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TMI Tax Updates - e-Newsletter
May 13, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Disallowance u/s 40A(3)- When the cost of the land as well as additional payment is not claimed by the assessee as deduction, the question of any disallowance under Section 40A(3) or otherwise in the case of the assessee does not arise. - AT
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Registration u/s 12AA to society denied - The power of the Commissioner to look into the objects of the Society and the genuineness of the same cannot be doubted when the basis is of non-supply of information. - HC
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TDS - Assessing Officer was not justified in fastening the liability of TDS on the assessee in respect of notional gain worked out by the Assessing Officer on conversion of FCCBs - AT
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Computation of deduction u/s 10B - 100% EOU - inter unit transfer should not be treated as part of the “Total Turnover” while computing deduction u/s.10B of the Act - AT
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Additional payment in violation of Stamp Duty Act, 1899 - additional payments made to the parties which admittedly have not been routed as an expense in assessee’s P&L A/c has been wrongly added as an addition in assessee’s hands - AT
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Transfer pricing adjustment - the addition made by the TPO by determining arm’s length price of royalty on export at nil is deleted. There is no justification for disallowance of royalty on the export made to the AEs - AT
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Entitlement to the benefit granted under Section 9(1)(i) - procurement of goods for the purpose of exports - no income was derived by the assessee in India through its operations as LO in India - AT
Customs
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Refund - since the amount in question was deposited in compliance with the interim order passed by the High Court of Bombay, which was not towards duty, the question of unjust enrichment would not arise at all. - SC
Service Tax
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Seizure of bank account - Default of payment of service tax - Pursuant to such order to freeze the bank account, the service tax amount due and payable by the petitioners have been realized - no relief could be granted to the petitioners in these writ petitions. - HC
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Input service credit - transportation of cane seeds and bio manure to the place of the farmers - services availed by the appellant is having a nexus indirectly to the manufacturing of their final product - Appellant are entitled to take Cenvat Credit on GTA services - AT
Central Excise
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Demand of interest on wrong availment of CENVAT Credit - we find no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or has been erroneously refunded' as the word "AND". - HC
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Valuation - If certain items supplied by the buyers free of cost to the manufacturer the value consideration of the said items in the form of amortization cost must be added in the assessable value for the reason that the sale value in such case cannot be considered as sole consideration - AT
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Valuation - Inclusion of Amortized cost of mould - In absence of any depression to the assessable value, the cost of moulds in the present case cannot be held to be liable to duty without that being cleared by the appellant nor the difference realized by appellant from Tata Motors exigible to duty in absence of removal of that goods - AT
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Penalty u/s 11AC - whether the assessee is liable to pay interest and penalty in respect of the duty paid prior to the issue of a show cause notice to payment made after the due date - Held Yes - HC
Case Laws:
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Income Tax
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2015 (5) TMI 384
Disallowance under Section 40A(3)- additional payment in violation of Stamp Duty Act - whether Additional Payments having not been claimed as deduction by appellant, no disallowance could have been made in the hands of the appellant - Held that:- As per the collaboration agreement, the assessee was to purchase the land for and on behalf of CWPPL and whatever was the purchase price including the additional payment was debited to CWPPL and the assessee only received fixed remuneration i.e. ₹ 35,000/- per acre. Thus, we agree with the contention of the learned counsel that the assessee has not claimed any deduction in respect of cost of the purchase of the land, whether original or additional payment. When the cost of the land as well as additional payment is not claimed by the assessee as deduction, the question of any disallowance under Section 40A(3) or otherwise in the case of the assessee does not arise. We, therefore, delete the entire disallowance made by the Assessing Officer under Section 40A(3) as well as additional payment. - Decided in favour of assessee.
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2015 (5) TMI 367
Transfer pricing adjustment - Computation of Arms Length Price - wrong selection of comparables - Held that:- Kals Information Systems Ltd., Accel Transmatics Ltd., Lucid Software Ltd. and Tata Elxsi Ltd. held to be not comparable with a company engaged in the provision of software development services such as the assessee. Megasoft Ltd. in the list of final comparables chosen by the TPO is concerned, this Tribunal in the case of Trilogy E-Business Software India Pvt. Ltd.[2013 (1) TMI 672 - ITAT BANGALORE] has held had held that only segmental data of the said company should be taken for the purpose of comparison. Adjustment on account of ALP and consequent addition made by the AO to the total income, both in the IT segment with the 10 remaining comparable companies (including segmental margin of Megasoft Ltd.) would be 10.89% after working capital adjustment. The same is given as ANNEXURE-II to this order. The said arithmetic mean of the comparables is within the (+) (-) 5% range contemplated by the second proviso to Sec.92C(2) and consequently no addition by way of adjustment to ALP can be made. We have already seen that the adjustment to ALP and consequent addition to the total income in ITES segment cannot be sustained. - Decided partly in favour of assessee.
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2015 (5) TMI 366
Penalty u/s 271(l)(c) - assessee has concealed the income by way of Capital Gain on sale of land at 44/A/1, Dhanori, Pune and furnished inaccurate particulars thereof - Held that:- In the present case too having regard to the conspectus of facts and circumstances, non-declaration of capital gain in assessment year 2007-08 cannot be construed as a deliberate lapse but it could only be construed as an inadvertent error of judgement on a point of law and therefore no penalty u/s 271(1)(c) of the Act is imposable. Moreover, it is also apparent from the contours of the dispute that the claim of the assessee for taxability of capital gains in assessment year 2008- 09 instead of 2007-08 has been rejected not on the basis of any falsity or inaccuracy in facts or particulars furnished by the assessee but only on an application of a legal position. In this context, a mere making of a claim, which is not found to be sustainable in law by the Assessing Officer cannot by itself be construed as furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act, as held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro products Pvt. Ltd., (2010 (3) TMI 80 - SUPREME COURT ). Thus lower authorities have erred in imposing the penalty u/s 271(1)(c) of the Act on the impugned aspect of the matter. - Decided in favour of assessee.
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2015 (5) TMI 365
Transfer pricing adjustment - determination of Arm’s Length Price (ALP) in respect of international transaction entered into by the Assessee with it’s Associated Enterprises (AE) - improper application of the Related Party Transaction (RPT) filter by the CIT(A) as submitted by AO - Held that:- In the cases of 24/7 Customer Pvt. Ltd. (2013 (1) TMI 45 - ITAT BANGALORE ), and Sony India Private Ltd. (2008 (9) TMI 420 - ITAT DELHI-H) and various other cases has taken a view that comparables having RPT of upto 15% of total revenues can be considered. In view thereof, the Revenue’s grievance on this issue as projected in the relevant ground has to be allowed. It is held that the CIT(A) ought to have adopted a threshold limit of 15% of the total revenue attributable to related party transaction as ground for rejecting comparable companies. Consequently it is held that comparable companies having RPT upto 15% of the total revenues alone can be included. Excluding companies with abnormal profits - Held that:- CIT(A) rejected some of the comparable companies chosen by the TPO by applying related party transaction filter. The filter of companies dealing in software products and abnormal profits owing to amalgamation of the companies during the relevant period thereby showing abnormal profits was applied to exclude Exensys Software solutions Ltd., was excluded for reasons of high turnover and high risk profile. Satyam Computer Services Ltd., has to be excluded from the comparable companies for non-reliability of financial data as it was involved in financial scam. - Decided against revenue. Exclusion of comparable companies with RPT of less than zero percent is not valid, and that companies where RPT is less than 15% alone can be considered, then the comparable rejected by the CIT(A) on the basis of the said filter will have to be included along with the four comparable retained by the CIT(A). Although 12 comparable which were rejected on the basis of RPT being more than zero percent, one comparable viz., Four Soft Ltd., will have to be excluded since the RPT is at 19.89% and thus in excess of 15%. Sathyam Computers Ltd., will get excluded for the reason that the financial results are not reliable. The remaining 10 comparable companies which were excluded by the CIT(A) by applying the Related Party Transaction filter of 0% related party transaction will now have to be included. Foursoft Ltd., and Thirdware Solutions Ltd., should be excluded from the list of comparable companies as there is no sale of software products during the year by these companies. TATA Elxsi Ltd.should be excluded from the list of comparable companies as it is functionally different and has incomparable size to that of the assessee. Bodhtree Consulting Ltd.[related party transaction as a percentage to the total revenue is 34% which is more than the accept/reject matrix of more than 25% fixed by the TPO.] and Infosys Technologies Ltd.[being a big company in all respects including the range of turnover] be excluded from the list of comparable companies for the purpose of determining the ALP. Geometric Software Solutions Ltd. - remand the question of excluding this company as a comparable to the TPO. If the RPT is more than 15% of the total revenues than this company should be excluded from the list of comparable companies. Working capital adjustment - Held that:- no basis for the TPO to come to a conclusion that advances received from AE, as having been utilized for purchase of fixed assets and therefore they need to be ignored while computing working capital adjustment to the profit margin of the Assessee. Having come to this wrong conclusion without any basis, the TPO has proceeded to ignore the advances received from AE while computing working capital adjustment. In our view such an approach cannot be sustained. Besides the above, the DRP has ignored the submissions made by the Assessee regarding non utilization of the advances received for acquiring fixed capital. n our view the submissions made by the Assessee that the advance received from the AE should be considered while working out the working capital adjustment deserves to be accepted, if the Assessee demonstrates that such advances were not utilized for acquisition of fixed assets. If it is so demonstrated, these advances need to be included for working out the working capital of the Assessee while computing adjustment towards working capital. The issue is accordingly remanded to the AO/TPO and the Assessee is directed to file the necessary details to demonstrate its case regarding advances not having been utilized for acquiring fixed assets - Decided in favour of assessee for statistical purposes. Exclusion of telecommunication expenses and travel expenses both from total turnover as well as export turnover while computing deduction u/s.10A - Held that:- As in Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) held that while computing the deduction under section 10A of the Act, if the export turnover in the numerator is to be arrived at after excluding certain expenditure, then the same expenditure should also be excluded from the total turnover also. Respectfully following the same, we dismiss this ground of revenue and of the view that the CIT(A) has rightly directed the AO to exclude telecommunication charges and travel expenses incurred be excluded both from export turnover and total turnover - Decided against revenue.
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2015 (5) TMI 364
Disallowance of wrong claim of deduction u/s 80IB - CIT(A) deleted disallowance - whether Unit-2 & Unit-3 were not separate and independent industrial undertakings and it was the case of extension of business of Unit-1 for which deduction u/s 80IB of the Act is not available being eleventh year of operation u/s 80IB of the Act? - Held that:- It should be a new and identifiable undertaking separate and distinct from the existing business. There must be a emergence of a physical separate industrial unit which may exist on its own as a viable unit. The said condition has been fulfilled in the case of M/s. FIL Industries Ltd. (2012 (7) TMI 188 - ITAT AMRITSAR ) and in the present case. Further in the case of M/s. FIL Industries Ltd. (supra) the deduction u/s 80IB was allowed in the initial years to both the units. Likewise in the case of the assessee, 100% deduction was allowed u/s 80IB for first five years and then 25% was allowed till assessment year 2012-13 except in the impugned year. In the case of M/s. FIL Industries Ltd. (supra) reliance has been placed on the decision of the Hon'ble Gujrat High Court in the case of CIT vs. Saurashtra Cement and Chemical Industries Ltd. reported in [1979 (2) TMI 21 - GUJARAT High Court], where the said findings have been reproduced hereinabove. In the facts and circumstances, we find that the facts in the present case are also similar to the case in the case of M/s. FIL Industries Ltd. (supra) as far as allowance of deduction u/s 80IB is concerned. Therefore, we find no infirmity in the order of the ld. CIT(A), who has rightly followed the decision of the ITAT, Amritsar in the case of M/s. FIL Industries Ltd. (supra) and has rightly allowed the claim of the assessee. - Decided in favour of assessee.
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2015 (5) TMI 363
Registration u/s 12AA to society denied - ITAT allowing the appeal of the assessee especially when the family run trust did not submit details of assets and properties that they possessed as well as the treatment given to the assets of an old school being taken over by them - Whether the ITAT was right in not upholding the findings of CIT u/s 12AA (1)(b)(ii) considering that assessee had failed to comply with provision u/s 12AA(1)(a) in as much as document and information called for was not submitted - Held that:- Tribunal was not justified in allowing the appeal and issuing necessary direction and should have sent the matter back to the Commissioner for fresh enquiry. Admittedly, the factum of the additional information being asked for was never denied by the respondent-Society. In appeal, the assessee had only raised the issue as to whether the order of the Commissioner is arbitrary and unjustified and whether the activities of the Society did not qualify in the nature of charity and the finding had been based on suspicion and conjectures. The additional information being asked for, as such, was never controverted. It was not contended that the information had been supplied but was not taken into consideration. Commissioner has to satisfy himself of the objects of the trust and the genuineness of the activities and after giving an opportunity of being heard to the trust or the institution, a refusal can be made to register the trust. Thus, the section gives power to the Commissioner to look into the genuineness of the activities of the trust and to satisfy himself about its activities. Under Section 12A, the provisions of Sections 11 & 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled. The said sections provide that income from property held for charitable purposes shall not be included in the total income of the previous year of the person in receipt of the income. These aspects have not been taken into consideration by the Tribunal which has placed heavy reliance upon the judgment of Pinegrove International Charitable Trust Vs. Union of India & others [2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT] which has now been upheld by the Apex Court in the case of M/s Queen's Educational Society (2015 (3) TMI 619 - SUPREME COURT). However, it is also to be noted that in Commissioner of Income Tax Vs. Surya Educational & Charitable Trust [ 2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT ] 355 ITR 280, subsequently, held that the principles laid down for excluding income under Section 10(23C) are not applicable while considering the application for registration under Section 12AA. It was also further held that the genuineness of the objects of the trust are to be taken into consideration. The power of the Commissioner to look into the objects of the Society and the genuineness of the same cannot be doubted when the basis is of non-supply of information. In such circumstances, it would be appropriate that the Commissioner undertakes the exercise afresh, on the basis of the application which has already been filed, keeping in view the material which can be produced by the respondent-assessee. Accordingly, the order of the Tribunal dated 19.02.2013 is set aside with a direction to the Commissioner to decide the application, filed under Section 12AA, afresh.- Decided in favour of revenue.
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2015 (5) TMI 362
Validity of proceedings under section 153-C - whether no satisfaction is recorded by the AO before initiating proceedings under section 153-C as held by ITAT admitting additional evidence? - Held that:- The Assessing Officer did not allow inspection of the record to the assessee or its counsel and that is why they have raised additional ground about validity of the proceedings under section 153-C. That is about absence of any satisfaction being recorded by the officer who was assessing the search party. In terms of section 153-A and 153-C proceedings can only be initiated after the Assessing Officer arrives at a satisfaction that the seized material pertains to other persons, namely, persons other than the searched party. It is only then the persons other than the searched parties can be proceeded against. There is nothing in the assessment order which would indicate that the assessment officer arrived at such satisfaction. The Tribunal noted that it has allowed this additional ground to be raised after hearing the departmental representatives' objection. To do complete justice and to both sides the Tribunal gave enough opportunity to the Revenue to produce the files and if the same contain the satisfaction of the Assessing Officer, then, to rely upon it before the Tribunal. The Tribunal noted that more than 20 months passed after the first direction to produce the record was issued. Despite repeated adjournments and as noted by the Tribunal in paragraph 9 of the impugned order, the satisfaction requisite for initiation of the proceedings under section 153-C was not available, in these circumstances, not only did the Tribunal find that it was necessary and in the interest of justice to permit raising of an additional ground, but to answer it. No substantial questions of law. - Decided against revenue.
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2015 (5) TMI 361
Deduction u/s.80IB(10) - whether ITAT allowing deduction u/s.80IB(10) for A.Ys.2003-04 even though the project had been sanctioned as residential + commercial by Pune Municipal Corporation and was thus not a housing project ? - Held that:- Since the project is admittedly approved prior to 1.4.2005 the assessee is covered in the case of the Commissioner of Income Tax Vs. M/s. Happy Home Enterprises decided in [2014 (9) TMI 707 - BOMBAY HIGH COURT] wherein which one of us (Shri S.C. Dharmadhikari, J.) was a party, after considering the submissions of revenue on the issue of applicability of the judgment of Brahma Associates [2011 (2) TMI 373 - BOMBAY HIGH COURT] has held that the clause (d) of section 80IB(10) is prospective in nature and would not apply to the housing projects commenced prior to 1.4.2005. In the present case it is seen that the approval of the project was granted on 16th July, 2002 well before introduction of the provisions of clause (d) which came into effect from 1.4.2005. No substantial questions of law. - Decided against revenue.
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2015 (5) TMI 360
Stay application - attachment of bank accounts and encashment of some amount - Held that:- In the instant case, the petitioner being aggrieved by the assessment order as well as the rectification order, had filed an appeal along with the application seeking for stay of the said orders. The First Appellate Authority without hearing the petitioner rejected the said application, which is contrary to law. The order passed by the First Appellate Authority is not a speaking order. Hence, I feel that the First Appellate Authority has to reconsider the matter afresh and pass appropriate orders on the application filed by the petitioner for grant of stay of collection of the tax demanded. Hence, it is appropriate to direct the First Appellate Authority to reconsider the matter afresh and pass orders in accordance with law after hearing the petitioner. - Appeal allowed.
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2015 (5) TMI 359
Revision u/s 263 - whether ITAT Visakhapatnam, is justified in holding that the CIT(A) did not exercise his jurisdiction under Section 263 properly? - Held that:- A perusal of the order of the Assessing Officer would show that the return of income filed by the assessee was accepted and the tax was finalized. From the order of the Assessing Officer, one cannot deduce whether the errors pointed out by the Commissioner of Income Tax were considered by the Assessing Officer or not. The Commissioner of Income Tax, not only pointed out the errors, but also had shown the effect of the same on the revenue. It is not known how the Tribunal has come to the conclusion that the errors have no effect on the revenue. The Tribunal ought not to have taken into consideration the explanation submitted by the assessee before the Commissioner for coming to the conclusion that the errors pointed out by the Commissioner have no effect on the revenue. Ultimately, it is for the Assessing Officer, at the time of de novo enquiry, to consider whether the explanation offered by the assessee to the points raised by the Commissioner is proper or not. When once the Commissioner has got power to point out the errors which had the effect on the revenue, the Tribunal cannot sit as an appellate authority on the order of the Commissioner passed under Section 263 of the Act. If the power exists in the Commissioner and is exercised by him after satisfying himself on the facts of the case, it is not for the Tribunal to re-appreciate the said satisfaction of the Commissioner. It is only when the Commissioner does not exercise the power properly in satisfying the twin test contemplated under Section 263 of the Act, the order of the Commissioner can be held to be perverse, but not by re- appreciating the order of the Commissioner. A prima facie perusal of the order of the Commissioner shows that the Commissioner was satisfied that there were errors which had effect on the interests of the revenue and it needed a further probe by the Assessing Officer. In the facts and circumstances of the case, we are satisfied that the order passed by the Commissioner is proper and validly exercised as per the powers conferred on him under Section 263 of the Act and we, accordingly, set aside the order of the Tribunal. - Decided in favour of the Revenue.
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2015 (5) TMI 358
Agricultural income - CIT(A) deleted the addition - Held that:- From the documentary evidence filed by the assessee before the ld. First Appellate Authority i.e. cash statement, the assessee has not established that assessee has deposited the cash on account of sale proceeds of agricultural crops. The assessee has also not established that he has received ₹ 7 lacs on account of sale of poplar trees from Atim Khan and Hamid Khan and ₹ 4,02,000/- on account of giving his Amrud Bagh on lease to Jamil Khan. As regards to the land measuring 42.92 hectares belonging to Ranbir Collective Cooperative Farming Society, the assessee has not established that he has received agricultural income from this farming society in spite of the fact that this land is belonging to Ranbir Collective Cooperative Farming Society. The assessee has also not produced any lease deed establishing that he is doing agriculture on the land measuring 42.92 hectares. Keeping in view of the facts and circumstances of the present case and the order passed by the revenue authorities as well as the evidences produced by the assessee before the ld. First Appellate Authority in the shape of paper book, we are of the view that ld. First Appellate Authority has deleted the addition merely on the basis of surmises and presumptions which is not permissible under the law. In our considered view, the impugned order is not sustainable in the eyes of law, therefore, we cancel the impugned order - Decided in favour of revenue.
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2015 (5) TMI 357
Disallowance u/s 40(a)(ia) - amount paid towards construction expenses - Non deduction of TDS - whether assessee is entitled to get benefit of amended provisions of section 40(a)(ia) brought by Finance Act, 2010 w.e.f. 01-04-2010 - Held that:- no disallowance can be made if after deduction of tax through the previous year, same has been paid on or before due date of filing of the return of income - Since tax deducted at source has been paid before due date of filing of return, no disallowance could be made in view of further amended provisions of section 40(a)(ia) of the Act which is applicable retrospectively w.e.f. 01-04-2005. Accordingly, CIT(A) was justified in deleting the disallowance of 8,91,500/- made by AO, same is upheld. - Decided against Revenue.
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2015 (5) TMI 356
Demands raised by the A.O. u/s 201 (1) & 201 (1A) - CIT(A) deleted the addition as inter - alia of relevant F.Y. 2005-06 is barred by limitation as per the provisions of section 201(3) of the I.T. Act - Held that:- CIT (A) has followed the judgment of Hon’ble Kerala High Court rendered in the case of Traco Cable Co. Ltd. vs. CIT, [1987 (2) TMI 36 - KERALA High Court ] and held that no order u/s 201 (1) could be made after 31.03.2013 in respect of Financial Years 2005 - 06 to 2009 - 10. In respect of Financial Year 2010 - 11, he held that an order u/s 201 (1) could be made in respect of last quarter for which statement has been filed in Financial Year 2011 - 12. Hence, as per the Proviso to section 201 (3) inserted by Finance Act 2009, for F.Y. 2007 - 08 and earlier years, the order u/s 201 (1) got time barred on 31.03.2011. For F.Y. 2008 - 09 to 3rd Quarter of F.Y. 2010 - 11 also, the order is time barred because of expiry of two years from end of the financial year in which the statement is filed because it is not in dispute that these statements were filed by the assessee. - Decided in favour of assessee. Recovery of interest u/s 201 (1A) - Held that:- When recovery of tax u/s 201 (1) is time barred, recovery of interest u/s 201 (1A) is also time barred. We find no infirmity in the order of learned CIT (A) on this aspect also because in our considered opinion, interest u/s 201 (1A) is consequential to default u/s 201 (1) and therefore, when action u/s 201 (1) is time barred, action u/s 201 (1A) is also time barred as a consequence and for that , specific mention of section 201 (1A) in section 201 (3) is not essential. - Decided in favour of assessee. Taxability of interest on NCDs - as per CIT(A) no tax was deductible in respect of any NCD in the case of the assessee in these years i.e. financial years 2009-10 to 2012-13 - Held that:- Decision of CIT(A) is on the basis that the exemption from TDS from listed and dematerialized securities came into force from 01/06/2008. He has given a clear finding that the assessee had earlier deducted TDS from interest in respect of NCDs prior to this date and in fact up to 30/09/2009. He has also noted that the details of interest in respect of TDS deducted during financial year 2007-08 to 2009-10 and challan for deposit of tax are available on pages 129 to 140 of the paper book. This finding of CIT(A) could not be controverted by Learned D.R. of the Revenue and hence, this has to be accepted that till 30.09.2009, TDS deduction was made by the assessee from interest on NCDs. The CIT(A) has given further finding that all the NCD of the assessee were listed and dematerialized. He has also given a finding that NCDs held by LIC were exempt from TDS under clause (vi) of the proviso to section 193 and therefore, no tax was deductible in respect of any NCD in the case of the assessee in these years i.e. financial years 2009-10 to 2012-13. These findings of CIT(A) also could not be controverted by Learned D.R. of the Revenue and since the interest on NCDs paid by the assessee were exempt from the requirement of TDS either on account of NCDs being listed and dematerialized or on account of held by LIC, TDS was not deductible and therefore, there is no reason to interfere in the order of CIT(A) on this issue also. - Decided in favour of the assessee. Taxability of interest on FCCBs - CIT(A) holding that the demand raised by the AO in respect of the notional gain arising from conversion of the FCCBs is contrary to the provisions of the Act as well as the ratified scheme of FCCBs - Held that:- CIT(A) has noted down the contents of CBDT Circular No. 621 dated 19/12/1991 as per which, capital gain is not chargeable on conversion of debenture or bonds in shares in view of clause (x) of section 47 of the Act. Hence, it is seen that no capital gain arise on conversion of debenture into shares. Moreover, even if such capital gain on conversion of debenture into share is considered as income at the time of conversion, this cannot be considered as interest and the liability of TDS cannot be fastened on the assessee. The CIT(A) has also referred to the provisions of section 115AC read with section 196C and observed that as per the scheme of taxation in respect of FCCBs, it has been provided that TDS is required to be deducted from interest payments on bonds until the conversion option is exercised. This scheme exempts the taxation of capital gain arising from the transfer of bonds outside India among non residents. He has further noted that the scheme expressly forbids the taxation of any capital gain arising from the conversion of bonds into shares. Considering all these facts and in view of the above discussion, we are of the considered opinion that the Assessing Officer was not justified in fastening the liability of TDS on the assessee in respect of notional gain worked out by the Assessing Officer on conversion of FCCBs and therefore, on this issue also, no reason to interfere in the order of CIT(A) - Decided in favour of the assessee. Taxability of interest on FDRs - AO treated the entire non tax deducted interest as tax deductible interest on the ground that the assessee only gave the names of deposit holders and the amount of interest earned but their address, PAN, amount of deposit, rate of interest and period were not give - Held that:- CIT(A) noted that the assessee vide his letter dated 13/03/2004 explained that the difference between the total interest and tax deductible interest was due to below ₹ 5,000/- interest cases as well as Form 15G/15H cases and in both of these cases, tax was not deductible. He has reproduced the details of total interest, tax deductible interest and non deductible tax interest in respect of financial years 2007-08, 2008-09 and 2012-13. Thereafter, a clear finding is given by CIT(A) that in spite of all these details and evidence furnished by the assessee, the Assessing Officer in her impugned order has treated the entire non tax deducted interest as tax deductible interest on the ground that the assessee only gave the names of deposit holders and the amount of interest earned but their address, PAN, amount of deposit, rate of interest and period were not given. He has further noted that the Assessing Officer has rejected Forms 15G/15H cases on the ground that names and amounts of interest involved in 15G/15H forms could not be ascertained from the copies of receipts for the delivery of these forms in the office of the CIT(A). Thereafter, a clear finding is given that sufficient opportunity has been given to the assessee as well as to the Assessing Officer during appellate proceedings and thereafter, he has given a finding that it is seen from the facts that there was no liability of the assessee for TDS on FDR interest. These specific findings of CIT(A) on this issue could not be controverted by Learned D.R. of the Revenue. When the FDR interest paid by the assessee is partly below ₹ 5,000/- per payee or partly the payee has given Form 15G/15H and as a consequence, no TDS was required to be deducted by the assessee, it was not proper for the Assessing Officer to raise this liability of TDS on such FDR interest. No infirmity in the order of CIT(A) on this issue - Decided in favour of assessee.
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2015 (5) TMI 355
Treatment of income - transaction of shares - short term capital gains or business income - Held that:- The mutual funds/shares have been shown as investment and not closing stock that the closing balance have been valued at cost and not at "cost or market value whichever is lower", that no borrowed funds have been used etc. the income from investment may be treated as income from capital gains and not as income from business. Ld. CIT(A) has observed that the AO has wrongly stated that the assessee has traded in derivatives which cannot be treated as investment. On perusal of the records, it is noticed that the transactions in respect of derivatives are not part of the short term capital gain. These have been separately quantified as business transactions and on this aspect a letter dated 4th December, 2009, has also been filed with the assessing officer clarifying this position. The Assessing Officer has reasoned that the assessee firm has earned incentive income and this incentive income has to be assessed as business income and the other income shall also become business income. We concur with the ld CIT(A) that this interpretation of the assessing officer is incorrect. The assesse having made investments and consequent to such investments some incentive is received. Treatment of that incentive income will not change the nature of the investments. On the contrary, this receipt of incentive itself confirms the fact that this assessee has earned incentive consequent to investments being made, which is normally given to the investor. - Decided against revenue. Portfolio management - Held that:- The assessee has made investments through portfolio management in five cases, and out of these five cases, the assessee has suffered losses in two cases to the extent of ₹ 21,65,551/- and has made gain in three cases of ₹ 36,04,177/- with the result that the net gain on account of portfolio management is only ₹ 14,38,626/- out of the total capital gain of Rs.l,76,03,580/-. The investment in portfolio management is a common feature and cannot be held to be a business. Another reason of the Assessing Officer is that assessee has prepared books of account, Profit and Loss Account and Balance Sheet and has got the same audited. There is nothing wrong in this. The assessee being a legal entity is required to maintain its books of account and get the same audited. This cannot be a ground for the assessing officer to hold that the assessee is carrying on business. The ld CIT(A) has rightly observed that if the contention of the assessing officer is accepted then probably in each and every case will be covered under the business income and there will be no case for investment. The assessing officer is wrong in assuming that for the purpose of investment, the books of account are not required to be maintained or are not required to be audited. CIT(A) has rightly held that held that the Assessing Officer was not justified in changing the treatment of income of appellant from Short term' capital gains to Income from business. The Assessing Officer was accordingly, directed to treat the income of ₹ 1,76,03,581/- declared by the assessee as Short term capital gains only and not as Business income. No infirmity in the order of the Ld. CIT(A)-Decided against revenue. Portfolio Management Fees surrendered and offered for taxation on account of being not allowable u/s 48 - Held that:- the income in question has been held to be short term capital gains only and not as business income, the aforesaid amount of ₹ 41,88,451/- has to be added back on account of Portfolio Management Fees while calculating the income from short term capital gains. We find that the ld CIT(A) has rightly directed that ₹ 41,88,451/- need to be added back while computing the income of the assessee. We do not find any infirmity in the said decision of the ld CIT(A) on the facts and circumstances of the case - Decided against revenue. Loss on trading of derivatives - whether be considered as business loss only and allowed to be set off against other income - Held that:- As per section 43(5)(d) of the Act, the profit/ loss on trading of derivatives will have to be considered as business income/ loss only. So in the instant case the loss is business income and the ld. CIT(A) has rightly held that the loss of ₹ 8,26,229/- on trading of derivatives is to be considered as business loss only and allowed to be set off against other income as per the provisions of the Act. In the background of the aforesaid discussions, we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the same - Decided against revenue.
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2015 (5) TMI 354
Transfer pricing adjustment - selection of comparable - Held that:- Eclerx Services Ltd. engaged in providing data analytics services with expertise in financial service and retail and manufacturing as thus be excluded from the list of comparables for the reason that it is providing high end services involving specialised knowledge and domain expertise and same cannot be compared with companies which are mainly engaged in providing low end services to group companies as of assessee. See Maersk Global Centre (India) Private Ltd. vs. ACIT [2014 (3) TMI 891 - ITAT MUMBAI] Vishal Information Technology Ltd. be excluded from the comparable list as it is functionally different from assessee also having low employee cost of 3%. Vishal is very high profit making company and operates on outsourcing model and hence, has different business model to that of assessee. Maple E Solutions Ltd. and Triton Corporation Ltd. be excluded from the comparable list as The promoters of the company were involved in the fraud for earlier years, hence the financial results of these companies are distorted and accordingly cannot be relied upon. Mold-tek Technologies Limited is engaged in providing engineering consulting services as part of its IT operations. The Company has specifically categorized its IT operations as KPO in its annual report. The Company has also accepted in its reply u/s 133(6) that the company provides engineering design drawing and detailed structural engineering using 3D and 2D software’s. The Engineering design services provided by the company are high end in nature involving special knowledge and domain expertise and therefore, not functionally comparable with the assessee company which is engaged in providing low end ITES enabled call centre services. Therefore, we hold CIT (A) is justified in excluding this company from the final list of comparable.
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2015 (5) TMI 353
Computation of deduction u/s 10B - whether receipts from forward contracts can be considered as profits derived from the business for the purpose of computing deduction ? - Held that:- Decision rendered in Assessee’s own case in AY 06-07 is applicable, wherein the Tribunal took the view that deduction u/s.10B of the Act is to be allowed only on the profits of the business of the undertaking. “Profit of the business of the undertaking”, according to the Tribunal, would be only profit from manufacture and export of readymade garments and not from gain on forward contract, has to be followed in the present AY also. As we have already observed, the AO has assessed the said gain as “Business Income” and therefore the decisions referred to above relied upon by the learned counsel for the Assessee are not relevant and helpful to the plea of the Assessee before us. Thus we do not deem it necessary to elaborate on the arguments advanced by the learned counsel for the Assessee before us. - Decided against assessee. Inclusion of inter unit job work charges for arriving at the total turnover of the EOU - Held that:- the present case, the Assessee has two EOU’s EOU-I and EOU II. Both the EOUs are manufacturing and exporting readymade garments. The reasoning adopted by the CIT(A) in the present case is that “Sales” and “Turnover” are not synonymous. According to him the word “Sale” and “Turnover” as used in Sec.44AB of the Act reveals the intention of the legislature in this regard. According to him the term “Turnover” would include have a wider connotation and would also include inter-unit sales. According to him there would have been an element of profit in the inter unit services to the unit providing service to the other unit. Factually it has not been demonstrated so. The CIT(A) has also proceeded to hold that even assuming that there was no profit element, yet such receipts have to be considered as includible in “total turnover”. We do not think that the above reasoning can be adopted in the context of the provisions of Sec.10B of the Act. In any event, the approach of the Hon’ble Supreme Court in the case of Punjab Stainless Steel Industries (2014 (5) TMI 238 - SUPREME COURT ), clearly suggests that the “total turnover” should be only in relation to the business of the Assessee which in this case is manufacture and sale of garments. Had garments been sold locally by either of the units than they were to be included in the “Total Turnover”. Keeping in mind the facts and circumstances of the present case and the precedents on which the learned counsel for the Assessee has placed reliance, we are of the view that the inter unit transfer should not be treated as part of the “Total Turnover” while computing deduction u/s.10B of the Act - Decided in favour of assessee. Disallowance of employees contribution to ESI payments by invoking the provisions of section 43B - Held that:- The issue in the aforesaid ground of appeal is squarely covered by the decision of Spectrum Consultants (India) Pvt.Ltd. Vs. CIT, (2013 (7) TMI 414 - KARNATAKA HIGH COURT) wherein it was held that if the employees contribution to ESI is paid on or before the due date for filing return of income u/s. 139(1), then the same cannot be disallowed. The AO is therefore directed to verify if the employees contribution to ESI has been paid by the assessee within the time limit as laid down in the aforesaid decision and allow the claim of the assessee, if it is found to be in accordance with the said decision - Decided in favour of assessee for statistical purposes. Taxation of long term capital gains - @20% instead of 10% - Held that:- taxation of long term As seen from the proviso of Section 112(1) if the benefit of indexation is not claimed under second proviso of section 48, then the rate of tax on long term capital gain will only be @ 10%. In the present case, neither the AO nor the CIT(A) has examined the question as to whether the benefit of indexation was claimed by the assessee or not. We therefore set aside the order of the AO for fresh consideration in the light of the provisions of law referred to above, after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Computation of deduction u/s. 10B - CIT(A) directing the AO to compute deduction u/s. 10B on the profits of EOU Unit-II without adjusting the losses of EOU Unit-I from the “profits and gains of business / profession” before computing such deduction - Held that:- CIT(A) has followed the decision of CIT v. Yokogawa India ltd.[2011 (8) TMI 845 - Karnataka High Court] wherein it was held that section 10A and 10B are exemption provisions and therefore income of such units have to be excluded at source itself before arriving at GTI and since income is not to be included in the income of the assessee at all, there is no occasion to set off losses of the assessee in respect of its other business against profits of the exempt unit. Following the aforesaid decision of the Hon’ble High Court of Karnataka, we uphold the order of the CIT(Appeals) - Decided against revenue.
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2015 (5) TMI 352
Transfer pricing adjustment - international transaction of ‘Provision of contract R&D services.’ - inclusion/exclusion of certain companies as comparables - Held that:- Infosys Technologies Ltd. directed to be excluded from the list of comparables as the extant assessee is a captive service provider with a limited number of employees at its disposal and also not owning any branded products but, rendering only offshore services with no expenditure on R&D etc and giantness of Infosys Ltd., in terms of risk profile, nature of services, number of employees, ownership of branded products and brand related profits, etc. Bodhtree Consulting Ltd. do not represent fair profitability on year to year basis, this company loses its tag of an effective comparable. We, therefore, order for the exclusion of this company from the final list of comparables. Tutis Technologies Ltd. no logic in not placing it in the final set of comparables as TPO inadvertently omitted to include it in the final set. There is no discussion either in the TPO’s order or the direction given by the DRP as to why this company was being considered as incomparable. It implies that the TPO though treated this company as comparable, but, erroneously omitted to include it in the final set of comparables. Goldstone Technologies Ltd. is not comparable with the assessee company and has been rightly excluded by the authorities below as company is also engaged in providing services comprising on-site and offshore operations. Apart from that, it added two more new divisions during the current year, being, Media Division and IPTB Division. By no standard this company on entity level can be considered as comparable with the assessee company. In so far as the export filter applied by the TPO for rejecting this company is concerned, we find that it fails on geographical factors. VJIL Consulting Ltd., Think e-global Services Ltd., and RS Software (India) Ltd. - There is no mention of the assessee’s objections about these three companies in the direction given by the DRP. As such, we find that the assessee did urge the inclusion of these three companies in the list of comparables before the TPO as well as the DRP, but, both of them chose not to comment on their comparability. Under such circumstances, we direct the AO/TPO to determine the comparability or otherwise of the above three companies and then take steps for including them in the list of comparables, if found to be comparable. - Decided in favour of assessee for statistical purposes. ALP of the international transaction of `Provision of software development serves’, is about not allowing risk adjustment - As the assessee is wholly dependent on its AE for securing business, its entire existence also depends on the same AE. If such AE runs out of business or its business is reduced, the assessee is bound to bear severe jolts. Since the ld. AR has failed to objectively demonstrate the relatively higher risks undertaken by the comparables on an overall basis, we are disinclined to grant any risk adjustment. No other aspect of the computation of ALP of the international transaction of `Provision of software development services’ has been challenged by the assessee in the present appeal. The impugned order is ergo set aside on the question of determination of the ALP of the `Software development services’ segment and the matter is remitted to the file of AO/TPO for computing ALP of the international transaction of this segment afresh in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes. International transaction of `Purchase of capital goods’ - Held that:- It is illogical to compute the ALP of the transaction of purchase of fixed assets and consequently reduce or nullify the amount of depreciation allowance de hors the consideration of international transaction of the revenue from AE, which is equal to depreciation as claimed with mark-up. Both the transactions of claim of depreciation allowance and revenue of depreciation with mark-up have to be seen jointly. The TPO in the present case has simply reduced the amount of deprecation allowance to Nil without simultaneously considering the revenue side of this transaction. If we consider these closely linked transactions of deduction for depreciation allowance and revenue due to depreciation in unison, the position which follows is that no further addition can be made on account of transfer pricing adjustment due to one-sided consideration of depreciation allowance at Nil. Rather, the determination of ALP of the international transaction of purchase of fixed assets, in the facts and circumstances of the instant case, is tax neutral. As such, we order for the deletion of addition made by disallowing or reducing the amount of depreciation on the assets purchased from AE. This ground is allowed. - Decided in favour of assessee.
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2015 (5) TMI 351
Disallowance u/s 40A(3) - Held that:- Facts in the case of the assessee are similar to the facts involved in the case of M/s Glitz Builders and Promoters Pvt. Ltd. (2015 (5) TMI 384 - ITAT DELHI) we, therefore, by respectfully following the said order delete the impugned addition made by the AO and sustained by the ld. CIT(A) also agreeing with the contention of the assessee has not claimed any deduction in respect of cost of the purchase of the land, whether original or additional payment. When the cost of the land, as well as additional payment is not claimed by the assessee as deduction, the question of any disallowance u/s 40A(3) or otherwise in the case of the assessee does not arise. - Decided against revenue. Interest on post dated cheques (PDC) paid out of books of accounts - CIT(A) deleted the addition - Held that:- CIT(A) has not deleted the addition but has only directed to recalculate the interest as After examining the loose papers seized at the time of search at the assessee’s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs and, therefore, he directed the Assessing Officer to recompute the interest on PDCs at the time of extension of the PDCs. He has further observed that if it is not possible to work out the extension of PDCs in each case, then the Assessing Officer is directed to recompute interest on PDCs after six months from the date of issue of the PDCs. See ACIT Vs M/s Pricison Infrastructure Pvt. Ltd. [2015 (2) TMI 105 - ITAT DELHI]- Decided against revenue. Additional payment in violation of Stamp Duty Act, 1899 - CIT(A) deleted the addition made by AO in view of the provisions of Section 37(1) - Held that:- This issue is covered in favour of the assessee vide order in the case of M/s West Land Developers Pvt. Ltd Vs ACIT [2014 (12) TMI 254 - ITAT DELHI] as these additional payments made to the parties which admittedly have not been routed as an expense in assessee’s P&L A/c has been wrongly added as an addition in assessee’s hands. - Decided in favour of assessee. Addition on account of deemed dividend - CIT(A) deleted addition - Held that:- the assessee had shown the impugned amount in its balance sheet as current liability which was received as an advance against the purchase of suitable land. The AO although invoked the provisions of Section 2(22)(e) of the Act but could not bring any material on record to substantiate that the amount in question was a loan or deposit and not the advance received from associates concern M/s Countrywide Promoters Pvt. Ltd.. We, therefore, by keeping in view the ratio laid down in case of CIT Vs. Ankitek Pvt. Ltd. (2011 (5) TMI 325 - DELHI HIGH COURT), do not see any valid ground to interfere with the findings of the ld. CIT(A). - Decided against revenue.
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2015 (5) TMI 350
Transfer pricing adjustment - payment of export commission - Held that:- TPO is to conduct a Transfer Pricing analysis to determine the arm’s length price (ALP) and not to determine whether there is a service from which assessee has derived benefit or not. The exercise to determine whether assessee had derived any benefit or not from payment of such management fee is to be examined by the AO and appropriate disallowance u/s 37 is called for. In the instant case, the TPO had determined the ALP of payment of export commission at ‘NIL’ by holding that the assessee did not derive any benefit from services rendered by the AE. Therefore, keeping in view the dictum laid down by the judgment of the Hon’ble Jurisdictional High Court in the case of CIT-I Vs. Cushman and Wakefield (India) (P.) Ltd. reported in [2014 (5) TMI 897 - DELHI HIGH COURT] necessarily AO as to determine whether the assessee has derived any benefit from payment of export commission and if any benefit had derived, whether such payment is commensurate to comparable transaction has to be examined by the TPO. For the above said purpose, the Transfer Pricing issue is restored to AO/TPO for denovo consideration. - Decided in favour of assessee for statistical purposes. Payment of royalty for export to Associated Enterprises (AEs) - Held that:- The assessee has sold the goods to AE on principal to principal basis and has received the sale consideration. In view of the above, in our opinion, there is no justification for disallowance of the royalty on the export. We may reiterate that the Revenue has disallowed the entire royalty paid even on domestic sale which has been considered at length by us in the earlier paragraph of this order and we have arrived at the conclusion that the payment or royalty was a revenue expenditure, incurred for the purpose of business. Accordingly, the addition made by the TPO by determining arm’s length price of royalty on export at nil is deleted. There is no justification for disallowance of royalty on the export made to the AEs. Accordingly, the addition made by the AO/TPO by determining the ALP of royalty on exports to the AEs at “nil” is deleted - Decided in favour of assessee. Sales tools expense disallowed - expense incurred by the Assessee for subsidizing 50 percent of the basic cost of standard tools / fixtures for standardization of ‘Honda Exclusive Authorized Dealers [‘HEAD’] outlets - Held that:- It is observed that position on this issue is similar to that of the immediately preceding issue inasmuch as neither the ld. AR nor the ld. DR is aware of the final position on this issue in the earlier years. We, therefore, set aside the impugned order on this score and remit the matter to the file of AO for deciding it in consonance with the final view taken on it in earlier years. - Decided in favour of assessee for statistical purposes.
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2015 (5) TMI 349
Transfer pricing adjustment - choice of certain comparables in respect of `Software development segment’ - Held that:- Infosys Technologies Ltd. in view the huge turnover, economies of scale, brand value and other factors pointed out by ld. counsel in his submissions and also keeping in view the decision of Hon’ble Delhi High Court in the case of Aginity India Technologies Pvt. Ltd. [2010 (11) TMI 852 - ITAT DELHI] & (2013 (7) TMI 696 - DELHI HIGH COURT) cannot be included in the list of comparables. Wipro Ltd. (Seg.) be treated as incomparable as this company is also operating as a full-fledged risk taking entity; engaged in providing technology infrastructure services, testing services, package implementation having more than 82,000 employees. It has its own R&D centre. It incurred around 11% of net sales as expenditure on research and development. None of the above factors match with the assessee company. Also there was a merger of Wipro Infrastructure Engineering Ltd., Wipro Healthcare IT Ltd., Quantech Global Services Ltd., with this company during the year in question. Exclusion of certain companies from the list of comparables in the ‘Marketing support services’ segment - Held that:- Choksi Laboratories Ltd.is basically engaged in providing testing services for various products and also offers services in the field of pollution control. As against this, the services provided by the assessee are purely in the nature of identifying customers for its AEs and providing technical support services to their customers. We fail to appreciate as to how marketing support services can be equated with testing services. When we peruse Schedule of fixed assets of this company, it can be seen that the major asset is ‘Instruments.’ It is with the help of these instruments that the company is providing services in the nature of testing of various products. By no standard, this company can be considered as comparable with the assessee. WAPCOS Ltd. (Seg.) is not comparable as this company has maintained accounts on entity level and there is no bifurcation available in respect of the services similar to those provided by the assessee under this segment, this company on entity level cannot be considered as comparable. Recruitment and training expenses - CIT(A) deleted addition - Held that:- The view taken by the ld. CIT(A) that the training expenses are to be allowed as revenue expenses is acceptable - Decided against revenue. Addition on account of Sundry balances written off - CIT(A) deleted addition - Held that:- The ld. AR fairly admitted that the ld. CIT(A) partly deleted the addition by considering additional evidence which was not there before the AO. Under such circumstances, we do not propose to examine the merits of the addition, which has been deleted in violation of rule 46A of the Income-tax Rules, 1962. Accordingly, the impugned order on this issue is set aside and the matter is sent to the file of AO for deciding it afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. - Decided in favour of revenue for statistical purposes.
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2015 (5) TMI 348
Penalty u/s 158BFA(2) - CIT(A) deleted penalty levy - Held that:- Where two views are possible on the issue, the penalty is not imposable in such cases. Therefore in such an event as per the spirit of decision of Hon’ble Delhi High Court in the recent case of CIT vs. Sarla Fabrics P. Ltd. (2012 (7) TMI 803 - DELHI HIGH COURT) the Hon’ble Court by relying on their own decision in the case of CIT-IV, New Delhi vs. IP India P Ltd. ( 2011 (11) TMI 252 - DELHI HIGH COURT) have held that - "where there is a difference of opinion either between different Benches of Tribunal or the High Courts, which is finally settled by the pending judgment of the Supreme Court and all necessary facts have been disclosed by the assesses in its return, the penalty is not warranted.” Thus find force in the finding of the Ld. CIT(A) that the imposition of penalty under section 158BFA(2) is not on automatic fall out or mandatory, therefore, in our view, Ld. CIT(A) has rightly deleted the penalty, which in our opinion does not need any interference, accordingly, we uphold the order of the CIT(A) of deleting the penalty made u/s. 158BFA(2) and dismiss the appeal of the Revenue. - Decided in favour of assessee.
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2015 (5) TMI 347
On money payment - CIT(A) deleted the addition - scope of Section 142A - Held that:- CIT(A) has given a finding that the DVO was called for valuation of the property on 18.12.2009 and he has given the report on 24.12.2009 without doing any inspection of the property and without supporting his valuation by any concrete evidence as to the actual market price in the same vicinity or surrounding locality. Ld CIT(A) has also given a finding that the assessee has sold the property at the highest price during the said period as compared to the sale price of other properties and his rates were higher than the Jantri rates. We thus find that ld CIT(A) after considering the submissions and the factual aspect of the case and by detailed and well reasoned order has deleted the addition. We also find that the Co-ordinate Bench of Tribunal in the case of ITO vs. Chandrakant Patel (2011 (4) TMI 868 - ITAT AHMEDABAD ) has noted that that the area of operation and scope of Section 142A is limited in its span only to determine the value of investment in respect of certain assets and there is no power vested with the A.O to seek the help of valuation officer in respect of determination of capital gain prescribed u/s 48 of the Act. Before us, Revenue has not brought any material on record to controvert the findings of Ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of Ld. CIT(A)- Decided against Revenue. Income from demolition - set off against the overhead expenses and the net expenses denied - CIT(A) deleted the addition - Held that:- While deleting the addition, Ld. CIT(A) has given a finding that the demolition of old structure was done by the Assessee as a builder and in the agreement it was not stated that the Assessee was given vacant land by removing all the debris upon demolition of the building. He has also noted that the income from sale of scrap has been accepted by Assessee in cheque and has been reduced from the project cost and therefore there is no loss to the Revenue as the project cost has been reduced. Before us, Revenue has not brought any material on record to controvert the findings of Ld CIT(A). We therefore find no reason to interfere with the order of Ld CIT(A) - Decided against Revenue.
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2015 (5) TMI 346
Income from other sources -assessee declared total export sale of ₹ 4,59,95,595/- against which certain expenses under various heads were claimed - AO considering the fact that the major expenses consisted of consumable store, dyeing and processing embroidery charges, fabrication charges, packing material and labour charges etc. and guided by the fact that in the preceding assessment year, it had been held that the major expenses were bogus wherein the export sale were also found to be not genuine - CIT(A) deleted addition - Held that:- There is no adverse finding specifically regarding the parties from whom the material was procured and also regarding the parties to whom payment for expenses were made or incurred. Once the evidences in support of the claim of purchases/expenses were produced before the AO and that after production of the same, the AO is not satisfied, he is required to give cogent reasons to reject the evidences produced. The burden of procuring the confirmations of such parties and also of producing the same for examination cannot be shifted on the assessee, as these are third parties who for various reasons may not choose to heed to the assessee's request for appearance before Income Tax authorities. In the appellant's own case wherein it was held that the adverse findings of earlier years were applicable with reference to those particular parties only and if those parties do not appear in the other years, no cognizance of the adverse findings in earlier years can be imported in the assessment of other years in absence of adverse material on record in this year. Thus AO had no material or evidence to reject the purchases and other expenses claimed in the P&L Account when such expenses were duly reflected in the audited books of accounts produced and the same being supported with the vouchers produced before the AO. Therefore, allow the above ground of appeal in favour of the appellant and accordingly, the addition of ₹ 4,59,94,594/- is directed to be deleted. - Decided in favour of assessee. Introduction of further capital - CIT(A) deleted addition - Held that:- So far as sources of other credits in the bank account are concerned, the same is duly supported with the audited accounts. The AO's objection in the remand report regarding source of credits in the Bank A/c of UTI Bank from which withdrawal has been made for making investment for ₹ 12,88,000/- has been examined from the Cash Book and the Bank A/c at UTI Bank and the same was found to be explained. It is however, relevant to note that the source of credits in Bank A/c of the appellant was not the subject matter of addition in this appeal, which was related to the credits in capital account. Regarding addition of ₹ 10 lakh made by way of FDR provided by the husband of the appellant, the same issue also appears in the appeal of the husband, Shri Anil Dhingra and it is found that the husband has confirmed handing over of FDR of ₹ 10 lakh to wife and the same has been credited by her in her capital account. The explanation regarding the source of FDR for ₹ 10 lakhs has been accepted in the appeal order dated 02.05.2011 in Appeal No. 393/07-08 in case of Shri Anil Dhingra. Therefore, the question of any additional investment by way of this FDR does not arise in appellant's case. In view of above discussion, the additions of ₹ 12,88,000/- and the ₹ 10,00,000/- stand deleted. - Decided in favour of assessee.
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2015 (5) TMI 345
Entitlement to the benefit granted under Section 9(1)(i) - procurement of goods for the purpose of exports - Assessing Officer treating the Tesco International Sourcing Limited - India Liaison Office as PE of the assessee - Held that:- Respectfully following the decisions of the Hon'ble Karnataka High Court ( 2015 (4) TMI 505 - KARNATAKA HIGH COURT) and that of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Years 2003-04 to 2007-08 [2014 (1) TMI 799 - ITAT BANGALORE] by taking into account all the aspects of the facts and circumstances of the issue as deliberated upon above and also in consonance with the judicial views (supra), we are of the view that Explanation 1(b) to s. 9(1)(i) of the Act is clearly applicable to the assessee’s case and, thus, no income was derived by the assessee in India through its operations as LO in India. - Decided in favour of assessee.
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2015 (5) TMI 344
Transfer pricing adjustment - determination of arm’s length price[ALP] in the case of cost contribution agreement - whether intra group services are duplication of services for which the AE has already paid in addition to what is paid by way of allocation is also to be looked into? - Held that:- As decided in Dresser Rand India Pvt.Ltd. Vs. ACIT [2011 (9) TMI 261 - ITAT MUMBAI ]Even cost contribution arrangement should be consistent with arm’s length principle, which, in plain words, requires that assessee’s share of overall contribution to the costs is consistent with benefits expected to be received, as an independent enterprise would have assigned to the contribution in hypothetically similar situation. The Assessee has in the present case filed material before the TPO to demonstrate the nature of services rendered. In the paper book filed before us the index of the paper book gives a description of the service. We are of the view that the above description alone would not suffice. As we have already seen the TPO had specifically called upon the Assessee to give details of the services rendered and how the same were utilized by the Assessee and its relevance for the Assessee’s business. The evidence filed by the Assessee in this regard is in the form of e-mails between parties, reports etc. As to how the evidence filed by the Assessee was actually useful in its business has also to be highlighted as the Assessee will be the best person to know these facts which are within its knowledge. It is only if such a stand is taken by the Assessee can the TPO take the issue forward to arrive at a proper conclusion. In our opinion filing of voluminous correspondence, reports etc., would not be a proper way of discharge of Assessee’s burden to establish the ALP of expenditure in question. We would therefore direct the Assessee to comply with the queries raised by the TPO in his show cause notice which has been set out in his order u/s.92CA of the Act. The Assessee has also given the breakup of costs incurred by the parent company and the basis of apportionment. The same has not been considered at all by the TPO. The findings of the DRP with regard to the nature of services as given in a chart in the earlier part of this order are general without reference to the material filed by the Assessee. The findings are purely on surmises and cannot be sustained in the absence of any material on the basis of which such conclusions were arrived at being set out in the DRP’s directions. The Assessee in the present case has chosen TNMM at the entity level and has not provided any other method for determination of ALP in respect of the transaction of “Payment of Technical and Management cost” individually. This will take us to the question as to whether the TNMM at the entity level will be the MAM or should the ALP determined using CUP. This will again depend on the question whether all the activities manufacture and trading etc., carried on by the Assessee is closely linked so that benchmarking its overall results with comparable company using TNMM would be appropriate. - Decided in favour of assessee for statistical purpose
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Customs
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2015 (5) TMI 371
Valuation - Undenatured Ethyl Alcohol - import price of the liquor - Import of goods against invalid licenses - Suppression of value of goods - Confiscation of goods - Redemption fine - Held that:- when the invoices are produced showing the purchase price of the goods in question and authenticity of these invoices is not doubted by the Department, these will form as the primary evidence in support of the contention of the respondents that the imported goods were purchased at UK pound 1.40 per bulk litre. Refund of amount deposited in compliance with the interim order - unjust enrichment - Held that:- By another Circular No.802/35/2004-CX., dated 08.12.2004 issued by the Board, the Board emphasised that such amounts should be refunded immediately as non-returning of the deposits attracts interest that has been granted by the courts in number of cases. - since the amount in question was deposited in compliance with the interim order passed by the High Court of Bombay, which was not towards duty, the question of unjust enrichment would not arise at all. - Decided against Rvenue.
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Corporate Laws
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2015 (5) TMI 370
Misc. applications under section 446(2)(b) of the Companies Act, 1956 filed by sub-tenants against decree holder Official Liquidator who as landlord let-out the property - Property in issue occupied by several persons claiming to be sub-tenants - Law did not require that a sub-tenant be made a party in an eviction petition by a landlord against his main-tenant - Decree of ejectment against the tenant would be equally binding upon the sub-tenant Held that:- No rent receipt evidencing payment of any rent by any of the objectors/resistors as sub-tenants to M/s. Mahesh Metal Works the "main tenant" was filed, exhibited or relied upon before the Executing Court. No letter from M/s. Mahesh Metal Works to the landlord i.e. the Official Liquidator of Maharaja Kishangarh Mills Ltd. evidencing the induction of sub-tenants in terms of Clause 2 of the letter/agreement to lease dated 7.4.1960 was also adverted to or otherwise brought on record. No evidence was filed to show as to which portion of the property "Patni Bhawan" and its appurtenant lands were in fact let-out by the Official Liquidator of the company-in-liquidation to M/s. Mahesh Metal Works. A bare look at the letter/agreement to lease dated 7.4.1960 shows that all of "Patni Bhawan" and its land were not delivered in tenancy on 7.4.1960. Clause 4 of the said letter (7.4.1960) states that "the Manager of the Mills is being requested to deliver possession to you at once and rent will commence from the date of delivery of possession to you." Importantly Clause 3 of the letter in issue states that "In a few rooms some furniture and other material of the Mills is at present locked. These rooms will be placed at your disposal after the goods lying those rooms is sold out. You shall not claim any reduction in rent for the period those rooms remain locked nor shall we claim any extra rent upon the same being vacated and placed at your disposal." There was nothing on record at the instance of the objectors before the Executing Court as to what portion of "Patni Bhawan" and appurtenant lands (including garage and tennis court) was indeed handed over by the Official Liquidator to M/s. Mahesh Metal Works and when. Further there was also no evidence to show which portion of "Patni Bhawan" and appurtenant land was allegedly sub-let to the objectors. The whole case of alleged sub-tenancy set up by the objectors was thus vague, wishy-washy and lacking in certainty otherwise essential for a valid contract of the alleged sub-tenancy purportedly created in their favour by the main-tenant. The Hon'ble Apex Court in M/s. Technicians Studio Private Ltd. [1977 (9) TMI 116 - SUPREME COURT] has held that the answer to the question whether a relationship of tenant and landlord exists between the parties is dependent upon the facts and circumstances gathered in a case. On that test, in the case at hand, in the absence of any iota of evidence to make out a tenant-landlord relationship between the "main-tenant" and the objectors/resistors, it has not been proved that they were the sub-tenants of the "main-tenant" M/s. Mahesh Metal Works and ever inducted in the suit property in that capacity. The sequitur is that the objectors/resistors had no modicum right to bring their case within the words "just cause" under Order 21 Rule 98(2) CPC and to resist the execution of the judgment and decree lawfully passed by a Company Court in company application No. 21/1980 under sections 446 and 477 of the Act of 1956 on 5th February 1987 directing eviction of M/s. Mahesh Metal Works- the tenant-inducted under letter/agreement of lease dated 7.4.1960. In the case of Rupchand Gupta [1964 (4) TMI 115 - SUPREME COURT] the Hon'ble Apex Court had the occasion to consider a matter in which a landlord brought a suit against his tenant for ejectment without impleading the sub-tenant as a co-defendant. The tenant did not contest the suit, consequent to which an ex parte decree was passed. The sub-tenant then filed a suit against the landlord and the tenant seeking a declaration that the decree against the tenant resulting from collusion between him and the landlord was not binding upon him as a sub-tenant. The Hon'ble Apex Court however repelled the argument and held that the law did not require that a sub-tenant be made a party in an eviction petition by a landlord against his main-tenant and a decree of ejectment against the tenant would be equally binding upon the sub-tenant. In the context of the aforesaid enunciation of law by the Hon'ble Apex Court, it is quite apparent that even in the event of the objectors/resistors having proved their sub-tenancy created by the main tenant M/s. Mahesh Metal Works, the judgment & Decree dated 5.2.1987 passed by the Company Court at the instance of the Official Liquidator against the tenant M/s. Mahesh Metal Works would be binding on them. That is however besides the point as in the case at hand, as detailed here in above no sub-tenancy created in favour of the objectors/resistors by M/s. Mahesh Metal Works was proved before the Executing Court. In my considered opinion in the facts of the case the objectors/resistors have no legal right to resist the Judgment & Decree dated 5.2.1987. I also find no force in the contention of the counsel for the objectors/resistors that the Official Liquidator had no authority to move the application bearing No. 21/1980 under sections 446 and 477 of the Act of 1956 before the Company Court seeking eviction of M/s. Mahesh Metal Works which was inducted as a tenant under the letter/agreement to lease dated 7.4.1960 on the ground that the Company Court itself subsequently vide order dated 15.10.1982 held that Patni Bhawan- an appurtenant land the tenanted premises were the property of Maharaja Kishangarh Somyog Mills Co. Ltd. and not of the company in liquidation i.e. Maharaja Kishangarh Mills Ltd. There is also no force in the submission of counsel for the objection with regard to the Addl. District Judge purportedly lacking in pecuniary jurisdiction for execution of the Judgment & Decree dated 5.2.1987. The Hon'ble Supreme Court has held in Mantoo Sarkar [2008 (12) TMI 719 - SUPREME COURT OF INDIA] has held that where the trial court has subject matter jurisdiction, its lack of pecuniary jurisdiction or even territorial jurisdiction, does not vitiate its judgment until prejudice is shown by the appellant. On this test of law, laid down by the Hon'ble Apex Court, the argument of the counsel for the objectors based on purported lack of pecuniary jurisdiction of the Executing Court in passing the order dated 21.4.2014 (when no prejudice has been pleaded, and argued) is liable to be rejected. So it is. In the circumstances obtaining, I find no error, legal or factual in the impugned order dated 21.4.2014 passed by the Executing Court. The conclusions of the Executing Court are based on an objective consideration and evaluation of the material evidence on record before it. There is no force in these misc. applications filed there against. - All the misc. applications dismissed.
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2015 (5) TMI 369
Application for Scheme of Amalgamation under Sections 391 & 394 of the Companies Act, 1956 - Observations of Official Liquidator and Regional Director duly addressed - Held that:- The Regional Director in Para 10 of his report has, however, submitted that as per the Memorandum of Association of the transferee company, the main objects of the transferee company are to carry on and undertake the business of financing, leasing, and hire purchase etc., whereas there is no mention whether the said company is registered with Reserve Bank of India as NBFC, if so, whether it has obtained no objection from the RBI with regard to proposed scheme of amalgamation. He further submitted that in the reply dated 16.02.2015, the petitioner companies have submitted that the transferee company, being non banking finance company, is registered with the Reserve Bank of India and it has served a copy of petition to the RBI on 24.12.2014 mentioning that the applicant companies have moved a petition before the High Court of Delhi for the purpose of approval of the Scheme of Amalgamation and also categorically mentioned that in case the RBI has any observations/comments, the same may be communicated to the Regional Director within 15 days of the submission of the said letter. The Regional Director, however, confirmed that he has not received any observations/comments from the RBI till the date of filing of his report. In view of the above, the observation raised by the Regional Director does not subsist. The Official Liquidator has submitted that in consequence of amalgamation, the share capital of the transferee company will be reduced to the extent of shareholding of transferor companies which is 99.96% shareholding in the transferee company. Accordingly, after the allotment of shares to the shareholders of the transferor companies, the post merger paid up share capital of the transferee company will be ₹ 55,000/- which is less than the minimum statutory requirement of ₹ 1,00,000/-. He, however, submitted that the transferee company has given an undertaking that the transferee company shall increase its paid up share capital so that the post merger share capital of the company be more than the minimum paid up share capital as per the provisions of the Companies Act, 2013. In view of the above, the observation raised by the Official Liquidator does not subsist. No objection has been received to the Scheme of Amalgamation from any other party. The petitioner companies, in the affidavit dated 29th January, 2015 of Ms. Richa Agrawal, Director of the petitioner companies, have submitted that the petitioner companies have not received any objection pursuant to the citations published in the newspapers on 25th December, 2014. 20. Considering the approval accorded by the equity shareholders of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Regional Director, Northern Region, and the Official Liquidator not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. - Application for scheme of amalgamation approved.
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FEMA
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2015 (5) TMI 368
Recovery of large amount of cash - contravention of the provision of Section 9(1)(b) and 9(1)(d) of FERA Act, 1973 - Offence under Section 56(1)(i) of FERA Act and Sections 49(3) and (4) of FEMA Act, 1999 - Reliability on co-accused's statement - Held that:- confession of co-accused is admissible only if the case of other co-accused has been tried jointly as per Section 30 of Indian Evidence Act. In such circumstances, no reliance can be placed on Exs.P5 and P7/statements of Haja Mohideen - It is true, statement of respondent/accused was recorded under Section 40 of FERA Act. Once the respondent has admitted his guilty, he ought to have proved his innocence. There is presumption under Section 59 of the FERA Act and burden is shifted on the accused to prove that he is innocent as per Sections 71 and 72 of the FERA Act - Ex.D13 shows that the respondent was alleged to have been hit by some persons (i.e.) Enforcement Officers on 11.04.1990 and 10.04.1990 and that the respondent was complained of eye pain for six days and the accused was given treatment for the injuries. So Ex.D10 is affirmed and fortified by Exs.D12 and D13, which shows that Exs.P12 and P14/statements of the accused are obtained by coercion. Except the statement of co-accused, no other independent witness was examined. Even though there are two attestors for the seizure mahazar, no one was examined and no reason has been assigned for non examination of those two independent witnesses, who were present at the time of searching A1/Haja Mohideen, Munavar Hussain and Syed Mohammed Buhari, who were sitting in the car. As per the judgment reported in [2009 (12) TMI 251 - DELHI HIGH COURT] (Directorate of Revenue Intelligence v. Moni),even though statement has been recorded under Section 40 of FERA Act, no recovery was effected from the respondents. This judgment is squarely applicable to the facts of the present case. - the respondent has proved his innocence by way of examining himself as D.W.1 and marking Exs.D1 to D14. The trial Court has also rightly held the respondent has proved that he is innocent by way of marking documents and hence, acquitted the respondent/accused for offences under Sections 9(1)(b) and 9(1)(d) of FERA Act, 1973 and Section 56(1)(i) of FERA Act, 1973 read with subsections 3 and 4 of FEMA Act, 1999. So the judgment of acquittal passed by the trial Court does not suffer any perversity and it is hereby confirmed. - Decided against Revenue.
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Service Tax
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2015 (5) TMI 383
Seizure of bank account - Default of payment of service tax - petitioners did not register themselves with the service tax department for rendering various service to the consumers and collecting fee - Held that:- to realize the service tax amount due and payable by the petitioners, the respective respondent had issued instructions to the respective bank where the petitioner is maintaining their account. Pursuant to such order to freeze the bank account, the service tax amount due and payable by the petitioners have been realized. Therefore, no relief could be granted to the petitioners in these writ petitions. It is also brought to the notice of this Court that the petitioners have assailed the final order passed by the respective respondent for recovery of service tax amount with penalties before the appellate authority and the appeals filed by them are pending. - Decided against assessee.
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2015 (5) TMI 382
Vocational training institutes - Exemption under Notification No.9/2003-ST, dated 20.06.2003 - Suppression of facts - Held that:- Appellants have been keeping the Department informed about their activities and therefore it is prima facie difficult to sustain the charge of willful statement/suppression of facts. Further, the Joint Commissioner himself vide letter dated 05.10.2005 informed the appellants that they qualified for the exemption on the training imparted by them. Indeed, CBEC itself vide its circular No. 59/8/03-ST, dated 20.06.2003 held that the institutes like the appellants' are eligible for exemption as vocational training institute. While the Board circulars do not have the authority to expand or curtail the scope of a Notification, prima facie , the Board's later circular No. 107 /01/2009 , dated 28.01.2009 may not represent the correct legal view in-as-much-as the training imparted by them actually enables the trainees to seek employment directly as a result of training; for example such trainees can seek employment directly after such training as interpreters. - appellants have made out a good case for complete waiver of pre-deposit of the impugned liabilities and we order accordingly staying the recovery thereof during pendency of the appeal - Stay granted.
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2015 (5) TMI 381
Denial of input service credit - goods transport services - Held that:- Appellant has availed Cenvat Credit on transportation services availed by them for transportation of cane seeds and bio manure to the place of the farmers. Both the sides disputed that whether the farmer who is growing sugarcane is supplying to the appellant or not. This fact has not been disputed in the show cause notice. The show cause notice only alleged that this transportation services have no nexus with the manufacturing activity of the appellant. Therefore, they are not entitled to take Cenvat Credit for these services. - As per Rule 2(L) of the Cenvat Credit Rules the assessee is entitled to take Cenvat Credit on the services which were used by them as a manufacturer directly or indirectly in relation to manufacturing of their final product. Therefore, the issue before me is that whether transportation availed by the appellant have any nexus to their manufacturing activity directly or indirectly. A similar issue came up before this Tribunal in the case of VST Industries Ltd [2012 (5) TMI 374 - CESTAT, BANGALORE]. As in the case of VST Industries Ltd [2012 (5) TMI 374 - CESTAT, BANGALORE]. this Tribunal held that the supply of tobacco seeds free of cost to the farmers and also necessary advice to be given to them by experts. These advisory arrangements were made under agreement between appellant and the services provider. In those circumstances, this Tribunal has held that providing of free tobacco seeds and security services are advisory services and are having nexus to the manufacturing activity of the cigarette manufacturer. Therefore, following the decision of this Tribunal in the case of VST Industries Ltd. (2012 (5) TMI 374 - CESTAT, BANGALORE) I hold that in this case the services availed by the appellant is having a nexus indirectly to the manufacturing of their final product. - Appellant are entitled to take Cenvat Credit on GTA services availed by them in question. In these circumstances, I set aside the impugned order - Decided in favour of assessee.
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Central Excise
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2015 (5) TMI 376
Waiver of pre deposit - tribunal ordered 50% amount to be deposited - prima facie case - undue hardship - Denial of CENVAT Credit - contravention of the provisions of Rule 4 of the Central Excise Rules, 2002 - Confiscation of goods - Held that:- CESTAT has found some substance in the contention of the appellant and has directed him to predeposit only 50% of the duty demand confirmed against the appellant and not the entire 100% of the amount. It can thus be seen from the facts and circumstances of the present case that the learned CESTAT has taken into consideration all the three factors i.e. prima facie case, undue hardship and the interest of Revenue. - Insofar as the factor i.e. undue hardship is concerned, it does not appear that the said contention was duly established by the appellant by producing sufficient evidence before the learned Tribunal. We do not find any error in the findings recorded by the learned Tribunal in the impugned order. - No case is made out for the interference at the hands of this Court as there is no substantial question of law involved in the present appeal for consideration of this Court - Decided against assessee.
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2015 (5) TMI 375
Demand of interest on wrong availment of CENVAT Credit - Whether in the facts and circumstances of the case and in law the Hon'ble CESTAT, is correct in allowing the appeal filed by the assessee that the assessee is not liable to pay interest on the Cenvat Credit taken wrongly but not utilized which is beyond the purview of the provisions of the C. Excise Law and the Rules made thereunder - Held that:- A bare reading of the Rule 14 would indicate that the manufacturer or the provider of the output service becomes liable to pay interest along with the duty where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded and that in the case of the aforesaid nature the provision of Section 11AB would apply for effecting such recovery - High Court proceeded by reading it down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as 'AND' by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or has been erroneously refunded' as the word "AND". On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest - Tribunal was of the view that in view of the judgment of the Punjab and Haryana High Court the Appeal deserves to be allowed on the short ground and as such, has not gone into other aspects of the matter. We find that it will be appropriate if the matter is reconsidered by the learned Tribunal. - Matter remanded back - Decided in faovur of Revenue.
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2015 (5) TMI 374
Valuation - inclusion of value of goods supplied free of cost - Demand of differential duty - Suppression of value of goods - Imposition of interest and penalty - Held that:- If certain items supplied by the buyers free of cost to the manufacturer the value consideration of the said items in the form of amortization cost must be added in the assessable value for the reason that the sale value in such case cannot be considered as sole consideration. Therefore, we are of the view on this count that amortization cost is legally includible in the assessable value. - As regard the goods supplied by the appellant to their sister concern, it is undisputed that valuation of such goods is adopted by cost construction method in terms of Rule 8 of Central Excise Valuation Rules, 2000. In accordance to which valuation should be 110% of the cost of manufacture of the goods. From the impugned order it was found that the appellants have not correctly valued the goods and not added 10% notional profit in the assessable value while clearing the goods to their sister concern. - differential duty demand on both the counts are correct and legal and the same does not require any interference. Appellant have not added amortization cost in respect of goods supplied to other than related person and also not correctly valued in respect of goods supplied to their sister concern. The fact of incorrect valuation and consequent short payment of duty was clearly suppressed by the appellant from the department therefore proviso to Section 11A in demanding differential duty was correctly invoked - It is straight law, irrespective of any other factors as and when a manufactured goods is cleared from the factory of the manufacturer he is bound to pay the correct duty leviable thereon, there is no explanation provided in the excise law that if buyer is entitled for the Cenvat Credit therefore no duty is required to be paid. Therefore, we do not agree that merely because recipient of the goods are entitled for the Cenvat Credit, it is a case of revenue neutrality. The availment of Cenvat Credit is subsequent act and that cannot be basis for payment of duty in the clearance of the goods from the manufacturer factory. - . Commissioner has correctly imposed the penalty under Section 11AC and interest under Section 11AB which does not require any interference - Decided against assessee.
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2015 (5) TMI 373
Determination of assessable value - Inclusion of Amortized cost of mould - Demand of differential duty - Held that:- Levy of duty on the difference between the charge of moulds and dies paid to maker thereof and recovery of such charge from Tata Motors is inconceivable when no such moulds and dies were removed by appellant. Such goods were never cleared by the appellant on the facts and circumstances brought out in the adjudication order. Appellant was mere user thereof. Such use of mould in the manufacture does not bring out the case of deemed removal thereof. Law is well settled that there is no one to one relation of the inputs to the outputs in Dai Ichi Karkaria Ltd. - [1999 (8) TMI 920 - SUPREME COURT OF INDIA]. The finished goods cleared are only liable to duty. But, mere use of moulds and dies to manufacture of such finished goods are not exigible to levy in the hands of the appellant. Record does not reveal allegation of undervaluation of the goods cleared to Tata Motors. - In absence of any depression to the assessable value, the cost of moulds in the present case cannot be held to be liable to duty without that being cleared by the appellant nor the difference realized by appellant from Tata Motors exigible to duty in absence of removal of that goods. - Decided in favour of assessee.
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2015 (5) TMI 372
Penalty u/s 11AC - whether the assessee is liable to pay interest and penalty in respect of the duty paid prior to the issue of a show cause notice to payment made after the due date - Held that:- though the application of Section 11AC of the Act would depend upon the existence or otherwise of the conditions expressly stated in the Section, once the Section is applicable in a case, the concerned authority would have no discretion in quantifying the amount of penalty. It must be imposed equal to the duty determined under Sub-Section (2) of Section 11 of the Act. Therefore, imposition of penalty is not automatic. Only if the conditions prescribed in Section 11AC of the Act is fulfilled, then there is no discretion left with the authority except imposing penalty. - portion of the order setting-aside the imposition of penalty is hereby set-aside. The matter is remitted back to the original authority to consider the leviability of penalty in the light of the statutory provisions contained under Section 11AC of the Act and the interpretation by the Apex Court in the [2009 (5) TMI 15 - SUPREME COURT OF INDIA] and [2008 (9) TMI 52 - SUPREME COURT] in accordance with law. - Matter remanded back - Decided in favour of Revenue.
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CST, VAT & Sales Tax
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2015 (5) TMI 380
Reassessment proceedings - Violation of principle of natural justice - No fresh notice issued - Held that:- after remand order was passed for fresh assessment by the Assessing Authority, the appellant had been given full opportunity to produce the books of account as well as the other evidences, as had been directed by the Tribunal. This being a case of reassessment after remand, cannot be said to be a matter relating to original assessment where notice under Section 39(1) of the Act was required to be given. It is not denied that at the time of original assessment, such notice under Section 39(1) of the Act had been given to the appellant - Where reassessment has been directed under orders of the Tribunal, permitting the appellant to produce books of account and other evidence, which has been complied with. In our view, no fresh notice under Section 39(1) of the Act, was required to be given after the remand - there is no violation of the principles of natural justice. We are also of the opinion that while holding that the books of account produced by the appellant were not to be accepted, the Assessing Authority was not obliged to give any notice to the assessee. As such, no interference is called for with the order of the learned Single Judge. - Decided against assessee.
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2015 (5) TMI 379
Jurisdiction of tax Board - Restoration of assessment order - Whether in construing the impugned transaction as sale and not lease, the learned Tax Board has exercised its jurisdiction appropriately for reversing the findings and conclusions of the first appellate authority and restoring the assessment order - Held that:- Tax Board, while noticing a very vital fact that dish antenna and digital decoders are supplied by Essel Agro to the petitioner-assessee on refundable security of five years, with a clear stipulation under an agreement that these goods are not for sale, has finally concluded that in want of lease agreement between the petitioner-assessee and the respective dealers, it is difficult to presume that the transaction is a lease, and as such it is a transaction of sale. In fact, none of the authorities have made any endeavor to find out truth about the transaction and more particularly the second appellate authority while passing the impugned order has not recorded cogent and convincing reasons. The very edifice of initiating proceedings by the Anti-Evasion Wing of the Commercial Taxes Department is investigation and the alleged incriminating materials collected during investigation against the petitioner-assessee. There remains no quarrel that petitioner-assessee has received dish antenna, digital decoder and other accessories from Essel Agro on payment of advance security deposit and there is an agreement between Essel Agro and the petitioner-assessee. Customers clearly know the price they will have to pay for the beer. They are required to pay an additional amount by way of deposit for taking away the bottle which is refunded if the bottle is returned. If the bottle is not returned the deposit is retained as liquidated damages for the loss of the bottle. There is a clear intention not to sell the bottle. Hence, we are of the view that the deposit cannot be considered as price of the bottles. - Tax Board has not exercised its jurisdiction appropriately in reversing the findings and conclusions of the first appellate authority and restoring the original assessment order. - entire matter requires re-examination by the original assessing authority, which has initiated the assessment proceedings pursuant to investigation. It will be noticed that if the Sales-tax authorities refused the prayer of the assessees to cross-examine the wholesale dealers, then such a refusal would not amount to an adequate opportunity of explaining the material collected by the assessing authority. Imposition of penalty pre-supposes an attempt of the assessee to avoid payment of tax or evasion of tax by resorting to certain dubious means. Legal position is no more res integra that avoidance, or evasion of tax is a sine qua non for imposition of penalty under Section 65 of the Act of 1994. The question of evasion of tax arises only when there is a concrete material against assessee that it is liable to pay the tax, which he has avoided to pay or made an attempt to evade the same. - question of tax liability of the petitioner is still fluid, inasmuch as, the dish antenna and digital decoders which it has supplied to the respective dealers is sale transaction or a lease is yet to be determined, obviously, it is not possible to infer mensrea of assessee in evading the tax. Therefore, this question at this stage cannot be conclusively decided, however, prima facie, it is answered in affirmative manner favouring the cause of the assessee of course subject to the final outcome of denovo assessment. As such, at this juncture, imposition of penalty is out of question. - Decided in favour of assessee.
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2015 (5) TMI 378
Validity of revised assessment orders - Exemption from tax to cotton tape - Finalization of proceedings - Held that:- Proceedings have been finalized by passing Exts. P9 and P10 orders by the fourth respondent with unwarranted haste, and virtually denying an effective opportunity of hearing to the petitioner. In the said circumstance, this Court finds that, the said orders cannot stand the test of judicial scrutiny of this Court and they stand set aside. It will be open for the 4th respondent to finalize the proceedings afresh, after giving an effective opportunity to produce the relevant books of accounts and hearing. The proceedings as above shall be finalized and orders shall be passed in accordance with law, on the basis of merits involved and untrammelled by any direction from any corner, to have the assessment finalized in any particular manner. - Decided in favour of assessee.
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2015 (5) TMI 377
Denial of request of adjournment for production of Books of Accounts - Held that:- Court finds that the reason stated by the petitioner for granting adjournment for producing the Books of Accounts was turned down, saying that it was a 'false reason', in view of the extent of turn over for the year 2012-13; for which no audit was necessary and hence not acceptable. The learned Counsel for the petitioner points out that the petitioner being a Company incorporated under the relevant provisions of the Companies Act, audit of accounts was very much necessary and denial of opportunity is totally against the principles of natural justice. - Matter remanded back on the condition of pre deposit - Decided conditionally in favour of assessee.
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