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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter May 13, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws News Stake holders and general public requested to bring-out issues/points by 25th May, 2016 which in their opinion would require further clarification/guidance in Income Declaration Scheme 2016 & the Direct Tax Dispute Resolution Scheme 2016; Both the Schemes are expected to come into force on the 1st of June, 2016 after the Finance Act 2016 receives the Presidential assent. Big Boost to Ease of Doing Business- Passing of Bankruptcy Code; Code is a comprehensive and systemic reform, which will give a quantum leap to the functioning of the credit market and would take India from among relatively weak insolvency regimes to becoming one of the world's best insolvency regimes; Vision of the new law is to encourage entrepreneurship and innovation RBI Reference Rate for US $ Parliament passes the Insolvency and Bankruptcy Code Circulars / Instructions / Orders FEMA 68 [(1)/23(R) - dated 12-5-2016 Foreign Exchange Management (Exports of Goods and Services) Regulations, 2015 DCBR.Dir.No.1/13.01.000/2015-16 - dated 12-5-2016 Reserve Bank of India (Co-operative Banks - Interest Rate on Deposits) Directions, 2016 Highlights / Catch Notes Income Tax Addition made on account of payment of “Mehta Sukhadi” - According to the appellant, such commission has been paid secretly to employees of numerous clients and those amounts are deductible under Section 37(1) - Assessee failed to prove the commission paid - additions confirmed - HC Visit to Get Source Unexplained credit u/s 68 - the amount received by the assessee is to be treated as income u/s 68, assessable under the head “Income from other sources” and accordingly as per the provision of section 71, Business losses of the assessee are to be set off against the same. - AT Visit to Get Source Addition u/s 56(2)(v) - whether gift cannot be revoked after acceptance? - It was a temporary advancement of the money by the transferor to the assessee and the amount was repaid when asked for, as per the transfer document - No addition - AT Visit to Get Source Additions u/s 68 - Once the receipt of deposits from the depositors is held to be genuine, the consequent disallownace of interest made by the Assessing Officer would automatically stand deleted - HC Visit to Get Source Interest income accrued on time deposits - AO has only taken into account the ‘Journal’ entries credited in the account. The AO has not taken into account the corresponding ‘Journal’ entries debited - No additions - HC Visit to Get Source Transfer of cases u/s 127 - The reasons cannot be vague and too general in nature, but must be specific and based on material facts. It is again not merely sufficient to record the reasons in the file, but it is also necessary to communicate the same to the affected party. - HC Visit to Get Source TDS u/s 194C or u/s 194H - Amount paid to the consolidator on purchase of land - there is no TDS liability as the assessee has not claimed any deduction for payment as amounted to the consolidator - AT Visit to Get Source Refund of TDS wrongly deducted - Deduction for TDS on Compensation u/s 28 of Land acquisition Act - ITO (TDS) directed to forthwith deposit such amount with the Reference Court, which shall thereafter disburse such amount to the petitioner herein. - HC Visit to Get Source Revision u/s 263 - claim of additional expenses made by the assessee in its re-revised return which was subsequently withdrawn - the present is a fit case for exercise of the suo-motu revisional powers of the learned CIT - SC Visit to Get Source CIT (A) has erred in not giving the due credit of MAT u/s 115JAA as MAT includes surcharge on MAT as well as education cess and the same was undisputedly paid by the assessee during the year under assessment - AT Visit to Get Source MAT - Adjustment to book profit u/s 115JB - the plea of the assessee that the amount of the deferred tax assets included in the brought forward loss should be excluded from the said amount is not tenable.- AT Visit to Get Source Levy of penalty - it is nowhere recorded that the details submitted by the assessee in its return are found to be incorrect or erroneous or false and in these circumstances, penalty u/s 271(1)(c) of the Act is not sustainable - AT Visit to Get Source Disallowance u/s 40A(3) - cash payments exceeding the sum of ₹ 20,000 - merely recording the connected purchase and sale transactions independently and separately instead of net adjusted amount in the cash book does not amount the violation of section 40A(3) - AT Visit to Get Source Interest u/s 234A and 234B - monies lying in post office deposits which were the subject matter of attachment u/s 281B of the Act should be construed as taxes paid by the assessee and accordingly interest u/s 234A and 234B has to be reworked accordingly - AT Visit to Get Source Exemption u/s.54EC - REC Bonds - father has invested in shares in the name of two minor children - the computation has to be worked out in the hands of the minor and allow the exemption and subsequent income should be added in the hands of the father u/s.64(1A) - AT Visit to Get Source Customs Procedure for search, disposal or destruction of the narcotics and the remedial steps that need to be taken to plug the loopholes, if any. - Apex Court issued the directions - SC Visit to Get Source Import of construction sand - Writ jurisdiction of High Court the High Court should be extremely circumspect while dealing with a writ petition against the notice issuing show cause. - SC Visit to Get Source Cancellation of bail - when the appellant had not violated any of the bail conditions, allowing the application for cancellation of bail after one year and three months, may not be appropriate - SC Visit to Get Source Revocation of CHA - the appellant is nowhere involved in the alleged smuggling or submission of forged document related thereto or abetted to the said offence. The impugned order revoking the CHA Licence is not legal and proper - AT Visit to Get Source Refund - appellant has filed refund claim under Notification No. 102/2007-Cus., dated 14-9-2007 wherein no time has been prescribed for filing refund claim. - that rejection of refund claim as time-barred is not sustainable - AT Visit to Get Source In the absence of any other corroboration, the statements of co-accused driver and helper cannot be made the clinching evidences to decide the case against the appellants - AT Visit to Get Source Indian Laws The Petitioner was not the Director when the offence was committed. Once this is so, she cannot avoid facing prosecution only on the ground of her having ceased to be the Director, when the last few acts of presentation of the cheque to the Bank and its dishonour took place - HC Visit to Get Source Service Tax Challenge to the recovery notices without challenging the order-in-original - service tax was collected but not paid - the petitioner cannot challenge the consequential order - HC Visit to Get Source Revenue Sharing agreement - Renting of immovable property to the joint venture as per the Partnering Agreement - all 3 are separate persons under Section 65B(37), cannot be held as service to self - liable to service tax - AAR Visit to Get Source Revenue Sharing agreement - Service Tax is applicable on the revenue share relating to the applicant to the extent it is relatable to rendering of taxable service - AAR Visit to Get Source Central Excise Tribunal having passed a completely non-speaking order displaying non-application of mind hindering judicial review to even ascertain that a law of question was involved - HC Visit to Get Source Manufacturing of Sada pan masala - Capacity Determination and Collection of Duty - The machine, if was not in a condition to pack the pouches more than 700, then the determination of duty for higher quantity is apparently bad - HC Visit to Get Source VAT The contracts of construction of glass curtain wall executed by the Applicant would not constitute contracts for construction of buildings mentioned in para A of the Notification dated 8 March 2000 issued for the purpose of section 6A(1) of the Works Contract Act - HC Visit to Get Source Case Laws: Income Tax 2016 (5) TMI 493 Revision u/s 263 - claim of additional expenses made by the assessee in its re-revised return which was subsequently withdrawn. - Held that:- There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree. Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue. The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn. We, therefore, are of the opinion that the learned C.I.T. was perfectly justified in coming to his conclusions insofar as the issue No.(iii) is concerned and in passing the impugned order on that basis. The learned Tribunal as well as the High Court, therefore, ought not to have interfered with the said conclusion. Thus we are of the opinion that the present is a fit case for exercise of the suo motu revisional powers of the learned C.I.T. under Section 263 of the Act. The order of the learned C.I.T., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High Court dated 7th August, 2008 are set aside. The appeal of the Revenue is allowed. 2016 (5) TMI 492 Disallowance of miscellaneous expenses and depreciation - ITAT confirmed CIT(A) order deleting the addition - Held that:- CIT(A) has examined the record and the accounts produced by the assessee and after scrutiny of the same returned findings of fact that the expenditure was justified. No rationale has been given by the AO for disallowing 50% of the expenses incurred. Neither is there a finding that the expenditure is not genuine nor have the books of accounts been rejected by the AO. There is no perversity in the findings of fact returned by the CIT(A) and affirmed by the Tribunal. - Decided against revenue Disallowance of interest income accrued on time deposits - ITAT confirmed CIT(A) order deleting the addition - Held that:- Find merit in the submission of the learned counsel for the assessee that the credit journal entries made as accrual of interest were made for the purpose of closing of quarterly results. The entries have been reversed and the interest actually received has been offered to tax. It is not the case of the appellant that the actual interest income received has not been offered to tax. The AO has only taken into account the ‘Journal’ entries credited in the account. The AO has not taken into account the corresponding ‘Journal’ entries debited. The CIT(A) as well as the Tribunal on perusal of the account statement have returned findings of fact that there is no suppression of interest income and the entire interest income has been offered to tax. - Decided against revenue 2016 (5) TMI 491 Transfer of cases - scope of section 127 - Authority competent to do so. - purpose of effecting transfer of cases from jurisdiction of one Commissioner to other - Held that:- It is clear that power to transfer cases from jurisdiction of one Assessing Officer to other vests in the Commissioner of Income Tax. The said provisions require an opportunity of hearing to be given to the assessee. It is also necessary that the show cause notice should contain reasons why transfer of cases is required to be made by the competent Authority and there is no provision for delegation of power by the Commissioner of Income Tax to issue such transfer order to any other Officer as such. It was absolutely necessary as requirement of law that the show cause notices issued to the petitioners had to be under the signature of Commissioner of Income Tax. However, show cause notices involved in the petitions are issued by and under the signature of Deputy Commissioner of Income Tax-II (Headquarters) and not under the signature of Commissioner of Income Tax. We thus find that initiation of proceedings under Section 127 of the Act in the instant cases was not by the Authority competent to do so. It is clear that in the matter of transfer of a case under Section 127 of the Act, it is necessary that the Authority which proposes to transfer the case must, wherever it is possible to do so, give the assessee a reasonable opportunity of being heard with a view to enable him to effectively show cause against the proposed transfer. The notice must also propose to give a personal hearing. It is also necessary to mention in the notice the reasons for the proposed transfer so that the assessee could make an effective representation with reference to the reasons set out. It is not sufficient merely to say in the notice that the transfer is proposed “to facilitate detailed and coordinated investigation”. The reasons cannot be vague and too general in nature, but must be specific and based on material facts. It is again not merely sufficient to record the reasons in the file, but it is also necessary to communicate the same to the affected party. Thus the impugned order passed by the respondents transferring cases of petitioners from Wardha (Maharashtra) to Jodhpur (Rajasthan) and from Nagpur (Maharashtra) to Jodhpur (Rajasthan) being arbitrary and illegal are not sustainable and are thus quashed and set aside. 2016 (5) TMI 490 Addition made on account of payment of “Mehta Sukhadi” - According to the appellant, such commission has been paid secretly to employees of numerous clients and those amounts are deductible under Section 37(1) - Held that:- Vague references are made to the statement made by the partners of the assessee firm whose presence had been recorded by CIT (Appeals) at the hearing. The CIT (Appeals) does not record any substantial evidence that had been provided and except to say that some documentary evidence was produced, the order of CIT (Appeals) leaves much to be desired and fails to inspire confidence. Apart from the fact that the names of recipients are not mentioned, we do not find any attempt on the part of assessee to lead any evidence indicating how these payments were made. None of the partners have given evidence to establish as to which partners dealt with various clients, whose names were not provided in the list forming part of the record. Although the list, a copy of which is now been taken on record, pursuant to the order in Notice of Motion reveals names of clients, most of whom are corporates, the assessee made no attempt to adduce any evidence as to which the partners dealt with clients in question. No attempt has been made to establish whether the payments were for the purpose of business. In fact the Assessing Officer has in our view rightly concluded that payment of commission did not result in any expeditious payments due to the assessee. Moreover, the finding of fact reveal that the rate of commission was not uniform. There is no evidence brought on record by the appellant to establish that payment of commission was matter of trade practice in its line of business. In absence of such evidence, we are inclined to accept the findings of the tribunal which is last fact finding authority and as such we are not inclined to interfere with this finding. In the view we have taken on the basis of the law existing at the time, the impugned order was passed to hold that the appellant had not established the payment of secret commission. No occasion arises to examine the application of the Explanation 1 to Section 37 of the Act, which would arise only if it is held that the expenditure of secret commission had in fact been incurred of the purposes of business. Appeal must fail and the substantial question of law raised for our consideration in all the three appeals viz “Whether on facts and the circumstances of the case, Tribunal was right in sustaining the addition made on account of payment of “Mehta Sukhadi” ? is answered in the affirmative i.e. in favour of the revenue and against the assessee 2016 (5) TMI 489 Addition on account of fall in GP rate - ITAT deleted the addition - Held that:- The assessee has placed on record a copy of chart, which was also filed before the Assessing Officer to demonstrate that there has been an alarming increase in the price of steel round bar. For example, the rate per mt. of raw material purchased from RINL increased from ₹ 20,350/- in the preceding year to ₹ 26,900/- in the current year, thereby registering an increase of 32%. In the like manner, there is increase in the rate of raw material from other parties ranging between 19% to 36%. This chart indicates that the input costs became costly in the instant year in comparison with the rates prevailing in the preceding year which led to the reduction in the overall profitability. The AO has not contradicted the contents of such chart. When we consider this factor pushing down the gross profit rate coupled with fact that the Assessing officer has not pointed out any mistake in the quantitative records maintained by the assessee or the value of the closing stock, the only conclusion which in our considered opinion can be drawn is that the books of account were properly maintained. We, therefore, hold that the learned CIT(A) was justified in cancelling the action of the AO in rejecting the books and resultantly deleting the addition - Decided against revenue Addition u/s 68 - Held that:- If the assessee, pursuant to the direction of the Assessing Officer for producing certain creditors, expresses its inability to produce the persons but places on record sufficient evidence to prove the genuineness of the deposits, the addition cannot be made under section 68 of the Act without the AO discharging his duty to summon the creditors. Once the receipt of deposits from the above six depositors is held to be genuine, the consequent disallownace of interest made by the Assessing Officer would automatically stand deleted.- Decided against revenue Addition on account of capital subsidy on sales tax - revenue or capital receipt - Held that:- The exercise of option by the assessee in paying half of the amount of deferred tax upfront thereby retaining the remaining half as subsidy, cannot convert the otherwise capital subsidy into an item of revenue. The Special Bench of the Tribunal in Sulzer India Limited vs. DCIT, (2010 (11) TMI 728 - ITAT, MUMBAI) has held that the payment of net present value against a deferred sales tax liability cannot be considered as income under section 41(1) of the Act. CIT(A) was justified in treating sales tax subsidy as a capital receipt.- Decided against revenue 2016 (5) TMI 488 Refund of TDS wrongly deducted - Deduction for TDS on Compensation u/s 28 of Land acquisition Act - TDS u/s 194A on interest awarded on enhanced compensation - Held that:- Interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression “interest” as contemplated in section 145A of the I.T. Act. The first respondent - Income Tax Officer was, therefore, not justified in refusing to grant a certificate under section 197 of the I.T. Act to the petitioner for non-deduction of tax at source, inasmuch as, the petitioner is not liable to pay any tax under the head “income from other sources” on the interest paid to it under section 28 of the Act of 1894. The petitioner had earlier challenged the communication dated 9th February, 2015 whereby its application for a certificate under section 197 of the I.T. Act had been rejected, and subsequently, tax on the interest payable under section 28 of the Act of 1894 has already been deducted at source. Consequently, the challenge to the above communication has become infructuous and hence, the prayer clause came to be modified. However, since the amount paid under section 28 of the Act of 1894 forms part of the compensation and not interest, the second respondent was not justified in deducting tax at source under section 194A of the I.T. Act in respect of such amount. The petitioner is, therefore, entitled to refund of the amount wrongly deducted under section 194A of the I.T. Act. For the foregoing reasons, the petition succeeds and is accordingly allowed. The second respondent having wrongly deducted an amount of ₹ 2,07,416/- by way of tax deducted at source out of the amount of ₹ 20,74,157/- payable to the petitioner under section 28 of the Act of 1894 and having deposited the same with the income-tax authorities, taking a cue from the decision of the Punjab and Haryana High Court in Jagmal Singh v. State of Haryana (2013 (7) TMI 774 - PUNJAB & HARYANA HIGH COURT ), the first respondent is directed to forthwith deposit such amount with the Reference Court, which shall thereafter disburse such amount to the petitioner herein. Rule is made absolute accordingly with costs. - Decided in favour of assessee 2016 (5) TMI 487 Exemption u/s.54EC denied - investment in REC capital gains bonds falling in two financial years - Held that:- The legislative intent in the subsequent amendment is to restrict the investment of ₹ 50,00,000/- to one financial year only. There was ambiguity and confusion on interpreting the provisions as the Commissioner of Income Tax (Appeals) examined the issue on the interpreting the word ‘’any’’ referring to dictionary meaning because there was no certainty was visualized considering the provisions, CBDT circulars and facts of the case. The Assessing Officer tried to make a distinction of provisions for restricting investment of ₹ 50,00,000/- only in one financial year. The assessee has invested in two installments falling in two financial years and availed tax exemption. Amendment of provisions of Sec.54EC in Finance Act, 2014 are prospective and apply from 01.04.2015 effective from assessment year 2015-16 onwards. We considering the facts and amendment of provisions rely on the jurisdictional High Court decision of CIT vs. C. Jaichander (2014 (11) TMI 54 - MADRAS HIGH COURT ) and CIT vs. Coramandel Industries Ltd (2014 (12) TMI 852 - MADRAS HIGH COURT ) and setaside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the addition and allow the grounds in favour of the assessee. Enhancement of income on investments made by the assessee’s two minor children in REC Bonds and denial of exemption u/s.54EC - Held that:- It is nobody case that father has invested in shares in the name of two minor children. The issue on the investment u/sec 54EC of the Act has been pindown on two aspects, the Commissioner of Income Tax (Appeals) has denied exemption to the minor child and second issue being whether income to be clubbed with parents ‘’total income’’ or ‘’such income’’ contested by the Revenue. We highlight the provisions of Sec. 64(1A) of the Act were income of the minor has to be computed before application of clubbing provisions. In respect of clam of exemption of capital gain, the computation has to be worked out in the hands of the minor and allow the exemption and subsequent income should be added in the hands of the father u/s.64(1A) of the Act - Decided in favour of the assessee. 2016 (5) TMI 486 Unexplained credit under section 68 - taxation under the hear income from other sources - whether the loss under the head ‘business’ can be denied to be set off against the income assessable under the head ‘income from other sources’ - Held that:- Denial of such set off brought by section 115BBE was brought on the statute by Finance Act, 2012 w.e.f. 01.04.2013 i.e. for and from the A.Y. 2013-14. Therefore, when the specific denial of the set off was brought prospectively by the legislature in section 115BBE, the set off of loss under the head ‘business’ against the ‘income from other sources’ cannot be denied to the assessee. We may add here that both sides argued at great length and have given multiple decisions which have been considered by us and for the sake of brevity, we have not dealt them separately but we have considered the entire gamut of case laws referred by Ld. Counsel for the assessee and taken into account before the above mentioned decision was reached. In effect, we hold that the impugned amount received by the assessee is to be treated as income under section 68 of the Income Tax Act, assessable under the head “Income from other sources” and accordingly as per the provision of section 71, Business losses of the assessee are to be set off against the same. The separate addition is therefore deleted 2016 (5) TMI 485 Tax credit of MAT disallowed - Held that:- By applying the ratio of the judgment in case of K. Srinivasan (1971 (11) TMI 2 - SUPREME Court) and provisions contained under Explanation (2) of section 115JB, we are of the consider view that the CIT (A) has erred in not giving the due credit of MAT u/s 115JAA of the Act as MAT includes surcharge on MAT as well as education cess and the same was undisputedly paid by the assessee during the year under assessment. Consequently, the impugned order is set aside. 2016 (5) TMI 484 Penalty u/s 271(1)(c) - excess cost of acquisition claim of the assessee - Held that:- the assessee has neither furnished inaccurate particulars of income nor he has concealed the particulars of income from tax authorities, because the assessee has merely enhanced the cost of acquisition of the land for the purpose of computation of income stated to be due to inadvertent mistake, which he has subsequently revised and paid the tax on the remaining amount. In our view, this is a case of mere clerical mistake which was to be examined by the AO at the very outset to take into account the actual cost of the acquisition of the land to assess the short term capital gain. Moreover, the cost of acquisition of the land was already in the notice of the tax authorities, the assessee being a tax payee. So, making incorrect claim does not amount to furnishing of inaccurate particulars. Moreover, in the penalty order, it is nowhere recorded that the details submitted by the assessee in its return are found to be incorrect or erroneous or false and in these circumstances, penalty u/s 271(1)(c) of the Act is not sustainable. - Decided in favour of assessee. 2016 (5) TMI 483 TDS u/s 194C or u/s 194H - Amount paid to the consolidator on purchase of land - Held that:- The amounts paid to the consolidator i.e. M/s. Vikram Electric Co. (P) Ltd. was duly accounted by the assessee in the purchases and closing stock. Undisputedly no sales have been made by the assesee during the period under consideration. In view of above scenario and facts we concur with the conclusion of the coordinate bench of the Tribunal in the case of the Philana Builders & Developers P. Ltd. (2016 (3) TMI 647 - ITAT DELHI ) and hold that the provisions of section 40(i)(ia) of the Act do not apply to the present case on the payments made by the assessee to the consolidator as the assessee has not claimed any deduction for payment as amounted to the consolidator, either in the profit and loss account or in the computation of the taxable income filed alongwith the return of income. Thus, we decline to accept contention of the Ld. DR that the payment made by the assessee to the consolidator on purchase of land attracts the TDS provision of section 194C or section 194H of the Act - Decided in favour of assessee 2016 (5) TMI 482 Addition invoking the provisions of section 56(2)(v) - whether gift cannot be revoked after acceptance? - Held that:- The gift deed, as reproduced hereinabove, clearly shows that the amount was being transferred, but such transfer was irrevocable at the instance of the transferor. It is trite that a document has to be read as a whole, in order to gather the intention behind the transaction. A reading of the gift deed shows that though the term employed is ‘gift’, the transferor intended to transfer the source of ₹ 5 lacs to the assessee only temporarily. This fact is also confirmed by the fact of issuance of revocation notices by the transferor to the assessee. It also gets buttressed by the very relevant fact of return of the amount by the assessee to the transferor on 27.03.2011, which fact has also been affirmed by the ld. CIT(A). It shows as covered in the written submissions that the assessee was never vested absolute ownership of the amount transferred. The transfer of the amount of ₹ 5 lacs to the assessee was a revocable transfer and it was in fact revoked. The nomenclature employed is not determinative of the transaction, as is well settled. In fact, by making this observation, the ld. CIT(A) has himself accepted that the transaction was not a gift. It was a temporary transfer of money, which was revoked at the option and instance of the donor. The transfer, as stated, is taken to be interest free unsecured loan. It amounts to money received, which money was returned. Moreover, even before the AO, the assessee had offered the explanation of the transaction being a gift, which position does not undergo any change in view of the document of transfer, as per which, the transfer was a revocable transfer. Revocation notices were issued and the money was ultimately returned. Observation of the ld. CIT(A) that the mere repayment after more than five years was done with a motive to change the colour of the transaction from that of a gift is erroneous. The fact remains that the transfer was revocable a transfer, at the instance of the transferor, which fact has not been disputed. Rather, to reiterate, revocation notices were issued by the transferor and in response to such notices, the transfer was revoked and the money was returned to the transferor. The ld. CIT(A) talks of ‘certain motive’ behind the transaction. However, as to what such ‘certain motive’ could be, does not have any reference to whatsoever in the impugned order. This observation of the ld. CIT(A) is also based only on assumptions and presumptions and the same cannot stand in the eye of law. Thus, the transaction in question has neither been shown to have been undertaken to avoid any tax liability, nor to have been undertaken for any ulterior intention of the assessee to circumvent any legal process. It was a temporary advancement of the money by the transferor to the assessee and the amount was repaid when asked for, as per the transfer document. Finding merit in the grievance sought to be raised by the assessee, the same is accepted. The order of the ld. CIT(A) is reversed. The addition is deleted. - Decided in favour of assessee 2016 (5) TMI 481 Disallowance u/s 40A(3) - cash payments exceeding the sum of ₹ 20,000 - Held that:- None of the case the payment is exceeding ₹ 20,000 for the purchase of old ornaments. In all the cases where the addition was made by the AO on account of deemed payment of ₹ 20,000 on the purchase of old ornaments, the assessee sold ornaments in exchange thereof. As a result, the net payment was made the party for the purchase of old ornaments. However the assessee in its books of accounts was showing purchase and sale in full value and the same was also recorded as payment for the purchase and receipt for the sale in the cash book. In our considered view merely recording the connected purchase and sale transactions independently and separately instead of net adjusted amount in the cash book does not amount the violation of section 40A(3) of the Act. On examination of record of the net amount of purchase and sale of the ornaments we did not find even a single case where the payment is exceeding ₹ 20,000. However we find that wherever the payment exceeds for purchase more than ₹ 20,000, it has been made through account payee cheque only as evident from the submission of the assessee. In view of the above, we conclude that the assessee has not violated provisions of section 40A(3) of the Act on account of payment exceeding for the purchase of old ornaments exceeding ₹ 20,000 - Decided in favour of assessee Disallowance u/section 40(a)(ia) - melting loss incurred by KARIGARS is nothing but payment made to KARIGARS without deducting TDS- Held that:- There is undoubtedly loss occurred in the course of melting and manufacturing process of gold. These melting and manufacturing activities are carried out by the KARIGARS who are paid the service charges in the form of cash as per the market prevailing system. Accordingly we opined that the aforesaid loss cannot be termed as payment to KARIGARS. As per the order of the AO the assessee duly explained the loss of gold incurred during the course of melting and manufacturing process to the tune of 906.880 grams. Such a loss was not doubted by the AO at the time of assessment but the addition for the loss of gold 166.170 grams was made due to non-availability of reconciliation. In our view merely assessee failed to provide the reconciliation does not mean that the payment has been made in the form of gold. The AO should have brought cogent reasons for treating the loss of gold as payment to the KARIGARS. As we find that the loss of 906.880 grams was duly explained which shows that there was the system of making the payment in cash to the KARIGARS. Accordingly we held that the less gold received from the KARIGARS cannot be termed as payment to KARIGARS. - Decided in favour of assessee Addition on account of non-production of the reconciliation statement of the gold deposit lying with the assessee - Held that:- the assessee at the time of assessment framed by the AO the assessee failed to reconcile the gold received from the customers to the tune of 30.100 grams therefore the same was treated as income. However from the submission of the assessee we find that the liability towards the deposit of gold from the customers was very much reflecting in the books of the assessee for the relevant year and no such liability was written back in the year. Now it is really clear that a trading liability can be taxed only if it is written off in the books of accounts. In the instant case although the assessee failed to give the reconciliation but such liability was not written off in the books of accounts. Accordingly in our considered view the aforesaid liability cannot be termed as income under section 41(1) of the Act. On contrary ld. DR failed to bring anything on record to controvert the argument of the assessee. So the liability towards the deposit of gold cannot be treated as income of the assessee - Decided in favour of assessee 2016 (5) TMI 480 Determination of fair market value as on 1.4.1981 for the purpose of granting deduction while computing capital gains - indexation - reference to DVO - Held that:- Property had been inherited by the assessee from grandmother who had acquired it before 1981. We hold that the indexation cost has to be given from the date from when the asset was held by the previous owner from whom it was inherited. We cannot brush aside the fact that the Learned AO had not referred the case to DVO for determination of fair market value as on 1.4.1981 on his own volition. Instead it was done based on the directions of this tribunal in the first round of appellate proceedings. In-fact, it is also seen that the assessee himself had raised this issue as an additional ground before this tribunal with a prayer to refer the case to DVO. While this is so, the assessee cannot have any grievance of the fact of Learned AO referring to DVO for determination of fair market value as on 1.4.1981. If the assessee has got any objections to the value determined by DVO, he is at liberty to file the same. But he chose not to file any objections for the same inspite of several opportunities provided to him by the Learned AO which is elaborated in the assessment order. Moreover, the assessee ought to have carried the matter further to the Hon’ble Calcutta High Court against the order of this tribunal in the first round of appellate proceedings in case if he had any grievance. We find that the assessee was not able to produce any evidence in this regard before us. We find that the determination of fair market value as on the date of sale i/e 25.5.2004 by DVO after giving reduction of 15% towards various encumbrances attached to the property , cannot be faulted with. In these facts and circumstances, it is only just and proper to hold that the reference made by the Learned AO to DVO at the instance of the order of this tribunal cannot be faulted with. Interest u/s 234A and 234B - whether CIT(A) was wrong in not considering the fact that the AO has made provisional attachment u/s.281B of the I.T Act on 17.01.2009 whereas he has charged interest u/s. 234A & 234B upto the date of assessment order which is completely arbitrary, unjustified and illegal? - Held that:- . We find lot of force in the arguments of the Learned AR on the aspect of adjustment of monies available in post office towards payment of taxes with corresponding impact on interest calculations. We hold that the monies lying in post office deposits which were the subject matter of attachment u/s 281B of the Act should be construed as taxes paid by the assessee and accordingly interest u/s 234A and 234 B of the Act has to be reworked accordingly. 2016 (5) TMI 479 MAT provisions - addition of deferred tax liability in book profit but not excluding the amount of deferred tax assets included brought forward loss - Held that:- From the plain reading of the provisions of this section 115JB of the Act, it is clear that the amount of loss brought forward or unabsorbed depreciation whichever is less as per books will be reduced from the amount of book profit. So in the instant case the plea of the assessee that the amount of the deferred tax assets included in the brought forward loss should be excluded from the said amount is not tenable. We are also relying in the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME Court] and Kinetic Motor Co. Ltd. v. DCIT [2003 (1) TMI 47 - BOMBAY High Court ] held that the AO does not have the jurisdiction to go beyond the net profit shown in the audited Profit and Loss Account which was accepted by shareholders and filed with Registrar of Companies, except to the extent provided in explanation to Sec. 115JB of the Act. The accounts of the taxpayer were duly certified by the auditors and the same was accepted by shareholders in the Annual General Meeting which was filed with Registrar of Companies and as per the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) and Hon'ble Bombay High Court in the case of Kinetic Motor Co. Ltd. the AO cannot make any adjustments to the book profits of the taxpayer once it was certified by the auditors. - Decided against assessee. Not allowing the expenditure disallowed u/s 14A of the Act while reducing the dividend income for the MAT - Held that:- From the plain reading of the provisions of this section 115JB of the Act, it is clear that the expenditure incurred in relation to dividend income then the book profit as per section 115JB will stand increased by that amount. However the assessee submitted that the Rule 8D of the IT Rules, 1962 came in force from 24.03.2008 so disallowance under section 14A is not applicable for the year under consideration. However we disagree with the view of ld. AR in terms of the provisions of section 115JB of the Act which are self explanatory. Accordingly in our considered view we find no infirmity in the decision of the ld. CIT(A)- Decided against assessee. Applicability of provisions of Section 234B and 234C - Held that:- As relying of Emami Ltd. Vs. CIT case [2011 (6) TMI 163 - CALCUTTA HIGH COURT ] we direct the AO not to charge any interest under section 234B & 234C of the Act on account of retrospective amendment in clause (h) & (i) to explanation 1 of section 115JB of the Act )- Decided against revenue. Disallowance of deferred revenue expenses - Held that:- The assessee has incurred expenses prior to the commencement of business and classified as deferred revenue expenditure. The assessee started claiming those expenses after the commencement of business 1/5th over the period of 5 years. However, the lower authorities disallowed the same on the ground that there is no provision under the Act to claim the deferred revenue expenses. From the facts of the case we observe that the AO is not skeptical about the genuineness of the expenses incurred. The whole amount of ₹ 154.64 million has been incurred in connection of business prior to the commencement of commercial production. Any expense incurred in connection to the business is an allowable expenditure. From the above explained citations of the cases denying the non existence of deferred revenue expenditure term in the act is not reasonable and tenable. In our considered view, all the expenses incurred prior to the commencement of production should be capitalized with the fixed assets of the assessee and depreciation should be allowed thereon accordingly as per law. We are also relying in the guidance note issued by the Institute of Chartered Accountant of India on treatment of expenditure during construction period where it was recommended that the indirect expenditure incurred during the construction period should be capitalized as part of indirect construction cost to the extent to which the expenditure is indirectly related to construction or if incidental thereto.- Decided against revenue. Disallowance of consultancy expenses - Held that:- From the records we find that WBIDC is a state level financial institution and engaged in providing equity capital and project financing to industrial units being set up in the state of West Bengal. We further find that the payment has been made to the government organization and the AO has not exercised his power under section 133(6) of the Act for the clarification by issuing show cause notice to the party before making the disallowance. We also find that the order of the AO is silent about the deduction of TDS from the payment of the consultancy charges to the party. Accordingly in the interest of Justice and fair play we’re inclined to the restore this file to the AO for fresh adjudication as per law after giving opportunity to the assessee. We also direct the AO to issue show cause notice to WBIDC under section 133(6) of the Act for the necessary details and clarification as required under the provisions of law. - Decided in favour of assessee for statistical purpose. Disallowance u/s 14A r.w.r 8D - Held that:- Rule 8D of the IT Rules came into effect from 24.03.2008 and the instant case before us is for AY 2005-06. Therefore, the provisions of Rule 8D of the IT Rules is not applicable in assessee’s present case. We further find that prior to insertion of Rule 8D of the IT Rules various courts have held that the disallowance in terms of provision of Sec. 14A of the Act should be restricted @ 1% of dividend income - Decided in favour of assessee partly Addition on account of year end adjustment in loss on foreign exchange account due to revaluation of sundry creditors and SBI MMD account - Held that:- AO treatment to difference arising on account of foreign exchange in the value of sundry creditors as notional loss and contingent liability which the assessee has not incurred so it was disallowed is strongly disagreed on the ground that this year and adjustment was made by the assessee in terms of AS 11 issued by ICAI and in pursuance of mercantile system of accounting as notified u/s 145 of the Act.- Decided against revenue. Addition of freight expenses - Held that:- The question of disallowance of freight expenses in connection with the stock transfer does not arise. This freight expense has direct connection with the business of the assessee. For other freight expenses, the reason given by the AO for the disallowance is not tenable as the AO has not pointed out any reasonable reasons for the same. There is no doubt that the assessee had made short recovery from the customers but the reasons for the same were duly explained by the assessee. Accordingly the Ld. CIT(A) has given the relief to the assessee and on this point of view Ld. DR has not brought anything on record contrary to the findings of the Ld CIT(A) in deleting the addition - Decided against revenue. Addition on account of claimant in accounting method - Held that:- the duty benefit under the scheme was available to the assessee only on receipt of this certificate issued by the Director-General of foreign trade. Prior to the year, assessee was recognizing the income on the completion of export but that really does not entitle the assessee for the duty exemption unless the certificate is received by the assessee. In view of above, we find no infirmity in the order of Ld CIT(A) in deleting the addition - Decided against revenue. Acceptance of revised return - Held that:- Proof of filing the audited financial statements with the Ministry of corporate affairs were also placed of the supplementary paper book. The financial statements duly audited along with audit report by the auditor of the company were placed. In view of above we do not find any reason to interfere in the order of learned CIT(A). - Decided against revenue. Addition in the computation of book profit on account of doubtful advances and debts - Held that:- AO has treated the provision created against the doubtful debts and advances as the provision for unascertained liability. Therefore for computing the book profit under the provisions of MAT deduction for such provisions was disallowed and added to the book profit. However in our considered view the provision for Sec. 115JB speaks for the provisions created for unascertained liabilities therefore we disagree with the view of the AO. See CIT vs. HCL Comnet Systems and Services Ltd (2008 (9) TMI 18 - SUPREME COURT ) - Decided against revenue. 2016 (5) TMI 478 Disallowance on discount and interest on borrowing through commercial papers and Non-Convertible Debentures (NCDs) - Held that:- In the present year, there was no re-structuring and/or purchase of shares. All that had happened in the preceding year. As on 01.04.2007 itself, which was the first day of the year under consideration, A & M Publications Limited stood merged with and into the respondent / assessee. All the funds available at that point of time with the respondent / assessee were, in the course of the year, deployed in the business of the respondent/assessee. Therefore, the Assessing Officer could not have disallowed the discount and interest on borrowing through commercial papers and non-convertible debentures. Consequently, the Commissioner of Income Tax (Appeals) and the Tribunal have come to the correct conclusion and have deleted the addition made by the Assessing Officer. - Decided against revenue 2016 (5) TMI 477 Reopening of assessment - failure to disclosure fully and truly all relevant facts for the allowance of claim under Section 35AB - Held that:- The petitioner had entered into an agreement with a foreign supplier for the purpose of acquiring technical knowhow. This agreement was disclosed to the Assessing Officer. The petitioner had sought permission from the Assessing Officer to remit the technical knowhow fees to the foreign supplier. This fact would appear from the exchange of correspondence between the petitioner and the assessment officer dated June 22, 1993, December 13, 1996 and December 19, 1996. In fact, the Assessing Officer had granted permission by writing dated December 19, 1996 to make the remittance. The petitioner has also disclosed its audited balance-sheet as also the quantum of remittance made and the manner calculated and arriving at the quantum of deductions claimed by the petitioner for the relevant assessment year. The assessment year was assessed on scrutiny under Section 143(3) of the Income Tax Act, 1961. The Assessing Officer was silent on account of the deductions claimed. He had allowed the amount of deductions claimed on such head in the order of assessment under Section 143[3} of the Income Tax Act, 1956. The petitioner is not guilty of disclosing fully and truly all materials facts necessary for its assessment for the relevant assessment year. - Decided in favour of assessee 2016 (5) TMI 476 Payment of interest towards purchase of debenture - revenue v/s capital expenditure - Held that:- The finding concurrently recorded both By the CIT (A) and the learned Tribunal that the debentures were held by way of business assets is not under challenge. In the absence of any challenge to the aforesaid finding it is axiomatic that the interest paid or payable for purchase of a business asset is allowable under section 36 - Decided against revenue 2016 (5) TMI 475 Reopening of assessment - sale of land and building - Held that:- It is evident that the petitioners had asserted that they had sold their ownership rights in the New Delhi property, which was accepted by the relevant assessing officer and certain benefits were permitted to the petitioners on such basis. The deed of sale was available with the department and it was evident therefrom that the ownership rights were transferred by the petitioners and not merely their leasehold rights, since the leasehold rights in the property had been converted to ownership rights between the agreement for sale and the deed of conveyance. - Decided against revenue Valuation of the property - Held that:- For the purpose of the valuation of the property, including its cost of acquisition, the petitioners had relied on the report of a licensed valuer. A valuation report is, loosely speaking, an opinion based on the facts narrated in support of such opinion. The entirety of the valuation report was before the department in course of the previous reassessment or scrutiny assessment and the relevant assessing officer accepted the same. The present attempt to question the valuation report amounts to a change of opinion or a review of the assessment, which is impermissible. The assessee had disclosed all facts and the basis for the valuation. That was accepted by the department. That is not a matter which can be reopened by claiming that there was a mistake in the valuation report.- Decided against revenue Assessment of cost or sale price of the New Delhi property - inclusion of amount received on account of rent or occupation charges - Held that:- It is evident that the government was in possession of the property for a considerable period without paying any occupation charges therefor. In the arbitration proceedings instituted by the petitioners and other co-sharers (they were then all co-lessees in respect of the property but co-lessors qua the occupant) an award was made for payment of damages on account of rent or occupation charges. It is nobody’s case that such amount was received in the relevant assessment year; at least that is not asserted in the recorded reasons. Further, in the context of what should be the consideration for the sale of a property or the assessment of any capital gain thereon, the occupation charges received is not a relevant factor and the omission to mention the same cannot be seen to be any failure to disclose any material fact pertaining to the relevant assessment. Indeed, it is such amount as was collectively awarded to the petitioners and the co-sharers by the arbitral award that may be the root cause for the issuance of the notice under Section 148 of the Act. Since the receipt of such sum may have been in an assessment year other than the assessment year for which it was due, the petitioners claimed the share of the money received on such account as a capital receipt and not a revenue receipt. The department has rejected such contention and a revision is pending on such score. However, such aspect of the matter has no nexus either with the valuation of the property or with the relevant assessment. - Decided against revenue Non disclosure of possession of the property - Held that:- Such assertion is demonstrably wrong since the information furnished pursuant to queries made in course of the previous reassessment covered such matter - Decided against revenue Deduction claimed under Section 54 - wrongful claim on the ground that it was a sale of the leasehold rights in a property and not a sale of a house property - Held that:- As noticed above, the leasehold rights had been converted to ownership rights prior to the sale deed being executed and such fact was known to the department in course of the previous reassessment and scrutiny assessment. In any event, when the deduction was allowed, the assessing officer is deemed to have taken such matter into consideration and any reassessment on such score would amount to a change of opinion or review which is impermissible. - Decided against revenue 2016 (5) TMI 474 Recovery proceeding - Grant of concession in terms of the Scheme sanctioned by BIFR - concession denied on the ground that the net worth of the petitioner company having turned positive - Held that:- A perusal of the impugned communication dated 25.08.2014 shows that the rejection of the claim of the petitioner is merely on the ground that the net worth of the petitioner company had become positive. The operative period of the scheme had expired on 31.10.2006. The issue has not been considered in the light of the observations made in the scheme formulated by the BIFR. Hence, the impugned communication deserves to be set aside. The writ petition is accordingly allowed.The impugned communication is set aside and the matter is remitted back to the competent authority to be decided afresh 2016 (5) TMI 473 Capital gains - member of an AOP taxed in place of AOP - distribution of assets - relinquishment of rights - whether settlement agreement reveals there was an agreement for outright transfer of land together with all the rights and as per Sec.2(47) the word transfer includes relinquishment of rights? - Held that:- The right person should be taxed and merely because the right person could not be taxed, it is not open to the Revenue to tax a wrong person. Merely because the AOP at the relevant point of time could not be assessed for tax is not a valid ground to tax a member of an AOP at the time when AOP is dissolved and the properties are distributed AOP was formed in the year 1995. The activities of the AOP were also continued for some time and it is only in the year 2004, on account of dispute, settlement was entered into between the members of AOP and the properties were distributed. It has been correctly held by the Tribunal that when distribution of assets takes place the same is not transfer of assets. The assessment at ₹ 14 Crore is on the basis of 20% share of the profit which the assessee would have earned in future. The Tribunal has taken note of the fact that the share of the income is not taxable in the hands of the members. Ultimately, the Tribunal found that the addition of ₹ 14 Crore made under the head of capital gain was incorrect and the said addition is ordered to be deleted. - Decided against revenue 2016 (5) TMI 472 Expenditure for construction of superstructures by the appellant on leased land - determining the nature of expenditure - capital expenditure or revenue expenditure - Held that:- The plain reading of the language of Explanation 1 indicates that the legal fiction was created as if the said structure or work is the building owned by the assessee. There is no warrant of reading Explanation 1 in a manner to read that when the assessee who holds a lease or other right of occupancy incurs any expenditure for purposes of the business or profession on the construction of any structure or doing of any work, in or in relation to and by way of renovation or extension or improvement to the building, then the said expenditure has to be treated as capital expenditure. The legal fiction has not been created to treat the said "such work" as mentioned therein as capital expenditure rather, the fiction has been created that when such work is carried out, it shall be treated as structure or work owned by the assessee. The words "any capital expenditure" used in Explanation 1 indicate that the legal fiction has to be read when any capital expenditure is incurred. Thus whether any capital expenditure has been incurred is a question which has to be decided on the basis of facts of each case and relevant tests applicable. Explanation 1 cannot be read as to mean that when works mentioned therein are carried out by the assessee, it shall be treated as capital expenditure. Explanation 1 however shall be attracted when expenditure is treated as capital expenditure. The use of the word "any" before the capital expenditure emphasises that the provision is attracted when there is any capital expenditure. The Division Bench in its reference order in Joy Alukkas' case [2014 (6) TMI 80 - KERALA HIGH COURT ] is not correct in its assumption that by Explanation 1 to section 32(1) Parliament manifested its legislative intention to treat the expenditure incurred by the assessee on leasehold building as capital expenditure. Had the Legislature intended to provide that all such expenditure incurred by the assessee as referred to in Explanation 1 shall be treated as capital expenditure, the explanation would have used different phraseology. It is well settled principle of statutory interpretation that language of the statute should be read as it is. Thus Explanation 1 has to be read as it is. The above rule of statutory interpretation was laid down by the apex court in CIT v. Tara Agencies [ 2007 (7) TMI 4 - SUPREME COURT OF INDIA ] Thus whether a particular expenditure is a capital expenditure or revenue expenditure is to be found out from the facts of each case and by applying the relevant tests in each case and when it is found that nature of such expenditure is capital expenditure, Explanation 1 shall automatically come into operation. As has been observed above, whether an expenditure incurred by the assessee in a particular case is a capital expenditure or revenue expenditure has to be decided on the facts of that case by applying the relevant tests. Explanation 1 to section 32(1)(i) does not intend to lay down that whenever expenditure has been incurred by the assessee for the purpose of business or profession on the construction of any structure or doing of any work in or in relation to or by way of renovation or improvement to the building, then such expenditure has to be mandatorily treated as capital expenditure. The Explanation only meant that in the event any capital expenditure is incurred by the assessee, the provisions of section 32(1) shall be applicable as if the said structure or work is a building owned by the assessee. We thus answer the reference holding that the ratio of the judgment of the Division Bench in Joy Alukkas' case [2014 (6) TMI 80 - KERALA HIGH COURT ]as expressed in paragraph 28 of the judgment needs no reconsideration. We further hold that whether an expenditure incurred by the assessee is a capital expenditure or revenue expenditure is to be decided on the facts of each case by applying the relevant tests.We make it clear that we have not expressed any opinion on the merits of the case. Let our answer be placed before the appropriate Division Bench to consider all issues and decide the appeals accordingly. 2016 (5) TMI 471 Disallowance u/s 14A r.w.r. 8D - Held that:- Rule 8D comes into operation where the Assessing Officer is not satisfied in relation to income which does not form part of the total income under this Act and thereafter if the Assessing Officer is unable to determine the amount of such expenditure incurred in relation to the income which does not form part of the total income then he may resort to the method with prescribed in Rule 8D of the IT Rules, 1962. Assessing Officer completely ignored the facts appearing in the computation of total income wherein assessee has added back security transactions tax of ₹ 69,482/- and management fees of ₹ 11,09,173/- to the net profit as per profit and loss account. As per submissions made by ld. AR it has been mentioned that dividend income of ₹ 4.29 crores is derived from mutual funds and assessee has paid a management fees of ₹ 11,01,973/- as a portfolio management fees to the portfolio manager who has taken care of the dealings of the assessee in regard to investment for various mutual funds including switching but not switching out from one fund to another in order to optimum benefit to the assessee. In the given situation where the assessee has himself added a sum of ₹ 11,71,455/- to its total income in relation to expenditure incurred for earning exempt income then there remains no reason to sustain the addition of ₹ 8,84,542/- as made by ld. Assessing Officer under the provisions of section 14A of the Act. We therefore, delete the same - Decided in favour of assessee 2016 (5) TMI 470 Sale of shares - Short Term Capital Gain OR business income - Held that:- It cannot be said that assessee was only a trader in shares because assessee has clearly demarcated the transactions in his books of account, which proves that he was an investor in shares and securities upto end of F.Y. 2006-07 and commenced the business of shares and securities during Asst. Year 2008-09 i.e. F.Y. 2007-08. However, shares and securities held upto 31.3.2007 were sold during financial year 2007-08 and income earned from sale of such investments were shown as short term and long term capital gain. We, therefore, hold that the short term capital gain should be accepted and there is no reason to interfere with the order of ld. CIT(A) and we uphold the same - Decided against revenue Addition made u/s 14A r.w. rule 8D - Held that:- AO has just made an estimated disallowance u/s 14A r.w.rule 8D at ₹ 11,598/- without examining the books of account so to satisfy himself with expenditure incurred in relation to earning dividend income which has not been added back by the assessee neither he has made a proper calculation with respect to provisions of section 14A r.w.rule 8D. We, therefore, are of the view that ld. CIT(A) has rightly deleted the disallowance of ₹ 11,598/- u/s 14A r. w. rule 8D as Assessing Officer has made ad hoc disallowance of equal amount of the exempt income at ₹ 11,598/- - Decided against revenue 2016 (5) TMI 469 Addition u/s 68 - Unexplained loans - Held that:- Assessee has fully proved its burden and discharged the onus upon the Department, however, no contrary evidence was shown by the AO which will prove that the transactions were not genuine, therefore, the addition made by the AO and confirmed by the Ld. CIT(A) is totally unwarranted and the same needs to be deleted - Decided in favour of assessee 2016 (5) TMI 468 Addition of income on protective assessment - Held that:- M/s Ajantha Trading Corporation being a limb of M/s Sony Fireworks Private Limited, the income of M/s Ajantha Trading Corporation has t be assessed only in the hands of M/s Sony Fireworks Private Limited. In the absence of partnership deed before the authorities below, this Tribunal is of the considered opinion that the income of M/s Ajantha Trading Corporation has rightly been assessed in the hands of M/s Sony Fireworks Private Limited. Since Shri P. Panjurajan claims that the income has to be assessed only in his hands and he has also filed revised return before the Assessing Officer, now this Tribunal confirms the substantive addition made in the hands of M/s Sony Fireworks Private Limited, therefore, the protective assessment cannot stand in the eye of law. 2016 (5) TMI 467 Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed and that time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee. 2016 (5) TMI 466 Turnover estimation - Application of 10.55% net profit rate on the total turnover shown in the bank account - whether the impugned bank account was actually used for running of textile business or running of cheque discounting business? - Held that:- CIT(A) has rightly observed that the transactions in the bank account do not pertain to the cheque discounting business being carried out by the appellant; as we also find that assessee is maintaining a considerable bank balance in this bank account and, therefore, in the given circumstances, we cannot believe that assessee was carrying on cheque discounting business through this account. In the given circumstances, when appellant is unable to prove that he has conducted cheque discounting business and that too in a bank account which was not in his name and the same was revealed during survey proceedings, we are of the view that ld. CIT(A) has rightly sustained the addition by applying 10.55% net profit rate on the total turnover shown at ₹ 18,75,554/- in the bank account operated by assessee - Decided against assessee. 2016 (5) TMI 465 Reopening of assessment - diversion of interest bearing to non-interest bearing funds - Held that:- As regards the reasons for which reassessment proceedings have been initiated, assessee could not placed on record any communication referring to discussion about the diversion of interest bearing to non-interest bearing funds which means that there was no discussion at all on this point and, therefore, there cannot be any change of opinion because there was no opinion framed on this aspect during assessing proceedings u/s 143(3) of the Act and the period of four years given in the Act specifically pertains to those aspects which may have escaped assessment during the proceedings u/s 143(3) of the Act and four years being sufficient period within which department can go ahead with re-assessment proceedings for any such escaped income arising out of the assessment records held in the possession of the department which have been gathered during the proceedings u/s 143(3) of the Act. Thus Assessing Officer has rightly initiated proceedings u/s 147 of the Act before the end of four years from the relevant assessment year. - Decided against assessee Disallowance of interest - diversion of interest bearing funds to non-interest bearing loans and advances - Held that:- On perusal of list of loans and advances as given as on the close of the financial year 2007-08 we observe that most of the loans and advances are in the nature of trade and commerce which the assessee might have given during the course of normal business. However, one cannot ignore the possibility that list of loans and advances may also include sister concern of the assessee from whom interest might not have been charged. However, in the given circumstances wherein we have examined that assessee was having sufficient interest free funds in the form of partners’ capital at the year end of ₹ 36,65,742/- as well as interest free secured loans of ₹ 36,85,604/-, disallowance of interest at ₹ 5,56,268/- on the loans and advances given of ₹ 41,02,373/- is uncalled for as the assessee had sufficient interest free funds available to apply to the loans and advances given. We are of the view that no addition for disallowance of interest expenses is to be sustained. We delete the same. - Decided in favour of assessee 2016 (5) TMI 464 Penalty u/s 271(1)(c) - inaccurate particulars of income towards unverifiable purchases - Held that:- Purchases are supported with the bills issued by the suppliers and the purchases of the assessee have not been questioned by the Assessing Officer during the course of assessment proceedings and neither any details are available on record to prove that additions have been made in the previous years in regard to unverifiable purchases. Also books of account of the assessee are audited under the Companies Act and under the provisions of section 44AB of the Act and they have not been rejected by the assessing authority. In such situation ld. Assessing Officer cannot draw an inference that assessee has furnished inaccurate particulars of income because records were duly submitted and no independent enquiry was carried out by the Assessing Officer to prove that balance standing under the head sundry creditors were not genuine The assessee has duly shown complete details of sundry creditors in its return of income for this year under appeal and in past also and addition for unverifiable purchases have been made without conducting any independent enquiry therefore, it is not a fit case for levy of penalty u/s 271(1)(c) of the Act. - Decided in favour of assessee. 2016 (5) TMI 463 Addition on account of unsecured loan - unexplained creditworthiness - Held that:- Due to lack of copy of bank statement and copy of identity it is difficult to accept the contention of assessee about the identity, creditworthiness and genuineness of the unsecured loan taken from Hemal Nanavati. It is pertinent to note that in many cases where the amount of unsecured loan is taken by account payee cheque but when the bank statement of the loan creditor is perused it is observed that the loan creditor normally maintains a minimum balance and just before few days of giving a loan by account payee cheque, cash is deposited in the bank account and unless it is proved that loan creditor has sufficient source of cash to deposit in the account, creditworthiness of the loan creditor is not proved and in the ground before us there is no documentary evidence except that the loan creditor is having opening balance in the books of account and during the year amount has been received by account payee cheques but no copy of bank statement is available through which we could have verified the factual status of the creditworthiness of the loan creditor. Also if the assessee has been able to show that for Asst. Year 2006-07 assessee had passed through scrutiny assessment u/s 143(3) of the Act and loan creditor Hemal Nanavati has been verified and held as genuine by Revenue for loan taken in Asst. Year 2006-07 then it could have formed the basis for us to accept the creditworthiness of Hemal Nanavati for the year under appeal. However, no such information is placed on record. Therefore, we are of the view that Assessing Officer has rightly made addition u/s 68 - Decided against assessee Addition on account of commission expenses - Held that:- No disallowance was called for in relation to commission expenses as assessee has been able to demonstrate complete details including calculation of commission debited during the year in profit and loss account - Decided against revenue Addition invoking provisions of Section 36(1)(iii) on account of interest expenses - Held that:- We have gone through the ledger account of Aabhar Holding Pvt. Ltd. and we observe that in the ledger account appearing in the sundry creditor list, assessee has entered into various transactions of sale of cloth and similarly various transactions of bleached cloth purchases are appearing which is enough to show that there has been regular business dealing with Aabhar Holding Pvt. Ltd. The net difference between the debit and credit balance of Aabhar Holding Pvt. Ltd. as on 31.3.2007 works out to the debit balance of ₹ 25,80,080/- (Rs.2,14,00,018/- (-) ₹ 1,88,20,938/-). In the given circumstances assessee has been able to prove that transactions have been entered in the course of business commercial expediency with regard to purchases and sales then it was not correct on the part of Assessing Officer to make disallowance of interest of ₹ 18,90,321/- only with reference to non-charging of interest in debit balance of ₹ 2,14,00,018/- in the name of Aabhar Holding Pvt. Ltd. Therefore, we are of the view that ld. CIT(A) has rightly deleted the addition - Decided against revenue Addition on account of unproved creditors - Held that:- Had there been genuine sundry creditors then either they had been paid off in the following years or they certainly would have given duly signed confirmation letters which are completely missing in the case of assessee. We are therefore, of the view that to the extent of ₹ 5,57,293/- addition was rightly made by Assessing Officer. As far as difference of the remaining amount of addition of ₹ 73,253/- (Rs. 6,30,546/- (-) ₹ 5,57,293/-), we confirm the decision of ld. CIT(A) as these amounts must have been paid off in the following years. Accordingly we sustain the addition of ₹ 5,57,293/- out of ₹ 6,30,293/- in relation to sundry creditors which have not been proved by the assessee. - Decided partly in favour of assessee Disallowance of packing material and stores expenses - Held that:- . From perusal of record, we observe that all relevant material in the form of copies of purchase bills of packing material, stores consumed were placed before the assessing authority and no defect has been pointed out by the Assessing Officer. The evidences placed on record are sufficient to support the claim of assessee for claiming allowance of ₹ 7,12,662/- towards packing material and stores consumed and we are of the view that ld. Assessing Officer erred in making an ad hoc disallowance by taking a view on the basis of his own surmises and conjectures and completely ignoring the documentary evidences and audited financial statements. We are therefore, of the view that ld. CIT(A) has rightly deleted the disallowance - Decided against revenue Disallowance of tractor expenses - Held that:- The disallowance having been made on ad hoc basis without pin-pointedly detecting any defects in the books of account of the assessee and the expenses have been supported by bills and vouchers. Therefore, the disallowance is deleted. - Decided against revenue Disallowance of provisions for expenses like staffs salary & bonus, travelling exp., telephone exp., electricity charges, audit fees and stationary bills etc. - Held that:- From going through the list showing provisions of expenses we find that all the expenses are of recurring nature which remained unpaid at the end of the year which mostly pertaining to the last month or as the case may be. However, we do not agree with the view taken by the Assessing Officer who has not pointed out any specific defect in regard to the expenses claimed by the assessee for ₹ 2,96,177/- rather he has made disallowance only by taking the basis of payment made in the subsequent year. In our view if the expenses has been genuinely booked in the books of account then payment made or not is not material and the same is the factual position in this ground wherein no defect has been specifically pointed out by the Assessing Officer in the claim and he has just made the disallowance for the unpaid amount which in our view is not correct. Therefore, we are of the view that ld. CIT(A) has rightly deleted this addition - Decided against revenue 2016 (5) TMI 462 Disallowance under section 14A - AO has computed the disallowance under section ½% on the average investment as on the opening balance and closing balance of investments of the relevant period - Held that:- As observed by the learned CIT(A), while interest expenditure has been incurred on funds invested in the capital of firms from where the assessee has received both taxable income in the form of interest income and remuneration, the assessee would have also incurred certain other expenses like brokerage, bank charges, vehicle expenses, depreciation thereon, etc. for earning such exempt income and therefore some disallowance would be called for under section 14A of the Act, though not as exactly laid out by the AO. In the factual matrix of the matter, as discussed above, we deem it reasonable to restrict the disallowance under Rule 8D(2)(iii) on an adhoc basis - Decided partly in favour of assessee 2016 (5) TMI 461 Addition made on account of redeemable preference share capital - CIT(A) deleted the addition - Held that:- CIT(A) recorded a categorical finding to the effect that amount payable and receivable by the assessee was squared off which was in accordance with the provisions of Companies Act. Further finding was recorded to the effect that these companies were assessed with I.T. Department for several years. The identity and genuineness of the transaction was duly accepted. The detailed finding recorded by CIT(A) are as per material on record. Moreover the issue is also covered by the decision of the coordinate bench in the case of Sinhal Products (P) Ltd. [2012 (3) TMI 523 - ITAT DELHI] wherein under similar facts and circumstances, the Tribunal has held that the assessee has discharged its initial onus to prove the identity, creditworthiness and genuineness of the transaction. We also found that it is not a case where department has received any information with regard to the fact that the share application were bogus entry or it is in the shape of accommodation entry. The share application is by the associate concern of the assessee which is also assessed with IT Department. Respectfully following the decision of coordinate bench vis-à-vis finding recorded by CIT(A), we do not find any reason to interfere in the order of CIT(A) resulting into deletion of addition - Decided in favour of assessee Addition on account of loan taken from M/s Akhil Marketing Pvt. Ltd. - Held that:-Transactions are duly recorded in the audited account of M/s Akhil Marketing Pvt. Ltd., which is also assessed to tax. We found that as on 31-3-2007 the party has shown advance of ₹ 6.29 crores including to the assessee also. ₹ 12.55 lakhs was payable as lease. The CIT(A) has recorded a categorical finding on the basis of material placed on record to the effect that all the three conditions regarding identity, creditworthiness and genuineness of the loan creditors were duly established. Since the findings are as per material on record, we do not find any reason to interfere in the findings so recorded by CIT(A).- Decided in favour of assessee 2016 (5) TMI 460 Allowability of deduction / exemption u/s 10A - Held that:- In the matters relating to the claim of deduction / exemptions, it is the requirement of that the initial year should be the year of scrutiny of the claims relating to the set-off of the new unit or splitting up of the existing units and other conditions specified in the said section 10A or similar provisions. AO is prevented from getting into these years in subsequent years such as AY 2006-07 and others. We have also considered the fact that the AY 2005-06 was not reopened for the reassessment or u/s 148 or revision u/s 263 of the Act etc as the case may be. Therefore,we find the argument of the Ld Counsel should be considered and the relevant grounds should be allowed in favour of the assessee. As decided in case of Paul Brothers [1992 (10) TMI 5 - BOMBAY High Court] unless deductions allowed for the assessment year were withdrawn, they could not be denied for subsequent years - Decided against revenue 2016 (5) TMI 459 Allowance on account of speculation loss - Held that:- We are not inclined to interfere with the findings of CIT(A) who has rightly granted relief to the assessee on account of speculation loss Addition on belated payments of Provident Fund - Held that:- The assessee did not deposit the amount of contribution with the PF Department / DSI Department within due date under the PF Act and/or ESI Act - There is no amendment in Section section 36(1)(va) of the Income Tax Act and considering section 36(1)(va) of the Income Tax Act as it stands, with respect to any sum received by the assessee from any of his employees to which the provisions of clause (x) of sub-section (24) of section 2 applies, assessee shall not be entitled to deduction of such amount in computing the income referred to in section 28 if such sum is not credited by the assessee to the employees' account in the relevant fund or funds on or before the due date as per explanation to section 36(1)(va) of the Act - By deleting Second Proviso to section 43B by Finance Act, 2003, it cannot be said that Section 36(1) (va) is amended and/or explanation below clause (va) of sub-section (1) of section 36 is deleted, which is with respect to employees' contribution - See COMMISSIONER OF INCOME TAX II Versus GUJARAT STATE ROAD TRANSPORT CORPORATION (2014 (1) TMI 502 - GUJARAT HIGH COURT)- additions confirmed - Decided in favour of Revenue. Disallowance u/s 40(a)(ia) - Held that:- Disallowance by invoking provisions of Section 40(a)(ia) of the Act ignoring the fact that relevant TDS was deposited by the assessee prior to due date of filing of return of income. This is a legal contention raised by the assessee before us. Since the issue was not pressed before the CIT(A), so he did not pass any order on merits on this issue. Therefore, in the interest of justice, we restore this issue to the file of the CIT(A) and direct him to decide this issue after providing due opportunity of hearing to the assessee. 2016 (5) TMI 458 Sale of shares/mutual funds - STCG and LTCG OR business income - Held that:- We are not inclined to interfere with the order of the CIT(A) who has rightly directed the Assessing Officer to accept the impugned amounts returned by the assessee under the head the head Long Term Capital Gain and Short Term Capital Gains - Decided against revenue 2016 (5) TMI 457 Disallowance u/s 37(1) - additional payment in violation of Stamp Duty Act, 1899 - Held that:- Since the material issue is that the said payment was never claimed by the assessee as business expenditure, the occasion to make a disallowance of the same does not arise. There is no dispute on the fact that the expenditure was not claimed as an expense by the assessee. In the circumstances, the occasion to make an addition of the same by way of a disallowance does not arise. Accordingly, we hold that the disallowance of ₹ 875,000/- on account of additional payments was wrongly made by the Assessing Officer. Moreover, the partial sustenance of this addition by the Ld. CIT (A) is also incorrect and is liable to be deleted for the reason aforesaid. Hence, this ground of appeal of the Department is also rejected.Section 40A(3) of the Act has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed. - Decided in favour of assessee Deemed dividend addition u/s 2(22) - Held that:- The assessee company is not a registered shareholder of the payer companies who have advanced loans to the assessee company. Thus we hold that the amount is not taxable as deemed dividend in the hands of the assessee company u/s 2(22)(e) of the Act as the assessee company is not a shareholder of the payer companies - Decided against revenue Customs 2016 (5) TMI 504 Import of construction sand - Writ jurisdiction of High Court - entire sand has been released pursuant to the order passed by the High Court. Whether the Plant Quarantine Order is applicable or not, or whether all the legislations that the Division Bench said are applicable or not should not have been gone into by the High Court in exercise of jurisdiction under Article 226 of the Constitution of India. Be that as it may, as there is no fresh import and as the sand is not there, we keep the question of law open and observe that the High Court should be extremely circumspect while dealing with a writ petition against the notice issuing show cause. 2016 (5) TMI 503 Cancellation of bail - appellant herein, who is an under-trial, in criminal case registered against the appellant and others under Sections 132 and 135 of the Customs Act - Held that:- when the appellant had not violated any of the bail conditions, allowing the application for cancellation of bail after one year and three months, may not be appropriate. - even otherwise it would be a fit case for grant of bail to the appellant at this stage. - We, thus, enlarge the appellant on bail on the same conditions on which it was granted by the Trial Court. 2016 (5) TMI 502 Invokation of Section 113 (d), 113 (II) of Customs Act, 1962 - Confiscation of goods and imposition of fine and penalty under Section 114 (II) - Two types of goods exported viz., Goat wax coated upper finished leather and Goat shoe suede finished leather. Goods alleged to have not satisfied the norms for Finished goods - Appellant contended that in absence of few processes it would not mean that the leather to be exported was not finished leather. Two processes had not been done on the goods viz., “wax coating” and “finishing coat”, therefore it had cured this deficiency by re-processing these goods. Also the goods have been exported. Held that:- By following the ratio laid down in the Tribunal's order in the case of M/s. Expos Leather Company Vs. CCE, Chennai [2010 (4) TMI 1112 - CESTAT CHENNAI] as upheld by the jurisdictional High Court, the impugned order imposing fine and penalty is set aside. - Decided in favour of appellant with consequential relief 2016 (5) TMI 501 Whether clothes seized by the department were meant for export to Nepal illegally - the evidences that seized goods were meant for export, are the statements of the driver of vehicle and the helper. These statements, as brought out in the SCN, convey that goods were to be taken to Nepal through bullock carts and that goods of similar nature were brought regularly and transported to Bargania by them at an average of 12-15 times a month. Held that:- in SCN it is stated that articles of clothes were meant for Nepal. The evidences of both the driver and the helper are hearsay evidences without any corroboration and authenticity. It is not on record as to from where the driver & helper got the conviction that seized goods were to be sent to Nepal and whether on earlier occasions they had taken similar consignments of clothes to Nepal. On the contrary, the documents produced by the owner of seized clothes regarding licit acquisition of seized goods were not at all investigated by the department. So, in the absence of any other corroboration, the statements of co-accused driver and helper cannot be made the clinching evidences to decide the case against the appellants. There is also no evidence on record whether the seized goods were actually moving towards the border. Rather as per the statements of the driver and the helper also the goods were being taken to Bairgania where claimant M/s. Shyam Trading Company is doing trading in clothes. In the light of relied upon case laws it cannot be held that there was any attempt to export seized clothes. Therefore, the department has failed to establish that the goods seized from truck were meant for illegal export to Nepal. - Decided in favour of appellants with consequential relief 2016 (5) TMI 500 Procedure for search, disposal or destruction of the narcotics and the remedial steps that need to be taken to plug the loopholes, if any. - Apex Court issued the directions as: (1) No sooner the seizure of any Narcotic Drugs and Psychotropic and Controlled Substances and Conveyances is effected, the same shall be forwarded to the officer-in-charge of the nearest police station or to the officer empowered under Section 53 of the Act. The officer concerned shall then approach the Magistrate with an application under Section 52A(ii) of the Act, which shall be allowed by the Magistrate as soon as may be required under sub-section (3) of Section 52A, as discussed by us in the body of this judgment under the heading seizure and sampling . The sampling shall be done under the supervision of the Magistrate as discussed in Paras 13 and 14 of this order. (2) The Central Government and its agencies and so also the State Governments shall within six months from today take appropriate steps to set up storage facilities for the exclusive storage of seized Narcotic Drugs and Psychotropic and Controlled Substances and Conveyances duly equipped with vaults and double locking system to prevent theft, pilferage or replacement of the seized drugs. The Central Government and the State Governments shall also designate an officer each for their respective storage facility and provide for other steps, measures as stipulated in Standing Order No. 1/89 to ensure proper security against theft, pilferage or replacement of the seized drugs. (3) The Central Government and the State Governments shall be free to set up a storage facility for each district in the States and depending upon the extent of seizure and store required, one storage facility for more than one districts. (4) Disposal of the seized drugs currently lying in the police maalkhana and other places used for storage shall be carried out by the DDCs concerned in terms of the directions issued by us in the body of this judgment under the heading disposal of drugs . 2016 (5) TMI 499 Revocation of CHA licence and forfeiture of security deposit - Seizure of Red Sanders Wood Logs - alleged involvement in documentation in respect of consignment of Red Sanders Wood Logs attempted to be exported which is prohibited and not allowed for export - Held that:- it is absolutely clear that documents was forged and last page of declaration which appears the signature is not signed by the appellant or his partner for the purpose of clearance of Red Sanders Wood Logs. This made very clear that documents which is used for clearance of Red Sanders Wood Logs has not been signed by the appellant or his partner or any other authorized person. It is also apparent on record from the entire proceedings that the documents was forged which was submitted by Shri Shailesh Bhanushali on his own and who was not authorized to submit the documents. Even CMC staff has also made serious mistake in accepting the documents from an unauthorized person which resulted into serious offence of attempted smuggling. From enquiry and statement of Shri Parvez Irani, it clearly appears that Shri Shailesh Bhanushali on his personal capacity colluded with the exporters for clearing the Red Sanders Wood Logs and from entire modus operandi which he has adopted, it is found that appellant or his partner is nowhere concerned either in the preparation of the documents or submission thereof. It is also found that there is allegation on the appellant for non-compliance of the Facility Notice No. 41 of 2009, dated 10-7-2009 and Public Notice No. 10/2010, dated 3-2-2010 according to which CHA is supposed to check and verify online the shipping bills filed in their name, so that if such forged shipping bill is filed, the same can be detected and smuggling of Red Sanders Wood Logs could be avoided. In this regard, we agree with submission of the appellant that at material time details of only those shipping bills which are filed online would be available. In the present case shipping bill was filed at the CMC for which Thoka Number is required without which CHA would not know that such shipping bill was filed, this because Customs House EDI system did not give the list of shipping bills which are filed at the Service Centre, only those shipping bills filed online get displayed on the system during the relevant period. Since the documents filed without knowledge of the appellant, the shipping bill has not been reflected in the system. This explanation given by the appellant was found satisfactory. Even if it is assumed that there is failure on the part of the appellant regarding non-compliance of facility notice and public notice that they have not checked filing of said Shipping Bills online, that alone does not suggest that appellant was involved in the documentation or in clearance of attempted smuggling of the goods. The charges have been proved only on the basis of statement of Shri Shailesh Bhanushali which is unauthorized employee and he was not authorized to file any documents and the documents was also forged and there is no corroborative evidence to support the statement of Shri Shailesh Bhanushali. Moreover Shri Shailesh Bhanusftali has subsequently changed his statement in examination and re-examination that filing of forged documents to the CMC was not known to the appellant. Therefore, the appellant is nowhere involved in the alleged smuggling or submission of forged document related thereto or abetted to the said offence. The impugned order revoking the CHA Licence is not legal and proper. - Decided in favour of appellant 2016 (5) TMI 498 Period of limitation - Refund claim - Filed beyond the time limit prescribed as per Notification No. 93/2008-Cus., dated 1-8-2008 - Held that:- it is observed that the appellant has filed refund claim under Notification No. 102/2007-Cus., dated 14-9-2007 wherein no time has been prescribed for filing refund claim. Therefore, the rejection of refund claim as time-barred is unsustainable and the impugned order is set aside. - Decided in favour of appellant with consequential relief Corporate Laws 2016 (5) TMI 495 Scheme of Amalgamation - Held that:- Scheme of Arrangement in the nature of amalgamation at Exhibit “C” of the petitions is sanctioned. The prayers made at paragraph11( a) in both the petitions are granted. The petitioners are directed to pay costs of ₹ 7,500/each to Mr.Devang Vyas, learned Assistant Solicitor General of India and the PetitionerTransferor Company is directed to pay costs of ₹ 7,500/to the office of the Official Liquidator. Service Tax 2016 (5) TMI 515 Scope of negative list u/s 66D(1) - educational services - Revenue Sharing agreement - Partnering Agreement to combine their mutual areas of expertise for the setting up and operation of an educational institution - the entire revenue relating to the school will be received in a joint account operated by the applicant and Choice Foundation jointly and revenue share would be drawn from this account by the applicant and Choice Foundation. Held that:- with regard to pre-school education and education up-to higher secondary school or equivalent, the “partnering person” would come under the Negative List and would not be liable to Service Tax. Regarding construction service where the entire consideration is received after issuance of completion certificate - Held that:- the construction of complex etc., in this case will not come under the ambit of declared service and not be liable to Service Tax. Renting of Immovable Property. Regarding renting of premises - Held that:- the applicant, Choice Foundation and “partnering person”, are all 3 separate persons under Section 65 B (37) of the Finance Act, 1994. Therefore, service of providing of renting of immoveable property by applicant to “partnering person” will not be “self service”. The consideration for renting said property would be received as per the “Revenue Share” clause in the said Agreement. Therefore, renting of immoveable property would be liable to Service Tax. a) Service Tax is applicable on the revenue share relating to the applicant to the extent it is relatable to rendering of taxable service. - b) Service Tax is applicable on the revenue share relating to Choice Foundation to the extent it is relatable to rendering of taxable service. - c) Service Tax is not leviable on the fees collected from the students to the extent it is covered under the Negative List in terms of Section 66D (l) of the Finance Act, 1994. - d ) Service Tax is payable by a person providing taxable service in terms of Section 68(1) of the Finance Act, 1994. Therefore, in this case, Service Tax will not be payable by the students, as they are not providing any service. 2016 (5) TMI 514 Delay in filing of appeal before the Commissioner(Appeals) - the order-in-original was passed by the Assistant Commissioner of Central Excise and Service Tax, Jamshedpur on 28.8.2015 and was issued on 17.09.2015 and was sent on 18.09.2015. - Held that:- looking to the provision of Section 85 (3A) of the Finance Act, 1994 the period to prefer an appeal is 2 months from the date of receipt of the Order-in-Original and there is a further period of 1 month for which a delay can be condoned. In the facts of the present case the appeal was preferred by this petitioner on 19.11. 2015. Thus, this petitioner can prefer appeal with a delay condonation application along with the appeal against the Order-in-Original and the same will be decided by the Commissioner (Appeals) on its own merits, looking to the date of receipt of the Order- in-Original. This aspect of the matter has not been properly appreciated by the Commissioner(Appeals) while rejecting the appeal preferred by this petitioner - Matter restored before the Commissioner (Appeals) to decide the issue. 2016 (5) TMI 513 Challenge to the recovery notices without challenging the order-in-original - service tax was collected but not paid - Held that:- without challenging the original order dated 28.02.2007, the petitioner cannot challenge the consequential order dated 04.04.2016 and it could be seen that the petitioner did not pay the amount in spite of repeated reminders sent by the respondents. - Writ petition dismissed - Decided against the assessee. Central Excise 2016 (5) TMI 512 Validity of Tribunal's order - Expand of scope of the appeal - Appellant submitted that Tribunal committed a grave error in expanding the scope of the appeal. The Department never served copy of the show cause notice to the appellant company and there was no proposal under the show cause notice of any tax or penalty against the appellant, therefore, the Tribunal could not have expanded the scope of the show cause notice by including the appellant company within the sweep of such proceedings. Department submitted that appellant company and the noticee were one and the same entities and the appellant company is dummy of the noticee company. It was therefore not necessary to hear the appellant separately before taking final decision of appropriation of the duty amount. Held that:- the show cause notice, was issued against the original noticee company and there was neither any proposal against the appellant company nor a copy was served to the appellant. Under the circumstances, by supplying a mere copy thereof, the Department cannot initiate proceedings against the appellant. In any case, it was neither the duty nor the authority of the Tribunal to direct so. If, after the Tribunal found that no order adverse to the appellant company could have been passed without a hearing, the Department was inclined to initiate the proceedings against the appellant, it had to take its own decision and issue notice, if even otherwise permissible in law, particularly having regard to the period of limitation prescribed. At any rate, the Tribunal could not have directed the Tribunal to do so and further, such requirement would not be fulfilled by mere supply of a copy of notice in case of another entity. Hence the contention that the appellant, being the dummy of the original noticee, no such separate notice or hearing was needed, simply begs the question. Whether the appellant was dummy or not is a central question and cannot be decided without full participation of the alleged dummy. - Decided in favour of appellant 2016 (5) TMI 511 Manufacturing of Sada pan masala - Capacity Determination and Collection of Duty - Petitioner submitted its declaration on 27.1.2015 wherein the maximum capacity for operation of the packing machine in relation to packing of notified goods was “upto 700 pouches per minute - Held that:- the petitioner at its own declared the production speed of the packing machine upto 1000 pouches per minute, but that was the maximum capacity and that appears to be reduced on 28.2.2015 and on the basis of that necessary alterations were made. The alterations made were noticed by the Superintendent (Technical) who also find that the packing machine now cannot produce more than 700 pouches per minute. The machine, if was not in a condition to pack the pouches more than 700, then the determination of duty for higher quantity is apparently bad. In view of it, we are of the opinion that the respondents should have determined duty by taking into consideration the production speed of the machines in-question as 700 pouches per minute only. Hence, the impugned order is set aside and the respondents are directed to re-determine the duty in accordance with the findings arrived at by this Court. - Decided in favour of petitioner 2016 (5) TMI 510 Validity of Tribunal's order - Non-speaking order passed - Held that:- the rest of the order is the submission of the parties only. We are not persuaded to assume the jurisdiction of the Tribunal all over again contrary to Section 35G of the Act. Therefore, the order dated 1-8-2014 in its present form is held to be unsustainable as non-speaking and cryptic. It is set aside and the matter is remanded to the Tribunal for passing a reasoned and speaking order displaying complete application of mind to the facts, issues involved, the findings of the previous authorities along with the reasoned conclusions of the Tribunal. Nothing in the present order can be deemed or construed as any opinion or observation on merits of the matter with regard to either of the parties as the matter is remanded limited on the question of Tribunal having passed a completely non-speaking order displaying non-application of mind hindering judicial review to even ascertain that a law of question was involved. - Decided in favour of appellant 2016 (5) TMI 509 Seeking direction to CESTAT to decide the restoration appeal as well as the stay application, expeditiously, and till then, recovery may not be initiated against the petitioner - Appeal was dismissed for not availing permission from the Committee of Disputes and after getting permitted the restoration application filed - Petitioner submitted that in case recovery is made without considering the stay application of the petitioner, it shall suffer irreparable loss - Held that:- in case the petitioner files a fresh application for early hearing of the restoration application, as well as the stay application, before the CESTAT, the same shall be considered and decided as expeditiously as possible and preferably within six weeks from the date of filing of the applications - Writ petition disposed of 2016 (5) TMI 508 Clandestine removal of goods - Clearance of goods without issuance of bills - Excess stock found lying in the factory - Confiscation of seized goods - Release of goods on issuance of bank guarantee - Tribunal held that the investigating officers failed to comply with the conditions of Section 36B of the Act in respect of relying upon this computer print out. There is no adequate material available on record to establish the clandestine removal of goods, so the demand of duty solely on the basis of these materials cannot be sustained. Also, as the clearance value was within the SSI exemption, the confiscation of the goods cannot be sustained. and the imposition of penalties are not warranted reported in [2015 (3) TMI 825 - CESTAT AHMEDABAD] - High Court by relying on the decision of this court in the case of The Commissioner of Central Excise And Customs, Surat- 2 Versus Ambica Organics [2016 (1) TMI 390 - GUJARAT HIGH COURT], disposed of the appeal. - Appeal disposed of 2016 (5) TMI 507 Territorial jurisdiction - Petitioner pleaded that having already been assessed to Sales Tax and having paid the entire dues for its operations in the State of Orissa, the Commissionerate at Bilaspur, Chhattisgarh has no jurisdiction to assess the petitioner once again for its operations in the State of Orissa - Held that:- the petitioner having raised the issue of jurisdiction and also for the reason that if the petitioner is coerced to pay tax for its operations in the State of Orissa twice, it may amount to double taxation, this Court is inclined to issue notice to the respondents. - Matter listed on another date 2016 (5) TMI 506 Imposition of penalty - Determination of cost of compressor and assessable value - Tribunal [2006 (7) TMI 665 - CESTAT NEW DELHI] held that appellant had kept the Department in the dark of the true value of their products-both excisable and exempted and the items in question did not reflect their actual value is, therefore, acceptable in toto. Therefore, the penalty is imposable - Apex court has set aside the impugned order remanded back to the Commissioner/Adjudicating Authority to decide the matter afresh in view of earlier decision in ‘CCE v. Frick India Ltd.’ as reported in [2007 (9) TMI 6 - SUPREME COURT OF INDIA] CST, VAT & Sales Tax 2016 (5) TMI 497 Entitlement to composite/concessional rate of tax under the Notification dated 8 March 2000 - Works contract Act - Whether the contracts of construction of glass curtain wall executed by the applicant would constitute contracts for construction of buildings mentioned in para A of the above Notification issued for the purpose of section 6A(1) of the Works Contract Act or would it constitute contracts incidental for ancillary to the contracts mentioned in paragraph B of the said Notification. Held that:- the term “construction of buildings” would not involve the fixing of glass walls. Since the Applicant is seeking a lesser rate of tax, the burden is on the Applicant and the provisions of the Notification dated 8 March 2000 have to be construed strictly. The word “construction” and the word “building” are not defined in the Act and are to be read in the context of their ordinary meaning. The work of fixing glass to a building in our view can in no manner said to be an activity which is covered under Notification dated 8 March 2000. The fabricated structural glazings prepared by the Applicant are transported to the site by the Applicant and affixed on the exterior portion of the building, which building is constructed by the building contractor who is a third party. There is no dispute that Applicant is not a building contractor, in that, it is not in the business of construction and erection of buildings. The activity of affixing glass and erecting glass walls with aluminium frame work requires an altogether different expertise, and is ordinarily sub-contracted by the building contractor. The contention that some of the walls in the building are not required to be constructed by laying bricks and they are substituted by affixing the glass would not carry the case of the Applicant further. We are also unable to accept the contention that the work of the Applicant would be covered under the term “incidental or ancillary activity to the construction of the building” as that would have to have a direct nexus to the construction of the building itself. Therefore, the alternative argument that the contract would get covered by paragraph B of the said Notification which includes incidental or ancillary contract to the contract of construction also cannot be accepted. What meaning is to be attached to the word “building” as mentioned in the Notification would have to be determined considering the facts and circumstances of each case. In our view, the reliance on the definition of 'building' in the Regulation 2(3)(11) of DCR is misplaced and would not assist the Applicant in any manner. That definition is in the context and purposes of DCR and cannot be imported and applied in the facts and circumstances of the present case. Therefore, the contracts of construction of glass curtain wall executed by the Applicant would not constitute contracts for construction of buildings mentioned in para A of the Notification dated 8 March 2000 issued for the purpose of section 6A(1) of the Works Contract Act nor would it constitute contracts incidental for ancillary to the contracts mentioned in paragraph B of the said Notification. - Reference disposed of 2016 (5) TMI 496 Seeking release from attachment of properties, movable and immovable, impounded items, stock of goods and bank accounts - Attached by virtue of provisional assessment orders made under Section 45 of the GVAT Act, 2003 - Petitioner submitted that the seized stock consists of goods which are perishable in nature and that part of the goods have already perished. The perishable stock, therefore, directed to be released and the attachment made on the bank account of the petitioners may also be lifted. Held that:- since it appears that on preliminary investigation made in the case of the petitioners by the respondents, the estimated tax liability of the petitioners is tax of ₹ 2,59,920/- and penalty of ₹ 5,07,61,026/- under the provisional attachment order dated 22.2.2016 and tax of ₹ 12,73,586/- and penalty of ₹ 5,22,82,724/- under the provisional attachment order dated 19.4.2016. While a larger figure of ₹ 398.88 crores is also stated, such liability is stated to be the joint and several liability of all concerned in the alleged scam. No basis is stated for arriving at such figure in the said orders. Investigation and inquiry is still underway, and at this stage there is no assessed liability. Therefore, by considering the total estimated liability qua the petitioners upon preliminary investigation in their case, attachment of the movable and immovable properties of the petitioners is sufficient to secure such amount. Therefore, the court is inclined to grant ad-interim relief to the petitioners at this stage. The respondents are hereby directed to lift the provisional attachment made on the bank accounts of the petitioners as well as to delete the condition for maintaining stock to the extent referred to in the orders dated 19.04.2016 and to permit the petitioners to dispose of the perishable goods. The respondents shall also provide the copies of the impounded items to as expeditiously as possible. Direct service is permitted. - Interim relief granted Indian Laws 2016 (5) TMI 505 Seeking modification in sentence order - Seizure of poppy husk - Appellant relied upon the statements given by the accused persons under Section 313 of the Code of Criminal Procedure, 1973 wherein they had pleaded innocence and had stated that they had been falsely implicated Held that:- once credible evidence has come on record which establishes the guilt of the appellants beyond reasonable doubt, mere statement of the accused person under Section 313 of the Code of Criminal Procedure, 1973 would be of no help to the accused person. It is found that the rigorous imprisonment for 10 years which is awarded by the Trial Court and affirmed by the High Court is the minimum sentence that can be awarded for the offence under Section 15 of the NDPS Act. Therefore, no merit found in these appeals. - Decided against the appellant 2016 (5) TMI 494 Offense punishable under Section 138 r/w. 141 of Negotiable Instruments Act - Petition was not the Director as the time of presentation of cheque since the resignation was tendered - Held that:- When the correctness of the contents of Form No.32 that the Petitioner has tendered her resignation on 1st January 2013 is disputed and when averments in the complaint are, prima facie, sufficient to prove involvement of the Petitioner in the alleged offence, the inherent powers of the High Court under Section 482 of Cr.P.C., which are to be invoked sparingly and in exceptional circumstances, could not be exercised in the instant case to quash the prosecution initiated against the Petitioner. If the relevant date for attracting vicarious liability of the Director under Section 141 of the Negotiable Instruments Act is, “at the time the offence was committed”, then, as the offence of Section 138 of Negotiable Instruments Act comprises of all these essential acts, majority of these acts in the present case, like the transaction in question and issuance of cheques took place when the Petitioner was very much Director of the Company. Hence, she cannot escape of the liability from this angle also. In this view of the matter, it cannot be said that the Petitioner was not the Director when the offence was committed. Once this is so, she cannot avoid facing prosecution only on the ground of her having ceased to be the Director, when the last few acts of presentation of the cheque to the Bank and its dishonour took place. Therefore, having regard to all the facts, this Court is of the considered opinion that, the Petitioner has failed to make out the case for quashing of process issued against her for the offence punishable under Section 138 read with Section 141 of Negotiable Instruments Act
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