TMI Tax Updates - e-Newsletter
April 5, 2016

Case Laws in this Newsletter:

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

TMI SMS

• VAT - valuation - transportation/ processing charges received by ONGC before the actual delivery has to be included in the sale price -HC

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Articles

• THE COMPANIES (AUDITOR’S REPORT) ORDER, 2016

News

• Auction for Sale (Re-issue) of Government Stocks

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• Statement by the Ministry of Finance on the story published in today’s Edition of Indian Express dated 4.4.2016

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• Commerce Ministry-CII-SEPC to Host Global Exhibition on Services

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• Release of new functionality to taxpayers to secure their E-filing account

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• CBDT achieves record setting Year in Delivery of Taxpayer Services; CPC Bengaluru processed more than 4.14 crore Income Tax returns, an increase of over 35% over the previous year; CPC also issued over 1.61 crore refunds above ₹ 100 to taxpayers, an increase of more than 47% over the previous year

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• RBI Reference Rate for US $

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• Prime Minister to launch the “Stand up India scheme” on April 5th 2016

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Notifications

Central Excise

• F.No.334/ 8/2016-TRU - dated 30-3-2016 - CE
  Corrigendum - Notification No. 16/2016 Central Excise, dated the 1st March, 2016

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Customs

• F. No. 520/09/2016-CusVI - dated 2-4-2016 - Cus
  Corrigendum - Notification No. 26/2016-Customs, dated the 31st March, 2016

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• 47/2016 - dated 4-4-2016 - Cus (NT)
  Amendments in Notification No. 41/2016-CUSTOMS (N.T.), dated 17th March, 2016, with effect from 05th April, 2016

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• F. No. 520/09/2016-CusVI - dated 1-4-2016 - Cus (NT)
  Corrigendum – Notification No. 43/2016 Customs (N.T.), dated 31st March 2016

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• F. No. 495/05/2016-Cus.VI (Pt.) - dated 30-3-2016 - Cus (NT)
  Corrigendum – Notification No. 31/2016 Customs (N.T) dated 1st March, 2016

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• F.No. D-22011/26/2015/Pt-III - dated 15-3-2016 - Safeguard
  Safeguard investigation concerning imports of “Hot-rolled flat products of non-alloy and other alloy Steel in coils of a width of 600 mm or more” into India Final Findings

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Income Tax

• S.O. 1229(E) - dated 29-3-2016 - IT
  Corrigendum – Notification No. S.O. 3442 (E) dated 17 December 2015

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• 22/2016 - dated 29-3-2016 - IT
  Section 10(46) of the Income-tax Act, 1961 – Central Government notifies “Andhra Pradesh Electricity Regulatory Commission” for dealing with specified income

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SEZ

• S.O. 1219(E) - dated 17-3-2016 - SEZ
  De-notification of 23.75.0 hectares of sector specific Special Economic Zone for Electronics/Telecom Hardware and support services including trading and logistics activities at SIPCOT Industrial Area, Sriperumbudur, Tamil Nadu

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Circulars / Instructions / Orders

Income Tax

• PRESS RELEASE - dated 4-4-2016
  Release of E-filing of Income Tax Returns (ITR) and other forms

Highlights / Catch Notes

Income Tax

• Stay application - looking at the manner in which the petitioner has been dealt with by the AO in regard to its stay application, it would be in the interest of justice that the application for stay filed by the petitioner be heard by another Officer different from the Assessing Officer - HC
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• Amount of loan waived - whether it does not constitute the income of the assessee in the context of Section 28[iv] - Once the loan is written off and the person writing off the loan, does not stand to benefit, in any concrete manner, except to the extent that he will be protected against any statutory claim, the same cannot be treated as revenue income - HC
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• Penalty u/s 271E - section 269T is applicable only on repayment of any loan or deposit taken by the assessee - at the time of repayment in cash there was no unsecured loan standing in the books of assessee - rather there was debit balance in the account of payee - No penalty - AT
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• Disallowance of loss - sale of shares - This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it to claim set off and carry forward of such a loss - AT
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• TDS u/s 194J - Non deduction of tds - No demand visualized u/s 201 of the Act should be enforced after the tax deductor had satisfied the officer in-charge of TDS that tax due have been paid by the deductee - AT
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• Validity of the disallowance u/s. 14A - The pro-rata formula of funding enshrined in Rule 8D(2)(ii) would thus apply on facts to the assets, both as at the beginning and the close of the relevant year and, thus, to the average assets, including investments, held during the year, signifying the appropriateness of the formula u/r. 8D(2)(ii) both on facts and in law. - AT
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Customs

• Bonafideness of appellant in buying and utilising the REP licences issued - the duty cannot be demanded from the transferers, where the licences were genuine but obtained by fraudulent representation, they can be made only voidable and imports which happen prior to the cancellation cannot be held as improper. - AT
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Service Tax

• Vacant land in possession of the appellant is excluded from the ‘renting of immovable property' as defined in Section 65(90a) and from the definition of taxable service as per Section 65 (105) (zzzz) if the vacant land is given for rent - AT
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Central Excise

• Cross utilization of the credit on excuse duty and service tax denied - the cross utilization of credit on goods and services being not covered by any restrictive provision, leave alone any prohibition or embargo, the Tribunal's order does not call for any interference - HC
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• Cenvat credit - having regard to the nature of the use for which these branch offices were taken on rent, the said service clearly qualifies to be covered within the scope of input service as defined in Rule 2(l) of the Cenvat Credit Rules, 2004. - AT
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• Denial of cenvat credit - inputs and capital goods sent to job-worker for further processing and the inputs sent directly to job-workers for further processing - with regard to goods which was neither sent directly to Job worker nor received back directly from job worker, demand confirmed - AT
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VAT

• Inclusion of processing and transportation charges received by ONGC as part of the sale price of LPG sold by ONGC to GAIL - such transportation and processing charges received by the ONGC before the actual delivery thereof it has to be included in the 'sale price' as per section 2(29) - HC
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• Inclusion of works contract within the purview of A.P. VAT Act - Execution of works contract outside the state - Demand set aside - HC
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• Power and jurisdiction of Commissioner to amend eligibility certificate - If the Tribunal was competent to amend the eligibility certificate, then there is no reason why clerical and arithmetical errors, which are apparent on the face of the record for which no debate exists could not be corrected by the Commissioner under section 4A(3) - HC
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Case Laws:

• Income Tax

• 2016 (4) TMI 133
  Notice of Motion - seeking stay of recovery of the disputed tax of ₹ 62.69 crores - Held that:- Court has been adjourning the present Motion from time to time is because, it appeared that the disposal of the Miscellaneous Application before the Tribunal is imminent. Therefore, this Court was of the view that it may be advisable to not invest time on the appeal and the stay application as in case the Miscellaneous Application is allowed, then the question of entertaining the appeal from the impugned order would not arise. On the other hand, in case the Miscellaneous Application is not allowed and the order dated 6th September, 2013 is left undisturbed then, different considerations would apply as the appeal itself would have to be considered for admission and depending on the view taken thereon, the question of grant of stay of the impugned order and recovery pursuant thereto would have to be considered. The entire exercise of considering the appeal and the stay application may be rendered useless in case, the Tribunal allows the Miscellaneous Application. In view of the fact that Miscellaneous Application is now listed on 1st April, 2016 before the Tribunal, it appears to us from the submission made before us that the disposal of the Miscellaneous Application is likely to take place in the very near future, it would be appropriate to adjourn this Notice of Motion, while granting ad-interim relief in terms of prayer clause (a) to the Motion.

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• 2016 (4) TMI 132
  Stay application - Held that:- Assessing Officer to accept a stay application and not immediately give acknowledgement of its receipt is unacceptable. The least that is expected of an civil servant is to be fair and civil. In the absence of the above, his conduct is not one becoming of an Officer belonging to the prestigious Indian Revenue Service. The least that is expected of an Officer is that when a person files an application / letter, which is accepted by him, an acknowledgement should be forthwith given to the party filing the application or letter. In case he refuses to accept the letter he should endorse on the letter / application the reason why it is not being accepted with a line or two for the refusal to accept. In case he does accept it and give an acknowledgment he can deal with the applications / letters as is appropriate in accordance with law. We believe that what has happened in this case is an aberration. However, the Chief Commissioner of Income Tax would ensure that his Officers do not behave in such an high handed and unfair manner, not expected of civil servants. Be that as it may, the stay application is still pending decision. Normally, we would have let the Assessing Officer decide the same. However, looking at the manner in which the petitioner has been dealt with by the Assessing Officer in regard to its stay application dated 17th February, 2016, it would be in the interest of justice that the application for stay filed by the petitioner be heard by another Officer different from the Assessing Officer i.e. respondent no.1 herein. The Officer to deal with the petitioner's stay application dated 17th July, 2016 is to be selected / nominated by the Revenue.

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• 2016 (4) TMI 131
  Amount of loan waived - whether it does not constitute the income of the assessee in the context of Section 28[iv] - Held that:- The protection given to the British National by the agreement dated 26.06.2000, cannot be treated as a consideration. The Customs Department was not bound by such an undertaking given by the two Indian Nationals. At the most it was a promise on the part of the Indian Nationals to protect the British National against any claim from the Customs Department. It was a promise to hedge the risk that may fall upon the British National. Once the loan is written off and the person writing off the loan, does not stand to benefit, in any concrete manner, except to the extent that he will be protected against any statutory claim, the same cannot be treated as revenue income. Decided against the appellant/Department.

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• 2016 (4) TMI 130
  Addition on account of difference in estimated value of shops and actual receipt - assessee has dissolved firm and distributed shop to partners - Held that:- CIT(A) has examined the issue lucidly and that too of all possible angles. The firm was disallowed w.e.f. 1-4-2006. On dissolution of the firm, assets must have been distributed. Unsold stocks represented shops/offices space fallen to the assessee. The moment the firm was dissolved, this stock was converted into capital assets of the partners. The AO could have taken action as per section 45(4) of the Income Tax Act against the firm on its dissolution in that assessment year. The ld.First Appellate Authority has examined this aspect in the findings. Once it is held as capital asset, then, the capital gain would accrue to the assessee and it can be enhanced with the help of section 50C only. The ld.CIT(A) has also done that. This action of the ld.CIT(A) has not been challenged by the Revenue in its grounds of appeal. - Decided against revenue Addition on advances given to some agriculturists in cash - Held that:- No merit in this ground of appeal raised by the Revenue. The assessee has explained that the source of money has duly been accounted for in his books. The AO has not doubted this source of money. Therefore, he cannot make the addition.- Decided against revenue

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• 2016 (4) TMI 129
  Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed and that time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.

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• 2016 (4) TMI 128
  Penalty levied u/s 271D - whether the order is time barred - Held that:- The last date before which the penalty order u/s 271D could have been passed by the Revenue was 31.03.2014 and the date of passing the order u/s 271D of the Act is 28.03.2014, which is well within the time limit prescribed under the provisions of Section 275(1)(a) of the Act. We are, therefore, of the view that the order u/s 271D is not time-barred and is valid. We, therefore, dismiss first ground of the appeal of the assessee. Section 269SS of the Act are squarely applicable on the cash loan transactions made by the assessee by way of taking cash loans from his brother’s proprietary concern M/.s Karamyog Commercial Corporation. Further, the learned Authorized Representative’s contention that the assessee should be given immunity from the harsh provisions of Section 271D by covering him u/s 273B of the Act as the assessee has reasonable cause for the said failure. We cannot agree with this contention because the assessee and his brother, both are having their bank accounts in Surat City and both of them are not agriculturists. They are regularly filing their return of income. Therefore, there cannot be any reasonable cause for such failure. In these circumstances, there do not seem to be any way out for the assessee to get away from the penalty u/s 271D and therefore, we do not find any reason to interfere with the order of the learned CIT(A) - Decided against assessee Penalty u/s 271E - Held that:- From going through the above provisions of Section 269T, we find that this section is applicable only on repayment of any loan or deposit taken by the assessee and looking to the facts of the case, we find that at the time of repayment in cash there was no unsecured loan standing in the books of assessee for which repayment have been made; rather the balance of ledger account of M/s. Karmayog Commercial Corporation was already standing as debit balance and even all through the period when cash payment of ₹ 5,13,440/- was made, the account of M/s. Karmayog Commercial Corporation never came under the unsecured loan category. We are, therefore, of the view that in such situation the assessee should not be visited with penalty u/s 271E of the Act, because the assessee has not made any contravention to the provision of Section 269T of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 127
  Addition u/s 56(2)(vi) - status of AOP OR individual or HUF - Held that:- Section 2(31) defines "person" as including (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not,(vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. It is palpable from the definition of `person’ as given in section 2(31) of the Act that AOP is a person different from an individual or a HUF. Even if an AOP consists of some individuals, the status of such a group of individuals remains as that of `AOP’, in the same way in which when some individuals enter into partnership, the body which comes into existence is called a `Firm’. The AO has rightly admitted the status of the assessee as an AOP and not an individual or HUF. It is axiomatic from a plain reading of the provision that any sum exceeding ₹ 50,000/- can fall within the ambit of section 56(2)(vi) of the Act only if it is received by an individual or HUF. Since the assessee in question is an AOP and not any individual or HUF, who received a sum of ₹ 1.60 crore without consideration, such a receipt in our considered opinion cannot be included in its total income within the framework of section 56(2)(vi). We, therefore, set aside the impugned order on this score and order for the deletion of this addition. - Decided in favour of assessee Disallowance of loss - AO has disallowed the loss by treating the transactions of sale of shares by the assessee to its trustees as sham and tax avoidance device - Held that:- loss arising from transfer of shares etc., held as long term capital assets, on which no STT is paid because of off-market sale transaction, does not fall within purview of section 10(38) and consequently becomes eligible for set off and carry forward as per the other relevant provisions. This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it to claim set off and carry forward of such a loss. The AO has held these off-market sale transactions as a colorable device and tax avoidance scheme adopted by the assessee to evade payment of legitimate tax due to the exchequer. In our considered opinion, this is a glaring example of tax planning rather than the tax avoidance as has been held by the AO. In view of the fact that the assessee entered into valid transactions of transfer of shares of Bajaj Hindustan Ltd., Tata Consultancy Ltd. and Reliance Communications Ltd. to Shri M.H. Dalmia and Smt. Abha Dalmia, we hold that the loss suffered on such transactions is a genuine loss which cannot be disallowed as it does not fall within the ambit of section 10(38) because of non-payment of STT. Overturning the impugned order on this issue, we direct the allowing of carry forward of loss - Decided in favour of assessee

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• 2016 (4) TMI 126
  Assessment under section 153A - Held that:- The assessments of 2007-08 to 2011-12, which are not based on any incriminating and therefore the assessment framed under section 153A of the Act cannot be stand on its own leg, which are not framed on the basis of any incriminating material found during the course of search operation and they do not conform the mandate of section 153A of the Act. Accordingly, the assessments framed under section 153A r.w.s. 143(3) for the assessment years 2007-08 to 2011-12 [five assessment years] are quashed. Assessment year 2012-13 and 2013-14, there is a time limit to issue notice under section 143(2) of the Act and the pending assessment were abated for these assessment years and framing assessment of these assessment years are valid. Further, regarding disallowance of agricultural income in 153A assessment, when there is no material to suggest that the assessee is having lesser agricultural income, what is stated so as to reduce it and treat as income from other sources. More so in the assessment year 2008-09 vide assessment order dated 06.12.2010 and for assessment year 2009-10 dated 09.12.2011, the Assessing Officer has accepted the returned agricultural income and when no incriminating material found to suggest the agricultural income is non-agricultural income and arbitrarily disallowing the same by the Assessing Officer and the ld. CIT(A) are not justified. Accordingly, the agricultural income declared by the assessee has to be accepted. Disallowance of deduction under section 54F - The assessee having purchased the land by investing capital gains and the intention to construct a residential building, for which, the assessee have a period of three years to construct a new residential building and if at all the assessee fails to comply with the requirement of section 54F as per proviso to section 54F(1) to (4) of the Act, then only it can be denied. Interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A as held by the Tribunal in the case of ACIT v. VN. Devadoss [2013 (9) TMI 400 - ITAT CHENNAI ). The interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A. Therefore, the period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A of the Act. - Decided in favour of assessee

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• 2016 (4) TMI 125
  Sale of investment - taxability in hands of assessee - Held that:- The profits on sale of investment in the years before us, which are year prior to the years with effect from which prospective amendment is made, are not taxable in the hands of the assessee. The taxability of income of insurance companies under the head ‘income from business and profession’ as governed by provisions of section 44 read with first schedule to the Income Tax Act, does not extend to taxability of profits on sale of investments – So far as the assessment years before us are concerned. We direct the AO to exclude profit on sale of investments from income of the assessee as not liable to be taxed. See Bajaj Allianz General Insurance Company Limited Vs Addl CIT [2009 (8) TMI 810 - ITAT PUNE-A] - Decided in favour of assessee Allowability of club expenses - TDS liability - Held that:- The payment of club fees was with a view to enable the assessee to improve its business relations and prospects. Therefore the payment of club fees was business expenditure not falling u/s. 40(a)(v) of the Act. See Otis Elevator Company (India) Limited Versus Commissioner Of Income-Tax [1991 (4) TMI 53 - BOMBAY High Court]. Hon’ble High Court of Delhi in the case of CIT Vs Samtel Color Ltd ( 2009 (1) TMI 26 - DELHI HIGH COURT ) has held that admission fee paid to Corporate Membership was an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitated the smooth and efficient running of a business enterprise and did not add to the profit earning apparatus of a business enterprise - Decided in favour of assessee MAT applicability - whether the provisions of Sec. 115JB of the Act are applicable to the assessee or not? - Held that:- We have perused the orders of the Co-ordinate Bench for the assessment year 2007-08 we find that the Co-ordinate Bench following the decision in the case of Krung Thai Bank PCL Vs DIT [2010 (9) TMI 18 - ITAT, MUMBAI ] directed the AO to exempt the assessee from the applicability of provisions of Sec. 115JB of the Act.- Decided in favour of assessee Credit for Dividend Distribution Tax u/s. 115-0 - Held that:- We find considerable force in the contention of the assessee. It is the submission of the assessee that it had paid Dividend Distribution tax to the extent of ₹ 58.56 crores out of which ₹ 47 crores have been given credit. The Ld. CIT(A) directed to verify the contention of the assessee that it had paid dividend distribution tax of ₹ 58.56 crores and it should be given credit. We do not find any infirmity in the order of the Ld. CIT(A) in directing the AO to give credit for the Dividend Distribution tax paid by the assessee.

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• 2016 (4) TMI 124
  Deduction u/s.80HHC on the undisclosed income - Held that:- There was no dispute about the fact that the assessee is entitled to deduction u/s.80HHC on the undisclosed income and the only question was as to whether the requirements of section 80HHC are fulfilled. From the detailed discussion given above, it is clear that in the present case all the conditions and requirements of section 80HHC are fully satisfied. We therefore, direct the AO to allow claim of deduction u/s.80HHC with regard to addition on income. Before parting with the issue it is pertinent to mention that the Hon’ble Supreme Court in the case of Vegitables Products, [1973 (1) TMI 1 - SUPREME Court ] has held that when there are two view in respect of point under consideration, then the view in favour of the assessee needs to be adopted. - Decided in favour of assessee

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• 2016 (4) TMI 123
  TDS u/s 194J - Non deduction of tds - Held that:- It is amply clear that none of the clauses of Explanation 2 to section 9(1)(vi) is attracted to the granting of economic interest of first refusal to the assessee-company by Shri Mohan Raju in any new business initiative. The right envisaged in the agreement is only acquiring the controlling interest in the new initiative of MR. We are unable to discern from the perusal of the agreement, transfer of any rights or use of intellectual property. Therefore, considering the definition given in the Explanation 2 to sec.9(1)(vi) of the Act, the impugned consideration paid to Shri Mohan Raju cannot be treated as royalty. Hence, the question of deducting tax at source under the provisions of 194J does not arise. No demand visualized u/s 201 of the Act should be enforced after the tax deductor had satisfied the officer in-charge of TDS that tax due have been paid by the deductee, held that once taxes have already been paid by the payee, there was no need to recover the same demand from the person responsible for deducting at source. In the present case, though no taxes have been paid by the payee on the amount, it serves no purpose to enforce demand from the tax deductor as the assessment in the hands of the payee is completed, the demand, if any, can be recovered from the payee under due process of law. - Decided in favour of assessee

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• 2016 (4) TMI 122
  Revision u/s 263 - claim of 1/5th of IPO expenses u/s. 35D - Held that:- The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous hut is prejudicial to the Revenue- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous The Gujarat Pollution Control Board has given consent and authorization treating the assessee an Industrial Undertaking - Decided in favour of assessee No disallowance has been made by the A.O u/s. 14A - Held that:- This observation of the Commissioner is also against the true facts of the case, the following observations/findings of the A.O would explain the position. "The submission of the assessee has been considered. Regarding investments, the assessee has put on records from its accounts evidence to demonstrate that the source of investment is out of interest free funds. Further regarding administrative expenses, the assessee has offered 0.5% of the average investments as disallowance u/s. 14A amounting to ₹ 8,80,758/-. Considering the details, the disallowance offered by the assessee during the assessment proceedings is accepted and a disallowance of ₹ 8,80,758/- is made u/s. 14A". From the above, it can be seen that that the A.O. has thoroughly examined the source of investment and after examination/verification, the A.O was convinced that the investment is out of interest free funds. - Decided in favour of assessee

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• 2016 (4) TMI 121
  Penalty under section 271(1)(c) - assessee claimed deduction under section 80IB(10) - Held that:- the assessee is entitled to the claim of deduction under section 80IB(10) of the Act on completed portion of building from year to year, if the assessee fulfills the requirement of completing the building by stipulated date i.e. 31.03.2008. Admittedly, in the facts of the present case, the assessee had completed the building before 31.03.2008 and even applied for completion certificate on 29.03.2008 after receiving the requisite No Objection Certificates from various departments and also the completion certificate issued by the Architect. In the above said facts and circumstances, where the assessee has furnished complete details in respect of its claim of deduction under section 80IB(10) of the Act and merely because the same was denied to the assessee on some premise, which does not hold good in today’s scenario of settled position of law.We find no merit in the order levying penalty under section 271(1)(c) of the Act in this regard. The facts in ACIT Vs. M/s. Rohan Engineering Construction (supra) are identical to the facts before us, where the assessee was not able to obtain the completion certificate by the appointed date and the deduction under section 80IB(10) of the Act was denied and it was held by the Tribunal that the assessee is not liable for levy of penalty under section 271(1)(c) of the Act. Following the same parity of reasoning, we reverse the order of CIT(A) and direct the Assessing Officer to delete penalty under section 271(1)(c) - Decided in favour of assessee

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• 2016 (4) TMI 120
  Income on account of rent - "income from house property‟ OR "income from business‟ - Held that:- We find it appropriate to send this issue back to the file of the AO to examine this aspect properly. If this income has been assessed under the head „income from business‟ in all the past years, then, Revenue should not change the head of income unless the AO is able to bring out on record some material pointing out change in facts or law. For this purpose, the AO is obliged under the law to give a detailed reasoning in the assessment order in case he is not accepting the claim of the assessee. In the absence of the same, the AO is not permitted to change the head of income and should accept the claim of the assessee. The assessee is permitted to submit requisite details and documentary evidences, as may be required by the AO, or as may be considered appropriate by it, as per law and facts. The AO shall give adequate opportunity of hearing to the assessee before deciding this issue afresh. With these observations, this issue is sent back to the file of the AO. Disallowance of benefit of deduction u/s. 80IB of interest income, rental income and income from other sources - Held that:- This issue is squarely covered against the assessee with the judgement of the Hon‟ble Supreme Court in the case of Liberty India (2009 (8) TMI 63 - SUPREME COURT) wherein it has been held by the Hon‟ble Supreme Court that for granting benefit of deduction u/s. 80IB only the profit and gains which are derived from the industrial undertaking would be eligible to be considered. The ld. Counsel of the assessee was not able to show that the receipts on account of interest and rental income were in any manner derived from the industrial undertaking.

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• 2016 (4) TMI 119
  Validity of the disallowance u/s. 14A - correct quantification of the disallowance of the indirect interest expenditure u/s. 14A r/w r. 8D(2)(ii)- Held that:- The excess current liabilities (over current assets) translate into liquid funds with the entity only on the liquidation of the corresponding current assets. It is only this excess – and to that extent only, that represents a non-dedicated source of funds, and go to swell the general pool of funds or the common hotch-potch, funding any asset that may be acquired for the time being. This would also hold in relation to ‘advance for orders’ (from customers), at ₹ 52.55 cr. as at 31.3.2008, as well, as to the extent the amount is retained in the form of current assets (as cash/bank balance or inventory of goods), the same is only a targeted funding, financing current assets only. The unsecured loans, constituting the other major source of finance, is similarly not toward financing any specific asset/s (or class of assets). Self generated funds (profits), which are normally also available, again on a non-dedicated basis, is absent in-as-much as the assessee-company has suffered a loss during the year, which is primarily responsible for the decline in the NWC. Rather than being a generator or source of funds, the firm’s operations have become an avenue for absorption of the funds for the current year. In fact, the excess (outstanding) current liabilities (as at the year-end), as a portfolio, represents such loss to the extent not met - the assessee continuing to maintain the current assets at the same level. Looked at in any manner, the enhanced current liabilities or funds generated from the decline in NWC can therefore only be said to finance all the additions to the assets proportionately. The pro-rata formula of funding enshrined in Rule 8D(2)(ii) would thus apply on facts to the assets, both as at the beginning and the close of the relevant year and, thus, to the average assets, including investments, held during the year, signifying the appropriateness of the formula u/r. 8D(2)(ii) both on facts and in law. Finally, the ld. CIT(A) has, subject to A.O.’s verification, held for an adjustment for interest on (bank) FDRs. The same shall, accordingly, stand to be similarly excluded, at an average for the year, both from the value of investments and the total assets in computing the pro-rata indirect interest u/r. 8D(2)(ii). Subject to these adjustments in applying the said rule, we confirm the same.

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• 2016 (4) TMI 118
  Penalty u/s 271(1)(c) - Held that:- Deleting both the additions on account of cash component of brokerage and on account of transactions with M/s. Vinita Estates, the consequential penalty levied u/s 271(1)(c) of the Act would not now survive for consideration. - Decided in favour of assessee

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• 2016 (4) TMI 117
  Computation of the income from house property - computation of actual rent - determination of prevailing market rent - Held that:- A.O. has not made any enquiry with respect to the computation of the income from house property with respect to the respective properties in accordance with section 22 and 23 of the Act and the principles laid down by the Hon’ble Bombay High Court in the case of Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT) to determine the prevailing market rent of these properties and rather computed ALV based on notional rent based on cost of properties. During the hearing , the ld. Counsel of the assessee also contended that the assessee has produced additional evidences before the authorities below which has not been considered by the authorities and principles of natural justice are vitiated. In view of the above, we are of the considered view that the matter with respect to ground raised by the assessee in memo of appeal needs to be set aside to the file of the A.O. for re-determination of the income from house properties in accordance with the provisions of section 22 and 23 of the Act and the principles laid down by the Hon’ble Bombay High Court in the case of Tip Top Typography (supra) after considering the additional evidences filed by the assessee in his defense. Addition on professional income - whether the assessee is liable to follow mercantile method of accounting in respect of income which has already been considered as income in the subsequent assessment year based on cash basis of accounting consistently followed by the assessee?- Held that:- The law has given freedom to the assessee to regularly employ either cash basis of accounting or mercantile basis of accounting to compute correct income chargeable to tax and the plain , simple and natural language and words used in the Section 145 of the Act does not , in our humble opinion, cast any bar on the assessee to follow regularly either cash basis or mercantile basis of accounting by the assessee having more than one source of income with in the head of income from ‘Profit and gains of business or profession’ or ‘income from other sources’ as in the instant case the assessee has two stream and sources of income under the head of income from ‘Profit and gains of business or profession’ viz. his professional income and also income from production of films because by following either of the two method of accounting regularly , there is not likely to be distortion in computation of correct income as per the provisions of the Act and it will be only timing difference which we have seen above due to following the above methods of accounting and no prejudice will be caused to the Revenue . The said income of ₹ 22,57,000/- from the profession is also stated to have been offered for tax by the assessee in the year of receipt i.e. immediately succeeding financial year 2007-08 by following consistently and regularly cash basis of accounting for his source of income from profession . Thus, we hold that the assessee is not following hybrid or mixed method of accounting and the assessee is following cash system of accounting for his income from profession and mercantile system of accounting for his income from film production which are permitted by Section 145 of the Act. Based on our discussions and reasoning given here-inabove , we order deletion of the addition made to the income of the assessee by the AO - Decided in favour of assessee Addition of unexplained cash credit u/s 68 - addition made to the income of the assessee as unexplained cash credit u/s 68 of the Act under the head “Income from other sources” - Held that:- Once the income is stated to be assessed in the hands of the assessee and the said accommodations C-18 and C-20 have been stated to be acquired out of undisclosed income and treated as own property by the assessee , which has been brought to tax in the hands of the assessee and due taxes paid to Revenue , then the capital gains arising on sale of these accommodations C-18 and C-20 owned by the assessee and held by the assessee in the name of close family members being sister and mother shall be chargeable to tax in the hands of the assessee although the accommodations are technically held in the name of close family members i.e. mother and sister of the assessee and hence we order deletion of addition of ₹ 10 lacs being advance on sale of these accommodations as made by the AO and as confirmed by the CIT(A) with the direction to the AO to compute capital gains arising out of these two accommodations as per Act which shall be brought to tax in the hands of the assessee in accordance with law after duly verifying and authenticating the claim of the assessee with respect to acquisition and ownership of the above accommodations C-18 and C-20 out of undisclosed income of the assessee which has been brought to tax and due taxes paid to Revenue as asserted by the assessee and the assessee is directed to appear before the A.O. and file the necessary evidences before the AO to support its claim and assertions for verification and authentication by the AO Addition of cash deposit u/s 68 - Held that:- Due to lack of financial support, the assessee could not even complete his basic education and as such he is not well versed with the terms of accountancy, tax and other laws and regulations. The assessee has once again hit as he had incurred huge losses in the film business. The assessee’s accountant also left the job without even handing over the charge of the books of account. The assessee was not having the proper information about the books of account and assessee was traveling while assessment proceedings are going on which was the main reason the assessee could not produce the evidence before the A.O. and hence there was sufficient cause for not producing the evidence during the assessment proceedings and accordingly prayed before the CIT(A) for admitting the additional evidence which the CIT(A) declined to admit the same. We find that there was sufficient cause shown by the assessee which prevented the assessee from producing the additional evidence during the assessment proceedings, hence, we direct the admission of the additional evidences by the AO .

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• 2016 (4) TMI 116
  Penalty u/s 271(1)(C) - disallowance of expenses - Held that:- After hearing counsels from both the sides and considering the nature of expenses disallowed by the AO which substantially allowed in the quantum appeal by the Tribunal. We are of the view that these were bonafide claim of the assessee and were incurred or provided by considering the same to be admissible under the law. The salary of the partners was provided under the expert views however wrongly calculated whereas the amount incurred in respect of foreign tour expenses and subscription and membership were fully and exclusively incurred for the business and is supported by bills and vouchers. This can at the most be regarded a case of difference of opinions where out of huge disallowance a small fraction had survived till the final disposal of the quantum appeal. The case of the assesee find strong support from the decision of the Apex Court in the case of (i) Reliance Petroproducts (P.) Ltd. (2010 (3) TMI 80 - SUPREME COURT) the Hon’ble Supreme Court has held, where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. - Decided in favour of assessee

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• 2016 (4) TMI 115
  Gains on sale of shares/securities - business income instead OR capital gains - Held that:- The taxpayer cannot be allowed to take advantage of holding two portfolio, primarily with a motive to avoid tax liability or to reduce tax incidence. In the instant case, eventhough the assessee is maintaining two distinct portfolios, but facts speak otherwise. The volume of transaction is greater in investment portfolio. The law does not permit a taxpayer that under the garb investment transaction he can treat his regular share trading as investment. However, in the case in hand, the lower authorities ought to have given specific finding qua the transactions, that has been shifted from business portfolio and frequency thereof. Therefore, we hereby set aside the impugned order and restore the issue to the file of AO for de novo assessment. The assessee would place all relevant material before the AO in support of its claim. - Decided in favour of assessee for statistical purposes.

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• 2016 (4) TMI 114
  Penalty u/s. 271(1)(c) - non deduction of tds u/s 194A - Held that:- The assessee made a claim but the same was rejected and disallowed not for the reason that the claim was fabricated, but keeping in view the statutory provision of law that the assessee did not deduct TDS thereon. It, therefore, can hardly be said that the assessee had furnished inaccurate particulars of income entailing penalty u/s. 271(1)(c) of the Act. The assessee had offered bona fide explanations before the authorities below and as such, the Assessing Officer was not justified to hold that the case of the assessee is hit by Explanation 1 to Section 271(1)(c) of the Act. We also find that the decisions relied upon by the ld. Counsel for the respondent go to support the case of the assessee, against which no counter material could be adduced on behalf of the Revenue. The ld. CIT(A) also reached his conclusions after following decisions of Hon’ble Supreme Court in the case of Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT] which do not stand rebutted on behalf of the Revenue. We, therefore, find no justification to interfere with the order of the ld. CIT(A). Accordingly, the appeal of the Revenue is found to have no merits and is liable to fail - Decided in favour of assessee

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• Customs

• 2016 (4) TMI 100
  Plea of innocence - Mis-declaration of goods imported and defrauded customs - Chassis number, engine number and year of manufacture were tampered and fabricated to impress the customs that the year of manufacture was much earlier and used before import and therefore, the imported car was second hand one. Also appellant was the facilitator of import and paid the duty for Maqsood Ali at the time of clearance of the car and was also discharged the loan of ₹ 33 lakhs taken from ICICI Bank by Maqsood Ali Marbhoobali to purchase the vehicle for import - Held that:- Appellant was conduit in the entire import process and illicit deal of loan repayment. He was actively involved in the import as well as subsequent transfer of the title over the car. Fabrication of the engine number, chassis number and year of the manufacture defrauded customs demonstrating that the import car was second hand and was in use abroad prior to import. But investigation result discarded that. Appellate finding is that the appellant is a defacto importer and also was a financier and was conduit in the entire process mis-declaration of import consciously and deliberately. The repayment of the loan by the appellant along with Jilani Khasim Sahikh proved their mutual interest and organised bid to defraud Customs. They were all beneficiary of the ill gain from the import investing in the offending vehicle. Maqsood Ali Marbhoobali hided his identity and disappeared form investigation to hide the racket and money trail. Material facts on record proved the pre-meditated design of the appellant. He was abettor of misdeclaration and defrauding customs. Mis-declaration resulted in evasion of duty. Therefore, differential duty of ₹ 11,48,670/- was realized. That was paid by the appellant. For the involvement of the appellant in the racket, he suffered penalty of ₹ 11,48,670/-. Therefore, appellant's deliberate, conscious active involvement as well as collusion, cannot be ruled out and proved to be non-innocent. - decided against the appellant

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• 2016 (4) TMI 99
  Bonafideness of appellant in buying and utilising the REP licences issued - Obtained on the basis of fabricated forged documents by others - Whether or not the appellant has a knowledge of fraud by which the licence was obtained from the licensing authority by the transferer - held that:- the REP licences transferred were genuine documents issued by the competent authority. Even if the appellants had made any enquiry with the DGFT themselves as the issuing authority at the time of purchase or utilisation for import of gold, there is no way the validity of REP licence could have been put to question. This is clear from the fact that the fraudulent submission of forged bank document/ shipping bills by the original exporters who obtained the REP licence was unearthed much later by the detailed enquiry of the officers. Here, the REP licences were issued by the competent authority and as such were genuine documents. However, the original parties/ exporters made fraudulent representation by giving forged documents to obtain such REP licences. Demand of duty from the transferers - Held that:- by examining the judgment of Mumbai Tribunal in the case of Sumit Wool Processors Vs. CC [2015 (10) TMI 329 - CESTAT MUMBAI], the duty cannot be demanded from the transferers, where the licences were genuine but obtained by fraudulent representation, they can be made only voidable and imports which happen prior to the cancellation cannot be held as improper. Therefore, duty cannot be demanded. - Decided in favour of appellant

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• 2016 (4) TMI 98
  Validity of Sentence order - Contravention in relation to poppy straw - punishment rewarded under Section 15 of the Act - Appellant contended non-compliance of section 42 of the Act which is mandatory - Held that:- as per decision of Hon'ble Supreme Court in a case, registration of First Information Report by SHO and communicating the same to Superintendent of Police would not constitute compliance of the provisions of Section 42 of the Act. The finding given by the trial Court that the sending of `Ruqa' to Police Station and recording of FIR and then sending the special report to the senior officers amounts to compliance is against the law. In some of the circumstances the compliance of Section 42 can be made by the Investigating officer after conducting the raid, if there are chances of the accused to fled away etc. Therefore, the mandatory provisions of Section 42 of the Act have not been complied with. Therefore, the sentence order is set aside. - Decided in favour appellant

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• 2016 (4) TMI 97
  Seeking release of Nepalese currency - Nepalese currency of the value of ₹ 5 lakhs equal to Indian ₹ 3.1 lakhs were seized and detention receipt given on 17th June, 2014 - Application for release filed on 07.07.2014 but till date not received any reply - Respondent contended that appellant not present himself for examination or has not submitted any document to prove the legitimate possession of the currency and department did not convert the detention into seizure as there is a difference in detention and seizure - Held that:- there appears to be no legal justification for the Customs Department not 'seizing' the Nepalese currency recovered from the Petitioner in the first place and secondly, in not giving a SCN within six months of such seizure. In the absence of any provision in the Act that permits 'detention' of such goods, the Court has to proceed on the basis that what was effected on 17th June 2014 was a 'seizure' of Nepalese currency from the Petitioner. That the seized currency was in the possession of the Petitioner and seized from him is also not in dispute. If that is the position, then under Section 110(2) of the Act a SCN had to be given under Section 124(a) of the Act within six months of 17th June 2014. With no such SCN having been given, the inevitable consequence, therefore, is that as mandated by Section 110(2) of the Act, the seized goods "shall be returned to the person from whose possession it was seized". Consequently, the Respondents are directed to release the Nepalese currency for which a 'detention' receipt was issued on 17th June 2014, to the Petitioner upon him presenting himself. - Petition disposed of

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• 2016 (4) TMI 96
  Forfeiture of property under SAFEMA - Properties acquired illegally and non filing of income tax returns - Non production of evidence to prove his business activities so as to justify the income and purchasing of properties - Petitioner had issued show-cause notice under Section 6 of the SAFEMA calling upon the respondent to explain the source of income - Held that:- there is no substance on a ground that the petitioner has taken so many factual and legal grounds so as to make an attempt to prove that show-cause notice was valid and proper as the law is well settled as interpreted and decided by the Honourable Supreme Court. Also it is difficult to believe that it would be difficult to get direct evidence to control grave offence and, therefore, burden of proof rests upon respondents to prove that what is pleaded by the authority is not correct rather than to ask the authority to prove that what is pleaded by them is correct fact. Petitioner has gone to the extent of challenging the impugned order by describing it as a non speaking order when it is pleaded that the Appellate Tribunal has neither considered the issue raised by the petitioner nor discussed the fact of the case. It is very much clear that the factual details are well discussed in such judgment and all issues are properly dealt with and answered by the Appellate Tribunal with reasonings and citations of relevant cases. Therefore, there is no substance in the petition when it is trying to misguide the judicial proceedings. Petitioner has disclosed relevant provisions of different Acts and few judgments and tried to emphasize that once the facts specified under the particular sections are established, then there may be statutory presumption of guilt which follows the punishment unless contrary is proved by the affected person. Thereby an attempt was made to submit that nexus is implicit and is not required to be established in such proceedings under the special act, wherein reverse burden is imposed upon the person against whom the action is initiated by the competent authority. Also the petitioner has tried to emphasize that the judgment in case of Fatima Mohammed Amin vs. Union of India [2003 (1) TMI 657 - SUPREME COURT] is not a good judgment and that the Hon'ble Supreme Court has not interpreted the judgment of Constitution Bench properly. If it is so, first of all it would be necessary for the petitioner to approach the Hon'ble Supreme Court to rectify its interpretation but in absence of any such exercise, this Court has to rely upon the Hon'ble Supreme Court’s judgment in case of Fatima (supra). Even decision in case of Kesar Devi vs. Union of India reported in [2003 (7) TMI 650 - SUPREME COURT] is also confirming the same view taken in the case of Fatima (supra) and, therefore, when two judgments of the Hon'ble Supreme Court are conclusive in its findings, an attempt of the petitioner herein to allege that the interpretation of previous judgment in these two judgments is not proper, cannot be upheld. It cannot be ignored that this petition is filed under Article 227 of the Constitution of India, where the Court has to verify the limited issue that whether proper care has been taken by the authority in passing impugned order or not. Thereby only because petitioner is not comfortable with some of the judgments of the Honourable Supreme Court then they have to prefer petitions against such order, unless and until they get the Supreme Court judgments reversed by the Honourable Supreme Court itself, this Court cannot uphold their pleadings and submissions which are contrary to the decisions of the Honourable Supreme Court. - Decided against the petitioner

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• Corporate Laws

• 2016 (4) TMI 91
  Demurrer application - Held that:- As the issue of maintainability involves the mixed question of law and facts. Therefore, in the interest of justice, the prayers made in the instant Company Application are partly allowed to the extent that the demurrer application be heard and decided first and for this purpose, the Respondents Advocate is hereby directed to file the reply to the Company Petition within 3 weeks and rejoinder, if any, be filed by the Petitioners Advocate within 2 weeks from the date of receipt of the reply so as to consider the demurrer application first based on the applicable provisions of the Companies Act, 1956/2013 and the facts contained in the Company Petition, reply to the Company Petition and rejoinder thereto.

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• Service Tax

• 2016 (4) TMI 113
  Demand of Service tax of ₹ 9.66 crores in respect of various services provided - Services falling under different heads - Appellant contended that its other division from where most of the services were provided i.e. CIRT, Pune has paid its service tax of ₹ 6.03 crores - Invoices produced by the assessee did not tally with the service tax paid by Pune, in the common balance sheet for the two and also there is no co-relation between ST 3 return and TR 6 challan - Held that:- it is not understandable that how the challans produced by the appellant would get reflected in the common balance sheet inasmuch as there is no provision in the balance sheet showing any payment of service tax on the basis of different categories or invoicewise etc. Similarly, the observations made by the adjudicating authority in respect of ST 3 return and TR 6 invoices not being co-related is vague observations without any further details as to how the two documents are not in consonance with each other. Ignoring the documentary evidence regarding services provided by CIRT, Pune and paid the service tax by same and making general observations in a legal matter cannot be appreciated. Therefore, the impugned order is set aside and the matter is remanded back. Demand of Service tax of around ₹ 3 crores - Business Auxiliary Service - Services provided to the member transport authorities inasmuch as they were providing services of finalization of Rate contract between the manufacturer vendor and the member transport authorities for which charging the fee from the manufacturer vendor - Held that:- as no fee is charged by the appellant from the member transport, the activity may not get covered under the category of “Business Auxiliary service”. Therefore, matter remanded back. Demand of Service tax of ₹ 12 lakh - Club and Association activity - Held that:- the issue is decided by the various High courts. By referring the judgment of Hon'ble High court of Jharkhand in the case of Ranchi Club Ltd vs. CCE [2012 (6) TMI 636 - Jharkhand High Court] and of Hon'ble High court of Gujarat in the case of Sports Club of Gujarat Ltd. vs. Union of India [ 2013 (7) TMI 510 - GUJARAT HIGH COURT], the matter is remanded back. - Appeal disposed of

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• 2016 (4) TMI 112
  Application of time-limit of Section 11B of Service Tax Act, 1994 - Rejection of refund claim for Service tax availed on input services which were procured for rendering output services which were exported without payment of Service tax - Held that:- the first appellate authority has correctly applied the law by relying the decisions of higher judicial forum. Therefore, the impugned order is correct, legal and does not suffer from any infirmity as the refund claim is not hit by time bar and appellant is eligible for refund. - Decided against the revenue

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• 2016 (4) TMI 111
  Taxability for the period 18.04.2006 to 31.03.2008 - Technical inspection of certification services outside India to Food and Drug Administration of USA - Reverse charge mechanism as per Section 66A of the Finance Act, 1994 - Held that:- in order to market the goods in USA the products needs to be certified by US FDA for which they have to pay a fee which have been charged under reverse charge mechanism. The decision of the Tribunal in the case of K.G. Denim Ltd. vs. Commissioner of Central Excise, Salem [2014 (9) TMI 544 - CESTAT CHENNAI] squarely applies to the case and payment of charges for technical inspection of certification services outside India will not fall under the category of reverse charge mechanism. Taxability for the period 18.04.2006 to 31.03.2008 - Business exhibition service outside India to Food and Drug Administration of USA - Reverse charge mechanism as per Section 66A of the Finance Act, 1994 - Held that:- the Tribunal in the case of Positive Packaging Industries Ltd. vs. Commissioner of Central Excise, Raigad [2013 (4) TMI 727 - CESTAT MUMBAI] has held that it gets attracted only if it is performed in India. It is also held that that business exhibition service, if entirely performed outside India would not get covered under taxable service even under reversed charge mechanism. Therefore, by following the same, as the appellant had engaged the services of an entity for business exhibition service outside India, same is not taxable. - Decided in favour of appellant

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• 2016 (4) TMI 110
  Whether the vacant land in possession of the appellant is excluded from the ‘renting of immovable property' as defined in Section 65(90a) and from the definition of taxable service as per Section 65 (105) (zzzz) if the vacant land is given for rent for the period from 01.04.2009 to 31.03.2010 - Appellant leased/rented out the vacant land to private parties for carrying out their business activity - Held that:- the same issue of the same assessee and for the same period was decided by the Tribunal in the favour of assessee. By relying on the same case reported in [2015 (10) TMI 1736 - CESTAT MUMBAI], the vacant land in possession of the appellant is excluded from the ‘renting of immovable property' as defined in Section 65(90a) and from the definition of taxable service as per Section 65 (105) (zzzz) if the vacant land is given for rent. - Decided in favour of appellant

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• Central Excise

• 2016 (4) TMI 108
  Cross utilization of the credit on excuse duty and service tax denied - Held that:- The accounts are maintained in relation to payments of both levies. Even that does not present any difficulty once the Revenue has issued a circular to guide the officers. That circular, a copy of which is handed over to us and contained in the compilation at page 36, is dated 30 March 2010. It is on the subject of cross utilization of credit on inputs and input service. The Tribunal, therefore, has rightly come to the conclusion that there are certain restrictions on the utilization of particular type of duty and for that purpose it has relied on Rule 7 of CENVT Credit Rules. A reference to that also does not vitiate the impugned order inasmuch as Rule 7 states that input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the conditions stipulated therein. In such circumstances, the cross utilization of credit on goods and services being not covered by any restrictive provision, leave alone any prohibition or embargo, the Tribunal's order does not call for any interference. The interpretation placed on the Rule is a probable and a possible view.

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• 2016 (4) TMI 107
  Service of decisions, orders, summons, etc - Invoking provisions of Section 37C of the Central Excise Act - Held that:- Tribunal has rightly observed that the petitioner has been regularly attending the proceedings of the Tribunal when the matter was listed on 9.7.2013, 16.8.2013, 17.10.2013 and 12.12.2013 but the matter was adjourned as the case did not reach for hearing. In these circumstances, it is clear that the present case is not one where the petitioner had repeatedly sought adjournment with a view to prolong the proceedings or to avoid hearing. Tribunal has rightly invoked the provisions of Section 37C of the Central Excise Act to presume that the petitioner was duly served. However, looking to the fact that the petitioner was diligently prosecuting the appeal and appearing before the appellate Tribunal on previous occasions, therefore, we are of the view that to ensure that the matter is heard and decided on merits after giving due opportunity of hearing to all concerned and with a view to do complete justice in the matter, the petition, filed by the petitioner is allowed and the impugned order is hereby set-aside subject to the petitioner depositing costs of ₹ 5000/- before the Tribunal.

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• 2016 (4) TMI 106
  Remand orders - CENVAT credit denied - Held that:- Any order of the Court or Tribunal amenable to appeal or revision and scrutiny by a superior Court was required to contain the necessary facts involved in the case, stand taken by both the parties, the submission made in support of their respective contentions, law applicable to the issues and lastly, the reasons in support of the conclusion The order dated 27.11.2014 is set aside and the matter is remanded to the Tribunal to hear the parties afresh and pass a reasoned and speaking order.

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• 2016 (4) TMI 105
  Recovery of duty payable - Tribunal has set aside the order passed by the Commissioner on the ground of absence of recovery machinery, and that in the absence of any mechanism for recovery of the amount, the Commissioner of Central Excise ought not to have passed the order for recovery of duty payable by the respondent-Corporation - Held that:- On perusal of the material on record, we are of the view that the impugned order does not speak on the merits of the case and legal aspects. Therefore, we feel it appropriate to remand the matter to the Tribunal for fresh consideration, by keeping it open to both the parties to raise all their contentions on factual and legal aspects, available to them under law.

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• 2016 (4) TMI 104
  Penalty under the provisions of Rule 96ZQ(5)(ii) of Central Excise Rules, 1944 - non payment of Central Excise duty as determined under annual capacity of production - Held that:- We find that the issue is no more res integra as Hon’ble High Court of Gujarat in the case of Krishna Processors vs. Union of India 2012 (2012 (11) TMI 954 - GUJARAT HIGH COURT ) struck down the provisions of Rule 96ZQ as ultra vires. Hon’ble High Court of Bombay in the case of Commissioner of Central Excise vs. Valson Dyeing Bleaching & Printing Works (2010 (9) TMI 338 - BOMBAY HIGH COURT ) has also held that once a particular rule is struck down as ultra vires nothing survives. Finally, Hon’ble Supreme Court in the case of Commissioner of Central Excise vs. Angadpal Industrial Pvt. Ltd. [2015 (10) TMI 1844 - SUPREME COURT ] has clearly held that vires of Rule 96ZQ was contested and if upheld nothing survives in the matter. - Decided against revenue

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• 2016 (4) TMI 103
  Cenvat credit disallowed - recovery of interest on the said amount and penalty of an equivalent amount - denial of claim as the appellant had taken cenvat credit of service tax paid on Renting of Immovable Property Service, Insurance Services, Construction Service, Travel Agent Service, Interior Decorator Service and Architect Service but the same did not qualify to be input services in respect of the appellant - Held that:- On cenvat credit in respect of renting of immovable property the adjudicating authority has not dealt with the contention of the appellant that the branch offices which were taken on rent were used not only for procuring orders and delivery of the goods but also for provision of erection commissioning and installation service and repair and maintenance service. Denial of cenvat credit by the adjudicating authority is clearly untenable specially when the other ground pleaded by the appellant that the branch offices were also used for provision of ECIS and repair and maintenance service has not been adverted to by it. Thus, having regard to the nature of the use for which these branch offices were taken on rent, we are of the view that the said service clearly qualifies to be covered within the scope of input service as defined in Rule 2(l) of the Cenvat Credit Rules, 2004. Regarding the insurance services perusal of the nature of insurance policies and the risks covered by them make it obvious that these were used in or in relation to the manufacture of the goods and their clearance upto to the place of removal except the insurance policy which insured the goods during their journey from the place of removal onwards. As regards the place of removal, it is no longer res-integra that in respect of goods exported, the port of export is the place of removal The definition of input service clearly states that input services inter alia means any service used by the manufacturer in or in relation to the manufacture of final products and clearance of final products upto the place of removal. Thus the insurance policies except to the extent they cover journey of goods from the place of removal onwards would be covered within the scope of input service. The input credit in respect of construction service in the case of NTF (India) Pvt Ltd. vs. CCE - (2013 (6) TMI 618 - CESTAT NEW DELHI ) it was held that construction of office rooms in factory premises relates to setting up, modernization, renovation or repairs of a factory premises and hence specifically covered within the scope of Rule 2(l) of Cenvat Credit Rules, 2004. In the light of these judicial precedents, the finding of the adjudicating authority with regard to denial of cenvat credit on construction service is unsustainable. In the case of Travel Agent Service such travel agent service is clearly covered under the scope of input service for the purpose of cenvat credit. See Goodluck Steel Tubes Ltd. vs. CCE (2014 (1) TMI 37 - CESTAT NEW DELHI ) As regards Interior Decorator and Architect Service ervices relating to interior decoration of sales and branch offices and show rooms clearly fall under the definition of input service being, inter alia in the nature of modernisation/ renovation or repair of factory or premises of provider of output service or an office relating to such factory or premises, and credit in respect of such services was allowed by CESTAT in the case of CCE, Bhavanagar vs. Nirma Ltd.(2010 (6) TMI 315 - CESTAT, AHMEDABAD ).

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• 2016 (4) TMI 102
  Wrongly availed cenvat credit on inputs/parts under Rule 14 of CCR - denial of credit on MS Channels, MS Angles, MS Plates etc. after the amendment of definition of Rule 2(k) of Cenvat Credit Rules, 2004 - demand appropriated with interest and imposed equivalent penalty - Held that:- Both sides have not considered various decisions of the Hon'ble Supreme Court and various High Court pronouncements on the issue of credit availed on MS Angles, channels etc. in the cases Commissioner Vs. Jawahar Mills Ltd. (2001 (7) TMI 118 - SUPREME COURT OF INDIA ), CCE, Tiruchirappalli Vs. India Cements Ltd. ( 2013 (1) TMI 5 - Madras High Court ) Accordingly, the appeal is remanded to the adjudicating authority who shall hear the case afresh after examining the ratio laid down in the above judgments and pass appropriate order.

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• 2016 (4) TMI 101
  Denial of cenvat credit - inputs and capital goods sent to job-worker for further processing and the inputs sent directly to job-workers for further processing - Held that:- As regards inputs and capital goods sent to job-worker and not received within 180 days, find that the learned counsel was correct in bringing to notice that the appellant had prepared challans for movement of inputs, partially processing inputs and capital goods as provided under Rule 4(5)(a) of the Cenvat Credit Rules. The said challans indicate clearly that the goods were sent to Himachal Pradesh unit and received back by the appellant within 180 days as mandated in the said rule. These documents were produced before the first appellate authority, as well as the adjudicating authority but the adjudicating authority did not take cognizance of the said documents. Tribunal being the last fact finding authority, after considering the documents which are produced thus hold that they indicate that the inputs and capital goods were received back within 180 days from the clearance to the job-worker. Provisions of Rule 4(5)(a) of Cenvat Credit Rules are fully satisfied and the impugned order to that extent is correct. As regards the inputs sent directly to job-worker for manufacture of final products, on a careful reading of the proviso to the said Rule 4(5)(a)(1) it contemplates that the appellant has to evidence that the inputs delivered directly to the job-worker are received back from the job-worker and accounted in his records. On a specific query from the bench, the learned counsel was unable to bring on record or show from the record that the respondents had prepared any challan for movement of inputs under the provisions of Rule 4(5)(a) of Cenvat Credit Rules, for the goods delivered directly nor is he able to show from records that the inputs delivered directly to the job-workers premises were received back within 180 days. Thus in the absence of any evidence to support the case, it has to be held that the said cenvat credit availed on such inputs delivered directly is incorrect and needs to be demanded from the respondent. Allow the appeal of the Revenue on this issue by upholding the order-in-original and confirming the demand of ₹ 5,20,872/- + education cess of ₹ 1,400/- along with interest. Penalty imposed on the respondent are unwarranted

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• CST, VAT & Sales Tax

• 2016 (4) TMI 95
  Refund claim of amount collected towards compounding fee - Detain of mix gold ornaments and released on collecting compounding fee - Proper due process of law not followed - Second respondent neither issued any notice nor passed any compounding order before collecting the compounding fee of ₹ 3,05,802/- from the petitioner for release of the goods - Held that:- in view of the ground raised by petitioner that it would suffice, if a copy of the notice relating to compounding fee is served on the petitioner, so as to enable them to approach the competent authority for appropriate relief, the petitioner is directed to submit a representation for furnishing a copy of the compounding notice to the second respondent. On filing of such representation, the second respondent shall furnish a copy of the compounding notice as well as the letter submitted by the petitioner immediately. On receipt of the same, the petitioner is permitted to file revision before the authority concerned. On filing of such revision, the authority concerned shall entertain the same without raising any issue relating to limitation and thereafter consider and pass appropriate orders on merits and in accordance with law, after affording due opportunity of personal hearing to the petitioner. Since the place of business of the petitioner is at Gujarat, representation shall be made by the counsel on record for the petitioner, on which basis, the copy of the compounding notice shall be furnished to him. - Petition disposed of

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• 2016 (4) TMI 94
  Inclusion of processing and transportation charges received by ONGC as part of the sale price of LPG sold by ONGC to GAIL - ONGC had not raised the said charges against GAIL or the ONGC had not paid any charges to the ONGC - Before the delivery of goods, the ONGC had charged and the ONGC is in receipt of the said charges - Held that:- merely because the ONGC had not received the transportation and processing charges from GAIL but had received from Joint Ventures, such transportation and processing charges cannot be excluded in the 'sale price'. Considering the definition of 'sale price' contained in section 2(29) such transportation and processing charges received by the ONGC before the actual delivery thereof it has to be included in the 'sale price' as per section 2(29). In support of the decision of Division Bench in the case of ONGC vs. Commissioner of Sales Tax, the learned Tribunal has committed a grave error in holding that processing and transportation charges not received by the respondent from Gas Authority of India Limited (GAIL) cannot be included as part of the sale price of the gas sold by the respondent to GAIL. Levy of tax - Entitlement for exemption notifications issued under Section 49(2) of the Act, 1969 as well as under section 5(2) of the VAT Act, 2003 - Sale of kerosene and LPG by the ONGC to various OMCs and inter-State sale of LPG in bulk sold outside the State - The relevant entries in respect of the exemption claimed under the VAT Act, 2003 are entry Nos. 53 and 69 divided into two parts 1) for the period between 11.06.2008 to 02.10.2008 and 2) for the period between 03.10.2008 onwards and with respect to the Central Sales Tax is entry No. 55. As per the exemption notification issued under section 49(2) of the Act, 1969 and so long as the Act, 1969 was in force, on sale of kerosene for domestic use sold for Public Distribution System the whole of the sales tax was exempted and on sale of LPG (domestic) no tax exceeding the rate of 14% can be levied - Held that:- the entries in question of the Schedule to the respective exemption notifications issued under the Act, 1969 and VAT Act, 2003 are required to be interpreted. Considering the relevant entries and the wordings used in the relevant entries more particularly Entry Nos.33, 70 and 173 of the Act, 1969 and VAT Act, 2003, as the case may be, and considering the law laid down by the Hon'ble Supreme Court in catena of decisions, as the wordings used in the respective exemption entries are very clear and therefore, required to be interpreted literally and as they are and there is no scope for either liberal and/or purposive interpretation. Now the relevant entry in respect of sales of kerosene under the exemption notification issued under section 49(2) of the Act, 1969 as Entry No.33. It provides that in respect of sales of kerosene for domestic use sold for public distribution system there shall be exemption from payment of whole of the sales tax. Therefore, in respect of sale of kerosene by the ONGC to various OMCs for domestic use for public distribution system, the ONGC shall be entitled to exemption from payment of sales tax under the Act, 1969 as per Entry No.33 and not liable to pay tax. Now for the exemption claimed by the ONGC in respect of the sale of kerosene by ONGC to various OMCs from payment of VAT under the VAT Act, 2003 claimed as per entry No.53, there is a vast difference in the wordings in the said Entry No.53 under the VAT Act, 2003 and the relevant entry No.33 under the Act, 1969. Entry No.53 provides that in respect of kerosene sold through the public distribution system there shall be exemption from payment of whole of the tax under the VAT Act, 2003. As the kerosene which is sold by ONGC to various OMCs 'for public distribution' and not 'through public distribution system' which is the condition for the grant of exemption and therefore, the ONGC shall not be entitled to the exemption from payment of VAT Act, 2003 and liable to pay tax. Now, for exemption claimed in respect of sales of LPG by ONGC to various OMCs, from payment of sales under the Act, 1969 as per Entry No.70 or in the alternative Entry No.173, the ONGC shall be entitled to the exemption from payment of sales tax as per Entry No.70 read with Entry No.173 to the extent to which the amount of sale tax exceeds 14 ps in a rupee. For exemption claimed by ONGC in respect of the sales of LPG, by ONGC to various OMCs from payment of value added tax under the VAT Act, 2003 as per Entry No.69 of the exemption notification issued under section 5(2) of the VAT Act, 2003, the ONGC shall be entitled to the exemption from payment of the whole of the tax under the VAT Act, 2003, pre 02.10.2008 which was prevailing at the relevant time. So far as post 03.10.2008 the entry amended and as per amended entry, the exemption is provided for the sales of LPG for domestic use by the consumers of the State which is not the present case, therefore, the ONGC shall not be entitled to the exemption from payment of tax under the VAT Act, 2003. Even the ONGC is not entitled to exemption from tax on the inter-State sales of LPG, effected by the ONGC from the Stat of Gujarat to other States as the exemption is available on inter-State sales of LPG for domestic use by the consumers of the State only and liable to pay VAT and is not exempt from more of the tax as per Entry No.16 of the Schedule to the Exemption Notification dated 31.03.2006, as amended and issued under section 5(2) of the GVAT Act. Levy of penalty - Section 45(2)(c) of the Act, 1969 - Held that:- As per sub-section (2) of section 45 of the Act, 1969, the penalty is leviable if it appears to the Commissioner, a dealer has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax. In the present case, it cannot be said that the ONGC has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax. Under the circumstances, there is no justification in levying the penalty under sub-section (2)(c) of section 45 of the Act, 1969. Levy of penalty - Section 45(6) of the Act, 1969 - Held that:- the penalty leviable under the said provision is as such a statutory penalty and as such there is no discretion vested in the Commissioner whether to levy the penalty leviable under sub-section (6) of section 45 of the Act, 1969 or not. Sub-section (5) of section 45 provides that in the case of a dealer the amount of tax assessed for any period under sections 41 to 50 or reassessed for any period under section 45 exceeds the amount of tax already paid by the dealer in respect of such period by more than 25% of the amount of tax so paid, dealer shall be deemed to have paid the tax to the extent of difference between amount so assessed or reassessed as aforesaid and the amount paid. Once considering sub-section (5) of section 45 of the Act, 1969, a dealer is deemed to have failed to pay the tax to the extent mentioned in sub-section (5), that shall be levied on such a dealer not exceeding a penalty ½ times the difference referred to in sub-section (5). Under the circumstances, to the aforesaid extent and on the difference of tax, as per sub-section (5) of section 45, the respondent ONGC - dealer is liable to pay the penalty as mentioned under sub-section (6) of section 45. Levy of penalty - Section 34(12) of the VAT Act read with section 9(2a) of the Central Sales Tax Act, 1956 - Held that:- the ONGC - dealer is liable to pay the penalty on the difference of the amount of tax liability in eventuality of mentioned sub-section (12) of section 34 of the VAT Act. - Appeal disposed of

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• 2016 (4) TMI 93
  Inclusion of works contract within the purview of A.P. VAT Act - Execution of works contract outside the state - Entire works contract executed in the State of Tamil Nadu where an assessment could be made to bring the said transaction within the purview of the A. P. VAT Act - Petitioner was not registered in the State of Tamil Nadu as on the date of entering into the contract - Held that:- While the assessing officer passed the assessment order justified bringing of the transaction into the fold of A. P. VAT Act and the assessment order does not indicate what are the goods which have been transported from Visakhapatnam and at what point of time and whether they relate to the execution of contract or supply of local goods or supply of imported goods. Further, the assessing officer also erred in stating that the contract was entered into in Visakhapatnam as the very documents indicate that the said three contracts were entered into at Mumbai. The statement of the assessing officer would be right with respect to the situs of the contract only when the goods were available at the time of the contract and the same does not hold good when the goods are to be supplied in later point of time. Therefore, the assessment so far as the bringing transaction relating to M/s. Tuticorin Coal Terminal Private Limited is concerned, is liable to be set aside. - Decided in favour of petitioner

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• 2016 (4) TMI 92
  Power and jurisdiction of Commissioner to amend eligibility certificate - Section 4A was introduced in order to promote industrialisation in the State of Uttar Pradesh by introducing a scheme by granting certain subsidies/exemptions/concessions in the rate of tax - A typographical error in the eligibility certificate with regard to an item known as "printing of plastic material" - Held that:- Section 10(2) of the Act provides that where any person is aggrieved by an order granting or refusing to grant a eligibility certificate under section 4A could file an appeal under section 10(2) of the Act before the Tribunal. This provision clearly indicates that an assessee, if aggrieved by the grant of an eligibility certificate could file an appeal and that the Tribunal was competent to modify the eligibility certificate, namely, that if the eligibility certificate contained some errors, the same could be rectified in an appeal by the Tribunal. If the Tribunal was competent to amend the eligibility certificate, then there is no reason why clerical and arithmetical errors, which are apparent on the face of the record for which no debate exists could not be corrected by the Commissioner under section 4A(3) of the Act agreeing with the decision of the learned single Judge in the case of Mansarovar Bottling Company [999 (7) TMI 635 - ALLAHABAD HIGH COURT(All)]. - Decided in favour of petitioner

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• Indian Laws

• 2016 (4) TMI 109
  Permissibility of a liquor vend in a “Convenient Shopping Centre” - Held that:- As decided in Residents Welfare Association (Regd) Vs. Govt. of NCT of Delhi & Ors [.2015 (5) TMI 438 - DELHI HIGH COURT] no illegality in the grant of license for liquor vends at the subject sites. All that we can do is to direct that in accordance with the minutes of the 11th meeting of the Advisory Group of the DDA held on 23rd August, 2013, a suitable framework be formulated so as to curb the nuisance associated with consumption of liquor around CSCs in residential neighbourhood. The same be done preferably within a period of four months of today.

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