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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter April 29, 2015 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Central Excise CST, VAT & Sales Tax Indian Laws News RBI Reference Rate for US $ RBI imposes penalty on Bhavana Rishi Co-operative Urban Bank Ltd., Hyderabad, Telangana Change In the Policy of Export of Preferential Quota Sugar to EU and USA under CSL and TRQ Quota Notifications Companies Law File No. 17/45/2015-CL-V - dated 10-4-2015 - Co. Law Companies (Auditor's Report) Order, 2015 DGFT 04/2015-2020 - dated 28-4-2015 - FTP Amendment in import policy of Urea under ITC (HS) code 3102 10 00 of Chapter 31 of ITC (HS), 2012 – Schedule – 1 (Import Policy) Income Tax 43/2015 - dated 24-4-2015 - IT Notification u/s 35(1) (ii) - Approved organization - Pandit Deendayal Petroleum University Raisan Gandhi Nagar Gujarat Circulars / Instructions / Orders Central Excise 1001/8/2015-CX.8 - dated 28-4-2015 Clarification on rebate of duty on goods cleared from DTA to SEZ Highlights / Catch Notes Income Tax Transfer pricing adjustment - Risk adjustment and negative working capital adjustment - Though, it may be true, in case of a captive service provider AE takes all major risks. But, at the same time assessee also bears single customer risk, as in the event of any loss or damage to the business of AE assessee is also likely to suffer. - AT Visit to Get Source Claim of expenditure against payment of compensation - Short notice payment for termination of Toll Manufacturing Agreement - compensation was a business contractual obligation of the assessee and therefore, the expenditure was incurred for business as well as commercial expediency of the assessee. - AT Visit to Get Source Initiation of proceedings u/s 153C - Company non-existent on account of its merger - Notice not served to amalgamated company - it is absolutely essential that the person so to be assessed should be in existence at the time of making the assessment - AT Visit to Get Source Addition u/s 69C - Neither during the course of search at Litika Group nor during the course of survey at assessee’s premises nor during the enquiries made after survey reveal that assessee had transferred cash of ₹ 3.99 crores to Litika Group - provisions of Section 69C are not attracted - AT Visit to Get Source Capital gain - consideration of the holding period of previous owner - inherited the property - assessee entered into a collaboration agreement with a builder - assessee ground floor out of the building made by the builder and in addition to that builder also paid ₹ 21 lacs to the assessee - Befefit of indexation allowed - AT Visit to Get Source Condonation of delay in furnishing the appeal - since the assessee society was operating under the supervision of State government, we are of the view that the said delay in filing the said appeal late by 1178 days in assessment year 2006-07, before the CIT(A), merits to be condoned - AT Visit to Get Source Levy of penalty under section 271(1)(c) - assessee in the return of income had claimed the depreciation on land perse and not on intangible assets. The said claim was against the provisions of the Act and was thus not bonafide claim made by the assessee - penalty confirmed - AT Visit to Get Source Exemption / eduction u/s 54F - more than one residential house - assessee claimed that old proerty was gifted to minor daughter through an oral HIBA - Since the gifts are held to be valid, the assessee cannot be regarded as owner of two residential house - exemption allowed - AT Visit to Get Source DTAA between India and Switzerland - Permanent Establishment / Business connection - establishing subsidiary in the other treaty country would not result in creating and establishing a PE of a foreign holding company in the said third country. - AT Visit to Get Source Presumption as to assets, books of account, etc. - A per the provision of section 292C, the assessee was liable to explain the source of the stock found in his premises as he was the owner of the business - AT Visit to Get Source Section 263 does not empower the CIT to thrust upon his view on the Assessing Officer. Revision u/s 263 is possible only if both the conditions i.e. the order passed by the Assessing Officer is erroneous and it is prejudicial to the interest of the Revenue, are satisfied. - AT Visit to Get Source Customs Impoundation and confiscation of goods - Export of 2496MT sugar - 'Export Release Orders' not obtained - tribunal has been more-than fair in reducing the penalty to nearly 1/10 of the original penalty. - There is no scope of the penalty being reduced any further by this Court - HC Visit to Get Source Central Excise Clearance of Aviation Turbine Fuel from Unregistered export warehouse - , the allegation in the show cause notice that Indian Oil Corporation, Shakur Basti, New Delhi is not a registered export warehouse and therefore is not entitled to receive duty free ATF from IOC s Refinery at Panipat is absolutely without any basis. - AT Visit to Get Source Rerolling process of the hot roll flat bars - if a hot rolled product has been subjected to very light cold rolling process known as skin pass or pinch pass without significant reduction of thickness, the process does not result in change of the character of the finished product as hot roll product. - AT Visit to Get Source SSI exemption - Use of old shareholder's brand name - if the brand name were owned and used by the same company under the old management there is no need of transfer of brand name from old management to new management because brand name is not owned by the management but it is owned by the company only - AT Visit to Get Source Valuation of goods - Job work - the appellant is applying the sale value of the principal and it is not under dispute that the said value is lower than the value computed in terms of hon'ble apex Court judgment in Ujagar Prints - demand set aside - AT Visit to Get Source VAT Taxability of Trust as a dealer under Kerala General Sales Tax Act, 1963 - the assessee-Port Trust would fall within the meaning of "dealer" under Section 2(viii) of the Act and is consequently assessable to tax under the Act - SC Visit to Get Source Demand of VAT on the invisible loss of yarn emerging during manufacturing process - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent - it is the onus upon the manufacturer to prove the loss / waste - matter remanded back - HC Visit to Get Source Validity of circular directing to reverse the credit to the extent of waste - Question of quashing the impugned circular is unnecessary in the light of the stand taken by the respondents that the impugned circular is not statutory and at best could serve as guideline - HC Visit to Get Source Case Laws: Income Tax 2015 (4) TMI 939 Computation of Capital gain in respect of sale of residential house - Deduction u/s 54 of Income Tax Act, 1961 - Correct Section for claiming exemption not mentioned in the return - Held that:- We are of the considered opinion that even if a wrong section was mentioned by the assessee in the return, it was the duty of the Assessing Officer to assist the tax payer in a reasonable way and to provide the relief if due to the assessee. This attitude rather will help the Revenue in assessing the income correctly. A correct advice by the Department would inspire the confidence of public at large. Even identical guidelines/instructions have been issued from time to time by the CBDT to its Officers (Circular No. 14(XL-35) dated 11.4.1955 and letter No. F.81/27/65-IT(B) dated 18.5.1965). If due to ignorance a wrong section has been mentioned by the assessee, it is the duty of the Assessing Officer to advise the assessee about the correct claim and also to assess the tax legitimately. This is the clear intention of the legislature. Without adverting further, we deem it appropriate to remand this file to the file of the learned Assessing Officer to examine the claim of the assessee afresh under provisions of section 54F of the Act, after providing due opportunity of being heard to the assessee. The assessee is also at liberty to furnish evidence, if any, to substantiate his claim. So far as the invocation of section 50C of the Act is concerned, the ld. CIT(A) held that the Assessing Officer rightly took the fair market value of the properties as adopted by the stamp valuation authority for computation of capital gain. Section 50C was inserted by the Finance Act, 2002 with effect from 1.4.2003. As per sub-clause (a) to sub-section (2) to section 50C, where the assessee claims before the Assessing Officer that the value adopted or assessed (or assessable) by the stamp valuation authority under sub-section (1) exceeds the fair value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to the Valuation Officer. Since we have remanded the issue of section 54F of the Act to the file of the learned Assessing Officer, therefore, the Assessing Officer is directed to examine the claim of the assessee on this point also. - Appeal of the assessee is allowed for statistical purposes. 2015 (4) TMI 938 Chit Fund Company - Disallowance of interest paid on deposits received from chit subscribers - Interest free advances given to sister concerns - AO disallowed interest expense on the basis of diversion of income for non-business purpose - CIT(A) disallowed interest expenses on account of non business expenditure - Disallowance u/s 14A - Disallowance of dividend paid to chit subscribers on non deduction of tax at source, treating it as Interest paid - Held that:- It is manifest from the relevant clause of the Byelaws governing the scheme of chit fund that the interest at the rate of 6% was payable by the assessee company on the instalments received in advance form the subscribers. Such interest was required to be calculated monthly and kept separately by the assessee, and accordingly in compliance with clause 5(d) of the Bye-laws, the amount of instalments received in advance from the subscribers was kept by the assessee separately in the form of bank deposits. In our opinion, receipt of advance instalments from the subscribers, payment of interest thereon at 6% per annum and investment of the amount of such advance subscriptions separately in the bank deposits in compliance with the bye laws of the chit fund scheme, thus was integral part of the business of the assessee of running the chit fund, and consequently, interest received by the assessee on such bank deposits constituted its business income. The learned CIT(A), therefore, was not justified in treating such interest as income from other sources. Similarly, the learned CIT(A), in our opinion, was not justified in confirming the disallowance made by the Assessing Officer on account of interest paid by the assessee on the instalments received in advance from the customers of the chit funds, as the said interest paid by the assessee as per the scheme of the chit funds, clearly constituted expenditure incurred by it wholly and exclusively for the purpose of its business. According to us, there was a direct nexus between the interest paid by the assessee on the said instalments deposited by the members with its business of running a chit fund, and the same, therefore, was allowable as business expenditure, as rightly claimed by the assessee. We, therefore, delete the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of such interest and allow ground no.2 of the assessee’s appeal. Disallowance u/s 14A - It is observed that investment in the range of ₹ 25 to 30 crores was made by the assessee company in the shares during the year under consideration and in order to manage the investment of this volume, which also involved taking decisions from time to time regarding change in the portfolio, certain expenditure was required to be incurred, which cannot be as low as 1 or 2% of the exempt dividend income, as claimed by the learned counsel for the assessee. Having regard to the facts of the case including especially the quantum of investment made by the assessee in the shares, the quantum of dividend income received during the year under consideration, etc., we are of the view that it would be fair and reasonable to estimate the expenditure incurred by the assessee for earning of exempt dividend income at ₹ 2,32,375 being 5% of the exempt dividend income. We accordingly restrict the disallowance made by the Assessing Officer and confirmed by the CIT(A) under S.14A to ₹ 2,32,375 and allow partly ground No.3 of the assessee’s appeal. Disallowance of dividend paid to chit subscribers on non deduction of tax at source - As agreed by the learned representatives of both the sides, the issue involved in the appeal of the Revenue is squarely covered in favour of the assessee by the decision of the coordinate bench of this Tribunal in assessee’s own case [2012 (2) TMI 468 - ITAT HYDERABAD] for assessment year 2008-09 rendered vide order dated 24.2.2012, wherein a similar disallowance made by the Assessing Officer was held to be unsustainable, following the decision of the Madras high Court in the case of Bilahari investments (P)Ltd. [2006 (6) TMI 59 - MADRAS HIGH COURT], wherein it was held that the dividend distributed by the assessee did not part-take the character of interest and consequently, the assessee was not liable to deduct tax at source. Respectfully following these judicial pronouncements in assessee’s own case on similar issue, we uphold the impugned order of the learned CIT(A), deleting the disallowance made by the Assessing Officer under S.40a(ia) on account of dividend paid by the assessee to the chit subscribers for non-deduction of tax at source and dismiss the appeal of the Revenue. - In the result, appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed. 2015 (4) TMI 920 Penalty u/s.271D - acceptance of loan in cash - violation of the provisions of section 269SS - Held that:- Respectfully following the decision of the Hon’ble jurisdictional High Court cited in Madhukar B. Pawar [2008 (6) TMI 321 - BOMBAY HIGH COURT ] we hold that penalty u/s.271D is not leviable on account of cash loan of ₹ 20,000/- received from Shri Ravindra by the assessee since the loan is not in excess of ₹ 20,000/-. The AO is accordingly directed to delete the penalty on this amount. We hold and direct accordingly. So far as the amount of ₹ 80,000/- received in cash from Shri Balakrishna Nagmoti is concerned, it is the submission of the Ld. Counsel for the assessee that the seized diary does not contain name of the above mentioned person. We, therefore, direct the Assessing Officer to verify the notings in the seized diary found during the course of search. In case the name of the above mentioned person is not appearing in the notings in the seized diary, then the Assessing Officer has to delete the penalty u/s.271D on account of cash loan of ₹ 80,000/- received from the above mentioned person. We hold and direct accordingly. So far as the cash loan of ₹ 1 lakh received from Shri Patil Saheb of Jalgaon is concerned, the Ld. Counsel for the assessee fairly conceded that there is violation of provisions of section 269SS. We, therefore, uphold the levy of penalty u/s.271D on account of acceptance of cash loan of ₹ 1 lakh from Shri Patil Saheb of Jalgaon. - Decided partly in favour of assessee. Account payee cheques have been added by the AO u/s.68 - Held that:- So far as the amount of ₹ 20,000/- received in cash on 12-03-2004 from Smt. Kalpana R. Patil is concerned the same has to be deleted in view of the decision Madhukar D. Pawar (Supra). Penalty u/s.271D on this amount is directed to be deleted.- Decided partly in favour of assessee. So far as the amount of ₹ 50,000/- received from Smt.Latadevi Malpani, ₹ 50,000/- from Smt.Neetadevi Malpani, ₹ 50,000/- from Smt.Rupali Malpani and ₹ 1,20,000/- from Shri Sonali Malpani are concerned in view of the submission of the Ld. Counsel for the assessee the amounts are taken from different persons not exceeding ₹ 20,000/- in each case, the same are restored to the file of the AO with a direction to verify from the seized diary and take appropriate decision as per law and facts after giving due opportunity of being heard to the assessee. So far as the amount of ₹ 50,000/- received from Shri Ramesh D. Pawar and ₹ 1,30,000/- from Shri Shivaji Kothawade are concerned the same is restored to the file of the AO with a direction to verify the submission of the Ld. Counsel for the assessee that the above persons are agriculturists and have no banking facility at their respective villages. If the same is found to be correct, then in our opinion there exists reasonable cause for accepting such cash loan from the agriculturists having no banking facility and the Assessing Officer is directed to cancel the penalty u/s.271D. So far as the amount of ₹ 1,40,000/- received from Shri S.L. Patil is concerned it is the submission of the Ld. Counsel for the assessee that he has received an amount of ₹ 80,000/- by account payee cheque from Shri S.L. Patil and the loan of ₹ 60,000/- has been added by the AO u/s.68 of the I.T. Act. Similarly, it is the submission of the Ld. Counsel for the assessee that the amount of ₹ 1,60,000/- received from Mr. Jagannath Pawar is not correct and it is only ₹ 16,000/- as per the seized diary and the assessee has taken further loan of ₹ 1000/- which was also repaid. Thus restore this issue to the file of the AO with a direction to verify from the seized diary regarding the veracity of the above submission of the Ld. Counsel for the assessee and decide the issue afresh in accordance with law after giving due opportunity of being heard to the assessee. So far as the amount of ₹ 50,000/- received from Shri Jambo Seth and ₹ 6 lakhs from Shri Jyoti Mahajan are concerned in absence of any satisfactory explanation given by the assessee regarding non levy of penalty u/s.271D we uphold the order of the CIT(A) confirming the levy of penalty on the above amounts. Since according to the Ld. Counsel for the assessee, no penalty has been levied in the case of loan from Smt. Sujata Bhamre, we are not dealing with this issue. 2015 (4) TMI 919 Transfer pricing adjustment - selection of comparable - Held that:- Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. Thus we hold that Infosys Ltd. be excluded from the list of comparable companies. KALS Information Systems Ltd. company is concerned, it is not in dispute before us that this company has been considered as not comparable to a pure software development services company. Tata Elxsi Ltd. company is concerned, it is not in dispute before us that in assessee’s own case for the A.Y. 2007-08, this company was not regarded as a comparable in its software development services segment. Comp-U Learn Global Tech India Ltd. the company has nil onsite revenue and satisfied all the filters applied by the TPO. We are of the opinion that some more analysis has to be done and we direct the TPO to look into the financial statement of the company and also provide an opportunity to the assessee to submit relevant details to substantiate its claim that Comp-U-Learn Tech India Ltd. is not a comparable company Persistent Systems Pvt. Ltd.is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Thus in the absence of segmental details / information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of comparables for the year under consideration. R Systems International ltd. Unless the financial year-end of a comparable case matches with that of the assessee, it cannot be considered as comparable because the figures of different financial year endings are distorted. He relied on an order passed by the Mumbai Bench of the Tribunal in case of Sandstone Advisors (P) Ltd. Vs. ACIT, [2013 (9) TMI 401 - ITAT MUMBAI], the Tribunal after considering the prescription of Rule 10B(4) has held that it is mandatory for the purposes of comparing the data of an uncontrolled transaction with an international transaction that the same must relate to the financial year ending similar to that of the assessee. Thus this case should be excluded from the list of comparables Think Soft Global Services Ltd. cannot be treated as comparable to assessee as software testing services cannot be equated with software development services. Thirdware Solutions excluded from the list of comparables the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services. I-Gate Global Solutions Ltd. be excluded on the basis of high turnover. Zylog Systems Ltd. excluded from the list of comparables as from the extracts of the annual report, it is seen that there is substantial increase in revenue in the impugned AY compared to the preceding AY. Therefore, considering the fact that the acquisitions made by the company during the relevant FY could have impacted the revenue earning and profitability of the company, it will not be safe to treat the aforesaid company as a comparable. Sasken Communication Technologies Ltd the entire annual report has not been placed before us, we are not in a position to give a conclusive finding in this regard. We, therefore, remit the issue relating to comparability of this company for fresh adjudication by the AO/TPO. Treating the deferred revenue expenditure as operating cost by TPO/DRP/AO - Held that:- We agree with the submissions of the ld. AR that every expenditure debited to the P&L account cannot be considered as operational in nature. From the observations made by TPO, it appears, he has rejected assessee’s claim only for the reason that no such entries were found in the annual report. The TPO has not properly examined the nature of expenditure. However, at the same time, assessee has to demonstrate that such expenditure was not claimed in any preceding assessment years. Therefore, considering the facts of the case, we are inclined to remit this issue back to the file of AO/TPO for deciding the issue afresh. Non-exclusion of a reasonable amount of employee cost from the operating cost while calculating the operating margin - Held that:- The matter requires re-examination by AO/TPO after verifying the cause for quantum jump of salary in the impugned AY. If it is found that part of the employee cost is non-operational, then, suitable adjustment may be given from the operating cost. Risk adjustment and negative working capital adjustment - Held that:- neither in its TP study nor before the TPO and DRP, assessee has submitted any computation made on a scientific basis towards risk adjustment. Though benefit of risk adjustment can be given in an appropriate case, but, it has to be on the basis of facts and evidence and cannot be granted in a routine manner. Though, it may be true, in case of a captive service provider AE takes all major risks. But, at the same time assessee also bears single customer risk, as in the event of any loss or damage to the business of AE assessee is also likely to suffer. Moreover, assessee has to demonstrate risk assumed by each of the comparable companies vis-à-vis the assessee. The basis for adjustment towards risk must come from assessee’s side. As assessee has not properly established its case either before the TPO or DRP by bringing facts and materials on record, we are inclined to remit this issue back to the file of AO/TPO for deciding afresh . 2015 (4) TMI 918 Claim of expenditure against payment of compensation - revenue expenditure or capital expenditure or otherwise - Short notice payment for termination of Toll Manufacturing Agreement - Held that:- The tax authorities must not look at the matter from their own view point, but that of prudent businessman. In any case if the assessee took a decision to discontinue the arrangement under the TMA with CCL in its best business interest then, such decision of the businessman cannot be questioned without doubting the genuineness of the arrangement and consequent payment of compensation. It is none of the job of the tax authorities to see how the assessee does business, in the best interest of its business. The payment in question has a direct nexus with the business activity of the assessee and, therefore, it was incurred for the business of the assessee and for commercial expediency. In the case of Sales Magnesite Pvt. Ltd. [1994 (11) TMI 38 - BOMBAY High Court], it was held that the question whether it was necessary for commercial expediency or not, is a question that has to be decided from the point of view of the businessman and not by subjective standard of reasonableness of the Revenue. Also in case of Bombay Steam Navigation Co., it was held that Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts an circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regard as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure. In view of the above discussion, and facts and circumstances of the case, we find that the payment of compensation was a business contractual obligation of the assessee and therefore, the expenditure was incurred for business as well as commercial expediency of the assessee. Accordingly the payment is an allowable business expenditure. - Decided in favour of assessee. 2015 (4) TMI 917 Initiation of proceedings u/s 153C of the Income Tax Act, 1961 - Company non-existent on account of its merger - Notice not served to amalgamated company - Held that:- In the present case it is an admitted fact that the assessee company amalgamated with M/s Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 vide order dated 16.08.2010 of the Hon’ble Jurisdictional High Court and the assessee informed the AO about this fact vide letter dated 27.08.2010 (copy of which is placed at page no. 3A of the assessee’s paper book) and the letter dated 23.08.2010 filed on 27.08.2010 with the Income Tax Department (copy of which is placed at page no. 3 of the assessee’s paper book). Therefore, this fact was in the knowledge of the AO that the assessee was not inexistence at the time of preparation of the satisfaction note dated 05.07.2010 (copy is placed at page no. 1 of the assessee’s paper book) for issuing notice u/s 153C of the Act. From the above facts, it is clear that the notice u/s 153C of the Act by the AO was not issued to M/s Windchimes Constructions Pvt. Ltd. with which the assessee company i.e. M/s Mevron Projects Pvt. Ltd. amalgamated. Therefore, the assessment framed vide order dated 31.12.2010 u/s 153C/143(3) of the Act on the assessee was not valid. Similar issue had been adjudicated in the case of M/s Micra India Pvt. Ltd. [2013 (11) TMI 679 - ITAT DELHI] and Khurana Engineering Ltd. [2013 (2) TMI 128 - GUJARAT HIGH COURT]. In view of the aforesaid discussion and keeping in view the ratio laid down in the above said judicial pronouncements, we are of the view that for making the assessment, it is absolutely essential that the person so to be assessed should be in existence at the time of making the assessment. In the present case the assessment has been framed by the AO on a date when the present assessee was not in existence and M/s Windchimes Constructions Pvt. Ltd. was fastened with the liability of the assessee but no notice was issued to the said amalgamating company i.e. M/s Windchimes Constructions Pvt. Ltd., therefore, the assessment framed by the AO vide assessment order dated 31.12.2010 was not valid. - Decided in favour of assessee. 2015 (4) TMI 916 Transfer Pricing adjustment in relation to International Transactions - Inclusion of certain companies by TPO in the list of comparables for ALP - Denial of deduction u/s 10A of the Income Tax Act, 1961 - Held that:- The Mumbai Bench of the Tribunal in Petro-Aroldite (P) Ltd. [2015 (3) TMI 1010 - ITAT MUMBAI] has held that a company cannot be considered as comparable because of exceptional financial results due to mergers/demergers etc. Similar view has been taken by the Delhi Benches of the Tribunal in several cases including Toluna India Pvt. Ltd. [2014 (10) TMI 424 - ITAT DELHI]. It is patent that the mergers/demergers largely influence the profitability of a company during the year of happening of such event, which makes it incomparable. As there have been acquisitions by Aftek Infosys Ltd. in the year in question and the financial results of the erstwhile company stand included in the overall profitability of this company, we hold that the same cannot be considered as a comparable. We find that the predominant view of the Tribunal across the country in several cases is that the transactions of a company having more than 25% of Related Party Transactions (RPTs) are considered as controlled, thereby failing the test of comparability. This view has been taken in several decisions including by the Delhi Bench in Toluna India Pvt. Ltd. [2014 (10) TMI 424 - ITAT DELHI] and Actis Advisers Pvt. Ltd. [2012 (10) TMI 779 - ITAT, DELHI] and Mumbai Bench in Stream International Services Pvt. Ltd. [2014 (10) TMI 393 - ITAT MUMBAI]. The mechanism for calculating the percentage of Related Party Transactions has been broadly laid down in Nokia India Private Ltd. [2014 (11) TMI 101 - ITAT DELHI]. Since the authorities below have not examined the extent of the RPT percentage of this company, which the learned AR is claiming to be in excess of 25%, we set aside the impugned order and remit the matter to the file of AO/TPO for fresh determination of the percentage of Related Party Transactions of this company in consonance with the broader principles laid down in the case of Nokia India Private Ltd (supra), to the extent these are applicable. If the Related Party Transactions of this company are found to be more than 25%, then this company should be excluded from the set of comparables and in the otherwise situation, it should continue in the list of comparables. We find from its Annual report, which is available in the paper book, that the business acquisitions of three firms in USA were undertaken by this company giving a substantial boost to its operations. When we come to the Schedule of fixed assets of this company, which is available on page 523 of the paper book, it can be seen that there is an entry with the narration “Business acquisitions”, during the year with the value of ₹ 8,47,18,999/-. These facts abundantly show that this company undertook acquisitions in the relevant year making it incomparable in the light of the reasoning given above while dealing with Aftek Infosys Ltd. We, therefore, order to delete this company from the list of comparables. Section 10A dis-allowance - The only objection taken by the Assessing Officer for refusing deduction under Section 10A is that the registration was granted by the STPI Society and not the Inter-ministerial Standing Committee. We find that this issue is no more res integra in view of the judgment dated 26.2.2013 of the Hon’ble Delhi High Court in Technovate E Solution Pvt. Ltd. [2013 (3) TMI 372 - DELHI HIGH COURT], a copy of which has been placed on record by the ld. AR. In this judgment, it has been held that the approvals given by the Directors of Software Technology Parks of India are valid having the authority of the Inter-ministerial Standing Committee. This position was fairly accepted by the ld. DR also. In view of the binding precedent of the Hon’ble jurisdictional High Court, the facts of which are on all fours with those of the assessee company, we are of the considered opinion that no exception can be taken to the view canvassed by the learned CIT(A) on this score. - Decided partly in favour of assessee. 2015 (4) TMI 915 Addition u/s 69C of the Income Tax Act, 1961 on account of unexplained investments - Transactions recorded in regular books of accounts - Assessee paid taxes on profit earned on all transactions - No expenditure incurred or found incurred by the assessee - Held that:- There is no dispute to the fact that transactions entered into by the assessee with the Litika Group were mere paper transactions as accepted by the AO. There is also no dispute to the fact that all the amounts of such paper purchase/sale transaction were routed through banking channels. No transaction of cash dealing was found either during the course of search at Litika Group nor during the course of survey at assessee’s premises. It is also a matter of record that all these transactions were entered by the assessee in its regular books of accounts. Such circuitous transactions were entered into books of accounts and the profit earned thereon had been duly shown in the Profit and Loss account. There is also no dispute to the fact that on entire profit earned on actual transactions as well as circuitous transactions of purchase and sales, the assessee had paid due taxes on profit earned on all these transactions. In the instant case the assessee has neither incurred any expenses nor was not found to have incurred any expenditure, therefore, there is no question of explanation regarding source of such expenditure. Accordingly, there was no justification on the part of the AO’s action for making any addition u/s.69C. Neither during the course of search at Litika Group nor during the course of survey at assessee’s premises nor during the enquiries made after survey reveal that assessee had transferred cash of ₹ 3.99 crores to Litika Group. There is also nothing on record to suggest that assessee and Litika Group were involved in some scam/scandal involving money laundering or violation of any law. After considering all these factual position, the CIT(A) recorded detailed finding at para 3.3 of his appellate order and held that provisions of Section 69C are not attracted. It is also not the case of the department that excess payment received during the year amounting to ₹ 3.99 crores was not forming part of the gross results of the assessee on which profit was earned and taxes were duly paid. The detailed finding recorded by the CIT(A) at pages 10 to 14, para 3.3 have not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings recorded by the CIT(A) resulting into deletion of addition made u/s.69C of the Act. - Decided against the revenue. 2015 (4) TMI 914 Penalty for undisclosed income u/s 271(1)(c) of Income Tax Act, 1961 - Explanation 5 to section 271(1)(c) does not cover any immovable property - Principle of ejusdem generis - Assessee fulfilled all the conditions specified in explanation 5(2) to section 271(1)(c) - Held that:- In the instant case, in relation to the assessment year under consideration, the assessee was found to be the owner of 'construction on agriculture land (Rs.12,54,780/-) and membership of VLCC (Rs.1,95,220/-) during search. The impugned investments were duly shown by the assessee in her return of income for the assessment year 2007-08. As discussed above, the ownership of the assessee in construction of agriculture land could not be termed as ownership of 'any money, bullion, jewellery or other valuable article or thing' as envisaged under Explanation 5 in view of the judgements of Cochin Bench in case of South India Fiance [1991 (8) TMI 135 - ITAT COCHIN]. Therefore, so far as investment in 'construction on agriculture land' was concerned, the Explanation 5 to Sec.271(1)(c) was not applicable in the assessee's case and accordingly, penalty to that extent was not leviable. The learned C.I.T.(A). wrongly took the contradictory stand. On the one hand he held that the assessee was not entitled for immunity provided under Explanation 5(2) because the undisclosed income consisted of investment in construction on agriculture land and therefore, not covered by the term 'any money, bullion, jewellery or other valuable article or thing' as held by the honourable Cochin Bench, at the same time he confirmed penalty levied by the A.O. under Explanation 5 to Sec.271(1)(c). Once it was held that Explanation 5 was not applicable on the facts of the assessee's case, penalty could have not been imposed under the said Explanation. Moreover, the CIT(A) wrongly considered payment towards membership of VLCC as immovable property and confirmed the levy of penalty. Furthermore, the assessee’s case was covered under exceptional circumstances provided under clause (2) of Explanation 5 to Sec.271(1)(c) as all the conditions specified in Explanation 5(2) to Sec.271(1)(c) were satisfied fulfilled as evident from the following facts: (a) Shri Purnandu Jain, head of the family, in his statement recorded u/s.132(4) on 27.04.2007 offered ₹ 20 crores as additional income for and on behalf of various members of his family.In view of the above discussion, we do not find any merit in the action of AO levying penalty u/s.271(1)(c) of the Act, as the assessee had fulfilled all the conditions specified in explanation 5(2) to section 271(1)(c) of the I.T.Act. - Decided in favour of assessee. 2015 (4) TMI 913 Calculation of Capital gain - Non consideration of the holding period of previous owner - Befefit of indexation - inherited the property - assessee entered into a collaboration agreement with a builder - assessee ground floor out of the building made by the builder and in addition to that builder also paid ₹ 21 lacs to the assessee - Held that:- Almost similar were the facts in the case of Janhavi S. Desai [2012 (7) TMI 496 - BOMBAY HIGH COURT] - the actual date of acquisition must be considered for calculating the capital gain. - the date on which the assessee inherited the property to be the relevant date and accordingly recomputed the capital gain. Scope of sec. 2(42A) of the Act - Explanation I only determines the holding period of an asset for the purpose of short term capital gains and has no application to long term capital gain for the assessee to get the benefit of indexation? - the period of holding shall be from 01.04.1981 in respect of the entire property where property was acquired by the previous owner before 1.4.1981. Similar view has been expressed by the Hon'ble jurisdictional Delhi High Court in the case of Arun Shungloo Trust [2012 (2) TMI 259 - DELHI HIGH COURT]holding that the assessee trust having acquired the property in trust on 05.01.1996, which property was acquired by the previous owner sometime before 01.04.1981 on sale of property by the assessee in 2001-02, it was entitled to the benefit of indexed cost of acquisition from 01.04.1981 and not for the period on or after 05.01.1996. The ratios laid down in these decisions also support the finding given by the Learned CIT(Appeals) on the issue. We thus do not find any reason to interfere with the first appellate order in this regard. The same is upheld. The grounds are accordingly rejected. - Decided against the revenue. 2015 (4) TMI 912 Condonation of delay in furnishing the appeal - Mistake found in order of CIT appeal - Bonafide belief for not to claim deduction under section 80P of the Income Tax Act,1961, resulting in delay in appeal - Held that:- The assessee has in the appeal filed against the order of CIT(A) raised preliminary issue against the dismissal of appeal in limine. The CIT(A) had dismissed the condonation petition moved by the assessee holding that there was no merit in the claim of the assessee vis-à-vis deduction claimed under section 80P of the Act. The CIT(A) has further noted that the assessee by way of ground of appeal No.1 had raised the issue of deduction under section 80P of the Act. However, we find that the CIT(A) by mistake has made the said observation. The perusal of the ground of appeal filed with the Form No.35 reflects that one issue raised by the assessee i.e. while taxing the interest on Government Securities as an independent taxable income at ₹ 95,77,140/-, the learned AO erred in not setting off the loss on sale Government Securities amounting to ₹ 214,17,311/- against the profit on sale of units of mutual funds as stated earlier. The assessee had not raised any issue with regard to denial of deduction under section 80P of the Act. The order of CIT(A) on such surmises was thus, incorrect. The second aspect of the issue is whether the assessee is entitled to the condonation of delay in filing the appeal late before CIT(A). The Hon’ble Supreme Court in MST. Katiji & Ors. [1987 (2) TMI 61 - SUPREME Court] had laid down the proposition that while considering the application for condonation of delay, sufficient cause pleaded by the party should be considered. The Hon’ble Supreme Court further held that sufficient cause for the purpose of condonation of delay should be interpreted with a view to do even-handed justice on merits in preference to approach which scuttles a decision on merits. The assessee before us has pleaded for the condonation of delay in filing the appeals late before the CIT(A), especially in the circumstances where the assessee was initially under the bonafide belief that it was not entitled to the deduction under section 80P of the Act and hence, the appeals were not filed in time. However, the issue now raised is the correct computation of income in the hands of the assessee i.e. where on the one hand, the Assessing Officer had taxed gains arising on sale of securities in the hands of the assessee, similar loss arising on the sale of securities merits to be considered to the set off against the said gains on sale of securities. The second aspect pointed out by the assessee was the status of the assessee society wherein though it was formulated by the State government to carry on the specific purpose, but same could not be carried on as necessary approvals were not granted to the assessee. Thereafter, there was a decision to wind up the affairs but same could not be wound up because of holding up of money with cooperative societies which in turn, were in liquidation. In the entirety of the above said facts and circumstances, we are of the view that there was a reasonable cause for the delay in filing the appeals in time before the CIT(A) and since the assessee society was operating under the supervision of State government, we are of the view that the said delay in filing the said appeal late by 1178 days in assessment year 2006-07, before the CIT(A), merits to be condoned. Accordingly, we condone the same. - Decided in favour of assessee. 2015 (4) TMI 911 International transaction with Associated Enterprises - Adjustment in Arm length Price - Comparables rejected - Software Technology Parks of India Scheme - Short credit of TDS - Interest u/s 234B and 234C - Held that:- Eclerx Services Ltd. - The Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions Pvt Ltd. [2014 (2) TMI 83 - ITAT BANGALORE] has followed the decision of Hyderabad Bench in the case of Capital IQ Information Systems (India) Pvt Ltd. [2014 (9) TMI 125 - ITAT HYDERABAD], wherein the Tribunal has held that extraordinary event occurred during the previous year makes the company incomparable. As mentioned here in above, the extraordinary even has taken place in the case of Eclerx Services Ltd which excludes this company as a comparable. We, therefore, hold that this company cannot be considered as comparable. Mold-Tek Technologies Ltd - The appointed date for amalgamation and the demerger were 1.10.2006, and 1.4.2007 respectively. The business and the assets and liabilities of Tech-men Tools Private Limited stand transferred to and vested in Mold Tek Technologies Limited w.e.f.1.10.2006. In our considered opinion, this is definitely an extraordinary event which make this company excluded from final list of comparables on similar lines as discussed by us in the case of Eclerx Services Ltd and the same judicial decision as considered in the case of Eclerx Services Ltd. - The appeal filed by assessee is allowed. Short credit of TDS - In our considered opinion, this issue needs to be verified at the assessment level. We, therefore, restore this issue to the file of AO. The AO is directed to grant credit for the TDS as per TDS certificate furnished by the assessee in the light of the provisions of law. This ground is treated as allowed for statistical purposes. Interest u/s 234B and 234C of the Income Tax Act - In our humble opinion charging of interest is mandatory though consequential in this case. The AO is directed to levy interest as per the provisions of law. - Decided partly in favour of assessee. 2015 (4) TMI 910 Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 - Concealment of particulars of Income - Concealment of income - Depreciation claimed on leasehold rights in land as intangible asset - Held that:- In view thereof, where the Tribunal has come to a finding that the assessee is not entitled to the depreciation even under section 32(1)(ii) of the Act in respect of leasehold rights of land, the contention of the assessee that it was not claiming depreciation on land perse but was claiming depreciation on leasehold rights in land which were business or commercial rights and therefore, intangible assets under section 32(1)(ii) of the Act, does not stand the test of time. Where the explanation tendered by the assessee in respect of its claim on depreciation on the leasehold rights of land was found to be untenable, Explanation - 1 to section 271(1)(c) of the Act is clearly attracted and the assessee is exigible to levy of penalty under section 271(1)(c) of the Act. Even otherwise, the perusal of the record reflects that the assessee in the return of income had claimed the depreciation on land perse and not on intangible assets. The said claim was against the provisions of the Act and was thus not bonafide claim made by the assessee. On this account also, the assessee is liable to levy of penalty under section 271(1)(c) of the Act. Another contention raised by the assessee was that merely because the claim by it had been held to be not correct, would not amount to furnishing of in-accurate particulars of income. Reliance in this regard was placed on the ratio laid down by the Hon’ble Supreme Court in Price Waterhouse Coopers [2012 (9) TMI 775 - SUPREME COURT]. The said plea of the assessee does not stand because it is undisputed that the claim made by the assessee, was not bonafide. The claim of the assessee in any case, was not sustainable in law and in view of the above, where the explanation of the assessee is not found to be bonafide, the assessee is liable to levy of penalty under section 271(1)(c) of the Act. Accordingly, we uphold the order of CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act. - Decided against the assessee. 2015 (4) TMI 909 Dis-allowance of Interest expenses on borrowed fund - Utilisation of part borrowed funds to repay debts of sister concerns - TDS not deducted on reimbursement of expenses - Commission paid to specified persons u/s 40A(2)(b) - Held that:-The first issue regarding dis-allowance of proportionate interest on borrowed funds, it is evident from the findings given in the impugned order as well as material placed on record that, the borrowings from the banks has been substantially reduced in this year, whereas interest free borrowings from the sister-concerns have increased. The interest free funds have been borrowed to reduce the bank borrowings only. The fund flow statement, which is part of the audited accounts, also show that the assessee has generated huge cash from operating activity. Besides this, if the assessee has taken interest free loans from sister-concerns for the purpose of business, then the payment of the said amount, even if they are partly from the interest bearing borrowings from the bank, the same cannot be held to be diversion for non-business purposes or not utilized for the purpose of business. Thus, we agree with the conclusion and findings given by the CIT(A) on this score and accordingly ground no.1 raised by the Revenue is dismissed. Regarding reimbursement of expenses, it is noted that CIT(A) has decided the issue against the assessee, however, has directed the A.O. to disallow only the correct amount of reimbursement for which he has directed the AO to verify the exact amount. We do not find any reason to interfere on such a direction. Accordingly ground no.2 raised by the Revenue stands dismissed. Lastly, regarding disallowance of ₹ 33,06,289 on account of commission paid to Shri Vijay Jain and M/s.B.Arunkumar & Co., who are specified persons u/s 40A(2)(b), it is seen from the records that, Shri Vijay Jain is the Director and CEO of the assessee-company and commission paid to him is a part of his salary package, as he is looking after the entire business of the assessee-company. The said amount of salary package, which includes commission income, was there in assessment years 2004- 2005 and 2005-2006 also, wherein the CIT(A) has deleted the disallowance made by the A.O. on similar grounds. The said order of the CIT(A) has attained finality as no appeal has been filed by the Revenue against the said order. Thus, we do not find any reason to disallow the payment made to Shri Vijay Jain either on the ground that it is excessive or it is not for the purpose of business. So far as the disallowance of ₹ 35,606 on account of commission paid to M/s.B.Arunkumar & Co., it is seen that similar payment of commission at the rate of 0.75% of the sales affected through them has been accepted in the earlier years and the same has attained finality. Therefore, consistent with the earlier years precedents, we do not find any reason to interfere such a finding in this year without any material on record to rebut the same. Accordingly ground no.3 is also treated as dismissed. - Decided against the revenue. 2015 (4) TMI 908 Exemption / eduction u/s 54F - more than one residential house - assessee claimed that old proerty was gifted to minor daughter through an oral HIBA - Validity of oral gifts - Held that:- An oral gift already made was reduced to writing at a later point of time on the same day i.e., on 18.8.2008. This would be clear from a reading of the affidavit filed in confirmation of oral gift, which we have already extracted in the earlier part of this order. Therefore, the gift in question satisfies all the requirements of law and has to be held as valid in law. Since the gifts are held to be valid, the assessee cannot be regarded as owner of the old property. Therefore, the assessee will be the owner of only one property. Apart from this property, the assessee claims to have purchased a plot of land over which a new residential house is sought to be constructed. Therefore, the restriction in the proviso to section 54F(1) of the Act are not attracted in the case of assessee. The CIT(A) did not take note of the error of omission of these loans in the statement of affairs; but chose to rely only on the disclosure of asset which were claimed to be wrongly made in the statement of affairs. In our view, the explanation offered by the assessee is bona fide and it has been shown by the assessee that the statement of affairs on which the Revenue placed reliance was not reliable as it contained errors. We are, therefore, of the view that the assessee satisfies all the conditions for grant of exemption u/s. 54F of the Act. We accordingly direct the AO to allow the deduction claimed by the assessee. - Decided in favour of assessee. 2015 (4) TMI 907 Denial of deduction u/s 80IB(10) - Unapproved project - Completion certificate not obtained - Dis-allowance of expenses on material consumed & Labour expenses - Unexplained and unreconciled differences - Held that - The Revenue is raising the issue regarding two objections that the project was not approved project and secondly that the project was not completed because no completion certificate has been issued. Regarding the first objection of the Revenue that the project was not approved, we find that as per the approval letter of U.P. Avas Avam Vikas Parishad dated 21/06/2003 available on page No. 51 & 52 of the paper book, the project was approved on this date and such approval was valid for five years up to 20/06/2008. In this regard, it was one of the main objections of the Assessing Officer that U.P. Avas Avam Vikas Parishad is not a local authority. In this regard, in Para 9.6 of his order, CIT(A) has referred to a judgment of Hon'ble Apex Court in the case of R. C. Jain reported in [1981 (2) TMI 200 - SUPREME COURT OF INDIA]in which it was held by Hon'ble Apex Court that local authority includes Delhi Development Authority. Regarding the second aspect i.e. regarding completion of the project, we find that although the completion certificate has not been issued but the assessee has already made application for issue of completion certificate on 23/07/2007, copy of which is available on record.Here are various judgments of various High Courts in which, it was held that even if completion certificate is not issued but it is otherwise established that the project was completed, deduction u/s 80IB (10) is allowable. Dis-allowance of expenses - We find that a clear finding has been given by CIT(A) that the Assessing Officer while making this disallowance has not brought any specific material on record and in absence of any specific finding on this addition, the addition cannot be sustained. He has also given a finding that as the entire earnings of the assessee from the project is deductible u/s 80IB(10), there is no question of claiming higher expenses and any addition, even if made, shall increase the deduction available u/s 801B(10). We find that a clear finding is given by CIT(A) that those flats for which premium was paid by the assessee were sold for higher amounts. Since by making this payment of premium of ₹ 10 lac, the assessee has actually made extra income because of sale of those flats on higher price, we do not find any justification for making disallowance and therefore, we decline to interfere in the order of CIT(A) on this issue also. Unexplained and unreconciled differences - We find that a clear finding is given by Cit(A) that the Assessing Officer has taken the debit balance as credit balance. He has also given a finding that these amounts are not relatable to current year but are brought forward balances from previous years and the same has been accepted in the previous year u/s 143(3). These findings of CIT(A) could not be controverted by Learned D.R. of the Revenue and hence, we decline to interfere in the order of CIT(A) on this issue. - Decided against the revenue. 2015 (4) TMI 906 Addition u/s 68 of the Income tax Act, 1961 - Unexplained share application money - Share application money received from outside India, credit worthiness of investor not established - Held that:- In respect of share application received from first five parties as mentioned in para 3, the AO observed that all the five companies were functioning from common premises; all had opened accounts in the same bank, all had received share application money either on the same day or the next date of deposit in the bank account. Thus, a number of peculiar features noted in all the five transactions clearly revealed that these were bogus transactions so as to dislodge assessee’s claim of genuineness. The CIT(A) after recording detailed finding at para 9 of his appellate order further fortified the action of the AO. The findings recorded by lower authorities have not been controverted by Ld. AR by bringing any positive material on record. Accordingly we do not see any reason to interfere with the findings of Ld. CIT(A) resulting into confirmation of addition of ₹ 38,75,000/- in respect of five parties mentioned at para 3 of this order. - Decided against the assessee. Share application money received outside India - In respect of share application money received from Smt. Nirmala Barmecha, we found that Smt. Nirmala Barmecha is a none resident Indian, residing in Israel. The assessee has filed a bank statement to substantiate remittance of money to assessee company. Sources of money was also substantiated by filing the Joint Bank Account of Smt. Nirmala Barmecha with her husband. The Bank statement which is a copy of ‘foreign Currency Account Statement’, reveals withdrawal of US Dollar 2,50,000/- on 15/2/2007 and a further withdrawal of US Dollar 2,00,000/- on 26.2.2007. The certificate of bank for remittance from the Israeli Accountant dated November 25, 2001 was also filed certifying that source of money was deposits/ savings in her joint account with her husband. We also find that as per the income tax return filed by the Smt. Nirmala Barmecha at India, she was having capital exceeding ₹ 3.4 crores, with investments mainly, in shares and debentures and income arising therefrom amount to ₹ 4.04 lacs which has been also offered for tax.The detailed findings recorded by CIT(A) with regard to identity, genuineness and creditworthiness of Smt. Nirmala Barmecha has not been controverted by Ld. DR by brining any positive material on record. Accordingly we do not see any reason to interfere in the findings recorded by the CIT(A) resulting into deletion of addition of ₹ 1,98,49,900/- received on account of share application money from Smt. Nirmala Barmecha. - Decided against the revenue. 2015 (4) TMI 905 DTAA between India and Switzerland - Existence of Permanent Establishment/Business connection in India - Taxability of business Income earned in India, by company incorporated outside India - Applicability of Interest u/s 234B - Held that:- The decision of the Hon’ble Delhi High Court in the case of E-Funds IT Services [2014 (2) TMI 442 - DELHI HIGH COURT] , wherein Hon’ble Court has held that establishing subsidiary in the other treaty country would not result in creating and establishing a PE of a foreign holding company in the said third country. Thus, at the outset the subsidiary SRSIPL of the assessee does not constitute a PE of its holding company i.e. the assessee. Considering the services rendered by SRSIPL in the light of the OECD commentary, SRSIPL cannot be considered as PE of the assessee. The decision relied upon by Ld. DR do not support the Revenue on the facts of the present case, like in the case of Delhi Bench of the Tribunal in the case of Motorola Inc. (supra, the facts were that the employees of the assessee had worked both for the assessee as well as its Indian subsidiary. The employees also had the right to enter the office of the Indian subsidiary either for the purpose of working for Indian subsidiary or for the purpose of working for the assessee and the Indian subsidiary provided perquisite to the employees of the assessee and the assessee paid salaries to the employees, on these facts the Indian subsidiary was considered as place of business. However, facts of the case in hand clearly show that the employees of the SRSIPL has only provided services to SRSIPL and there is no noting on record to prove that the employees had provided services to the assessee or the assessee is paying their salaries or perquisites. The decision of the Hon’ble Supreme Court in the case of Morgan Stanley [2007 (7) TMI 201 - SUPREME Court] has been duly considered by the Hon’ble Delhi High Court in the case of E-Funds IT Solutions (supra). To sum up, the assessee does not have any business connection in India in the light of Explanation-2 to section 9(1) of the Act. The assessee does not have any PE in India. The facts on record show that there is neither Service PE nor Agency PE in the form of SRSIPL. Considering the facts in totality in the light of the relevant provisions of the law and the DTAA and the judicial decisions referred to herein above, we have no hesitation in setting aside the assessment order and accordingly we direct the AO not to treat the income of the assessee as taxable under the Act. Interest u/s 234B of the Income Tax Act, 1961 - We find that at para-10.6 the DRP following the decision of Hon’ble Bombay High Court in the case of NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]has directed the AO not to levy interest as the assessee is from a foreign country. The AO has not followed the direction of the DRP. We accordingly, direct the AO to follow the directions of the DRP. Ground No.3 is treated as allowed for statistical purposes. - Decided partly in favour of assessee. 2015 (4) TMI 904 Delay in filing of appeal - Affidavit of Chartered Accountant for condone of delay in filing appeal submitted - Denial of exemption u/s 10(23C)(iiiad) to Society - Held that:- The affidavit and cavalier conduct of Shri Kaushal Agarwal, C.A. raises serious questions on his professional competence and work ethics in giving such an affidavit which hides more than it explains. The burden is on the assessee to reasonably explain day to day delay and establish that there existed reasonable and sufficient cause in delaying the filing of appeals for about 1 year. If the proper dates or occasions are not mentioned with proper facts then the delay cannot be condoned. In this behalf, we rely on the decision of the Hon’ble Madras High Court in the case of Madhu Dadha [2009 (6) TMI 26 - MADRAS HIGH COURT].We find merit in the contentions of ld. DR that law helps diligent and not the indolent as well as the axiomatic delay defeats equity. In our considered view that the condonation petitions filed by the assessee and material available on the record, fail to invoke any confidence, fail to explain reasonable and sufficient cause for condonation of long delay of 347 days in filing these appeals . The assessee has to come clean with all the relevant facts, which happened in the period of one year. The assessee has to explain all the events and be specific in the dates. The depositions made in the C.A. affidavit remain uncorroborated and there is no affidavit from the said Shri Malik Parvej in support of the affidavit of C.A.. Thus, the vague affidavit given by the C.A. remains uncorroborated and unreliable. In the entirety of facts and circumstances of the case, we decline to condone the delay of 347 days in filing these appeals. - Appeal dismissed. 2015 (4) TMI 903 Appeal against validity of assumption of jurisdiction under section 153A - Additions in income on account of low house hold withdrawals & credit appearing in the capital account - Addition on account of waste material found - Held that:- We find that as per this judgment of Hon'ble jurisdictional High Court in Dr. A.K.Bansal [2013 (4) TMI 366 - ALLAHABAD HIGH COURT], the issue involved in these grounds is squarely covered against the assessee. In this case, it was held by Hon'ble jurisdictional High Court that neither the Assessing Officer nor the appellate authority, can look into the validity of the search by calling for the warrant of authorisation and examining the records authorising search for the purpose of an enquiry whether the search was valid. Respectfully following this judgment of Hon'ble jurisdictional High Court, this issue is decided against the assessee and accordingly these grounds are rejected. We find that it is noted by Assessing Officer in the assessment order that this is the first year of business of Shri Ram Agencies but the assessee has shown opening balance of capital as on 01/04/2007 at ₹ 1,57,010/-. The Assessing Officer asked the assessee to explain the same along with the supporting documents regarding the source of opening capital and also to explain the source of ₹ 20,000/- introduced during this year. In reply, the assessee has furnished a copy of the capital account and has not provided any details regarding sources of fund. During the year, the assessee has shown cash deposit in his capital account of ₹ 20,000/- on 01/10/2007. No explanation has been given regarding the source of this cash deposit. Considering the facts, as discussed above, we do not find any reason to interfere in the order of CIT(A) because the assessee could not establish the source of this credit appearing in the capital account of the assessee. Also neither before CIT(A) nor before us, the assessee could show that there was any source of house hold expenses during the first half year of the present previous year. Under these facts, we do not find any reason to interfere in the order of CIT(A) on this issue also. - Decided against the assessee. Addition on account of waste material - We find that before the Assessing Officer, the assessee has given two explanations. First explanation was that the stock found in course of search was waste material and therefore, no addition is justified. The second explanation was that they valued the stock at ₹ 3,99,570/- and it was submitted that this may be treated as part of ₹ 60 lacs surrendered against the stock by Shri K. N. Singh Patel. After considering this submission, it was held by the Assessing Officer that the material found at the time of search is waste material or not cannot be verified at this stage and no such contention was raised earlier. Regarding the claim of ₹ 60 lac surrendered against stock, it is noted by the Assessing Officer that such surrender was made by him against the stock of Pal Pan Private Limited and in this manner, the Assessing Officer rejected both the explanations of the assessee and made the addition. On this issue, a clear finding is given by CIT(A) in Para 9.2.2 of his order that Shri K. N. Singh Patel is not related to the assessee and as per the provision of section 292C, the assessee was liable to explain the source of the stock found in his premises as he was the owner of the business. He has also given a finding that Shri K. N. Singh Patel has nowhere owned up the assets found in the premises of the assessee and no benefit of set off can be allowed against the amount surrendered by him as no such specific bifurcation appears to have been given by Shri K. N. Singh Patel. These findings of CIT(A) could not be controverted by Learned A.R. of the assessee and therefore, we do not find any reason to interfere in the order of CIT(A). - Decided against the assessee. 2015 (4) TMI 902 Validity of Revision of assessment order - Both conditions i.e. Erroneous & prejudicial to the interest of revenue need to be fulfilled for order of revision - Dis-allowance of various expenses - Held that:- It is a settled law that for invoking the provisions of section 263 the CIT must satisfy both the conditions that the order passed by the Assessing Officer is erroneous and also that it is prejudicial to the interest of the revenue. If one of the conditions is absent, the order passed by the CIT by invoking the provisions of section 263 will not be legal. The term ‘erroneous’ has not been defined under the Income-tax Act but it is well settled that each and every type of mistake or error committed by the Assessing Officer cannot be said to be an error. An order can be said to be erroneous if there is an incorrect assumption of fact or incorrect application of law in the order passed by the Assessing Officer. If the Assessing Officer after making the enquiries and examining the records, taken one of the possible views, it cannot be said that the order passed by the Assessing Officer is erroneous. Jurisdiction u/s 263 has been exercised on the basis that all expenses charged to the profit and loss account is attributable to the investment in shares. Once the assessing officer has examined the nature of all the expenses and given the finding that the expenses relates to the business. It cannot be said that the order passed by the assessing officer is erroneous. It is not a case of lack of inquiry and also not a case where the assessing officer has taken a view which is unsustainable in law. Even we noted in the order passed u/s 263, the CIT has not given specific finding that the order passed is erroneous but stated that the order passed is prima facie found to be erroneous.Even we may mention that where there are two views possible as to the interpretation of any transaction and the Assessing Officer has taken one of the view favourable to the assessee, the order cannot be said to be erroneous unless the view taken by the Assessing Officer is unsustainable in law.Same view has been taken by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME Court]. Section 263 does not empower the CIT to thrust upon his view on the Assessing Officer. Revision u/s 263 is possible only if both the conditions i.e. the order passed by the Assessing Officer is erroneous and it is prejudicial to the interest of the Revenue, are satisfied. When the Assessing Officer has taken one of the possible views, the order passed by the Assessing Officer cannot be regarded to be erroneous. Thus, in our opinion, under the facts and circumstances of this case, the CIT has not correctly exercised his jurisdiction and had acted beyond the power as laid down u/s 263 of the Act. - Decided in favour of assessee. Customs 2015 (4) TMI 937 Denial of refund claim - SAD - Notification no. 102/2007 dt.14.09.2007 - Claim filed with wrong jurisdiction officer - Held that:- notification does not requires the claim to be filed with the jurisdictional customs officer, who, in this case, was the proper officer at CFS, Mulund. By mistake, their consultant filed these claims in question at Dadri. The said claims were forwarded after a few months by Customs to ICD, Mulund. There is no dispute on the fact that the claims were filed within the stipulated time limit of one year but with ICD Dadri. There is also no dispute on the fact that the claims were received subsequently in CFS Mulund. I note that although notification 102/2007 requires refund claim to be filed with the jurisdictional Customs authorities. A similar issue came up before the Gujarat High Court relating to Notification no. 41/2007-ST wherein also the requirement of filing refund before the jurisdictional Customs officer was stipulated. - Following decision of Commissioner of Central Excise vs. AIA Engineering Ltd. [2010 (9) TMI 555 - GUJARAT HIGH COURT] - Decided in favour of assessee. 2015 (4) TMI 925 Prohibition on trade - Denial to operate as courier service - cost recovery charges - It is stated that the appointment of the custodian for handling of courier cargo is a precondition prescribed by statute for allowing courier operations and hence, the courier operations can be allowed only after the statutory requirement is fulfilled. - held that:- present stalemate is only because of the communication gap between the third respondent and the first respondent regarding cost recovery charges. The petitioners are penalised on account of the same. Though it is imperative that the third respondent should comply with the mandatory conditions prescribed under Regulation 5 of the Handling of Cargo in Customs Area Regulations 2009, respondents 1 and 2 should not have prevented the petitioners from conducting their operations. - Decided in favour of appellant. 2015 (4) TMI 924 Impoundation and confiscation of goods - Export of 2496MT sugar - 'Export Release Orders' not obtained - export obligation under 'Advance Authorization' scheme - Imposition of penalty - Held that:- assessee has hopelessly failed to establish the physical incorporation of the imported input in 2006 in the exported sugar in the year 2010. The Assessing Authority and the Tribunal appears to be correct in recording a finding that the appellant has violated the provisions of Customs Act, in exporting sugar without there being any 'Export Release Order' in the facts of this case - tribunal has been more-than fair in reducing the penalty to nearly 1/10 of the original penalty. There is no scope of the penalty being reduced any further by this Court. - Decided against assessee. 2015 (4) TMI 923 Maintainability of petition - Alternate remedy - Held that:- When an alternative remedy is available, more particularly, in the cases of fiscal nature, invoking of the jurisdiction under Article 226 of the Constitution of India, is not permissible. In fact this Court on 03.02.2015 after referring to the above decisions has dismissed a writ petition in [2015 (2) TMI 437 - MADRAS HIGH COURT] on the very same ground and in [2015 (2) TMI 429 - MADRAS HIGH COURT] - writ petition is not maintainable Corporate Laws 2015 (4) TMI 922 Application for winding up - Doctrine of equitable set-off - Company deposited entire disputed sum in court - Difference of Opinion - Matter referred to Hon'ble Chief Justice - Held that:- Controversy - Whether Winding up petition can be accepted on the ground of principle of equitable set-off ? - Whether Winding up petition can be accepted even if particularly when the company deposited the entire sum in Court. Since we could not be ad idem on the ultimate result we direct this matter to be placed before the Hon’ble Chief Justice for appropriate assignment of the controversy to a third judge to have His Lordship’s views on the issue so that we could ultimately pass an order on the majority decision. Central Excise 2015 (4) TMI 933 Denial of Cenvat credit - Contravention of Rule 57 AB, 57 AC and 57 AE of the Central Excise Rules, 1944 - Availment of Cenvat credit without receiving goods - Held that:- The respondent, unearthed a fraudulent availing of MODVAT/CENVAT credit based upon fraudulent GR receipts and other documents issued by Shri R.K.Gupta, Proprietor of R.K.Enterprises. The respondent recovered fraudulent stamps, documents, GR receipts, books and other material from the premises of Shri R.K.Gupta, who thereafter made a statement admitting to the bogus transactions. It would also be appropriate to point out that Shri R.K.Gupta did not possess any manufacturing facility or any godown from where he could supply goods. The appellant has admittedly availed CENVAT credit on goods received from Shri R.K.Gupta. It was held by tribunal that "there is no dispute about the fact that GRs under which the goods had been dispatched by the registered dealer M/s R.K.Enterprises are bogus and had been fabricated by him. In fact, the owner of one of the truck which was used for transportation of the goods covered under invoice No.241 & 258 in her statement has clearly stated that she is not aware of the transportation of any goods of M/s R.K.Enterprises.” I also find that appellant has not challenged this order of the Tribunal. Commissioner (Appeal) has held that burden of proof that goods were received and used for manufacture of final product lies on the appellant and same has not been discharged by them. In view of the fact that the order of the Tribunal was not challenged and also the fact that appellant did not prove receipt and use of the goods in the manufacture of find products, there is no infirmity in the order passed by the Commissioner (Appeal). Accordingly I uphold the order in appeal and reject the appeal of the appellant.” The appellant having failed to prove to the satisfaction of the authorities receipt and consumption of goods received from Shri R.K.Gupta, we have no hesitation in holding that no question of law much less the question of law framed by the appellant arises for adjudication. - Decided against the assessee. 2015 (4) TMI 932 Clearance of Aviation Turbine Fuel from Unregistered export warehouse - Amended Notification No. 47/01-CE (NT) dated 26/6/01 allows removal of petroleum products without payment of duty for export warehousing - Held that:- The appellant have a warehouse for storage of various petroleum products including ATF at Shakur Basti. Beside this, BPCL and HPCL also have similar warehouses at Shakur Basti for the purpose of export. During period prior to 06/9/04, non-duty paid petroleum products including Aviation Turbine Fuel were being received in these warehouses and while the Aviation Turbine Fuel was being supplied as export under bond under Rule 19 to Foreign going aircrafts, other petroleum products were being cleared on payment of duty. During the period prior to 6/9/04 Notification No. 46/01-CE dated 26/6/01 permitted clearances of any excisable goods by a manufacturer without payment of duty to a bonded warehouse for export there from there under Rule 19 subject to condition that the warehouse is located at the approved station and the same has been approved by the Commissioner. This notification issued under Rule 20 (1) of the Central Excise Rules, 2001 was applicable to all excisable goods including the petroleum products and the same is still in force and has not been amended. Notification No. 47/01-CE (NT)dated 26/6/01 also issued under Rule 20 (1) of the Central Excise Rules, 2001 permitted removal of only certain excisable goods mentioned in the table annexed to this notification, without payment of duty to a bonded warehouse or from one bonded warehouse to another bonded warehouse. By amending Notification No. 17/04-CE (NT) dated 04/9/04 Sl. No. 1 of the table to the Notification No. 47/01-CE (NT) was deleted as a result of which w.e.f. 06/9/04 the petroleum products manufactured by refinery could no longer be cleared without payment of duty to a bonded warehouses. However, as mentioned above, Notification No. 46/01-CE (NT) still continued and has not been amended in any manner. In other words w.e.f. 06/9/04, while the oil refineries could no longer clear the petroleum products without payment of duty to a bonded warehouses for storage there, they could still clear the petroleum products for the purpose of export to a bonded warehouse for export from that warehouse. It is for this reason that the Board vide Circular No. 798/31/04-CX dated 08/9/04 clarified that while the facility of removal of petroleum products without payment of duty from a Refinery to a bonded warehouse or from one bonded warehouse to another bonded warehouse has been withdrawn w.e.f. 06/9/04 vide Notification No. 17/04-CE (NT) dated 04/9/04, the facility of removal of petroleum products without payment of duty for export warehousing continues to be available under Notification No. 46/01-CE (NT). This position was reiterated again in the Board s Circular No. 804/1/2005-CX. dated 04/1/05 and in this Circular the Board also clarified that for the purpose of exports, separate storage of the duty paid and non-duty paid petroleum products is not required subject to condition that tank wise account is maintained about the receipt and discharge of duty paid and non-duty paid petroleum products. The only objection of the Department in this case is that the Shakur Basti Warehouse is not approved by the Commissioner and separate registration as intermediate warehouse has not been obtained. In our view this objection is without any basis, as we find that immediately after amendment to Notification No. 47/01-CE (NT) by Notification dated 04/9/04, the appellant under their letter dated 13/9/04 addressed to the Commissioner and had requested for converting the existing bonded warehouse at Shakur Basti as export warehouse under Rule 20 for export of ATF and in response to this Circular, the Department had clarified that since they are already holding a Central Excise registration No. AAAC 116814XM001 with the Division, the same registration number would be used for intermediate export warehouse for export clearances. Thus this letter clearly shows that the required registration as intermediate export warehouse has already been granted to the Shakur Basti Warehouse. In view of this, the allegation in the show cause notice that Indian Oil Corporation, Shakur Basti, New Delhi is not a registered export warehouse and therefore is not entitled to receive duty free ATF from IOC s Refinery at Panipat is absolutely without any basis. In view of this, we hold that the impugned order is not sustainable. - Decided in favour of appellant. 2015 (4) TMI 931 Rerolling process of the hot roll flat bars - Classification of process as hot rolling or cold rolling - Manufacturing activity or not - Held that:- Merely on the basis on the types of customers who were buying the products or the statements of the suppliers of the rolling stands that the rolls supplied by them were suitable for cold rolling, it cannot be concluded that the product of the appellant was a cold roll product. In terms of the HSN explanatory notes, if a hot rolled product has been subjected to very light cold rolling process known as skin pass or pinch pass without significant reduction of thickness, the process does not result in change of the character of the finished product as hot roll product. In this case, the stand of the appellant from the very beginning has been that there has not been any significant change in thickness. No evidence has been produce that this claim of the appellant is not correct. The judgment of the tribunal in the case of BharatBhai B. Gala vs CCE Ahmadabad [2007 (6) TMI 11 - CESTAT,AHMEDABAD]cited by the Ld. DR is not applicable to the facts of this case, as the dispute in this case is as to whether the process undertaken by the appellant is process of hot rolling or cold rolling and this point has to be decided on the basis of the criteria prescribed in this regard in the HSN explanatory notes. No tests have been done to establish as to whether the Appellant s final product has the characteristics of cold rolled product. In view of this, we hold that the impugned order is not sustainable. - Decided in favour of appellant. 2015 (4) TMI 930 Benefit of SSI exemption Notification No 9/2003-CE dtd 1.3.2003 - assessee cleared their products Zip Fasteners bearing brand name of MIG, GVM and TLR belonging to M/s Madura Coats Pvt Ltd to their own central depot - Held that:- Assessee manufactured and cleared Zip fasteners with sliders bearing the brand /trade name MIG, GUN, TLR belonging to Madura Coats Pvt Ltd. - it is clearly evident from the record that the appellant cleared Zip fasteners with sliders, which were bearing the brand /trade name of Madura Coats Pvt Ltd. Para 4 of SSI exemption notification No 9/2003 provides that the exemption contained in this notification shall not apply to the specified goods bearing a brand name or trade name, whether registered or not, of another person. So, it is to be considered as to whether the goods were cleared by the assessee bearing any brand name of other person. - in the earlier SSI exemption Notification No. 175/86, 1/93 it was specifically mentioned where a manufacturer affixes the specified goods with a brand name , which are absent in the present SSI exemption notification. Admittedly, the assessee had cleared the specified goods bearing brand name of other person. - case of Kohinoor Plastics Ltd (2005 (8) TMI 115 - SUPREME COURT OF INDIA) would squarely apply in the present case. Therefore, we do not find any merit in the submissions of the Ld Advocate. - There is no material available of suppression of facts with intent to evade payment of duty. So, the Commissioner (Appeals) rightly set aside the penalty. - there is no reason to interfere the order of the Commissioner (Appeals) - Decided against Revenue. 2015 (4) TMI 929 Rejection of rebate claim - Pan Masala Packing Machines - Abatement claim on pro rata basis - Held that:- From the language of Rule 10 it is clear that for claiming abatement under Rule 10, there must be total stoppage of the machines which have to be sealed in such a manner that same cannot be operated and besides this, there should be no clearances of any specified goods during the period of stoppage of production for which abatement has been claimed. From the objectives of notifying the goods for assessment and collection of duty based on capacity of production, as mentioned in Section 3A(1) of the Central Excise Act, 1944 and from perusal of the Rules framed under Section 3A(1), it is clear that these rules Shave been framed keeping in view the widespread duty evasion by Pan masala/Gutka manufacturers and the provisions of various rules of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 including Rule 10 thereof must be seen in this background. The interpretation of Rule 10 sought by the appellant would be not only against the provisions of this rule but would also be against the smooth functioning of the system of collection of duty from Gutka/Pan masala units, as envisaged under these Rules. It appears that it is not the case of the appellant that during the period of abatement, there was total stoppage of production and clearances. - There is very much clear that there should be complete stoppage of the machine which is not in the matter in hand. Therefore, I find that both the lower authorities have concluded correctly that the appellant has not satisfied the condition of the grant of abatement as production in the factory of the notified goods was in operation. Therefore, I hold that the appellant is not entitled for abatement. - Decided against assessee. 2015 (4) TMI 928 Denial of CENVAT Credit - Bogus invoices - Held that:- Both the authorities below failed to appreciate that the Department had not provided the relied upon documents. On perusal of the Adjudication order, I find that the Adjudicating authority observed that appellants were directed to collect the copies of the relied upon documents from DGCEI office. - Adjudicating authority directed the appellants to collect the documents from DGCEI office, who has not supplied the documents to them, as contended by the respondents. But, the Commissioner (Appeals) observed that the documents were supplied with the show cause notice, which is totally mis-conceived, inconsistent and contradicting. The ld.Advocate Shri S.J. Vyas fairly submit that they could not file the reply to the show cause notice as the documents were not supplied to them. I agree with the submissions of the learned Advocate that if the Department fails to supply the relied upon documents, it is difficult to file the reply to the show cause notice and therefore, the impugned orders are not sustainable on this ground alone. - Matter remanded back - Decided in favour of assessee. 2015 (4) TMI 927 SSI exemption - Use of old shareholder's brand name - penalty under Section 11AC - interest under Section 11AB - Held that:- Whole basis of the case that the brand name in question were earlier used by same company under different management and thereafter due to change of management the brand name should have been transferred and in absence of that it cannot be said that brand name belong to the respondent. As far as this basis of demand, we completely disagree with the Revenue that admittedly there is no change in the identity of the company, it is only a change of management. Change of management does not make in change of identity of the company. As regard private limited company it is the company who holds the identity and not share holders, therefore company remained intact irrespective of change of share holders. - In this position if the brand name were owned and used by the same company under the old management there is no need of transfer of brand name from old management to new management because brand name is not owned by the management but it is owned by the company only. - when brand names belong to company how it could be transferred from earlier shareholder to present shareholder. This finding of the Ld. Adjudicating authority is absurd and beyond common sense. In view of our discussion we are of the considered view that the order of the Ld. Commissioner (Appeals) is proper and legal which does not require any interference, therefore the same is upheld - Decided against Revenue. 2015 (4) TMI 926 Valuation of goods - manufacture of acetylene gas - appellant also manufacture the same product on job-work goods, arrived at the assessable value on the basis of sale price provided by their principal, M/s. BOC Ltd. and discharged the excise liability on the said value - Revenue contends that sale price of the goods manufactured and sold by the appellant to the independent buyer (other than job worker) should be applied for the purpose of valuation of job-work goods also - Held that:- The appellant is manufacturing acetylene gas on job-work basis where the principal M/s. BOC Ltd. is supplying the inputs. The appellant is paying excise duty on the sale-price at which the goods is sold by their principal, M/s. BOC Ltd. As regards the valuation of job-work goods, it is settled by the hon'ble Supreme Court in the case of Ujagar Prints (1988 (11) TMI 106 - SUPREME COURT OF INDIA) that the valuation of job-work goods should be arrived at by taking the cost of raw material plus job-charges including profit of the job-worker. In the present case, the appellant is applying the sale value of the principal and it is not under dispute that the said value is lower than the value computed in terms of hon'ble apex Court judgment in Ujagar Prints (1988 (11) TMI 106 - SUPREME COURT OF INDIA). So long as this factual position is not in dispute, we find that adoption of the value by the appellant is absolutely legal and correct. - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (4) TMI 936 Taxability of Trust as a dealer under Kerala General Sales Tax Act, 1963 - Activities carried out by trust like dealing in scrap items etc., other than its statutory functions - Trust is a statutory authority constituted for rendering port services under the Major Port Trusts Act, 1963 - Held that:- Since the definition of “dealer” is wide to include transactions conducted in the course of business or otherwise, to answer the question posed before us, we do not deem it necessary to examine the nature of activity carried out by the assessee-Port Trust in as much as whether it falls under the definition of “business” under the Act or not. In the Madras Port Trust case [1999 (3) TMI 500 - SUPREME COURT OF INDIA], this Court has laid emphasis on the expression "carrying on business" in the context of the TN Act, and it is in that context it has reached the conclusion that the Madras Port Trust is not engaged in any business which is a necessary prerequisite under the definition of a “dealer” under the TN Act. In the Act herein, the necessity of a person carrying on business to be placed under the definition of “dealer” is absent. The definition expressly includes the persons who whether in course of business or not engage in the sale or transfer of goods and thus, does not mandate the requirement of conducting business for a person to be exigible under the Act. The contradistinction between the definition of “dealer” under the TN Act and the Act makes it abundantly clear that the observations of this Court in Madras Port Trust case, which refer to the definition of TN Act and interprets it to reach the conclusion of the Trust not being exigible to tax, cannot be accepted in the instant case. It is further pertinent to notice that the TN Act was amended by Act 22 of 2002 whereby explanation (3) was added to definition clause 2(g) of the TN Act. By the said amendment the Madras Port Trust has now been declared as a dealer under the TN Act. Explanation (3) states that if the port trust disposes of any goods including unclaimed or confiscated or unserviceable or scrap surplus, old or obsolete goods or discarded material or waste products whether by auction or otherwise directly or through an agent for cash or for deferred payment or for any other valuable consideration, notwithstanding anything contained in the TNGST Act, it shall be deemed to be a dealer for the purpose of the Act. Therefore, by amendment act the legislature has specifically brought in Port Trust also within the definition of "dealer" under Section 2(g) of the Act and thus, the substratum of the judgment in Madras Port Trust case has been lost. In light of the foregoing discussions, we are of the considered opinion that the activities of the assessee in respect of buying, selling, supplying or distributing goods, executing works contract, transferring the right to use any goods or supplying by way of or as part of any service, any goods directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration, whether in course of business or not, would fall within the purview of Section 2(viii) of the Act. Hence, the assessee-Port Trust would fall within the meaning of "dealer" under Section 2(viii) of the Act and is consequently assessable to tax under the Act. - Decided against the appellant. 2015 (4) TMI 935 Validity of circular directing to reverse the credit to the extent of waste - TNVAT - Demand of VAT on the invisible loss of yarn emerging during manufacturing process - Refund was vat credit was claimed on export - Circular No.22/2011 dated 20.10.2011 - Held that:- Head of the Department is entitled to give administrative instruction, which shall be binding on all his subordinates. The problem would arise only when certain subordinates without due application of mind mechanically apply the circular/guideline/instruction and proceed to take action unmindful of the factual and legal position. There might be cases where the administrative head will issue instructions to the subordinates for the day-to-day conduct of the affairs of the establishment. But in the instant case, the subordinate officers as well as the Commissioner are all authorities functioning under a taxation statute and each one of them exercising quasi judicial function. Therefore, even though the Commissioner may be the Head of the Department, the manner, in which a particular return is to be assessed or a refund has to be granted or refused cannot be issued in the form of guideline or instruction to the Assessing Officer. - assessing officer cannot be solely guided by the impugned guidelines and has to exercise his quasi-judicial powers. In any event there is no cause of action to challenge the impugned circular. Question of quashing the impugned circular is unnecessary in the light of the stand taken by the respondents that the impugned circular is not statutory and at best could serve as guideline. A note of caution is added by observing that no Assessing Officer or Adjudication Authority exercising powers under the VAT Act or Rules framed thereunder can blindly follow the circular while considering a return or refund claim. Accordingly the challenge to the impugned circular is held to be unnecessary since the circular is a non-statutory circular and is in the nature of guideline and the prayer for quashing the circular is rejected Whether Section 18 of the TNVAT Act is a Scheme by itself or whether the benefit to a dealer under Section 18 is subject to the conditions prescribed under Section 19(9) of the TNVAT Act - Held that:- Section 18 of the VAT Act is not an independent provision, not a scheme by itself and forms part of the statute. Consequently, the Input tax credit or refund, which is claimed under Section 18 of the VAT Act is subject to restrictions and conditions under Section 19 of the Act. - Decision in the case of Ashoka Marketing Ltd., and another Vs. Punjab National Bank and others [1990 (8) TMI 393 - SUPREME COURT] followed. Registered dealer, who claims for refund of the input tax under Section 18(2), which itself in the nature of credit has to first satisfy that the circumstances set out in Section 19(9) are not attracted. Therefore, it is not sufficient for the registered dealer to merely state or show that the goods were used in the manufacture and there is nothing more to be done by him and he would be entitled to the entire credit of the tax paid by him on the input by way of refund. The said contention cannot be accepted in the light of the discussion made above. Therefore whether it is a process loss or manufacturing loss or destruction or theft, loss while process loss or manufacturing loss or destruction or theft, loss while in storage, damage in transit or destruction at some intermediary stage of manufacture are to be established before the assessing officer by the dealer and to satisfy the assessing officer that loss of the goods purchased is not covered under any one or more of the contingencies under Section 19(9) of the Act. The Assessing Officers appear to be have been impulsive after issuance of the impugned guideline partly precipitated by the dealers since they did not avail opportunity granted by the Honourable Division Bench before whom they agreed to demonstrate their manufacturing process before their concerned Assessing Authority that there is no loss of material. Be that as it may, the earlier round of litigation did not decide the merits of the issue. Therefore, the same cannot be an embargo for the petitioners, who may be the members of the earlier writ petitioner association and in any event, there was no finding on the legal issues while deciding the earlier writ petitions or that matter in the Writ Appeal. Going by the object of the enactment, the Assessing Officer is bound to examine the refund claim under Section 18 in accordance with the procedure stipulated for availing input tax credit by applying Section 19 of the VAT Act and it is only then, the Authority can pass an order on a refund claim. Therefore, the processing of refund application under Form W is in effect akin to an assessment proceedings since the benefit which flows under claim in Form W, is in effect, the amount which the dealer avail as refund would be a credit if the transaction was not a zero rated sale. - Assessing Officers were not justified in adopting uniform percentage as invisible loss and calling upon the dealer to reverse the refund/input tax credit availed to that extent. Consequently, all notices issued to the petitioner for reopening and all consequential order passed reversing the input tax credit to the extent of either 4% or 5% or adhoc basis stands set aside. However, liberty is granted to the concerned Assessing Officer to issue show cause notices to the petitioners clearly setting out the circumstances under which they propose to revise or call upon the petitioner to reverse refund sanctioned and after receiving their objections shall proceed in accordance with law. Section 18 of VAT Act is subject to the restrictions and conditions under Section 19 of VAT Act. Therefore, if in a given cases of wrong availment, Section 19 provides for reversal. Therefore, it is incorrect to state that once the refund is granted, reopening does not arise. Such interpretation is not in consonance with the scheme of the Act; more so, when what is given to the petitioner is concession or set-off. - Decided partly in favour of assessee. 2015 (4) TMI 934 Waiver of pre deposit - It is contended by the petitioner that the Tribunal has ignored from consideration the strong prima facie case in favour of the petitioner - O.C. Stamps were not affixed on Form E - Held that:- petitioner has placed reliance on a Division Bench judgment of this Court reported in [2013 (6) TMI 28 - ALLAHABAD HIGH COURT] Mawana Sugars Ltd. Vs. Deputy Commissioner, Commercial Tax and others. It is further contended that the petitioner is in debt to the tune of ₹ 66,78,59,922/- having taken loan from the District Co-operative Bank Ltd., Lakhimpur Kheri. As such the financial condition of the petitioner is not such that it may be able to deposit any amount. It is contended that the relevant facts for consideration of the application for waiver having not been considered, the impugned order suffers from non application of mind. It is further contended that the petitioner Co-operative society is managed and controlled by the State of U.P. and being its instrumentality, the Tribunal ought not to have insisted on deposit of any amount as a condition precedent for consideration of stay application. - Impugned order dated 29.8.2014 passed by the Tribunal is quashed - Decided in favour of assessee. Indian Laws 2015 (4) TMI 921 Sale of the mortgaged property - Condonation of delay in filing the Misc. Application - Rectification of recovery certificate - Contravention of the provisions of the DRT Act and the relevant rules applicable for sale of the property - Rejection of misc. application by DRT & DRAT both - Held that:- We are of the view that the High Court has rightly found fault with the DRT and DRAT in rejecting the Misc. Application filed by the respondent, who has sought for rectification of the recovery certificate filed by him. Therefore, the High Court has rightly rejected the same after adverting to the judgments in the cases of State Bank of Bikaner & Jaipur [1999 (9) TMI 769 - SUPREME COURT OF INDIA] and Punjab National Bank and ors [2006 (12) TMI 479 - Supreme Court of India]. The exercise of jurisdiction by the High Court for giving the direction to the Court Receiver to sell the mortgaged property even after the DRT was established at Mumbai and in view of the fact that the proceedings before the High Court were automatically transferred to it in view of Section 31 of the DRT Act and therefore it was impermissible in law for the High Court to direct the Court Receiver to sell the property of the respondent in public auction by executing the Court decree, which action of the Court Receiver is void ab initio in law. The provisions of the Limitation Act are applicable to the proceedings of the DRT in view of Section 24 of the Act of 1993 and therefore, the provisions of Section 5 of the Limitation Act are applicable to the provisions of the said Act. The same has not been examined and considered by the DRT-II and the DRAT at the time of passing the impugned orders in the writ petitions. In view of the foregoing reasons, the legal contentions urged on behalf of the appellant-Bank have no substance in the matter for the reason that the recovery certificate issued on 29.11.2004, was sought to be modified by the appellant-Bank itself by filing an application before the DRT-II and the same has not been modified, which is another strong ground for the respondent to file Misc. application for the cancellation of the sale of the property in favour of the appellant-Bank, along with condonation of delay application urging tenable grounds. - Decided against the appellant.
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