Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 11, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Expenses incurred n connection with raising of debts / FCC Bonds constitute allowable expenditure of the Assessee. - AT
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Addition u/s 68 - Revenue failed to provide that parties were in accommodation entries in form of loan and share application money after charging certain commission as such no survey/search has been carried out on the creditors to prove that these companies are habitual to provide loan/share application money - AT
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The addition on account of yield comparability made by the AO is not sustainable in the eyes of law and CIT (A) has rightly deleted the same - AT
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When reopening u/s 147/148 under the given circumstances is itself not permissible, the AO is not empowered to review the applicability of section 10BA - AT
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Exemption u/s 11 - Charitable activity u/s 2(15) - even if it is proved that certain favours were done by the Executive Committee in allotment of quota that would not make the assessee a non-charitable institution. - AT
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Capital gain - no title has been transferred in part performance of the contract as it had not affected the immovable property comprised there-in, hence capital gain cannot be brought to tax - AT
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MAT - Once there is no possibility for preparing the accounts in accordance with the part II & II of Schedule VI of Companies Act then the provisions of sec. 115JB cannot be forced - AT
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Estimation of income based on best judgment assessment due to rejection of books of accounts, should not be ordinarily interfered by appellate authorities, unless there are demonstratively cogent reasons to do so. - AT
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Penalty U/s 271(1)(c) - penalty proceedings are distinguished and separate and assessee can raise fresh plea in the penalty proceedings, which has been done in this case - AT
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TDS u/s 194J - bandwidth charges - The payments made to service providers were for the use of bandwidth and the payments cannot be considered to be in the nature of managerial, consultancy or technical services so as to attract the provisions of section 194J - AT
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Penalty u/s 271(1)(c) - Where the AO is not clear whether penalty is levied for concealment of income or furnishing of inaccurate particulars, then such an order suffers from non-application of mind and cannot be upheld in law - AT
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Depreciation in respect of electrical installations, elevators, DG sets installed in the building, which have been let-out by the assessee, which is receiving rental income from the said building allowed - HC
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PE in India - In order to conclude that Nortel India constitutes a Dependent Agent PE, it would be necessary for the AO to notice at least a few instances where contracts had been concluded by Nortel India in India on behalf of other group entities. In absence of any such evidence, this view could not be sustained. - HC
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Fees for technical services received - computation of period of stay - From the wording of the article 5 of DTAA in question, it is not possible to accept the plea of the Revenue that the supervisory activities need not have been carried on for six continuous months. - HC
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Condonation of delay - ignorance of law is not an excuse and therefore, delay in filing of appeal cannot be condoned on account of ignorance of law. - AT
Customs
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Classification - Photo Sensors - Revenue has completely failed to indicate/prove that how the item in question is a measuring or checking instrument to be covered under CTH 9031.8000. - the subject item is covered by 8541.40 - AT
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Hon’ble Supreme Court has emphasized time and again that the orders pursuant to a personal hearing either by a court or the Tribunal or any quasi judicial body ought to be passed expeditiously and within a reasonable time - HC
Service Tax
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Import of internet connectivity services - The server placed outside are meant for internet connectivity services related cannot be considered as hiring of simple physical space for placing servers - prima facie case is in favor of assessee - AT
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Transfer of Cenvat Credit under Rule 10 in case of provider of output services - transfer of all assets on demerger - prima facie, denial of credit to the appellant is not in accordance with the provisions of Rule 10. - AT
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Reimbursement of an amount paid to Mormugao Port Trust towards Cargo related charges - Assessee satisfied the condition of being Pure Agent - amount of reimbursement of the expenses cannot be included for discharge of Service Tax liability - AT
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The provisions of Section 65(9a) & (9b) clearly indicates that any services rendered in relation and respect of ATM machines are taxable from 01.05.2006 - Such services cannot be taxed prior to 01.05.2006 - AT
Central Excise
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Valuation - packing material which was used was durable and returnable by the buyer. Therefore, the cost of packing material should not be included in the transaction value - SC
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If Cenvat credit had been wrongly taken, that is an independent liability by itself irrespective of its utilisation which may have followed, as far as taxing statutes are concerned. - HC
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Condonation of delay - 2192 days - The entire period from the time of filing of the Appeal in the Gujarat High Court till its disposal as above by that Court must, in our view, be fairly excluded for the purposes of limitation - HC
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Area Based exemption - expansion of unit - the contention of Revenue that the applicant proposes to take separate factory license, ESI No. and PF Codes for expanded Haridwar Plant II, therefore, it will not fall under the category of existing unit, is not correct - AAR
VAT
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Allowability of change of place of business - The registering authority has not considered the provisions of Section 17 (14) (a) of the Vat Act, which makes it obligatory upon the registering authority to carry out the amendment irrespective of the fact that the application was not furnished within the prescribed period as provided u/s 75 - HC
Case Laws:
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Income Tax
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2016 (5) TMI 373
Business income attributable to PE in India - whether the Assessee, a tax resident of United States of America (USA), has a Permanent Establishment (hereafter 'PE') in India? - Held that:- The AO has also held that Nortel India constituted Dependent Agent PE of the Assessee in India. The aforesaid conclusion was premised on the finding that Nortel India habitually concludes contracts on behalf of the Assessee and other Nortel Group Companies. In the present case, there is no material on record which would indicate that Nortel India habitually exercises authority to conclude contracts for the Assessee or Nortel Canada. In order to conclude that Nortel India constitutes a Dependent Agent PE, it would be necessary for the AO to notice at least a few instances where contracts had been concluded by Nortel India in India on behalf of other group entities. In absence of any such evidence, this view could not be sustained. The CIT(A) as well as the ITAT has proceeded on the basis that the Assessee had employed the services of Nortel India for fulfilling its obligations of installation, commissioning, after sales service and warranty services. The ITAT also concurred with the view that since employees of group companies had visited India in connection with the project, the business of the Assessee was carried out by those employees from the business premises of Nortel India and Nortel LO. In this regard, it is relevant to observe that a subsidiary company is an independent tax entity and its income is chargeable to tax in the state where it is resident. In the present case, the tax payable on activities carried out by Nortel India would have to be captured in the hands of Nortel India. Chapter X of the Act provides an exhaustive mechanism for determining the Arm's Length Price in case of related party transactions for ensuring that real income of an Indian Assessee is charged to tax under the Act. Thus, the income from installation, commissioning and testing activities as well as any function performed by expatriate employees of the group companies seconded to Nortel India would be subject to tax in the hands of Nortel India and the same cannot be considered as income of the Assessee. In view of our conclusion that the Assessee's income from supply of equipment was not chargeable to tax in India, the question relating to attribution of any part of such income to activities in India does not arise. In view of our conclusion that the Assessee does not have a PE in India, the question of attribution of any income to the alleged PE also does not arise. - Decided in favour of assessee
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2016 (5) TMI 372
Depreciation in respect of electrical installations, elevators, DG sets installed in the building, which have been let-out by the assessee, which is receiving rental income from the said building - Held that:- The lessee is required to pay not only the rentals on the building but also charges for the facilities provided by the assessee. The facilities and services provided by the assessee are at Annexure–2 to the said agreement. On a conjoint reading, it becomes clear that the rental income is income from house property. But the charges received towards provision and maintenance of facilities and services as per Annexure-2 cannot be construed to be income from house property. The said income, in our view, has to be considered as income from business and therefore, the claim for depreciation has to be allowed, which has been rightly done so by the Tribunal. - Decided in favour of assessee Payment of interest on borrowed capital - whether an allowable business expenditure? - Held that:- It is noted that in the financial year 2003-04, assessee had constructed a project known as M/s.IBC Knowledge Park Pvt. Ltd., on Bannerghatta Road, Bengaluru. However, there were disputes between the assessee and Bangalore Housing Development and Investments, a partnership firm, with whom the assessee had entered into a joint development agreement. As a result, assessee could not sell the constructed properties. Sale of constructed properties is not a sine qua non for commencement of business. Assessee's business commenced when it had purchased land, obtained plan sanction and put up construction. Thus, when the business of the assessee had commenced during the financial year 2003-04, interest paid by the assessee on borrowed capital cannot be added back to the work in progress. The Tribunal in this regard has relied upon a decision in the case of K.Raheja Development [2005 (5) TMI 552 - ITAT MUMBAI], which has been held to be correct by this court. We hold that the Tribunal was right in giving relief to the assessee and the findings of the Tribunal would not call for any interference.- Decided in favour of assessee Disallowance of interest - Held that:- The Tribunal has found that the assessee had filed a letter dated 30/9/2006 before the Assessing Officer. In paragraph No. 21 of the said letter, detailed workout of interest on borrowings for 'Tower A' is furnished. 'Tower A' had been let-out and the interest amount was paid during the previous year. Interest in respect of 'Tower B' had not been claimed as deduction.- Decided in favour of assessee Correctness of allowing the claim of deduction on construction management fee to an extent of 25% - Held that:- It is noted that M/s. Accenture Services Pvt. Ltd., had engaged the services of the assessee herein as construction management services. The income earned is business income and cannot be considered as income from other sources. Also, if the assessee had received income of ₹ 78.25 lakh towards construction management services, it would have incurred expenditure in various forms. But the details of expenditure was not putforth by the assessee. In the circumstances, the Tribunal assessed the expenditure to be allowed as expenses at 25% of the gross fee. We think that the Tribunal was right in construing the said income as business income and not as income from other sources. We do not find any perversity in the said assessment of 25% being the expenditure incurred from the gross fee. - Decided in favour of assessee Assessment u/s 153C - Held that:- Where incriminating material leading to undisclosed income of another assessee was detected in a search operation, in those cases, reopening of the concluded assessment have taken place. There has been no single decision cited by the learned counsel for the Revenue where the assumption of jurisdiction of the Assessing Officer is in the absence of any incriminating material or undisclosed income having been detected during the course of search leading to reopening of a concluded assessment. In the instant case, though documents belonging to the assessee were seized at the time of search operation, there was no incriminating material found leading to undisclosed income. Therefore, assessment of income of the assessee was unwarranted. Consequently, no satisfaction was recorded in the case of the assessee.- Decided in favour of assessee Assessment u/s 153C / 158BD - Held that:- In the instant case, one of the conditions precedent for invoking a block assessment pursuant to a search in respect of a third party under Section 158BD of the Act, i.e., recording satisfaction that undisclosed income belongs to the third party, which was detected pursuant to a search under Section 133 of the Act, has not been complied with in the instant case. Therefore, the reassessment as such made under Section 158BD in respect of the assessee is not in accordance with law.- Decided in favour of assessee
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2016 (5) TMI 371
Fees for technical services received - computation of period of stay - whether taxable by reason of article 12(2) of the Double Taxation Avoidance Agreement with Japan? - Held that:- On examination of the purchase orders, a common feature which emerged was that the supervisors were to come from Japan and Maruthi Udyog Ltd. had to bear the cost of their air tickets as well as their boarding and lodging in India. The period of supervision in the case of the individual contracts did not exceed the period of 180 days. In other words, they did not constitute a supervisory permanent establishment in terms of article 5(4) of the Double Taxation Avoidance Agreement. Fees for technical services paid to the assessee for the supervisory services is concerned, there was no effective connection between the execution of the purchase orders for supply of equipment and supervision of their installation, and, the project office for the paint and assembly shop of the YE2 car project of Maruthi Udyog Ltd. Additionally, as pointed out by Mr. Aggarwal, the supervisory fee paid by Maruthi Udyog Ltd. was on the basis of "man days". The number of days per supervisor was calculated by dividing "man days" by the "number of supervisors". If 10 supervisors had stayed for 100 man days, the supervision period would be 10 days only, though the "man days" are 100. Thus, the period of stay would be only of 10 days and not 100 days. A comparison of the relevant portions of article 5 of the Double Taxation Avoidance Agreement between India and Japan with the corresponding clause in some of the double taxation avoidance agreements entered into by India with other countries shows that where it is intended that the computation of the six months period for determining whether an assessee can be said to have a permanent establishment should be in the aggregate, i.e., not "continuous", the double taxation avoidance agreement itself provides for it. From the wording of the article 5 of the Double Taxation Avoidance Agreement in question, it is not possible to accept the plea of the Revenue that the supervisory activities need not have been carried on for six continuous months. The court concurs with the views of ITAT that in the present case the fees for technical services was liable to be taxed at 20 per cent. under article 12(2) of the Double Taxation Avoidance Agreement. - Decided in favour of the assessee and against the Revenue.
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2016 (5) TMI 370
Capital gain - valid transfer or not - existence of no conveyance deed or registered agreement for sale - Held that:- In this instant case , the MOU dated 29.12.2004 entered with GCB is not registered and hence it does not convey any title or ownership rights u/s. 53A of the Transfer of Property Act,1882 in respect of the property as per the newly inserted section 17(1A) of the Registration Act,1908. Thus with regard to the transfer of the property in the instant case as per factual matrix of the case as set out above, there is no valid transfer u/s. 53A of the Transfer of Property Act,1882 had taken place as contemplated u/s. 2(47) of the Act as the MOU dated 29.12.2004 is an unregistered document , no title has been transferred in part performance of the contract as it had not affected the immovable property comprised there-in, hence capital gain cannot be brought to tax. We have also noticed in the instant case that possession is handed over for the limited purpose of demolition and reconstruction of the property for constructing seven storey’s of residential building on this property , and it is not that the assessee and the other coowners of the property in execution of the MOU have handed over the possession of the property in lieu of the part consideration received from GCB in the capacity of the buyer of the said property, rather the possession of the afore-stated property was handed over to GCB as licensee only for limited purpose of demolition of the existing bungalow and for reconstruction of the said property by constructing seven storey’s residential building on the said property. The assessee and the co-owners continue to enjoy the possession as and in the capacity as the owners of the afore-stated property while concurrent possession was with GCB as licensee for limited purposes of demolition of bungalow and for construction of seven stories and hence in our considered view, income there-of cannot be brought to tax in the hands of the assessee and the co-owner during the impugned assessment year as transfer as contemplated u/s 2(47) of the Act read with Section 53A of the Transfer of Property Act ,1882 is not been effected as the possession in fact was never been transferred from the assessee and the co-owners to the GCB in its capacity as buyer of the fourth and fifth floor to be constructed in lieu of constructing rest of five floors for the assessee and the other co-owners as also on payment of ₹ 1.65 crores by GCB to the assessee and other co-owners as per facts and circumstances of the case as set out above. The agreement has already been terminated by the assessee and the co-owners on15.10.2007 for deficiency and discrepancies in performance by GCB in terms of the MOU dated 29.12.2004 with respect to the quality of construction and time of completion and the matter being sub-judice whereby Hon’ble Bombay High Court is seized of the suit filed by GCB with respect to the dispute between the assessee and co-owners on the one hand and the GCB on the other hand. Complete performance of the MOU has not allegedly been done by the builder as it is also on record that only 90% of the work was claimed to have been finished by GCB and no conveyance deed or registered agreement for sale has been registered in favour of GCB by the assessee and the other coowners. The additions made by the AO and as confirmed by the CIT(A) in view of our above reasoning and discussions as set out above are not - Decided in favour of assessee
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2016 (5) TMI 368
Rejection of books of accounts - estimation of net profit rate - Held that:- The assessee has not maintained proper records and books of account. The assessee's non-explanation of huge expenses around ₹ 1.00 crore and wayside expenses of ₹ 92,01,739/- cannot be taken lightly as they are incurred in cash. It is the burden on the assessee to demonstrate that the expenses claimed by him are corroborated and reasons for non-maintenance of records are duly explained. It has not been demonstrated by the assessee that distinguishing features as pointed out by the ld. CIT(A) in respect of earlier years and current year are unjustified. Consequently, the nature of inference leads to believe that in this year the severity and nature of defects in the books of account are different than earlier years. We thus find merit in the contentions of the ld. DR that principles of res judicata do not apply to ITAT proceedings and principles of consistency are also not applicable as facts are distinguishable. It is settled law that estimate based on best judgment assessment due to rejection of books of accounts, should not be ordinarily interfered by appellate authorities, unless there are demonstratively cogent reasons to do so. In this case, the assessee has failed to point out that order of the ld. CIT(A) as to estimation of net profit rate is contrary or excessive. In view thereof, we see no infirmity in the order of the ld. CIT(A) which is upheld. - Decided against assessee
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2016 (5) TMI 367
Penalty levied U/s 271(1)(c) - unexplained investment U/s 69A - Held that:- It is a fact that the assessee’s father was 90 years old suffering from cancer, have not been denied. The fact that the earlier gift of ₹ 13.75 lacs from the father has not been disputed by the department. The ld CIT(A) while confirming the penalty has relied only on the observation of the ITAT in quantum proceedings. It is a settled law that the penalty proceedings are neither mechanical nor automatic and merely because there is a finding in the quantum order making the addition by itself cannot justify for imposition of penalty more so when the assessee had disputed the addition. The assessee’s reliance on the decision in the case of Eilly Litty & Compnay and National Textiles (2009 (3) TMI 33 - SUPREME COURT ) is well founded. Thus the ld CIT(A) except relying on the observations of the ITAT has done nothing to hold the assessee’s explanation was false and any other material to draw an inference qua the imposition of penalty. The assessee has given a reasonable explanation on merits about the gift and while considering the penalty issue, nothing adverse has been commented thereon except the finding of the ITAT. It is a settled law that penalty proceedings are distinguished and separate and assessee can raise fresh plea in the penalty proceedings, which has been done in this case. Having raised proper explanation and please in the penalty proceedings, it was incumbent on the CIT(A) to have considered the reply as an appellate authority and given proper findings. The mere reference to ITAT in quantum proceedings, which are separate and distinguish, cannot partake a character of exercise of appeal discretion by the ld CIT(A). In view thereof, the case before us is not fit for imposition of penalty, the same is deleted. - Decided in favour of assessee
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2016 (5) TMI 366
TDS u/s 194J - non deduction of tds on bandwidth charges - Held that:- On the facts of the present case, it is our considered opinion that mere provision of bandwidth does not require human intervention. The payments made to service providers were for the use of bandwidth and the payments cannot be considered to be in the nature of managerial, consultancy or technical services so as to attract the provisions of section 194J of the Act. In view thereof, in the absence of any human intervention between the assessee and the services provided by the AIGP, it cannot be said that the payment made by the assessee was for technical services. Merely because for maintenance purpose certain human intervention might be required, it cannot lead to the surmise that the bandwidth charges paid to various AIGP were in the nature of technical services governed by the provisions of section 194J of the Act. The bandwidth charges were paid for utilizing the standard facilities which were provided by way of use of technical gadgets and the same does not involve technical services as there was only interconnection of the networks to the equipments of other service providers. Hence in the absence of any human intervention for providing bandwidth, the payments made for utilizing such services was not in the nature of technical services governed by section 194J of the Act. Accordingly, we reverse the finding of CIT (A) in this regard and hold that bandwidth charges were not liable for tax deduction at source under the provisions of section 194J of the Act. - Decided in favour of assessee.
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2016 (5) TMI 365
Penalty under section 271(1)(c) - Held that:- The perusal of order levying penalty under section 271(1)(c) of the Act reflects the Assessing Officer held the assessee to have defaulted in concealing particulars of income and also furnishing inaccurate particulars of income. Under the provisions of section 271(1)(c) of the Act, it is provided that a person is liable for levy of penalty where he has concealed the particulars of his income or furnished inaccurate particulars of income; either of two conditions have to be satisfied before penalty for concealment can be levied. The Courts have time and again held that the Assessing Officer has to be specific in reasons levying penalty for concealment, whether it is for concealment of income or furnishing of inaccurate particulars of income. Where the Assessing Officer is not clear whether penalty is levied for concealment of income or furnishing of inaccurate particulars, then such an order suffers from non-application of mind and cannot be upheld in law. - Decided in favour of assessee.
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2016 (5) TMI 364
Addition u/s 68 - cash credit - non-genuine transactions - bogus / accommodation entries in form of loan - Held that:- Assessing Officer had not considered the evidence filed by the assessee during the course of assessment proceedings i.e. affidavits confirming the transaction, PAN number, complete addresses of creditors, copy of balance sheet, ITR for A.Y. 2008-09, bank statement and form No. 18. The assessee had discharged its onus by providing the requisite evidences to prove the identity, genuineness and creditworthiness of the cash creditors. The ld Assessing Officer herself had accepted the remaining cash creditors to the tune of ₹ 3.95 crores explained on the basis of similar evidences produced by the assessee as genuine. The loan/share capitals were received from the private limited companies. They also are filing return under the company’s law and all information is available on MCA website. The ADIT report was not conclusive to held that the cash creditors were not genuine. It is not required under the law to prove the source of source U/s 68 of the Act. Primary burden lies on the assessee has been discharged by filing the requisite evidences before the Assessing Officer and shifted on the Assessing Officer to disprove the cash creditors’ transactions are not genuine or bogus. The share application money was received by the appellant and subsequently returned though banking channel. In case of 7 companies, the notices were served on it on given addresses. There is no evidence directly or indirectly with the Assessing Officer that the assessee had routed undisclosed money in the guise of share application money or loan. The ld DR’s argument have also not convinced us that these parties were in accommodation entries in form of loan and share application money after charging certain commission as such no survey/search has been carried out on the creditors to prove that these companies are habitual to provide loan/share application money even there is no evidence with the ld DR for making such allegation during the course of written submissions - Decided against revenue
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2016 (5) TMI 363
Addition on account of difference in the sales price of sugar between the assessee and of another entity located in the same area - adoption of average rate of sugar sold by that entity for determining the sale value of sugar sold by the assessee - Held that:- We are of the considered view that yield of any crop of one farmer cannot be compared with the yield of another farmer though adjoining to each other because it may depend on numerous factors, like, quality of seeds, pesticides and manures used, day-to day look after of the crop, etc. Tax authorities are not entitled to make addition merely on ground of low yield shown by the assessee on the basis of guesswork particularly when the entire transactions as to sale, purchase and crushing of sugarcane has been recorded in the books of accounts in the ordinary course of business which have been duly audited and have not been disputed by the AO. So, the addition on account of yield comparability made by the AO is not sustainable in the eyes of law and CIT (A) has rightly deleted the same. Hon’ble Supreme Court in judgment cited as Commissioner of Income-tax, West Bengal vs. Calcutta Discount Company Ltd. reported in (1973 (4) TMI 6 - SUPREME Court ) decided the identical issue to the effect that where a trader transfers his goods to another trader at a price less than the market price, and the transaction is a bona fide one, the taxing authority cannot take into account the market price of those goods, ignoring the real price fetched, to ascertain the profit from the transaction. An assessee can so arrange his affairs as to minimize his tax burden - Decided against revenue Addition on account of interest accrued and due but not paid - AO invoked the provisions contained u/s 43B(d) - Held that:- Shakkar Vishesh Nidhi, State Govt. Loan and UP Cooperative Sugar Factories Federation Ltd. do not fall under the definition of financial institution so as to attract the provisions contained u/s 43B(d) by any stretch of imagination - Decided against revenue Addition on account of old creditors - Held that:- Even in the remand report the AO himself admitted that he has not obtained any confirmation of the creditors from the assessee. On the face of the admitted fact that the books of account of the assessee has never been disputed by the AO and the assessee is an Uttar Pradesh Government Undertaking and all the purchases are being made against the bills making addition on the basis of surmises and conjectures is not sustainable. So finding no illegality or infirmity in the findings returned by the ld. CIT (A) deleting the addition - Decided against revenue
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2016 (5) TMI 362
Reopening of assessment - exemption u/s 10BA - Held that:- No doubt, Hon’ble Apex Court in judgment cited as Liberty India (2009 (8) TMI 63 - SUPREME COURT) held that incentive profits are not profits derived from eligible business u/s 80IA/80IB, they belong to the category of ancillary profits of such undertaking. Profits derived by way of incentive, such as, DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression “profits derived from industrial undertaking” under section 80IB. However, judgment (supra) is not applicable to the facts and circumstances of the case because when reopening u/s 147/148 under the given circumstances is itself not permissible, the AO is not empowered to review the applicability of section 10BA. So, in the given circumstances, we are of the considered view that reassessment in this case is not permissible under any circumstances. - Decided in favour of assessee.
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2016 (5) TMI 361
Exemption u/s 11 - whether miscellaneous income earned by the assessee can be considered as receipts from rendering services, in relation to trade, commerce or business, as specified in the proviso to section 2(15)? - Held that:- Activity carried on business principles does not mean that the assessee was carrying on business. It is clear from material on record that all activities of the assessee are directed towards achieving its main object of promoting export on ready made garments from India. It did not carry any activity for earning profit and, therefore, it has to be held that the assessee did not carry on ‘business’ as the term is understood in common parlance. The assessee, therefore, is a public charitable institute. For the purpose of granting exemption, the dominant or min object is to be seen even if it is found that at some point of time the persons at the helm of affairs did not observe rules and acted in a manner not authorized by rules that would not make any difference to the claim of the assessee. A breach of a duty by public or private holder of an office cannot change the character of office or institution. Thus even if it is proved that certain favours were done by the Executive Committee in allotment of quota that would not make the assessee a non-charitable institution. For all the above reasons, we hold that assessee is a charitable institution to which provisions of section11 are applicable. The provisions of section 28(iii) or of s.11(4A) are not applicable to this case as the assessee did not carry on any business. The objects of the assessee are charitable in nature and that the assessee did not carry on any activity with an object to carry profit. As there is no profit motive, the question of attracting the proviso to section 2(15) does not arise - Decided in favour of assessee.
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2016 (5) TMI 360
Foreign Currency Convertible Bonds (FCCBs) - allowability of the claim of expenses - capital expenditure or revenue expenditure - Held that:- In the instant case, Ld AR for Assessee demonstrated that the Assessee earned substantial business from abroad after acquiring the foreign companies with the said FCC Bonds. The impugned expenditure incurred were incurred undisputedly by the Assessee in connection with FCCBs which were applied for acquiring the foreign companies which brought more business for the Assessee. Thus, there is nexus to the business of the Assessee. - Decided in favour of assessee We have held that the expenses in question are in principle of revenue nature. It is the trite law such expenses incurred 9n connection with raising of debts / FCC Bonds constitute allowable expenditure of the Assessee. We dismiss the revenue's finding that the said expenditure is expended in connection with issue of equity shares as the said Bond subscription $ 5.5 million was ultimately refunded with Interest after the lock in period. - Decided in favour of assessee Disallowance u/s 14A - Held that:- Assessee has an additional ground mentioning that some investments made in the subsidiaries yielded dividends chargeable to tax in India. Such investments should be kept outside the scope of the provisions of Rule 8D of the IT Rules, 1962 while determining the quantity to be disallowed u/s 14A of the Act. In this regard, Ld Counsel for the assessee cited various decisions and various arguments in support of his claim. One of such judgment is pronounced by the Hon‟ble Delhi High Court in the case of Joint Investments Private Limited [2015 (3) TMI 155 - DELHI HIGH COURT ] which is relevant for the proposition that the disallowable amount u/s 14A must not mean that the entire exempt income should be disallowed. Various decisions have come up on this issue involving the disallowance u/s 14A r.w. Rule 8D of the Act. This issue requires reconsideration and fresh decision by the AO in the light of the said decisions on the issue. - Decided in favour of assessee for statistical purposes Disallowance of deduction of bad debts - Held that:- AO has not been able to point out an instance of bad debts where the action of the appellant was mala fide. An assessee is entitled to re-evaluate and revalue its debtors from time to time failing which he will have unrealistic realizable figures in his books of accounts and the appellant has exactly done the same in this case. In view of the above facts, the disallowance on account of bad debts is directed to be deleted - Decided in favour of assessee
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2016 (5) TMI 359
Condonation of delay - Held that:- Ratio laid down by the Hon’ble Supreme Court in the case of Swadeshi Cotton Mills Co. Ltd. vs. Government of UP (1972 (11) TMI 78 - SUPREME COURT OF INDIA) that ignorance of law is not an excuse and therefore, delay in filing of appeal cannot be condoned on account of ignorance of law. The ratio laid down by the Hon'ble jurisdictional High Court in the case of Spporthi Sadan Convent vs. CIT (2016 (5) TMI 191 - KARNATAKA HIGH COURT) is squarely applicable to the present case. In the present case also, the assessee not revealed the ill-advice nor produce any material in support of the averments made in affidavit. Therefore, we hold that it is not a fit case to condone the delay in filing the present appeal and the petition for condonation of delay is dismissed.
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2016 (5) TMI 358
Stay application - attachment orders of immovable property as well as movable property - Held that:- In the event the Assessing Officer decides the stay application against the Petitioner, then in terms of the CBDT instructions, an application to the next superior authority i.e. Additional Commissioner and/or the Commissioner would be filed by the Petitioner within one week from the date of the Assessing Officer's order, rejecting the stay application being communicated to the Petitioner; The Respondent-Revenue will not act further upon the impugned notice dated 28th March, 2016 being Exh.A1 to A5 till such time as the Petitioner's application is disposed of by the next superior of the Assessing Officer i.e.Additional Commissioner/ Commissioner and for the period of three weeks thereafter. This is only to enable the Petitioner to take recourse to such legal remedies as may be advised; The attachment made by the order dated 28th March, 2016 being Exh.A1 to A5 is not disturbed by this order. They continue. Only the Revenue will not act upon it to take any further action in the manner provided in the Second Schedule to the Act, for the period as mentioned herein above at (ii); The Petitioner will file an undertaking not to dispose of and/or alienate the property, which are subject to attachment by order dated 28th March, 2016 being Exh. A1 to A5 passed under Section 281B of the Act till such time as the above orders of attachments are not set aside and/or varied; It is clarified that the Assessing Officer and/or Commissioner and/or CIT(A) will not be in any manner be influenced by any observations made by us in our order dated 12th April, 2016 or in this order while deciding any application/ appeal before it. Needless to state that the same will be decided upon its own merits; and It is directed that the Assessing Officer and the Additional Commissioner/ Commissioner of Income Tax would decide the Petitioner's application expeditiously i.e. within three weeks of the receipt of the applications. It is further clarified that the time during which the Revenue is unable to act further upon the orders of attachment dated 28th March, 2016 being Exh. A1 to A5, because of pendency of this Petition and disposal of the Petitioner's application within the aforesaid time frame, would be excluded for the purpose of computing the life of the orders of attachment under Section 281B (2) of the Act.
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2016 (5) TMI 357
Deduction under Section 10A - Held that:- No manufacturing activity was carried out by the respondent-assessee for the three earlier years i.e. A.Y. 2006-07, 2007-08 and 2008-09 on the basis of a survey carried out on 25th September, 2008. The result of this survey would be relevant if at all for examining the petitioner's claim, if any, under Section 10A of the Act for the assessment year 2009-10. It cannot be the basis for denying the claim of benefit under Section 10A of the Act for the earlier assessment years 2006-07, 2007-08 and 2008-09 in the absence of any evidence to support the Revenue's contention of no manufacture during the three assessment years i.e. A.Y. 2006-07, 2007-08 and 2008-09. Both the CIT(A) as well as the Tribunal have on examination of the record rendered a finding of fact that the respondent is engaged in manufacturing activity under the control of Central and Excise Department. The document which was submitted during the assessment proceeding were not found to be lacking in any material particulars by the authorities. The impugned order also finds that payments for imports and receipts on account of exports were made through regular banking channels and with the due approval of the Customs and Central Excise Department. - Decided in favour of assessee
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2016 (5) TMI 356
Disallowance invoking the provisions of section 40(a)(i) - Indo-US Double Taxation Avoidance Agreement - ‘fee for technical services’ - Held that:- There is no material to establish that any technical knowledge, skill, etc. has been made available to the assessee so as to consider it as falling within the purview of Article-12 of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non-resident recipients do not have permanent establishment in India and, therefore, in the said background the same can, at best, be treated as independent personal services covered by Article-15 of the Indo-US Double Taxation Avoidance Agreement. As a consequence and in the absence of any fixed base in India, such income cannot be held chargeable to tax in India so as to require deduction of tax at source. Therefore, invoking of section 40(a)(i) of the Act to disallow such expenditure is not tenable. In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, CIT(Appeals) made no mistake in holding that the payments are not 'fee for technical services'. The aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of ‘business profits’. It has also not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the CIT(Appeals) that such payments are not liable for disallowance under section 40(a)(i) of the Act. With regard to the payments to KPMG, Mauritius, KPMG Hazen Hassan, Egypt, KPMG Dubai, UAE and KPMG, Sri Lanka CIT(Appeals) held that the payments for such services fall within the scope of article 14/15 of the respective treaties dealing with independent personal services and in the absence of any fixed place of business of the recipient in India, income from such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax at source and accordingly the invoking of section 40(a)(i) of the Act has been set-aside by the CIT(Appeals). The aforesaid factual matrix brought out by the CIT(Appeals) has not been assailed by the Revenue before us on the basis of any cogent material and, thus, the same is hereby affirmed. Payment made by assessee to KPMG, Malaysia for audit services it is not in dispute that the said services have been rendered outside India and the same cannot be construed as managerial or technical services so as to be governed by Article-13 of India-Malaysia tax treaty, as contended by the Revenue. Clearly, they are in the nature of independent personal services falling for consideration under Article-14 of Indo-Malaysia tax treaty and, therefore, in the absence of any fixed place of business of the recipient in India, the impugned income is not chargeable to tax in India. Therefore, in such a situation, assessee is not liable for deduction of tax at source - Decided in favour of assessee
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2016 (5) TMI 355
Rejection of books of accounts - estimation of profit - Held that:- Additional Commissioner has nowhere mentioned as to why the working given by the assessee cannot be accepted. More so, he has not given any reasoning as to how the duplicate entries taken in Annexure-A/7 as well as in the books, would be taken care. He simply treated Annexure-A/7 as gospel truth. On the other hand, the ld.CIT(A) has ironed out the anomalies or the error in the entries in an Annexure-A/7. We do not find any error in the finding of the ld.CIT(A) to this extent. The next aspect is application of net profit rate. On one hand, the assessee is armed with two sets of circumstances, viz. (i) net profit rate accepted by the Settlement Commission, after a discussion with both the parties, and secondly, average net profit rate as worked out on the basis of entries recorded in the books as well as as worked out in Annexure-A/7. The average in Annexure-A/7 is 3.44% of the entries mentioned therein. In our opinion, ends of justice would meet, if we apply net profit rate at 5% of the unaccounted sales accepted by the ld.CIT(A). The ld.AO is directed to re-work out the income of the assessee on the basis of 5% net profit rate on the sales worked out by the assessee and accepted by the CIT(A) in both these years.
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2016 (5) TMI 354
Addition as fringe benefits u/s 115WB(1)(c) - contribution to the Employees Provident Fund Organisation towards employees Pension Scheme, 1995 - Held that:- The CBDT vide its CIRCULAR NO. 8/2005, dt: 29-8-2005 has clarified that the contribution to approved gratuity fund or provident fund was not chargeable to FBT. In view of the above discussions, we hold that contributions made to the Employees Provident Fund under the Employees Pension Scheme,1995 which is a statutory contribution as framed by the Government of India exercising the powers conferred on it by section 6A of the provisions of the Employees Provident Fund & Miscellaneous Act, 1952 is not a superannuation fund as defined u/s. 2(6) of the Act. Therefore addition made by the AO towards fringe benefits u/s.115WB(1)(c) of the Act is not sustainable. Accordingly, We confirm the order of CIT-A and the ground raised by Revenue is dismissed. - Decided in favour of assessee
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2016 (5) TMI 353
Addition of insurance premium - Held that:- Payment towards insurance premium under keyman policy is for the benefit of assessee’s company from any risk that it may sustain by losing the valuable services of their directors and its senior staff from any eventuality by any accident or death made by the AO and as held by the Hon’ble High Court Bombay in the case of COMMISSIONER OF INCOME TAX vs. B.N. EXPORTS reported [2010 (3) TMI 186 - BOMBAY HIGH COURT] it is an expenditure which is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purposes of business. Therefore, the order of the CIT-A is justified in deleting the addition made by the AO.- Decided in favour of assessee Disallowance towards excess remuneration paid to one of the directors of the assessee company - Held that:- The said Sunil Kumar being one of the directors of assessee company is directly covered under the persons referred in clause (b) 40A(2) of the Act and hence therefore, whatever may be the payment is in the opinion of AO in excessive or unreasonable shall not be allowed as a deduction. However, keeping in view that the services rendered by Sunil Kumar resulted in the business worth ₹ 614.86 lakhs, we find ourselves in agreement with the ld. CIT(A) that the remuneration paid to him cannot be considered as excessive or unreasonable to attract the provision of section 40A(2)(b). - Decided in favour of assessee Disallowance of expenditure incurred towards club memberships - Held that:- The expenditure paid to club and did not bring into existence an asset or advantage for the enduring benefit of the business of assessee to treat the same as capital expenditure. The club expenditure, it only facilitates smooth and efficient running of a business of the assessee. Therefore, club expenditure paid for staff is an allowable expenditure.- Decided in favour of assessee Addition on account of cesstion of the liability u/s 41(1) - Held that:- In the present the AO noted that the assessee admitted that the amount of ₹ 43,571/- has remained as unclaimed by creditors for a considerable period of time. Therefore the fact remains undisputed that the liability carried forward for many years and there was no cessation or remission in the case on hand. There are two conditions are to be fulfilled in order to attract provisions of Section 41 (1) of the Act, i.e cessation or remission and it should be of previous year and that those two conditions were missing in this case under consideration.- Decided in favour of assessee
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2016 (5) TMI 352
Addition of store relocation expenses - revenue v/s capital expenditure - Held that:- AO in the assessment year 2003-04 has already allowed the expenses by treating the same as revenue in nature. However, we are of the view that Revenue should not have filed this ground of appeal before the Tribunal, because the same expenses has already been admitted by the AO in his order dated 25.3.2015 relevant for the assessment year 2003-04. Following the consistent view adopted by the Revenue in the assessment year 2003-04 in assessee’s own case, we dismiss the ground raised by the revenue. - Decided against revenue Addition being debentures restructuring - revenue v/s capital expenditure - Held that:- Restructuring fees paid by the appellant to renegotiate the rate of interest on debentures represented the present value of differential rate of interest which should be allowed as revenue expenditure. See CIT vs. Gujarat Guardian Ltd [2009 (1) TMI 13 - HIGH COURT DELHI] - Decided against revenue
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2016 (5) TMI 351
Disallowance of intra head adjustment in respect of business loss and Profit under the head Capital Gain by invoking provision of explanation to section 73 - Held that:- Respectfully following the judgment in the case of CIT vs. HSBC Securities & Capital Markets India P. Ltd. (2012 (6) TMI 715 - BOMBAY HIGH COURT ) and the decision of ACIT, Spl.Circle 18(1) vs. Concord Commercials (P) Ltd.(2005 (1) TMI 314 - ITAT BOMBAY-H ), we are of the view that during the year under appeal assessee’s income mainly includes income from capital gain at ₹ 6,58,227/- and exempt income in the form of dividend at ₹ 57,171/- under the head business assessee has suffered a loss of ₹ 6,18,448/- and further observing the fact that specific amendment has been inserted in the statute by way of including companies engaged in the business of trading of shares in the explanation to section 73 of the Act w.e.f.1.4.15 clearly gives indication that for the year under appeal ld. Assessing Officer was not correct in invoking the explanation to section 73 of the Act on the assessee’s case and therefore, erred in treating business loss as deemed speculation loss and not allowing set off against the income from capital gain. - Decided in favour of assessee.
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2016 (5) TMI 350
Net profit determination - AO estimated profit @5% on the said undisclosed sale - CIT(A) estimated the commission income @11% on the said undisclosed sale - Held that:-The estimates are to be made keeping in view the background of the business of the assessee and the available records and is to be a reasonable and fair estimate of income to be brought to tax which necessarily involves estimation based on some guess work and the same cannot achieve perfection or precision to yield exact income which can be brought to tax . The CIT(A) made an estimate of the earnings of the assessee keeping in view the entire background of the case and in our considered view, no defect or infirmity is observed in the working of the estimates by the CIT(A), which is hereby ordered to be confirmed. However, with respect to courier charges of ₹ 9,51,665/- being included in the income of the assessee on estimated profit rate basis as set out above, direction for limited verification are hereby issued to the AO to verify whether the courier charges of ₹ 9,51,665/- debited by the assessee to the Profit and Loss account and claimed as an expenses by the assessee in the return of income filed with the Revenue, as per the agreement with Casio India Pvt. Ltd. are to be part of gross revenue or were reimbursed by Casio India Company Pvt. Ltd. separately and if these expenses are found to reimbursed by the Casio India Company Private Limited separately, then the total amount of courier charges of ₹ 9,51,665/- claimed by the assessee as revenue expenses will be disallowed, otherwise the income as computed by the CIT(A) is confirmed. We order accordingly Undisclosed cash deposits - Held that:- The total payment made for the undisclosed purchases made from Thakkral Computers Private Limited through the bank account is 24,55,282/- and hence there will also be sales corresponding to the said purchases. Both the sales and purchases with respect to these electronic items so purchased from Thakkral Computers Private Limited is not declared and disclosed by the assessee to the Revenue in the return of income filed with the Revenue. There are cheques deposited of ₹ 22,50,000/- on different dates in the Kotak Mahindra Bank Limited by the assessee for which no explanations was offered by the assessee to satisfy the ingredients of Section 68 of the Act which was added by the AO to the income of the assessee and confirmed by the CIT(A). With respect to the cash deposit of ₹ 5 lacs in Kotak Mahindra Bank , the assessee came out with an explanation that the same is part of sale proceed in cash of the electronic items purchased through Thakkral Computers Private Limited and the same should be treated as part of sale proceeds in cash, which explanation was accepted by the CIT(A) being plausible and bona-fide explanation in the absence of any incriminating material brought by the Revenue to disprove the contentions of the assessee and in our considered view, we donot find any infirmity in the orders of the CIT(A) which we confirm and the action of the CIT(A) granting relief of ₹ 5,00,000/- is upheld. Unexplained investment u/s 69 - Held that:- We have observed that the assessee has made payment of ₹ 24,55,282/- to Thakkral Computers Pvt. Ltd. out of the regular bank account with IndusInd Bank whereby the credits are duly offered for tax by the assessee as per the facts emerging from the orders of the authorities below, the said payments of ₹ 24,55,282/- to Thakkral Computers Pvt. Ltd. had not been recorded in the books of account. The assessee has come forward with the explanation that this represent unexplained purchases and correspondingly unrecorded sales were made. It was further submitted that 5% of the investment be treated as profit u/s. 44AF of the Act and the same should be brought to tax. The CIT(A) has estimated profit at ₹ 5 lacs on these transaction based on the explanation of the assessee that ₹ 5 lacs deposited in cash in bank account with Kotak Mahindra Bank represents cash sales not disclosed to the Revenue with respect to the electronic items purchased from Thakkral Computers Private Limited and represents part of profit from these unrecorded purchase and sale of electronic items and the CIT(A) gave relief of ₹ 19,55,282/- as the sources of making payment were duly explained to be commission income credited in the IndusInd Bank which was offered for tax by the assessee and the bank account with IndusInd Bank was duly declared and disclosed by the assessee to the Revenue . We do not find any infirmity in the orders of the CIT(A) which we confirm and uphold the same Decided against revenue Double stage of estimation - DR submitted that the CIT(A) erred in giving relief of double stage by first estimating commission @11% on sales and then applying profit rate of 15% - Held that:- . No explanation with evidences has been submitted by the assessee before the authorities below to explain the income which need to be brought to tax in context of the undisclosed sale of ₹ 2.09 crores made through the assessee by Casio India Company Private Limited. The CIT(A) in a very reasonable and fair manner first estimated commission income @11% on undisclosed sale made and on the courier charges , which was in parity with and equivalent to the ratio of commission income of ₹ 39,11,279/- being given by Casio India Company Private Limited to the assesssee on disclosed sale of ₹ 3.52 crores which is also confirmed by the TDS certificate and the books of account of the assessee and on the same ratio estimated 11% commission on undisclosed sales of ₹ 2.09 crores and, thereafter, the CIT(A) applied the 15% ratio of profit on commission income on disclosed sale and undisclosed sales whereby giving benefit of the deduction of expenses to the assessee. Hence, the action of the CIT(A) cannot be faulted with as the estimation has been done by the CIT(A) on a reasonable and fair basis as some guess work is always involved in estimation and the same cannot be made with exact precision and perfection to arrive at exact income. Hence, we donot find any infirmity in the orders of the CIT(A) which we uphold and confirm - Decided against revenue
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2016 (5) TMI 349
Addition made on account of discrepancy in DVAT account - Held that:- The reconciliation statement, ledgers of the parties in the books of accounts of the assessee. It is ample clear that the purchases shown by the assessee in the purchase returns are the same that of the sales shown by the assessee in the sales returns in regard to these three parties in the books of accounts of the assessee. The CIT(A) after considering the reconciliation statement, copies of the ledger accounts of the alleged party rightly and correctly held that there were no inflated purchases shown by the assessee in its Profit & Loss Account and there were no access purchases were claimed by the assessee in its P & L Account. In view of above, we are inclined to agree with the conclusion of the CIT(A) all that there were no inflated purchases claimed by the assessee in its Profit & Loss Account. Therefore, addition made by the AO on the allegation of inflated purchases cannot be held as sustainable and the same was rightly deleted by the CIT(A) - Decided in favour of assessee Addition made on account of discrepancies in sales and purchases - Held that:- Neither the AO nor the Ld. DR has brought on record any allegation to establish that the sales were made by the assessee during the FY 2008-09 relevant to AY 2009-10 amounting to ₹ 1,12,99,491/- from M/s. A.P.Sons and of ₹ 2,39,166/- from M/s. South Delhi Saree House and thus, we are in agreement with the conclusion of the CIT(A) wherein he held that there were no unaccounted sales of the assessee to its alleged dedicated dealers i.e. M/s A.P. Sons and M/s. South Delhi Saree House and hence we uphold the findings of the CIT(A) on this count. - Decided in favour of assessee Disallowance of expenses - Held that:- The assessing officer made additions without any reasonable cause for both the assessment years and the CIT(A), after considering and properly appreciating the facts, circumstances and explanation of the assessee to the rightly held that the expense was incurred wholly and exclusively for the purpose of the business of the assessee and the same was allowable expenses expenditure for the assessee under the provisions of the Act - Decided in favour of assessee
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2016 (5) TMI 348
Adoption of land rate for the purpose of valuation u/s.50C - Held that:- To consider valuation cell letter dt. 10.03.2005 and letter of Registration Department, Sub-Registrar, Adayar dt 24.02.2011 referring guideline value adopted in respect of Vikram Sarabai Instronics Estate, Thirumanmiyur alongwith CD. The guideline value adopted by SRO for the period from 01.04.2003 to 31.07.2007 being ₹ 516/- per sq.ft and present assessment year falls within the above period and there is an increase in guideline from 01.08.2007 being ₹ 2,400/- per sq.ft. The ld. Counsel substantiated the arguments with the letters addressed to the valuation cell, Sub- Registrar, and objections filed with the valuation officer. The ld. Commissioner of Income Tax has not provided opportunity to the assessee inspite of written request furnished in the appellate proceedings. So, considering the apparent facts circumstances and valuation rates adopted by Sub-Registrar and the assessee, we are of the opinion that assessee should be provided with one more opportunity based on the guideline value, valuation report and valuation under Wealth Tax Act and to consider the contents of CD as requested by the assessee in adjudicating the appeal. Therefore, we set aside the order of Commissioner of Income Tax (Appeals) and remit the entire disputed issue to the Commissioner of Income Tax (Appeals) to pass the order afresh based on the above findings and provide adequate opportunity of being heard to the assessee.
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2016 (5) TMI 347
Determination of gross profit rate - Held that:- We find that the assessee has not maintained the stock register as to production of the items being manufactured by the assessee. Hence, the lower authorities have rightly invoked the provisions of section 145(3) of the Act. We further find from the record that Coordinate Bench vide its order dated 9-01-2012 in assessee's own case had made a lump sum addition of ₹ 5.00 lacs against gross profit rate of 8.81% shown by the assessee in the assessment year 2008-09. By respectfully, following the decision of Coordinate Bench in assessee's own case for the assessment year 2008-09 (supra) , a lump sum addition of ₹ 5.00 lacs is directed to be made which will meet the ends of justice to both the parties. - Decided partly in favour of assessee
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2016 (5) TMI 346
Addition of cash found at the time of search - Held that:- The Assessing Officer of Smt. Lalita Devi has scrutinized the cash availability U/s 143(3) of the Act and same cash has been accepted by the Assessing Officer. Further it is also undisputed fact that the husband of Smt. Lalita Devi Late Vallav Das Parwal was running a shop of wholesale of Ghee and oil etc. in the name of Maheshwari Store, Chandpole Bazar, Jaipur, who had expired on 19/08/2007. There was a cash balance as per cash book. Finally, the proprietory concern has closed on 15/9/2007, therefore, there is reasonable explanation with the assessee that he has received two lacs from his mother on different dates. Therefore, the addition confirmed by the ld CIT(A) is deleted. The finding on levy of interest U/s 234(c) of the Act is consequential to the above finding. - Decided in favour of assessee
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2016 (5) TMI 345
TDS u/s 194A - interest payment to a member - assessee is a co-operative society engaged in the business of banking - Held that:- Clause (v) of sub section (3) of section 194(1) of the Act provides for exemption in respect of interest on deposits paid to a member of a co-operative society including co operative bank. Prior to the amendment of section 194(1)(3)(v) of the Act w.e.f. 1.6.2015, there was no distinction between a member of a cooperative society and member of a co-operative bank. Therefore, we are of the opinion that the assessee is not liable to deduct TDS on interest payment to its members. We further noticed that in case of non members, the assessee stated that it has complied with the TDS provisions, where the interest payment exceeds ₹ 10,000/. In few cases, where interest exceeds ₹ 10,000/-, the depositors have furnished declaration in form no.15G/15H, therefore, no TDS is deducted. The CIT(A) during the course of appellate proceedings, after examining the declaration form furnished by the assessee has accepted the claim of assessee and deleted the additions. Therefore, we are of the opinion that the CIT(A) has rightly deleted the additions. - Decided in favour of assessee
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2016 (5) TMI 344
Estimation of business income - Held that:- The issue has already been considered and adjudicated by the coordinate bench of this Tribunal in the case of one of the assessees herein, viz., Maa Highways, for assessment year 2007-08, wherein estimation of income in the hands of subcontracts at 5% of the gross receipts was held to be reasonable. Respectfully following the same, we hold that in all these cases as well, the business income of the assessees for the years under appeal be estimated at 5% of the gross receipts, and additions if any, may be determined accordingly. - Decided in favour of assessee in part. Additions made on protective basis - Held that:- Though the authorities below have not mentioned the section under which the disallowance and the consequential additions are made, from the order of the Assessing Officer, it appears that the receipts of the assessee were disallowed as they are not used for business activity. Thus, it is disallowance of business expenditure. The CIT(A) has rightly pointed out that the amounts withdrawn cannot be presumed to have been deployed and incurred towards revenue expenditure and got debited to the Profit & Loss Account. Where there is estimation of business income, disallowance and consequential addition of revenue expenditure is not sustainable, as held by the jurisdictional High Court in the case of Indwell Constructions (1998 (3) TMI 121 - ANDHRA PRADESH High Court ). In view of the same held that no separate disallowance of expenditure shall be made once income is determined by resorting to estimation. Respectfully following the same, we do not see any reason to interfere with the orders of the CIT(A).- Decided in favour of assessee.
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2016 (5) TMI 343
Transfer pricing adjustment - addition relating to payment of royalty u/s.92CA(3) - Held that:- adjustments are made by the Transfer Pricing Officer without giving any detailed reasons in his order. He has merely stated the fact of the impugned adjustment and left at that. When assessee raised the grievance before the DRP, the DRP observed that the TNMM was rejected as the TPO was able to find internal CUP but does not give any further details. It is difficult to even understand, much less examine, the reasoning adopted by the authorities below in making these adjustment This matter is required to be remitted back to the assessment stage with a direction to the TPO to adjudicate upon these issues de novo, by way of a speaking order and after giving yet another reasonable opportunity of hearing. The assessee is at liberty to take such plea, as may be advised, and the TPO shall adjudicate upon the pleas so taken by way of a speaking order. - Decided in favour of assessee for statistical purposes.
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2016 (5) TMI 342
Addition u/s. 69 - undisclosed investment - Held that:- The investment has been made under the arrangement of an MoU and the other persons have a beneficial interest in the property. In this regard, we find that the assessee has made investment of ₹ 6,50,000/- only in the property and the other two persons namely; Shri Arvindbhai Patel and Shri Vinodbhai Solanki has made the investment of ₹ 65,00,000/- and ₹ 58,94,325/- respectively. The investment has been made under the arrangement of an MoU and same was accepted by the other two persons. It is not in dispute that the pay-orders have been purchased from their bank accounts and have been given to the revenue authorities. Therefore, the decision of the Assessing Officer holding that the investment belonged to the assessee was not justified and addition u/s. 69 cannot be made in the hands of the assessee. Accordingly, the CIT(A) has rightly deleted the addition in question. The CIT(A) has also rightly observed that the source of investment by the other two persons, who have owned the amount of investment in the land, was not clear. He also pointed out that since the other two parties have owned the investment, the Assessing Officer should have to investigate the source of investment in their respective hands by initiating appropriate proceedings and in case they were not assessed with the Assessing Officer, the concerned Assessing Officer should have to pass on the information to the jurisdictional Assessing Officer for taking the necessary action. Having observed so, the CIT(A) was justified in deleting the addition - Decided in favour of assessee Addition u/s 68 - loan received through banking channels - Held that:- It is not in dispute that these parties are assessed to income-tax, having PAN and also they have confirmed the fact of granting loan to the assessee. Moreover, it is also pertinent to note that the Assessing Officer has made this addition without inviting objections from the assessee and without giving reasonable opportunity of being heard. There is nothing on record to suggest that the Assessing Officer has issued any summons to the respective parties. In this case, we find that the depositors in this case are established their identity and genuineness of the transaction as the transactions were routed through the banking channel; more so, the assessee has submitted the confirmation from the two depositors, indicating the PAN and address of the concerned. With regard to creditworthiness, the primary onus to prove the unsecured loan was established by the assessee by providing the name, address and PAN of the depositors. Thus, the onus was shifted upon the Assessing Officer to prove that the contention of the assessee was not correct by making necessary enquiries under the powers vested u/s 133(6) and 131 of the Income-tax Act. There is no material evidence on record to suggest that the Assessing Officer has discharged his onus, i.e, the burden of proof; therefore, the addition in question is not justified and the same is directed to be deleted.- Decided in favour of assessee
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2016 (5) TMI 341
Disallowance of trading loss consisting of advance - Held that:- As decided in CIT V Versus Abdul Razak And Co. [1981 (2) TMI 27 - GUJARAT High Court ] any debt which arose during the course of normal business activity and which becomes bad or irrecoverable, the same has to be allowed as trading loss under section 28(1). Considering the facts and circumstances of the case on hand, in our opinion, the Assessing Officer was not justified in making the disallowance of trading loss in respect of written off of trade advances made by the assessee to the parties namely Rayees Readymade And Denguz Apparels in the course of its business operation. Therefore, the Assessing Officer is directed to allow the aforesaid disallowance made by him. - Decided in favour of assessee
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2016 (5) TMI 340
Revision u/s 263 - Disallowance u/s u/s. 40A(7) - Held that:- While computing the total income for the year under consideration, the assessee has already disallowed u/s. 43B of the Act. Therefore, it can be safely concluded that there is no allowance of any deduction during the year under consideration.Surprisingly, we find that the Commissioner wanted the A.O to disallow the same u/s. 40A(7) of the Act. We fail to understand when the assessee has not claimed any deduction during the year under consideration how could the Commissioner direct the A.O to disallow the same, when no deduction has been claimed. - Decided in favour of assessee Disallowance u/s. 43B - Held that:- Commissioner is apprehensive that since the assessee has made disallowance u/s. 43B of the Act, the assessee will claim the deduction in the year in which the payment will be made. We are of the view that such apprehension of the Commissioner can be considered, if at all possible, in the year of the claim of deduction. However, in so far as the year under consideration is concerned, we do not find any reason in making the assessment order erroneous and prejudicial to the interest of the revenue. We accordingly set aside the order of the Commissioner made u/s. 263 of the Act and restore that of the A.O made u/s. 143(3) of the Act. - Decided in favour of assessee
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2016 (5) TMI 339
penalty u/s 271(1)(c)- Held that:- It is an undisputed fact that the returned income has been accepted, there is no satisfaction recorded by the assessing officer that assessee had concealed income with reference to return of income filed by him in response to notice u/s 148. Supreme Court in Varkey Chacko v. CIT [1993 (8) TMI 1 - SUPREME Court ] has held that a penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. The penalty was permissible under the law on the date on which the offence of concealment of income was committed, that is to say, on the date of the offending return Of greater importance is the necessity for a definite finding that there is concealment, as without such a finding of concealment, there can be no question of imposing any penalty. In the assessee’s case, the AO has not given any finding in assessment order that the assessee had concealed any income or furnished inaccurate particulars of such income. He had simply accepted the returned income u/s 148. Hence assessee’s case is covered by the decisions referred to above and penalty u/s 271(1)(c) will not be imposable. - Decided in favour of assessee
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Customs
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2016 (5) TMI 394
Classification - Photo Sensors imported - Whether goods are to classified under Chapter Heading 8541 40 as per appellant or under Chapter Headings 9031 as per respondent - Petitioner contended that their product is not a kind of measuring and checking instruments covered under Chapter Heading 9031 of Customs Tariff. Also not a measuring or checking instrument, appliance and machine, covered as inclusion in the Chapter Heading 9031 of Customs Tariff's Explanatory Notes 1(A)7. Held that:- the item in question is photocouples means it is a combination of LED (Light Emitting Diodes) and phototransistors. The impugned item is specifically mentioned under the name of photocouples saying that it consists of electroluminescent diodes combined with Photodiodes, Phototransistors or Photothyristors. Here item consists of LED (Light Emitting Diode, which is nothing but electroluminescent diode as mentioned in the Explanatory Notes and phototransistor. In this device, light passes through LED and phototransistor receives the light. In this way the item gives a signal, whenever light is obstructed, when some other substance or a thing comes in between. In this way whenever there is obstruction and there is no signal received by phototransistor, the outcome again will be a kind of signal and that is used in signal receiving machines/instrument to know that how many times there is restriction/obstruction in receiving light. In this way this item is being used by the appellants for manufacturing harness connectors which are then supplied to ATM manufacturing companies. Revenue’s argument that the item in question is covered under Chapter Heading 9031.8000 saying that it is a measuring and checking instrument, which is the specific description for Chapter Heading Entry 9031. Here Revenue refers to Explanatory Notes under Section (I)(A) and Entry 7 further saying it is an opto-electronic and pneumatic sensor. However Revenue has completely failed to indicate/prove that how the item in question is a measuring or checking instrument to be covered under CTH 9031.8000. Therefore, the subject item is covered by 8541.40 and it cannot be covered under the Chapter Heading 9031.8000. - decided in favour of appellant with consequential relief
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2016 (5) TMI 393
Validity of CESTAT dismissal of appeal order - Pre-deposit order not complied with - no demand as such was raised against the present appellant in order-in-original - Appellant contended that pre-deposit order was required to be complied with by the co-noticee, against whom the demand was raised and not the present appellant. Consequently the dismissal of the present appellant’s appeal for failure to comply with the pre-deposit order is, on the face of it, erroneous - Held that:- the impugned order of the CESTAT is set aside and the appellant’s appeal before the CESTAT, and any connected pending application thereto, as on the date of dismissal, is restored to the file of the CESTAT and shall be disposed of in accordance with law. - Appeal disposed of
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2016 (5) TMI 392
Validity of order - passed nearly 16 months after the date of personal hearing - Held that:- it is common ground that the Hon’ble Supreme Court has emphasized time and again that the orders pursuant to a personal hearing either by a court or the Tribunal or any quasi judicial body ought to be passed expeditiously and within a reasonable time. However, bearing in mind that the Revenue’s orders have immediate impact and parties ought to know their position in financial year to year, it is not proper that such an enormous delay should take place. It is not a case where we find that any reason can be assigned for a hopelessly delayed order. Therefore, the impugned order is quashed and set aside. Petition disposed of
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2016 (5) TMI 391
Seeking direction for release of goods within a stipulated time - Import of Thiamexthoxam 141 G/L+Lambda-Cyhalothrin 106 GL - Goods imported to Chennai Sea Port for re-export to third party client in Colombia - Clearance withheld for want of CIB Registration and for production of Certificate from CIB as per Section 3(e) of the Insecticide Act, 1968. Petitioner contended that it may be given liberty to give additional representation. Held that:- without going into the merits of the case, the petitioner is being given the liberty to give one more representation to the 3rd respondent for the release of the goods, within a period of one week from the date of receipt of a copy of this order and the 3rd respondent is directed to consider the representations already made by the petitioner and also the representation to be submitted by the petitioner and pass orders on merits and in accordance with law within a period of three weeks thereafter after giving due opportunity of personal hearing to the petitioner. - Petition disposed of
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2016 (5) TMI 390
Legality and correctness of impugned order - Petitioner placed heavy reliance on the contents of Circular No.27/2015-Customs dated 23.10.2015 and pleaded that the communication sent to the Customs Officials reference to the dropping of Criminal Proceedings pending against the accused committed offences in case of baggage and outright smuggling cases and in case of appraising cases and commercial frauds. Held that:- it is observed in candid terms that 'the market value of the goods smuggled by the Petitioner was approximately ₹ 31.83 lakhs and further the valuation of smuggled goods at ₹ 21,22,150/- as per the Order-in-Original was not merely a mechanical replication of the internet prices of the smuggled goods etc., the necessary qualitative and quantitative details relating to the valuation of the smuggled goods at ₹ 21,22,150/- were not furnished on the side of the Respondent before this Court. Also, the Petitioner had not availed a valuable/ reasonable opportunity of being heard before adjudication wherein admittedly, a penalty of ₹ 1,50,000/- was imposed upon the Petitioner. As such, in view of the aforesaid divergent stand taken by the respective parties in regard to the valuation of the goods smuggled by the Petitioner in India in the subject manner in issue and also as to the applicability of the Circular No.27/2015-Cus, this Court, in the interest of Justice, Fair Play, Equity, Good Conscience and even as a matter of prudence, sets aside the impugned order passed by the trial Court and allows the Criminal Revision Petition. - Decided in favour of appellant
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2016 (5) TMI 389
Levy of penalty - Seizure of silver - Smuggling of goods - High Court held that the appellants have completely failed to prove that the seized silver was not smuggled goods, therefore liable to be levy of penalty and confiscation of goods on the ground of improper importation of silver reported in [2015 (11) TMI 592 - ALLAHABAD HIGH COURT] - Apex Court dismissed the special leave petition
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2016 (5) TMI 388
Anti-dumping duty on caustic soda (sodium hydroxide) - Inclusion of sale price of chlorine in determining the cost of production of caustic soda - Tribunal held that the cost of production of caustic soda comes to almost same as has been adopted by DA by taking sale price of Chlorine into consideration. Therefore, in the absence of any discrimination made by the DA for arriving at the cost of production in respect of foreign manufacturers and domestic manufacturers, the importer without knowing the actual basis of cost of production applied by the foreign producers cannot raise the ground on any presumption reported in [2006 (5) TMI 218 - CESTAT, NEW DELHI] - Apex court remanded the matter back to the Tribunal by directing that non-interference of it will not be taken note of by the Tribunal. - Apex Court disposed of the petition
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2016 (5) TMI 387
Impoundation and confiscation of goods - Export of 2496MT sugar - 'Export Release Orders' not obtained - export obligation under 'Advance Authorization' scheme - Imposition of penalty - High Court held that appellant has violated the provisions of Customs Act, in exporting sugar without there being any 'Export Release Order' and tribunal has been more-than fair in reducing the penalty to nearly 1/10 of the original penalty results in no scope of the penalty being reduced any further reported in [2015 (4) TMI 924 - ALLAHABAD HIGH COURT] - Apex Court has dismissed the Special leave petition.
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Service Tax
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2016 (5) TMI 378
Waiver of pre-deposit of service tax - Period involved is 16/6/2005 to 31/5/2007 - Site Formation and Clearance, Excavation and Earth Moving and Demolition Services - Imposition of interests and penalties under Section 76, 77 and 78 of the Finance Act - Held that:- admittedly appellant started paying duty under the mining services w.e.f. 01/6/2007. The dispute relates to the same set of activity for the period prior to 01/6/2007. It stand held in number of decisions of the Tribunal that when a specific category of service is brought under the service tax net, w.e.f. a particular date, it has to be held that the same activity was not covered by any other earlier services. Revenue has not objected to the appellant's payment of service tax under mining services. In fact, its stand accepted that after 01/6/2007 the same activity would fall under mining services. In such a scenario, it is not open to the Revenue to hold that the activity was falling under a different category of site formation and clearance, for the period prior to 01/6/2007. As the issue is bonafide interpretation of complex, provisions of law and in the absence of any direct evidence showing any malafide on the part of the assessee, the demand is prima facie barred by limitation. - Waiver and unconditional stay granted
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2016 (5) TMI 377
Waiver of pre-deposit - Non-payment of Service tax under various categories - Demand of Service tax along with interest and penalties - Import of taxable service under the category of event management service - Held that:- services received by the applicant from the overseas entities in connection with organizing annual summit in India will fall under the taxable service of 'event management' and the applicant is liable for such tax on reverse charge basis with effect from 18.4.2006. Therefore, waiver of pre-deposit of the confirmed Service tax dues cannot be made to the full extent under this category. Import of internet connectivity - Internet telecommunication services - Held that:- the applicants claim that their payment to US company should be considered as for renting of movable property appears, prima facie, not sustainable. The server placed outside are meant for internet connectivity services related cannot be considered as hiring of simple physical space for placing servers. Management consultancy services - Applicant claimed that they have acted as pure agent - held that:- the claim of applicant was not accepted by the adjudicating original authority. At the prima facie stage itself it is found that the merits of the case could not be categorically analysed without detailed examination of the terms of agreement and also the claim of applicants as being pure agent. The applicants appears to have an arguable case in this category. Business support services - providing infrastructure support to the corporate companies - Held that:- it is found that prima facie, the applicant failed to make out a case for waiver of pre-deposit of full dues. At this stage, appellant could not explain various categories of sharing expenses and how such sharing of expenses are not relatable to business support services. Certain infrastructure facility are shared and the final tax liability of the applicant on this count has to be seen after examining each type of expense shared by the corporate companies. As the applicant failed to make out a strong case for full waiver of adjudicated dues and no financial hardship pleaded, the appellant is to be directed to deposit an amount of ₹ 2,00,00,000/- (Rupees Two crores only) within 8 weeks. - Stay application disposed of by not granting full waiver
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2016 (5) TMI 376
Waiver of pre-deposit - Transfer of Cenvat Credit under Rule 10 in case of provider of output services - transfer of all assets on demerger - Cellular telecommunication services - Cenvat Credit availed on various inputs and capital goods used for setting up of towers and prefabricated buildings - Imposition of penalty - Held that:- The question as to when the transferor does not seek the transfer of the accumulated credit, whether the same would lie in the account books of transferor or in that case, the credit is required to be disallowed. The plain reading of the said Rule nowhere suggest that owner or the transferor of the business is legally bound to transfer the credit which cannot remain in existence. Appellant continues to provide output service on which they were paying service tax and towers and other infrastructure having remained where the same were located earlier and continue to be used by the appellant. In such a scenario, we prima facie agree with the learned advocate that the denial of credit to the appellant is not in accordance with the provisions of Rule 10. As such, on the point of time bar also, the appellant has good prima facie case. Therefore the condition of pre-deposit is dispensed with and all. - Stay petition allowed
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2016 (5) TMI 375
Liability of service tax - Maintenance & Repair Services "Business Auxiliary Services" - Whether the activity of the appellant in supplying and maintenance with repairs the ATM machine are liable to be tax - period involved is July, 2003 to 31.03.2006 - Appellant contended that Service Tax liability in respect of ATM machines was brought into statute w.e.f. 01.05.2006 and hence no liability arises for the material period. Held that:- the provisions of Section 65(9a) & (9b) clearly indicates that any services rendered in relation and respect of ATM machines are taxable from 01.05.2006. It is undisputed that the appellant had rendered the services of Installation and various services in respect of Automated Teller Machines. It is found that Tribunal’s decision in the case of NCR Corporation India Pvt. Ltd. Vs. Bangalore [2008 (5) TMI 27 - CESTAT BANGALORE] was considering the self same issue and held in favour of the assessee that services rendered in respect of Automated Teller Machines are taxable from 01.05.2006. The self same issue for the very same period was before the Tribunal in the appellant’s case wherein, Revenue authorities wanted to tax these services under Erection, Commission and Installation Services or under Works Contract Services. The Tribunal held that the services rendered by the appellant in respect of Automated Teller Machines cannot be taxed prior to 01.05.2006. Therefore, now the issue is settled in favour of the appellant, and the impugned order holding the services rendered by the appellant in respect of Automated Teller Machines are taxable under any other category prior to 01.05.2006 is erroneous. Accordingly, that portion of the impugned order which confirms the Service Tax liability along with interest on this point is liable to be set aside. Liability of Service tax - Goods Transport Agency - Held that:- agreement talks about movement of Automated Teller Machines by paying sum, which would mean the appellant had rendered services to do with movement of Goods during the material period. In our view the appellant had no case on merits, on holistic reading of clauses of agreement, leads to inevitable conclusion that the said agreement is for movement of ATM’s to various locations, and appellant is paid for such movement of ATM’s.Therefore, the services rendered by appellant would fall under category of Goods Transport Agency Servicesand accordingly liable to Service tax along with interest. Imposition of penalties - Section 76, 77 and 78 of the Finance Act, 1994- Goods Transport Agency - Held that:- since majority of demand is set aside in respect of Automated Teller Machines, we hold that there is no reason for visiting appellant with penalty in respect of Goods Transport Agency as in our view appellant could have entertained a view that the movement of ATM’s is not covered under Goods Transport Agency Services. Therefore, penalties imposed are set aside. Revenue’s appeal seeking to the enhance penalty under Section 76 consequently fails. Appeal disposed of
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2016 (5) TMI 374
Demand of Service Tax - Port services, Cargo Handling, Steamer Agents, "Business Auxiliary Services" and renting of immovable property services - collected charges under various heads as reimbursement charges - Held that:- on perusal of sample documented invoice, it is found that respondent had issued invoices indicating herein that particular invoice is for reimbursement of an amount paid to Mormugao Port Trust towards Cargo related charges and annexing invoice which is in respondent's name issued by Mormugao Port Trust. Various documents indicate procedure followed by the respondent i.e. pay the amount to service provider and claim the same as reimbursement from their client. Hence, this activity of the respondent is covered as an activity of a pure agent. By following the decision of Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. Vs. Union of India [2012 (12) TMI 150 - DELHI HIGH COURT], the provision of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 which would mean any amount of reimbursement of the expenses cannot be included for discharge of Service Tax liability. - Decided against the revenue
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Central Excise
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2016 (5) TMI 383
Clandestine production and removal of goods - Allegation on the basis of 62 reconstructed challans - Held that:- the Tribunal, in the impugned order, noted that the case of clandestine removal is based predominantly on 62 reconstructed copies of delivery challans-cum-proforma invoices. Such challans were, however, neither original nor xerox copies. There was no identification of the author of these challans. Thus, reconstructed challans were not recovered from the premises of the assessees. Even Commissioner (Appeals) had found that 20 of these reconstructed documents were fake. In the challans, neither the vehicle number nor the name of the transporter was mentioned. No investigation was undertaken by the department to corroborate the contents thereof by recording the statements of the transporters. No confirmatory statements of the buyers were available on the record. Duty demanded - Held that:- the Tribunal, observed that due to major renovation at the office/godown of JBMC, subject goods were temporarily stored in Appellant's factory premises. No investigation has been done in order to refute the claim of the main appellant, by recording the statement of transporter or the supplier of trader from whom the goods have been claimed to be purchased from JBMC. It is a well established law that documentary evidence will prevail over an oral evidence especially in these proceedings where cross examination of such witness is not provided. As the decision of Tribunal was based entirely on appreciation of evidence on record, no question of law arises. - Decided against the revenue
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2016 (5) TMI 382
Condonation of delay - 2192 days - Delay in filing appeal happened because first the appellant had filed the appeal before the Gujarat High Court who was not having the territorial jurisdiction to entertain an appeal - Appeal before the Gujarat High Court was in fact filed in time - Held that:- there is no doubt that the Appellants were pursuing their remedy in a “Court”. The only question was one of lack of territorial jurisdiction. There is also no dispute that the Appeal before the Gujarat High Court was in fact filed in time. The entire period, therefore, from the time of filing of the Appeal in the Gujarat High Court till its disposal as above by that Court must, in our view, be fairly excluded for the purposes of limitation. If that is not done, great injustice and unfairness will result. The direction of that High Court, with respect, is that the papers in each of these Appeals be returned to the respective Appellants / their Advocates for presentation to the Competent Appellate Court, which is this Court. Therefore, for the purpose of computing the delay to be condoned, if any, we must take first the two dates that lie at the extremities, viz., the date of receipt of the order appealed against and the date of filing of the Appeal in the present Court. From this period, the entire period from the date of filing of the Appeal in the Gujarat High Court to the date of its disposal by that High Court is to be excluded. If the remaining period is found to be 180 days or less, then there is no question of any application being necessary to condone the delay and the Appeal is in time. It is only if this remaining period exceeds 180 days that the Appellant will be required to file a application seeking condonation of delay and setting out the reasons or cause which in the Appellant's opinion is sufficient. - Notice of Motion allowed
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2016 (5) TMI 381
Liability for payment of interest - Rule 14 of the Cenvat Credit Rules, 2004 - Cenvat credit taken but reversed before utilization - Appellant submitted that the Tribunal committed manifest error of law in holding that if the Cenvat credit had been taken by making paper entries only and had not been utilised, there is no liability to pay interest. Held that:- the fact that the liability would arise from wrong taking of Cenvat credit by making entries and that utilisation was the second step thereafter which was not required to be necessarily fulfilled for the liability of interest. The taking of Cenvat credit precedes the utilisation. If Cenvat credit had been wrongly taken, that is an independent liability by itself irrespective of its utilisation which may have followed, as far as taxing statutes are concerned. The order of the Tribunal is therefore held to be not sustainable. - Decided in favour of appellant
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2016 (5) TMI 380
Valuation - Includability - Whether the cost of packing material is to be treated as the component of transaction valuation under Section 4 of the Central Excise - Tribunal by relying upon the judgment of this Court in the case of K. Radha Krishnaiah vs. Inspector of Central Excise and Others [1986 (11) TMI 46 - SUPREME COURT OF INDIA], Mahalakshmi Glass Works (P)Ltd. Vs,. Collector of Central Excise [1988 (7) TMI 59 - SUPREME COURT OF INDIA] and Triveni Glass Ltd. vs. Union of India and Ors. [2005 (2) TMI 130 - SUPREME COURT OF INDIA] found to the effect that the packing material which was used was durable and returnable by the buyer. Therefore, the cost of packing material should not be included in the transaction value - Apex Court do not find any merit in the appeal, hence, dismissed the appeal.
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2016 (5) TMI 379
Area Based exemption - expansion of unit - Whether the benefit of Notification No. 50/2003-C.E. dated 10.06.2003 will be available to goods manufactured from the unit i.e. PLANT-II HARIDWAR established from expansion of the existing unit - Held that:- Notification No. 50/2003-CE inter-alia exempts goods other than specified goods cleared from units located in areas mentioned in Annexure II and III to the Notification from whole of the duty of excise or additional duty of excise, subject to 2 conditions. It is observed from the Intimation / Declaration filed by the applicant under Notification No. 50/2003-CE that both the conditions have been satisfied. It is also observed that exemption benefit under 2(b) will not be available to the applicant as the industrial unit did not exist before 07.01.2003 and it started trial production only on 21.03.2010. The unit is located in the area mentioned in Annexure-II to the said Notification. Therefore, this sub-condition is satisfied. It is also noticed from the Intimation/ Declaration under Notification No. 50/2003-CE, submitted by the applicant that they commenced commercial production on 26.03.2010. Since it was a new unit, it could not have started production before 07.01.2003. Therefore, this sub-condition is also met by the applicant. It is noticed that the Circular No. 939/29/2010-CX dated 22.12.2010 has clarified that Notification No. 50/2003-CE does not place a bar or restriction on any addition / modification in the plant or machinery or on the production of new products after the cut-off date. In the instant case, applicant proposes to manufacture shoes of different brand and design by installing fresh plant/machinery. Further, the contention of Revenue that the applicant proposes to take separate factory license, ESI No. and PF Codes for expanded Haridwar Plant II, therefore, it will not fall under the category of existing unit, is not correct. Relevant Notification No. 50/2003-CE, as also CBEC Circular dated 22.12.2010 and 17.02.2012, do not envisage such condition. In view of said clarifications issued by CBEC, applicant can continue to avail the benefit of excise exemption. As far as second issue raised by Revenue regarding applicant starting a new unit i.e. Haridwar Plant II and not falling under the existing unit, is concerned, applicant has relied on Circular No. 960/03/2012-Cx dated 17.02.2012. It is observed from the above Circular that the situation of expansion of an eligible unit by acquiring an adjacent plot of land and installing new plant and machinery on such land, is akin to expansion by way of installing new plant and machinery inside the existing plot/premises. CBEC clarified that in such cases, the exemption should continue to be available from the residual period of exemption. In the present case, the applicant proposes to effect expansion in Khasra No. 72 and 74, wherefrom the new unit had started commercial production w.e.f. 26.03.2010. Therefore, in view of Circular dated 17.02.2012, applicant is eligible for said exemption. - Decided in favour of applicant
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CST, VAT & Sales Tax
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2016 (5) TMI 386
Allowability of change of place of business - Application rejected on the ground that a belated application was filed, inasmuch as the petitioner shifted his place of business on 20.01.2013 without previous intimation and that the application for change of place of business was filed after 11 months on 05.12.2013. Also the petitioner did not give details of closure of its business at Noida nor filed the filing fee of ₹ 20/-. Held that:- the application form of the petitioner in Form No. VII only required the petitioner to provide information of the principal place of business and that was at Noida. The other place of business indicated by the petitioner was at Banglore outside the State of U.P. Thus, the change of declaration required under sub-rule (8) of Rule 6 of the Rules, which requires written permission of the Commissioner was not required to be done by the petitioner. Rule 6(8) has no application in the instant case and could not be relied upon by the respondents. The ground for rejecting the application for change of place of business on the ground that the application was filed belatedly is patently erroneous. The registering authority has not considered the provisions of Section 17 (14) (a) of the Vat Act, which makes it obligatory upon the registering authority to carry out the amendment irrespective of the fact that the application was not furnished within the prescribed period as provided under Section 75 of the Act. We further find that there is no finding that the petitioner is still or simultaneously carrying on his business at Noida as well as at Ghaziabad. In the absence of this finding, the application for change of place of business could not be rejected. It is found that the petitioner's application on the ground of nonfurnishing ₹ 20/- as filing fees was not an incurable defect and that the same could have been cured. The registering authority could not reject the petitioner's application on this ground and should have allowed the petitioner to cure the defect. Therefore, the order rejecting the petitioner's application for change of place of business was wholly illegal and, cannot be sustained. Ex parte provisional assessment order passed - no notices were served - Respondent contended that proper service was made by refusal as well as by affixation and there was no illegality in the service of the summons. Also the petitioner has a remedy of filing an appeal against the assessment orders and that it was not necessary to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India - Held that:- the rule of alternative remedy is not a bar for entertaining the writ petition. No doubt it is a rule of discretion but in the instant case, there would be a travesty of justice if we relegate the petitioner to the alternative remedy of an appeal. There is a total abdication by the respondents in adhering to the process of service of summons under Rule 72 of the Rules. Rule 72 of the Rules has been ignored and a procedure which is not known to law has been adopted. Rule 72(a) of the Rules provides that the service of summons is required to be made on a dealer or a person concerned in person or his agent. Here, the report of process server indicates that there was no Firm at the Noida address. At the Ghaziabad address, the process server met one person, who refused to divulge his name but clearly indicated as to which person would receive the notice. The process server, however, indicates service by refusal. In our opinion, the report of the process server is wholly illegal. There is no finding that the person who refused to accept the notice was a dealer or a person concerned in person or an agent empowered to accept the notice. In the absence of any report to this effect we are of the opinion that there is no valid service by refusal. Admittedly, the Assessing Authority has no jurisdiction to effect service of summons outside his territorial jurisdiction. Territorial jurisdiction of the Assessing Authority was Noida. Ghaziabad was outside his territorial jurisdiction. Thus, the Assessing Authority could not serve the summons to the petitioner at Ghaziabad address through or his process server. The Assessing Authority was required to adopt the procedure as per clause (j) and (k) of Rule 72 of the Rules, which in the instant case was not followed. Under this sub clause, the Assessing Authority is required to send the summons to the assessing authority where the dealer resides and through that Assessing Authority the service is required to be effected. On this ground also, it is held that there is no proper service of the summons at the Ghaziabad address. Also the affixation made under clause (e) of Rule 72 of the Rules was done at Noida address. This affixation at Noida was patently illegal and could not be held to be a proper notice by affixation, inasmuch as the respondents knew that the petitioner had shifted his place of business and there was no one at the Noida address. The respondents have not come with a stand that the petitioner is simultaneously carrying on his business at Noida as well as at Ghaziabad. In fact, the respondents admit that the petitioner has shifted his place of business from Noida to Ghaziabad. There is another aspect, that clause (h) of Rule 72 of the Rules has not been followed which requires the summons to be sent by registered post acknowledgment due in addition to personal service unless dispensed with by the Assessing Authority. In the instant case, there is nothing to indicate that the assessing authority had dispensed with the service of summons by registered post. Therefore, it is apparently clear that there was no valid service of summons and consequently, ex-parte proceedings were taken based on which ex-parte assessment orders were passed which can not be sustained and are liable to be quashed. It is found that pursuant to the ex-parte assessment orders, a sum of ₹ 49.82 crores was realized after attaching the bank account which included the admitted amount of ₹ 3.3 crores. Therefore, the petitioner's application could not be rejected on the ground that the admitted tax of ₹ 3.3 crores was not deposited by the petitioner. Once the amount has been realized, it was not open to the petitioner to deposit any further amount. Consequently, the order rejecting the recall application could not be sustained. Hence, the exparte assessment orders passed by the assessing authority, for the period April to October, 2015 under U.P. VAT Act and Central Sales Tax Act are quashed. The garnishee notices and the subsequent proceedings initiated thereto by attachment of the bank account and withdrawal of the amount of ₹ 49,82,01,250/- being wholly illegal and without any authority of law are also quashed. The order rejecting the recall application filed under Section 32 of the Vat Act being wholly erroneous is also quashed. The order rejecting the petitioner's application for change of place of business filed under Section 75 of the Vat Act read with Rule 33 of the Rules being wholly illegal is also quashed. - Decided in favour of petitioners
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Indian Laws
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2016 (5) TMI 385
Taking possession of the residential house - taking over of possession of the secured interest to the secured creditor - Held that:- At the stage of making over the possession of the secured interest to the secured creditor, any person, whose interests are adversely impacted in the process of taking possession by the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, acting on its own or acting though a Commissioner appointed for the said purpose, is entitled to file his objections for recording the fact of taking possession of the land (secured asset). When any such memorandum of objections has been drawn and presented before the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, the said Court is bound to consider the same and pass an appropriate order. In the instant case, no such memorandum of objections has been drawn by the petitioner or filed before the Chief Metropolitan Magistrate. Therefore, the statement made by the Advocate-Commissioner in her affidavit filed before us, clearly brings out, in paragraph 3, that she has identified the scheduled property and executed the warrant and further went on to assert that the petitioner, his servants, his wife and several others stated that the house bearing D.No. 1-5-230 situated in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal, Ranga Reddy District belongs to the petitioner herein. We have to go by her statement of fact that the said house bearing D.No. 1-5-230 is, in fact, lying in Survey No. 51/EE, but not in Survey No. 51/AA. This apart, the learned Advocate- Commissioner has also recorded, in paragraph 3 of her affidavit, that the petitioner never filed any work order (memo) before her requiring her to execute the warrant by any method specified in the work memo. In the absence of any such material to the contra, the conduct of the Advocate-Commissioner in taking possession of the building bearing D.No. 1-5-230 cannot be objected to or found fault with. Even otherwise, there is no credible material that was placed on record of this Court to show that the house bearing D.No. 1-5- 230 is actually lying in Survey No. 51/AA, but is not lying in Survey No. 51/EE of Alwal Village. The fact that the house property has been assessed to property tax by the local municipality/corporation, does not necessarily reflect that the said house property is lying in Survey No. 51/AA, but not in Survey No. 51/EE. As was already noticed supra, the revenue record filed by the petitioner itself has brought out that he has land of an extent of Ac.1.03 guntas lying in Survey No. 51/EE and land of an extent of Ac.0.15 guntas lying in Survey No. 51/AA. In which parcel of these two extents of land did the petitioner construct the house bearing D.No. 1-5-230 is a matter left for guessing by us. In the absence of any credible material, we will not be justified in returning a finding of fact that house bearing D.No. 1-5-230 was, in fact, lying in Survey No. 51/AA, but not in Survey No. 51/EE. Even otherwise, that being a controversy of fact, which can only be determined upon collection of evidence, both oral and documentary, in exercise of jurisdiction under Article 226 of the Constitution, seldom such collection of evidence is resorted to, in that, this Court is not forbidden from collecting any such evidence, but was not indulged in routinely.
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2016 (5) TMI 384
Recovery proceedings under the SARFAESI Act, 2002 - Held that:- Undisputebly, the action of the first respondent Bank under the SERFAESI Act, 2002, has travelled to the stage of section 13(4) or post 13(4) stage. The petitioners have got an alternative statutory remedy by way of preferring appeal before the Debt Recovery Tribunal under section 17 of the Act. The petitioners have to be relegated to the said alternative remedy, where all the contentions are kept open to be canvassed by the petitioners, as may be permissible in law. For the aforesaid position of law, this court is not inclined to entertain this petition so as to exercise writ jurisdiction. It is open to the petitioners to approach the Tribunal by way of appeal under Section 17 of the Act.
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