required to deal with all aspects of facts and also law and then record its conclusions based thereon. - Matter remanded back

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• 2016 (4) TMI 978
  Condonation of delay of more than 2200 days - Held that:- there is hardly any reason for the long delay. Therefore, the Tribunal was justified in refusing to condone the delay. No substantial question of law arises for our consideration in the above appeals. Hence, in a matter that arose out of the show cause notices issued in 1999, do not propose to entertain these appeals. - Decided against the revenue

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• 2016 (4) TMI 977
  Includability in assessable value - Freight and insurance - Tribunal on the basis of Supreme Court Judgment held that freight and insurance were not includible in the assessable value of the goods reported in [2007 (6) TMI 517 - CESTAT CHENNAI] - Apex Court dismissed the appeal since the tax effect involved is negligible.

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• 2016 (4) TMI 976
  Demand of interest and imposition of penalty u/s Section 11AB and 11AC respectively - Cenvat credit availed to the extent of 100% in respect of Capital goods instead of 50% - Held that:- subsection (1) of Section 11A provides for issuance of show cause notice and subsection (2) provides for determination of duty. In the present case neither any show cause notice was issued for proposing any demand of duty/Cenvat nor any determination of duty / Cenvat was made under subsection (2). Issuance of show cause notice and determination of demand is the main ingredient in order to demand interest and penalty under Section 11AB and 11AC respectively. In absence of observance of Section 11A (1) and (2) the interest and penalty cannot be imposed. Therefore, interest and penalty are unsustainable. - Decided in favour of appellant

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• 2016 (4) TMI 975
  Demand for recovery of credit - Dispatches made for export - non-production of any evidence regarding incurring the cost of transportation from the factory to the port - Held that:- the show-cause notice has been issued solely on the ground that the factory gate is the place of removal. The CBEC vide Circular No. 999/6/2015-CX dated 28/02/2015 pointed out by the appellants clarified that in respect of manufacturers exporters, the place of removal is ICD/ports. In the instant case, there is no doubt that the appellants are manufacturers/exporters. In these circumstances, the only ground raised in the show-cause notice failed. The issue regarding cost of being incurred by the appellants or not is totally irrelevant. - Decided in favour of appellant

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• 2016 (4) TMI 974
  Auction for the privilege - denial of preference - Held that:- With respect to the contention that the first respondent has granted the benefit of preference to the fourth respondent though such a relief has been declined by this Court in Ext.P9 order, we notice that such a contention was raised before this Court earlier W.P.. The said contention was considered by this Court and rejected, in Ext.P5 judgment. This Court has found that, the consequence of Ext.P9 interim order was to set at naught all the proceedings initiated against the fourth respondent pursuant to registration of the crime against him, including cancellation of his license. Therefore, a further declaration to the effect that his right of preference was available to him was unnecessary. Having suffered the said judgment, it is not open to the appellant to agitate the said contention again. Another contention put forward by the learned Counsel is that, the fourth respondent had requested for the grant of privilege to him and upon rejection therof, had participated in the auction from the general category. Since he had participated in the auction and was unsuccessful, it was not open to him to claim the privilege after the auction was conducted. We notice that, the fourth respondent had challenged the denial of preference to him before this Court in earlier W.P. In the said writ petition an interim order had been granted by this Court staying confirmation of the auction that was conducted on 5.3.2014. It is clear from the conduct of the fourth respondent that he had challenged the proceedings of the auction without any delay and had obtained interim orders against confirmation thereof. The said writ petition was disposed of by Ext.P5 judgment, with the appellant also on the party array, directing the first respondent to consider and take a decision in the matter after hearing all the parties. Having suffered Ext.P5 judgment pursuant to which the first respondent had considered the rival contentions of the appellant as well as the fourth respondent and decided the issues, it is not open to the appellant to contend that the fourth respondent should be held disentitled to the preference claimed by him for the reason that he had participated in the auction. The said contention is therefore rejected.

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• 2016 (4) TMI 973
  Seeking permission to sell the non-bonded duty paid goods - to make deposit which is a pre-requisite of filing the appeal - Held that:- if the petitioner is placed on terms and under the strict supervision of the respondent, if the non-bonded goods which are the absolute property of the petitioner could be ascertained, the petitioner could be permitted to sell the same in favour of purchasers whom the petitioner may identify and if the monies raised are directly provided to the respondent or made to be deposited before the CESTAT to meet the demand of the pre-conditional deposit and the remaining amount if any could be handed over to the respondent in partial discharge of any liability, subject to the result of the appeal, it would meet the ends of justice. Therefore, on sale of such goods, the amount shall firstly be deposited as a pre-conditional deposit before the CESTAT and the remaining amount under protest shall be appropriated by the respondent, subject to the result of the appeal. - Petition disposed of

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• 2016 (4) TMI 972
  Leviability of duty - Unaccounted goods found - Clearance of goods supported by invoices but not appearing in statutory record - lapse by the appellant to record the clearance - appears to be for preventable reason in absence of any enquiry and contrary evidence discarding absence of Excise Clerk came to record - Held that:- Revenue did not interrogate the Excise Clerk to find the truth. Had there been examination of the Excise Clerk, there would have been scope to discard the preliminary evidence of the appellant recorded in the course of investigation. But that was not done. Therefore, appellant’s deposition became truthful without any evidence on record showing his premeditated design to cause evasion of duty. Accordingly there shall be no levy of duty at all when the appellant says that against both the allegations duty has already been paid. For no intention to cause evasion, confiscation is unwarranted. Accordingly, there shall be no redemption fine also. Imposition of penalty - Held that:- there was unaccounting of the transactions for preventable reasons. Preliminary statement recorded from the appellant when discloses unassailable conduct of the appellant, there should be no penalty at all. - Decided in favour of appellant

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• CST, VAT & Sales Tax

• 2016 (4) TMI 1014
  Payment of VAT - Invisible loss of yarn pursuant to manufacturing activity - by following the earlier orders of the Principal Bench of this Court in the case of M/s. Global Calcium P. Ltd. Versus The Assistant Commissioner (Commercial Taxes) [2016 (4) TMI 1013 - MADRAS HIGH COURT], the petition is disposed of. Therefore, the directions given therein shall be followed by the respondents while passing fresh orders in respect of the issue related to invisible loss. - Petition disposed of

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• 2016 (4) TMI 1013
  Payment of VAT - Invisible loss of yarn pursuant to manufacturing activity - Held that:- matter is covered by the decision of this court in the case of Interfit Techno Products Ltd., vs. The Principal Secretary, Commissioner of Commercial Taxes [2015 (4) TMI 935 - MADRAS HIGH COURT]. Therefore, by following the same, the matter is disposed of. - Matter disposed of

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• 2016 (4) TMI 968
  Whether the reversal of input tax credit on the purchase of DEPB licence used for payment of import customs duty was in order or not - Importer and exporter of spices, crude drugs, kiran items and chemicals - Can the Department deny the benefit of input tax credit for the duty paid by the petitioner on the purchase of DEPB licences, when such licences are considered to be "goods" within the meaning of Section 2(21) and the tax paid on the purchase of such licences are considered as "input tax" under Section 2(24) and also when the charging provisions in Section 3(3) clearly entitle a registered dealer to such a benefit. Held that:- before considering the issue as to whether DEPB licences constitute "goods" within the meaning of Section 2(21) of TNVAT Act, 2006, it may be useful to look at the ratio decidendi of the decision of the Supreme Court in Yasha Overseas Vs. CST [2008 (5) TMI 43 - SUPREME COURT ]. The said decision arose under interesting circumstances. In H.Anraj v. The State of Tamil Nadu [1985 (10) TMI 258 - SUPREME COURT OF INDIA], the Supreme Court held that lottery tickets constituted "goods" within the meaning of the expression "goods" as given in the Tamil Nadu General Sales Tax Act, 1959 and the Bengal Finance (Sales Tax) Act, 1941. In view of the above said Supreme Court judgments, the petitioner is basically right in contending that DEPB licences are goods. But, the mere fact that these licences constitute goods within the meaning of Section 2(21) of Tamil Nadu Act 32 of 2006, is not sufficient to make the petitioner entitled to input tax credit. Section 19(1) provides for input tax credit shows that the entitlement for such credit is restricted only to the amount of tax paid or payable under the Act by the registered dealer to the seller on his purchases of taxable goods specified in the First Schedule. Therefore, unless the claim for input tax credit relates to the tax paid or payable on the purchase of taxable goods specified in the First Schedule, it is not possible to grant credit. DEPB licences do not even fall under any of the categories mentioned in Section 19(2). The case of the petitioner does not even fall under Sub-Section (3) or Sub-Section (4) of Section 19. Therefore, the Department was right in denying the benefit of input tax credit in respect of the duty paid by the petitioner on the purchase of DEPB licences, despite the fact that these licences constitute goods within the meaning of Section 2(21). The petitioner has used these DEPB licences, for the purpose of payment of import duty. Therefore, the benefit that they are claiming now under the Tamil Nadu Value Added Tax Act appears to be a double benefit. As we have pointed out earlier, the petitioner cannot claim credit, unless he satisfies all the three conditions specified in Section 19(1) namely (i) that he is a registered dealer (ii) that he actually paid or became liable to pay tax on the purchase of taxable goods and (iii) that the tax paid or payable was in respect of goods specified in the First Schedule. The petitioner does not satisfy all the three conditions. Hence, the denial of input tax credit on the purchase of DEPB licences is perfectly in order and the first question of law is answered against the petitioner. Whether the purposes indicated in Clauses (i) to (vi) of Sub-Section (2) of Section 19 are enumerative or exhaustive - Held that:- Section 19(2) directs input tax credit to be allowed for the purchase of goods made within the State from a registered dealer, if they are for the purposes indicated in Clauses (i) to (vi) therein. Section 19 is a complete Code in itself. There are 20 sub-sections under Section 19, each of which serves a different purpose. While Sub-Section (2) gives a list of purposes for the purchase of goods within the State, which would make a registered dealer entitled to input tax credit, Sub-Section (3) speaks about a similar entitlement in so far as the purchases of capital goods are concerned. Sub-Sections (5) and (6) indicate the circumstances, under which, the input tax credit cannot be allowed. But, the entitlement of a registered dealer to input tax credit, does not arise solely out of Sub-Section (2) of Section 19. It arises actually out of Sub-Section (1) of Section 19. But, since Sub-Section (1) covers all types of purchases of all types of goods specified in the First Schedule by all types of registered dealers, it is generic in nature. Out of such generic entitlement stipulated in Sub-Section (1), the statute carves out. Therefore, entitlement, non-entitlement, etc., are covered with reference to specifics in the other Sub-Sections of Section 19. It does not mean that the very entitlement to credit could be traced only to Sub-Sections (2) to (4) and the non-entitlement could be traced to Sub-Sections (5) to (10). If a dealer satisfies the essential conditions stipulated in Sub-Section (1), he is entitled to credit. Therefore, we are of the considered view that Sub-Section (2) of Section 19 is enumerative and not exhaustive. The second question of law is answered accordingly. But, our answer to the second question of law as above, will not actually advance the cause of the revision petitioner. This is in view of our answer to the first question of law that no input tax credit can be claimed merely on the purchase of DEPB licences. Therefore, despite the fact that on the second question of law, we agree with the submission of the learned counsel for the petitioner, the revision petitioner is not entitled to any relief. - Decided against the petitioner

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• 2016 (4) TMI 967
  Re-assessment of returns - Chillers imported outside the country - Commitment of offence in regard to stipulation in contract that chillers had to be purchased from Malaysia - Held that:- an officer of the rank of Commissioner is totally unaware of the provisions of the Sales Tax laws. The State Government has no legal competence to levy tax on goods which are imported from outside the State. It also has no competence to levy tax on goods imported from outside the country. The learned Commissioner has held that since the goods were imported from Malaysia for which the dealer was not authorized and, therefore, the dealer has committed an offence. we fail to understand this logic of the Commissioner of Taxes. The contract was entered into between the Airport Authority of India and Voltas. In the said contract there was a stipulation that these chillers had to be purchased from Malaysia. Even otherwise any dealer is not duty bound to buy goods from only within the State. He can buy goods from outside the State and bring them within the State or can import them into the country in accordance with law. If he has not smuggled in the goods, he has not committed any offence. Whether the assessee had charged 20% tax over and above the contract value - Works Contract - Held that:- the state has failed to produce any evidence in regard to its conclusion that the dealer had charged 20% sales tax over and above the contract value. This leaves no manner of doubt that the contract value was inclusive of all taxes and duties and the stand of the Revenue in this regard is totally false. The entire exercise of reassessment was started only with a view to delay the re-payment of the sum of Rs. 14,65,591/-. It is indeed shocking that a State should behave in such a manner. The contract was available with the Revenue and yet it refused to read contract. The Commissioner of Taxes also came up with a fanciful argument that the assessee had committed an offence by importing chillers from Malaysia. Therefore, this is a fit case where exemplary costs should be imposed. - Petition disposed of

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• Indian Laws

• 2016 (4) TMI 964
  Maintainability of writ petition against an order passed by the Debts Recovery Tribunal disposing of an appeal filed under S.17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Held that:- When extraordinary writ remedy is invoked, despite the availability of an alternative remedy, the Court should at the threshold, examine, whether the petition can be entertained having regard to the pleading in the petition, more particularly, the reason(s) stated for bypassing of the alternative remedy. In a catena of decisions, it has been held by the Apex Court, that writ petition under Article 226 of the Constitution should not be entertained when the alternate remedy is available under the Act, unless exceptional circumstances are made out. The writ remedy cannot be permitted to be availed as a routine / matter of course, but only in exceptional circumstances. The Apex Court has recognized some exceptions to the rule of alternative remedy i.e., where the statutory body has not acted in accordance with the provisions of the enactment in question or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of principles of natural justice, or when the vires of the statute is under challenge. Unless the Court is convinced that the case falls under the exceptional categories, the writ petition filed against the order of the Tribunal, passed in exercise of the jurisdiction under S.17 of the SARFAESI Act, on account of the legislative intent behind the enactment of the SARFAESI Act and RDDB Act and the ratio of law laid down by the Apex Court in the cases of (1) Kanaiyalal Lalchand Sachdev [2011 (2) TMI 1277 - SUPREME COURT OF INDIA ] (2) Satyawati Tondon [2010 (7) TMI 829 - SUPREME COURT ] and (3) Sri Siddeshwara Co.Op. Bank Ltd. [ 2013 (9) TMI 216 - SUPREME COURT ], cannot be entertained, as the approach of the High Court should be consistent with the provisions of the statutes and also the law laid down by the Apex Court, mandated by Article 141 of the Constitution. In view of the aforesaid discussion, we are of the opinion that Hotel Vandana Palace case [2011 (11) TMI 723 - KARNATAKA HIGH COURT] does not lay down the correct position of law i.e., in so far as point No.(ii) answered therein. Hence, the finding recorded on point No.(ii), in Hotel Vandana Palace case, is declared as per incuriam. Needless to say that any decision(s) of this Court which take(s) the view contrary to the law laid down by the Apex Court, in (1) Kanaiyalal Lalchand Sachdev (2) Satyawati Tondon and (3) Sri Siddeshwara Co.Op. Bank Ltd., does not lay down the correct law on the question involved in this Reference. The Reference is answered accordingly. The petition be now listed before the learned Single Judge, to decide in the first instance, the entertainability or otherwise of the writ petition by keeping in view the position of law, as above.

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