TMI Tax Updates - e-Newsletter
April 6, 2015

Case Laws in this Newsletter:

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

TMI Short Notes

• Service Tax:

  Whether the penalty under section 78 of the Finance Act, 1994 can be reduced below the minimum limit prescribed by invoking section 80 of the Finance Act, 1994?

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• Service Tax:

  Whether the penalty under Section 76 of the Finance Act, 1994 can be reduced below the limit prescribed by the section?

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Articles

• Key Takeaways of the Foreign Trade Policy, 2015-2020
• MOBILE INSURANCE AND ANTI THEFT “MOBILE APP” - VAT OR SERVICE TAX

News

• Summary of ICDS -IV- Revenue Recognition issued by CBDT

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Notifications

Income Tax

• 77/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Bharti Foundation, New Delhi

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• 76/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Hinduja Foundation, Mumbai

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• 75/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Indian Red Cross Society, Tamilnadu

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• 74/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Association for Advancement and Rehabilitation of Handicapped (AAROH), New Delhi

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• 72/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Sri Chaitanya Seva Trust, Maharashtra

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• 71/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –DR. Manohar Dole Medical Foundation, Maharashtra

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• 70/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Seva Mandal Meghraj, Gujarat

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• 69/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Disha Charitable Trust, Gujarat

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• 67/2015 - dated 11-2-2015 - IT
  U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Notified Eligible Projects or Schemes - Society for Education, Welfare and Action-Rural , Bharuch

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Highlights / Catch Notes

Income Tax

• Disallowance u/s.40(a)(ia) due to no TDS - View taken by the Special Bench of this Tribunal in Merilyn Shipping & Transport stands rejected by the judgement of Hon’ble Gujarat High Court in the case of CIT vs. Sikandar Khan N.Tunvar - disallowance confirmed - AT
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• Accrual of interest - receivable or not actually received - unless and until an assessee shows that a loan or advance had become a non-performing asset, there can be no question of applying the norms set out for such non-performing asset. - AT
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• Accrual of income - Work relate to the installation and erection of the equipment has been completed in subsequent years as the time taken varies between 1 month to 21 months. Therefore, the accrual of income earned happened only in subsequent years - AT
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• Depreciation - if the undertaking has been taken on slump sale, no prudent businessman would leave the undertaking remain idle for so many months, when it is capable of running of its own without any interruption. - AT
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• Existence of HUF - genuineness - The income-tax return of HUF could not be filed due to income being below the taxable limit - the certificate of Post Master with regard to the maturity of the KVP/NSC was only in support of the already existing evidences which prove the existence of HUF and source of the investment - AT
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• Taxation rights for the salary earned for work done in the USA - India USA DTAA - the situs of accrual is the situs of services rendered which in the instant case is clearly in the USA and the amounts are also received in the USA. Hence, it cannot form part of income taxable in India as per Section 5 - AT
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Customs

• Interest on refund claim - Though, the refund amount was paid to the claimant-appellant consequent upon dismissal of SLP filed by the revenue, but the date of computation of the interest amount will commence from the date of cessation of three months of the refund application - AT
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• Denial of refund claim - Unjust enrichment - Even assuming that the amount has been collected without the authority of law, still the doctrine of unjust enrichment is applicable for its refund to the applicant - AT
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Service Tax

• Denial of refund claim - when the appellants themselves had discharged the tax liability, there cannot be any refund of the amount as the issue is considered as 'closed' by the revenue authorities. - AT
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Central Excise

• Remission of duty - Loss of goods in fire - Chief Fire Officer gave opinion that it may be due to mishandling of workforce of assessee i.e. due to careless smoking of biris and cigarettes - assessee failed to prove what steps have been taken to prevent fire - Benefit of remission denied - HC
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• Valuation of goods - sale from depot - the value of the goods under assessment shall be the transaction value of the goods sold from the depot at the time nearest to the time of removal - AT
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• Valuation of goods - the amount charged from the customers as carrying cost of the extra raw materia linventory would be includible in the assessable value - AT
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VAT

• Classification of goods - the goods sold by the assessee, namely, router, is a computer peripheral, falls under Serial No.22, Entry 68 of Part B of I Schedule of TNVAT Act, 2006 - HC
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Case Laws:

• Income Tax

• 2015 (4) TMI 175
  Retrospectivity of amendment brought in section 40(a)(ia) - no disallowance under section 40(a)(ia) required to be made as held by CIT(A) - belated deposit of TDS - Held that:- Similar issue was considered by this Tribunal relying on CIT vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] wherein held that the impugned amendment to section 40(a)(ia) permits remittance of TDS to the Central Government account on or before the due date of filing return of income u/s. 139(1) of the Act is retrospective in nature. Considering the consistent view taken by the Tribunal, we are inclined to hold that when the assessee, though deducted TDS before 31st March, 2005, relevant to A.Y. 2005-06, relating to expenditure claimed for the assessment year under consideration and paid the said amount to the Central Government before the due date of filing the return of income for A.Y. 2005-06, that expenditure cannot be disallowed u/s. 40(a)(ia) of the Act. If it is so, the CIT(A) is justified in allowing claim of the assessee. - Decided in favour of assessee.

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• 2015 (4) TMI 174
  Disallowance of leave encashment - Whether on facts and circumstances of the case, the CIT(A) ought to have followed the decision of the jurisdictional High Court in the case of CIT vs. Hindustan Latex Ltd. [2012 (6) TMI 713 - KERALA HIGH COURT ] and deleted the disallowance of provision for leave encashment amounting to ₹ 24.37 crores - Held that:- issue is fully covered by the judgment of the Hon’ble Kerala High Court in the case of the South Indian Bank Ltd. vs. CIT reported in [2014 (2) TMI 1080 - KERALA HIGH COURT] wherein the Apex Court held that it pertains to the provision made for leave encashment and the disallowance was u/s. 43B(f). Therefore, the said disallowance is justified. In view of this, we are inclined to decide the issue against the assessee. Whether on facts and circumstances of the case, the CIT(A) erred in confirming the action of the Assessing officer in assessing interest/commission received upfront on inland/export bills purchased/discounted/LCs opened - Held that:- assessee has transferred an amount of ₹ 27.64 crores towards other liabilities out of the interest received upfront on inland bills and export bills purchased/discounted. Though initially, the full amount received is credited to the P&L account as it was received by the assessee, at the time of preparing final accounts, proportionate interest relating to the remaining period of maturity of the bills was transferred from the P&L account to unexpired interest/discount/commission in the balance sheet. According to the Ld. AR, this amount is not accrued to the assessee and since the assessee can charge interest only on the borrower, such income is apportioned on the basis of period of time. In our opinion, when bills are discounted, the transaction is completed and income is accrued to the assessee and there is no question of postponement of recognition of income. Hence, in our opinion, the lower authorities are justified in treating the amount accrued as income of the assessee - Decided against assessee.

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• 2015 (4) TMI 152
  Revision u/s 263 - AO has allowed deduction of ₹ 809.86 lakhs under the head “salaries, wages and allowances” for “provision” made pending finalisation of Pay Revision of employees which had become due from 01.01.1997 and this liability which accrues on account of pay revision, is neither ascertainable nor had been approved during the P.Y. relevant to the A.Y. 1999-2000 - Held that:- Applying the propositions laid down in the binding judgement of CIT vs. DLF Ltd. (2012 (9) TMI 626 - DELHI HIGH COURT) considered the judgement of Malabar Industrial Co. [2000 (2) TMI 10 - SUPREME Court] there is no element of unsustainability in the order of the AO, as far as the allowing of the deduction of the provision made in salaries for impending pay revision is concerned. Thus the invocation of jurisdiction u/s 263 of the Act by the Ld.CIT is bad in law. - Decided in favour of assessee.

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• 2015 (4) TMI 151
  Share transactions - Capital gains v/s business income - CIT(A) allowed assessee’s claim of long term capital gains and partly allowed the claim of assessee regarding short term capital gains and confirmed the balance of short term capital gains as business income - Held that:- In the present appeal, we note that the assessee made investment in shares with intention to earn dividend income on appreciation of price of shares. Therefore, it cannot be said that the assessee was doing business. If the conclusion drawn in the impugned order, observations made from the assessment order, assertions made by respective counsel and the material available on record are kept in juxtaposition and analyzed, we find that the assessee had been consistently investing in shares and income arising from delivery based transaction of sale and purchase of shares was correctly shown as capital gains i.e. LTCG and STCG depending upon period of holding. In view of the above discussion, we do not find any merit for treating the capital gains offered by the assessee as business income. - Decided in favour of assessee.

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• 2015 (4) TMI 150
  Disallowance of expenditure for purchase of license for windows - Held that:- The expenditure are incurred for the purchase of application software and therefore are revenue in nature. Windows being application software cannot be treated as capital assets and therefore any license fee paid for the purchase of windows has to be allowed as revenue expenditure as the software has to be updated every year. We accordingly set aside the findings of the ld.CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee. Disallowance of prior period expenses - Held that:- Since fraud and financial irregularities were detected during the year under consideration. The claim of such financial irregularities has to be allowed during the year under consideration itself. We find that the complete details of transactions were submitted by the assessee before the AO. The AO did not care to verify the same. The assessment order pertains to assessment year 2005-06 and we are entering in the assessment year 2015-16. Ten years have since been lapsed, it would be gross injustice to the assessee, if we restore this issue to the file of AO for verification of the details. Considering the details and judicial decisions, we set aside the findings of the ld. CIT(A) and direct the AO to delete the addition of Rs. ₹ 2,66,59,853/- - Decided in favour of assessee. Disallowance of foreign exchange fluctuation treated it as capital loss - Held that:- The ratio laid down by the Hon’ble Supreme Court in the case of Sutlej Cotton Mills Ltd (1978 (9) TMI 1 - SUPREME Court) squarely apply on the facts of the present case, wherein held that “Where profit or loss arises to an assessee on account of appreciation or depreciation in value of foreign currency held by him, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if foreign currency is held by assessee on revenue account or as a trading asset or as part of circulating capital embarked in business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature.” Thus we direct the AO to delete the addition - Decided in favour of assessee. Addition under section 40(a)(ia) - non deduction of tds - CIT(A) deleted the addition - Held that:- CIT(A) has very rightly appreciated the documentary evidence and the details submitted by the assessee and found that most of the expenses were reimbursement and in some of the cases the assessee has obtained no deduction certificate from the respective AO and wherever the TDS was applicable, the assessee has deducted the same.. We have also considered the documentary evidence and after perusing the details as submitted by the parties concerned, we do not find any reason to interfere with the findings of the ld. CIT(A). - Decided against revenue. Addition of capital expenditure - CIT(A) deleted the addition - Held that:- The assessee has incurred expenditure on repair and maintenance and no new assets has been brought in to existence. As no distinguishing facts have been brought on record by the ld.DR, we do not find it necessary to interfere with the order of ld.CIT(A). - Decided against revenue. Disallowance of advertisement expenditure - CIT(A) deleted the disallowance - Held that:- It is an undisputed fact that the advertisement expenses have been incurred by the NPIL. It is also an undisputed fact that the assessee has simply credited it to the account of NPIL as reimbursement of the expenditure. It is further found that NPIL has made TDS on the advertisement expenses. All that being the facts of the matter, we do not find any reason to interfere with the finding of the ld CIT(A). - Decided against revenue. Expenditures paid to various vendors without TDS - CIT(A) deleted the addition - Held that:- The assessee once again explained the nature of transaction and the misappropriation done by the employee of the assessee. After considering the facts and the submissions, the ld. CIT(A) was of the firm belief that loss is required to be allowed in the year in which it was detected. The ld. CIT(A) correctly deleted the entire addition drawing support from the decision of Associated Banking Corporation Of India Limited (1964 (10) TMI 7 - SUPREME Court) and Badridas Daga (1958 (4) TMI 2 - SUPREME Court) - Decided against revenue.

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• 2015 (4) TMI 149
  Share transaction - Short Term Capital Gain v/s Income from Business - whether period of holding of shares is the basic yardstick for determination of either investment or dealing in shares? - Held that:- As held by the Hon’ble Apex Court in the case of Associated Industrial Development Co.Ltd. (1971 (9) TMI 3 - SUPREME Court), whether a particular holding is by way of investment or formed part of stock in trade is a matter which is within the knowledge of the assessee and it is for the assessee to produce evidence from his records as to whether he maintained any distinction between shares which were hold by him as investments and those hold as stock in trade. In this case the assessee has not produced any such evidence. The fact remains that the assesee has purchased and sold these shares within a period of one week’s time and gained ₹ 66,20,920/-. Though purchased in previous year they were not accounted for or classified as investment. This coupled with the fact that the entire purchase has been sold shows that the assessee has never intended to keep these shares as investment. Commissioner of Income- Tax (Appeals) was justified in confirming that assessment of Short Term Capital Gain as Income from Business. - Decided against assessee.

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• 2015 (4) TMI 148
  Disallowance u/s.40(a)(ia) due to no TDS - no moneys outstanding at the end of the year - Non deduction of TDS on payment actually made to the sub-contractors - civil construction - Held that:- Issue regarding inapplicability of section 40(a)(ia) in respect of amounts paid during the year stands concluded against the assessee in the case of CIT vs. Sikandar Khan N. Tunvar [2013 (5) TMI 457 - GUJARAT HIGH COURT] and CIT vs. Crescent Export Syndicate[2013 (5) TMI 510 - CALCUTTA HIGH COURT]. View taken by the Special Bench of this Tribunal in Merilyn Shipping & Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) stands rejected by the judgement of Hon’ble Gujarat High Court in the case of CIT vs. Sikandar Khan N.Tunvar(supra) and CIT vs. Crescent Export Syndicate (supra). In this view of the matter and bearing in mind the fact that neither there is any decision of any of Hon’ble High Court in favour of the assessee, on this issue, nor we do not have the benefit of any guidance of Hon’ble jurisdictional High Court on this issue, we are bound by the specific views expressed by Hon’ble Gujarat High Court and by the Hon’ble Calcutta High Court rather than a long drawn inference from the judgement of Hon’ble Allahabad High Court in the case of CIT vs. Vector Shipping Services Pvt. Ltd. (2013 (7) TMI 622 - ALLAHABAD HIGH COURT) . - Decided against assessee. Disallowances of certain expenses - Held that:- The hyper technical approach adopted by the A.O. is thus does not appeal to us. We delete the disallowance of ₹ 25,400/- in respect of repairs and maintenance expenses, in respect of prepaid insurance of vehicle and machinery, in respect of printing and stationery expenses. As for the disallowance of ₹ 46,700/- which is made on account of expenses being personal in nature, we see no reasons to interfere in the same. Accordingly, to that extent disallowances are confirmed. - Decided partly in favour of assessee.

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• 2015 (4) TMI 147
  Transfer pricing adjustment - selection of comparable - Held that:- Avani Cimcon Technologies Ltd. cannot be treated as comparable as this company is into product development. As segmental details of operating income of software development services and sale of software products are not available, it could not be ascertained whether the profit ratio of this company can be taken into consideration for comparing with the assessee. Celestial Labs Ltd. is not comparable to the assessee as the functions are not similar. Further, on a perusal of the order of the DRP, it is to be seen that two of the members of the panel on considering the fact that in many other cases Celestial Labs Ltd., was not treated as comparable on the ground that it is not involved in development of software services have differed from the final order passed by the panel. Infosys Technologies Ltd. and Wipro Ltd. cannot be considered as comparables to the assessee as they are industrial giants not only on account of quantum of revenue earned by them but due to various other factors like reputation, brand value, goodwill etc. Mega Soft Ltd.cannot as it is predominantly a product development company and the margin from software development services is only 23.11% we direct Assessing Officer/TPO to consider only segmental margin of this company for the relevant AY for computing ALP. Thus direct the Assessing Officer/TPO to compute the ALP afresh Exemption u/s 10A – manner of computation - Communication and freight expenses reduced from the export turnover only while computing deduction u/s 10A of the Act - Held that:- Following the decision of CIT Vs.Gemplus Jewellery, [2010 (6) TMI 65 - BOMBAY HIGH COURT] and ITO Vs Saksoft Ltd (32009 (3) TMI 243 - ITAT MADRAS-D) we direct the AO to exclude the communication expenses from export turnover as well as total turnover while computing deduction u/s 10A of the Act. Appeal of the assessee is partly allowed.

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• 2015 (4) TMI 146
  Dismissal of appeal - CIT(A) relied on case of CIT vs Multiplan (India) Pvt. Ltd [1991 (5) TMI 120 - ITAT DELHI-D ] and Estate of Late Tukojirao Holkar vs. CWT [1996 (3) TMI 92 - MADHYA PRADESH High Court] - Held that:- The procedure to be followed by the CIT(A) while disposing the appeals is set out in section 250 of the Income Tax Act, 1961. Dismissal of the appeal relying upon the decision of Multi Plan and Late Tukojirao Holkar vs. CWT (Supra) does not meet the statutory requirements. The impugned order does not fulfill the requirements of the Act. Notwithstanding the fact that the assessee was seeking adjournments even in those facts and circumstances the statutory duty caste upon the First Appellate Authority cannot be abdicated as the said authority is mandatorily required to decide the appeal as directed by the Statute. The impugned order accordingly is set aside and the issue is restored back to the file of the CIT(A) with the direction to decide the appeal in accordance with law. -Decided in favour of assessee for statistical purposes.

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• 2015 (4) TMI 145
  Disallowing interest paid having no nexus with the interest income earned - funds borrowed from individual lenders have been advanced to M/s. SSAPL and has earned interest income on funds so borrowed - Held that:- It is an undisputed fact that the interest income earned by the assessee is to be assessed as "income from other sources". If any expenditure has been incurred for earning of such income, the same is to be allowed as deduction under section 57(iii), while computing the taxable income. From the proximity of the dates, it can be seen that there is a direct nexus between the loan taken and loan given. Similarly, the assessee has received sum of ₹ 15 lakhs on 27th March 2008 and 28th March 2008, from three persons and the same have been given to the company on 28th March 2008 and 2nd April 2008. At that time also, a sum of ₹ 12,90,000, which was debited by way of autosweep by the bank and the same has been remitted back at the time of clearance of the cheque. Thus, the contention of the learned counsel before us appears to be factually correct and the findings of the learned Commissioner (Appeals) as noted above, gets vitiated from the facts and material placed on record. Thus, we set aside the impugned order passed by the learned Commissioner (Appeals) and hold that there is a direct nexus between the loan received and the loan given and, therefore, the interest paid by the assessee has to be allowed from the interest income as there is a direct nexus. - Decided in favour of assessee. Disallowance of bank charges and profession fees paid - Held that:- The amount of bank charges for a sum of ₹ 280, is also directly relatable to earning of the income from other sources. However, regarding professional fees of ₹ 3,750, nothing has been placed before us on record as to what was the nature of such professional fees, as it has neither been mentioned by the Assessing Officer / learned CIT(A) nor by the assessee. In the absence of any such explanation or record, the disallowance with regard to professional fees of ₹ 3,750, stands confirmed. In the result, the disallowance of interest of ₹ 4,48,640, and bank charges of ₹ 820, stands deleted and the claim of professional fees of ₹ 3,750 stands confirmed - Decided partly in favour of assessee.

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• 2015 (4) TMI 144
  Penalty u/s 271D - cash deposits with in contravention of Section 269SS - Held that:- No shred of doubt about the genuineness of the transactions and their disclosure in the books of account and returns of both the assessee who happen to be husband and wife, carrying on the business as sister concerns. Section 271D read with Section 269SS was introduced by the legislature to discourage the menace of black money. Since these transactions are genuine, this element of black money is totally ruled out. Under these circumstances, we are of the view that the transactions being genuine and the assessee having offered reasonable explanation justifying these cash transactions, the impugned penalty u/s 271D is not leviable. See Raj Kumar Sharma (2007 (4) TMI 218 - RAJASTHAN High Court ) and Saini Medical Store (2005 (2) TMI 72 - PUNJAB AND HARYANA High Court)and Sunil Kumar Goel (2009 (3) TMI 131 - PUNJAB AND HARYANA HIGH COURT). Thus penalty is deleted. - Decided in favour of assessee.

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• 2015 (4) TMI 143
  Disallowance of Interest - CIT(A) deleted the addition - assessee filed its return of income in the status of AOP - Held that:- As decided in CIT vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY], if there are mixed fund then presumption should be there that any investment or withdrawal is out of interest free own funds. In the present case, it is seen that on 01/04/2007 there was net credit balance of members of AOP to the extent of ₹ 313.98 lacs and as on 31/03/2008 also, there is net credit balance of all the members taken together to the extent of 366.27 lac. Even the net transaction during the year is also in positive to the extent of ₹ 292.66 lacs. Thus presumption has to be there that even excess withdrawal by some members was out of credit balance of other members in their capital. Under these facts, no disallowance out of interest expenditure is justified. - Decided against revenue. Disallowance of Freight Inward & Outward expenses - CIT(A) restricted addition - Held that:- From the comparative figures of sales and purchase of the present year and preceding year, it is seen that there is decline in both sales and purchases. It is also seen that there is decline in the expenses incurred on account of freight outward but there is increase in the expenses for freight inward to the extent of ₹ 4.17 lac as against ₹ 2.45 lac in the preceding year. The Assessing Officer has noted that the assessee could not explain the increase. These expenses are not supported by proper bills and vouchers also. Thus disallowance made by the Assessing Officer at ₹ 1,00,000/- out of freight inward expenses is reasonable and, therefore, CIT(A) was not justified in reducing the same to ₹ 50,000/-. - Decided in favour of revenue Shop repair & maintenance expense - Held that:- in the absence of any specific finding of the Assessing Officer pointing out some expenses of capital nature or non business nature, such ad hoc disallowance is not justified. The CIT(A) has also upheld the disallowance of ₹ 4,00,000/- merely on the basis that 20 times increase in repair & maintenance is not properly explained by the assessee before the Assessing Officer but we are not satisfied with this logic of CIT(A) because the increase or decrease in repair expenses is not dependent on turnover. For wear and tear in so many years, many a times, repairing takes place in one year and the expenses may be like this i.e. 20 times of the preceding year. In the absence of any specific finding to show that any expenditure was of capital nature or of non business nature, such ad hoc disallowance is not justified. Therefore, we delete the entire disallowance out of shop repair & maintenance expenses. -Decided in favour of assessee.

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• 2015 (4) TMI 142
  Accrual of interest - receivable or not actually received - CIT(A) deleted the addition - Held that:- It is an admitted position that the loans were advanced based on Promissory Note. Interest can be considered as overdue only when there is an agreement between the parties wherein a stipulation is there with regard to the date of payment of interest. In the absence of any such stipulation, we can never say that interest has fallen due on a particular date or was overdue. There is nothing on record to show that possibility of realising the interest was nil. Ld. Counsel of the assessee had admitted that the said companies were having substantial assets with them. Hence we cannot say that interest income was illusory or not real. In such circumstances, we are of the considered opinion that the assessee cannot take of refuge under the Prudential Norms issued by the Reserve Bank of India and say that principles of accrual of income, when mercantile basis of accountancy is followed would not apply to it. No doubt, Section 45Q of the R.B.I. Act is overriding in nature and has to be given primacy. However unless and until an assessee shows that a loan or advance had become a non-performing asset, there can be no question of applying the norms set out for such non-performing asset. We are, therefore, of the opinion that ld. CIT(Appeals) fell in error in deleting the addition made by the Assessing Officer. We, therefore, set aside the order of ld. CIT(Appeal) and the addition made by the Assessing Officer is restored. - Decided against assessee.

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• 2015 (4) TMI 141
  Denial of deduction under section 80P(2)(a)(iii) - Held that:- Undisputedly, the assessee is not a Co-operative Society and is also not engaged either in marketing of agricultural produce or providing credit facilities to its members. Therefore, the assessee is not entitled for deduction under section 80P(2)(a)(iii) of the Act. Since the ld. CIT(A) has properly adjudicated the issue in the light of relevant provisions of the Act, we find no infirmity therein. Accordingly, we confirm his order. - Decided against assessee.

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• 2015 (4) TMI 140
  Trading addition - addition deleted by learned first appellate authority - Held that:- AO has completed the assessment on hypothetical and arithmetical basis which is not permissible under the law. He has made the assessment for full financial year and, therefore, any analysis during mid year is misleading and uncalled for. However, the comparison of trading account with the Input Tax Account and Output Tax Account, whether made up to 24.08.2006 or for the whole year i.e. 01.04.2005 to 31.03.2006 fully tally with the trading account as per books of account. Finally, the learned first appellate authority has rightly deleted the addition of ₹ 27,32,912/- after appreciating the evidence produced by the assessee for the whole year in dispute. Thus, we find no infirmity in the impugned order on the deletion of addition in dispute and we uphold the impugned order on this very issue. - Decided against revenue. Disallowance of bad debts - FAA deleted the addition - Held that:- Learned first appellate authority has rightly observed that the assessee-firm has sold goods to M/s Raaga International, Tarn Taran Road, Amritsar in May, 2004 by three bills for total amount of ₹ 1,82,250/-. Only one payment of ₹ 37,500/- was received during the financial year 2004-05 and the balance of ₹ 1,44,750/- was irrecoverable and claimed as bad debts. On the basis of various documentary evidence filed by the assessee as well as on the basis of judgment of Hon'ble Supreme Court of India) in the case of T.R.F. Ltd. Vs. Commissioner of Income Tax (2010 (2) TMI 211 - SUPREME COURT , the learned first appellate authority deleted the addition in dispute. Secondly, it is also not disputed by the Assessing Officer that the recovery of amount in dispute is still unrecovered. Therefore, the addition in dispute amounting to ₹ 1,44,750/- has rightly been deleted by learned first appellate authority and we uphold the impugned order on the deletion of addition of Rs. ₹ 1,44,750/-. - Decided against revenue.

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• 2015 (4) TMI 139
  Accrual of income - Contingent income not credited to Profit & Loss account - CIT(A) deleted the addition - as per revenue claim of expenditure by the principal and credit of income to the account of assessee after deduction of tax thereof are irrelevant considerations as per the method of accounting regularly followed by the assessee - Held that:- Work relate to the installation and erection of the equipment has been completed in subsequent years as the time taken varies between 1 month to 21 months. Therefore, the accrual of income earned happened only in subsequent years and not in the impugned F.Y. 2008-09 relevant to A.Y. 2009-10 as held by the Assessing Officer. Therefore, the assessee was justified to content that income accrues only in subsequent year when the assessee gets an enforceable right to receive the same. The similar view has been taken in the case of CIT Vs Lucas Indian Services Ltd. (2008 (11) TMI 217 - MADRAS HIGH COURT). In view of above factual and legal discussion, the addition made by Assessing Officer was rightly deleted by CIT(A). This reasoned finding of CIT(A) needs no interference from our side. - Decided in favour of assessee.

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• 2015 (4) TMI 138
  Disallowance of business loss - CIT(A) held that no business was carried out by the appellant during the year - argument of the Ld. Counsel is that the Short Term Capital Gains declared by the assessee is in respect of sale of plots of land and the assessee has only changed the head of taxability of the business activity but otherwise the assessee has done the business - Held that:- Unable to accept the plea of the Ld. Counsel. As per the provisions of Sec. 14 of the Income-tax Act the income is to be computed under the different heads after allowing the relevant expenditure. Though it is claimed by the assessee that the assessee is in the business of the land development but the assessee has shown the transactions of the land as an investment and declared the Short Term Capital Gains. So far as the claim of the business in the real estate is concerned three is not even a single transaction of sale or purchase of land or real estate and even there is no opening or closing stock-in-trade. We, therefore, concur with the finding of the Ld. CIT(A) that the assessee has not proved that the expenses debited to the profit and loss account of the M/s. V.V. Realtors are expended only and exclusively for the business of the assessee.Nothing has been placed before us to demonstrate that the assessee has carried out any regular systematic business activity. We do not find any reason to interfere with the order of the Ld. CIT(A) - Decided against assessee. Allowance part of the expenses as a deduction against income from short term capital gains - Held that:- In this case the assessee has claimed the expenditure in different head and the said act of the assessee should not deprive him for claiming the allowable expenditure in computing the income under any of other head. We, accordingly, direct the Assessing Officer on the basis of observations of the Ld. CIT(A) to allow the following expenditure after verification - (i) brokerage and commission of ₹ 2,97,200/-, (ii) corporation charges of ₹ 2,000/-, (iii) Departmental expenses of ₹ 3,550/-, (iv) land survey charges of ₹ 2,500/- and (v) legal and professional charges of ₹ 37,500/-. Needless to say the assessee should be given opportunity of being heard as per the principles of natural justice. - Decided in favour of assessee for the statistical purposes.

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• 2015 (4) TMI 137
  Addition made on account of interest paid to others - CIT(A) deleted addition - Held that:- Copy of balance sheet and profit and loss account submitted by the assessee clearly shows that loans and interest were appearing as liability as on 31.03.2005 at ₹ 18,50,000/- which stands tallied with the bank accounts which was also placed before the authorities below. The ld. DR was unable to controvert the submissions of the assessee in this regard, therefore, we find no fault in the order of the CIT (A) - Decided in favour of assessee. Expenses claimed under the head electricity expenses, generator expenses, repair and maintenance for personal use - CIT(A) reducing the addition of ₹ 43,301/- to ₹ 22,460/- being 1/4th of the expenditure - Held that:- There are separate meters for residential portion and the Eye Hospital portion. Therefore, there was no scope for any disallowance out of the electricity expenses. Further, in respect of generator expenses, repair and maintenance expenses, we find that the CIT (A) has sustained 1/4th of the addition for which assessee is not in appeal. In view of these facts, we find no fault in the order of the CIT (A)- Decided in favour of assessee. Purchase of Retinal Camera - CIT(A) deleted the addition - Held that:- The assessee filed the evidence that M/s. Eye Tech Industries has not received the payment against the camera and the e-message has been submitted in this regard. The revenue is not able to prove that emessage received from M/s. Eye Tech Industries was not genuine. The revenue is also failed to prove that the apparent is not the real and the onus is on the party who claims it to be so.Find no fault in the order of the CIT (A)- Decided in favour of assessee. Addition to income - rejecting the books of account on the basis of the seized documents - CIT(A) deleted the addition - Held that:- The documents are not having any heading and it do not mention any period for which it pertains to. The revenue has not related the name of the person for whom the various figures appearing therein, therefore, no addition can be made on the basis of such bald and cryptic document. The Assessing Officer has gone to reject the books of account as he cannot accept the results declared by the assessee but, in our considered view, books of account cannot be rejected summarily without any basis.- Decided in favour of assessee. Purchase of property - CIT(A) deleted the addition - Held that:- No evidence found during the search operation which could suggest that the property in question was purchased for ₹ 79,00,000/- instead of ₹ 49,00,000/-. Further, there is no evidence that assessee has paid any on money on purchase of this property. Assessee’s husband made a statement in the mid-night during the search operation that ₹ 30 lacs was paid in cash, however, the same was retracted by way of an affidavit filed before the DGIT (Inv.), Lucknow. Further, there is no corroborative evidence on the record found and seized during the search operation. We also get strength from the Circular No.286/2/2003-I.e. (Inv.) dated 10.03.2003 where such disclosers were held to be of no consequence without corroborative documents. Find no fault in the order of the CIT (A)- Decided in favour of assessee. Unexplained cash credits u/s 69 - CIT(A) deleted the addition - Held that:- corpus of Trilok Prakash Agarwal HUF came to be in existence in 1982 itself. Therefore, it is justified to be assessed income of Trilok Prakash Agarwal HUF. As far as, the source of investment of ₹ 10,90,000/- is concerned, we find that investment in KVPs/NSCs were made as early as in 1998 as these were renewed regularly thereafter. The bank accounts with Indraprastha Bank Limited was found during the search and these accounts were pertained to Trilok Prakash Agarwal HUF. The investments were made in the name of coparceners and the members of HUF. The source of investment of KVPs for the financial year 2004-05 was out of maturity and re-maturity of earlier investments.The assessee has able to demonstrate that he was having ₹ 10,70,000/- with him which was invested during the year. Find no fault in the order of the CIT (A)- Decided in favour of assessee.

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• 2015 (4) TMI 136
  Depreciation - Assets taken over under slump sale - use of computer for more than 180 days or not - Assets taken over under slump sale - date of put to use - CIT(A) allowed the assessee depreciation of ₹ 98,88,500/- on computers relying purely on the revised certificate submitted by the assessee - Held that:- there is no reason whatsoever to not rely upon the veracity of the revised statement filed by the auditor. It was only the original certificate which had contained error which led the AO to believe the assets were put to sue from 25.12.2002. There was no other material whatsoever in the possession of the AO. In these circumstances, the AO’s reluctance to give credence to the revised certificate of the Auditor is not at all sustainable. Moreover, on the basis of the facts of the case it emerges that assessee has acquired the assets under slump sale with effect from April 1, 2002. In these circumstances, there is no plausible reason why April, 25, 2002 would be mentioned as date on which the assets are put to use. Ld. CIT(A) is correct in observing that the main purpose of taking the undertaking of slump sale basis is to enable such undertaking to run after transfer of the going concern. Hence, if the undertaking has been taken on slump sale, no prudent businessman would leave the undertaking remain idle for so many months, when it is capable of running of its own without any interruption. In the background of the aforesaid discussion, we do not find any infirmity in the order of the Ld. CIT(A). - Decided against revenue.

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• 2015 (4) TMI 135
  Existence of HUF - genuineness of investment made in KVP/NSC - Held that:- Some of the evidences on which the assessee has relied were part of the seized record. The Bank account details were seized as per Annexure ‘F’ of panchnama. The investment in NSCs/KVPs were from these bank accounts and M/s. Trilok Prakash Agarwal HUF had made investment in several years in FDR/NSC and on maturity, the same has been reinvested in subsequent years. These investments were made in the name of coparcener/karta. The income-tax return of HUF could not be filed due to income being below the taxable limit. Thus no fault in the order of the CIT (A) in this regard. We also hold that the certificate of Post Master with regard to the maturity of the KVP/NSC was only in support of the already existing evidences which prove the existence of HUF and source of the investment. - Decided against revenue. Unaccounted investment - CIT(A) deleted the addition made on money payment of ₹ 30 lacs for purchase of property at Shivalik Malviya Nagar, New Delhi on the basis of statement made u/s 132(4) of the Income-tax Act, 1961 during the course of search operation - Held that:- The property in respect of which the assessee has made a statement is not owned by him. The ownership of the property is in his wife’s name, Smt. Mukul Aggarwal, therefore, the provisions of section 69B of the Income-tax Act, 1961 cannot be invoked in assessee’s case. Further, no evidence of any on money was found or seized during the search operation. The statement was recorded at the odd hours in the night. The assessee has submitted an affidavit before the Director General (Inv.), U.P., Lucknow on 07.11.2005 stating that the search party confronted him at around 3.00 AM in the morning of 28.10.2005 when he was too tired and weak and in that situation, he was not having any other option but to obey raiding party and he kept on signing whatever document which has been put before him and he made it clear that any surrender recorded in the statement is baseless, false and without his knowledge. He denied absolutely his legal consent by the discloser. Revenue has not made any effort to disprove the contents of this affidavit. We also find that this addition was made only on the basis of statement and there is no corroborative evidence whatsoever found and seized during the search operation. The assessee has categorically retracted from this statement. There is no evidence whatsoever on the record to substantiate that any on money was paid for the purchase of the property. CBDT Instruction No.286/2/2003 IT (Inv.) dated 10.03.2003 also discourages such confessions where concurrence is taken without any supportive evidence. Such forced admission without any support of documents cannot be treated as admission when same are also retracted immediately by way of filing affidavit. In view of the facts, we confirm the deletion of addition. - Decided against revenue. Disallowance restricted of car deprecation of 1/8th on account of personal use by CIT(A) - Held that:- assessee is not maintaining log book for the use of car. He has not debited car running expenses which show that the car was being used for personal purposes also. No log book is being maintained. Therefore, we find that the CIT (A) was justified and sustaining the disallowance of part depreciation on the car expenses. - Decided against assessee.

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• 2015 (4) TMI 134
  Transfer pricing adjustment - selection of comparable - Infosys Technologies Limited - Held that:- The assessee is claiming to be operating at minimal risk as 100% of its services are provided to AEs. The assessee is claiming to be engaged into software development services and administrative support services as against the diversified services rendered by Infosys Technologies Limited. The assessee is claiming not to have its own proprietary products like Finacle owned by Infosys Technologies Limited. The assessee is claiming to have spent only nominal amount of expenditure at ₹ 2.7 lakhs on advertisement/sales promotion & brand building as against ₹ 499 crores incurred by Infosys Technologies Limited. The assessee claims not to have incurred any expenditure on research and development as against Infosys Technologies Limited spending a sum of ₹ 102 crores on it. The above facts clearly indicate that prima facie the case of Infosys Technologies Limited does not appear to be comparable with that of the assessee. The contention of the learned DR that the difference in the revenues earned by the assessee vis-a-vis Infosys Technologies Limited was not of such a magnitude as was in the case of Agnity India Technologies (P.) Ltd. (2013 (7) TMI 696 - DELHI HIGH COURT), does not advance the case of the Revenue. Mphasis BFL Limited learned AR submitted that it is engaged in diversified IT services segment offering business process operations, application development and maintenance etc. as against the assessee being a contract software development services. Certain other points were also highlighted to justify the exclusion of this case. On a pointed query from the Bench, the learned AR agreed that such points of difference have not been considered by the authorities below. Remit the matter to the file of the TPO for computing the ALP of the international transactions afresh in the light of our above discussion - Appeal decided in favour of assessee for statistical purposes.

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• 2015 (4) TMI 133
  Taxation rights for the salary earned for work done in the USA - India USA DTAA - Held that:- Following the decision of the Apex Court in the case of P.V.A.L. Kulandagan Chettiar (2004 (5) TMI 8 - SUPREME Court), the interpretation of the phrase 'may be' in Article 16(1) is applied in the impugned assessment year so as to exempt from the Indian taxable income of the assessee, his salary income which has been offered to tax in USA. We therefore allow this ground of the assessee on this aspect. - Decided in favour of assessee. Levying to tax in India the salary income which accrued and arose outside India and was also received by the Appellant outside India - Held that:- From a plain reading of Section 5(2), it is clear that the per diem paid in the USA is not income received or deemed to be received in India; neither does it accrues or arises in India as it is towards working in the USA. As held by in the case of Avtar Singh Wadhwan [2000 (11) TMI 116 - BOMBAY High Court] the situs of accrual is the situs of services rendered which in the instant case is clearly in the USA and the amounts are also received in the USA. Hence, it cannot form part of income taxable in India as per Section 5. Mutually exclusive to this argument, we can apply the same rationale of the earlier ground (i.e, interpretation of Article 16(1)) can be applied too applying the 'exemption regime' for the impugned year and hence even under this view the per diem cannot be brought to tax in India. - Decided in favour of assessee.

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• Customs

• 2015 (4) TMI 159
  Interest on refund claim - revenue contended that the refund amount has been sanctioned within three months from the date of judgment of Hon'ble Supreme Court in dismissing the Special Leave Petition (SLP) filed by the department; and that for a substantial period, the amount was lying with the Consumer Welfare Fund and not with the department. Thus, according to impugned order, since there is no delay in sanction of refund by the Customs Department, the appellant is not entitled for interest thereon - Held that:- it is an admitted fact on record that the refund claim application filed by the appellant on 24.12.1998 was ultimately sanctioned by the Assistant Commissioner (Refund) on 13.04.2011 i.e. after a lapse of more than 12 years. As per the statutory mandates of Section 27 read with Section 27A of the Act, the time limit for payment of the refund amount to the appellant by the Customs authorities (without interest) expired on 23.03.1999. Since, claimed amount was finally paid to the appellant on 13.04.2011, in our considered view, the appellant is entitled for the statutory interest from 24.03.1999 to the date when the refund was eventually paid i.e. 13.04.2011. Though, the refund amount was paid to the claimant-appellant consequent upon dismissal of SLP filed by the revenue, but the date of computation of the interest amount will commence from the date of cessation of three months of the refund application, and not from the date, when the refund amount was finally paid. - beneficiary of the principal amount is entitled for compensation in the form of interest because; he is deprived of its right of claim for a considerable period of time at the discretion of the person responsible for paying the amount. - Following decision of J.K. Cement Works -Vs:- Asst. Commissioner of Central Excise & Customs, reported in [2004 (2) TMI 78 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR] - Impugned order is set aside - Decided in favour of assessee.

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• 2015 (4) TMI 158
  Denial of refund claim - Unjust enrichment - whether the refund amount has to be credited to the Consumer Welfare Fund as per the mandates of Section 27(2) of the Customs Act, 1962 by applying the doctrine of unjust enrichment, or the same is required to be paid to the appellant - Held that:- As per the first proviso to sub-section (2) of the said section, the amount of duty as determined by the statutory authority shall, instead of being credited to the said Fund, be paid to the applicant, if such amount is relatable to the duty paid by the importer, if he had not passed on the incidence of such duty to any other person. Section 28D of the Act contains fiction to the effect that every person who has paid the duty on any goods under the Act shall be deemed to have passed on the full incidence of the duty to the buyer of the goods. This presumption is rebuttable by the person who claims refund of the duties. Therefore every person claiming refund under Section 27 of the Act has to demonstrate by relevant documentary evidence that he is not benefited by unjust enrichment. If the incidence of duty paid is borne by another/any other person, then the person claiming the refund will be unjustly enriched at the cost of other(s). Thus, in such eventuality, the refund amount shall be credited to the said Fund, instead of sanctioning in favour of the applicant. Showing the excess amount of Customs duty in the Balance Sheet for the period 2011-12, that to after rejection of the refund application by the original authority, is not at all relevant since the said amount was admittedly considered in the cost of production for the year 2008-09 and was absorbed in the sale value. Therefore, as per my opinion, the appellant has no locus standi to seek refund from the revenue to be unjustly enriched at the expense of some other person. In absence of any plausible evidence, the certificate furnished by the appellant cannot be relied on to arrive at the conclusion that the refund claimed amount has not been loaded in the costing of the garments sold in the year of import. If the refund is sanctioned to the assessee without proper verification of the books of account, there is every possibility of enrichment by the receipt of a benefit to which he is not entitled to, and accordingly, the advantage of refund benefit at some other's cost and expense will be unjust. Considering the said view, the doctrine of unjust enrichment was incorporated in the Customs statute in the year 1991 consequent to the enactment of the Central Excise and Customs Law (Amendment) Act, 1991. The effect of the amendment is that every assessee seeking refund of any duty to prove that he had not passed on the burden of such duty to any other person. - Thus, it is erroneous to assume that the provisions of Income Tax Act will be applicable for refund of customs duty. Refund amount has not been collected or retained illegally by the exchequer, rather the refund claim has been sanctioned and the amount has been credited to the Consumer Welfare Fund, in absence of any evidence produced by the appellant that the incidence of such duty amount has been borne by it and not passed on to any other person. Even assuming that the amount has been collected without the authority of law, still the doctrine of unjust enrichment is applicable for its refund to the applicant as per the ruling of Hon'ble Supreme Court in the case of Mafatlal Industries Ltd. -Vs. - Union of India, reported in [1996 (12) TMI 50 - SUPREME COURT OF INDIA]. - Decided against assessee.

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• 2015 (4) TMI 157
  Refund of excess duty - Imported goods and cleared for home consumption without contesting the assessment made in the Bill of Entry No. 691527 dated 29.09.2004 - Held that:- Both AC (Refunds) and the Commissioner (Appeals) have rightly dismissed the appeal by relying on the Hon'ble Apex Court judgment in the case of Priya Blue and Flock (I) (2004 (9) TMI 105 - SUPREME COURT OF INDIA), which was discussed in detail in the impugned order. Since the issue was well settled by the Hon'ble Apex Court, in the above judgements and the said Apex Court decision has been followed by various High Courts and Tribunals and the issue is no longer in dispute. Since the appellants not contented the assessment of duty made in the said Bill of Entry, the AC (refunds) has rightly informed the appellants. By respectfully following the Apex Court decision which is relied by the Lower Appellate Authority while rejecting the appeal - Decided against assessee.

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• Corporate Laws

• 2015 (4) TMI 156
  Winding application under Section 433 and 434 of Companies Act - Interest amount not paid - Held that:- The debit note refers to a sum of ₹ 40,20,040/- as being the interest amount debited in respect of outstanding amount. In such circumstance, whether the amount as paid through the cheque dated 15.7.2012 has been received by the petitioner and has been accounted and when there is dispute with regard to fact as to whether the balance amount claimed as interest by the petitioner is due and payable, at this stage, this Court cannot come to the conclusion that the respondents are unable to pay their debts. Even assuming for a moment that any amount is due and payable by the respondents to the petitioner and even if the proceedings for dishonour of cheque has been initiated against the respondents, the same would have to be litigated in an appropriate forum. -Decided against the petitioner.

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• 2015 (4) TMI 155
  Disclosures under regulation 29 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 - Shares acquired by Public Financial Institution (PFI) on invocation of pledge - Disclosure under regulation 13 of SEBI PIT (Prevention of Insider Trading) Regulations, 1992 - Held that:- Fact that Scheduled Commercial Banks/ PFI‟s even after acquiring the pledged shares on invocation of pledge do not show such shares in their audited accounts as their own investments, would have no bearing while construing the scope and ambit of the proviso to regulation 29(4). Once it is seen that the exemption under the proviso to regulation 29(4) relates to the obligation arising from the deemed acquisition specified under regulation 29(4), then, it is wholly irrelevant for the purpose of construing the proviso to regulation 29(4) as to how shares acquired by Scheduled Commercial Banks/ PFI‟s on invocation of pledge are treated in their audited books of accounts. In other words, scope and ambit of the proviso to regulation 29(4) is to be construed on the basis of the language used in the said proviso and not on the basis of the treatment given by Scheduled Commercial Banks/ PFI‟s to the shares acquired by them on invocation of pledge. Similarly, fact that regulation 31(3) specifically requires promoters of every Target Company to make disclosures within seven days from the creation or invocation or release of encumbrance does not support the case of appellants. On the contrary, very fact that the expression “invocation of pledge” is specifically used in regulation 31(3) and the said expression is conspicuously absent in regulation 29(4) clearly shows that neither regulation 29(4) nor the proviso to regulation 29(4) are intended to apply acquisition of shares on invocation of pledge. Similarly, in the absence of any exemption, under PIT Regulations, 1992 SEBI is justified in holding that on acquisition of shares by invocation of pledge, appellants were required to make disclosures under regulation 13 of PIT Regulations, 1992. Since regulation 13(1) of PIT Regulations, 1992 requires “any person” holding shares in excess of the limits prescribed therein to make disclosures, and admittedly appellants had acquired shares in excess of the limits prescribed therein, without dealing with various contentions raised by appellant in that behalf we hold that the expression “any person” in regulation 13(1) of PIT Regulations, 1992 is wide enough to cover acquisition of shares by Scheduled Commercial Banks/ PFI‟s on invocation of pledge and therefore, in the facts of present case, failure on part of appellants to make disclosures constitutes violation of regulation 13 of the PIT Regulations, 1992. Although penalty is imposed on the appellants for the first time for violating disclosure provisions that triggered on acquisition of shares by invocation of pledge, it is a matter on record that various Scheduled Commercial Banks have been making disclosures as and when disclosure provisions are triggered on acquisition of shares by invocation of pledge. If various Scheduled Commercial Banks have been making disclosures from time to time, there is no reason as to why penalty ought not to be imposed on appellants for not complying with the disclosure provisions contained in Takeover Regulations, 2011. In these circumstances, we see no reason to interfere with the quantum of penalty imposed against the appellants. - Decided against the appellant.

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• Service Tax

• 2015 (4) TMI 173
  Denial of refund claim - refund claims of an amount paid by the appellants on a direction of the DGCEI - 'Construction of Complex Service - Held that:- It can be seen from the above section 73(3) that the said section is not ambiguous and very clearly lays down that the Central Excise officer shall not serve any notice on the appellant if the payment which has not been paid or has been short-paid is ascertained by the Central Excise officer and paid before the service of notice, no notice requires to be issued to the assessee. The provisions of sub-section are very clear and if no notice is issued to the appellants under Section 73(1) of the Finance Act, 1994, it would mean that the tax liability discharged by the appellants would be the tax as accepted and paid by him. In our considered opinion, when the appellants themselves had discharged the tax liability, there cannot be any refund of the amount as the issue is considered as 'closed' by the revenue authorities. - No infirmity in impugned orders - Decided in favour of assessee.

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• 2015 (4) TMI 172
  Demand of service tax - Manpower recruitment or supply agency services - Violation of principle of natural justice - Opportunity of hearing not granted - Held that:- Grievance of learned Counsel of the appellant as to they were not given an effective to personal hearing seems to be correct. We find that the adjudicating authority has confirmed substantial amount as service tax liability without affording another opportunity to the appellant for defending the case personally. In our view, the impugned order is passed in violation of principles of natural Justice. - Matter remanded back - Decided in favour of assessee.

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• 2015 (4) TMI 171
  Penalty u/s 76, 77 & 78 - Invocation of Section 80 - Held that:- Reason which has been pleaded by the appellant before the first appellate authority as well as before us for short levy or non-levy of service tax is on account of liquidity crisis which got worse because of various Court petitions filed by their lenders and creditors. This particular plea has not been contraverted by the revenue in the Order-in-Original or the impugned order. In our considered view, the reason the appellant has given is justifiable reason for setting aside the penalty imposed on them; which the Adjudicating Authority has rightly done so by not imposing penalties under Section 76 & 77 of the Finance Act, 1994. We invoke the provisions of Section 80 of the Finance Act, 1994 and set aside the penalty imposed under Section 78 of the Finance Act, 1994 as upheld by the impugned order. - Decided in favour of assessee.

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• Central Excise

• 2015 (4) TMI 166
  Remission of duty - Loss of goods in fire - Held that:- For the loss of excisable goods duty is payable by assessee. This is the general rule. However, there is an exception. If the assessee is able to prove that it was unavoidable accident due to natural causes on which he had no control. Obviously, in order to avoid duty payable under Rule 49 of Rules, 1944, onus is on assessee to prove that accident occurred due to reasons beyond his control and he could not have avoided it. - Chief Fire Officer gave opinion that it may be due to mishandling of workforce of assessee i.e. due to careless smoking of biris and cigarettes. This opinion, as a matter of fact was not disputed by Sri D.K. Srivastava, Finance Controller appearing on behalf of assessee before Excise Commissioner - assessee failed to lead any evidence whatsoever before the authority concerned to show as to what steps it has taken to avoid accident, if any, caused by fire and that accident in question was for unavoidable reasons. - Revenue has committed manifest error in law and therefore reasons assigned by Tribunal in allowing assessee's appeal is clearly erroneous - Decided in favour of Revenue.

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• 2015 (4) TMI 165
  Validity of the order passed - Violation of principle of natural justice - Opportunity of hearing not granted - Held that:- A reading of Section 33-A (1) and (2) of the Central Excise Act together would make the position very clear that affording an opportunity of hearing to the licensee is mandatory else it would defeat the very purpose of the Act. In this case the petitioner has produced documents along with their objection dated 18.12.2014 and sought time to appear for personal hearing. Pursuant thereto, by a communication dated 14.11.2014, the second respondent called upon the petitioner to appear on any of the three days mentioned therein. On receipt of the same, the petitioner, by a letter dated 18.12.2014 requested the second respondent to have the personal hearing on any date after 15.01.2015. However, such request made by the petitioner has not been considered by the second respondent. - final order of adjudication is in contravention to the principles of natural justice - Therefore, the impugned order is set aside - Decided in favour of assessee.

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• 2015 (4) TMI 164
  Interest demand on erroneously sanctioned rebate claim - Held that:- As per section 11AA, the person who is liable to pay duty shall in addition to the duty be liable to pay interest at the rate specified in sub-section (2). These statutory provisions are quite clear and interest is payable automatically. The respondent has already accepted their interest liability. As such, Government orders that in this case interest is payable in terms of section 11AA of Central Excise Act, 1944. - Decided in favour of Revenue.

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• 2015 (4) TMI 163
  Denial of rebate claim - Commissioner (Appeals) mainly on the ground that the rebate claims were sanctioned of duty paid on value which was more than transaction value and the claims should be restricted to duty paid on transaction value - Held that:- Applicant has stated that while clearing the goods from factory they prepared ARE-1 No. 199/09-10 dtd. 27-10-2009 in the month of October 2009, when exchange rate was 47.70 Rs. Per US $ and ARE-1 No. 400/09-10 dtd. 22-02-2010 when exchange rate was 45.70. However, the goods covered vide both AREs-1 could be exported only in the month of April 2010 vide single shipping Bill No. 8341080 dtd. 09-04-2010, when exchange rate reduced to ₹ 45 per US $ due to this reason, the difference in ARE-1 value and FOB has occurred. Government notes that CBEC has clarified in circular No. 510/06/2000-Cx dtd. 03-02-2000 that there is no question of requantifying the amount of rebate by applying same other rate prevalent to subsequent the date to which duty was paid. In this case applicant has stated the different in ARE-i value and FOB value is due to difference in foreign exchange rates. This pleading is not examined by lower authorities. This factual position is required to be verified by the original authority, and if said contention is found correct, then rebate claims cannot be reduced as clarified in the above said CBEC circular. - Matter remanded back - Decided in favour of assessee.

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• 2015 (4) TMI 162
  Valuation of goods - sale from depot - Whether the nearest time, in terms of Rule 7 of Central Excise Valuation(Determination of Price of Excisable Goods) Rules, 2000, could be the time subsequent to the time & date of clearance/removal of the goods under assessment from the factory to depots - Held that:- the value of the goods under assessment shall be the transaction value of the goods sold from the depot at the time nearest to the time of removal - Following decision of S.C.Enviro Agro India Pvt.Ltd. vs. CCE, Thane-II [2011 (12) TMI 431 - CESTAT MUMBAI] - Decided against Revenue.

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• 2015 (4) TMI 161
  Valuation of goods - inclusion of cost of raw material inventory - Whether the amount charged by the appellant from their customer M/s. Bajaj Tempo under debit notes as interest on raw-material inventory, which was the cost of carrying additional raw-material inventory to ensure timely supply of the finished product to the M/s Bajaj Tempo, is to be included in the assessable value or not - Held that:- in terms of the Apex Court's judgement in the case of Bombay Tyre International vs. Union of India reported in [1983 (10) TMI 51 - SUPREME COURT OF INDIA], the cost of carrying finished goods inventory is includible in the assessable value and no reduction of this account can be claimed by the appellant, and in our view, the ratio of this judgment of the Apex Court would be applicable to the cost of raw material inventory also. It has, therefore, to be held that the amount charged from the customers as carrying cost of the extra raw materia linventory would be includible in the assessable value. - Decided against the assessee. Levy of penalty - Held that:- The suppression of fact or contravention of the Provisions of the Central Excise Act, 1944 or of the rules made there under with intent to evade the payment of duty is a state of mind which has to be ascertained from the circumstances of the case. In this case, since the fact of recovery of extra inventory cost from M/s Bajaj Auto under debit notes had not been disclosed in the ER-I returns, it has to be inferred that the short payment was on account of suppression of fact on the part of the assessee and, hence, the longer limitation period has been correctly invoked and penalty under section 11AC has been correctly imposed. - No merit in appeal - Decided against assessee.

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• 2015 (4) TMI 160
  100% EOU - Denial of exemption claim - DTA Clearances - Whether the scrap generated in the appellant's unit and cleared into DTA is eligible for basic customs duty exemption under notification no.21/2002-Cus - Held that:- exemption notification unconditionally exempts the "melting scrap". According to the department, the scrap being cleared into DTA is not melting scrap. In our prima facie view, the stand of the department is incorrect and without any basis, as the only use of scrap is for re-melting. In view of this, the impugned order denying the basic customs duty exemption under notification no.21/2002-Cus (Sl.No.332) for the purpose of calculation of duty payable in respect of the DTA clearances of scrap in terms to proviso to Section 3(1) of the Central Excise Act, 1944 is not correct. As regards the denial of exemption notification no.23/03-Cus [sic:- notification no.23/03 CE] the only ground adopted by the department is that the scrap generation norms have not been provided but this stand also prima facie is not correct in view of the letter dated 26.05.2010 of the DGFT addressed to the appellant company. - impugned order is not correct and as such, the appellant have strong prima facie case in their favour. - The requirement of pre-deposit of duty demand, interest and penalty by the appellant company and the requirement of pre-deposit of penalty by Shri Praveen Garg, Ex Finance Head is waived for hearing of their appeals and recovery thereof is stayed - Stay granted.

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• CST, VAT & Sales Tax

• 2015 (4) TMI 170
  Classification of goods - Classification of shalimar oil - Oil partly used as edible oil partly as hair oil - Rate of tax @ 12% or 4% - Bar of limitation - Held that:- no assessment could be made under section 17 of the AGST Act after expiry of 3 years from the end of the year in respect of which or part of which the assessment is made. In other words, under section 19(1) of the AGST Act, for the assessment year 1999-2000, the limitation period would expire on 31.03.2003 and for the assessment year 2000-2001, the limitation period would expire on 31.03.2004. It is not necessary to delve into the other part of sub-section (1) or the proviso thereto or sub-section (2), since no defence has been put up by the respondents on the basis of the said provisions. The power to make a reference must be traced to a valid source of law which is not available in the AGST Act. Section 19(3) or section 73A of the AGST Act cannot be construed to be provisions providing for a “reference”. There is another aspect. Limitation period prescribed for completion of assessment or re-assessment is for a definite purpose. An assessee cannot be subjected to assessment or re-assessment proceeding for an indefinite period. If the contention of the respondents, as advanced, is accepted, it would lead to a situation where an Assessing Officer would have the liberty to seek clarification from the Commissioner in the garb of reference thereby extending the limitation for framing assessment for an indefinite period and the Commissioner can also without any limitation of time provide the clarification whereafter the extended limitation of 2 years would commence from the end of the year in which the clarification is received by the Assessing Officer. This will certainly lead to an absurd situation and confer unfettered limitation on the Assessing Officers while framing assessment or re-assessment. - impugned notices dated 10.02.2009 and 17.02.2009 are clearly unsustainable being beyond the period of limitation and are accordingly adjudged void ab initio. Consequently, those are set aside and quashed. - Decided in favour of assessee.

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• 2015 (4) TMI 169
  Seizure of the goods - Imposition of penalty - goods were not accompanied by a Form No.402 - Opportunity of hearing not granted - Violation of principle of natural justice - Held that:- It is apparent that the goods of the petitioner have been detained along with the truck by the fifth respondent. Thereafter, the fifth respondent, by the impugned order, has assessed the tax payable on the goods in question at ₹ 1,65,240/- and has imposed penalty at 150% of the said amount being ₹ 2,47,860/-. In this regard, a perusal of the provisions of sub-section (5) of section 68 of the VAT Act reveals that the officer-in-charge of the check-post or barrier may, after giving the owner, driver or person-in-charge of goods, a reasonable opportunity of being heard and after holding such further inquiry, as he deems fit, impose on him penalty, in addition to tax payable under the Act, not exceeding one and one-half times of the tax for possession of goods so seized. Reverting to the facts of the present case, it is not in dispute that the value of the goods in question is ₹ 3,60,000/- . If the goods are sought to be sent outside the State of Gujarat, the tax payable would be at 2%, which would come to ₹ 7,200/-. However, even if the goods are meant for sale within the State of Gujarat, the highest amount of tax that could be leviable would be at the rate of 15%, which would come to ₹ 54,000/-. From the facts which have come on record, it is apparent that the petitioner has not been afforded an opportunity of hearing by the respondents. Clause (a) of subsection (5) of section 68 of the VAT Act clearly contemplates affording reasonable opportunity of being heard to the owner, driver or person-in-charge of the goods. Under the circumstances, the impugned order clearly suffers from the vice of being in breach of the principles of natural justice and as such, cannot be sustained on this ground alone. - Decided in favour of assessee.

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• 2015 (4) TMI 168
  Whether the butter and ghee sold by the assessee under a brand name registered under Trade Marks and Merchandise Act, 1958 falls under Entry 8(1) of Part D of I Schedule to the Tamil Nadu General Sales Tax Act at the reduced rate of tax at 10% - Held that:- It is not in dispute that the goods falling under Entry 8 of Part D of I Schedule are taxable at the rate of 11% in relation to butter and ghee if sold under the brand name prior to 04.05.1998. The dispute relates to the period on or after 04.05.1998. The rate of tax, as understood by the Department, in respect of butter and ghee sold under the brand name registered under the Trade Marks and Merchandise Act, 1958 continued to have the benefit of reduced rate of tax at 10% in terms of Notification No.73 dated 05.03.1997, as is evident from the Entry itself. Once the Entry shows that the rate of tax would be 10% in terms of the said notification dated 05.03.1997, even after 4.5.1998, the question of the Department demanding tax at the rate of 11% cannot be justified - prior to the issuance of erratum, Notification No.73 dated 5.3.1997 would hold good and therefore the assessee was justified in paying 10% tax. Hence, the Tribunal failed to consider the said Entry 8 of Part D of the I Schedule to Tamil Nadu General Sales Tax Act - Decided in favour of assessee.

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• 2015 (4) TMI 167
  Classification of goods - computer peripherals / router - whether the goods sold by the respondent/assessee is exigible to tax at the rate of 4% as goods falling under Sl. No.22 of Entry 68 of Part B of I Schedule or falling under Entry 69 of Part C of the I Schedule of the Tamil Nadu Value Added Tax Act, 2006, (hereinafter called as TNVAT Act, 2006) as claimed by the Revenue - Held that:- What are all computer peripherals have not been defined in Serial No.22 of Entry 68 of Part B of I Schedule to TNVAT Act, 2006. Therefore, whatever goods, which are falling within the definition of 'peripheral' would be entitled to such a benefit. We find that 'router', from the nature of its use in conjunction with the computer as has been defined by the Appellate Deputy Commissioner and the Tribunal based on relevant computer related dictionary and data, is a peripheral of a computer. It is also held by the Tribunal that 'router' is a computer network device that transmits data from one area to another and expands the capabilities of the computer, hence, it does not form part of core computer architecture. Therefore, we find that the Appellate Deputy Commissioner as well as the Tribunal are justified in holding that the goods sold by the assessee, namely, router, is a computer peripheral, falls under Serial No.22, Entry 68 of Part B of I Schedule of TNVAT Act, 2006. - No question of law arises - Decided against Revenue.

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• Indian Laws

• 2015 (4) TMI 154
  Challenge to appointment of some of the original respondents as Ministers to the Council of Ministers of Union of India despite their involvement in serious and heinous crimes - Purity of election - Criminalisation of politics - Doctrine of implied limitation - concept of constitutional trust in the Prime Minister - Principle of constitutional silence - Held that:- Prime Minister has been regarded as the repository of constitutional trust. The use of the words "on the advice of the Prime Minister" cannot be allowed to operate in a vacuum to lose their significance. There can be no scintilla of doubt that the Prime Minister's advice is binding on the President for the appointment of a person as a Minister to the Council of Ministers unless the said person is disqualified under the Constitution to contest the election or under the 1951 Act, as has been held in B.R. Kapur's case. That is in the realm of disqualification. But, a pregnant one, the trust reposed in a high constitutional functionary like the Prime Minister under the Constitution does not end there. That the Prime Minister would be giving apposite advice to the President is a legitimate constitutional expectation, for it is a paramount constitutional concern. In a controlled Constitution like ours, the Prime Minister is expected to act with constitutional responsibility as a consequence of which the cherished values of democracy and established norms of good governance get condignly fructified. The framers of the Constitution left many a thing unwritten by reposing immense trust in the Prime Minister. The scheme of the Constitution suggests that there has to be an emergence of constitutional governance which would gradually grow to give rise to constitutional renaissance. It is worthy to note that the Council of Ministers has the collective responsibility to sustain the integrity and purity of the constitutional structure. That is why the Prime Minister enjoys a great magnitude of constitutional power. Therefore, the responsibility is more, regard being had to the instillation of trust, a constitutional one. It is also expected that the Prime Minster should act in the interest of the national polity of the nation-state. He has to bear in mind that unwarranted elements or persons who are facing charge in certain category of offences may thwart or hinder the canons of constitutional morality or principles of good governance and eventually diminish the constitutional trust. We have already held that prohibition cannot be brought in within the province of "advice" but indubitably, the concepts, especially the constitutional trust, can be allowed to be perceived in the act of such advice. Thus, while interpreting Article 75(1), definitely a disqualification cannot be added. However, it can always be legitimately expected, regard being had to the role of a Minister in the Council of Ministers and keeping in view the sanctity of oath he takes, the Prime Minister, while living up to the trust reposed in him, would consider not choosing a person with criminal antecedents against whom charges have been framed for heinous or serious criminal offences or charges of corruption to become a Minister of the Council of Ministers. This is what the Constitution suggests and that is the constitutional expectation from the Prime Minister. It is not for the court to issue any direction to the Prime Minister or the Chief Minister, as the case may be, as to the manner in which they should exercise their power while selecting the colleagues in the Council of Ministers. That is the constitutional prerogative of those functionaries who are called upon to preserve, protect and defend the Constitution. But it is the prophetic duty of this Court to remind the key duty holders about their role in working the Constitution. Hence, I am of the firm view, that the Prime Minister and the Chief Minister of the State, who themselves have taken oath to bear true faith and allegiance to the Constitution of India and to discharge their duties faithfully and conscientiously, will be well advised to consider avoiding any person in the Council of Ministers, against whom charges have been framed by a criminal court in respect of offences involving moral turpitude and also offences specifically referred to in Chapter III of The Representation of the People Act, 1951 - Petition disposed of.

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• 2015 (4) TMI 153
  Eviction of petitioner - Procedure of law not followed - Held that:- shop room in question was given to one Mr. Harjit and the petitioner was only looking after the said shop room. - petitioner is not the licensee in respect of the shop room in question, the present writ petition is not maintainable. - Decided against appellant.

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