TMI Tax Updates - e-Newsletter
April 8, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Ccopyright societies are established under law not liable to pay service tax on any receipts from its members

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Articles

1. DEDUCTIONS - ENTREPRENEURS SHOULD TAKE ADVANTAGE OF THIS TAX SEASON

   By: Pulkit Jain

2. Issues in Real Estate Sector and Real Estate Act

   By: Bijay Shrestha

News

1. GST – CONCEPT & STATUS – As on 5th April, 2017

2. GST - Understanding Goods and Services Tax (Short Presentation)

3. GOODS & SERVICES TAX (GST) (Status as on 01st April, 2017)

4. Insurance Cover for Public Deposits

5. Violation of Companies Act

6. Simplified Proforma for Incorporating Company Electronically (SPICe)

7. Capital Investments in Bank by GOI

8. Merger of Bharatiya Mahila Bank with State Bank of India

9. Review of Ongoing Schemes

10. NRI Investments in NPS

11. Setting up of an International Financial Services Centre (IFSC) in a Special Economic Zone (SEZ); First IFSC becomse operational at the Gujarat International Finance Tec-City (GIFT), Gandhinagar

12. Reduction in Import Duty to stabilize the domestic prices

13. India and ADB Sign $175 Million Loan Agreement to help improve Solar Transmission System

14. RBI Reference Rate for US $

15. Significant Achievements Towards Eliminating Domestic Black Money

Highlights / Catch Notes

GST

• Amendments to Customs, Excise, and CST regulations aim to align with GST for streamlined tax processes and improved compliance.

  : Customs, Excise & CST amendments - Post GST
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Income Tax

• High Court Orders Special Audit u/s 142(2A) for Complex Land Revaluation and Equity Share Issues in Firms.

  Case-Laws - HC : Special audit u/s 142(2A) - there are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners in capital account equal to revalued amount of land; conversion of capital account to loan account of shareholders and issues relating to issuance of equity shares against the balances of revaluation credits at an unreasonable premium - order for special audit is justified - HC
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• CBDT Directed to Process Income Declaration Scheme Submission; Adjust for Advance Tax and TDS Payments per 2016 Court Order.

  Case-Laws - HC : CBDT directed to process the petitioner’s application under the IDS, 2016, and give adjustment or credit to the amounts paid as advance tax and TDS to its account, under the Income Tax Act, and accept the balance amounts (after also giving credit to the amounts paid during the interregnum, pursuant to the interim order of this court dated 29th November, 2016). - HC
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• Tax Withholding Not Required on FCCB Interest u/ss 196C and 115AC Due to Exclusion in Section 9(1)(v)(b.

  Case-Laws - AT : Tax withholding liability - liability to deduct tax at source u/s 196C r.w.s. 115AC on the interest payable on FCCBs - since income in question is squarely falling under the exclusion clause of income deemed to accrue or arise in India u/s 9(l)(v)(b) of the Act, it cannot fall within the ambit of income accrued and arisen in India, and hence, the same cannot be said to be covered u/s 5(2) - AT
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• Arbitration Awards for Income Loss in DDA House Construction Deemed Non-Taxable Capital Receipts Under Tax Laws.

  Case-Laws - AT : Nature of receipt - damages received from DDA - loss of sources of income - Arbitration awards from DDA in respect of construction of houses - Receipt is capital in nature - not taxable - AT
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• SCB's Payment to Assessee Not "Fees for Technical Services" u/s 9(1)(vii) of Income Tax Act. No Human Intervention.

  Case-Laws - AT : Royalty/fees for technical services u/s. 9 (1) (vi)/9 (1)(vii) - payment made by SCB to assessee company does not fall within the realm of “fees for technical services‟ as contained in Sec. 9(1)(vii), albeit the assessee has only provided a standard facility for data processing without any human intervention - AT
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• Discrepancy in Turnover and TDS Certificates Justifies Additions by Assessing Officer Under Tax Law.

  Case-Laws - AT : Assessing Officer was right in making additions towards difference in turnover as per books of account and TDS certificates - AT
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• Assessment Reopening Invalid: Orders Void Ab Initio Due to Improper Notice Service by Assessing Officer.

  Case-Laws - AT : Reopening of assessment - As a matter of fact despite assessee’s repeated submission that notice has not been served properly, the AO has not bothered to serve the notice upon the assessee or his agent even though there was adequate time for the said service of notice through the ordinary means for subsequent years - assessment orders in these cases are void abinitio - AT
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• Leased assets returning to owner and re-leased must continue depreciation if part of asset block.

  Case-Laws - AT : Assets given on lease and returning back to the assessee and again given on lease depreciation is required to be allowed once the assets purchased in the earlier year have entered the block of assets, and depreciation in respect of such assets has been allowed in that year, depreciation in respect of such assets is necessarily to be allowed for the subsequent year - AT
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• Wholesale Buyers Bear Sales and Promotion Costs; Assessee Acts as Coordinating Agency, Not Sole Beneficiary of Premium.

  Case-Laws - AT : The liability of sales and promotion expenses or advertisement lies with the wholesale buyers and not on the assessee and assessee merely acts as a coordinating/managing central agency. But such a managing and coordinating of advertisement does not implicate the assessee that it is the sole beneficiary or owner of the entire premium money generated - AT
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• Income Tax Law: Best Judgment Provision Ensures Accurate Income Assessment Based on Evidence, Not Arbitrary Estimates.

  Case-Laws - AT : The best judgment is not a provision to penalize the assessee and resort to wild estimate but it is a machinery provision which is to be based on assessing the correct income and that too based on material and evidence having live link nexus with the income which is to be assessed - AT
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• Taxpayers Not Liable for Interest u/s 234B If Income Accrual is Unforeseen and Unpredictable.

  Case-Laws - AT : Interest was payable u/s 234B - if the assessee is not able to forecast / anticipate the event for accrual of income during the previous year, no Interest can be demanded u/s 234B - AT
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Customs

• Video Cassette Blanks Freely Importable Under Exim Code 852390 03.20, No Restrictions on Importation.

  Case-Laws - AT : Import of video cassette blanks - the goods are correctly classifiable under Exim Code No.852390 03.20 and as such freely importable - AT
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• Revenue Must Return Unused Documents to Assessee When Relying Only on Select Evidence in Assessments.

  Case-Laws - AT : If the Revenue has chosen to rely only upon some of the documents recovered from the assessee, it is the duty of the Revenue to return all the balance documents on which no reliance stand placed by them - AT
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Service Tax

• Company Not Liable for Service Tax on Fixed Charge Bus Transport for Staff; Not a Tour Operator Service.

  Case-Laws - AT : Tour operator service - They only provided buses on fixed charges for transportation of staff as per the schedule and timing decided by the client company. In such situation, there can be no liability of service tax under the category of tour operator service on the respondent - AT
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• "Club or Association Service" Payments Taxable, But Copyright Societies' Member Receipts Exempt Under Law.

  Case-Laws - AT : Taxability - amount received and/or retained by assessee towards expenditure as consideration for rendering of 'club or association service' - There can be no doubt that 'copyright societies' are established under law and hence not liable to be taxed on any receipts from its members. - AT
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• Activity Not a 'Support Service' Unless Optional and Flexible for In-House or Outsource Performance, Says Rule.

  Case-Laws - AT : Classification of service - Unless an activity is optional for the continued existence of the organization and permits the flexibility of self-performance vis-a-vis outsourcing, it does not appear to invite coverage as 'support service of business or commerce' - AT
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Central Excise

• Heirs Not Liable for Sole Proprietorship Dues Without Specific Legal Provision After Proprietress and Attorney Holder's Deaths.

  Case-Laws - HC : Recovery of dues of sole proprietor concern - both proprietress as well as power of attorney holder of concern died - the heirs of such deceased sole proprietor/proprietress cannot be proceeded against in the absence of a clear legal stipulation. - HC
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• Court Upholds Excise Duty on Tobacco Manufacturing Based on Packing Machine Speed; No Judicial Intervention Needed.

  Case-Laws - HC : Levy of duty on manufacturing of Chewing Tobacco or Unmanufactured Tobacco - if a packing machine is in working condition, then, its speed is a relevant consideration for imposition of excise duty. Such levy cannot be said to be arbitrary or unreasonable which may warrant intervention by this Court under power of judicial review. - HC
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• Rule 5 Refunds Apply to Deemed Export Supplies in India, Not Just Physical Exports Out of India.

  Case-Laws - AT : 100% EOU - Refund claim - it cannot be said that Rule 5 refund is applicable only for exports of goods out of India and not for deemed exports supplies in India - deemed exports supplies are also eligible for refund u/r 5 - AT
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• Cotton Waste from 100% EOU Exempt from Duty for DTA Sales Under Notification No. 23/2003-C.E., No Conditions Apply.

  Case-Laws - AT : 100% EOU - cotton waste cleared to DTA sales - cotton waste is exempted under N/N. 23/2003-C.E. without any condition. Even if the respondents have no permission for DTA sales in terms of Exim Policy, such waste cannot be subjected to any duty - AT
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• Terminal Charges Included in Assessable Value for Central Excise Duty on Oil Marketing Companies, Excluding BPCL.

  Case-Laws - AT : Valuation - transaction value - the price being paid by the Oil Marketing Companies (other than BPCL) includes the terminal charges also - price or cost paid to the manufacturer constitutes the assessable value on which Central Excise duty is payable. - AT
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VAT

• Penalty Imposed u/s 45(6) When Tax Discrepancy Exceeds 25% Between Paid and Actual Tax Payable.

  Case-Laws - HC : The difference in the amount of tax paid with the return and the tax payable would be more than 25% - penalty u/s 45(6) is rightly imposed on the difference of tax paid and tax payable. - HC
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Case Laws:

• Income Tax

• 2017 (4) TMI 362
  Deprecation on Iraqi assets - difference on the translation of the overseas account in the Head Office account at the end of the year on exchange rate prevalent on the last day of the accounting year - Held that:- The amount of this difference was notional debit/credit and did not represent any loss or income for the purpose of computing the taxable income under the Income-Tax Act. The entries on this account were made only for balancing the books. Therefore, this exercise was merely done on account of incorporating the trial balance appearing in the Iraqi branch in the Head Officer books in Indian currency. Since no actual gain accrued to the assessee, there was no question of taxing this amount. We, accordingly, confirm the order of the ld. CIT(A) Disallowance of interest on borrowing - Held that:- Addition on account of interest upto the date of search to be deleted on the ground that no interest bearing funds were utilised for making any interest free loans/advances to various parties and hence, no interest should be disallowed in the year in question. See Commissioner of Income Tax Vs. M/S Jai Prakash Industries Pvt. Ltd.[2017 (3) TMI 1160 - ALLAHABAD HIGH COURT] Share issue expenses debited in P & L account to be covered under Section 35D

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• 2017 (4) TMI 361
  FBT - nature of expenses incurred by the assessee / employer for the services / activities - deemed Fringe Benefits provides to employees as per the provisions of Section 115WB(2) Clause A to Q of the I.T. Act, 1961 - Held that:- When the language of Section 115WA and 115WB is clear and unambiguous and even the intention of the legislature while enacting sections 115WA and 115WB(2) is very clear i.e. with respect to the “deemed fringe benefits”, neither there is any scope for either literal and/or purposive interpretation nor there is any occasion to consider the intention and for that purpose the speech of Hon’ble Prime Minister in the Parliament. At the cost of repetition it is observed that in absence of challenge to the constitutional validity of either sections 115WA or 115WB, both the aforesaid provisions are required to be read as they are. As per the cardinal principle of law, the provisions are required to be read, more particularly taxing provisions are required to be read not only as they are but even while reading such provisions one has to see that the provisions do not become nugatory and/or otiose. Considering the provisions of Sections 115W, 115WA, 115WB(1) and 115WB(2) as they are, the CBDT has rightly clarified that with respect to the expenses incurred by the assessee / employer for the services / activities referred to in clause (A) to (P) of subsection (2) of Section 115WB, there shall be FBT, is absolutely just and proper and in consonance with the provisions of the Statute more particularly sections 115WA, 115WB and 115WC. The clarifications made by the CBDT in the impugned circular cannot be said to be contrary to the provisions of the Statute more particularly Sections 115W, 115WA, 115WB(1) and 115WB(2). Under the circumstances, the challenge to the impugned circular fails and it is held that the FBT is leviable on the expenses referred to in clauses (A) to (P) of subsection (2) of Section 115WB as they are deemed to be the fringe benefits deemed to have been provided by the employer to his employees. Under the circumstances, the petitions deserve to be dismissed and are, accordingly, dismissed. Estimation of FBT - Held that:- Fringe Benefit is required to be valued as per section 115WC(1) of the Act more particularly 20% of such expenses are to be treated as fringe benefits as per section 115WC(1) of the Act. Under the circumstances, learned Tribunal has materially erred in valuing the Fringe Benefit on the basis of the estimation.

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• 2017 (4) TMI 360
  Special audit under Section 142 [2A] - Held that:- What is required to be considered while passing an order under Section 142 [2A] of the Act, at the time order under Section 142 [2A] of the Act, any proceedings are pending before the A.O or not ? Notice under Section 148 of the Act ie., reassessment proceedings can be said to be the proceedings pending before the A.O, and therefore, if at that stage of proceedings [in the present case, reassessment proceedings before him], the Assessing Officer, having regard to the multiplicity of transactions in the account or specialized nature of the business activities of the assessee and the interest of the Revenue, is of the opinion that it is necessary to so to do, he may pass an order under Section 142 [2A] of the Act; subject to compliance with the procedure, as required under Section 142 [2A] of the Act. Therefore, in the facts and circumstances of the case, it cannot be said that the impugned order is contrary to Section 142 [2A] of the Act. In the present case, having found that there are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners in capital account equal to revalued amount of land; conversion of capital account to loan account of shareholders and issues relating to issuance of equity shares against the balances of revaluation credits at an unreasonable premium, and after having been satisfied that considering the specialized nature of business activities of the assessee, the Assessing Officer has passed an order of special audit in exercise of powers under Section 142 [2A] of the Act. Considering the scope and ambit of Section 142 [2A] of the Act, it cannot be said that in the facts and circumstances of the case, the respondent has committed any error and/or any illegality while passing the order under Section 142 [2A] of the Act. Under the circumstances, the present writ petitions deserve to be dismissed and are accordingly dismissed.

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• 2017 (4) TMI 359
  Denial of credit for advance tax deposited and tax deducted at source (TDS) - Held that:- The only bar discernable under the scheme in question is evident from Section 189 is that no person declaring under the Act shall not be entitled to "claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment." Also, under that provision the person so declaring shall not be entitled to " to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957 (27 of 1957)". Therefore, the court is of the opinion that there is no bar for an assessee or declarant to claim credit of advance tax amounts paid previously relative to the assessment years or periods for which it seeks benefits under the scheme. In the decision in Shelly [2003 (5) TMI 4 - SUPREME Court] is decisive that advance tax is a mode of tax recovery, which the assessee is bound to pay under the scheme of the Income Tax Act and also the clarification by the Revenue, that credit for TDS paid, can be enjoyed for availing the benefit (under the scheme in question) precludes any meaningful argument by it that advance tax payments relative for the assessment years covered by the declaration cannot be taken into consideration as payments under and for purposes of availing the benefits of the scheme. Thus the petition has to succeed. Accordingly a direction is issued to the respondents to process the petitioner’s application under the IDS, 2016, and give adjustment or credit to the amounts paid as advance tax and TDS to its account, under the Income Tax Act, and accept the balance amounts (after also giving credit to the amounts paid during the interregnum, pursuant to the interim order of this court dated 29th November, 2016). The respondents shall ensure that the petitioner’s payments and declarations are processed in accordance with the IDS, 2016.

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• 2017 (4) TMI 358
  Taxing of accrued income shown as unmatured advances in the balance sheet - Held that:- The issue is covered in favour of the assessee by the decision of the ITAT, Hyderabad in assessee’s own case for AY 2001-02 what is to be seen is whether the assessee has followed a recognized method of accounting or not. If method followed by the assessee is such whereby correct income cannot be deduced, then only the assessing officer has the authority to adopt a reasonable basis to determine the total income. In the instant case,. It cannot be disputed that the assessee has followed a recognized method of accounting and hence, there is no question of adding any further amount to the total income. - Decided in favour of assessee Arm’s length Price determined by TPO u/s 92CA - Held that:- As noted from the order of TPO, the total cost of the assessee adopted by the TPO is not correct as he should have adopted the cost what is relevant for the international transactions. As observed by the CIT(A), the cost adopted by the assessee are only relating to man power and depreciation relating to computer, may not be sufficient, there may be other cost associated to the international transactions like administration, management resources etc. To substantiate the cost allocation method adopted by the assessee, Assessee has filed additional evidence before us, which requires verification. At the same time, some of the filters adopted by the TPO, as highlighted by CIT(A), are not proper and some of the comparables considered by the TPO are not relevant to the assessee. Considering the above factual errors, we remit the issue back to the file of the TPO for de-novo consideration. We direct the TPO to re-do the assessment after giving proper opportunity to the assessee in this regard. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.

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• 2017 (4) TMI 357
  Addition on unexplained money - excess payment of license fee - Held that:- The assessee was following mercantile system of accounting. Thus, as per the consistently followed method of accounting by the assessee, which is mercantile system, only expenditure which has accrued and became due during the year is allowable deduction to the assesse as per section 145 of the Act. Ld A.R. of the assessee has not brought any positive material on record to controvert the findings of lower authorities that Rs. 2,34,256/- being license fee to State Excise was the expenditure for subsequent financial year 2011-12 and not for the year under consideration. Hence, the disallowance made by the Assessing Officer of Rs. 2,34,256/- was fully justified and, therefore, uphold the order of the CIT(A) - Decided against assessee Addition on undisclosed receivables - Held that:- As the assessee could not offer any explanation or furnish any evidence to the contrary therefore, the CIT(A) confirmed the order of the Assessing Officer held that contract receipts of Rs. 2,07,105/- remained to be credited to the bank account of the assessee as at the end of the year, which has not been shown as an asset in the balance sheet. Therefore, he made addition of Rs. 2,07,150/- to the income of the assessee. - Decided against assessee

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• 2017 (4) TMI 356
  Tax withholding liability - liability to deduct tax at source u/s 196C r.w.s. 115AC on the interest payable on FCCBs - Held that:- As decided in assessee's own case for previous AY interest paid by assessee to non-resident investor is specifically excluded from the deeming provisions as per S.9(l)(v)(b), and therefore, such interest payment cannot be covered in definition of income deemed to accrue or arise in India. It was thus held that since the income in question is falling within the ambit of this exclusion clause of income deemed to accrue or arise in India as per S.9(l)(v)(b), it cannot fall within the ambit of income accrued and arisen in India, and hence, same cannot be said to be covered u/s 5(2) of the Act. Therefore, there was no occasion to deduct tax at source on such remittance. Respectfully following the decision of the co- ordinate bench of the Tribunal in the case of the Adani (2013 (1) TMI 518 - ITAT AHMEDABAD),which is identical both in terms of the facts and laws relied upon by the Assessing Officer, we hold that since income in question is squarely falling under the exclusion clause of income deemed to accrue or arise in India u/s 9(l)(v)(b) of the Act, it cannot fall within the ambit of income accrued and arisen in India, and hence, the same cannot be said to be covered u/s 5(2) of the Act. Since the recipient non-resident are not taxable on this income in India, there was no obligation to deduct tax at source on such remittance. Hence, assessee cannot be held liable u/s. 201(1)/(1A) of the Act. - Decided in favour of assessee

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• 2017 (4) TMI 355
  Penalty u/s 271AAA - assessment pursuant to search - Held that:- We find that during the course of search the assessee has duly disclosed the undisclosed income. The nature thereof has been duly exhibited as mentioned above. No further query whatsoever has been asked by the Revenue regarding further clarifying the manner of earning of income or substantiating the source thereof. Where the assessee was not asked about the manner in which the income was earned and when he was not asked to substantiate the manner in which undisclosed income was arrived, penal provisions of section 271AAA are not attracted. We find that the case of present assessee is even on a better footing as the detail of undisclosed income has been duly specified with the nature and amount thereof. No further question regarding the manner in which income was earned and no question was asked to further substantiate the manner in which the undisclosed income was arrived at. Thus we hold that the assessee in this case cannot be held liable for penalty u/s 271AAA. Accordingly we set side the orders of the authorities below and delete the penalty. See Neerat Singal vs. ACIT [2013 (6) TMI 762 - ITAT DELHI] - Decided in favour of assessee.

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• 2017 (4) TMI 354
  Eligibility to tax under section 44BB income from its project with M/s. Leighton Contractors (India) P. Ltd. - Held that:- Following the decision of the Coordinate Bench in the assessee’s own case for A.Y. 2007-08 we reverse the impugned order of the learned CIT(A) and hold that the amount received from M/s. Leighton Contractors (India) P. Ltd. is also liable to be taxed in terms of section 44BB of the Act.

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• 2017 (4) TMI 353
  Nature of receipt - damages received from DDA - loss of sources of income - Arbitration awards from DDA in respect of construction of houses at Rohini, Motia Khan and Vasant Kunj for earlier years - Held that:- The only receipt on which assessment was completed was receipt of award during the year and there was no other income. Assessee was out of the contract business due to the dispute with DDA, therefore, damages so received were for loss of business and not merely loss of profit, same was capital in nature. The business of assessee was totally paralyzed. The nature of dispute under consideration is similar to dispute in AY 2003-04. We further find that Ld. CIT(A) by following the decision of Delhi ITAT in the assessee's own case for the asstt.year 2003-04, rightly deleted the addition made by the Assessing Officer who treated the-same as revenue receipt, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 1 raised by the Revenue. Damages and interest being still subjudice cannot be brought to tax in the year under consideration. The finding of the Assessing Officer in this respect that if the assessee fails in appeal by the judgement of Hon'ble High Court then the same will be deducted from its income is not justified. After considering the relevant facts of case and in view of the legal proposition cited in cases relied upon by the assessee, the ld. CIT(A) has rightly deleted the addition which does not need any interference on my part, hence, uphold the action of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 2 raised by the Revenue.

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• 2017 (4) TMI 352
  Royalty/fees for technical services u/s. 9 (1) (vi)/9 (1)(vii) - Held that:- As decided in assessee's own case for previous AYs assessee is also providing similar services to other clients like Hong Kong Government and other big MNEs and there is nothing special or exclusive about the services which are being rendered to SCB. In view of the entire gamut of facts as discussed above, we are of the opinion that the payment made by SCB to assessee company does not fall within the realm of “fees for technical services as contained in Sec. 9(1)(vii), albeit the assessee has only provided a standard facility for data processing without any human intervention. Accordingly, we hold that the said payment is not taxable in India as “fees for technical services in terms of Sec. 9(1)(vii) of the Act. - Decided in favour of assessee Short credit of TDS - Held that:- The AO is directed to verify the claim made by the assessee and allow the credit, if due. Charging of interest u/s. 234A/B - Held that:- It is admitted that this issue is covered in favour of assessee in view of the decision of Hon'ble Bombay High Court in the case of NGC Network Asia LLC(2009 (1) TMI 174 - BOMBAY HIGH COURT) wherein held that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee.

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• 2017 (4) TMI 351
  Unexplained investment in the capital of the firm - Held that:- No evidence before us to explain the source of investment of Rs. 1,00,000/- in the capital of the firm being Rs. 50,000/- each made on 15.5.2008 and 30.6.2008. Therefore, do not find any good and justifiable reason to interfere with the order of the CIT(A) and hence, this ground of appeal of the assessee is dismissed. Disallowing agricultural income - Held that:- Assessing Officer has not considered the income of Rs. 60,240/- shown by the assessee as agricultural income but treated the same as income from other sources of the assessee on the ground that the assessee failed to produce evidence of sugar cane cultivation and sale of sugar cane. Before me also the assessee has failed to produce any evidence in this regard. Therefore, find no good and justifiable reason to interfere with the orders of the lower authorities and dismiss the ground of appeal of the assessee. Estimating the interest on term deposit in bank - as contended that interest income of fixed deposit was offered to tax by consistently following method of offering interest income to tax in the year of receipt - Held that:- When questioned by the Bench what is the evidence that the assessee has offered to tax the interest income on fixed deposit of Rs. 1,05,000/- in the year on receipt, ld Authorised Representative of the assessee expressed his inability to produce any such evidence. In absence of the same, the argument of the ld A.R. of the assessee cannot be accepted.

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• 2017 (4) TMI 350
  TDS u/s 194C or 194I - disallowance on hire charges paid for tippers/tractors/water tankers under section 40(a)(ia) - Held that:- The assessee fails to bring on record any evidence to prove that it is a simple hire of tippers/tractors/water tankers, but not work. Though, the Authorized Representative of the assessee pressed upon the findings of the Commissioner of Income Tax, in the revision proceedings, on perusal of the order of the Commissioner of Income Tax, we find that the Commissioner of Income Tax has not given any findings with regard to nature of transaction, to come to a conclusion that the payments are coming under section 194-I. Therefore, we are of the view that hire charges incurred by the assessee for hiring the tippers/tractors/ water tankers is coming within the meaning of term ‘work’ as defined in Explanation-(iv) of section 194-C of the Act. The Commissioner of Income Tax (Appeals) without any reason, simply observed that the impugned payments are made for hire of tippers/tractors/ water tankers etc. and such payments are not made for execution of works contract. Therefore, we set aside the order passed by the Commissioner of Income Tax (Appeals) and upheld the additions made by the Assessing Officer towards disallowance of hire charges under section 40(a)(ia), for failure to deduct tax at source under section 194-C of the Act, for both years. Difference in gross turnover as per the books of account and as per the TDS certificates - Held that:- The assessee claims that it is reconciled the difference, failed to explain how withheld amount has been excluded from the gross receipts with necessary calculations. On the other hand, the Assessing Officer has clearly brought out the facts to the effect that the amount mentioned in the TDS certificate and recoveries made towards TDS, withheld amount and other deductions is tallied with the gross amount certified by the contractees. Therefore, we are of the view that the Assessing Officer was right in making additions towards difference in turnover as per books of account and TDS certificates. The Commissioner of Income Tax (Appeals) without appreciating the facts, simply observed that the difference represents amount withheld earlier and released for payment now, but which was already offered to tax as part of gross receipts. Therefore, we set aside the order passed by the Commissioner of Income Tax (Appeals) and upheld the additions made by the Assessing Officer towards difference in turnover as per books of account and TDS certificates.

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• 2017 (4) TMI 349
  Income from sale of agricultural land - Computation of LTCG - cost of acquisition computation - Held that:- Though, the assessee tried to substantiate the sale agreement, he failed to prove the genuineness of sale agreement with necessary evidences. All the evidences filed by the assessee in the form of affidavit from the parties who acted as witnesses to the transactions has been negated by the A.O. by bringing a clear fact to the effect that the party to the agreement Shri P.V. Prasad has given a statement, wherein he has categorically disowned the agreement. Therefore, we are of the view that the assessee failed to prove the unregistered sale agreement with necessary evidences to accept his claim that he has made outright sale of agricultural land to Shri P.V. Prasad. Sale consideration stated to be received from sale of land - Held that:- A.O. has brought out a clear fact to the effect that the assessee himself has executed individual sale deeds in favour of the buyers of the flats and consideration has been directly paid to the assessee. The A.O. further observed that the consideration shown in the sale deed is lesser than the guidance value of the property as per the sub-registrar value for the purpose of payment of stamp duty. Accordingly, the A.O. has worked out a sale consideration of Rs. 4,46,99,501/- and applied the provisions of section 50C of the Act for the purpose of computation of long term capital gain. We find that as per the provisions of section 50C of the Act, when the sale consideration shown in the sale deed is less than the guidance value of the property for the purpose of payment of stamp duty, the SRO value has to be considered as deemed consideration for the purpose of transfer of property. In this case, the assessee has executed sale deeds and the consideration agreed in the sale deed is less than the guidance value of the property. Therefore, we are of the view that the A.O. was right in computing the long term capital gain based on the guidance value of the property as per the SRO value. Cost of acquisition of the property - Held that:- Though, the assessee furnished a copy of registered document vide document no.2201 dated 25.3.1980, the A.O. observed that the document furnished by the assessee relates to sale of vacant residential flat, which cannot be applied to sale of agricultural lands. We find force in the findings of the A.O., for the reason that the lands sold by the assessee are agricultural lands and market value of the property as on 1.4.1981 has to be taken as per the SRO value, which is applicable to the agricultural lands, but not for the vacant residential flats. The A.O. has obtained a certificate from the SRO, which indicates the market value of the agricultural land as on the date of sale. Therefore, we are of the view that the A.O. was right in re-computing cost of acquisition by adopting value of Rs. 25,000/- per acre. Application of the provisions of section 45(2) - Held that:- A.O. was erred in not considering the alternative plea of the assessee for computation of income from sale of land by applying the provisions of section 45(2) of the Act. We further opined that, it is for the A.O. to compute the income by applying appropriate provisions of the Act, even though the assessee has made an incorrect claim to compute the income. In this case, although the assessee made alternative plea for computation of income by applying the provisions of section 45(2) of the Act, the A.O. has rejected the plea without assigning any reasons. Therefore, we are of the view that the A.O. was erred in not considering the plea of the assessee, with reference to the provisions of section 45(2) of the Act. The CIT(A) after considering the relevant provision has rightly observed that, the case of the assessee squarely fall within the provision of section 45(2) of the Act and the A.O. was erred in not considering the assessee’s plea for application of Section 45(2) of the Act. Therefore, we deem it appropriate to remit the issue back to the file of the A.O. for the limited purpose of verification of computation filed by the assessee and direct the A.O. to consider the alternative plea of the assessee with reference to the relevant materials and direct him to recompute the income by applying the provisions of section 45(2) of the Act. Appeal filed by the revenue is allowed for statistical purposes.

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• 2017 (4) TMI 348
  Reopening of assessment - invalidity of service of notice - Held that:- In identical facts as in the case of another assessee of the same group examination of the materials produced in this regard do not reflect any effort on the part of the AO to service the notice by post or by other ordinary means of service as required by section 282. This fact is evident from the date of issue of notice and the date of affixture being the same. The above clearly reveals that the AO has not taken reasonable steps to serve the notice in the ordinary course. Thus as in the case of CIT vs. Kishan Chand [2009 (11) TMI 535 - Punjab and Haryana High Court ] in this case also no other mode was adopted and steps of service of notice was taken except reportedly through the affixture about few days before time was expired. Thus it is clear that the AO has not made regular attempts for service of notice in regular manners and was not justified to make substituted service of notice. There is no report of notice server to the effect that there was any refusal of notice by the assessee. In the report of Inspector, names of two witnesses are referred. The addresses of the witnesses are far away from the premises of the assessee. The report of the Inspector does not state that witnesses have identified the place or was known to them personally. As a matter of fact despite assessee’s repeated submission that notice has not been served properly, the AO has not bothered to serve the notice upon the assessee or his agent even though there was adequate time for the said service of notice through the ordinary means for subsequent years. It is settled law including that from the Hon’ble Apex Court in the case of CIT vs. Ramendra Nath Ghosh (1971 (8) TMI 26 - SUPREME Court ) that in absence of proper service of notice the assessment procedure lose their validity. - assessment orders in these cases are void abinitio. - Decided in favour of assessee

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• 2017 (4) TMI 347
  Initiation of the proceedings u/s 153A - Held that:- In the present case, it is an admitted fact no incriminating material was found during the course of search and the time limit to frame the assessment u/s 143(3) of the Act lapsed much before the search which took place on 07.01.2010 while the time period to issue the notice u/s 143(2) of the Act was only upto 30.09.2009. In the instance case, it is an admitted fact that the AO while framing the assessment u/s 153A of the Act made the addition without any incriminating material found during the course of search. - Decided in favour of assessee

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• 2017 (4) TMI 346
  Claim of the deduction u/s 11 declined - whether the assessee exist for purpose of earning profit and the applicant is not promoting sports on non-profit basis - Held that:- In the present case, material as placed before us suggests that the Assessing Officer is swayed by the figures and volume of receipts. Admittedly, such receipts are intermittent and not regular and also is dependent on the conduct of cricket match. It is not other way round that the cricket matches are dependent upon such activities. The undisputed facts are that the assessee is registered under the Rajasthan Sports (registration, recognition and regulation) Act 2005 and formed with the objective of promoting the sports of cricket within the state of Rajasthan so main objective or activity of the assessee is promotion of the cricket. The association is organizing tournament like Ranji Trophy, Irani Trophy, Dilip Trophy, Maharan Bhagwat Singh Trophy, Salim Durrani Trophy etc. the Assessing Officer has not doubted about these activities of the association. It is also brought to our notice that in the international one day match between south Africa and India, the association suffered deficits of Rs. 1.6 crores. RCA has also incurred in various other expenses with a view to promote the game of Cricket viz. on coaching camps of Rs. 20,40,360/-, state cricket activities of Rs. 1,08,60,566/-, Ground expense of Rs. 33,97,435/- and international tournament expenses of Rs. 2,09,16,911/-. These facts go to demonstrate that the assessee has been predominantly engaged into the activity of promoting cricket match. Case of Institute of Chartered Accountant vs Director General of Income Tax [2013 (7) TMI 205 - DELHI HIGH COURT] held that even though fee are charged by the petitioner Institute for providing coaching classes and holding interviews with respect of campus placement, the said activity cannot be stated to be rendering of service in relation to any trade, commerce or business as such activities are undertaken by the petitioner institute in furtherance of its main object which has held earlier are not trade, commerce or business. In the present case also the main activity of the assessee is conducting of the cricket match which falls under the category of general public utility. This fact is not disputed by the Revenue. All these activities an ancillary to the main activity. Therefore, we are of the considered view that the Assessing Officer was not justified in declining the exemption. - Decided in favour of assessee Depreciation on capital assets - Held that:- In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available. See Commissioner of Income Tax vs. Krishi Upaz Mandi Samiti [2015 (3) TMI 11 - RAJASTHAN HIGH COURT]- Decided in favour of assessee Addition made on account of non-deduction of deduction of tax at source - Held that:- The appellant’s submission is that the TDS has been deposited before due date of filing the return. Since the amount has been deposited by due date, the disallowance appears to be uncalled for and is, accordingly, deleted.- Decided in favour of assessee Disallowance of expenses - Held that:- Once the assessee is able to prove the veracity all the expenditure same should not be disallowed merely on the basis of the conjecture. Therefore, we deemed it proper to restore this issue to the file of the assessee for decision afresh.

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• 2017 (4) TMI 345
  Disallowance of depreciation on all Sale and Lease Back transactions - Depreciation on assets leased to Kedia Distilleries - Held that:- There were search and seizure operations carried out in the case of Kedia Group of companies on 23rd September, 1996. The search revealed that the group has entered into finance lease transactions with various banks, financial institutions and companies during the accounting years 1990-1991 to 1995-96. On the basis of statement of Managers of KDA Distilleries, AO declined assessee’s claim of depreciation. The allegation by the AO is that the assessee is a fictitious supplier and manufacturer without any basis and material on record. The existence of the assets leased to Kedia Distilleries is doubted by the AO by placing reliance on the documents collected during search action of the Kedia Group and admissions of persons of the group. The AO has not even named the person on whose statement he has relied on and has not given the same to the assessee for rebuttal, and the documents collected during search have also not been given to the assessee for, their comments and rebuttal. This is in gross violation of the principles of natural justice and the observation made by us for WPL squarely applies here. We also found that all the details in relation to the assets leased to Kedia Distilleries are on the records of the AO. These details and documents include photo copy of lease agreement, invoices of the assets purchased which have been leased, details of payment, installation certificates, details of insurance, details of lease rent received, details of assets either having been received back or sold at the end of the lease term, valuation report, amongst other details.In view of the above disallowance of depreciation in respect of assets leased to KDS Distilleries is not sustainable. Assets leased to DCM Shriram Consolidated the genuineness of the transaction has not been doubted by the AO to disallow the claim of the assessee. It is merely on the basis of the aforesaid alleged non-verified letter, which cannot be the basis of the impugned disallowance. We also found that the assessee has got the gas cylinders insured by a nationalised insurer namely, National Insurance Company Ltd, who has issued a policy no 350100/11/13, for Rs. 34,76,000 which has been filed by the assessee with the AO during the course of original assessment proceedings. This policy document means two things, first, that the fair market value of the gas cylinders is Rs. 34,76,000, as no insurance company will insure goods at a higher value, and second, the existence of the leased assets, though no lower authorities have doubted the existence of the assets for the impugned disallowance. In all fairness, we restore the matter back to the file of AO to again verify the certificates issued by lessee confirming that no depreciation is found that issue has not claimed any depreciation. Assessee should be allowed its claim of depreciation. Assets leased to Searsole Chemicals Ltd. - Held that:- Assessee has filed with the AO and CIT(A) complete details in respect of lease transaction with Searsole Chemicals Limited which includes photo copy of lease agreement, invoices of the asset purchased which have been leased, details of payment, installation certificates, details of insurance, details of lease rent received, valuation report, amongst other details. Under these facts and circumstances matter cannot be restored back to the file of AO. We therefore direct the AO to delete the disallowance of depreciation. No merit in the disallowance of depreciation pertaining to parties in category B as in respect of transactions with these parties regarding sale of lease back of assets, we found that complete details in respect of each lease transaction which includes photo copy of lease agreement, invoices of the assets purchased which have been leased, details of payment, installation certificates, details of insurance, details of lease rent received, details of assets either having been received back or sold at the end of the lease term, valuation report, amongst other details. Respective lease rentals have been received and offered by assessee as its income is very important point. We found that lease rent so collected and offered as income was more than the depreciation claimed by the assessee. It indicates that assessee has no reason to evade tax in so far as income shown on lease rent is more than the depreciation so claimed in respect of these sale and lease back transactions. We also verified the facts of leased assets and found that the leased assets have either been received back from lessee at the end of the lease period or sold to the lessee and the resultant income or loss has been incorporated in the profit and loss account of said period. In category C The depreciation in respect of this category transactions pertain to assets that have been purchased and leased in the earlier years, that is, the disallowance is not in respect of the assets that have been purchased/ given on lease during the previous year ended on 31st March, 1993. The AO for income-tax assessment year 1992-93 passed the assessment order dated 22.02.1995 under section 143(3) wherein the entire claim of depreciation on these assets has been allowed by him. Thus, once the AO has applied his mind and allowed depreciation on the assets leased, then, in the subsequent year, the AO is obliged to allow depreciation on such assets, and cannot take a different view, without bringing any adverse material on record that would suggest otherwise of the assets acquired in the earlier year(s). Assets given on lease and returning back to the assessee and again given on lease depreciation is required to be allowed once the assets purchased in the earlier year have entered the block of assets, and depreciation in respect of such assets has been allowed in that year, depreciation in respect of such assets is necessarily to be allowed for the subsequent year that is, the year under reference. If the AO wants to take another view and disallow depreciation, then he has necessarily to reopen the assessment of the earlier year to disallow the depreciation and then and then only, can disallow depreciation in the year under reference; this has not been done by the AO, even though it was open to him to do so while passing the assessment order on 31.3.1999. The fact that he has not reopened the assessment of the immediately preceding year, thus, the view taken by the AO to disallow the depreciation for the year under reference is not consistent with the view taken by him in the immediately preceding previous year, and hence, not sustainable in law. Disallowance of depreciation in respect of motor cars and other vehicles - Held that:- We found that vehicles have registered in the name of respective lessees in the registration book also indicated the lessee as the owner of the vehicle and name of the assessee appears only under the caption of “hypotheticated to”. In terms of these observations, we do not find any infirmity in the order of CIT(A) for decline of claim of depreciation in respect of motor cars and other vehicles. Sale and lease back of plant and machinery CIT(A) observed that the agreement does not stipulate wholesale buyer of the cost of the dismantling at the end of the lease period of transportation. As per our considered view, it does not matter in so far as it is now going to change the character of the arrangement and if the assets has to be repossessed the expenses of repossession is to be borne by the lesser only. Penalty u/s.271(1)(c) - disallowance of depreciation on the assets leased out by assessee - Held that:- CIT(A) has deleted the penalty imposed u/s.271(1)(c) on the plea that claim of assessee was debatable and after applying the various judicial pronouncements reached to the conclusion that no penalty should be imposed for such debatable issue. In terms of the findings recorded by CIT(A), we do not find any reason to interfere in his order deleting the impugned penalty.

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• 2017 (4) TMI 344
  Twin branding pricing mechanism - whether this amount of premium generated through alleged twin branding mechanism has flown back to the assessee or not? - proof of assessee being a sole beneficiary of the entire amount or part of the amount? - bogus bank accounts - survey proceedings - Held that:- Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee company or the assessee company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion how so ever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of ‘preponderance of probability’ is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigation have been carried out, then nothing can be implicated against the assessee. The entire basis of the Revenue to draw adverse inference in fact originated from the investigation and surveys carried out in the case of wholesale buyers and the statement given by the wholesale buyers about generation of premium money; and whence, finally the said allegation of the excise department has not been found be acceptable then the entire substratum on which the revenue’s case hinges. It would be difficult to appreciate the stand of the revenue that the assessee was beneficiary of the premium money or relate back the flow back of the money to the assessee. It appears that the charging of premium amount over and above the MRP by the retailers and wholesale buyers may be keeping the assessee in loop to coordinate for meeting out certain expenses which also included advertisement and sales promotional expenses. The entire scheme was so designed that the liability of sales and promotion expenses or advertisement lies with the wholesale buyers and not on the assessee and assessee merely acts as a coordinating/managing central agency. But such a managing and coordinating of advertisement does not implicate the assessee that it is the sole beneficiary or owner of the entire premium money generated as held by the Hon’ble Apex Court in the case of the ITC [2004 (9) TMI 103 - SUPREME COURT OF INDIA] that there could not be any presumption that manufacturer is getting the money over and above the MRP. Thus, on this account also the revenue’s case fails.- Decided in favour of assessee Rejection of books of accounts - estimation of income by multiplying the volume of sales of lower price brand with the differential price of higher price brand on account of theory of ‘twin branding mechanism’ and thereby giving an adhoc reduction of 10% on the ground that some of the share in premium money belonged to the wholesale buyers - Held that:- Once we hold that there is no material to implicate the assessee then the presumption that assessee is maintaining cash in bank account outside the books also fails because this allegation too is not flowing from the first premise of the AO. The additional reason cited by the Ld. CIT (A) falls within the realm of suspicion and surmises and based on such suspicion and surmise sans any direct material, the same cannot be upheld. As stated several times herein above, there is no finding or any cogent material to establish that extra amount collected in cash by shopkeepers/retailers have been passed on further from wholesale buyers/ super buyers to the manufacturer, i.e., assessee; and once that is so, the presumption of indirect flow back cannot be made the basis for such addition or estimation of income. Various case laws have been referred by the learned counsel before us on this point; however, we are not referring to these decisions because, we have arrived at our conclusion on the basis of material facts brought on record and as referred to before us. Best judgment does not entail wild guess work or huge additions should be resorted to, albeit it lays down the determination of income based on fair and reasonable analysis based on some tangible material. The framing of the best judgment though entails some kind of fair and honest estimation but at the same time it should be based on material and information on record. The best judgment is not a provision to penalize the assessee and resort to wild estimate but it is a machinery provision which is to be based on assessing the correct income and that too based on material and evidence having live link nexus with the income which is to be assessed. Thus, on this count also, we are unable to uphold the kind of estimation or addition which has been made by the AO and sustained by the Ld. CIT (A) and accordingly, we direct the AO to delete the entire addition. - Decided in favour of assessee

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• 2017 (4) TMI 343
  Non compete fees non eligible for depreciation - Held that:- What we find in the instant case is that clause 8.6.1 to 8.6.4 of the tripartite agreement between the assessee, Orchid India and Shri. K. Raghavendra Rao and the bipartite agreement between assessee and Shri. K. Raghavendra Rao were not carefully verified by any of the lower authorities. What is required to be seen is whether the payment of non compete fee was a supporting one to the transfer of the injectable drugs division. We are of the opinion that this issue also requires a fresh look by the ld. Assessing Officer . We therefore set aside the orders of the lower authorities with regard to disallowance of depreciation an intangible assets and remit it back to ld. Assessing Officer for to considering afresh, in accordance with law Nature of expenditure - capital outgo or revenue outgo - Held that:- It is not disputed that capacity expansion was of Orchid India and not of the assessee. Orchid India was not an Associated Enterprise of the assessee. The payments made by the assessee to ensure continuous supply of rawmaterial did not enhance its own asset structure in any way. Assessee was obliged to pay price charged by M/s. Orchid India apart from the lumpsum it had affected. Agreement between assessee and M/s. Orchid India placed at paper book page No.964 clearly places an obligation on M/s. Orchid India to maintain sufficient capacity and supply the projected needs of the assessee during the term of the agreement. In our opinion, the payments made by the assessee to M/s. Orchid India was only in the revenue field to ensure the supply of its raw material on a long term basis. Expenditure was primarily and essentially related to manufacturing operation of the assessee which ensured its profit earning capability. It was only an outlay of business in order to carry it on in an efficient manner. In our opinion, the expenditure was allowable as revenue outgo. Transfer pricing adjustment - Held that:- When the assessee had supplied a number of items to its Associated Enterprise abroad, prices of some of which were lower than the agreed price rates and some were higher than the agreed rates, then, in our opinion, considering only the items where there was a deficient pricing was not appropriate. Assessee has produced a chart at paper book page no.587 to 589 which interalia show that some of the items were charged at higher than the agreed rates. We are of the opinion that even though an adjustment can be made, such adjustment has to consider both positive as well as negative price difference. We are of the opinion that this issue requires a fresh look by the ld. Assessing Officer. We therefore set aside the orders of the lower authorites with regard to adjustment for difference in pricing between cost of shipment and standard price, back to the file of the ld. Assessing Officer /TPO for consideration afresh. Downward adjustment on interest paid by the assessee to its Associated Enterprise for ICCD - Held that:- There is a wide disparity between what is stated in the Balance sheet and the schedule of M/s. TPG Wholesale Private Limited filed before Registrar of Companies and the rate considered by the TPO. The rate 0.5% as well as 50% prime- facie appear to be incorrect, unless there were other conditions which constrained the said company to pay a interest which was significantly different from normal market rate for convertible debentures. The question of comparability of TPG Wholesale Private Limited for bench marking the ICCD interest rate of the assessee in our opinion requires a fresh visit by the ld. Assessing Officer/TPO. We set aside the orders of the lower authorities with regard to downward adjustment of H22,14,66,575/- and remit the issue back to the ld. Assessing Officer/TPO for consideration afresh in accordance with law. Selectio of Associated Enterprise of the assessee - Held that:- The term influence appearing in Sec.92A(2)(i) of the Act is a type of dominant influence which lead to a defacto control over the other enterprise. The entire sales of the assessee were to Apotex Cort/ Apotex Inc Signet and M/s. Hospira group, concerns of which the latter admittedly were Associated Enterprises of the assessee.The total sales to Hospira group as already mentioned by us at para 5 above, aggregated to H283,79,39,806/-. It can be safely concluded from the above data that more than 20% of assessee’s sales were to Apotex Corp and Apotex Inc. The profit shared earned by the assessee from them aggregated to H30,07,34,065/- out of the total profits of H125,26,61,036/-. We are therefore of the opinion that M/s. Apotex Corp and Apotex Inc were in a position to exercise a dominant influence over the assessee. A person who purchased more than 1/5th of the total sales of the assessee, in our opinion, would have a distinctly dominant influence on the pricing and can exercise a defacto control. In the circumstances, we are of the opinion that lower authorities were justified in treating M/s. Apotex Corp and Apotex Inc as Associated Enterprise of the assessee. Profit split ratio - Held that:- Essential elements that are required to be verified for applying the said method was never considered by the lower authorities while considering the profit split ratio at 60:40. Considering all these facts, while holding that M/s. Apotex Corp and M/s. Apotex Inc were Associated Enterprise of the assessee, the matter regarding bench marking Arms Length Pricing of the profit share, in our opinion requires a fresh visit by the ld. Assessing Officer/TPO. We therefore set aside the orders of the lower authorities and remit the issue regarding adjustment of profit share back to the file of the ld. Assessing Officer/TPO for consideration afresh in accordance with law.

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• 2017 (4) TMI 342
  Disallowance of exemption claimed u/s 54 and 54F - assessee had made investment in acquiring two residential flats whereas the benefit of deduction under section 54/54F is available on acquisition/construction of "one" residential house only - Held that:- The assessee acquired the flat, the intention was to use it as one residential unit. In our considered view, it will not make any distinction whether the flats were constructed as such by the builder or the same was altered or combined into one at the instance of the buyer (assessee). Thus, the assessee is very much eligible to claim the benefit of deduction under section 54/54F on the entire amount of investment made in residential flat bearing Nos. 2601 and 2602 in Beau Monde, Tower "C", Prabhadevi, Mumbai. Thus, the learned Commissioner of Income-tax (Appeals) has rightly granted relief to the assessee and, therefore, his order is upheld. - Decided in favour of assessee.

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• 2017 (4) TMI 341
  Expenses on brand building - whether is of capital in nature and accordingly not allowable as revenue expenditure? - Held that:- First ground is covered by the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case for previous AY 2009-10 held that expenditure incurred on brand building was revenue in nature. Thus, under these facts and circumstances of this case and in view of the clear position of law as discussed above, we hold these expenses are revenue expenses and direct the Assessing Officer to treat the same as such and allow the same and, therefore, we delete the disallowance made by the Assessing Officer. Addition under section 14A read rule 8D - Held that:- We direct the AO to delete the disallowance on account of interest under rule 8D(2)(ii) in toto and so far as the disallowance under rule 8D(2)(iii) is concerned, the investments made in the sister concerns are of strategic nature are also required to be excluded while calculating the disallowance under rule 8D(2)(iii) of the Rules. We, therefore, direct the AO to rework the disallowance under rule 8D(2)(iii) after excluding strategic investments and accordingly the ground raised by the assessee is allowed. Additional depreciation allowed Interest was payable under section 234B - Held that:- It was nobody's case that the assessee had committed a default in payment of advance tax when it actually paid it, the assessee could not be held liable to pay interest under section 234B. Insofar as the observations in the order of the Tribunal, that the assessee should have anticipated the events that took place in March, 1992, were concerned, they had no substance. It was rightly submitted that it was not possible for the assessee to anticipate the events that were to take place in the next financial year and pay advance tax on the basis of those anticipated events. It was to be held that in the facts and circumstances of the case it is not justified in law in holding that the interest was payable under section 234B

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• 2017 (4) TMI 340
  Assessment of income - Held that:- AO can adopt 8% of the sales turnover as income of the year. Even though there was a plea for allowing depreciation and interest from that amount, considering the past record of assessee and the orders of Co-ordinate Bench, we determine the Net Profit of 8% on the sales disclosed by assessee, which should justify the parties on the facts of the case. Accordingly, we modify the orders of CIT(A) and allow the grounds of assessee partly.

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• 2017 (4) TMI 339
  Reopening of assessment - denial of exemption under section 10(23C)(iiiad) - proof of educational purposes of school - Held that:- Neither of the Authorities below, nor the ld. DR before us has been able to repudiate the assessee’s categorical assertion that no religious education has ever been imparted by the assessee school right from since its inception and that the assessee school is affiliated with the Punjab School Education Board (In short, ‘PSEB’), and it is imparting education only on the pattern of the PSEB, which pattern is a recognized pattern in India and is the pattern prescribed by the State Govt. in Punjab. The existence of the assessee solely for educational purposes has been elaborated and confirmed by us in the preceding paras. So far as regards the receipts of the assessee, firstly, neither of the Authorities below has raised any objection with regard to the receipts of the assessee being less than the prescribed limit of Rs. 1 crore. For the A.Y. 2007-08, the receipts of the assessee, as per the Income & Expenditure Account for the year ending 31.03.2007, amounted to Rs. 52,01,115.28, i.e., much below the prescribed limited of Rs. 1 crore. The above apart, it is patent on record that in the case of Arya Shiksha Mandal, the governing body of the assessee school, in scrutiny assessment, vide order dated 29.11.2012 (APB 2007-08 Pg 12 – 13), the status as well as the nature of service of the Mandal was accepted as that of a charitable educational society. From the above discussion, it is evident that both the reasons recorded by the AO for reopening the completed assessments of the assessee are based on factual errors, rendering the notice issued u/s 147, finding its basis in the aforesaid reasons, to be an invalid notice - Decided in favour of assessee

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• Customs

• 2017 (4) TMI 319
  Imposition of penalty u/s 112 (a) & (b) and u/s 114 of the CA - smuggling of gold - Held that: - the involvement of the Appellant in the smuggling of the gold into India and in attempt of smuggling of Indian and foreign currency is clearly made out. Therefore, the charges against the Appellant making him liable for penalty u/s 112 (a) & (b) and u/s 114 of the CA are sustained - appeal dismissed - decided in favor of Revenue.

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• 2017 (4) TMI 318
  Warehoused goods - disposal of warehoused goods at the end of expiry period - Allocation and apportionment of proceeds of sale of imported goods that were warehoused and disposed off in accordance with section 150 of CA, 1962 - Jurisdiction of Commissioner - Held that: - On perusal of the provisions of CA, 1962, we do not find that disposal or apportionment of sale proceeds is the responsibility of a Commissioner. If, in the course of a decision, a matter is referred to the Commissioner for approval, especially when it is not warranted, it cannot be claimed to be a decision which has been taken by the Commissioner in exercise of powers referred to in section 129A(1) of Customs Act, 1962. Because the grievance arise from a decision communicated by the Deputy Commissioner of Customs, without purporting to have originated elsewhere, an appeal lies before Commissioner of Customs (Appeals). We therefore find no infirmity of jurisdiction - without authority to retain balance of sale proceeds, there is grave impropriety in attempting to review a decision taken earlier to settle a portion of the claim preferred by the owner of the tank in which the warehoused goods were stored - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 317
  Bail application - the applicant's case is that he is detained since 5-10-2016 and the investigation will take considerable time to conclude - Revenue's claim is that the applicant has committed forgery and offence under the Explosive Act and Explosive Substance Act, goods were imported without valid import licence and under misdeclaration - Held that: - There are serious allegations against the applicant and to meet the allegations, there is clinching evidence against the applicant. The investigation is in progress. Hence, it is not in the interest of society to release the applicant on bail - application dismissed - decided against applicant.

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• 2017 (4) TMI 316
  Jurisdiction of Customs Authorities - the petitioner's case is that although the Authorities have the power, in the facts of the case the power should not be exercised - Held that: - The reasoned order passed by the Authority acting under a statute is justifiable. However to sustain a writ petition against such an order the petitioner has to demonstrate that, such order suffers from the vice of lack of jurisdiction, or is perverse or has been passed for extraneous considerations or is such that it shocks the conscience of the Court. The Writ Court is not to sit in appeal over the impugned order, reassess the evidence and come to a different finding. The petitioner not able to substantiate any ground on which a reasoned order such as the one under challenge in the present writ petition has to be set aside - petition dismissed - decided against petitioner.

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• 2017 (4) TMI 315
  Future sale of existing goods in India - denial on the ground that the goods imported were cleared later to the date of sales invoice - Held that: - future sale of existing goods in India and in the custody of Customs is undeniable in absence of any contrary evidence to show that the appellant was dealer of similar goods not imported. In absence of any evidence to show the appellant’s oblique motive, there cannot be suspicion to hold against the appellant - appeal allowed. Refund of SAD - CENVAT credit - there was no endorsement of the condition of the notification and no Cenvat credit is admissible in respect of the goods covered by the sales invoice - Held that: - Larger Bench of the Tribunal has already held in the case of Chowgule & Company Pvt. Ltd. v. Commissioner of Customs [2014 (8) TMI 214 - CESTAT MUMBAI (LB)] that such an endorsement may not be necessary since the invoice do not carry the duty element - appeal allowed. Appeal allowed in toto - decided in favor of appellant.

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• 2017 (4) TMI 314
  Import of video cassette blanks - classified under CTH 852390.09 or otherwise - It is the case of importer-appellant that the goods will fall under category of freely importable ones, while department's view is otherwise. Adjudicating authority in the impugned order has come to a conclusion that since width of the cassettes is not mentioned as any documents and even the examination report does not indicate the width as also that this point was not taken during the earlier proceedings, the goods fall under the category of restricted goods - whether the imported goods in this case are freely importable or otherwise? - Held that: - adjudicating authority should have considered the submission of the appellant in its correct perspective as appellant has procured the S-VHS recorder/player and produced the same before the adjudicating authority. Instead of deciding the issue on facts by ascertaining whether the cassettes are compatible with S-VHS recorder/player, adjudicating authority decided the issue on technicality. The decision of Tribunal in the case of Phil Corporation [2000 (11) TMI 683 - CEGAT, MUMBAI] squarely covers the issue, as in that case also similar cassettes were imported and the same objections were raised, while allowing appeal of the appellant-importer Tribunal held that the goods imported are freely importable - the two decisions of Tribunal categorically hold that similar goods as imported by appellant are freely importable - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 313
  Benefit of project import - N/N. 14/2004-Cus and 3/2004-CE - respondent claimed classification of the resins to be registered under Project Import under Customs Tariff Heading No. 9801, on the ground that these resins were components/integral requirement of water demineralization of plant - Adjudicating authority rejected the contentions of respondent herein and denied the benefit of project import - Held that: - the technical literature produced before the first appellate authority is not challenged by the Revenue in any way. Further, it is noticed that first appellate authority has followed the ratio of the case laws as decided by the Tribunal. In view of the foregoing the impugned order, in our view is correct and legal and does not require any interference - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 312
  Duty received short - whether adjudicating authority was correct in dropping the proceedings initiated against the respondent for recovery of the Customs duty on the goods imported i.e. Phosphoric acid during the period April 1997 to September 2001? Held that: - N/N. 24/94 and earlier one Notifications exempt Phosphoric Acid from customs duty if they are imported for manufacture of fertilizers. In the case in hand, there is no dispute as to the fact that the Phosphoric Acid imported is for manufacture of fertilizers. When there is no dispute as to the short receipt of the Phosphoric Acid in the shore tank, the demand as raised by the Revenue was correctly dropped by the adjudicating authority - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 311
  Misdeclaration of value of imported air conditioners - DEPB Scheme - Held that: - the goods came through Bill of Entry No.9909 dt. 17.4.2000 was under DEPB scheme. Ld. Commissioner did not examine at all that DEPB clearance whether was proper and in accordance with law and against proper DEPB scrips. That aspect needs rigorous test - matter remanded to the Adjudicating Authority to issue notice to the respondent to hear the matter afresh - appeal allowed by way of remand.

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• 2017 (4) TMI 310
  Principles of natural justice - all the RUDs were received by assessee in person under dated acknowledgment on 14/08/2014 but some other documents which were not made RUDs in the show cause notice were being asked for by the appellant - whether such non relied upon documents which are not having any direct bearing in the case, the appellants persistent request for said documents, without any plausible explanation, is justified? Held that: - such type of observation made by the adjudicating authority is neither legally appreciable nor correct in as much as it is for the assessee to adjudge as to which documents are relevant for his defence. If the Revenue has chosen to rely only upon some of the documents recovered from the assessee, it is the duty of the Revenue to return all the balance documents on which no reliance stand placed by them. For the said reason we find no merits in the Ld. DRs objection that first the appellant should give a list of all the non relied upon documents which they needed to procure. The non RUDs are required to be returned back to the person from whose possession same were taken and it should be left to the assessee to find out as to whether the same are relevant or not. On account of non supply of documents, detailed submission could not be made by the assessee. Without commenting upon the fact as to whose fault it is, the fact remains that the adjudication has taken place without the defence plea of the appellant being on record. For such reasons, we are compelled to set aside the impugned order and remand all the matters to adjudicating authority for fresh decision - appeal allowed by way of remand.

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• PMLA

• 2017 (4) TMI 305
  Prevention of Money Laundering - praying the appeal filed by the appellant may be posted before a Bench comprising of the Hon’ble Chairperson/Legal Member - Held that:- The application relies on certain provisions of the PMLA namely 27, 28, and 33 which have been repealed by the Finance Act of 2016 (28 of 2016) with effect from 1-6-2016. The application is therefore, infructuous and is liable to be dismissed as such. It is also noted that by virtue of Section 25 of the PMLA as amended by the Finance Act, 2016 (28 of 2016) it is provided that the Appellate Tribunal constituted under Section 12 of SAFEMA shall be the Appellate Tribunal under the PMLA. With regard to the composition of Benches of the Appellate Tribunal, sub-section (6A) of Section 12 of SAFEMA as amended by the Finance Act, 2016 (28 of 2016) specifically provides for constitution of single Member or two Member Benches and for such Benches to exercise the powers and functions of the Appellate Tribunal. It is well settled that the Appellate Tribunal being a creation of the statute is bound to act in accordance with the provisions of the said statute. The application is therefore, without any merit also.

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• Service Tax

• 2017 (4) TMI 338
  Levy of tax - bus service for transporting staff - Revenue entertained a view that such activity of transporting persons by providing bus will be covered under the taxable activity of “tour operator service” liable to service tax in terms of the provisions of FA, 1994 - Held that: - the case of Capricorn Transways Pvt. Ltd. vs. CCE, Raigad [2014 (11) TMI 165 - CESTAT MUMBAI] held when the vehicle, in question, are not tourist vehicle and are only contract carriage buses not holding tourist permit, no liability to service tax will arise - the assessee is providing buses at fixed charges and the schedule of operation is as per the instruction of the client company. There is no scope to tax such activity under a tour operator service. Reliance was placed on the Circular dated 17/09/2004 issued by the Board - The respondent herein was not engaged in planning, scheduling, organizing or arranging tours. They only provided buses on fixed charges for transportation of staff as per the schedule and timing decided by the client company. In such situation, there can be no liability of service tax under the category of tour operator service on the respondent - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 337
  Taxability - amount received and/or retained by assessee towards expenditure as consideration for rendering of 'club or association service' - It is the case of the tax authorities that the amount retained on account of amounts expended is a consideration received by it for rendering 'club or association service' and is, therefore, liable to tax and FA, 1994 - Held that: - this appellant is an association of persons. Doubtlessly, the members have paid a certain amount for the privilege of membership. They have likewise participated in contributing to the common expenses of the association - That members may come together for a common purpose which may involve membership fee and participation in common expenditure is an accepted reality of the existence of social man. To take it beyond that perspective to the hard reality of subjection to tax, the object of the tax law must also be fulfilled which, in relation to FA, 1994 is the rendering of a service. The impugned order has failed to convince that a service is rendered by the appellant to its members and the contributions are the quid pro quo for that service. There can be no doubt that 'copyright societies' are established under law and hence not liable to be taxed on any receipts from its members. Demand set aside - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 336
  Classification of service - legal consultancy service or not - demand under the category of support services’ of business or commerce - Held that: - it cannot be in doubt that respondent appears before tax authorities in statutory proceedings. Such appearance also involves preparation and certifying of documents that are required to be filed in accordance with compliance necessities - Submission of returns or appearance for resolution of disputes are not activities that are directly concerned with furtherance of business activities of an organization. On the contrary, these are activities that are thrust upon an organization for its very survival in the realities of the legal environment in which the organization functions. These are unavoidable and are not easily performed by the human resources available within the organization. Professional outside assistance has, necessarily, to be solicited and, considering the inevitability of such soliciting, loses the character of having to be outsourced for economic viability. Unless an activity is optional for the continued existence of the organization and permits the flexibility of self-performance vis-a-vis outsourcing, it does not appear to invite coverage as 'support service of business or commerce' and the appeal of Revenue has not ventured to do so - appeal rejected - decided against Revenue.

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• 2017 (4) TMI 335
  Validity of SCN - extended period of limitation - N/N. 24/2004 dated 10/09/2004 - exemption to computer training institutes - Held that: - the computer training institutes, no longer enjoy exemption with effect from 01/07/2004 or 10/09/2004 when exemption was specifically continued only for recreational training and vocational training Institute - no case of suppression of facts with intent to evade duty or tax is made out, nor any case of contumacious conduct is made out on the part of the appellant - the extended period of limitation is not attracted - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (4) TMI 334
  Cement - benefit of N/N. 50/2003 - exemption on cement in terms of the N/N. 50/2003 had not been granted to the appellant despite the fact that the appellant had started commercial production of clinker, one of the items manufactured by it, in its manufacturing unit prior to the due date, namely, 31st March, 2010 - Held that: - if the appellant had placed the Circular dated 26th April, 2012 or any other such circular before the learned Tribunal, as asserted, the appellant may move the learned Tribunal by way of review. The learned Tribunal, after hearing the parties may pass such order as it may deem fit - appeal allowed by way of remand.

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• 2017 (4) TMI 333
  Recovery of dues of sole proprietor concern - both proprietress as well as power of attorney holder of concern died - whether the dues of such concern can be recovered from legal heirs of the owners? - Held that: - The law itself does not permit continuation of the recovery proceedings against the heirs and legal representatives of sole proprietors/proprietress who are carrying on business of manufacturing of excisable goods as a sole proprietor/proprietress. Their concern, after their death, therefore, does not exist and the heirs of such deceased sole proprietor/proprietress cannot be proceeded against in the absence of a clear legal stipulation. The Revenue can proceed by taking recourse to ordinary civil law. The Revenue can institute such legal proceedings as are permissible under the general law and upon success therein, it can enforce and execute the order/decree by even attaching the movable and immovable properties, including the subject property if otherwise permissible in law - petition allowed - decided in favor of petitioner.

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• 2017 (4) TMI 332
  Valuation - Section 3A of CEA, 1944 - Zarda - Chewing Tobacco - The Central Government in exercise of the powers conferred under Section 3A of the Central Excise Act, 1944 published a Notification on 27th February, 2010 notifying Chewing Tobacco as notified goods. As a consequence of such Notification, the levy and collection of the excise duty was to be done in accordance with the provisions of Section 3A of the Excise Act. In terms of the Rules so notified, the levy and collection of the excise duty on the goods in question was to be done not on the basis of the actual production by the manufacturing unit, rather it was to be done on the basis of total manufacturing capacity of the unit - The grievance of the petitioner is that in terms of the earlier Notification, there was uniformity throughout the country with regard to levy of excise duty on production of the goods in question. The tax impact although was heavy but was bearable. But now, some States, including Bihar, have issued notifications whereby the Chewing Tobacco have been prohibited from being manufactured and treating them to be food products. Held that: - Rule 6(5) of the Rules notified on 27th February, 2010 contemplates that the machines which the manufacturer does not intend to operate shall be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision. Rule 10 contemplates that in case a factory did not produce the notified goods during any continuous period of fifteen days or more, the duty calculated on a proportionate basis shall be abated in respect of such period provided the conditions specified in the said Rules are complied with. Rule 13 contemplates that in case a manufacturer does not intend to further operate a packing machine, he shall intimate to the authorities which shall then be uninstalled and sealed by the Superintendent of Central Excise and removed from the factory premises under his physical supervision. The primary challenge is to the amendments in the 2010 Rules is to the clause, wherein speed of manufacturing packing machines has been made the relevant consideration for determining the production capacity of a factory. We do not find that such factor is unreasonable. The different manufacturers may use packing machines having varied manufacturing speed. A manufacturer can have one packing machine with specific manufacturing speed whereas; another manufacturer can have another machine with another packing speed. The manufacturing speed is relevant for determining the production capacity of a factory. It is not unreasonable or arbitrary without any nexus of the objective to be achieved. The objective for compound levy is to avoid evasion of excise duty. A manufacturer choosing to suspend manufacturing for continuous 15 days has a liberty to seek abatement of the duty on fulfillment of the conditions. The manufacturer has the liberty to un-install any packing machine at any point of time, but subject to fulfillment of conditions. Even, liberty is given to manufacturer to suspend manufacturing for any other factor beyond the control of the manufacturer. The liberty has been given to manufacturer to seek abatement of excise duty if the unit is not producing the notified goods during any continuous period of fifteen days or when any packing machine is to be uninstalled, etc. In other words, if a packing machine is in working condition, then, its speed is a relevant consideration for imposition of excise duty. Such levy cannot be said to be arbitrary or unreasonable which may warrant intervention by this Court under power of judicial review. The levy of excise duty is on manufacturing of Chewing Tobacco or Unmanufactured Tobacco. The product is a marketable goods. Merely because that some States prohibited the manufacturing of tobacco, it will not cease to be marketable commodity if the manufacturing process in a factory is continuing. The compound levy of excise duty is on the condition of a working packing machine having a manufacturing speed to produce pouches of chewable tobacco or unmanufactured tobacco. Therefore, the capacity of a packing machine is the base of marketing chewing tobacco and unmanufactured tobacco. The legislative intent in terms of the World Health Organization is to discourage the consumption of tobacco progressively. Therefore, the levy of excise duty with the factor of manufacturing speed of packing machine cannot be said to be violative of fundamental rights enshrined under Article 19(1)(g) of the Constitution. Petition dismissed - decided against petitioner.

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• 2017 (4) TMI 331
  Reduction of adjudication - appellant has come out with a fair approach to reduce the litigation before adjudicating authority furnishing details of the material facts and evidence for his scrutiny - Held that: - When readjudication order is perused, it does not throw light whether the ld. adjudicating authority has made appropriate calculation of the duty liability determining whether each and every items of the respective annexures appearing in pages 66-106 of the appeal folder was "furniture" and liable to duty - What are all the activities carried out at the respective site shall also be examined for the purpose of determination of the character of the goods emanated out of the activity so carried out and determine whether any "furniture" were cleared thereat for dutiability. Keeping in view that SCN was issued in the year 1998, it is high time that the authority within three months of last date of hearing, shall pass appropriate order and re-adjudication is expected to be completed by 30.09.2017 to protect interest of justice. Appeal allowed by way of remand.

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• 2017 (4) TMI 330
  100% EOU - Refund claim - rejection on the ground that goods supplied against advance authorization to the domestic market - Held that: - Rule 5 refund provides for refund of unutilized accumulated Cenvat credit against exports of goods, Rule 5 does not discriminate between physical exports out of India and deemed exports supplies made within Indian territory therefore in absence of such discrimination, it cannot be said that Rule 5 refund is applicable only for exports of goods out of India and not for deemed exports supplies in India - deemed exports supplies are also eligible for refund u/r 5 - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 329
  Excisability - spent solvents/industrial waste - Whether spent solvents/industrial waste cleared by the respondent are non-excisable goods of lesser purity obtained as by-products during the manufacturing process or whether they are cleared as distilled solvents such as methanol, toluene, IPA, acetic acid, etc., with purity ranging from 90% to 97%? Held that: - the retesting of the impugned goods was not possible due to its non-availability - This Tribunal in the case of M/s. Gemini Edibles & Fats India Pvt. Ltd. v. CC, CCE & ST, Guntur [2016 (6) TMI 990 - CESTAT HYDERABAD] had occasion to consider the dutiability of ‘spent earth’ arising as residue in the process of refining crude palm oil. The issue was held in favor of assessee after analyzing the C.B.E. & C. Clarification No. 904/24/2009-CX., dated 28-10-2009 - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 328
  100% EOU - cotton waste cleared to DTA sales - The view of the Department is that sale value of cotton waste should be included in arriving at the eligible quantum of sale in DTA - Held that: - Assistant Development Commissioner of NSEZ, Noida had clarified that as cotton waste is unconditionally exempted from duty, the same is not to be counted for DTA sales entitlement in terms of Para 6.8(e) of the Policy - reliance was placed in the case of M/s CT. COTTON YARN LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE [2013 (1) TMI 249 - CESTAT NEW DELHI], where it was held that obtaining soft cotton waste in the course of carding and combing, ginning cotton does not amount to manufacture and no new product with distinct name, usage and character emerges. We further note that cotton waste is exempted under N/N. 23/2003-C.E. without any condition. Even if the respondents have no permission for DTA sales in terms of Exim Policy, such waste cannot be subjected to any duty - appeal rejected - decided against Revenue.

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• 2017 (4) TMI 327
  Benefit of N/N. 108/95, dated 28-8-95 - denial on the ground that at the time of clearance, the respondent was not having valid and proper certificate as per notification - Held that: - the substantial benefit cannot be denied on the basis of procedural irregularity, if any - In the present case, the certificates were signed by the Executive Head of the Project Implementing Authority and countersigned by the Principal Secretary. The same is not in dispute. The submission of proper certificate subsequently cannot be brushed aside and the substantial benefit cannot be denied on technical ground - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 326
  Demand raised by invoking extended period of limitation - It is the case of the Revenue that the appellant undertook certain process, which do not amount to manufacture - Held that: - in terms of Rule 16(1) where the duty paid goods are brought back to any factory for being remade, reconditioned, etc., the assessee shall state the particulars of such receipt in his records and shall be entitled to take Cenvat credit of the duty paid on such goods - the appellants have complied with the said condition. Thereafter, at the time of clearance also, they have cleared the same under proper invoice and on payment of duty. In such situation, to sustain a case for extended period, no element of suppression, fraud, etc., can be established. As such, without going into the merits of the case, the demand is not sustainable on the question of time-bar itself - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 325
  Clandestine manufacture and removal - Held that: - the third party’s records at the supplier’s side as affirmed by the person incharge and further corroborated by the appellant cannot be discounted only on the ground of further evidences like transportation and receipt of money has not been proved. In a clandestine manufacture and clearance, each stage of operation cannot be established with precision - I find no reason to interfere with the findings recorded by the lower authority - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 324
  CENVAT credit - SSI exemption - Rule 11 of CCR, 2004 - while opting exemption in terms of small scale notification, the balance credit, if any, would lapse, in terms of Rule 11 of CCR, 2004 and as such would not be available for utilisation - the contention of the appellant is that it has carried forward and utilised the credit during the period 1-4-2010. As such the SCN issued on 21-3-2010 is barred by limitation. They have also taken an additional ground that apart from clearing the kraft paper under exemption, they also paid paper cess at the rate of 125% of the assessable value u/s 9 of the Industries (Development and Regulation) Act, 1951, which is nothing but the duty of excise - Held that: - the matter needs to be go back for considering the plea of the assessee - appeal allowed by way of remand.

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• 2017 (4) TMI 323
  Valuation - transaction value - Whether duty of Central Excise is payable on the Refinery Gate Price (RGP) paid by the Oil Marketing Companies (OMC) to the appellant or it is payable on the subsidized price at which the Oil Marketing Companies so sell the goods to SKO (Superior Kerosene Oil) under PDS and LPG (Liquid Petroleum Gas) (Domestic) to their consumers? Held that: - the transaction value would be the price, where above three elements/conditions are present or fulfilled. We find that above three elements are present in the case of the amount/the price paid by OMCs (other than the BPCL). The price which is charged by the appellant-KRL from the Oil Marketing Companies (other than the BPCL) is the price as per the provisions of Section 4(1) of the Central Excise Act, 1944. The price charged by the appellant - KRL from BPCL cannot be called as ‘transaction value’, when BPCL is related to the appellant as KRL is said to be the subsidiary company of the BPCL. - It is to be noted that the price being paid by the Oil Marketing Companies (other than BPCL) includes the terminal charges also. Therefore, for the purpose of Central Excise duty, the assessable value which is now called the ‘transaction value’ [after the amendment made in Section 4 of the Central Excise Act, 1944 by the FA (w.e.f. 1-7-2000)] is the price that is charged by the KRL from OMCs for the subject goods. Whether terminal charges being the amount collected by the appellant from the Oil Marketing Companies is to be included in the transaction value of SKO (PDS) and LPG (Domestic) for the purpose of assessment of Central Excise duty? - Held that: - the price or cost paid/received to/by an assessee or manufacturer (from independent buyer) constitutes the assessable value/transaction value for the purpose of levy of Central Excise duty. The Hon’ble Supreme Court in the case of C.C.E., Jaipur-II v. Super Synotex (India) Ltd. [2014 (3) TMI 42 - SUPREME COURT] observes that the price or cost paid to the manufacturer constitutes the assessable value on which Central Excise duty is payable - the words that gain signification are “actually paid”. Appeal dismissed - decided against appellant.

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• 2017 (4) TMI 322
  Shortage of stock - imposition of penalty - Held that: - The penalty u/s 11AC is imposable to the extent of 100% of duty evaded by the manufacturer. Whether the present case is a case of duty evasion by resorting to clandestine activities or is a case of bona fide action is required to be examined. As already observed, that the clearance of product during a holiday, which product is already entered in the records, without raising an invoice can be considered to be a bona fide action of the assessee, thus not inviting any penal action against them in terms of Section 11AC. However, the fact remains that the goods were cleared without payment of duty and without raising the invoices, though may be, under compelling circumstances, thus inviting penal action u/R 25 - imposition of penalty of Rs. 1 lakh in terms of the provision of Rule 25, would be justifiable - appeal rejected - decided partly in favor of assessee in terms of reduction of penalty.

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• 2017 (4) TMI 321
  Clandestine removal - appellant case is that the SCN was based on the presumption about the figures mentioned on the loose sheets to be one hundredth of the actual transactions value and also about the numbers mentioned on the slips to be connected to their dealers with whom they have regular transaction of duty paid and exempted goods - Revenue's claim was that the figures on the loose sheets were related to cash transactions of clandestine clearances of dutiable goods - validity of SCN - Held that: - in none of the statements there was any admission that the data recorded on the loose sheets, was related to the value of the goods cleared clandestinely. There is force in the argument of the learned Counsel for the appellants that department did not compare the data with the data related to clearances of goods on which duty was paid and the goods manufactured by them which did not attract duty. We, therefore, find that the show cause notice is based on presumption. Therefore, subject of SCN dated 13-8-2004 is not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 320
  Rectification of mistake - the decision in Para 4.1 of the said order is based on the explanation to Section 35F as is existed prior to 6-8-2014 when the term “duty demanded” included the interest payable. In the instant case the definition of Section 35F as is existed after 6-8-2014 is applicable and therefore the arguments made in Para 4.1 of the order do not hold good. There has been another error made by the applicants in their appeal memorandum. While no penalty is in dispute in the prayer made in their appeal memorandum, they have approached the Tribunal to set aside interest and penalties, apparently this leads the error in the order. ROM disposed off by making necessary rectification.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 309
  Whether in the facts and circumstances of the case the learned Tribunal is right in law and in facts in confirming the order passed by the Revisional Authority imposing penalty u/s 45(6) of the Act which has been imposed upon the Revisional Authority for the first time as the same was not imposed by the AO while passing the original order of assessment? Whether that while calculating / considering the difference of 25% between tax paid and tax payable, while imposing penalty u/s 45(6) of the whether any amount paid by the assessee/dealer is first to be applied towards tax payable as sought to be contended on behalf of the appellant–assessee or the same is required to be first applied towards interest, thereafter for penalty and thereafter for tax as contended on behalf of the Revenue? Held that: - on bare reading of subsection (5) and (6) of Section 45, it is integral part of the assessment and the levy of penalty on the difference of amount of tax paid and amount of tax payable as per the order of assessment or reassessment as the case may be shall be automatic. Therefore, when the penalty on the difference of amount tax paid and tax payable is more than 25% of the amount of tax so paid, there shall be automatic levy of penalty under Section 45(6) of the Act and therefore, no separate notice is required to show cause as to why penalty under subsection (6) of Section 45 may not be imposed. However, a notice may require to be issued while imposing penalty in other cases, more particularly, Section 45(1)(b) When the AO failed to impose the statutory penalty, it can be said that there was an omission on the part of the AO and therefore, the same was revisable by the Revisional Authority in exercise of powers u/s 67 of the Act. Even matter is required to be viewed from another angle. In the present case, even the First Appellate Authority who incidentally was also a Revisional Authority, in fact enhanced the amount of tax payable. The AO levied the purchase tax on lignite at 19.75% while passing the assessment order and the First Appellate Authority held that purchase tax was leviable at 25% and therefore, in fact enhanced demand of tax. Under the circumstances, in the present case even the original assessment order came to be modified by the First Appellate Authority and the tax liability came to be enhanced and therefore, it can be said that the original assessment order merged into order passed by the First Appellate Authority and therefore, also the penalty under Section 45(6) of the Act was leviable/imposable on the difference of tax paid at the time of filing of return and tax payable as determined by the Appellate Authority. Under the circumstances also, penalty imposed u/s 45(6) of the Act is not required to be interfered with. The learned Tribunal has not committed any error in confirming the order passed by the Revisional Authority in imposing the penalty u/s 45(6) of the Act on the difference of amount of tax paid with the return and the amount of tax held to be payable by the Appellate Authority. If the amount paid along with return is first applied towards the tax, the difference of tax shall be less than 25% and therefore, penalty u/s 45(6) of the Act was not imposable is concerned, the aforesaid cannot be accepted. Section 47(4a) and 47(4b) is very clear. That as per the aforesaid provision any amount paid/deposited by the assessee/dealer shall be first applied towards the interest, thereafter the penalty and thereafter, the balance amount, if any, shall be applied/adjusted towards tax liability. Under the circumstances, applying Section 47(4a) and section 47(4b) of the Act, the difference in the amount of tax paid with the return (after deducting the interest of Rs. 28,234/- as per the order passed by the Appellate Authority) and the tax payable would be more than 25% (para 15 of the impugned judgment and order) passed by the learned Tribunal). Under the circumstances, penalty u/s 45(6) is rightly imposed on the difference of tax paid and tax payable. Appeal dismissed - decided against appellant-assessee.

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• 2017 (4) TMI 308
  Reversal of ITC - section 19(2)(v) - Interpretation of statute - Held that: - the issue involved in this writ petition in respect of ITC reversal u/s 19(2)(v) is covered by a recent decision of this Court in the case of M/s. Everest Industries Limited Versus The State of Tamil Nadu, The Deputy Commissioner (CT) (FAC) [2017 (3) TMI 279 - MADRAS HIGH COURT] where it was held that A plain reading of the provisions of sub-section (1) and sub-section (2) of Section 19 of the 2006 Act would show that, as long as specified goods, which suffer tax are used for any of the purposes set out in clauses (i) to (vi) of sub-section (2) of Section 19, the assessee should be able to claim the ITC, with a caveat in so far as clause (v) is concerned, and was decided in favor of petitioner - the matter is remitted back to the respondent for considering the above said issue afresh - appeal allowed by way of remand.

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• Indian Laws

• 2017 (4) TMI 307
  Place of convenience - Designated Court selection - alternative statutory remedy - Held that:- The convenience of the parties are required to be considered. The convenience would include the existence of more appropriate forum, expenses involved, the law relating to the lis, verification of certain facts which are necessitous for just adjudication of the controversy and such other ancillary aspects. The place of convenience is also required to be taken into consideration. It would be appropriate on the part of this Court to relegate the petitioners to appropriate Court at Maharashtra including the Court designated under the MPID Act, as may be advised, on the principle of forum conveniens without entering into the merits of the contentions raised in these petitions. However, liberty is reserved to the petitioners to raise all such contentions before such Court. For the aforesaid reasons, all these petitions are not entertained. Letters Patent Appeals are also disposed of by modifying the order dated 24.02.2015 passed by the learned Single Judge in Special Civil Application No.4689 of 2014 and allied matters to the extent of reserving liberty to the petitioners to move an appropriate Court at Maharashtra including the court designated under the MPID Act, as may be advised. However, it is clarified that though the contentions of the parties are recorded in this judgment, no opinion is expressed on merits thereof since it may affect any of the parties before any other forum.

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• 2017 (4) TMI 306
  Consumer protection - power of administrative control vested in the National Commission over the State Commissions under Section 24(B)(1)(iii)- Held that:- The Union Government shall for the purpose of ensuring uniformity in the exercise of the rule making power under Section 10(3) and Section 16(2) of the Consumer Protection Act, 1986 frame model rules for adoption by the State Governments. The model rules shall be framed within four months and shall be submitted to this Court for its approval; (ii) The Union Government shall also frame within four months model rules prescribing objective norms for implementing the provisions of Section 10(1)(b), Section 16(1)(b) and Section 20(1)(b) in regard to the appointment of members respectively of the District fora, State Commissions and National Commission; (iii) The Union Government shall while framing the model rules have due regard to the formulation of objective norms for the assessment of the ability, knowledge and experience required to be possessed by the members of the respective fora in the domain areas referred to in the statutory provisions mentioned above. The model rules shall provide for the payment of salary, allowances and for the conditions of service of the members of the consumer fora commensurate with the nature of adjudicatory duties and the need to attract suitable talent to the adjudicating bodies. These rules shall be finalized upon due consultation with the President of the National Consumer Disputes Redressal Commission, within the period stipulated above; (iv) Upon the approval of the model rules by this Court, the State Governments shall proceed to adopt the model rules by framing appropriate rules in the exercise of the rule making powers under Section 30 of the Consumer Protection Act, 1986; (v) The National Consumer Disputes Redressal Commission is requested to formulate regulations under Section 30A with the previous approval of the Central Government within a period of three months from today in order to effectuate the power of administrative control vested in the National Commission over the State Commissions under Section 24(B)(1)(iii) and in respect of the administrative control of the State Commissions over the District fora in terms of Section 24(B)(2) as explained in this judgment to effectively implement the objects and purposes of the Consumer Protection Act, 1986.

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