Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 7, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Companies Law
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F. No. 1/19/2013-CL-V - dated
4-4-2016
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Co. Law
Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Amendment Rules, 2016
Income Tax
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S.O. 1243(E) - dated
29-3-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Chil Chil Asian Mission Society, Kanglatongbi, Manipur
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S.O. 1242(E) - dated
29-3-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Bharat Sevashram Sangha, Kolkata
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S.O. 1241(E) - dated
29-3-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Archana Educational Trust, Mumbai
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S.O. 1240(E) - dated
29-3-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Basavanagudi Aquatic Centre, Bangalore
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S.O. 1239(E) - dated
29-3-2016
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sarvodaya Vikas Samiti, Allahabad, Uttar Pradesh
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S.O. 1103(E) - dated
15-3-2016
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IT
U/s 35AC - Notifies the various institutions Approved by the National Committee
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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TDS u/s 194J - Tribunal was justified in law in holding that the amounts paid to the doctors is not in the nature of "salary" and liable for deduction of tax at source as required under section 194J as "Professional fees" even when assessee engaged the doctors as consultants - HC
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Levy of penalty on disallowances on account of provision for gratuity - It s not a case of voluntary and suo moto disclosure of income. It is also not a case where the mistake can be said to be bonafide, as relevant evidences in the shape of ledger accounts were not furnished - levy of penalty confirmed - AT
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Addition u/s 68 - AOP - As in the eyes of law there is no evidence which the assessee has shown about the legal existence of an AOP. Income-tax Dpartment can assess an entity as an AOP only if it has a separate PAN and there is no mechanism in the statute for including the income of an AOP along with return of an individual. - AT
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State authorities should not raise technical pleas if the citizens have a lawful right, which is being denied to them merely on technical grounds. The state authorities cannot adopt the attitude which private litigants might adopt - AT
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Transfer pricing adjustment - adjustment in respect of international transaction relating to export of manufactured IC engines by considering the difference in the gross margin - Net profit margin of controlled transactions has to be compared with net profit margin of uncontrolled transactions - AT
Customs
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Rejection of refund claim - Reimbursement of Central sales Tax - Inter-state purchase made by an EOU from another EOU - If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be held to be bad in law. - HC
Indian Laws
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Cost accountant v/s Chartered Accountants - nature of work - amendment to Section 63 of the Karnataka Co-operative Societies Act, 1959 - auditing of accounts by Cost Accountants of a firm of Cost Accountants permitted. - Amendment sustained - HC
Service Tax
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Imposition of penalties - the consultant, upon handing over the Service Tax matter defrauded appellant by showing the payment of entire Service Tax liability by forged challans - penalties waived. - AT
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Rejection of refund claim - input services used in export of goods - when the goods were exported under claim of drawback, the impugned refund claims would not be admissible by virtue of proviso (e) to Notification No.41/2007-ST - AT
Central Excise
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A litigant approaching the Court with a perceived grievance according to his understanding has a right to be told why his perception was not correct. He cannot be confronted with the conclusions without telling him the reasons. - HC
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Rebate claims - Duty was paid on exempted goods - The amount so paid cannot be treated as duty under Section 3 of the Act and therefore, not admissible as rebate under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-1-2004 - CGOVT
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CENVAT credit - inter unit transfer of credit - assessee rightly utilized the Cenvat Credit transferred by DT units, for clearance of the goods for home consumption during the period April 2005 to Sept. 2009 as the Assessee was holding single registration certificate during the said material period - AT
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Cenvat Credit on the goods imported under Duty Free Import Authorization (DFIA) Scheme - he appellants' availment of Cenvat Credit in respect of SAD paid on the import made under DFIA becomes legal and correct - AT
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Change of classification - manufacturer of home appliances like, Mixer Grinder, Juice Extractors, Hand Blenders etc. - the said mixer would be classifiable under heading 8509 - AT
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CENVAT credit on the input used by the jobworker for the manufacture of goods on jobwork basis under Notification No.214/86-CE dated 25.03.1986 - Rule 6(3)(b) which is applicable only on the clearance of exempted goods shall not apply in the case of the goods manufactured on jobwork basis under Notification 214/86 - AT
VAT
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Input tax credit - the case of stock transfer is squarely covered by the proviso and no input tax credit is vouchsafed in respect of packing materials used in connection with finished products, which are stock transferred outside the State in course of inter-State trade or commerce - HC
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Attachment of personal property - Since the source of acquisition of property cannot be traced to the funds of the company and since the dues are of a Private Limited company, independent properties of the Director cannot be attached - HC
Case Laws:
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Income Tax
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2016 (4) TMI 221
Entitled to deduction under Section 80IA - Held that:- It is abundantly clear from Sub-Section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that Sub-Section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 801A in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied.
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2016 (4) TMI 220
Offenses punishable under Sections 276C(1) and 277 of Income Tax Act 1961 - non-disclosure of fixed deposits - Held that:- In this case there is non-disclosure of fixed deposits of ₹ 9.62 crores and the interest earned on it for three consecutive financial years. It is only when the authorities came to know about the concealment and the authorities issued notice the petitioner filed revised returns and paid the tax. Had it not been detected by the income tax authorities, the said income would not have come to limelight. Be that as it may, the Magistrate has taken cognizance for the offences under Sections 276C(1) and 277 of the Income Tax Act, 1961. The petitioner appeared before the Magistrate, the evidence has commenced. If at all the petitioner has to establish his innocence during the course of the trial. Therefore, it cannot be said that the continuation of the proceedings would amount to abuse of process of the Court.
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2016 (4) TMI 219
Claim for deduction under Section 35(2AB) - assessing authority adopted the net expenditure for allowing the weighted deduction and same was done on the basis of DSIR guidelines - Tribunal setting aside the computation made by the assessing authority in respect of claim for deduction under Section 35(2AB) - Held that:- Tribunal has proceeded on the premise that when the regular work is in the nature of R&D work done and sold, it becomes a business income and chargeable as business income. It is only when the assets acquired in the process of carrying on R&D work, if they are sold, such realization would go to reduce the expenditure of scientific research.In our view, the approach to the issue considered by the Tribunal is appropriate. In any case, no substantial question of law would arise for consideration as canvassed. Addition u/s 14A r.w.r. 8D - Held that:- Disallowance of interest expenses in the present case made under Rule 8D(2)(ii) of the I.T. Rules should be deleted as the Hon'ble Bombay High Court in Reliance Utilities & Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT ) has held that where the interest free funds far exceed the value of investments, it should be considered that investments have been made out of interest free funds and no disallowance u/s. 14A towards any interest expenditure can be made. This view was again confirmed by the Hon'ble Bombay High Court in CIT v. HDFC Bank Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT ] wherein it was held that when investments are made out of common pool of funds and non-interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made.
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2016 (4) TMI 218
Reopening of assessment - AO completed the original assessment under Sections 8(2) read with 15 of the Interest Tax Act, 1974 on 7.3.2000, for the assessment years 1996-97 and 1997-98 - Held that:- The nature of the omission on the part of the assessee was indicated in the notice for reopening the assessment as an omission to indicate the nature of the discounting charges. The amount, in respect of which, the assessee claimed exemption, related to discount on treasure bills. The Department claimed that under Section 2(7) of the Interest Tax Act, discounting charges alone are excluded from the definition and that a discount on treasure bills does not stand excluded. The Department perceived that this distinction between a discount on treasure bills and discounting charges was omitted to be brought to the notice of the Assessing Officer, entitling the Assessing Officer to reopen the assessment after four years on the ground of failure to furnish full and true information. Admittedly, the assessee made a disclosure about the amount, in respect of which, they were making a claim under the heading 'bill discounting charges'. Since it is a scrutiny assessment, the Assessing Officer was obliged to consider the accounts, documents and evidence before passing the orders of assessment. Normally, it is presumed that an officer entrusted with a statutory function, carries it out in accordance with law unless it is assailed to be not so. It is not the case of the Department that there was a failure on the part of the Assessing Officer to discharge his duties under Section 8(2) properly. In such circumstances, it must be presumed that there was no omission on the part of the assessee or that there was an omission on the part of the Assessing Officer to scrutinize the accounts as per Section 8(2). In all other cases, reopening is not possible. - Decided in favour of the assessee
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2016 (4) TMI 217
TDS u/s 194J - ITAT held that the amounts paid to the doctors is not in the nature of "salary" and liable for deduction of tax at source as required under section 194J as "Professional fees" - Held that:- Tribunal was justified in law in holding that the amounts paid to the doctors is not in the nature of "salary" and liable for deduction of tax at source as required under section 194J as "Professional fees" even when assessee engaged the doctors as consultants and as per the agreements, these consultants would be governed by the rules and regulations of service, conduct rules, discipline etc., which proved that there existed an employee-employer relationship. All cases the correct method of approach is whether having regard to the nature of work there was due control and supervision by the employer. The receipt of remuneration for holding an office does not necessarily gives rise to relationship of master and servant between the holder of office and the person who pays the remuneration. Whether a person is a servant or an agent would be determined by the duties of employee, the nature of business, terms of his employment/engagement and kind of supervisory control over his work. A person who is engaged to manage the business may be servant or agent, according to the nature of his service and authority of his employment. The profession involves occupation required purely intellectual or manual skill, as held by the Hon'ble Supreme Court in the case of CIT Vs Mohandas (1965 (11) TMI 33 - SUPREME Court ). As decided in Elbit Medical Diagnostics Ltd. case [2010 (2) TMI 1163 - KARNATAKA HIGH COURT] while the duration spent at the premises by itself is not the criteria to come to the conclusion that there is a employer – employee relationship the appellant commissioner – the Tribunal which had occasion to examine the contract having opined that it is more in the nature of payment of contractual services and not in the nature of employment there is no justifiable or worthwhile reason made out to accept the submissions or to interfere with such finding. - Decided against revenue
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2016 (4) TMI 216
Deduction u/s. 54F - Tribunal was right in allowing assessee claim for deduction u/s. 54F especially when assessee owned two properties on the date of transfer of original assets and income from two properties were chargeable to tax under the head income from house property - Held that:- It is not a case of the Department that the case of the assessee would fall under any one of the three sub-clauses of clause (a) together with clause (b). The case of the Department is that the assessee had income from a commercial property that was treated as income from house property. To be precise, the assessee had one residential house in Chennai, one commercial flat in Chennai, from out of both of which, he was deriving a total income of ₹ 4,25,131/-. He also had a land in Neelankarai which was sold and a house property was purchased in Kodaikanal. Under Section 22 of the Act, any income from any buildings, irrespective of which the use which has to be treated under the head "income from house property". Therefore, the Revenue cannot take above all the terminology use in clause (b) under the proviso. This is a mistake into which the Revenue has fallen to treat the case of the assessee as falling within the purview of the proviso. The facts of the case as narrated in the order of assessment would show that the assessee did not own more than one residential house other than the new asset on the date of transfer of the original asset so as to fall clause (a)(i) of the proviso. The assessee did not purchase any residential house other than the new asset within one year of the transfer of the original asset. Therefore, his case did not also fall within clause (a)(ii) of the proviso. The assessee did not construct any residential house other than the new asset, so as to fall under clause (a)(iii). Therefore, the assessee did not satisfy any of the three sub-clauses contained in clause (a). Hence, the question of applying clause (b) of the proviso independent of the clause (a) of the proviso did not arise. - Decided in favour of the assessee
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2016 (4) TMI 215
Disallowance of interest on timeshare deposits - Held that:- We find that as per the orders of the Hon’ble Bombay High Court, Himco had amalgamated with the assessee, that it had taken over all the liabilities and assets of amalgamated company, that both the companies were following different system of accounting, that following the directions of the Hon’ble High Court and the mandate of the Act and the Companies Act the assessee had made provision for liability towards interest accrued on 25% of refundable deposits of 30/06/2005, that the assessee had given proper treatment to the amount in question in its books of accounts. In our opinion, if a liability can be ascertained on a scientific basis then it cannot be termed a contingent liability. We have also taken cognizance of the fact that the amalgamation scheme was approved by the Hon’ble Bombay High Court and assessee had Acted in pursuance of the order of the court. The payment of interest payable to the sole selling agents, for, the parties must be assumed to be in full knowledge of the affairs of the erstwhile firm. Therefore, the liability to pay the sum was a trading liability and was allowable as a deduction. - Decided in favour of assessee Disallowance u/s 14A - quantification of disallowance - Held that:- We find that in the case of Godrej Agrovet (2014 (8) TMI 457 - BOMBAY HIGH COURT ), the Hon’ble Court had held that percent of exempt income would constitute a reasonable estimate for making disallowance in the years earlier to 2008- 09. Following the same, we direct the AO to restrict the disallowance to 2% of the exempt income.- Decided in favour of assessee in part Determination of income as per the provisions of section 115 JB - Held that:- We find that the AO not given any reasons for adding certain items while determining the income u/s. 115JB of the Act, that the FAA has rejected the claim of the assesse. He had not adjudicated the issue of accrued interest calculated on the interest bearing deposits to time sharing-members for the purposes of calculating the book profit. The assessee had made submissions in that regard. Even if it was a new claim, the FAA was supposed to decide the issue for computing book profit for the year under consideration. Though the AO cannot accept a new claim without a revised return of income. But, the appellate authorities are not bound by such restrictions. The FAA should have decided the issue on merits. Therefore, we are of the opinion that, in the interest of justice, matter should be restored back to the file of the FAA for adjudication of the issue raised by the assessee. Here, we would like to mention that allowability of expenditure u/s. 37 has been dealt by us , while deliberating upon the ground no. 1. As far as FBT is concerned we want to mention that the CBDT, vide its circular no. 8/2005 (F. No. 142/21/2005TPL, dtd. 29. 08. 2005) has dealt the issue in answer to question no. 103. It has been clarified by the Board that FBT was an allow able deduction in the computation of books profit u/s. 115JB of the Act. Considering the above facts, we are reversing the order of the FAA. - Decided in favour of assessee in part
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2016 (4) TMI 214
Penalty under section 271(1)(c) - adjustment to the arm's length price - Held that:- Assessee has furnished all relevant information in respect of international transaction with A.E. in the audit report as well as transfer pricing study. In fact, the Transfer Pricing Officer himself admits that the assessee furnished the updated margins of the comparables. The Transfer Pricing Officer has not found any of the information submitted by the assessee misleading or unreliable. Therefore, in our view, a case of furnishing of inaccurate particulars of income has not been made out to justify imposition of penalty under section 271(1)(c). Addition made under section 40(a)(ia) - Held that:- On a perusal of the provisions contained under section 144C, it is to be noted that the as per sub–section 3, if the assessee intimates the Assessing Officer the acceptance of variation made in the draft assessment order or no objections are received within the period prescribed under sub–section (2), Assessing Officer shall complete the assessment on the basis of draft order. However, in case, the assessee raises objection against the draft assessment order, as per sub–section (13) of section 144C, the Assessing Officer shall pass the final assessment order in conformity with the direction of the DRP without providing any further opportunity of being heard to the assessee. Thus, the final assessment order as contemplated under section 144C(13) is only to implement the directions of the DRP. Therefore, in our view, if the Assessing Officer has not initiated penalty proceedings under section 271(1)(c) in respect of a particular item of addition in the draft assessment order, he cannot do so in the final assessment order. Thus, in such a situation, if at the stage of final assessment, the Assessing Officer initiates penalty proceedings under section 271(1)(c) against additions not objected / contested before DRP, assessee would be put to a very precarious position, because in terms of section 144C(13), final assessment order has to be passed without affording any further opportunity of being heard to assessee. Therefore, on a harmonious construction of relevant statutory provisions, we are of the view, if the Assessing Officer did not initiate proceeding for imposition of penalty under section 271(1)(c) in respect of a particular addition in the draft assessment order, he cannot do so in the final assessment order.
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2016 (4) TMI 213
Unexplained share capital u/s 68 - increase in share capital - Held that:- It is seen that the AO has not verified the details furnished by the assessee and I.T. records of the shareholders/investing companies. The averments of the assessee before the AO were not controverted by the AO. The assessee has discharged its burden of providing basic details which were required for verification to fulfill the conditions as laid down by higher judicial authorities for examining the issue u/s. 68 of the Act It is seen that in the present case, the identities of the share applicants are not in dispute. The Hon’ble Supreme Court in case of Divine Leasing & Finance Ltd. (2007 (11) TMI 627 - SUPREME COURT ) has held that if the share application money is received by the assessee company even from the bogus shareholders whose names are given to the AO then the Department is free to proceed to reopen their individual assessments in accordance with law. The addition in regard to the share capital cannot be treated as the undisclosed income of the assessee if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO. Further the Hon’ble Supreme Court has categorically held that the Revenue is free to proceed to reopen the individual assessments of such alleged bogus shareholders. In these circumstances, respectfully following the decision of the Hon’ble jurisdictional High Court as also Hon’ble Supreme Court referred to supra, the addition made by the AO and deleted by the learned CIT (A) represented by the increase in share capital of the assessee cannot be treated as unexplained cash credits in the hands of the assessee. - Decided in favour of assessee
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2016 (4) TMI 212
Penalty levied under section 271(1)(c) - sales tax exemption/ subsidy undisclosed - Held that:- Assessee has made sufficient disclosure of the fact of claim of sales tax exemption/ subsidy before the Assessing Officer. In the same set of facts, the assessee is interpreting, benefit of sales tax as subsidy or incentive of capital nature, whereas the Revenue and the appellate authorities including Tribunal has held the benefit of sales tax as revenue in nature. But, we don’t find that the assessee has concealed or furnished inaccurate particulars of income on the issue of claim of sales-tax exemption/subsidy. In the case of CIT versus Zoom communication (p) Ltd (2010 (5) TMI 34 - DELHI HIGH COURT ) it is held that if the assessee makes a claim which is not only incorrect in law but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable for penalty under section 271(1)(c) of the Act , but in the facts of the case the claim is on the basis of certain notifications and the assessee has furnished explanations which cannot be said to malafide . In the case of CIT versus HCIL Kalindee Arsspl (2013 (8) TMI 245 - DELHI HIGH COURT ) also the Hon’ble court has held that merely because the assessee complied with the statutory procedural requirement of filing the prescribed form and certificate of the chartered accountant, cannot absolve the assessee of its liability if the actor attempt in claiming the deduction was not bonafide. The facts of the case in hand are different from the facts of the case of CIT versus HCIL Kalindee Arsspl( supra). In the circumstances, we are of considered opinion, that no penalty for concealment or furnishing of inaccurate particulars of income on the issue in dispute can be levied under section 271 (1)(c) of the Act. - Decided in favour of assessee. Levy of penalty on disallowances on account of provision for gratuity - Held that:- As regards the addition on account of provision for gratuity it is an admitted position that this sum was not added back in the original computation of income. It is also apparent that the aforesaid mistake was detected only in the revision proceedings u/s 263 of the Act; when assessee was directed to reconcile the difference of ₹ 1.81 crores under the head provision for “gratuity” between outstanding as per balance sheet and audit report. It is also matter of record that the notice u/s 263 of the Act was dated 3.1.2013 and omission to make the aforesaid addition was admitted only finally on 15.10.2013 u/s 143(3)/263 of the Act. Thus it s not a case of voluntary and suo moto disclosure of income. It is also not a case where the mistake can be said to be bonafide, as relevant evidences in the shape of ledger accounts were not furnished in the revision proceedings or reassessment proceedings. In such circumstances we cannot regard the mistake to be an inadvertent mistake or simple case of oversight. We therefore find justification in the imposition of penalty u/s 271(1)(c) of the Act - Decided against assessee. Levy of penalty u/s 271(1)(c) - additional deprecation claimed by the appellant u/s 32(1)(iia) in respect of computer software ‘Primevera’ - Held that:- On consideration of the facts we hold adequate and necessary disclosure in accordance with law were made by the appellant company in respect of claim of additional depreciation in the audited financial statement, tax audit report and return of income. Thus in the above back ground denial of claim of depreciation tantamount to an legal inference adopted on the facts by the assessee but that cannot be a ground to hold that assessee has either concealed income or furnished inaccurate particulars of income. As in the case of CIT v Rubber Udyog Vikas (P) Ltd. [2011 (2) TMI 858 - PUNJAB AND HARYANA HIGH COURT] has held that making an incorrect claim would not tantamount to furnishing of inaccurate particulars unless it was established that the assessee had acted with a mala fide intention or had claimed deductions being aware of the well settled legal position - - Decided in favour of assessee.
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2016 (4) TMI 211
Penalty u/s 271(1)(c) - loss on sale of fixed asset in its books of accounts and the same was shown in the audited profit and loss account - Held that:- As during preparing computation of income loss on sale of fixed assed being disallowable expenditure was not added back to the profit as per profit and loss account resulting in showing total income less by ₹ 2,07,551/-. On coming across this fact during assessment proceedings itself assessee accepted the mistake and agreed for adding the amount of ₹ 2,07,551/- to the total income. Assessing Officer went ahead imposing penalty u/s 271(1)(c) of the Act at ₹ 70,550/- for concealment of income and furnishing of inaccurate particulars of income. We also find that assessee is a regular income-tax payee and books of accounts are audited u/s 44AB of the Act and income has been declared. Loss on sale of fixed asset at ₹ 2,07,551/- was shown in audited profit and loss account and this impugned loss has been the result of sale of fixed asset and so this transaction certainly has travelled in the books of account and got placed in the audited financial statement and, therefore, there cannot be any concealment of particulars in this case. We also find that Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT (2012 (9) TMI 775 - SUPREME COURT ) has dealt similar issue and while adjudicating the issue provisions towards payment of gratuity which was not allowable expenditure was not added back to the total income even if indicated in the tax audit report and their lordships have decided the same in favour of assessee
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2016 (4) TMI 210
Addition u/s 68 - Association of persons (AOP) or not - CIT(A) treating the cash as loan/deposits and adding to total income as non genuine loan/deposit u/s 68 - Held that:- As in the eyes of law there is no evidence which the assessee has shown about the legal existence of an AOP. Income-tax Dpartment can assess an entity as an AOP only if it has a separate PAN and there is no mechanism in the statute for including the income of an AOP along with return of an individual. Therefore, we do not find any basis in the submission of ld. AR that there actually existed any AOP and therefore, the cash received by the assessee from his relatives cannot be treated as a contribution by the relatives towards the share trading business under a common AOP. The assessee has relied on various judicial pronouncements. However, the facts discussed in these judgments are different from the facts of the case of assessee and therefore, we dismiss the contentions of assessee for accepting the existence of an AOP. We find that assessee has not been able to prove the identity, creditworthiness and genuineness of the transactions of cash loan received from the above three parties and merely seems to be an adjustment to prove the source of cash in the books of account. For the lack of requisite evidences and information, we are unable to accept the contentions of ld. AR and we are of the opinion that ld. Assessing Officer has rightly made the addition u/s 68 of the Act on account of cash credit for the sum received from above said three parties. - Decided against assessee.
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2016 (4) TMI 209
Penalty u/s 271(1)(c) - TPA adjustment - disallowance in the case of an assessee who has entered into an “international transaction” defined in Section 92B - Held that:- In the present case it is found that given the clear indication of compliances required by law, there is in fact a clear evidence that disclosures made by the assessee were in good faith and with due diligence and there is absence of wilful or malafide effort to conceal and defraud the Revenue. Due diligence presupposes making all possible efforts/endeavours which a prudent man would have done in the given circumstances or a process whereby one gathers facts to make an informed choice on a matter. Good faith on the other hand is an abstract and comprehensive term. It requires that the action should be honest and encompasses a sincere belief or motive without any malice or the desire to defraud others. It is drawn from the Latin term bonafide and Courts use the term interchangeably. However, in the present case the twin requirements of conjoint compliances presuppose that the two terms due diligence and good faith cannot be used interchangeably or independent of one another. Thus the acceptable standards laid down by the statute are that due and diligence efforts made by a prudent man in a given situation have also to be in good faith as all due diligent efforts per se may not be in good faith. Conversely an act done in good faith with honesty and sincerity per se is not sufficient as acts done in good faith protects acts of negligence. However, the act of computing a transaction is to be done with due diligence i.e. strictly in accordance with the provisions contained in section 92C and in the rules framed there under and thus necessarily in the manner prescribed therein while so computing no negligence even in good faith is legally acceptable. Hence the statute has mandated that not only the assessee is required to act in due diligence but it must also act in good faith. The requirements are very stringent and required to be met scrupulously. In the facts of the present case, we find that the bonafide of the assessee cannot be doubted. To sum up it is seen that at the relevant point of the time when the TP Study was filed there was a debate on the issue of single year data and multiple year data. Considering the change of method from RPM to TNMM, we find that the assessee’s explanation that the method was changed from TNMM from 2005-06 AY to RMP in 2006-07 & 2007-08 AY on the ground that there was only one segment in the year and accordingly the most appropriate method selected was the RPM. Notwithstanding the fact that the said approach was not approved by the TPO, it does not detract from the plausible claim that in view of only one segment i.e. the distribution segment the method selected in good faith and due diligence was RPM. Even otherwise we find that the assessee at the time of filing its TP study could not anticipate that despite there being only one segment, the TPO would still insist on holding that TNMM would be the most appropriate method relying on the past position where change in facts is an admitted position. The due diligence standards assiduously required to be adhered to in the present case are standards of reasonable and ordinary diligence. But extraordinary and extreme measures of care, caution and prudence insomuch as to anticipate a vigilance to the extent that despite a plausible explanation on facts the most appropriate method selected by the assessee would still be disturbed by the TPO, is beyond all the possible shades of due diligence expected from an assessee at the time of computing its transaction. - Decided in favour of assessee.
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2016 (4) TMI 208
Income received - business receipts OR royalty/fee for technical services - PE in India - DTAA between India and UK - Held that:- Decide the issue of the fee/income received by the assessee in favour of the assessee with a direction to the AO to treat the receipts of the assessee as business income of the assessee. Since the assessee has admitted that it has a PE in India, hence the AO is directed to consider the taxability of the receipts as business income of the assessee as per the provisions of DTAA between India and UK.
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2016 (4) TMI 207
Deduction of bad debts disallowed - Held that:- The claim on account of bad debts written off is now settled on the basis of judgment of the Hon'ble Supreme Court in the case of T.R.F Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT]. There is no dispute on facts that bad debts have been written off. Thus, as per law, the assessee is undisputedly eligible for the claim. The only hurdle created by the AO was that since the claim was not made in the return of income, therefore, the claim could not have been allowed to the assessee. We do not respectfully agree with the views of the AO. In our considered view, if the assessee is entitled for a deduction, as per law and facts, same should not have been denied to itr merely because the claim was not made in the return of income. That would, in our considered opinion, amount to collecting taxes without authority of law. It is further noted by us that it is well settled position of law that assessee can resile from its return of income during the course of assessment proceedings if he is able to show that the return filed was not in accordance with the law or if some income was wrongly offered to tax, which was as per law, not liable to tax, or if the assessee finds that there was omission to make a claim in the return of income. The only precaution to be taken here would be that fresh claim of the assessee should be strictly within the four corners of law. If it is so, the claim made even for the first time during the assessment proceedings should not be rejected. In our view, there are no estoppels on legal issues under the income tax law. Even if, assessee agrees or consents for something contrary to law, the A.O. is obliged under the law, to discharge his duty of making fair assessment of income and to compute amount of tax payable as per law. As per Article 265 of the Constitution of India, "No tax can be collected except by authority of law". Hon'ble Supreme Court in the case of Ramlal vs Rewa Coalfield Ltd (1961 (5) TMI 54 - SUPREME COURT ), held that the state authorities should not raise technical pleas if the citizens have a lawful right, which is being denied to them merely on technical grounds. The state authorities cannot adopt the attitude which private litigants might adopt. - Decided in favour of assessee.
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2016 (4) TMI 206
Penalty u/s 271(1)(C) - income surrendered during the course of search - Held that:- any observation or finding recorded by the Assessing Officer in the assessment orders for all the four years under consideration, from which the satisfaction as required to be arrived at by him to initiate penalty proceedings under section 271(1)(c) is discernable. However, he has not been able to pinpoint any such observation or finding recorded by the Assessing Officer in this context. A perusal of the assessment order also shows that there is no such observation or finding given by the ld. CIT(Appeals) from which the satisfaction as required to be arrived at by the Assessing Officer is discernable. The decision of the Coordinate Bench of this Tribunal in the case of Suvaprasanna Bhattacharya (2015 (12) TMI 43 - ITAT KOLKATA) thus is clearly applicable in the present case and respectfully following the same, we hold that in the absence of the requisite satisfaction recorded by the Assessing Officer in the assessment order, the initiation of penalty proceedings itself was bad in law and the penalties imposed in pursuance of such initiation are not sustainable. It is also observed that the income surrendered during the course of search was declared by the assessee in the returns of income filed for three years under consideration, i.e. A.Y. 2004-05, 2005-06 & 2006-07 in response to the notices issued by the Assessing Officer under section 153A and the income so declared was accepted by the assessee without making any further addition. Thus penalty cancelled - Decided in favour of assessee
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2016 (4) TMI 205
Eligibility of deduction u/s 80IB - whether CIT(A) is justified in treating WBIHDCO as Local Authority for allowing deduction u/s 80IB although it does not fall under the categories as defined in Section 10(20) of the I.T.Act? - Held that:- The order of the CIT(A) does not call for any interference. The only reason assigned by the AO for not allowing deduction u/s.80-IB(10) of the Act was since the housing project in question was approved by WBHIDCO and since income of WBHIDCO is not covered by Explanation below section 10(20) of the Act and the housing project of the Assessee, it cannot be said that the housing project was approved by local authority and therefore the deduction u/s.80-IB(10) of the Act is not admissible. As rightly contended by the Assessee and held by the CIT(A), the explanation below Sec.10(20) of the Act is only for the purpose of Clause (20) of Sec.10 and this has been made very clear in the said explanation itself. It cannot therefore be extended to the provisions of Sec.80-IB(10) of the Act. WBHIDCO has been appointed as a Planning authority in respect of the Planning area of Rajarhat pursuant to notification issued under the WB Town and Country (Planning & Development) Act, 1979. For the purpose of Sec.80-IB(10) of the Act it is natural that the authority in charge of planned developed in an area should be the proper authority to sanction plans for housing project keeping in view the need for planned and organized development. We are of the view that the AO misdirected himself in making reference to provisions of Explanation to Sec.10(20) of the Act which defines the term "Local Authority" only for the purpose of the purpose of Clause (20) of Sec.10. For the reasons given above, we confirm the order of the CIT(A) and dismiss the appeal by the Revenue. - Decided in favour of assessee
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2016 (4) TMI 204
Transfer pricing adjustment - adjustment in respect of international transaction relating to export of manufactured IC engines by considering the difference in the gross margin earned by the assessee from sale of IC engines in the domestic market and gross margin earned by the assessee from export of IC engines to AEs - CIT(A) deleted the addition - Held that:- We find no infirmity in the order of the CIT(A) who has decided the issue as per the provisions of Rule 10B(e) as well as para 3.26 of the OECD guidelines as well as various other decisions according to which net profit margin of controlled transactions has to be compared with net profit margin of uncontrolled transactions. The Ld. Departmental Representative could not controvert the legal and factual findings given by the CIT(A). In absence of any distinguishable features brought before us by the Ld. Departmental Representative we do not find any infirmity in the order of Ld.CIT(A) deleting the addition. Accordingly, the same is upheld. Since we are dismissing the ground raised by the revenue by upholding the order of CIT(A) on the issue of net margin, the other arguments of the assessee are not considered being academic in nature. Grounds raised by the revenue are accordingly dismissed. Disallowance u/s 14A - Held that:- We find the assessee during the impugned assessment year has earned interest and dividend income of ₹ 31,41,04,213/- which it claimed as exempt. We find the AO applying the provisions of Rule 8D disallowed an amount of ₹ 40,36,560/-. In appeal the Ld.CIT(A) following the decision of Hon ble Bombay High Court in the case of Godrej and Boyce Mfg. Company Pvt. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) deleted the addition holding that provisions of Rule 8D are prospective in nature and therefore are applicable to A.Y. 2008-09 and on onwards. Since the assessment year involved in the impugned appeal is A.Y. 2005-06, therefore, no disallowance is called for under provisions of Rule 8D as the same is not applicable for the impugned assessment year. However, it cannot be said that no administrative expenses have been incurred by the assessee for earning the huge tax free dividend income. Considering the totality of the facts of the case, disallowance of an amount of ₹ 2 lakhs, in our opinion, will meet the ends of justice Adjustment on account of export of IC engines of LHP Division to AEs - Held that:- The lower authorities have not properly considered the submissions made before them. In our opinion, the matter requires revisit to the file of the TPO with a direction to give another opportunity to the assessee to demonstrate as to how the export sales made to AEs is at Arm s length. The ground raised by the assessee in the CO is accordingly allowed for statistical purposes.
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2016 (4) TMI 203
Disallowance of Book Distribution expenses - Held that:- AO disallowed the expense in relation to sample books distribution on the basis of non-availability of supporting documents at the time of assessment proceedings. The assessee was able to produce only the receiving registers duly signed by the recipients to whom the specimen copies were given. In the absence of documentary evidence the AO disallowed such expense on the basis of reasonable estimate. We further find that such expense claimed by assessee for distributing of sample books are not supported from the bills & vouchers. However, Ld. AR was able to give the registers, wherein the details of recipients of sample books were contained. We also find that disallowance was made by AO @ 35% of total book distribution expense which has been reduced by Ld. CIT(A) to 15%. From the order of lower authorities we find that that the nature of the expenses has not been doubted but the supporting expenses vouchers have not been produced, so the disallowance was made on estimated basis. No comparison of such expenses claimed by the assessee in the preceding years or subsequent years relevant to the year under consideration has been furnished. Considering the fact regarding the importance of distribution of sample books and totality of the claim of assessee we further restrict the distribution of such expenses to the extent of 5%. Accordingly, we direct the AO to re-compute the disallowance of sample books distribution expenditure @ 5% of the total expense incurred by assessee. - Decided partly in favour of assessee Disallowance of carriage inward expense and carriage outward expenses - Held that:- It is only possible to make such payments in cash and not through any banking channel. Also on the reverse side of vouchers the names of coolies/transports to whom payment were made put their signatures/thumb impressions. Evidencing the genuineness of the expense, sample copies of debit vouchers relating to 'carriage inward' and 'carriage outward' enclosed at page No. 46 to 89 of the paper book is enclosed. As find from the chart given by Ld. AR in relation to above stated expenses that assessee has been incurring such expenses for the above stated activities and no disallowance has been made in the past. Besides, this, we find the amount incurred by assessee is meager. Considering the submission of Ld. AR and totality of the facts, we reverse the orders of authorities below and delete the additions made by AO.- Decided in favour of assessee Disallowance of "Shree Ganesh Puja and "Bengali New Year Celebration" expenses - Held that:- AO disallowed such expenses on ad hoc basis @ 25% of the above-stated expenses. However, we find from the details of expenses given by assessee in the form of a comparative chart that such expenses have been incurred by assessee in earlier year and no disallowance have been made on this account. Therefore, in order to maintain the consistency of such expenses we deem it fit to reverse the orders of authorities below and delete the same.- Decided in favour of assessee Disallowance of sales promotion expenses - Held that:- Assessee has been claiming these expenses in the earlier years and subsequent year to the relevant year. But no disallowance has been made in respect of the above expenses in earlier years and subsequent years to the relevant assessment year.We find that the AO has disallowed the expenses on adhoc basis due to non production of the supporting bills and vouchers. However the ld. AR before us has submitted a chart showing the comparison between the turnover and such expenses for the earlier years and subsequent year. The purpose of this comparison of expenses of various years isto justify that the assessee has been incurring such expenses consistently and no issue for the disallowance arose.In view of above and in the interest of justice we reverse the orders of authorities below and delete the addition. - Decided in favour of assessee Disallowance of canvassing charges - Held that:- The assessee has been incurring such expenses for canvassing charges for which no disallowance has been made by Revenue either in earlier year or subsequent year. Therefore to keep the consistency incurring by assessee for such expenses and considering the facts of the case, we delete the additions made by AO and confirmed by Ld. CIT(A) and AO is directed accordingly.- Decided in favour of assessee
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2016 (4) TMI 202
Transfer pricing adjustment - MAM - Held that:- To determine the ALP of the international transaction pertaining to payment of intra-group services, TNMM has to be applied following the aggregation approach as the transactions are closely linked and integral to the manufacturing operations of the assessee and therefore the determination of ALP on an aggregate basis would be more appropriate. Adjustment in connection with notional interest - Held that:- In the present case, since no income has been earned or can be said to have been earned by the assessee in respect of interest chargeable from AEs, the question of applying the provisions of section 92 of the Act does not arises. Lower authorities erred in making TP adjustment on account of notional interest on outstanding receivables from AEs and hence the assessee’s ground(s) of appeal on this issue is allowed.
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Customs
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2016 (4) TMI 186
Suspension of CHA licence - out of business for nearly 7.5 yrs - there have been delays at entry levels and during this process valuable right to livelihood of the applicant has been denied to them - Held that:- this process has taken almost four years. The issue regarding delays by the revenue impinging upon the fundamental right to livelihood of the CHA was raised. There is a total lack of responsibility and accountability on behalf of the revenue officers while conducting the proceedings under various regulations governing the CHAs. Therefore, by following the decision of coordinate bench in the case of G&S International [2015 (2) TMI 1069 - CESTAT NEW DELHI] and echoing their angst it is only suggested to the appellant to approach such fora which are endowed with the necessary powers not only to compel such public authorities to observe judicial discipline but also ensure that such public authorities are visited with appropriate consequences for such conduct.
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2016 (4) TMI 185
Rejection of refund claim - Reimbursement of Central sales Tax - Inter-state purchase made by an EOU from another EOU - Manufacture and export of injectable drugs and infusion technologies - Held that:- when the policy provides for reimbursement under paragraph 6.11, the said objective was prevented or diluted by the Appendix. The Appendix is meant for effectuating the rights contained in the policy and not to frustrate the operation of the substantive right. The Appendix should be meant only for reaching the objective and definitely should not be meant for defeating a person from getting the fruits of the substantive right provided in the policy. A procedure should not run contrary to the substantive right in the policy. Here, it is only a procedural amendment and not a policy amendment. When the policy gives a right to the petitioner for claiming refund of taxes, it cannot be prevented by making an amendment in the procedure. The petitioner can be prevented only if the policy is amended prohibiting refund of tax for the purchases made from an 100% EOU. The procedure was to be prescribed by an authority in implementing the policy and must be in consonance with the policy. If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be held to be bad in law. Since the impugned communciations are in conflict with paragraph 6.11 of the Foreign Trade Policy, the same are liable to be set aside. - Decided in favour of appellant
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2016 (4) TMI 184
Seeking direction to assess and permit provisional release of second hand Digital Multifunction print and copying machines - upon payment of applicable duties of customs on assessable value - Goods notified as restricted goods as per Notification No.35 (RE-2012)/2009-2014, importable only as against authorisation - Held that:- the Commissioners of different regions, namely, Kolkata, Mumbai, Delhi and Chennai are exercising their discretions inconsistently. Mumbai and Kolkata Commissioners are releasing the goods on deposit of customs duty and also on payment of fine under Section 125 of the Customs Act, 1962 in the identical facts, wherein the old and used digital multifunction devices with standard accessories and attachments are imported without authorisation. On the other hand, the Commissioner, Chennai is taking a contrary stand. Thus the inconsistent views while exercising discretion have led to indiscretion at the hands of the Commissioners, resulting in divergent orders being passed. It is well settled that exercise of discretion dehors proper guidelines may create sometimes discrimination and arbitrariness. As a sequitur, the Central authorities may consider issuance of proper guidelines to all Commissioners, dealing with the goods, which are imported without authorisation in respect of release of goods, subject to adjudication as contemplated under the provisions of law. Respondents shall furnish a bond for making penalty, if any found imposable on adjudication along with the customs duty. Decided against the revenue
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2016 (4) TMI 183
Challenging dismissal of appeal - Non-compliance of conditional order - Held that:- it is possible for the Tribunal to tinker with its earlier order either without an application for modification or without an application for extension of time. Many times, conditional orders are passed as self working orders. It does not mean that a conditional order, passed not as a self working order, will always remain alive to be tinkered with at any point of time, say for instance even nearly after two years. In this case, even assuming that the ratio laid down by the Calcutta High Court in the case of CCE Vs. Shree Govinddeo Glass Works Ltd [2010 (10) TMI 750 - CALCUTTA HIGH COURT] is correct, the Tribunal could not have done anything in the light of the fact that the conditional order of the Tribunal passed originally in 2009 got modified by an order of the learned Judge of this Court and it was confirmed by the Division Bench. Therefore, even if the law laid down by the Calcutta High Court is accepted by the Tribunal to reflect the correct position in law, the Tribunal could not have modified the order passed by this Court. Once a conditional order passed by the Tribunal attains a finality, the same cannot be annulled after a consequential order is passed. The conditional order was neither challenged by way of an appeal nor an application for extension of time or for modification was ever filed. The contention that no finality attaches to an interim order, cannot be accepted. In so far as the application for stay and the conditional order are concerned, it attains finality unless modified by a subsequent order on an application for extension or for modification. - Decided against the appellant
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2016 (4) TMI 182
Seeking direction for release of goods - Import of Carl Jung brand of non-alcoholic beverage since 2011 - Held that:- by following the order of this court in the petitioner's own case reported in [2016 (4) TMI 90 - MADRAS HIGH COURT], petition is disposed of.
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2016 (4) TMI 181
Seeking release and return of 1 No of Gold Bar and 3 Nos of Gold Cut Pieces - Goods possessed by the respondents and the statement taken from petitioner was not his voluntary statement and his signature was taken under threat and coercion - Held that:- it is clear that the entire Mahazar has been typed in English, however, the petitioner had signed in Tamil. Whether the contents of the Mahazar was explained to the petitioner was not mentioned in the statement. Therefore, based on the Mahazar, it cannot be stated that the petitioner had admitted, as stated by the respondents, in their Counter. When the petitioner had signed the Mahazar in Tamil, the respondents should have explained the contents of the Mahazar to the petitioner in Tamil and also recorded the same in the Mahazar. Therefore, based on the statement, recorded by the respondents alone, it cannot be said that the petitioner had admitted that he was smuggling the gold. Therefore, by following the decision of Division Bench, the petitioner can get the return of gold, on deposit of 50% of the duty for the value of Gold and on such deposit, being made, the second respondent can be directed to release the gold. - Decided in favour of petitioner
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2016 (4) TMI 180
Validity of prohibition imposed - in terms of Regulation 23 of the Customs Brokers Licensing Regulations, 2013 - Appellant cleared raw materials, which are used to manufacture drugs and pharmaceuticals without proper import licence and without clearance from the Assistant Drug Controller results in prohibiting the appellant from working in any section of Chennai Customs Commissionerate and Customs Stations under the jurisdiction of Chennai Customs Zone - Appellant contended that once the proceedings initiated by the Cochin Commissionerate had resulted only in the imposition of a penalty of ₹ 10,000/-, the order of the Chennai Commissionerate prohibiting the appellant from operating within the area of Chennai Commissionerate, cannot continue indefinitely - Held that:- it appears that the order of the Licensing Authority holding the appellant guilty of violation and imposing a penalty has been challenged by the appellant before the Tribunal. So long as that order remains final, the finding that there was violation, also remains. Therefore, the appellant can seek a review of an order of prohibition only if the finding recorded by the Cochin Commissionerate that there was a violation, is ultimately set aside. - Decided against the appellant
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Corporate Laws
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2016 (4) TMI 176
Maintainability of petition before the Company Law Board under Section 111A of the Companies Act 1956 - amalgamation - Held that:- Section 10F of the Act engulfs the requirement of the existence of the question of law arising from the decision of the CLB as an essential pre-condition for the maintainability of the appeal thereunder. Section 10F defines the parameters of inquisition by the appellate forum depending on the nature of the order impugned and the nature of the type of the order under scrutiny. When a question of law is neither raised nor considered by the appellate forum, it would not be a question arising out of its order notwithstanding that it may arise on the findings given. Only a question that has been raised before or decided by the Tribunal that could be held to arise out of this order. ( See : Purnima Manthena & Anr. Vs. Renuka Datla & Ors.[2015 (11) TMI 133 - SUPREME COURT OF INDIA ]). Therefore, this point is also a non-issue. The fact laid before the CLB was not an application simplicitor to hold an inquiry as it deems fit to find out whether there has been a contravention of any law for the time being in force and direct any company to rectify its register or record. The question that was required first to be established was whether :- (a) The respondents 1 to 3 and 8 to 11 had any obligations to the erstwhile UWB ; (b) Whether the respondents have committed a breach of those obligations ; and if answer to these two issues are in the affirmative ; (c) Whether that would amount to contravention of law. Therefore, though it is open to the appellant to take such legal recourse, they may be advised. Adopting action under Section 111A of the Companies Act, 1956 is not an option. Thus in view, the appellant has not made out any case to show that the respondents 1 to 3 & 8 to 11 have contravened any law. Even if take the case of the petitioners at face value that the respondents 1 to 3 & 8 to 11 have breached the Articles of Agreement, still in view, that cannot be contravention of any law.In fact, the Company Law Board while signing off, made it clear that dismissal of the petition would not bar the appellant from availing any other remedy as may be available in law. Section 111A(3) does not cover a situation of transfer of shares in violation of a private agreement.
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Service Tax
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2016 (4) TMI 201
Period of limitation - Rejection of refund claim - Service tax paid on input services for the period July, 2011 to January, 2012 and February, 2012 to June, 2012 - Engaged in providing Pre-publishing Services relating to E-Publishing and are registered under the category of providing Information Technology Software Services - Appellant availed various input services for rendering export of services - Held that:- the Commissioner (Appeals) has power to condone the delay of one month on showing the sufficient cause for not filing the appeal within the period of limitation. Further, the Hon'ble Apex Court has laid down liberal approach for condoning the delay. Since the matter has been dismissed only on time barred aspect and not on merits, the matter is remitted back to the Ld. Commissioner (Appeals) to be decided on merits. - Matter remanded back
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2016 (4) TMI 200
Demand of Service tax - Custom House Agent Services (CHA) and Business Auxiliary Services (BSA) - Taxable value adopted by the appellant for the purpose of payment of service tax was not in accordance with the provisions of Section 67 of the Finance Act, 1994 - Assesse paid service tax only on the income accounted as Service Income leaving the income under Transportation Income and Brokerage Income etc., disclosed them by suppressing the facts with an intention to evade payment of service tax - Held that:- while considering the waiver of pre-deposit, this Tribunal discussed the issue at length to decide the quantum of deposit and ordered full payment of service tax on CHA and BAS. The quantum of service tax payable on the differential value of CHA services is arrived at 10% of the total invoice value. Accordingly, this Bench directed the appellant to make pre-deposit of ₹ 12.00 lakhs i.e. the entire amount of service tax demanded under the head BAS service for the period 03-04 to 06-07 and on the CHA service of ₹ 64.00 Lakhs (being 10% of the value on which tax has been demanded). The appellants are not contesting the service tax on 10% of the value of CHA services on the invoice value and service tax on the BAS service. Accordingly, the demand confirmed under CHA service on the value of about ₹ 64 lakhs (being 10% value on the invoice) is liable to be upheld. Similarly, the demand of service tax under BAS service on the value of ₹ 67,46,030/- lakhs is also liable to be upheld. Demand of Service tax - Reimbursable expenses by CHA - Held that:- the issue already stands settle by the Tribunal in the case of D.S. Narayana & Co. Pvt. Ltd. Vs. CCE, Visak [2015 (11) TMI 1110 - CESTAT BANGALORE] and Aashita International Ltd. Vs. CST, Ahmedabad [2013 (12) TMI 797 - CESTAT AHMEDABAD] and by relying on the Hon’ble Delhi High Court judgment in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. UOI [2012 (12) TMI 150 - DELHI HIGH COURT], set aside the service tax demand of reimbursable expenses. Also by following the ratio of above decisions, the total demand in excess of 10% is related to reimbursable expenses and the same is not liable to service tax. Imposition of penalty - Section 76 & 78 of the Act - Held that:- by considering the overall circumstances of the case and also considering the issue relates to interpretation of statute and levy of service tax whether reimbursable expenses are taxable or not, which was agitated before various appellate forums and finally the Hon'ble Delhi High Court in the Intercontinental Consultant's case settled the issue, therefore, this is a bonafide belief on the appellant's on leviability of service tax on reimbursable expenses and also considering the fact that the appellants are registered with the Service Tax department and paid service tax regularly under the CHA services, the imposition of penalty is not sustainable. Accordingly, the penalties imposed under Section 76 & 78 of the Act are set aside. - Decided partly in favour of appellant
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2016 (4) TMI 199
Dispensation of pre-deposit - Confirmation of service tax liability and imposition of penalty - Commission paid to foreign bankers under the category of banking and other financial service on reverse charge basis - Appellant claimed that demand is barred by limitation - Held that:- the notice stand issued in the April, 2010 for confirmation of demand of duty relating to the activity undertaken in December, 2006. The said activity of the assessee was not performed in India and the demand was confirmed on the reverse charge basis, in respect of commission paid to foreign bankers for raising the capital in foreign countries. During the relevant period, there was lot of confusion in the field, and law was not clear either to the assessee nor to the Revenue itself. Lot of litigation was going on the legal issue of payment of tax on reverse charge basis. So, in the absence of any positive evidence to reflect upon the malafide by the appellant, it cannot be said that the non-payment of service tax, if at all, was with an intention to avoid the same. Hence, the appellant has good case on limitation. Therefore, as the appellant has already deposited the amount of ₹ 4.88 lakhs approx., by treating the same as sufficient, the condition of pre-deposit of the balance amount of tax and entire amount of penalty and interest is dispensed of. - Pre-deposit dispensed of
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2016 (4) TMI 198
Imposition of penalties for non discharge of Service tax liability - Section 78 of the Finance Act, 1994 - Demand of Service tax along with interest is discharged by appellant - Demand raised on allegation that the consultant, upon handing over the Service Tax matter defrauded appellant by showing the payment of entire Service Tax liability by forged challans - Held that:- as the ratio in the case of Hemangi Enterprises vs. Commissioner of Central Excise, Pune I [2015 (10) TMI 1732 - CESTAT MUMBAI] covers the issue. By respectfully following the same, the penalties imposed on the appellant are set aside. - Decided in favour of appellant
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2016 (4) TMI 197
Rejection of refund claim - under Notification No. 41/2007-ST dated 6.10.2007 - Goods exported under claim of drawback under Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 - Appellant contended that drawback did not include the service tax paid on the impugned input services - Held that:- there is no doubt that the impugned services were input services. If the contention of the appellant that these services were not included in fixing the all industry rates of drawback was true then there was no need to incorporate the said proviso in Notification No.41/2007-ST as the said proviso would in that case be redundant. There is natural presumption that legislature would not incorporate redundant provisions in law. Further if the said proviso did not affect the eligibility of the exporters for refund under Notification No.41/2007-ST then there was no need for the Govt. to delete the said proviso vide Notification No.33/2008-ST dated 7.12.2008.There is nothing in Notification No.33/2008-ST dated 7.12.2008 which expressly or impliedly gave it retrospective effect. It is thus clear that when the goods were exported under claim of drawback, the impugned refund claims would not be admissible by virtue of proviso (e) to Notification No.41/2007-ST also held by CESTAT in the case of Rajasthan Textile Mills vs. C.C.E., Jaipur - [2014 (8) TMI 853 - CESTAT NEW DELHI]. Rejection of refund claim - CHA services - Benefit was denied as the description of goods was not mentioned in the invoice issued by CHA - Held that:- the grounds namely services not covered under port service, non-submission of proof of payment of service tax under GTA service and debit note not being prescribed document for this purpose have been analysed in appellant's own case and decided in its favour reported in [2016 (2) TMI 259 - CESTAT NEW DELHI]. Regarding CHA services bills of lading and container numbers are clearly mentioned therein and thus it would be quite possible to link as to which goods the CHA bills related to. Therefore this ground for denial of refund in respect of CHA services is not sustainable. - Decided partly in favour of appellant
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Central Excise
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2016 (4) TMI 196
Adjustment of rebate sanctioned to the petitioner against a pending demand raised on the petitioner - denial of principles of justice - Held that:- In view of the breach of principles of natural justice in passing the impugned order, grave prejudice is caused to the petitioner inasmuch as an amount of ₹ 1.49 crores being the sanctioned rebate claim is being adjusted against a confirmed demand of ₹ 2.38 crores which is stayed by the orders dated 22nd December, 2012 and 18th May, 2015 of the Customs, Excise and Service Tax Appellate Tribunal. The impugned order has not considered the above aspect as in the absence of the petitioner being served with a show cause notice or being granted an opportunity for personal hearing, the aforesaid facts could not be brought to the notice of the Assistant Commissioner of Central Excise. In the circumstances, we set aside the impugned order dated 17th September, 2015 to the extent the rebate claim of ₹ 1.49 crores granted as being adjusted against the confirmed demand of ₹ 2.38 crores in exercise of power under Section 11 of the Act. It is made clear that the Assistant Commissioner of Central Excise would adjudicate on the issue of adjusting an amount of ₹ 1.49 crores (being the rebate granted) against the pending demand, in accordance with the principles of natural justice.
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2016 (4) TMI 195
Failure to deposit the penalty amount as ordered under Section 35F - Held that:- The Appellant does not appear to have brought to the attention of the authorities at earlier stage the dropping of the proceedings against the original assessee on 16.12.2013. The fact was mentioned for the first time in the Miscellaneous Application. The earlier interim order of the Tribunal dated 3.9.2014 directing deposit of entire penalty amount of ₹ 27,000/-. Therefore could not be faulted with. But if a Miscellaneous Application was then filed referring to order dated 16.12.2013, dropping the proceedings against the original assessee and that therefore the order for deposit of penalty passed against the Appellant was not sustainable, the Tribunal while dismissing the modification application, on 16.10.2014, was albeit, required to deal with the issue even briefly by recording its satisfaction alongwith reasons. It has repeatedly been held that reasons are part of the principles of natural justice which apply with equal force to Courts and Tribunals. It is trite law that justice must not only be done but it must appear to be done. A litigant approaching the Court with a perceived grievance according to his understanding has a right to be told why his perception was not correct. He cannot be confronted with the conclusions without telling him the reasons. Modification application restored to file for fresh disposal on merits in accordance with law
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2016 (4) TMI 194
Non tendering or delivery of order-in-original to the assessee - Held that:- None of these orders record a finding that the adjudication order dated 22.07.2010 was actually tendered to the appellant – assessee on a particular date or then received by him on a particular date. There is no finding that because of a particular provision in any law it is deemed to have been received by him on a particular date. As such, we find the application of mind by the CESTAT as also by the Appellate Authority unsustainable. The fact of not tendering or delivery of order-in-original to the assessee and its impact is lost site of by the learned authorities. Accordingly, both the orders are quashed and set aside and the matter is placed back for fresh consideration before the Commissioner (Appeals) of Central Excise at Nagpur. The said authority shall look into all relevant records and provisions of law and take suitable decision on the request of the appellant for condonation of delay.
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2016 (4) TMI 193
Provisional assessment in terms of Rule 7 of the Central Excise Rules, 2002 - Held that:- Since Rule 7 gives right to the assessee to apply for provisional assessment and for payment of duty on provisional basis, the learned Single Judge was justified in allowing the writ petition in passing order in terms of prayer (a) of the writ petition. Therefore, considering the facts and circumstances of the case and the submission advanced, no order is passed on this appeal. Accordingly, Deputy Commissioner of Central Excise and Service Tax, Durgapur, the proforma respondent No. 3 is directed to dispose of the application for provisional assessment filed in terms of Rule 7 of the Rules within four weeks from the date of presentation of a copy of the certified copy of this order by passing a reasoned order in accordance with law, to be communicated to the parties after giving an opportunity of hearing. At the time of hearing, the parties are at liberty to rely on judgments and orders in support of their contentions and the Deputy Commissioner in his reasoned order shall deal with the same.
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2016 (4) TMI 192
Rebate claims of duty paid on exported of exempted goods under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 - Held that:- Government finds that there is no merit in the contentions of applicants that they are eligible to claim rebate of duty paid @ 10%, i.e., General Tariff Rate of Duty ignoring the effective rate of duty @ 0%/4% or 5%. As such, Government is of considered view that lower authorities are legally right in holding that rebate is admissible only to the extent of duty paid at the effective rate of duty, i.e., 0%/4% or 5% in terms of Notification No. 4/2006-C.E., dated 1-3-2006 as amended, as applicable on the relevant date on the transaction value of exported goods determined under Section 4 of Central Excise Act, 1944. Hence the Order-in-Appeal are upheld to that extent. In some cases the original authority either denied rebate where excise duty payable was NIL in terms of Notification No. 4/2006, dated 1-3-2006 read with Notification No. 21/2002-Cus., dated 1-3-2002 or confirmed recovery of rebate erroneously sanctioned on the ground that duty was not payable by the applicant. As held in above paras, the rebate is admissible only to the extent of 0%/4%/5% as the case may be. The Notification No. 4/2006, dated 1-3-2006 issued under Section 5A(1A) of the Act, grants exemption from whole of duty of excise absolutely. So applicant was required not to pay duty. The amount so paid cannot be treated as duty under Section 3 of the Act and therefore, not admissible as rebate under Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-1-2004. Moreover, when goods are exempted from payment of duty, no Cenvat credit is permissible under Rule 6(1) of Cenvat Credit Rules, 2004. In view of the above, Government observes that the applicant was not allowed to pay duty on the exempted goods as per proviso 5A(1A) of Central Excise Act, 1944 and no Cenvat credit on the inputs is available under Rule 6(1) of Cenvat Credit Rules, 2004. Further the applicant has also not claimed that the duty on such fully exempted goods has not been paid from such inadmissible Cenvat credit and therefore, no re-credit is permissible in such cases. Hence, Government finds that orders of recovery by original/appellate authority are legal and proper.
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2016 (4) TMI 191
CENVAT credit - inter unit transfer of credit - transferred by DT units, for clearance of the goods for home consumption - whether on 15.04.2004, three units would be considered as separate units and the transfer of credit from DT unit to the Assessee and utilisation of the said credit for clearance of the finished goods by the Assessee - Held that:- Rule 3 of the Cenvat Credit Rules 2004 provides a manufacturer of final product shall be allowed to take cenvat credit of the duty paid on any excisable goods received in the factory or manufacturer of the final product. Sub-Rule (4) of Rule 3 of Rules 2004 provides the Cenvat Credit may be utilized for payment of any duty of excise on any final product. Thus, there is no one-to-one co-relation between the inputs and final product. The Assessee was holding a single registration certificate during the material period and they have rightly discharged duty liability for clearance of the goods for home consumption by utilising credit from Cenvat Account on inter-unit transfer of credit from DT Division to the Assessee, by a common pool. In any event, substantial benefit of the Assessee of utilisation of Cenvat Credit by a common pool cannot be denied by a technical infraction of provision of law, if any. In view of the above discussions, we hold that the assessee rightly utilized the Cenvat Credit transferred by DT units, for clearance of the goods for home consumption during the period April 2005 to Sept. 2009 as the Assessee was holding single registration certificate during the said material period. Accordingly, the demand of Cenvat Credit alongwith interest and penalties are set aside. The penalty imposed on Shri Deepak Prabhakar Marathe, General Manager and Authorised Signatory of the assessee, is also set aside. The appeals filed by the appellants are allowed. The application for extension of stay is dismissed as infructuous. - Decided in favour of assessee
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2016 (4) TMI 190
Cenvat Credit on the goods imported under Duty Free Import Authorization (DFIA) Scheme - denial of claim for violation of condition provided in para (v) of Notification No. 40/2006-Cus - Held that:- In the show cause notice the credit was proposed to be denied for violation of condition provided in para (v) of Notification No. 40/2006-Cus, whereas the adjudication order and Commissioner (Appeals) order decided the matter referring to para (iiia) of the Notification. It is not permitted in law to adjudicate the matter in the show cause notice on the ground, which is not flowing from the show cause notice. Hence, it is not permitted that the adjudication order or the appellate order is traveled beyond the scope of show cause notice. I therefore do not agree with the lower authority in as much as the entire finding is based on para (iiia) of the Notification No. 40/2006. From the retrospective amendment in para (v) of Notification No. 40/2006-Cus, which has been validated for the period from 1 st May 2006 to 18 th February 2009, the appellant are entitled for the Cenvat Credit. Thus the appellants' availment of Cenvat Credit in respect of SAD paid on the import made under DFIA becomes legal and correct - Decided in favour of assessee
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2016 (4) TMI 189
Cenvat credit of the service tax paid on transportation of goods - Whether Cenvat Credit is admissible in respect of service tax paid on transportation of the goods cleared from the places for delivery at the place of the buyer as per the terms of the contract of sale between the parties prior to 01.04.2008 and thereafter? - “from the place of removal” and “upto the place of removal” - Held that:- In substance, the service recipient of the transportation is called the person liable to pay service tax. Once service tax is levied under Section 66 of the Finance Act, 1994 that becomes admissible credit for the grant under the scheme of Cenvat Credit Rules, 2004. Therefore, the service tax paid in terms of the reverse charge mechanism under Section 68 of the Finance Act, 1994 read with Section 19 of the Sale of Goods Act, 1930 and the circular aforesaid becomes input service to fulfill contractual obligation. That does not disentitle the tax payer to the Cenvat credit of the service tax paid in respect of transport service availed to make delivery of goods at the destination which otherwise would make the rule of cascading effect otios and export shall be taxable. That is not permitted. Even for this reason also the assessees are entitled to Cenvat credit. So far as the export of goods are concerned, following the aforesaid rationale, the service tax paid availing transportation service shall be admissible to the Cenvat credit or refundable where that is not possible to be set off against future liability. It is also submitted in the Bar that C&F and CHA services were availed for export of the goods. Following the ratio laid down in the case of Western Agencies Pvt. Ltd. Vs Commissioner of Central Excise, Chennai (2011 (3) TMI 528 - CESTAT, CHENNAI (LB)), the service tax paid in respect of those services shall entitle the assessees to avail Cenvat credit. Learned Adjudicating Authority concerned shall dispose of claims of the appellants on the issues of Cenvat credit granting fair opportunity of hearing to them and examining relevant evidence in each case following aforesaid guidelines shall pass reasoned and speaking order. If there are any other claims other than the Cenvat credit , C&F and CHA service, such issues shall be dealt by the authority in accordance with law considering pleadings, evidence and law.
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2016 (4) TMI 188
Change of classification - manufacturer of home appliances like, Mixer Grinder, Juice Extractors, Hand Blenders etc. - Heading 8509 or 8548 - denial of benefit of assessment under Section 4A of the Central Excise Act, 1944 - Held that:- It is clear from the description of the heading only "electrical parts" can be classified under heading 8548. There is no assertion that the said juicer attachment contains any electrical parts and, therefore, heading 8548 does not appear to be a correct heading. Furthermore as seen from the Explanatory Notes to the HSN it does not leave any doubt that the said mixer would be classifiable under heading 8509. - Decided in favour of assessee
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2016 (4) TMI 187
CENVAT credit on the input used by the jobworker for the manufacture of goods on jobwork basis under Notification No.214/86-CE dated 25.03.1986 admissible - demand was raised for an amount equivalent to 10% of the value of the goods which was manufactured by the appellant on jobwork basis which was returned without payment of duty to the principal supplier of raw material in terms of Notification No.214/86 - Held that:- As per the condition of the Notification 214/86 principal supplier of raw material indicates to discharge the excise duty either on the jobwork goods itself or on the final product in which jobwork intermediary goods is used. With this proviso it can be said that the goods manufactured on jobwork basis is exempted from payment of excise duty. It is that the Notification 214/86 only facilitates the principal supplier of raw material to avoid payment of duty at two stages, (1) at jobwork stage and (2) at the stage of final product clearances. However, the amount of duty required to be paid will remain same as if no duty is charged at the jobworker end the same shall be available as CENVAT credit to the principal supplier of raw material. It is only for the convenience of the procedure, Notification 214/86 was issued and not to exempt any excise duty. Since the goods manufactured on jobwork basis is exempted on the ground that the excise duty is charged on the full value of final product wherein the value of jobwork goods deemed to have been included the jobwork goods is not exempted. Therefore, Rule 6(3)(b) which is applicable only on the clearance of exempted goods shall not apply in the case of the goods manufactured on jobwork basis under Notification 214/86 The issue involved in the present case has been decided in a number of cases and accordingly the demand raised for an amount equivalent to 10% of the value of jobwork goods in terms of Rule 6(3)(b) is not sustainable. - Decided in favour of assessee
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CST, VAT & Sales Tax
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2016 (4) TMI 179
Input tax credit - Whether stock transfer is covered by the proviso of Section 6(3)(d) - Non consideration of the effect of the use of word “or” in Section 6(3)(d) of the Uttarakhand Value Added Tax Act while discussing the appeal - Held that:- the use of the word “or”, in the context of this case, is intended to convey the meaning that the sale may be within the State, an intra-State transaction in Uttarakhand, or the sale may be in the course of inter-State trade or commerce. The proviso clearly provides with reference to Clause (d) that where the finished goods, mentioned in Clause (d), are dispatched outside the State other than by way of sale, the consequences provided therein will follow. This would clearly mean that the legislature intended to cover the cases of sale in the course of inter-State trade or commerce in Section 6(3)(d) of the Uttarakhand VAT Act. Any other view would render the words in the proviso meaningless. In other words, when goods are sent by way of stock transfer in the course of inter-State trade, the case would not be covered by Section 6(3)(d) of the Uttarakhand VAT Act. The intention of the legislature was to provide limited relief of providing input tax credit, but confined to raw materials, which are used in the manufacture or processing of finished goods, which are sent by way of stock transfer as a case of stock transfer cannot be treated as a case of sale. In such circumstances, the proviso would appear to be an independent provision and the concept of sale would apply to both an intra-State sale, as also, inter-State trade and commerce within the meaning of Section 6(3)(d) of the Uttarakhand VAT Act. In other words, the case of stock transfer would not fall within the ambit of Section 6(3)(d) of the Uttarakhand VAT Act. Therefore, the case of stock transfer is squarely covered by the proviso and no input tax credit is vouchsafed in respect of packing materials used in connection with finished products, which are stock transferred outside the State in course of inter-State trade or commerce. - Decided against the appellant
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2016 (4) TMI 178
Attachment of personal property - Petitioner is one of the director of Company and Company did not paid certain tax, interest and penalty dues - Held that:- there is nothing on record to suggest that the petitioners are debtor of the company in default. Under the circumstances, reference to Section 44 of the Gujarat Value Added Tax Act would be of no consequence. Further, it is not even the case of the Department that the properties of the petitioner under attachment and sale were acquired by her through any of the investments made by the company. Since the source of acquisition of property cannot be traced to the funds of the company and since the dues are of a Private Limited company, independent properties of the Director cannot be attached as held by this Court in case of CV Cherian Versus CA Patel [2012 (3) TMI 372 - GUJARAT HIGH COURT]. - Decided in favour of petitioner
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2016 (4) TMI 177
Correct consumption of excisable materials in the process of execution of works contract - Held that:- the revisional authority after recording prima facie reasons and giving opportunity of being heard to the petitioner, disagreed with the view of the Assessing Officer. Such view was accepted by the Tribunal. No question of law therefore arises. Not agreed with the suggestion of the petitioner that in the process, the authorities taxed the entire value of the works contract and not just taxable raw material used in executing such contract. Decided against the appellant
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Indian Laws
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2016 (4) TMI 175
Cost accountant v/s Chartered Accountants - nature of work - amendment to Section 63 of the Karnataka Co-operative Societies Act, 1959 - auditing of accounts by Cost Accountants of a firm of Cost Accountants permitted. - Held that:- it is not evident that by virtue of the impugned amendment, a Cost Accountant has been enabled to carry out functions which can only be performed by a Chartered Accountant. This is statutorily governed and there can be no entrenchment on such functions. It is not the case of the petitioners that auditing the accounts of a cooperative society is the exclusive domain of Chartered Accountants. If that be so, there is no ground for challenge made out.
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