Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 3, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Entitlement to deduction u/s 80IC - process of cutting of stainless steel pipes of larger size with electric cutter and including painting and welding of pipes - whether manufacturing of "Route Markers" falls within the definition of "manufacture" - held Yes - HC
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Disallowance of excessive and unreasonable remuneration/salary paid to the directors - no comparable case was cited where salary for similar work having similar qualifications was paid at lower rate. It is also not brought on record that how and in what manner salary paid to the directors was excessive or not comparable with the market rates - AT
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Benefit of section 54 - Expenditure incurred on improvement/ renovation of the new residential house for the purpose of deduction under section 54 allowed - AT
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Penalty under section 271(1)(c) - surrendered investment cannot be considered for levy of penalty in so far as penalty should not be made if there is no conscious breach of law - AT
Customs
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Denial of drawback claim - Confiscation is not warranted since the goods were made of 90% brass the appellant entertained a bona fide belief that the same merited classification under Entry No. 853802 and accordingly, claimed the drawback benefit- AT
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Conversion of free shipping bill into draw back shipping bills - order of the Tribunal remanding the matter to the Commissioner directing conversion of free shipping bill into drawback shipping bill without giving the Commissioner the power to examine the issue would not be justified - HC
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Anti-dumping investigations - Ex post facto extension of the investigation period granted by the Central Government on 30.04.2014 extending the period of investigation from 09.03.2014 to 09.06.2014 was valid. - HC
Corporate Law
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Power to immediate inspection of the documents / registers or to take any extract or copy required, u/s 94 of Companies Act, 2013, delegated to Regional Directors
Wealth-tax
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Assessee has leased out the property to the lessee for running banking business, which is not the business activity of the assessee - assessee does not fall within the exclusionary clause mentioned in section 40(3)(vi) of the Finance Act, 1983 - Chargeable to wealth tax - HC
Service Tax
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If the revenue authorities did not raise any queries when the records were audited, then the show-cause notice issued in October 2013 invoking the extended period for demanding the service tax liability for the period April 2008 to March 2012, is in our considered view blatantly time barred, as it cannot be said that appellant had suppressed any information - AT
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Whether the respondent is required to discharge the service tax liability on the amount which they have received from the distributors and dealers or on the MRP on which the subscribers purchases Recharge Vouchers and SIM Cards from the distributors or dealers - demand and penalty set aside - AT
Central Excise
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Denial of exemption claim - Compounded rubber - Notification was rescinded w.e.f. 1.3.94 and reintroduced in the same manner vide another Notification issued on 28.3.1994 - exemption would deemed to be continue - SC
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Valuation of goods - includibility of the cost of transportation charges - cost of transport which is also separately shows, is not includable in the valuation for the purpose of excise duty - SC
Case Laws:
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Income Tax
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2015 (4) TMI 85
Disallowance of foreign travel expenses - Held that:- the CIT(A) has observed that no specific instance of non-business expenditure or unverifiable expenditure is pointed out by the Assessing Officer. While allowing the claim of the assessee, the CIT(A) has also observed that the average expenditure of the assessee is below 400 USD per day which is in accordance with the norms of daily expenditure abroad adopted by the RBI for the purpose of granting foreign exchange in foreign visits. - Revenue could not point out a single instance of non business expenditure - No infirmity in CIT's order. Disallowance made out of vehicle running expenses and depreciation - Held that:- Revenue could not point out as to on what reasons the disallowance can be made in the case of the company which is juristic entity when the vehicles are owned by the company. In the case of company there cannot be any element of personal use of the vehicle by the company, therefore, no disallowance can be made. no infirmity in the findings of CIT(A). Disallowance of Property Tax paid in USA - Held that:- as per the matching principle whenever income earned abroad is taxed in India, the expenditure incurred in earning the same is to be allowed. Therefore, we do not find any infirmity in the order of CIT(A) and confirm the same. - Decided against Revenue.
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2015 (4) TMI 84
Deduction u/s 40(a)(ia) of the Income-tax Act, 1961 - Non deposit of TDS for previous months - Held that:- Calcutta High Court in the case of CIT v. Virgin Creations in [2011 (11) TMI 348 - CALCUTTA HIGH COURT] has held that the relevant amendment brought into the statute is retrospective and therefore, all such payments of TDS made before due date of filing of the return would be outside the purview of applicability of sec.40(a)(ia). Even though, the Tribunal, Mumbai Special Bench in the case of Bharti Shipyard Ltd. v. DCIT (2011 (9) TMI 258 - ITAT MUMBAI ) had held against the assessee on this issue, the decision of the Hon’ble Calcutta High Court is in favour of the assessee. Therefore, we have to follow the judgment of the Hon’ble Calcutta High Court rather than the decision of the Tribunal, Mumbai Special Bench. Accordingly, we hold that the Commissioner of Incometax( Appeals) is justified in deleting the disallowance made by the Assessing Officer under sec.40(a)(ia). - Decided against Revenue.
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2015 (4) TMI 83
Deletion of additions made by the assessing Officer being unexplained cash, undisclosed income and undisclosed investment - Violation Rule 46A of the Income-tax Rules - Held that:- Rule 46A(1) stipulates the grounds on which the appellate authority can allow additional evidence. Sub rule (2) provides that the appellate authority while admitting such evidence must record its reasons in writing. Sub rule (3) provides that no evidence produced under sub rule(1) shall be taken into account unless the Assessing Officer has been given a reasonable opportunity of examining the evidence or documents produced or permitted to cross examine the witnesses examined or permitted to produce any evidence or document in rebuttal to the additional evidence produced by the appellant. One of the conditions laid down in Rule 46A is that the Assessee is entitled to submit additional evidence if proper opportunity is not given by the Assessing Officer, during the course of assessment proceedings, but in that case CIT(A) is bound to record reasons in writing for admission of such additional evidence. In the present case such exercise has not been done by CIT(A)- Matter remanded back - Decided in favour of Revenue.
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2015 (4) TMI 82
Block assessment - Assessment u/s 158BD r.w.s. 158BC - addition on unexplained expenditure u/s 69C - bsence of satisfaction note - Held that:- In the present case, it is clear that the satisfaction Note has not been supplied to the assessee, as deduced by the CIT(A). Therefore, following the parity of reasoning laid down by the Hon’ble Delhi High Court in the case of Janki Exports International (2004 (3) TMI 21 - DELHI High Court ), we set-aside the impugned orders of the lower authorities and restore the matter back to the file of the Assessing Officer who shall supply the reasons recorded for arriving at the satisfaction for invoking section 158D of the Act to the assessee. On receipt of such reasons, assessee shall be entitled to file objections which shall be disposed-off by the Assessing Officer by way of a speaking order and only thereafter he shall proceed to pass a fresh assessment in accordance with law. - Decided in favour of assessee for statistical purposes
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2015 (4) TMI 60
Entitlement to deduction u/s 80IC - process of cutting of stainless steel pipes of larger size with electric cutter and including painting and welding of pipes - whether manufacturing of "Route Markers" falls within the definition of "manufacture", entitling him to the deductions, under Section 80IC? - Tribunal allowed the claim - Held that:- The question as to what amounts to manufacture, is no more res integra. It is a settled principle of law that the word "manufacture" is generally understood to mean bringing into existence a new substance and not some change in the substance. (Union of India v. Delhi Cloth and General Mills Co. Ltd., [1962 (10) TMI 1 - SUPREME COURT OF INDIA]). It is also a settled principle of law that "manufacture" implies a change, though every change may not be a manufacture, even though article is a result of treatment, labour and manipulation. (Deputy Commissioner of Sales Tax v. Pio Food Packers, [1980 (5) TMI 30 - SUPREME COURT OF INDIA]). In Collector of Central Excise v. Technoweld Industries, [2003 (3) TMI 123 - SUPREME COURT OF INDIA] as relied by revenue the Court was dealing with a case where the assessee was engaged in the business of drawing wires into thinner gauge from wires of thicker gauge, by cold drawing process. The old product did not lose its identity or could be put to similar and same use. In our considered view, no ratio of law is laid down by the Apex Court in the said decision, unlike the ones we have noticed hereinabove. In the instant case, as we have already observed, by applying the settled principles, the activity carried out by the assessee can only be said to be manufacturing a new product. Thus no hesitation in holding that the Appellate Tribunal was justified in concluding that the product (Route Marker) produced by the assessee was commercially different from its raw material and further, it is commercially known to be different in the market. In other words, the assessee was engaged in manufacturing of the said product. Therefore, the assessee was entitled to deduction claimed under Section 80IC of the Income Tax Act. We find no reason to disagree with the said opinion of the Tribunal. - Decided in favour of assessee.
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2015 (4) TMI 59
Reduction in profit - ITAT upholding the decision of the CIT(Appeals) in reducing the profit of the assessee from 30% to 10% in respect of profit from M/s.Lameens Entertainment and from 30% to 15% in the case of Dress Designer account - Held that:- Commissioner of Income Tax (Appeals) and the Tribunal, both, has reached the concurrent finding of fact that the profits has restricted to 10% of the gross receipts received from M/s.Lamee's Entertainment Factory, and on account of dress designing. This finding of fact has not been shown to be perverse or arbitrary. Guinness of gift - ITAT deleted addition - Capacity and creditworthiness of the donor who gifted ₹ 9.60,000/- to the assessee - Held that:- Gift of ₹ 9.60 lakhs which was received by the respondent-assessee from her sister in U.S.A. was found to be the gift given by close relative who was a capable donor on the basis of the evidence produced before the Authorities by the respondent-assessee. The aforesaid concurrent finding of the Authorities are finding of fact and have not been shown to be perverse or arbitrary in any manner. The conclusion reached by the Authorities under the Act are reasonable, we see no reason to interfere with the same - Decided against revenue.
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2015 (4) TMI 58
Correctness of the notice issued under section 158BC - Whether Commissioner of Income Tax (Appeals) did not grant full relief to the assessee and restricted it? - 10% of the sum of ₹ 8,98,36,614/- was held to be from inflated purchases by CIT(A) but deleted by tribunal - Held that:- if the books of accounts and other documents relevant for this purpose in terms of the Tribunal's conclusion establish that the assessing officer's conclusion that the purchases are bogus cannot be sustained, then, the sustainence to the extent of 10 / 11% by the Commissioner of Income Tax (Appeals) was also not justified and is unsustainable, that is only because it was based on loose sheets. On the strength of these loose sheets, a case of bogus purchase cannot be made out. There is no other evidence other than this and available on record with the assessing officer. It is in these factual circumstances that the order passed by the Commissioner even to the above extent has been set aside. We do not find that such conclusion and essentially on the facts as are to be found of the impugned order would raise any substantial question of law. The Tribunal's conclusions are consistent with all the documents and their contents. This is nothing but an attempt to seek re-appreciation and re-appraisal of such factual conclusion. - Decided against revenue.
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2015 (4) TMI 57
Unaccounted purchases - Whether the appellate authorities were correct in holding that the sum of ₹ 2,83,01,868/- reflected in the profit and loss account and the books of accounts of the assessee as payment made to Mr Chotu Sab and his relatives for purchase of land should be accepted in its entirety even though the finding are based on mere conjuncture and surmises when proof of ₹ 1,27,00,000/- only was shown and the balance ₹ 1,56,01,868/- had not been proved by the assessee by adducing any cogent evidence? - Held that:- In view of the fact that the Department itself has accepted the payment of ₹ 2.83 crores and add to the sellers Mr Chotu Sab and his family members and assessed them on the said amount for payment of capital gains, the contention of the learned counsel for the appellants that the burden of proof of payment by the respondent - assessee should not be shifted on the Revenue, is not worthy of acceptance. The respondent has claimed that he made the payment of the said amount to Mr Chotu Sab and his family members which has also been accepted by the Revenue in the returns filed by Mr Chotu Sab and his family members. Once the same has been done, the Department cannot turn around and claim that the respondent assessee should prove to have made such payment of ₹ 2.83 crores and add for purchase of the said land. No substantial question of law to be decided by this Court. - Decided against revenue.
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2015 (4) TMI 56
Transfer pricing adjustment - adjustment to the Arms’ Length Price (“ALP”) to an international transaction - Held that:- Turnover filter is an important criteria in choosing the comparables. The assessee’s turnover is ₹ 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores. Thus, companies having turnover of more than 200 crores have to be eliminated from the list of comparables. KALS Information Systems Ltd., Accel Transmatic Ltd. be excluded from the list of 26 comparable arrived at by the TPO. Tata Elxsi Limited predominantly engaged in product designing services and not purely software development services should also be excluded for the purpose of comparison while determining the ALP of the international transaction in question. For segmental margins in so far as it relates to providing software services by Megasoft alone should be taken for the purpose of comparison. Assessing Officer should confine the adjustment, qua the transactions by the assessee with its AE alone. To be more specific, the adjustment is to be made only to the transactions with the AE. Exclusion of expenses incurred on travel expenses in foreign currency and expenses incurred towards communication expenses from export turnover while computing deduction under section 10A n the ground that these expenses are incurred in rendering technical services rendered to clients outside India - Held that:- Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] we are of the view that it would be just and appropriate to direct the Assessing Officer to exclude expenses incurred in foreign currency towards travelling and expenses incurred towards communication both from export turnover and total turnover, as has been prayed for by the assessee. - Decided in favour of assessee Non-grant of set-off of brought forward business loss and unabsorbed depreciation against the alleged income - DRP directing the AO to set-off of brought forward business loss and unabsorbed depreciation before computing the deduction under Section 10A - Held that:- The carried forward business loss of Sec.10A unit cannot be set off or carried forward during the tax holiday period against any income.The carried forward business loss to the extent it pertains to non- 10A unit can be set off against income of non-10A unit.Sec.10A is an exemption provision and therefore will not enter the computation of total income and therefore there is no question of any carried forward loss being set off against the profits eligible for deduction u/s.10A of the Act and the profit or loss of Sec.10A unit during the tax holiday period is quarantined and loss if any is carried forward to the assessment years immediately following the last of the assessment years for which the Assessee is entitled to claim exemption u/s.10A, for being set off in accordance with law as if it were any other loss to be dealt with in accordance with Sec.70 to 72 and 32(2) of the Act.D RP’s order/directions on this issue based on a Tribunal decision rendered prior to the decision of the Hon’ble Karnataka High Court in the case of Yokogawa (2011 (8) TMI 845 - Karnataka High Court ) cannot be sustained. We direct the AO to decide the claim of the Assessee in the light of the legal position set out - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 55
Deduction u/s 10B denied - Held that:- Exemptions are not available to the assessee and order of AO on this issue does not need any interference and the issue was decided in favour of Revenue respectfully following the order of the ITAT [2002 (5) TMI 217 - ITAT HYDERABAD-B] - Decided against assessee. Tax not deducted at source on the payment made to non resident - disallowance u/s 40(a)(i) - amount represents the fee paid to Barnes & Thornburg, Attorneys at Law, USA., the said Attorneys for the services rendered by them in connection with the takeover of a company M/s Analytical Surveys Inc - revenue expenditure or capital expenditure - Held that:- At any rate under article 15 of the DTAA between India and USA, independent professional charges are to be taxed only in the country of residence unless there is a fixed base in the source country. As there is no such fixed base in India, the payment in question is not taxable in India. So there is no liability for tax deduction at source in terms of section 194J and as such the payment is not hit by section 40(a)(i). As this amount is not taxable in India under the DTAA between India and USA and as no asset is acquired, it is allowable as Revenue expenditure. - Decided in favour of assessee. Technical service fee - amount paid by the Appellant to M/s. Infotech Software Solutions Inc (ISSI) USA, the subsidiary of the Appellant - whether amount of ₹ 2,01,40,454 paid by the Appellant to M/s. Infotech Software Solution - Held that:- Issue is covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for AY 2006-07 & 2007-08 wherein held that no operations have been undertaken by foreign subsidiaries in India and no engineers have been deputed by them to India and even they do not have permanent establishment in India. In terms of the respective DTAA, no income of the foreign subsidiary is taxable in India in terms of either section 9(1)(i) of the I.T. Act or the concerned Articles relating to business profits (Article 7 r.w. Article 5) in the respective DTAAs. As no technical knowledge was made available to the assessee company by its foreign subsidiary which is the requirement under the DTAA for payment to qualify as technical services fee, payment in question is not taxable in India and so there is no requirement for deduction of tax at source o the payment and so the assessee company is not hit by provisions of section 40(a)(i). - Decided in favour of assessee. Deduction under section 80HHE - expenditure incurred in foreign currency is to be reduced from "export turnover" while granting the deduction - Held that:- The amount of expenditure incurred in foreign currency can be considered for exclusion, only if it represents expenses incurred in foreign currency while providing technical services. In the present case the assessee has not provided any technical services. Further, it is not charged to the customers and so not included in export turnover. The principle that what is not included cannot be excluded has been accepted by the ITAT in the assessee’s own case a for the AY 2006-07. - Decided in favour of assessee. Deduction under section 80HHE - communication expenses are excludible from “export turnover” for granting deduction - Held that:- This amount is not charged to the customer and so not included in the “export turnover” and so cannot be reduced from it. This issue is covered in favour of the assessee by the order of the Tribunal in the assessee’s own case for AYs 2006-07 & 2007-08 - Decided in favour of assessee. Taxability of amounts accrued on forfeiture of convertible share warrants - Held that:- Forfeited amounts are to be treated as capital receipts. Further, these amounts were not added by the AO in the assessment and so the CIT (A) has no jurisdiction to include this amount in the assessment. - Decided in favour of assessee. Deduction under section 80HHE - on-site software services is not part of the business profits - Held that:- This amount has to be included in “profits of business” by virtue of the Explanation to section 80HHE and also by the CBDT Circular dated 17.01.2013.- Decided in favour of assessee. Weighted deduction u/s 35 (2AB) - whether cannot be allowed on the ground that there is no requisite approval from the prescribed authority? - Held that:- As it was submitted by the ld Counsel that the assessee had the necessary approval of the Dept. of Scientific and Industrial Research for the last so many years and it has been renewed periodically. The recognition for the relevant period dated 11 Mar 2003 bearing No. TU/IV-RD/1812/2003 was filed before the CIT(A) and before the ITAT at page 266 of paper book, thus disallowance in question is deleted. - Decided in favour of assessee. Reopening of assessment - Held that:- All the material facts were disclosed by the assessee and it was merely a change of opinion on the part of the AO for reopening the assessment u/s 147. Following the ratios of the decision in the case of CIT vs. Kelivinator India (2002 (4) TMI 37 - DELHI High Court ), we dismiss the Revenue’s appeal. - Decided in favour of assessee. Software link service charges are liable for exclusion from both the export turnover as well as the total turnover for the purpose of computing deduction u/s 10A of the IT Act 1961 as relying on Patni Telecom Pvt. Ltd vs. ITO [2008 (1) TMI 452 - ITAT HYDERABAD-A ] - Decided in favour of assessee.
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2015 (4) TMI 54
Bogus donations - Quantification of donation of gold to Shri Shirdi Sansthan by director and family members of the company - CIT(A) quantified donation at 114.590 kg as against 124.253 kg that the assessee himself has quantified the same - as per revenue the source of income was nothing but diversion of funds in the guise of subcontract to Sri N. Srinivasa Rao - search conducted - Held that:- This is a case of search under section 132 of the Act. The Department framed the assessment under section 153A of the Act after the search. As per the provisions of section 153A the Assessing Officer is required to determine the income on the basis of material available on record consequent to search action under section 132 of the Act. The Assessing Officer is precluded from collection of any confession statement in the course of search action and base the addition on that basis. The Central Board of Direct Taxes Instruction No. 286/2/2003-IT (Inv.) dated March 11, 2003 strictly prohibits placing reliance on the confession statements. The Assessing Officer cannot presume the income of the assessee for the period covered by section 153A on the basis of confession statement. The Assessing Officer is required to bring on record positive material in support of the addition. The addition made by the Assessing Officer in the present case is contrary to the evidence brought on record. The addition made on the basis of statement recorded from the assessee or from the assessee's son which is not recorded under section 132(4) of the Act. It is recorded consequent to the post search enquiry and that statement was also retracted by the assessee. The Assessing Officer herein made the addition only on the basis of statement of the assessee's son dated April 26, 2010. The contents of this statement were retracted vide letter dated December 28, 2010. Being so, the assessment is not based on any cogent material. The assessment cannot be made on the basis of probability. It should be based on the evidence brought on record. In our opinion, tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. The assessee out of ignorance included income as taxable in the return and it approached the court to direct the Assessing Officer to exclude said amount from assessable income then an appropriate decision is to be taken. The plea of the Revenue was that the Department could not be faulted for accepting returns filed by the assessee where he himself had offered the donations for tax. The plea of the Department cannot be accepted in view of the judgment in the case of S. D. S. Mongia v. CBDT [2006 (11) TMI 621 - DELHI HIGH COURT] wherein held that the Revenue is not entitled to tax the income which was offered by the assessee himself though it is not taxable and it should tax only that amount which is chargeable under section 4 of the Income-tax Act, 1961. CIT(A) should have appreciated that all the incriminating evidences available in the seized documents were considered by the Deputy Director of Income-tax (Investigation) in toto in course of post search investigation in the hands of individual and also by the Assessing Officer in the course of assessment proceeding and undisclosed income resulting from these seized papers were to be considered in the assessment of the assessee leaving no room for any further addition in the hands of the assessee on the basis of offer by the assessee, in such circumstances there could be no undisclosed income in the hands of the assessee particularly on the basis of receipts relating to donation as the impugned receipt is not in the name of the present assessee. Also have appreciated the salutatory principle that the income-tax is a levy on income. The substance of the matter is the income. If income does not result at all, there cannot be a tax, even though there is offer by the assessee which did not materialise. Thus the evidence brought on record is not enough to sustain the addition in the hands of the assessee. The ground raised by the assessee in his cross-objection with regard to addition towards donation of gold to Shiridi Saibaba Sansthan is allowed. - Decided in favour of assessee. Addition of ₹ 18 lakhs in the name of Sri N. Srinivasa Rao under section 68 - CIT(A) deleted the addition - Held that:- The contract works awarded by M/s. AMRCL was disbelieved and the additions were made in the hands of M/s. AMRCL on the said account. Further, the amount of contract receipts appears to have already suffered tax in the hands of the company, as such there is no basis for making the addition originating from the same amounts in the hands of the assessee, being the loanee. On this count, the addition of ₹ 18,00,000 made on account of amount standing in the name of Mr. Srinivasa Rao Nukala, as unexplained credit is not sustainable. Accordingly, deletion by the Commissioner of Income-tax (Appeals) is confirmed.- Decided in favour of assessee. Addition of ₹ 13 lakhs under section 68 in the name of Lordven Enterprises - Held that:- The onus is on the assessee to prove the transaction by explaining the same with reference to the above three factors on cumulative basis. In the absence of the same, the transaction cannot be treated as genuine one and as such the credit will be treated as unexplained credit. The ratios of the case laws cited by the Assessing Officer in the assessment order, more specifically the decision of the jurisdictional High Court in the case of R. B. Mittal v. CIT [2000 (8) TMI 54 - ANDHRA PRADESH High Court] are very much relevant for the facts of the case. Accordingly, the treatment meted out by the Assessing Officer for the credit of ₹ 13,00,000 from M/s. Lordven Enterprises is held to be sustainable and as such the addition made on this count is confirmed. - Decided against assessee. Addition of ₹ 6 lakhs in the name of Sri Veerendra Kumar - Held that:- Advance of ₹ 6,00,000 shown to have been received from Shri Veerendra Kumar towards the advance of property and the amount was returned in the same year since the transaction did not materialise. However, it has been observed that the amounts were received and repaid in cash and no confirmation in this regard was furnished either before the lower authorities. There was no indication as regard to the details of the transaction with which such amount was received and repaid. In absence of the needed explanation with evidences as regard to the genuineness of the transaction and creditworthiness of the creditor, it is held that provisions of section 68 are applicable. The provisions of section 68 put the onus on the assessee or assessee to explain the transactions with reference to the identity and creditworthiness of the creditor, apart from the genuineness of the transaction and we are of the opinion that the assessee had failed on this count. Hence, the amount of ₹ 6,00,000 received by Shri Veerendra Kumar, which was treated by the Assessing Officer as unexplained credit, is confirmed.- Decided against assessee.
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2015 (4) TMI 53
Disallowance of excessive and unreasonable remuneration/salary paid to the directors - Held that:- In the instant case, it is noticed that during the year relevant to the assessment year 2006-07, i.e., when the salary was increased first time, the assessee-company had set up a heart care unit, dialysis machine and intensive care unit, etc. Therefore, the area of working and functions of both directors had increased. In the present case, it is also noticed that another visiting doctors were getting the salaries varying from ₹ 4 lakhs to ₹ 9 lakhs only for visits of 2 hours to 4 hours while directors were working round the clock. If the salary paid to the directors is compared with the remuneration paid to the visiting doctors for few hours, it cannot be said that it was excessive. Further more, the Assessing Officer although invoked the provision of section 40A(2)(b) of the Act, however, no comparable case was cited where salary for similar work having similar qualifications was paid at lower rate. It is also not brought on record that how and in what manner salary paid to the directors was excessive or not comparable with the market rates. In the instant case, the Assessing Officer estimated the salary on the basis of the salary paid for the assessment year 2006-07 and increased the salary for the year under consideration to 50 per cent. of the preceding year. However, he had not considered this vital fact that new facilities were provided by the assessee-company in the year under consideration and the directors were required to devote more time in comparison to the earlier years. In our opinion, the estimate made by the Assessing Officer was without any basis. Similarly, the learned Commissioner of Income-tax (Appeals) without appreciating the facts of the case in right perspective considered the salary of ₹ 10 lakhs and ₹ 8 lakhs to Dr.Sunil Chugh and Dr. Kalpana Chugh respectively as reasonable but he had not assigned any basis for the same. In the instant case, it is noticed that Dr. Sheel Acharya who was visiting the assessee-company only for four hours had been paid a sum of ₹ 8.81 lakhs and if the working of the directors is to be considered for at least 12 hrs a day the remuneration on that basis would have been at ₹ 26.43 lakhs (Rs. 8.81 lakhs x 3) and even if this fact is to be considered that Dr. Sheel Acharya was having a super specialised degree while the directors were having specialised degrees then it cannot be said that the salary of ₹ 18 lakhs per annum for each of the directors was excessive. We, therefore, considering the totality of the facts of the case are of the view that the addition sustained by the learned Commissioner of Income-tax (Appeals) was not justified. Accordingly, the same is deleted. - Decided in favour of assessee. Disallowance of interest expenses - Held that:- In the instant case, the disallowance has been made by the Assessing Officer by observing that the assessee diverted the borrowed funds. On the contrary, the claim of the assessee is that surplus funds were available which were invested in the mutual funds. The CIT(Appeals) confirmed the disallowance made by the Assessing Officer observing that dividend income was exempted under section 10 of the Act, therefore, disallowance was to be made under section 14A of the Act. However, it is not brought on record how much surplus was available with the assessee out of which how much borrowed funds were invested in the mutual funds. It is not in dispute that disallowance under section 14A read with rule 8D of the Income-tax Rules, can be made, however, for doing so, the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed and the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. However, in the present case, nothing is brought on record as to whether the assessee earned any income which was claimed as exempt and what method was adopted by the Assessing Officer for making the impugned disallowance. The learned Commissioner of Income-tax (Appeals) also confirmed the disallowance made by the Assessing Officer in slip shod manner and had not brought material facts on record. We, therefore, considering the totality of the facts of the case deem it proper to set aside this issue back to the file of the Assessing Officer to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 52
Benefit of section 54 denied and granting exemption under section 54F - whether the provision of section 55(3) to be read with the section 49(1)(ii) were clearly attracted in the case and not the provision of section 55(2) of the Income-tax Act, 1961? - Held that:- As the property in question was purchased by one Shri. B. E. Cassinath, the great-great-grandfather of the assessee around the year 1898. Mr. B. E. Cassinath died in the year 1912 and left behind him a will. By the said will and codicil, he created a settlement regarding the residential property in question and appointed his wife and sons as executrix and trusties of will. The testator gave a life interest to his children/ grand children in the property in question. The trusties of the will sold the property in question and thereafter the property changed hands various times however, the families of the heirs of the testator continued to reside in the property in question. The assessee is a descendant of B.E. Cassinath the testator. Appellant in the instant case is not the owner of the property and holds mere tenancy right with respect to the impugned property. In view of this and in view of the specific provisions of section 54, CIT(A) correctly held that the appellant is not entitled to claim deduction under section 54 of the Act. The Assessing Officer is, therefore, justified in rejecting the claim of the appellant and in denying the deduction under section 54 of the Act. As the tenancy right is a capital asset other than residential house, the Assessing Officer has rightly granted the deduction under section 54F of the Act. - Decided against assessee. Cost of acquisition under section 55 - Assessing Officer rejected the claim of the assessee for cost of acquisition being fair market value as on April 1, 1981 and index cost based on the value as on April 1, 1981 and held that there is no cost incurred for purchase/acquisition of the tenancy rights and accordingly took the cost of acquisition at nil also confirmed by CIT(A) - Held that:- There is no dispute that the tenancy was acquired by the grandfather of the assessee in the year 1945 and capital asset in the shape of tenancy right became a property of the assessee by inheritance which clearly falls within the modes provided under section 49(1).The case of the assessee clearly falls under sub-clause (iii) of clause (a) of sub-section (1) of section 49. Once the capital asset in question became the property of the assessee as per section 49(1)(iii)(a) and the previous owner acquired the property prior to April 1, 1981, then the cost of acquisition of the capital asset for the purpose of sections 48 and 49 shall be the cost of acquisition of the asset to the previous owner or the fair market value (FMV) of the asset as on April 1, 1981 at the option of the assessee provided under the provisions of section 55(2)(ii)(b) of the Income-tax Act. As we have already discussed in the forgoing paragraphs that the case of the assessee falls under sub-clauses (i) to (iv) of section 49(1) therefore, the provisions of sub-clause (a) of clause (ii) of sub-section (2) of section 55 do not apply in the case of the assessee. Thus fair market value of the tenancy rights as on April 1, 1981, shall be the cost of acquisition as per the provisions of section 55(2)(ii)(b). The assessee filed the valuation report for valuing the fair market value of the asset in question as on April 1, 1981 and the authorities below have not questioned the correctness of the value as on April 1, 1981. We further take note that the Bombay Stamp Act recognises the value of surrender of tenancy rights exceeding 29 years as almost equivalent to the market value of the property therefore, it supports the claim of fair market value as on April 1, 1981. - Decided in favour of assessee. Expenditure incurred on improvement/ renovation of the new residential house for the purpose of deduction under section 54 disallowed - Held that:- Case of D. P. Mehta v. CIT [2001 (1) TMI 29 - DELHI High Court] clearly supports the claim of the assessee because the assessee made the investment for making the house habitable and the claim has been made only after the new asset was made habitable. In view of the above discussion and facts and circumstances of the case, we hold that the assessee is entitled to the exemption under section 54, in respect of the expenditure incurred on the renovation work to make the house habitable apart from cost of purchase. - Decided in favour of assessee. Exemption under section 54F - ₹ 1,25,00,000 deposited in capital gains account in the Central Bank of India on July 29, 2009 and the assessee has utilised the said amount for purchase of another flat - Held that:- Deduction under section 54 is eligible even for purchase of more than one house. See Commissioner of Income-tax, Bangalore Versus Smt. Jyothi K. Mehta [2011 (1) TMI 551 - KARNATAKA HIGH COURT], CIT v. Mrs. K. G. Rukminiamma [2010 (8) TMI 482 - Karnataka High Court] - CIT(A) correctly allowed the exemption - Decided in favour of assessee.
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2015 (4) TMI 51
Disallowance of gratuity paid of employees for non common cadre promoted to common cadre and ceased to be employees of bank - Held that:- It is pertinent to mention that the employees themselves demanded the gratuity and the letters of demand are on record at paper book 26 to 34 where it has been mentioned by each employee that he ceased to be employee of the assessee-bank with effect from the date mentioned in the letter and therefore, the assessee-bank was requested that the amount of gratuity of the service rendered by that employee in the assessee-bank be paid to the Punjab State Co-op. Bank Ltd., Chandigarh as per letter No.10983 dated December 29, 2006. The letter No. 10983 dated December 29, 2006, is a letter of the Punjab State Co-op. Bank Ltd., Chandigarh on record, where it has been asked by that bank to remit the amount of gratuity and leave salary contribution of non-cadre period in respect of non common cadre employees who were promoted as managers in the common cadre available at paper It is also pertinent to mention that the said employees ceased to be employees of the assessee-bank and therefore, the argument of the learned Departmental representative that the employees have not retired cannot be accepted. The assessee-bank and Punjab State Co-op. Bank Ltd., Chandigarh are different persons having separate permanent account number cards and separate legal entity and separately assessed to the Income-tax Department. Moreover, the Punjab State Co-op. Bank Ltd., Chandigarh vide letter dated July 27, 2001 has issued a letter to the manager of the Central Co-operative Banks of Punjab State to remit the said amount, which is available at paper book 15 and 16. In the facts and circumstances of the case, the assessee had not made the provisions for the gratuity to his employees which became payable during the year on their retirement and has been paid during the impugned year and therefore, the Commissioner of Income-tax (Appeals) is not justified in confirming the action of the Assessing Officer on this account. We reverse the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow the claim of the assessee with respect to gratuity paid amounting to ₹ 22,03,792. Accordingly, grounds of the assessee are allowed. - Decided in favour of assessee. Addition on interest was less charged from the customers - accrual of interest - Held that:- It was explained before the authorities below by the assessee that this is a consistent practice being followed by the assessee since beginning that any interest extra charged or lesser charged has to be adjusted in the next year. The assessee has submitted the details of interest lesser charged or over charged which has been accepted by the Department in the preceding year and consistent practice is being followed in the impugned year as well. Even there is no tax effect as incidence of tax in the impugned year as well as in the following year and in the preceding year is the same. In the present facts and circumstances, the right to receive has accrued only in the following year and the same has been charged in the following year itself. Therefore, the said charge cannot be made during the impugned year. The assessee has been following consistent method of practice and right to accrue the income had arisen in the following year which has been charged in the following year which is not under dispute. Accordingly, AO is directed to allow the claim of the assessee - Decided in favour of assessee.
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2015 (4) TMI 50
Penalty under section 271(1)(c) - enhancement of income on the assets held to be taxed as capital gains - Held that:- As per the assessment orders the incomes have been offered for taxation as agreed amount in so far as they have been rendered to tax as investments from tax paid incomes in the earlier years. It is nobody's case that the incomes which accrue or arise but remaining in the hands of the mutual funds or trust as investments whether could be computed on the basis of provisions of the Income-tax Act as earned for taxation or increase in capital. Unfortunately the assets that have been brought to tax as income in the hands of the assessee are increase in wealth were not to be disclosed in the form of financial assets in the balance-sheet. The computation was confronted to the assessee in so far as the holders of the funds on behalf of the assessee informed the assessee that the funds have accumulated to such an extent. It was therefore nobody's case that the assessee should have incorporated the enhancement of income on the assets held by it to be taxed as capital gains when no such decision could take place by the assessee. The crux of the issue therefore results in giving a finding that the amount was agreed upon by the assessee on the Assessing Officer giving a finding that the assessee's funds as held by the holders of the funds had informed the assessee that the funds have increased in value whether he agreed to encash the enhancement or not. The investment was noted by the AO in the assessment year 2005-06 and again after a gap of one year, i.e., 2007-08 when the assessee cannot be said to be paying tax again on the so-called enhancement by the mutual fund company being the portfolio manager who keep changing the net asset value of the units in various other forms giving high or low rate of return. The assessee remained secured in so far as he had parted with the funds which funds belonged to him in the first place were reinvested in the hope that they will generate more income than the rate of interest available from a scheduled bank. Therefore it was a clear case of valuation of tax paid capital which the assessee had already paid tax on till such time when the enhancement was brought to the notice by the Assessing Officer on the basis of information made available to and by the assessee was readily agreed upon by the assessee to be taxed in the impugned assessment year. The short-term capital gains never accrued to the assessee and in fact is a loss in the capital was not considered in so far as the Assessing Officer had brought more income to tax quantum-wise in 2005-06 leading to duplication of income taxed in the assessment year 2007-08. It was enhancement in the capital which stood tax paid was therefore to be taxed at the time of receipt or transfer and not because the holder of the capital informs that the capital has increased. The crux therefore that the assessee agreed to the proposition that the holder of the asset is informing that his capital investment was worth more was accepted by the Assessing Officer as concealment in the hands of the assessee is not at all justified. The surrendered investment therefore cannot be considered for levy of penalty in so far as penalty should not be made if there is no conscious breach of law (Hindustan Steel Ltd. v. State of Orissa [1969 (8) TMI 31 - SUPREME Court]. Thus penalty so levied under the provisions of section 271(1)(c) for the both assessment years under consideration is fit for cancellation - Decided in favour of assessee.
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2015 (4) TMI 49
Disallowance of interest expenditure on account of notional interest cost made by the AO - CIT(A) deleted disallowance - Held that:- Advances were made by the assessee during the regular course of business. And the advances were in the nature of credit facilities and the impugned advances were in the nature of the business advances and were not bearing any interest. The AO had disallowed the interest on notional basis only. We find that ld. CIT(A) has rightly held that since these advances were not bearing any interest, the disallowance of interest made by the AO on notional basis is not in accordance to law. Since the assessee had interest free funds of ₹ 47.50 crores in excess of the business advances, hence, in view of the Hon’ble Apex Court decision in the case of SA Builders (2006 (12) TMI 76 - SUPREME COURT OF INDIA) wherein it was held that where an advance is made for business purpose and commercial expediency no disallowance on account of interest can be made, therefore, Ld. CIT(A) has rightly deleted the addition on this account. - Decided in favour of assessee. Disallowance of technical advisory fees - Held that:- IT(A) has rightly observed that the onus is on the assessee to substantiate on the basis of evidences regarding business expenditure which has been claimed u/s 37(1). This onus has not been discharged by the assessee. We note that ld CIT(A) has rightly held that in the absence of any evidences on record regarding the nature of services provided for which the above expenditure has been incurred, the disallowance made by the AO is as per law, hence, the ld CIT(A) has rightly dismissed this ground of appeal. In view of the above we are of the view that no interference is called for in the impugned order passed by the ld CIT(A), hence we uphold the same by rejecting this ground of appeal as raised by the assessee in respect of “Technical Advisory Fees” which amounts to ₹ 7 crores and we confirm disallowance of ₹ 7 crores because assessee failed to substantiate its claim. Depreciation - Whether CIT(A) has failed to allow depreciation thereon being expenditure [technical advisory fees] of capital nature eligible for depreciation u/s. 32(1) ? - Held that:- The assessee vide the agreement dated 15.02.2001 read in conjunction with agreement dated 04.01.2001 has acquired the know-how to manufacture “No Mercury Added R-20 Batteries” and for manufacture of technical documentation, drawing, design etc for “D Paper” and “AA Meta”, which are intangible asset qualifying for depreciation u/s 32(1)(ii) of the Act. As we had noted before the consideration for M/s SISL as per the agreement dated 04.01.2001, is in force from 01.01.2001 up to 31.12.2001, which need to be read in conjunction with agreement dated 15.12.2001, so the agreement is in force from 01.01.2001 to 31.12.2001. And the total consideration for the year is ₹ 8.77 crores. So we can allow one-fourth (1/4th) of the said consideration as capital expenditure for which depreciation can be allowed. It amount to ₹ 2.19 crores for which the AO is directed to allow depreciation in accordance to law for the relevant assessment year, which needless to say the rest of the amount i.e. ₹ 6.58 crores will become the W.D.V for the subsequent Assessment Year. - Decided partly in favour of assessee. Disallowing excise duty payment which was deductible u/s. 43B - Held that:- The liability of ₹ 70 lacs on account of excise duty was not of the assessee. Keeping in view of the said agreement, ld. CIT(A) has rightly held that he concurred with the view of the AO that since the liability did not belong to the assessee, hence, the claim of deduction u/s. 43B of ₹ 70 lacs was not allowed, which does not call any interference on our part, hence, we uphold the order of the Ld. CIT(A) on this issue. However, we find force in the contention of the ld AR that the said levy of ₹ 70 lakhs additional Excise Duty was challenged and the same have been refunded back to M/s Rialto which in turn has refunded it to the assessee in subsequent Assessment Year, in that case that amount shall not taxed which will amount to double taxation in the hands of the assessee - Decided against assessee. Disallowance of inventory written off - CIT(A) has deleted the addition - Held that:- CIT(A) in the instant case also found that the assessee had filed the complete details of the inventory which have been written off, as well as evidences in the form of persons before whom the said items were disposed off. Therefore, Ld. CIT(A) has rightly held that as the facts being similar, he has no reason to differ with the findings of the Ld. CIT(A)-XII, New Delhi on the identical and similar issue involved in A. Y 2004-05. Hence, following the earlier precedent, the Ld. CIT(A)-XV, New Delhi has rightly deleted the addition of 2,07,89,275/- and decided the issue in favour of the assessee.
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2015 (4) TMI 48
Unexplained (unsecured) loans - CIT(A) deleted the addition - Held that:- The claimed unsecured loan was supported with sufficient documents and the Learned CIT(Appeals) after discussing the explanation of the assessee in this regard has deleted the addition by passing a reasoned order. We are thus not inclined to interfere therewith - Decided against revenue. Disallowance of depreciation - the assessee did not produce original bills/challan for verification - CIT(Appeals) deleted the disallowance - Held that:- CIT(Appeals) held that the claim of the assessee regarding depreciation cannot be rejected merely on the ground that bills of purchase pertaining to the acquisition of fixed assets were not made available to the Assessing Officer. He noted that the Assessing Officer has not given his finding to the fact that the machinery and plants or other fixed assets have not at all been used during the accounting year under appeal or were kept idle. He noted further that the auditors have not made any adverse remarks in the tax audit report for the assessment year under consideration. The Learned CIT(Appeals) has accordingly directed the Assessing Officer to allow deprecation on the fixed assets purchased during the year under consideration in accordance with the admissibility thereof after necessary verification.- Decided against revenue. Disallowance of commission - addition made by AO with this finding that he was not satisfied with the explanation furnished by the assessee in this regard in absence of written agreement between the assessee and consignment agents - CIT(Appeals) deleted the addition - Held that:- IT(Appeals) has deleted the addition on the basis that in other assessment years, similar claim was allowed and the Assessing Officer ought to have maintained consistency in this regard even during the year under consideration. The First Appellate Order on the issue is reasoned one, hence, we are not inclined to interfere therewith.- Decided against revenue. Unexplained share capital - CIT(Appeals) deleting the addition - Held that:- The assessee, about the non-furnishing of bank statement had stated that they had approached to the bank to get the bank statement but failed to, because it was more than 13 years old. The assessee has, however, furnished the confirmation letters from the shareholder containing the details of amount invested, cheque no., date, bank particulars, PAN and income-tax particulars. All these documents were filed before the Assessing Officer as well as Learned CIT(Appeals). On the basis of furnishing these documents, CIT(Appeals) held that initial burden of the assessee was discharged. We concur with this view of the CIT(Appeals). It is well established proposition of law that after discharging of initial burden by the assessee to establish genuineness of the transaction, the onus shifts upon the Assessing Officer to rebut those evidences for the denial of the genuineness of the claimed transaction. No such effort has been on the part of the Assessing Officer to examine the correctness of above stated documents filed by the assessee to establish the genuineness of the transactions in question. See CIT vs. Lovely Exports (P) Ltd. (2008 (1) TMI 575 - SUPREME COURT OF INDIA), CIT vs. Value Capital Services (2008 (4) TMI 263 - DELHI HIGH COURT) & Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2008 (12) TMI 22 - DELHI HIGH COURT) - Decided against revenue.
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2015 (4) TMI 47
Computation of taxable Long Term Capital Gain of HUF - Lower Authorities taking sale consideration in the hands of the assessee at ₹ 13,33,333/- when in fact the Sale Deed specifically mentions that he gets the sale consideration of ₹ 4,00,000/- only, and therefore, the calculation of the taxable capital gain of ₹ 11,71,597/- which is far much more than the actual sale consideration of ₹ 4,00,000/- is patently bad in law - whether the Revenue Authorities were correct in adopting the index price in A.Y.2003-04 instead of 1.4.1981? Held that:- On perusal of the sale deed stated to be registered on 27th of March, 2009 we have noted that the executors of the sale deed were the family members of the Assessee. Meaning thereby the Assessee was not the only seller of the property but the property in question was sold jointly by all the members of the family. The property in question was sold for a consideration of ₹ 80 lac. As per section 49 where the capital asset became the property of the Assessee by succession or inheritance then the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property had acquired it. In this case, the Assessee, Sri Harish Babulal had acquired this property by inheritance on death of his father Sri Babulal Popatlal who expired on 19th December, 1961. We, therefore, hereby hold that if the dates are correct than the index cost of acquisition is required to be adopted as on 1.4.1981, i.e., 100 instead of 463 as alleged by the AO. Since, the family tree was not disclosed in the assessment order therefore, at this stage of second appeal it is not clear that whether the dates as mentioned were verified by the AO or not. The only reference which we have noticed is in paragraphs 3, 4 & 5 of the sale deed. Therefore, the AO is required to investigate this issue in the light of the dates mentioned in the said registered sale deed, especially, the date of death of the father of the Assessee. If it is found to be prior to 1.4.1981 then naturally the year of inheritance shall be held as 1.4.1981 for the purpose of fixation of cost indexation. With these remarks this issue raised is restored back for denovo adjudication. - Decided in favour of assessee for statistical purpose Cost of acquisition - Held that:- Assessee got his share in the property after the death of his father and later on after the death of Rohit Babulal his already existed share was enhanced or increased by the death of Sri Rohit Babulal. So the Assessee is required to place on record the correct factual position in respect of the property which was inherited by the Assessee on death of his father and the portion of the property which he received on the death of Sri Rohit Babulal. After verifying this fact, the AO shall examine the datas referred in the valuation report so as to decide the correctness of the value of the property for the purpose of applying the value in the formula of cost inflation index. Since certain facts are yet to be determined as discussed by us therefore, the additional ground of assessee also allowed for the statistical purpose.
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2015 (4) TMI 46
Revision u/s 263 - not provided for the interest and remuneration to the partners though authorized in the partnership deed thus had earned more profits than the reasonable profit and this attracts provisions of section 80IA(10) r.w.s. 10B(7) - whether the issue sought to be raised in order passed u/s 263 of the Act was not on the basis of material thrown up by search u/s 132 of the Act and cannot be subject matter of addition while framing assessment u/s.153A ? - Held that:- Commissioner has not restored the issue for examination to the file of the AO but held that the interest and remuneration was to be taken into account for the purpose of the calculation of the business income eligible for the deduction u/s.10B of IT Act. This is not a case where learned Commissioner wanted a relook the issue by the Revenue Department but directed in absolute terms to recompute the claim hence in the interest of justice, we hereby hold that such an order of the learned Commissioner was not sustainable in the eyes of law. We have already held that the impugned orders of the AO were not an erroneous order because ultimately the calculation of the claim of deduction u/s.10B should be made on the basis of the case laws as discussed in the case, therefore, there was no ultimate gain to the Revenue Department. Such an order of the AO cannot be termed as prejudicial to the interest of the Revenue. While granting the deduction u/s.10B it was not a situation that an incorrect application of law was applied by the AO. We therefore conclude that the revisionary order passed u/s.263 of the learned Commissioner was not sustainable in the eyes of law; hence quashed. - Decided in favour of assessee.
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2015 (4) TMI 45
Disallowance on account of interest - Held that:- It is apparent the networth / non-interest bearing funds available with the company were much more than the Loan & Advances given. We find that the Inventories held by the assessee company has reduced from ₹ 47.79 cores to ₹ 36.79 cores i.e. by ₹ 11 cores. The cash and bank balances have reduced from ₹ 1.29 cores to ₹ 0.40 cores i.e. by ₹ 0.89 cores. Thus we find that the funds of ₹ 11.89 cores released from the current assets became available as assessee own interest free funds as submitted by them. The Hon'ble Supreme court in the case of S A Builders Ltd. vs CIT (2006 (12) TMI 76 - SUPREME COURT OF INDIA) has held that if the borrowed funds are lent to a sister concern interest free as a measure of commercial expediency, the interest paid on the borrowed fund is for the purpose and the same should be allowed as deduction. Therefore, even if it is presumed that the interest advances were given out of borrowed funds, it will be considered as prudent business decision and to protect the earning of business income and the interest will be allowable as deduction not only under section 36 but also under section 37 of the Act. We find that the assessee had sufficient amount of money towards Share Capital, Reserve & Surplus and the Interest Free Advances given were fully covered by amount of Share Capital, Reserve & Surplus, disallowance of Interest need to be deleted and taking into consideration of the Coordinate Bench of the ITAT ’C’ Bench, New Delhi in assessee’s own case for the assessment year 2003-04 [2012 (10) TMI 317 - ITAT, DELHI] in Revenue’s appeal, we decide the issue against the Revenue by deleting the addition of 1,75,51,634/- on account of interest. - Decided in favour of assessee.
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2015 (4) TMI 44
Block assessment - Assessment u/s 158BD r.w.s. 158BC - addition on Unexplained loan and unexplained expenditure u/s 69C - absence of satisfaction note - Held that:- After examining the record, CIT(A) came to conclude that though the satisfaction note was recorded by the Assessing Officer yet a copy of the same has not been provided to the assessee. Therefore, in the aforesaid factual background, following the parity of reasoning laid down in the case of Janki Exports International (2004 (3) TMI 21 - DELHI High Court ) as well as M/s Bhagyashree Steel Center [2015 (4) TMI 82 - ITAT PUNE], we setaside the impugned orders of the lower authorities and restore the matter back to the file of the Assessing Officer who shall supply the reasons recorded for arriving at the satisfaction for invoking section 158D of the Act to the assessee. On receipt of such reasons, assessee shall be entitled to file objections which shall be disposed-off by the Assessing Officer by way of a speaking order and only thereafter he shall proceed to pass a fresh assessment order in accordance with law. Since we have set-aside the matter back to the file of the Assessing Officer on the preliminarily ground, the merits of the impugned addition of ₹ 39,55,062/- have not been examined by us, which would be re-visited by the Assessing Officer in accordance with law in the ensuing proceedings. - Decided in favour of assessee for statistical purposes.
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2015 (4) TMI 43
Share in the property sold - capital gain computation - CIT(A) held assesseee's share as 1/18th, instead of 1/6th determined by the Assessing Officer on the basis of Form 6A dated 08/11/1983 - Held that:- Since assessee along with his sons had 1/6 share, Assessing Officer taxed the entire share in his hand without considering the share of his sons ignoring the fact that they had received their share of payment and reflected the sale consideration in their respective returns. The land records establish the fact that assessee along with his sons were equal owners in the said property as discussed above. The land records including the assessee's sons was of 2005 which is much prior to transfer, therefore, Assessing Officer was not justified in ignoring this evidence. Moreover, assessee’s sons have disclosed their income from sale of this property in their respective tax returns including same in assessee’s hand would result in double taxation. Considering these facts and circumstances, CIT(A) was justified in directing the Assessing Officer to treat the disclosed capital gain 1/18th share. This reasoned finding CIT(A) needs no interference from our side. - Decided against revenue.
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2015 (4) TMI 42
Transfer pricing adjustment - DRP excluding M/s. Ashapura Clay Tech Ltd. from the list of comparables for the purposes of Transfer Pricing Analysis resulted in the deletion of transfer pricing Adjustment of ₹ 2,55,49,852 worked out by the TPO - Held that:- Although we agree with the contention of the Learned Departmental Representative that M/s.Ashapura Claytech Ltd. cannot be excluded from the list of comparables only on the ground of high/abnormal profits, we find on comparative analysis of the functional profile of the said company that the same is not functionally comparable with the assessee company. It is observed that the assessee company is purchasing Grey Bentonite Clay/Fullers Earth Lump extracted from the mines and selling the same almost in the same form, after removing impurities and moisture in specified lumps of different sizes. It is also involved in manual breaking of lumps using hammer in order to reduce the lumps into required sizes. All this minor processing work being done by the assessee does not change the basic nature and character of the product and what is ultimately sold by the assessee company remains to be the same commercial product, viz. Grey Bentonite Clay/Fullers Earth Lump. On the other hand, M/s Ashapura Claytech Ltd. is using Grey Bentonite Clay/Fuller’s Earth Lump as raw material and after carrying out different operations, such as crushing, milling, sieving, etc., it is producing Bentonite/Bio-green Granules which is highly efficient and economic material for use in agricultural pesticides, catlitter and floor absorbents. All its operations to convert Grey Bentonite Clay/Fullers Earth Lump into Bentonite/Biogreen Granules are carried out with the help of different machinery at different stages and what is ultimately produced, namely Bentonite/Biogreen Granules is a new product which is commercially different from the Grey Bentonite Clay/Fullers Earth Lump used as raw material. The activities carried on by the assessee company as well as the M/s.Ashapura Claytech Ltd. thus clearly show that the assessee company is engaged only in trading of Grey Bentonite Clay/Fullers Earth Lump, whereas M/s Ashapura Claytech Ltd. is engaged in the manufacturing of Bentonite Biogreen Granules, where Grey Bentonite Clay/Fullers Earth Lump is used as raw material. Thus find ourselves in agreement with the Dispute Resolution Panel that the product/function of M/s. Ashapura Claytech Ltd. is not similar with that of the assessee company and the same therefore, cannot be taken as a comparable for the purpose of TP Analysis, in order to determine the ALP of the international transactions of the assessee company with its AE - Decided against revenue.
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2015 (4) TMI 41
Deduction u/s.80IB(10) - whether the project 'Vanshaj Prestige' had commenced construction much before the amendment to section 80IB(14)(a) and therefore it is not possible for the assessee to comply with the definition of built up area? - whether CIT(Appeals) erred in holding that the assessee is eligible for deduction u/s.80IB(10) without appreciating that as per provisions of section 80IB(14)(a) built up area is to be calculated taking into account all the projections and balconies and as such the flats on the first floor of building B exceeded the built up area of 1500 sq.ft. making the assessee ineligible for deduction ? Held that:- Firstly, it is contented that the definition of the ‘built-up’ area contained in section 80IB(14)(a) of the Act was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 and it is not applicable in the present case as assessee’s project was approved and commenced prior to 01.04.2005. We are in complete agreement with the aforesaid plea, which has also been accepted by the CIT(A). As decided D.S. Kulkarni Developers Ltd. Vs. ACIT [2015 (4) TMI 6 - ITAT PUNE] in The extract of Rule 15.4.2, has been placed in the Paper Book at page 36, and it reflects that a multi storied stilt flooring space constructed under a building is allowed to be used as a parking subject to height restrictions. In terms thereof, it is sought to be made out that the area of car parking is specifically excludible while calculating ' builtup area' as per the Development Control Rules and therefore, the Assessing Officer was wrong in considering such area for the purpose of computing 'built- up area' of the residential units. A bare perusal of the Development Control Rules, in our view, supports the assertions put forth by the assesses and therefore, the area of car parking is not to be includible for the purposes of computing 'built- up area' of residential units in the facts and circumstances of the present case. Decided in favour of assessee Inclusion of common terrace identified in the built-up area of the respective flats - Held that:- CIT(A) has given a factual finding that the agreements with flat owners do not indicate that the common terrace was a part of the flat agreement. It is also observed by the CIT(A) that the respective flat owners were not the owners of so called common terrace and the assessee also pointed out before him that even the Government Registered Valuer in his report nowhere stated that the common terrace area is exclusively used by the four flat owners referred above. Having regard to the aforesaid, in the absence of any controversion from the side of the Revenue, we find no reasons to approve the action of Assessing Officer in including the area styled as ‘additional common terrace’ as a part of the built-up area of the four residential units in question. - Decided in favour of assessee
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Customs
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2015 (4) TMI 68
Denial of drawback claim - Confiscation of goods - Imposition of redemption fine and penalty - Held that:- It is an admitted position that the brass electrical wiring accessories sought to be exported by the appellant predominantly consists of brass. It also contained certain metal screws which were made of materials other than brass. In order to fall under Entry No. 853802 of the drawback schedule, the item should be made 'wholly' of brass. In other words, it should be of 100% brass and nothing else. Therefore, in the present case, the appropriate classification is Entry No. 853899 which provides for a drawback of 1% of the FOB value of the goods exported. Therefore, the finding of the lower authorities to that extent cannot be faulted - it is not warranted since the goods were made of 90% brass the appellant entertained a bona fide belief that the same merited classification under Entry No. 853802 and accordingly, claimed the drawback benefit. That by itself does not constitute a mis-declaration. The decision of the hon'ble apex Court in the case of Northern Plastic Ltd. vs. Collector of Customs & Central Excise [1998 (7) TMI 91 - SUPREME COURT OF INDIA] case refers. Therefore, confiscation of the goods with an option for redemption and imposition of penalty is clearly unwarranted considering the fact that the appellant is a small-scale manufacturer-exporter of brass items. Accordingly, I set aside the fine and penalty imposed on the appellant. - Decided partly in favour of assessee.
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2015 (4) TMI 67
Conversion of free shipping bill into draw back shipping bills - Whether in the facts and circumstances of the case, the Tribunal was legally justified to allow the appeal filed by the 1st respondent ignoring the fact that they have failed to comply the provisions of Rule 12(1)(a) of Drawback Rules, 1995 - Held that:- Department's contention is that the specific direction given by the Tribunal for conversion of free shipping bill into Drawback shipping bill is not in consonance with the above-said Circular and Rule 12 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995. To that extent, the plea of the Department appears to be justified. - When a specific direction is issued by the Department of Revenue, Drawback Section as to how free shipping bills should be treated for the purpose of drawback, it is incumbent that the said procedure should be followed - order of the Tribunal remanding the matter to the Commissioner directing conversion of free shipping bill into drawback shipping bill without giving the Commissioner the power to examine the issue would not be justified. However, since the Tribunal remanded the matter to the Commissioner, on remand, the jurisdictional Commissioner is empowered to consider the claim for drawback in accordance with Circular No.4 of 2004 dated 16.1.2004. - Decided in favour of assessee.
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2015 (4) TMI 66
Extension of the investigation period - Anti-dumping investigations - imports of Cast Aluminium Alloy Wheels originating - whether the ex post facto extension of the investigation period granted by the Central Government on 30.04.2014 extending the period of investigation from 09.03.2014 to 09.06.2014 was valid - Held that:- Central Government can grant ex post facto extension provided it is done within the overall period of six months beyond one year and the extension does not spill over beyond the eighteen-month period. We take this view because we do not see any bar or prohibition in the said Rule 17 which would prevent the Central Government from extending the period of investigation even after the initial period of one year or the extended period has expired provided it is granted within the overall period of eighteen months. It is not stipulated in the first proviso to Rule 17(1)(a) that the extension must be granted during the initial period or an extended period. Extension must not be granted within the initial period or extended period, as the case may be, otherwise the investigation will lapse automatically at the end of such period. In our view, at the end of the initial period or an extended period, if the period of eighteen months has not expired, the investigation would, in a sense, be suspended till it is revived by an ex post facto extension within the overall period of eighteen months. In the case of a suspension of investigation under Rule 15, when it is subsequently resumed by the DA, the period for which investigation was kept under suspension shall not be taken into account while calculating the said period of one year. This would not be so where suspension of investigation operates because the extension order from the central government is awaited. The clock, in such a case, would continue to run and the time taken by the Central Government would not be excluded in computing the period of eighteen months. Furthermore, under Rule 15 it is the DA who suspends the investigation, whereas the kind of suspension we are considering is not at the instance of the DA but on the happening of certain events and circumstances. Mr Balbir Singh is right when he contends that the DA, when he made his request for extension on 03.03.2014, could not presume that the Central Government would grant the extension. It is for this reason, that, on 09.03.2014, when the first period of extension expired and the grant of further extension was awaited by the DA, his mandate to investigate got suspended. The DA's mandate was revived on 30.04.2014 when the extension was ultimately granted. It is from that date that the investigation would resume. Ex post facto extension of the investigation period granted by the Central Government on 30.04.2014 extending the period of investigation from 09.03.2014 to 09.06.2014 was valid. Violation of principle of natural justice - Opportunity of hearing not granted - Interested party - Held that:- there is no dispute that the petitioners are interested parties. There is also no dispute that all the earlier investigation (including the first oral hearing) was conducted by the earlier DA and not by the DA who took over only on 29.05.2014. In any event, it is an admitted position that the new DA had to afford an opportunity of hearing to interested parties including the petitioners. The Respondents have taken the plea that the new DA had only 12 days to complete the investigation and submit the Final Finding and the manner in which he conducted the proceedings was the best he could do in the short time available. But, we are afraid that this is not good enough. The opportunity of hearing must not be illusory. Just because there was paucity of time (for no fault on the part of the interested parties), the DA cannot ride roughshod over the principles of natural justice. The DA is bound to grant a meaningful opportunity of hearing to the interested parties and written submissions or comments are no substitute for this. This has been settled by the Supreme Court in the ATMA case [2011 (1) TMI 7 - SUPREME COURT OF INDIA]. Anti-dumping investigations are time-bound but, that does not mean that such important matters can be bull-dozed in the manner it has been done in the present case. A period of dormancy of 2 months and 18 days (from 09.03.2014 to 28.05.2014) has been followed by a short period of 12 days of frenetic activity which has resulted in principles of natural justice being violated. The hearing granted on 30.05.2014 cannot be regarded as a reasonable opportunity of hearing. Interested parties were informed by email at 6.22 pm on 29.05.2014 that the hearing would be granted at 5:00 p.m. the next day (30.05.2014). Requests by interested parties for giving another date so that they are able to avail of the opportunity was rejected by the DA and, that too, just 20 minutes prior to 5:00 pm on 30.05.2014. The fact that the hearing could be attended by only one exporter is testimony of the lack of reasonable opportunity. Sure, the new DA was in a hurry as he had only 12 days with him but, that does not mean that he could give a go-by to the requirement of affording a reasonable opportunity of hearing to the interested parties before he submitted his Final Finding. In the light of the clear dicta in the ATMA case in the context of anti-dumping investigations, the decisions in Swadeshi Cotton Mills (1981 (1) TMI 250 - SUPREME COURT OF INDIA) would not come to the aid of the respondents. Petitioners, who are interested parties, were not given an adequate opportunity of hearing by the DA before he issued the impugned Final Finding dated 09.06.2014. - Consequently, the impugned Final Finding dated 09.06.2014 having been rendered in violation of the principles of natural justice, cannot be sustained and is quashed - Decided partly in favour of assessee.
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Corporate Laws
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2015 (4) TMI 65
Violation of provisions of SEBI DIP (Disclosure and Investor Protection) Guidelines, 2000 - Corresponding provisions of SEBI ICDR (Issuance of Capital and Disclosure Requirements) Regulations, 2009 - Violation of provisions of SEBI PFUTP (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 - Failed to include all material information in RHP/Prospectus - Suppression of several material informations and facts in RHP/Prospectus to mislead and defraud the investors - Non -disclosure of outstanding litigation against subsidiaries - Non- Disclosure of financial details relating to subsidiaries Held that:- In this case, I have already found that the process of share transfer of three subsidiaries of DLF in Sudipti, Shalika and Felicite was through sham transactions as alleged in the SCN and that the Noticees employed a plan, scheme, design and device to camouflage the association of DLF with its three subsidiaries namely, Felicite, Shalika and Sudipti. In this case under such plan, scheme, design and device, the Noticees suppressed several material information in the RHP/Prospectus of DLF and actively concealed the fact about filing of FIR against Sudipti and others. In the facts and circumstances of this case, I find that the case of active and deliberate suppression of any material information so as to mislead and defraud the investors in the securities market in connection with the issue of shares of DLF in its IPO is clearly made out in this case. I am satisfied that the violations as found in this case are grave and have larger implications on the safety and integrity of the securities market. In my view, for the serious contraventions as found in the instant case, effective deterrent actions to safeguard the market integrity. It, therefore, becomes incumbent to deal with contraventions, digression and demeanour of the erring Noticees sternly and take appropriate actions for effective deterrence. In this regard, the observation of the Honble Supreme Court, as a word of caution, in the matter of N. Narayanan [2013 (4) TMI 652 - SUPREME COURT]is worth mentioning. I note that clause 6.10.2.3 of DIP Guidelines requires an issuer to disclose financial details relating to its subsidiaries. As already found hereinabove, Sudipti, Shalika and Felicite continued to be subsidiaries of DLF consequent to the sale of shareholding by the wholly owned subsidiaries of DLF in them and on the relevant dates there was " holding -subsidiary " relationship between DLF and those three companies. I, therefore, find that the DLF failed to make disclosures in its RHP/Prospectus in terms of clauses 6.10.2.3 of the DIP Guidelines as alleged in the SCN. In terms of clause 6.2 of the DIP Guidelines, the Prospectus should contain 'all material information' which shall be true and adequate so as to enable the investors to make informed decision on the investments in the issue. The test of materiality of the information as envisaged in clause 6.2 of the DIP Guidelines is that the information should be true and adequate so as to enable the investors to make informed decision on the investments in the issue. In my view, this test depends upon facts and circumstances of each case. In this case, all the information which were not disclosed as found hereinabove, were material information. I, therefore, find that by not disclosing material information in the Prospectus and actively concealing them from the prospective investors, DLF misled them and violated clause 6.2 also Considering the above, I, in order to protect the interest of investors and the integrity of the securities market, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11, 11A and 11B thereof and regulation 11 of the PFUTP Regulations, clause 17.1 of DIP Guidelines and regulation 111 of the ICDR Regulations hereby restrain the following entities from accessing the securities market and prohibit them from buying, selling or otherwise dealing in securities, directly or indirectly, in any manner, whatsoever, for the period of three years.
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2015 (4) TMI 64
Proposed Scheme of Amalgamation under section 391 & 394 of the Companies Act, 1956 - Regional Director observe that none of the company doing any significant business activity, better option to go into liquidation - Held that:- In view of the law as laid down by the Supreme Court in Mafatlal Industries Ltd. [1996 (9) TMI 488 - SUPREME COURT OF INDIA], I find no merit in the contentions of the Regional Director that it is a better option for the company to go into liquidation to wind up its operation and company. With regard to the objection raised by the Regional Director about the selection of cut off date as 22.10.2013, learned counsel for petitioner has contended that similar petition has been filed in respect of two companies, which are identically situated and whose promoters and directors are same and in one of the companies a secured creditor being a foreign company had given its No Objection Certificate on 25.10.2013 and since there had to be a cut off date so the date 22.10.2013 was selected. In my view the explanation provided is reasonable and is accepted. Hence the objection raised by the Regional Director is rejected. In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under sections 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. - Scheme of Amalgamation approved.
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Service Tax
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2015 (4) TMI 81
Commercial or industrial construction services - appellant had constructed High-Tech Textile Park and one Auditorium-cum-Sports Complex - Suppression of facts - Invocation of extended period of limitation - Held that:- Office of the Commissioner of Central Excise and Customs, Aurangabad did not respond to such letter nor any further correspondence was entered with the appellant on this matter. We also note from the records that the service tax returns which needs to be filed by an assessee, in this case the appellant, clearly indicates that the appellant had been keeping the Department informed about the amounts received by them which according to him would fall under the category of exempted services. These service tax returns were accepted by the Department and no question were raised nor any clarification was sought from the appellant. - there was no query from the revenue authorities on the returns which were filed by the appellant. In our considered view, if the revenue authorities were informed about the activities that the appellant is willing to undertake and seeking the clarification whether such activity would fall under the service tax liability or not, and also subsequently indicating in the service tax returns the amounts received by them towards such exempted services, the question of suppressing any material facts from the Department would not arise lead. If the revenue authorities did not raise any queries when the records were audited, then the show-cause notice issued in October 2013 invoking the extended period for demanding the service tax liability for the period April 2008 to March 2012, is in our considered view blatantly time barred, as it cannot be said that appellant had suppressed any information let alone vital information from the Department with intention to evade tax. In our view the service tax liability confirmed against the appellant is blatantly time barred and the impugned order to that extent is totally incorrect and is liable to be set aside. - Decided in favour of assessee.
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2015 (4) TMI 80
Telephone services - whether the respondent is required to discharge the service tax liability on the amount which they have received from the distributors and dealers or on the MRP on which the subscribers purchases Recharge Vouchers and SIM Cards from the distributors or dealers - Held that:- According to the amended provisions of Section 67, the value of any taxable service shall be the gross amount charged by the service-provider for such service rendered by him. In instant case, the amount charged by the assessee (service-provider) is the amount received by them from dealers/distributors and nothing extra was charged by the appellants. Admittedly, Service tax was paid on this amount. There are a few elements specified in the Explanation to Section 67, as includible in the value of taxable service. The Revenue has no case that any of these elements is applicable to the appellants. - Decision in case of BPL Mobile Cellular Ltd. [2007 (6) TMI 107 - CESTAT, CHENNAI] followed. Revenue filed a Civil Appeal before the Hon ble Apex Court and the Hon ble Apex Court dismissed the Civil Appeal after condoning the delay. The said dismissal is reported at [2008 (1) TMI 817 - SUPREME COURT OF INDIA]. As the dismissal of Civil Appeal tantamount to order of Apex Court on the self same issue in favour of the assessee, we have to follow the same; reliance placed by the learned A.R. on the decision of the Apex Court in the case of Idea Mobile Communication Ltd. (2012 (8) TMI 565 - CESTAT, NEW DELHI) may not carry the case of the Revenue any further. - Decided against Revenue.
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2015 (4) TMI 79
Demand of service tax - manpower recruitment or supply agency service - contract with labour contractors for cutting and transporting sugarcane through labourers from producer/members supplying the sugarcane to the factory. - held that:- Following decision of Amrit Sanjivini Sugarcane Transport Co. Pvt. Ltd. vs. CCE [2013 (8) TMI 58 - CESTAT MUMBAI] - impugned orders are set aside - Decided in favour of assessee.
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Central Excise
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2015 (4) TMI 75
Entitlement of the excise exemption in terms of exemption Notification No.1/93 dated 28.2.1993 - denial on the ground that the respondent is using the brand name of M/s. TISCO Ltd. i.e. TISCOG - Held that:- It becomes clear that amendment was brought to deny the benefit of Notification to those SSI units which have been making use of branded good for another person irrespective of whether the brand name owner himself is SSI unit or not. It was also made abundantly clear here that the requirement of affixation or brand name by the SSI unit was immaterial. That was the purpose for substituting the word "affixing" by the word "bearing". Going by the consideration this Court held in Australian Foods (India) (P) Ltd. case [2013 (1) TMI 330 - SUPREME COURT] that after this amendment in para 4 it was not necessary that there has to be affixation of the name or mark on the goods. - impugned order of the CEGAT is untenable and not in accordance with law - non-payment of duty by the respondent was bona fide act, having nurtured a belief that it was not liable to pay the excise duty on the goods - Therefore, while setting aside the order of the Tribunal, we restore the order of the Commissioner only insofar as it pertains to imposition of excise duty in the sum of ₹ 34,67,164/- and set aside the penalties imposed in the said order. - Decided partly in favour of Revenue.
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2015 (4) TMI 74
Denial of exemption claim - compounded rubber - demand of duty on Captive consumption during the transitional period - Notification granting exemption was rescinded for a period of few days - Held that:- Compounded rubber was also rescinded by the same Notification dated 1.3.94 and reintroduced in the same manner vide another Notification issued on 28.3.1994, ratio of W.P.I.L . Ltd. case [2005 (2) TMI 137 - SUPREME COURT OF INDIA] shall squarely apply to the present case as well. As a result, only on this ground, these appeals are allowed and the demand raised against the appellants is quashed. - By an interim order passed in this case the respondents were called upon to make deposit of ₹ 22 lakhs, 24 lakhs and 22 lakhs respectively, with the excise Department. The aforesaid amount shall be refunded to the appellants within a period of three months - Decided in favour of assessee.
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2015 (4) TMI 73
Valuation of goods - includibility of the cost of transportation charges - Held that:- Tribunal has arrived at a categorical finding that the respondent is not responsible to pay the cost of transport from the place of removal to the place of delivery i.e. from the factory gate to the depot separately. In terms of Rule 5 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000, such a cost of transport which is also separately shows, is not includable in the valuation for the purpose of excise duty. - no error in the judgment of the Tribunal - Decided against Revenue.
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2015 (4) TMI 72
Denial of refund claim - Unutilized CENVAT Credit - Notification No. 29/96 CE(NT) dated 03.09.96/96 - applicant appears to have not maintained any register for deemed credit of availed in respect of exported gods and further that they were eligible for deemed credit of availed in respect of exported goods and further that they were eligible for deemed credit of 50% of duty payable, however, they claim for 60% of it - Held that:- applicants has initially preferred appeal before tribunal against impugned Order-in-Appeal. Tribunal rejected the appeal of applicant on merit vide order dated 31.03.2006 Order-in-Appeal cannot be agitated before Government of India. This is clear violation of judicial principles and the applicant has misused the provisions of law by filing this revision application when their appeal is already rejected by Hon'ble CESTAT on merit. - Moreover issue involved in the case is of refund of unutilized cenvat credit which is not covered under section 35EE read with first proviso to section 35B(1) of Central Excise Act, 1944. So no revision application is maintainable before Central Government against impugned Order-in-appeal. - revision application stands dismissed as non-maintainable under section 35EE of the Central Excise Act, 1944. - Decided in favour of assessee.
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2015 (4) TMI 71
Denial of rebate claim - basic requirement of Rule 18 ibid for considering rebate claim that the goods should be exported, has not been fulfilled by the claimant in as much as they have short shipped 92 cartons out of the total 535 cartons mentioned on the ARE-I No.33/04-05 dated 10.06.2004 - it was not possible to ascertain the exact quantity and quality of processed fabrics short shipped on the basis of available record - Held that:- appellate authority has categorically held that 92 cartons which were short shipped do not pertain to ARE-1 No. 33/04-05 dated 10.6.2004 and all the 535 cartons pertaining to said ARE-1 have been exported. Such factual observations of appellate authority has not been controverted by department by any substantial documentary evidence. Department failed to adduce any evidence that the short shipped 92 cartons pertain to goods covered vide impugned ARE-1. Under such circumstances the findings of appellate authority cannot be faulted with. - Decided against Revenue.
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2015 (4) TMI 70
Denial of rebate claim - adjudicating authority partly rejected rebate claims totally amounting to ₹ 60744/- on the ground that FOB value is less than the value shown in the ARE-1's because of addition of International Freight and Insurance in the assessable value which is not allowed under section 4 of the Central Excise Act, 1944 - applicant filed initially two appeals before appeal before Commissioner (Appeals), in time claiming interest on delayed payment of rebate claim. Applicant subsequently filed two more appeals against the same Order-in-Original pleading to grant partial rebate claim of ₹ 60741 which was rejected by Assistant Commissioner of Central Excise - Held that:- On perusal of records, Government observes that the first two appeals filed in time claiming interest were allowed by the Commissioner (Appeals). Applicant had not challenged rejection of part rebate claim of ₹ 60741/- in these appeals. The another two appeal filed subsequently were time barred on the one hand and not legally maintainable, in view of first two appeals. The ignorance of law cannot be excuse for filing second set of appeals. As such two appeal filed subsequently were rightly dismissed by Commissioner (Appeals). - No infirmity in impugned order - Decided against assessee.
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2015 (4) TMI 69
100% EOU - whether demand of Central Excise duty alongwith interest and penalty and confiscation of the quantity of 31.537MT of Aluminium ingots and 64.902MT of finished goods cleared by the assessee to M/s. Sai Flipped Coil Pvt. Limited and M/s. Vitrag Impex, respectively, manufactured out of duty free raw materials are sustainable - Held that:- Assessee obtained permission from the Central Excise authorities to supply the goods to M/s. Sai Flipped Coil Pvt. Limited. As per sale contract, the goods were delivered on FOB Rajkot. The said Company also admitted receipt of the goods. In any event, it is the responsibility of the advance license holder to fulfil the conditions. It is significant to note that advance license holder has provided EODC certifying discharge of export obligation under the advance license. Similarly, the supplies made to M/s. Vitrag Impex in DTA against receipt of foreign exchange. The appellants sought for permission for sale in DTA from the Development Commissioner based on the purchase order placed on the appellant by M/s. Reza Overseas Metal Trading of UAE for delivery of goods to M/s. Vitrag Impex. It is important to note that the said sale was made on full payment of duty. No justification to raise demand of Central Excise duty on the goods supplied to the said Companies. So, the demand of Central Excise duty alongwith interest and confiscation of goods and imposition of redemption fine in respect of supply of materials to the said two parties are not sustainable. Demand of duty alongwith interest and imposition of penalty as well as confiscation and imposition of redemption fine on the raw materials and the finished goods except shortage of 5.867MTs of Zinc Scrap, on the assessee, are not sustainable. The learned Advocate had not seriously disputed the demand of duty on 5.867MTs Zinc Scrap. It is seen from the adjudication order that, it was admitted that the goods were cleared clandestinely and therefore, penalty under Section 11AC of the Act, 1944 is justified. But, the goods were not available for confiscation and, confiscation of goods and imposition of fine was not proper and legal. As the demand of duty and confiscation of goods are not sustainable, imposition of penalties on the appellants are not warranted. Impugned order is modified to the extent the demand of duty alongwith interest and imposition of penalty of equal amount of duty as determined on 5.867MT Zinc Scrap found short as per Panchnama dated 27/ 28.04.2005 are upheld, and all other demand of duties along with interest, confiscation and imposition of fine and penalties are set-aside. As the adjudicating authority had not given an option to pay penalty of 25% of the duty, within thirty days along with duty and interest from the date of receipt of adjudication order as per Section 11AC (i) of the Act, the assessee is given an option, to pay the penalty 25% of the duty alongwith duty and interest on 5.867MT of Zinc scrap, within thirty days from the date of receipt of this order. Failure to which, the assessee shall pay the penalty of equal amount of duty as determined. - Decided partly in favour of assessees.
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CST, VAT & Sales Tax
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2015 (4) TMI 78
Benefit of lesser tax under Section 3(3) of the Tamil Nadu General Sales Tax Act - whether the Tribunal was justified in deleting the turnover in terms of Section 3(4) of the Tamil Nadu General Sales Tax Act - Held that:- Following decision of M/s.Tube Investments of India Limited V. State of Tamil Nadu [2010 (10) TMI 938 - MADRAS HIGH COURT] - no tax can be collected without the authority of law. Therefore, following the above-said decision, we find no question of law much less any substantial question of law arises for consideration in this revision - Decided against Revenue.
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2015 (4) TMI 77
Penalty under Section 54 (1) (14) of the U.P. Value Added Tax Act, 2008 - goods were not accompanied by Form-38 - Intention to evade tax - Held that:- From a perusal of the order of the Joint Commissioner, Faizabad Zone, Faizabad dated 28.02.2011 as well as the order of the Tribunal dated 23.11.2011 it will be seen that absolutely no finding has been given either by the Assessing Officer or by the Tribunal as to whether there was an intention on the part of the Food Corporation of India-revisionist to evade tax. In my opinion the provisions of Section 54 sub-section 1 clause 14 are mandatory and the Taxing Authorities are under an statutory obligation to examine the material on record and discuss the merits of the matter and record a clear finding with regard to the intention of the dealer or importer as to whether there was or was not an intention to evade tax. Both the orders of the Assessing Authority, Appellate Authority as well as Tribunal are silent on this aspect of the matter and therefore the orders dated 28.02.2011, 22.06.2011 and 23.11.2011 are illegal and in violation of the mandatory provisions of Section 54 (1) (14) of the VAT Act, 2008 and are accordingly set aside. The matter is remitted to the Assessing Authority to reconsider the matter in the light of the observations made above and the law laid down by the Division Bench of this Court in the case of M/S. Rama Pulses (2009 (10) TMI 885 - ALLAHABAD HIGH COURT), within a period of two months from the date of receipt of the certified copy of this order. - Decided in favour of assessee.
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2015 (4) TMI 76
Evasion of tax - Enhancement in turnover of assessee - Held that:- Assessing authority has given detail reasons based on evidences on record including own documents of the applicant, with regard to the evaded purchases and sales. Brief facts in this regard have already been noted above. The Assessing Authority has relied upon the figures disclosed by the applicants at different stages. The Assessing Authority has also found that the applicant-assessee has not maintained register in Form-XLI under Rule 56(9) of the Rules. - applicants also could not point out any ground in the appeal filed before the first appellate authority that the findings as aforenoted with regard to figures disclosed before the Additional Commissioner and the Assessing Authority and the statement given, are incorrect or the findings recorded in this regard are perverse. The applicants have also not filed their audited balance sheet and trading results to demonstrate financial hardship in depositing even 20% of the disputed amount of tax. Prima facie I find that the Assessing Authority has given sufficient reason to come to the conclusion of evaded purchases and sales. Prima facie, I also find that sufficient basis has been given by the assessing authority to determine the quantum of evaded purchases and sales. The appeals against the assessment orders are pending before the first Appellate Authority and as such in these revisions only a prima faice case can be looked into. This Court is not required to go deeper into the merits of the case at this stage as it may affect the decision on merit in the appeal pending before the first Appellate Authority. On consideration of the prima facie case and the fact that no documentary evidences of financial hardship are available on record of these revisions, I do not find any error in the impugned orders of the Tribunal. - No question of law arises from the order of the Tribunal - Decided against Assessee.
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Wealth tax
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2015 (4) TMI 61
Valuation of property - Whether the Tribunal is correct in concluding that the value of the lease hold right in the property under consideration was correctly brought into the computation of net wealth as per provisions of Section 40 of the Finance Act, 1983 for the assessment year under consideration - Held that:- it is clear that none of the exceptions as enumerated in Section 40 (3) (vi) are attracted to the facts of the present case. In the present case, the building has been leased out to Central Bank of India for which rent is being collected by the assessee/appellant. It therefore follows that by virtue of Section 40 (1) read with Sections 40 (2) and (3) of the Act, the building constructed by the appellant would fall within the definition of specified asset for the purpose of determining the net wealth of the assessee liable to wealth tax. It is of no avail on the part of the assessee to plead that a commercial activity conducted in the premises would fall outside the purview of wealth tax, because, as stated above, the assessee in this case does not fall within any of the exceptions provided under Section 40 (3) (vi) for availing the benefit. Such being the case, the building as such, constructed on a leasehold property, would be termed as an asset in terms of Section 40 (3) and, therefore, the net wealth of the company has to be determined in terms of Section 40 (2) of the Act for the purpose of levy of wealth tax under Section 40 (1). Assessee/appellant herein has leased out the property to the lessee for running banking business, which is not the business activity of the assessee/appellant. Therefore, as held by the Full Bench, assessee/appellant does not fall within the exclusionary clause mentioned in section 40(3)(vi) of the Finance Act, 1983, and, thereby, the assessee is liable to be taxed on the value of the tenanted portion of the building under Section 40 of the Finance Act, 1983. The abovesaid Full Bench decision is squarely applicable to the facts of the present case. Accordingly, following the Full Bench decision in Fagun's case (2006 (9) TMI 118 - MADRAS High Court), the 1st substantial question of law is answered against the assessee/appellant and in favour of the Revenue/respondent. Whether the Tribunal is correct in concluding that assessibility of the said right in the property under consideration at ₹ 82 Lakhs in the computation of net wealth even though rights in the property had vested with Central Bank of India in terms of sub-lease agreement - Held that:- department has taken into consideration the value of the building alone, constructed by the assessee, for the purpose of computation of the net wealth and not the value of the land. However, in the order it has been stated that for the purpose of computation of the value for land and building, the value of the building alone is taken as a composite value. However, no appeal has been filed by the Department challenging that portion of the order of the Tribunal. In such circumstances, this Court is of the considered opinion that the value adopted by the Tribunal at ₹ 82 Lakhs for the purpose of computation of net wealth is just and proper and calls for no interference, as the value of the building alone is taken as composite value for the purpose of computation of the value of the land and building. Accordingly, in view of the above, the 2nd substantial question of law is also answered against the assessee/appellant and in favour of the Revenue/respondent. - Decided against assessee.
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Indian Laws
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2015 (4) TMI 63
Constitutional validity of certain regulations of the Competition Commission of India (General) Regulations, 2009 - Violation of Article 14 of the Constitution of India - Held that:- Today and in fact even at the time when the present writ petition came up first, CompAT was/is functioning and the appeal if preferred by the petitioner to CompAT would have been taken up for hearing along with the application for interim relief which would have been filed therewith. Thus this petition cannot be compared with other petitions in the batch, interim relief wherein came to be granted in the circumstances - If the same interim order were to be extended to this petition as well as all other petitions which may also be filed impugning the provisions of the Competition Act and the Regulations thereunder, the same would lead to none approaching CompAT, thereby making CompAT non-functional. In these petitions, are not concerned with the challenge even if made to the merits of the order of the CCI as indeed we cannot be and had clarified so at the initial hearing only. In the hearing till now also, none of the counsels has made arguments on the merits of the order of the CCI. The hearing in these petitions is confined to the challenge to certain provisions of the Act and the Regulations thereunder and to the query raised by us in the order dated 30th September, 2014 supra. We do not see any reason for multiplying the petitions. If the said challenge is to succeed, the judgment would bind all those covered thereby. - Thus merely on the ground of having made the same challenge, the persons aggrieved from the orders of the CCI cannot avoid approaching CompAT which as aforesaid is now functional or from seeking the interim relief from CompAT - Decided against appellant.
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2015 (4) TMI 62
Arbitration agreement or not - Stock trading agreement between appellant and respondent - Appellant raised a grievance that without his instructions 65 transactions were effected by Edelweiss without any confirmed order or instruction from him - Respondent contends that matter referable to arbitration - No application was filed under Section 8 of the Arbitration and Conciliation Act, 1996 - view taken by the learned Single Judge is that the requirement of law i.e. Section 8 of the Arbitration and Conciliation Act, 1996 is for a party relying upon an arbitration agreement to apply to the Court praying that parties be referred to arbitration not later than when submitting the first statement on the substance of the dispute - Held that:- Section 9 of the Securities Contracts (Regulation) Act, 1956 provides that any recognized stock exchange may, subject to the previous approval of Securities and Exchange Board of India (SEBI) make bye-laws for the regulation and control of contracts. Section 9(2)(n) of the Act provides the method and procedure for settlement of claims or disputes including settlement by arbitration. Under S.9(2)(n) the National Stock Exchange has framed Bye-Laws which have been approved by SEBI. Section 9(4) provides that the Bye-Laws made under Section 9 shall be subject to conditions with regard to previous publication, and the same shall be published in the Gazette of India, and also in the Official Gazette of the State in which the principal office of the recognized Stock Exchange is situated, and shall have effect as from the date of publication in the Gazette of India. - arbitration under the National Stock Exchange Bye-Laws are Statutory Arbitrations would be covered under Section 2(4) of the Arbitration and Conciliation Act, 1996. In the written statement filed a specific prayer has not been made to refer the parties to arbitration, but we have highlighted hereinabove that in the written statement filed a preliminary objection has been taken that the suit is barred in view of the arbitration agreement. The written statement filed is with strings attached by challenging the maintainability of the suit in view of the arbitration clause and therefore in such circumstance the said objection taken by Edelweiss contained in the written statement could be treated as an application under Section 8 of the Arbitration and Conciliation Act, 1996. - It is trite that it is the substance of a matter contained in a document which matters and not the form thereof - appeal has to be dismissed - Decided against appellant.
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