TMI Tax Updates - e-Newsletter
May 14, 2015

Case Laws in this Newsletter:

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

Articles

• TAX APPEAL IS NOT A ‘LIS’

News

• RBI Reference Rate for US $

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• Approval to amend the Benami Transactions (Prohibition) Act, 1988

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• Approval for Permitting 100 percent equity divestment after two years of construction completion for all BOT projects

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• Indirect Tax Revenue (Provisional) Collections Increase from ₹ 32,661 Crore in April 2014 to ₹ 47,747 Crore During April 2015;

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• SIT Recommends making Tax Evasion a Crime

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• Claim of Undue Tax Exemption by Private Companies

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• Directorate of Criminal Investigation (DCI)

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• Income Tax Related Public Grievances

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• Tracking of High Value Transactions by Income Tax Department; Additional Tax of ₹ 4733.61 Crore Collected and 30,68,662 New Returns Filed due to Non-Filer Monitoring System (NMS)

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• Direct Taxes worth ₹ 6,95,988 Collected Druing 2014-15; Direct Taxes Contribute more than 56% to total Central Taxes During 2013-14 and 2014-15

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• Existing Posts in the Competition Commission of India; SC/ST Employees of CCI

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Notifications

SEZ

• S.O. 1051(E) - dated 13-4-2015 - SEZ
  Set up a sector specific Special Economic Zone for Engineering and related industries (formerly, light engineering including automotive/automotive components ) at Kalwara, Bhamboriya, Bagru Khurd and Jhai Village, Tehsil Sanganer, District Jaipur, in the State of Rajasthan

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Circulars / Instructions / Orders

FEMA

• Circular 1 of 2015 - dated 12-5-2015
  Consolidated FDI Policy

Highlights / Catch Notes

Income Tax

• Disallowance of the claim u/s 80IB(10) - project completed in part - merely because the assessee had not completed the building No.D within prescribed time under the provisions of Act, the deduction under section 80IB(10) could not be denied in entirety. - AT
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• Disallowance u/s 43B - vend fee outstanding as a liability payable to the Government of Kerala as on the last day of the accounting year - it would be a 'fee' by 'whatever name called' - to be allowed only on actual payment - SC
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• TDS on wheeling and transmission charges - use of transmission lines or other infrastructure i.e. plant, machinery and equipment - The focus of the revenue is only the requirement of deduction of tax whether under Section 194I or Section 194J - This approach is erroneous - HC
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• TP Adjustments - The considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done.- HC
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• Demand notices u/s 156 - requirement of deposit during the pendency of appeal - petitioner had already deposited 50% of the tax demand - assessee may not be treated as assessee in default. - HC
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• If the Assessing Officer has raised same issue it has not made any addition then the CIT(A) cannot picked up this issue making further disallowance and enhancement without adopting due opportunity of hearing of the assessee by simply holding that no details or evidence have been filed. - AT
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• Disallowance of the service tax payable under section 43B - since the assessee did not debit the amount to the P&L account as an expenditure nor did the assessee claimed any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting the question of disallowance of deduction not claimed could not arise - AT
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• Deduction u/s 80IB - allocation of expenses, from Head Office - even if the assessee has made some allocation in the present year, it has to be seen that such allocation is in line with the allocation made in earlier years as per the direction of the Tribunal. - AT
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• Nature of expenditure relating to loan - Processing charges and other expenses incurred by the assessee in connection with the loan borrowed, thus, are to be considered in the nature of interest as per the definition given in section 2(28A) - AT
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Customs

• CHA - Suspension of custom clearance license - the authority issuing the charge sheet/show cause notice, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in the present case, the entire proceeding initiated by the show cause notice gets vitiated by unfairness and bias and the subsequent proceedings become an idle ceremony - HC
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Service Tax

• Waiver of pre-deposit - Tribunal in the case of appellant ordered to deposit entire amount of service tax with interest except penalty - in a similar case stay was granted for entire demand - the interim benefit had been granted to another party, would not itself be a ground for review, as such - HC
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• Refund claim - while making e-payment, the petitioner company has wrongly mentioned its assessee code wherein one letter viz., "J" has been wrongly mentioned instead of "H" - admittedly, the petitioner has made the payment twice - HC
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• Indian subsidiary providing marketing support services for the products manufactured outside India - AAR held that service is not taxable in India - The Commissioner cannot be permitted to now turn around and challenge the said order which was passed by the Authority on the basis of his own statement - HC
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Central Excise

• Classification of fixed dos combination of Vitamin B-1, B-6 and B-12 injectible as well as tablets form - goods in question would be classified under Heading 3003.10 - SC
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• Denial of CENVAT Credit - Service tax paid on the invoices raised by the C&F agents on GTA outward transportation - credit allowed - AT
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Case Laws:

• Income Tax

• 2015 (5) TMI 402
  Rejection of books of accounts by AO - Held that:- Assessing Officer was right in rejecting books u/s. 145(3) since assessee has not maintained any stock register/production register and books of accounts were incomplete. There was discrepancy in figure of sale/purchases furnished by assessee at the time of survey and furnished during course of assessment proceeding. Assessing Officer has pointed out the defects in maintenance of books of accounts. The argument of assessee that books of accounts could not be completed since it was middle of the season has no force. Assessee has maintained inward/outward register, souda books and bill books. There was no difficulty in maintaining the books of accounts. Assessee not having completed the books on regular basis has resulted in difference in data furnished during survey and subsequently during assessment proceedings. Assessee is expected to complete books of account on regular basis, which has not been done in this case. In view of discrepancy pointed out by Assessing Officer, books of account of assessee were not reliable. He has rightly rejected the books of account u/s. 145(3). This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. - Decided against assessee. Addition for the alleged low G.P. - Held that:- AO has computed gross profit rate of various items dealt with by assessee on the basis of records of assessee, norms of industry and statement of main partner of assessee firm. He then applied gross profit rate so computed on sale of various items to compute gross profit rate of assessee. The sale figures given by assessee during assessment proceedings were adopted by Assessing Officer. Gross profit computed by Assessing Officer is ₹ 37,24,780/-. After reducing gross profit declared by assessee amounting to ₹ 17,61,483/-. Assessing Officer made addition of ₹ 19,63,297/- on account of low gross profit rate. Under facts and circumstances, CIT(A) was justified in upholding the rejection of books of accounts as discussed above and having done so, CIT(A) was justified in sustaining addition of ₹ 19,63,297/- made on account of low gross profit rate - Decided against assessee. Addition on account of sales of cattle feed - CIT(A) deleted the addition - Held that:- As regards the addition of ₹ 21,150/- and ₹ 1,23,021/-, CIT(A) observed that these sales have been recorded in books of account produced during assessment proceedings and Assessing Officer has already taken into account sales disclosed by assessee during assessment proceeding for making gross profit addition. Therefore, addition on account of these sale should not be made. As regards addition of ₹ 4,49,682/-, CIT(A) observed that these sales pertained to M/s. Raghuvir Cotton Co. and have been included in turnover of said concern. Since said concern has filed separate return of income Assessing Officer was not justified in making addition assessee’s hands. Accordingly, addition of ₹ 5,93,853/- was rightly deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference from our side. - Decided against revenue. Unaccounted purchase of Kapas Shanker - CIT(A) deleted the addition - Held that:- Assessing Officer has chosen not to accept purchase account in which quantity record have been made. It was also stated on behalf of assessee that all purchases so recorded were duly supported by purchase bills and were in agreement with the data contained in impounded books and there was no reason that same be treated as unaccounted. In this background, CIT(A) rightly observed that these purchases are accounted for. Assessing Officer has not mentioned anything in remand report against arguments of counsel. Accordingly, CIT(A) rightly accepted the contentions of assessee and where rightly deleted addition of ₹ 1,23,987/- on account of purchase of Kapas Shanker. This factual finding of CIT(A) needs no interference from our side. - Decided against revenue. Unaccounted purchase of Shankar Kapasiya (cotton seeds) - CIT(A) deleted the addition - Held that:- CIT(A) observed that purchases recorded in X-13 pertain to assessee firm and associate concern M/s Raghuvir Cotton Co. The associate concern has filed return of income independently showing these transactions. Return of same has been accepted. Assessing Officer has not mentioned anything in the remand report against the plea of assessee. In this background, CIT(A) rightly observed that purchases recorded in X-13 and X-26 are identical. Assessing Officer has not given any adverse opinion on the point in remand report. Moreover Assessing Officer made addition of the entire purchases which was not correct. At best addition of the peak amount can be made. In view of this, CIT(A) deleted addition of ₹ 71,89,691/-. This factual finding of CIT(A) needs no interference from our side. - Decided against revenue. Unaccounted purchase of Kalyan Kapas - CIT(A) deleted the addition - Held that:- CIT(A) having considered arguments of assessee and observations of Assessing Officer and remand report of Assessing Officer observed that Assessing Officer has made this addition on the basis of figures given by assessee during survey while he has made gross profit addition on the basis of sale figures given by assessee at the time of assessment proceedings. In this background, Assessing Officer was not justified in making this addition and same was rightly deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference - Decided against revenue. Unaccounted sale of cotton. bales - CIT(A) deleted the addition - Held that:- The stand of assessee has been that Assessing Officer can add the profit element on sale of such goods since sales were accounted. The amount of sale difference cannot represent the income of assessee, who has disclosed the sale. CIT(A) having considered the argument of assessee and observation of Assessing Officer found that sale of cotton bales is out of accounted stock and at best profit can be added and not entire sale. Accordingly, Assessing Officer is directed to compute profit on sale of cotton bales and make addition of profit on sale of cotton bales and not entire sale. This reasoned factual finding of CIT(A) needs no interference from our side - Decided against revenue. Unaccounted sale of kala - CIT(A) deleted the addition - Held that:- CIT(A) having considered arguments observed that Assessing Officer has not accepted the contention of assessee on the ground that impounded book X-13 belongs to assessee and transactions recorded pertained to assessee alone. Assessee on other hand has mentioned during survey itself that it is not dealing in Kala and the associate concern M/s. Raghuvir Cotton was dealing with the same. Moreover, the sale of kala has been reflected in the transactions of associate concern for which return has been filed. Assessing Officer has not pointed out anything adverse in the remand report filed by Assessing Officer. In this background, CIT(A) rightly observed that addition made by Assessing Officer by clubbing the income of M/s. Raghuvir Cotton Co. was not justified and same was rightly directed to be deleted - Decided against revenue. Unexplained stock difference - CIT(A) deleted the addition - Held that:- CIT(A) having considered the observations of Assessing Officer and arguments of assessee found that assessee was right in arguing that Assessing Officer has already made addition of gross profit of various items. Same addition can not be made again. Accordingly, same was deleted by CIT(A). This reasoned factual finding of CIT(A) needs no interference from our side - Decided against revenue. Disallowance of unpaid sales tax u/s. 43B - CIT(A) deleted the addition - Held that:- Assessing Officer has made addition on the ground that entire procedure has not been followed and only certificate issued by the District Industry Centre was filed and certificate issued by sales tax authority was not furnished. Stand of assessee has been that this certificate was never called for by Assessing Officer and has enclosed the certificate issued by sales tax authority during appellate proceedings. CIT(A) having considered the same observed that Assessing Officer has made addition of this amount on the ground that assessee did not produce required certificate in Form D issued by sales tax Authority. The certificate has been produced by assessee during appellate proceedings since it was not called for during assessment proceedings. In remand report, Assessing Officer has not commented on certificate which shows that he as nothing to say on the point. Since assessee fulfilled the conditions as prescribed in this regard. Assessing Officer was not justified in making addition of unpaid sales tax liability. Same was rightly deleted by CIT(A). - Decided against revenue. Unexplained cash credits - Held that:- CIT(A) observed that assessee has failed to file confirmations and also failed to produce the creditors to establish the genuineness of cash credits. Accordingly, addition made by Assessing Officer of ₹ 4, 61,445/- as unexplained cash credit was rightly confirmed by CIT(A), which needs no interference from our side. - Decided against assessee.

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• 2015 (5) TMI 401
  Disallowance of the claim u/s 80IB(10) - assessee had claimed the deduction under section 80IB(10) of the Act against the sale proceeds of residential project ‘Daffodil Avenue’ - Held that:- As relying on Siddhivinayak Kohinoor Venture Vs. ACIT [2013 (10) TMI 1295 - ITAT PUNE ] merely because the assessee had not completed the building No.D within prescribed time under the provisions of Act, the deduction under section 80IB(10) could not be denied in entirety. The assessee is entitled to the prorata deduction under section 80IB(10) of the Act in respect of building Nos.A, B and C which have been constructed as per the conditions laid down in section 80IB(10) of the Act. Reversing the order of CIT(A), the Assessing Officer is directed to allow the prorata claim of assessee under section 80IB(10) of the Act in respect of building Nos.A, B and C. Thus, the grounds of appeal raised by the assessee are allowed.

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• 2015 (5) TMI 400
  Penalty u/s 271(1)(c) - Tribunal has deleted first enhancement made by the ld. CIT(A) and restored the issues in respect of remaining three enhancements to the AO for a fresh consideration - Held that:- there can be no question of sustaining any penalty, at this stage, on the enhancements so made. There can be no penalty on the amount of enhancement deleted by the tribunal. On the enhancements restored to the AO, the question of penalty can be examined only by the AO pursuant to the making of fresh assessment. The impugned order is set aside and the instant penalty on such restored issues is sent back to the AO for taking an appropriate decision after the finalization of the fresh assessment pursuant to the tribunal order. - Following decisions of Mohd. Mohatram Farooqui vs. CIT [2010 (2) TMI 1122 - SUPREME COURT] and Sanjay Gupta vs. CIT [2014 (5) TMI 860 - DELHI HIGH COURT] - Decided in favour of assessee.

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• 2015 (5) TMI 399
  Disallowance of prior period expenses - CIT(A) allowed part relief - Held that:- Material Bills were correctly disallowed as the details of the amounts were examined and it was noted that these expenses relate to purchase of material etc. As these expenses should have been accounted for on a mercantile basis in year in which these were incurred, the same cannot be allowed as a deduction in the current year. Service Bills received in the current year for services rendered in the previous years. Since the service bills have been received in this year, the expenditure is allowable in this year. Thus, addition of ₹ 15,693 is deleted. Expenses of Previous years settled during the current year directed to be allowed as deduction as he settlement of dispute has taken place in this year, the amount is allowable as a expenditure in this year itself. Expenses on duty drawbackexcess credit was made earlier the necessary entries were passed debiting the accounts of the excess amount of duty drawback. It was explained by the appellant that it was a regular system of accounting followed by him and did not result in any profit or loss over a period of time, thus this amount is allowable. Similar is the case of Insurance claim. Commission payment payment may get settled in the next year whereby on the date of payment there might be a change in the foreign currency rates. It was explained by the appellant that it was a regular system of accounting followed by him and did not in any profit or loss over a period of time. Expenses allowable u/s 43B are only allowed on payment basis. Even if the liability would have been made in the earlier years the same would have been disallowed. Thus payment of bonus, customs and tax are covered within the provisions of section 43B, accordingly the addition is deleted. - Decided against revenue. Disallowance of travelling expenses - CIT(A) has restricted the disallowance - Held that:- Since the disallowance was made on ad hoc basis without pointing out any defect either in the books of account or in the vouchers maintained by the assessee, no disallowance on ad hoc basis is permissible under the law. We, therefore, delete the addition even sustained by the ld. CIT(A). - Decided in favour of assessee. Disallowance of postage, telegram and telephone expenses - Held that:- Assessee is a company where expenditures cannot be considered to be of personal in nature. The Assessing Officer has made ad hoc disallowance having noted that these expenditures were incurred for non-business purposes, without pointing out any defect. Even before us, nothing has been stated by the Revenue that a particular expenditure has been incurred for non-business purposes. We are, therefore, of the view that no disallowance is sustainable in the eyes of law. Accordingly, the addition sustained by the ld. CIT(A) is also hereby deleted - Decided in favour of assessee. Disallowance of motor car expenses and depreciation - Held that:- D.R. could not establish that the motor car was utilized for the purpose other than business of the assesseecompany. Therefore, no disallowance on ad hoc basis is sustainable in the eyes of law. Accordingly, we delete the addition - Decided in favour of assessee. Disallowance of balance written off - CIT(A) deleted addition - Held that:- The appellant at the time of entering the rental agreement had paid ₹ 5,95,500 as an advance which, as per the agreement, was to be adjusted in the last year when the property is vacated. The agreement clearly that the advance rental shall be adjusted in the last 5 installments of the rent, this property had been vacated in this year, the impugned advance needed to be adjusted during the year under consideration. The accounting treatment whether the same should be allowed under "rent1 or "balances written off" does not affect the allowability of such expenses. As the property has been located during the year under consideration, the impugned expense has to be allowed to the appellant - Decided in favour of assessee. Disallowance of agricultural income expenses - Held that:- No defect in the order of the ld. CIT(A) as in the books, net loss from agriculture operations has been shown at ₹ 5,56,622, which wrongly included a sum of ₹ 4,21,344/- on account of tease rentals written off, which was not at all related to agricultural activities. If one excludes this amount, the total disallowance on account of agriculture expenses would have been ₹ 1.35,278/-. Out of this amount, the appellant has already added back an amount of ₹ 1,05,860/- in the computation of income filed for that year, Thus the balance amount of ₹ 29,418 only needs to be disallowed. - Decided against revenue. Deduction under section 80HHC - Held that:- CIT(A) has directed the Assessing Officer to re-compute the deduction under section 80HHC in the light of the judgment of the Hon'ble Apex Court in the case of CIT vs. Ravindra Nath Nair, [2007 (11) TMI 10 - Supreme Court of India] Disallowance of bad debts - Held that:- CIT(A) correctly reexamined the claim of the assessee and finding force in the contentions of the assessee that the claim of bad debts of ₹ 1,37,525/- has only been disallowed because of the fact that RBI has not approved this much amount in the settlement of the claims sent to them & it may not be out of context to mention that the bad debts are governed by section 36(1)(vii) of the Act which clearly stipulates that if the income has already been offered as income, then in that case the amounts can be written off as bad debts deleted the addition. - Decided against revenue.

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• 2015 (5) TMI 398
  Transfer pricing adjustment - DRP holding that the internal comparability does not provide meaningful benchmarking - Held that:- - As decided in assessee’s own case for the earlier assessment year [2014 (8) TMI 64 - ITAT DELHI], it has been held that the assessee was justified in undertaking internal bench marking analysis on standalone basis by placing on record working of operating profit margin from international transactions with AEs and transactions with unrelated parties undertaken in similar functional and economic scenario, and the same should be the basis for determination of arm’s length price in respect of international transactions undertaken with the associated enterprise - the matter is remitted back to the AO for fresh adjudication and for the purpose of determining the arm’s length price in respect of the international transactions undertaken with the associated enterprise by making internal comparison of profitability form the international transactions with associated enterprise and profitability from the international transactions with unrelated parties after allocating respective revenues and expenses to both the segments – Decided in favour of Assessee by way of remand. Deduction u/s 10A - disallowance of miscellaneous income considering the same as part of business income - Held that:- As relying on assessee's own case [2014 (8) TMI 64 - ITAT DELHI] the amount received by the assessee towards notice period is to be treated as income derived from the eligible undertaking and deduction u/s 10A shall be allowed accordingly. The Assessing Officer shall modify the assessment order in the light of the aforesaid direction and allow the deduction u/s 10A of the Act in terms of this order - Decided in favour of assessee. Adhoc disallowance of interest expenses - Held that:- As decided in assessee’s own case [ 2014 (8) TMI 64 - ITAT DELHI] interest expenditure on the utilization of borrowed funds for the acquisition of new assets, from the date of its acquisition till the date when the asset is put to use, is to be disallowed - the interest paid on the capital borrowed for acquisition of an asset for extension of existing business, shall not be allowed as deduction, from the date on which the capital was borrowed for acquisition of the asset till the date on which the asset was first put to use - no efforts has been done by the AO to find out the date on which the assessee borrowed the fund for acquisition of asset in the relevant AY and we also find that no attempt has been made by the AO to find out on which date the asset thus procured with the said borrowed fund have been put to use - Only after the dates has been found out then only one can compute the disallowance as prescribed by the proviso to section 36(1)(ii) of the Act – thus, the matter is remitted back to the AO with a direction to AO to find out the date on which the assessee borrowed the fund for acquisition of asset and also to find out on which date the asset for extension of business thus procured has been put to use - Decided in favour of assessee for statistical purposes.

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• 2015 (5) TMI 397
  Disallowance u/s 43B - vend fee outstanding as a liability payable to the Government of Kerala as on the last day of the accounting year - ITAT upholding deletion of disallownce - Held that:- Reading of the document, namely, a Government of Kerala order dated 28.04.1988 it is clear that the State compulsorily takes from the three mills, a vend fee for the purpose of conferring a special benefit on the said three mills, viz., the repair and replacement of existing machinery and equipment. On facts in the present case, it is clear that the amendment made to Section 43B is attracted. Even if the vend fee that is paid by the respondent to the State does not directly fall within the expression 'fee' contained in Section 43B(a), it would be a 'fee' by 'whatever name called', that is even if the vend fee is called 'privilege' as has been held by the High Court in the judgment under appeal. This being the case, we find that question which was answered in favour of the assessee and against the Revenue by the High Court in Commissioner Of Income-Tax Versus Sri Balaji And Co. [2000 (1) TMI 17 - KARNATAKA High Court ] was not answered correctly. We therefore, set aside the aforesaid judgment and allow the present appeal in favour of the Revenue. In case the respondent has actually paid the aforesaid fee in a previous year relevant to some other assessment year, he will be entitled to claim the benefit of Section 43B for that particular assessment year in accordance with law. - Decided in favour of revenue.

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• 2015 (5) TMI 396
  TDS on wheeling and transmission charges - payment made by the assessee to entities like Maharashtra State Electricity Transmission Company Limited (MSETCL) and Power Grid Corporation of India Limited (PGCIL) for the use of transmission lines or other infrastructure i.e. plant, machinery and equipment - whether payment could not be termed as rent under the provisions of section 194I and consequently the provisions of sections 201 and 201(1A) could not be applied ? - Held that:- No 'service' is being provided by the MSETCL or the STU. No doubt, MSEDCL as transmission licensee is required to provide superintendence, maintenance and repairs to the system. However, no such service is rendered by the MSETCL to MSEDCL. MSETCL is obliged to maintain the system by value of operation of law under the Electricity Act. MSEDCL accesses the STU and distributes electricity passing through the STU. Our views stand fortified by the very fact that the revenue itself is confused and unsure as to the nature of the charge. The focus of the revenue is only the requirement of deduction of tax whether under Section 194-I or Section 194-J. This approach is erroneous. The revenue contends that the WT charges could be rent or fees for technical services but in our view it is neither. Wheeling charges represent the charge for permitting use of the STU by persons other than the Distribution licence. The Transmission charges simply constitute fees for availing of the said transmission utility to be used by open access concept for distribution of electricity to licensees and consumers. In view of the above discussion, we are of the view that the WT charges are neither rent nor fees for technical services. Keeping the said interpretation into effect into effect, we find that while interpreting the expression 'rent' in the present scenario, we must bear in mind that taking into account the functioning of MSEDCL which is a public utility, it will not be appropriate to equate the transmission charges or wheeling charges to rent or fees for technical service. Electricity Act of 2003 was enacted partly on account of deteriorating performance of the State Electricity Boards on account of various factors, including difficulties in power tariff fixation by the erstwhile electricity boards which were unable to take decisions on the tariff in a professional and independent manner. As a result, there were subsidies of unsustainable levels. The restructuring of the electricity boards had created various relationships amongst the four entities inter se namely, MSEB Holding Company Limited, Maharashtra State Electricity Transmission Company Limited, Maharashtra Power Generation Co., Maharashtra State Electricity Distribution Company Limited. Our decision in this appeal is restricted to the State Electricity Boards and the reconstituted entities, to exclusion of others in an attempt to avoiding any absurd results which was not intended by the Legislature. In this behalf, we find it appropriate to make a reference to the following observations of the Hon'ble Supreme Court in the case of Commissioner of Income-Tax, Bangalore V/s. J.S. Gotla Yadagiri reported in (1985 (8) TMI 5 - SUPREME Court ). Thus Transmission charges and / or Wheeling charges are not amounts paid under any arrangement for use of land, building, plant machinery, equipment, furniture, fitting, etc. and, therefore, not rent. Equally, the amounts are not fees for technical services.- Decided in favour of the Assessee

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• 2015 (5) TMI 395
  Disallowance under section 14A - disallowance of ₹ 1 lakh confirmed by ITAT as against ₹ 20,27,896/- Held that:- Order of the Tribunal as regards disallowance under section 14A and restricting the same to ₹ 1 lac was justified in view of the material before the Tribunal. Furthermore, having considered the fact that a sum of ₹ 4,47,649/- was not conceded in the return but was adhoc acceptance during the course of assessment, the assessee could not be bound by it. The Tribunal as the second fact finding authority had gone into factual aspects in great detail and therefore having interpreted the law as it stood on the relevant date the order passed cannot be faulted. - decided against revenue Order computing arms length price - ITAT deleting the addition on account of TP adjustment on guarantee commission - Held that:-Guarantee commission, the adjustment made by the TPO were based on instances restricted to the commercial banks providing guarantees and did not contemplate the issue of a Corporate Guarantee. No doubt these are contracts of guarantee, however, when they are Commercial banks that issue bank guarantees which are treated as the blood of commerce being easily encashable in the event of default, and if the bank guarantee had to be obtained from Commercial Banks, the higher commission could have been justified. In the present case, it is assessee company that is issuing Corporate Guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done. In our view the comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. No substantial question of law - decided against revenue

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• 2015 (5) TMI 394
  Demand notices u/s 156 - requirement of deposit during the pendency of appeal - whether the petitioner-assessee shall be treated as assessee in default and appropriate action of recovery shall be taken? - petitioner-assessee had already deposited 50% of the amount - Held that:- The issues are already concluded in favour of the petitioner-assessee by the decision of this Court in the case of GSPC Gas Company Ltd. (2013 (11) TMI 1542 - GUJRAT HIGH COURT) and without expressing anything on merits with respect to the additions made by the Assessing Officer, as the petitioner had already deposited 50% of the tax demand as per the notices of demand for all the three Assessment Years, in the facts and circumstances of the case, we direct that during pendency and final disposal of the respective appeals before the learned CIT(A) against the assessment orders for the Assessment Years 2008-09, 2009-10 and 2012-13, the petitioner may not be treated as assessee in default. The learned CIT(A) to decide and dispose of the respective appeals in accordance with law and on its own merits without, in any way, being influenced by the present order expeditiously. - Decided in favour of assessee.

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• 2015 (5) TMI 393
  Reopening of assessment - ITAT uphold validity of reopening u/s.147 read with s.148 - grievance of the assessee that reasons to reopen the assessment were recorded by one officer and the notice under section 148 was by another officer - Held that:- The present Tax Appeal is allowed and the matter is remitted to the file of the learned Tribunal directing to decide and dispose of the appeal on remand afresh in accordance with law and on merits and to deal with the contention on behalf of the appellant that the reasons were recorded by one officer and the notice under Section 148 of the Income Tax Act, 1961 was issued by another officer and therefore, reassessment has been vitiated. - Decided in favour of assessee by way of remand.

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• 2015 (5) TMI 392
  Ex-gratia payment disallowed - payments made to ex-employees - Assessing Officer has raised allegation against the assessee that no employee was on the role of assessee company and impugned payment has been made either on behalf of M/s Ranbaxy Laboratories Ltd. or M/s Solrex Pharmacetuicals Company but this allegation has been made on the basis of doubt without bringing out any sufficient material or evidence. In this situation, when the quantum of payment has not been doubted and the assessee company is contended that Ms. Christen D’Souza worked as a Secretary from 6.10.1999 and Mr. Chetan Madan worked as marketing executive posted at Ratlam from 01.04.1997. We, therefore, are of the considered view that it would be just and proper to allow assessee to show evidence of services rendered by them and evidence payment of ex-gratia payment as claimed by the assessee for the assessment year under consideration. - Decided in favour of assessee for statistical purposes. Disallowance of irrecoverable dues from Government department - Held that:- In this regard to issue of allowability of ₹ 2,42,543/- Assessing Officer has pointed out this amount but has not made any addition or disallowance in this regard. But the CIT(A) picked up this issue and made a disallowance by holding that the requires details names of the employees and amount dues is not ascertainable. It was contended by the Ld. DR that there was no issue before the CIT(A) in regard to Ground No.2 but Form No.35, we clearly observe that this issue has been raised by the assessee before the CIT(A) as Ground No.1. We further note that the Assessing Officer ignored to adjudicate the allowability amount of bad debt to the employees and the CIT(A) made the addition by holding that no details and evidence have been filed in this regard without providing any opportunity of being heard for the assessee. Therefore, this issue was not properly adjudicated by the Revenue authorities below and the disallowance and addition has been made in a casual manner. We may point out that if the Assessing Officer has raised same issue it has not made any addition then the CIT(A) cannot picked up this issue making further disallowance and enhancement without adopting due opportunity of hearing of the assessee by simply holding that no details or evidence have been filed. Thus restore to the file of the AO for proper examination and verification - Decided in favour of assessee for statistical purposes. In respect to disallowance of ₹ 82,722/-, CIT(A) was not justified in holding that the government departmental dues cannot be claimed as irrecoverable, until and unless such a decision is taken by the respective government department and a letter to this effect issued by it. However, we are of the considered view neither the Assessing Officer nor the CIT(A) has examined the issue properly as they have not asked any explanation from the assessee to show that the claim amount of deposit and interest is due from which department, from which date and what efforts have been made by the assessee company to recover this amount. Even the details of departments and the dates of deposit and interest accrued thereon has not been given, therefore, we again find it appropriate, just and proper to restore this issue to the file of the AO for proper verification and examination in the light of observation made by the coordinate Bench of the Tribunal in the case of Quintegra Solutions (P) Ltd. (2011 (9) TMI 920 - ITAT CHENNAI). - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A of the Act r.w.r. 8D - CIT(A) rejected the contention of the assessee that the disallowance u/s 14A of the Act r.w.r. 8D of the IT Rules cannot exceed the amount of actual general and administrative expenses claimed by the assessee - Held that:- CIT(a) approach was not proper and contrary to the basic principal vivid from the order of the Tribunal in the case of Gillette India Pvt. Ltd.(2012 (6) TMI 406 - ITAT DELHI ). We may further point out that the Assessing Officer has noted that the excess amount of ₹ 64,23,249/- debited to P&L account is being added back to the net profit but we are unable to see any basis for this segregation by the Assessing Officer for calculating and making and disallowance u/s 14A of the Act r.w.r. 8D(2) of the IT Rules 1962. At this juncture, we respectfully take cognizance on the decision of CIT Vs. Taikisha Engineering India Ltd. reported in (2014 (12) TMI 482 - DELHI HIGH COURT ) wherein a clear mode of calculation of disallowance has been given. Under the above facts and circumstances of the case, we find it appropriate that the issue of disallowance u/s 14A of the Act r.w.r. 8D of the IT Rules 1962 requires proper examination and verification at the end of AO and we restore the same to the file of AO with a direction that the issue should be decided afresh. - Decided in favour of assessee for statistical purposes.

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• 2015 (5) TMI 391
  Addition on account of difference in contract receipts shown by the appellant and accounted for by the customer M/s Uniproducts India Ltd. - Held that:- Assessee company is in the business of the building contract work and has followed AS-7 accounting standard, while finalizing account as per mercantile system. The ld CIT(A) and AO erred in not taking notice the working submitted by the assessee wherein the assessee has shown the working demonstrating that revenue earned from M/s Uniproduct Ltd, has been shown in the accounts on the percentage completion method. So viewed from this angle also the action of the authorities below is legally and factually untenable. So we find no justification to make the addition and so we allow the said ground of the assessee and direct the AO to delete the impugned addition made on this account. - Decided in favour of asseessee. Disallowance on account of the purchase made from M/s. Amit Steel on the ground that the said party was not traceable - Held that:- assessee has purchased steel from M/s Amit Steel but it was wrongly shown in the account of M/s Dharam Steel, because both the concerns belonged to the same person. And the mistake was clerical in nature. The assessee has pointed out the mistake which has arisen and on perusal of the Remand Report of the AO in which the Inspector’s Report wherein the Inspector has clearly mentioned that the M/s Amit Steel and Dharam Steel belongs to one and the same person and the mistake made by the assessee accountant need not come in their way to saddle them with the liability. The explanation of the assessee has been corroborated by evidence on record, therefore, there is no justification for impugned disallowance. We find force in the contention of the assessee’s counsel regarding this factual aspect and the ld. DR could not point out anything contrary to the said fact so we are inclined to allow this ground and direct the AO to delete the addition in dispute made on this account. - Decided in favour of assessee. Disallowance of the service tax payable under section 43B - Held that:- We find from the records that the Service Tax payable has not been claimed as deduction in the P&L account. We further find that assessee is following the mercantile system of accounting. Similar case was decided by the Hon’ble Jurisdictional High Court in the case CIT vs. Noble & Hewitt (I) P. Ltd. (2007 (9) TMI 238 - DELHI HIGH COURT ) has held “in our opinion, since the assessee did not debit the amount to the P&L account as an expenditure nor did the assessee claimed any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting the question of disallowance of deduction not claimed could not arise.” The aforesaid case is similar to that case in hand and therefore ratio laid down in that case is squarely applicable to the case in hand, therefore, we allow the claim of the assessee. - Decided in favour of assessee. Disallowance under section 40(a)(ia) - Held that:- Amount given to Arjun Singh was 42,300, Krishan ₹ 12,000/- and NTS Scaffolding ₹ 15,000/- which total amounting to ₹ 69,320/- which is admittedly less than the threshold limit of ₹ 1,20,000/- given in section 194I of the Act. Hence, we find force in the contention of the Ld. AR in this regard, so we direct the deduction of ₹ 69,320/-, out of ₹ 18,03,690/- from the disallowance made under section 40(a)(ia) of the Act. - Decided in favour of assessee.

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• 2015 (5) TMI 390
  Transfer pricing adjustment - selection of comparable - Held that:- Tata Elxsi Ltd. (seg), Sasken Communication Technologies Ltd.,Persistent Systems Ltd., Zylog Systems Ltd.,Mindtree Ltd. (seg), Larsen & Toubro Infotech & Infosys Ltd. be excluded from the list of comparable as having turnover of more than ₹ 200 Crores from the list of comparables since the assessee's turnover was less than ₹ 200 Crores. Bodhtree Consulting Ltd to be excluded as functionally different. KALS Information Systems Ltd. to be excluded as this company was developing software products and not purely or mainly software development service provider. Flextronics Software Systems Ltd. ould be inappropriate to compare the business operations of the assessee with that of a company following hybrid business model comprising of royalty income as well as regular software services income, for which revenue break-up is not available

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• 2015 (5) TMI 389
  Deduction u/s 80IB of Jorhat Unit - allocation of expenses, from Head Office to Jorhat Unit - Held that:- We do not find any merit in the contentions of assessee because even if the assessee has made some allocation in the present year, it has to be seen that such allocation is in line with the allocation made in earlier years as per the direction of the Tribunal. Regarding this contention that plea was not taken before the Tribunal in assessment year 2004-05 to the effect that there was absence of business arrangement between the assessee and any other person, we find that there is no merit in this contention also because it is noted by the Tribunal in the order for assessment year 2004-05 that power for adjustment is available to the Assessing Officer by virtue of sub section (8) and (10) of section 80IA. - Decided against assessee. Disallowance out of foreign travel expenses - Expenses incurred on the spouse of the Chairman and Managing Director of the company - Held that:- in the absence of any evidence regarding invitation to the spouse of the Directors of the company or their participation in any social engagements in the foreign country visited by them along with the Directors of the assessee company, we do not find any reason to interfere in the order of CIT(A) on this issue. Decided against the assessee. Enhancement of book profit U/s 115JB - Held that:- The authorities below have applied Explanation (1), clause (f) an sub-clause (ii) appearing below clause (i) of Explanation (1). It is submitted that on the facts of the present case where the investment in shares either directly or through PMS has yielded huge income in the form of short term capital gain which is taxable, it cannot be said that there was any expenditure that could be identified and said to be related to the exempted income. The expenditure was essentially been incurred for the purposes of earning income which is taxable and in case, by virtue of the “share holding being hold beyond a specified period” any incidental income has been earned, it cannot be said that the expenditure was relatable to any exempt income. Therefore, no part of the expenses could have been considered to be disallowable, so as to call for adjustment in book profit computed under section 115JB.Wholly without prejudice to the said submissions, it is stated that estimate of ₹ 10,00,000/- in relation to the income earned through direct investment (other than PMS) is much too high and excessive. The dividend income, apart from incidental to the investment in shares, the decision making process cannot be said to be entailing such a huge expenditure. In this view of the matter the assessee’s submission is that first of all no disallowance should have been made (which may affect the computation of book profit under section 115JB) and in any case and without prejudice to the said submission the estimate of expenditure at ₹ 10,00,000/- is much too high and excessive. Disallowance of dividend - Held that:- As it is noted by CIT(A) that out of total dividend income of ₹ 11.2 crores earned by the assessee, the earning of dividend income through PMS is ₹ 169.35 lac and therefore, earning of dividend income from self-investment is more than ₹ 10 crore - Held that:- CIT(A) has reproduced clause (f) to the Explanation 1 of section 115JB and as per this clause (f), any expenditure relatable to any income to which section 10 is applicable, is to be added back. The CIT(A) has directed the A.O. to compute the amount of expenditure incurred for earning dividend income in proportion to dividend income to total income i.e. capital gain + dividend, as noted by CIT(A) in Para 6.1 reproduced above. Considering the provisions of clause (f) of sub section (1) of section 115JB, we do not find any infirmity in the order of CIT(A) on this issue. Disallowance was made by the Assessing Officer for expenses incurred in relation to total dividend income whereas as per the decision of CIT(A), he has bifurcated such disallowance in two parts because the dividend income earned by the assessee of ₹ 1182.21 lac is in two categories i.e. partly from PMS investment to the extent of ₹ 169.39 lac and the balance in excess of ₹ 10 crore is on account of direct investment. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this issue because when dividend income from PMS is only ₹ 169.35 lac, the entire dividend income of ₹ 1182.21 lac cannot be considered for making disallowance out of expenses incurred on PMS and therefore, part relief allowed by CIT(A) is justified. At the same time, CIT(A) has covered up this aspect of earning dividend income of more than ₹ 10 crores out of direct investment by directing the Assessing Officer to disallow ₹ 10 crore on lump sum basis. Hence, on this issue, we confirm the order of CIT(A) Disallowance u/s 14A r.w.r. 8D - Held that:- None of the judgments cited by assessee is applicable because in all these judgments, the assessment year is prior to assessment year 2008-09 when Rule 8D was not applicable whereas in the present case, Rule 8D is applicable and therefore, in the facts of the present case, we find no infirmity in the order of authorities below and decline to interfere in the order of CIT(A). - Decided against assessee.

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• 2015 (5) TMI 388
  Validity of reopening of the assessment - AO in the reopened assessment proceedings determined taxable income at NIL under the normal provisions of Act and book profit at ₹ 1321.27 crores under the provisions of section 115JB - Held that:- Once the reassessment proceedings is initiated validly on compliance with various conditions prescribed in the Act, the same cannot be held to be invalid merely because the assessment order ultimately did not disclose about any escaped income. Further, under the present provisions of section 147, “re-computation of loss” is also brought within the scope of “Income escaping assessment”. There was definite information with the AO about the escapement of income and the assessee has also accepted the same by offering additional income. These contentions are urged before us without bringing any material on record and that the assessee has not approached either the assessing officer or the Ld CIT seeking copies of satisfaction note/opportunity and the assessee is raising these contentions merely on presumptions. Thus the Ld CIT has rightly upheld the validity of initiation of reassessment proceedings. Computation of deduction u/s 80HHC for the purpose of excluding the same from the Net profit for the purpose of computation of “Book Profit” u/s 115JB - Held that:- In view of the subsequent decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules P Ltd Vs. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA ] wherein held that ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to determine the interest income in terms of the decision rendered by the Hon’ble Supreme Court in the case of ACG Associated Capsules P Ltd (supra). Exclusion of 90% of the following Miscellaneous income while computing “Profits of business” for the purpose of computing deduction u/s 80HHC - Held that:- Ld CIT(A) was justified in holding that the Income - Deployment of P&M - Hire charges, Income from Time charter,Income - commission & Rent received represents independent source of income unconnected with the business activity of the assessee and hence 90% of the same is required to be excluded for arriving at the Profits of Business. In respect of remaining items of receipts i.e. penalty recovered from Contractors, Insurance claim received, Cash discount received, we notice that the following receipts arise out of business activities carried on by the assessee, i.e., they are not independent source of income and hence 90% thereof are not required to be excluded from the net profit in order to compute “Profits of business” in terms of Explanation (baa) to Sec. 80HHC of the Act. The remaining two items are Miscellaneous recoveries and Miscellaneous Income do not find the details relating to these two receipts accordingly we restore examination of these two items to the file of the assessing officer. Commission/surcharge paid to State Oil marketing Organisation (SOMO) of Iraqi Government Agency - CIT(A) deleted the addition - Held that:- The facts prevailing in the instant case show that the assessee has not made any payment directly to Iraqi Government. It has paid purchase price to its supplier M/s Alcon Petroleum Ltd. The Ld CIT(A) has given a categorical finding that there is no evidence or material to support the alleged payment of illicit commission/surcharge over and above the purchase price by the assessee to the Iraq Government. Further, as per the contract signed between the assessee and M/s Alcon Petroleum Ltd, M/s Alcon has also not paid any surcharge to Iraqi Government or their agency for procuring the crude oil. Hence, we are of the view that the Ld CIT(A) was justified in deleting this addition by holding that there is no material to support this addition. - Decided in favour of assessee.

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• 2015 (5) TMI 387
  Deduction under section 80IA - assessee is a company which is engaged in the business of providing storage facilities and handling of cargo at Kakinada Sea Port - CIT(A) allowing the claim of the assessee for deduction - Held that:- Keeping in view the certificate dated 08.04.2005 issued by the Kakinada Deep Water Port in the light of CBDT Circular Nos. 793 dated 23.06.2000 and 10/2005 dated 16.12.2005, we are of the view that the issue involved in the present case relating to the claim of the assessee for deduction under section 80IA is squarely covered by the decision of Hon’ble Bombay High Court in the case of ABG Heavy Industries Ltd., (2010 (2) TMI 108 - BOMBAY HIGH COURT ) wherein a similar claim of assessee for deduction under section 80IA was allowed by the Hon’ble Bombay High Court relying inter alia on Circular Nos. 793 dated 23.06.2000 and 10/2005 dated 16.12.2005 issued by the CBDT and the facility provided by the assessee was an integral part of the port. The findings that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The assessee was entitled to the special deduction under section 80IA. and this position is not disputed even by the learned D.R. - Decided in favour of assessee. Disallowance of expenditure incurred towards loan processing charges and rates and taxes for loan documentation - CIT(A) allowed the claim - Held that:- Assessee has relied on the definition of “Interest” given in section 2(28A) of the Act which provides that ‘interest’ means, interest payable in any manner in respect of any monies borrowed or debt incurred and includes any service fee or other charge in respect of the monies borrowed or debt incurred. Processing charges and other expenses incurred by the assessee in connection with the loan borrowed, thus, are to be considered in the nature of interest as per the definition given in section 2(28A) and the Ld. CIT(A) in our opinion, was fully justified in allowing the same as deduction as claimed by the assessee. We, therefore, uphold the impugned order of the Ld. CIT(A) on this issue - Decided in favour of assessee. - Decided in favour of assessee.

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• 2015 (5) TMI 386
  Reopening of the assessment - unexplained expenditure not supported by any evidence on the marriage ceremony and other ceremonial function of the daughter - Held that:- AO had initiated the proceedings u/s. 147 on the basis of the documentary evidence i.e. FIR filed by his daughter and TEP received from the Investigation Wing, which was confronted to the assessee and assessee himself admitted and not pressed on the issue of initiation of proceedings under section 147 of the I.T. Act. In our considered opinion, the AO has rightly issued notice u/s. 148 of the I.T. Act, after making necessary inquiry, in view of the TEP received from the Investigation Wing, New Delhi and after being satisfied found that it is a case where income has escaped assessment. He has also taken due approval from the competent authority, after applying their mind, the notice in dispute has been issued to the assessee. He has also recorded the reasons for such action. The AO has given his clear cut finding and satisfied himself before issuing of notice u/s. 148. The reasons were also provided to the assessee which are not based on mere suspicion and is on the basis of various documentary evidence. Therefore, in our considered opinion, the Ld. First Appellate Authority has also appreciated the relevant provisions as well as the facts of the case and rightly upheld the issuance of notice u/s. 148 of the I.T. Act in the case of the assesse. We are of the considered view that no interference is called for in the well reasoned order passed by the Ld. CIT(A) on the finding given by him on the issue of assumption of jurisidciton u/s. 147 and notice u/s. 148 which is valid and as per law. - Decided against assessee. Unexplained expenditure made on the marriage ceremony of the assessee’s daughter under section 69 - Held that:- The daughter of the assesse namely Jyoti Kapoor was a victim of dowry harassment by her In-laws including her husband. She has also lodged FIR. The FIR has been registered by Smt. Jyoti Kapoor, D/o of the assessee under section 498A, 406, 506, 323/34 IPC on 7.5.2002 against her husband and other family members. No doubt that the daughter of the assessee has written that her father has incurred a huge expenditure on her marriage, but she has not produced any documentary evidence that huge expenditure has been incurred by her Father, before the police authorities. Assessee being the father, accordingly, remained under mental tension during the dispute between his family and the family of her daughter in law. When the dispute arise between both the parties, it is very much possible to file a complaint by the in-laws cited by the assessee’s daughter against the assessee for her harassment and they filed the complaint against the assessee for unexplained, unaccounted expenditure incurred by the assessee on the marriage of his daughter. But they have also not produced any evidence supporting the complaint made by them against the assessee. This generally happen in the quarrel in the matrimonial dispute. Lastly, both the parties mutually seek divorce and the Hon’ble High Court of Delhi has awarded ₹ 7 lacs to the assessee’s daughter on account of expenditure incurred by the assessee on the marriage of his daughter. Keeping in view of the above, mutual divorce granted by the Hon’ble Delhi High Court by awarding ₹ 7 lacs on account of marriage expenditure incurred by the assessee on her daughter’s marriage, we are of the considered view that we are unable to hold that assessee has incurred more than ₹ 7 lacs expenditure on the marriage of his daughter for which the assessee has produced all the necessary evidence before the revenue authorities, which has not been properly appreciated by them. The AO had made the addition of ₹ 34,13,000/- under section 69 of the I.T. Act without any basis, based on presumption and assumption, which is not sustainable in the eyes of law, therefore, we delete the addition of ₹ 34,13,000/-, which was wrongly made by the AO and confirmed by the Ld. CIT(A). - Decided in favour of assessee.

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• 2015 (5) TMI 385
  Assessment on the basis of sworn statement given u/s 132(4) - Held that:- No substance in this contention. We have already noticed that the fact of providing accommodation bills came to light due to survey operations conducted at the premises of M/s Akruti Metals and Alloys Pvt Ltd. The statement taken from the director of the above said company was confirmed by the assessee in the statement taken from him u/s 132(4) of the Act as well as u/s 131 of the Act. It appears that the fact relating to accommodation bills also came to light during the course of search operations conducted in the case of M/s ABG Shipyard Ltd. Since the director of M/s Akruti Metals and Alloys Pvt Ltd had implicated the assessee and since the assessee has also accepted the same, in our view, the assessing officer was justified in placing reliance on the statement given u/s 132(4) of the Act. - Decided against assessee. Non incriminating material find during search - Held that:- In the instant cases, the assessee has not filed return of income prior to the date of search and hence the returns of income filed in response to the notices issued u/s 153A become the original returns of income for all the years under consideration. Consequently the impugned assessments are to be considered as original assessments in the hands of the assessee. The assessing officer is entitled to examine all the issues, since these assessments shall not fall in the category of “concluded assessments” in the absence of original return of income filed u/s 139 of the Act. Accordingly, we reject this ground also.- Decided against assessee. Column no.7 of notice of demand issued u/s 156 of the Act was left blank and hence the said notice was invalid - Held that:- The clerical errors would not vitiate the assessment orders and accordingly, we reject this ground also.- Decided against assessee. Additions made on account of low withdrawals made for household expenses - Held that:- assessing officer has simply estimated the household expenses without bringing any other material on record. The submission of the assessee is that he was maintaining a simple life and further the money withdrawn from his wife’s account was also used towards household expenses. Admittedly, the assessing officer did not consider the drawings made from the account of assessee’s wife. Since the assessing officer has not brought any material to support the estimate made by him, in our view, the same should be considered to be baseless and hence the same cannot be sustained. At the same time, the assessee also could not convincingly explain that the drawings disclosed by him along with the drawings taken from his wife’s account were sufficient to meet the expenses. Under these set of facts, we are of the view that this issue would meet the ends of justice in all the years under consideration, if the addition towards insufficient drawings is sustained to the extent as mentioned in order to take care of possible leakage, if any. Unexplained investments - Held that:- assessing officer should either accept or reject the financial statements in toto and partial reliance on them is not justified. The additions may be made out of the said financial statements, if the assessing officer was not satisfied with the explanations of the assessee with regard to any of the items disclosed therein. Since the items assessed as “unexplained investments” in all the years under consideration has been duly disclosed in the financial statements and the sources thereof were also explained therein, we are of the view that the impugned additions are not warranted. Accordingly, we set aside the order of Ld CIT(A) on this issue in all the years under consideration and direct the assessing officer to delete the additions made under the head “Unexplained investments” representing Life insurance scheme payments, PPF payments, Loans and Shares. - Decided in favour of assessee. Unexplained cash credits - Held that:- hile the assessee claims that the assessee did furnish the confirmation letter, the tax authorities state that the same was not furnished. In this regard, the Ld A.R invited our attention to the confirmation letter furnished in the paper book. Accordingly he contended that the observations made by the tax authorities are against the facts prevailing on record. Since the confirmation letter furnished by the assessee was omitted to be examined by the tax authorities, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of the Ld CIT(A) on this issue and restore the same to the file of the assessing officer for fresh examination. - Decided in favour of assessee for statistical purposes. Estimation of commission income on providing accommodation bills - Held that:- A question may arise as to whether the deduction directed to be given in the preceding paragraph is valid, since the resultant assessed income of AY 2010-11 would become lower than the income returned by the assessee. The fact remains that the assessee did not visualise the addition relating to Commission income at the time of filing returns of income of the years under consideration and hence there was no occasion for him to claim deduction of the commission income. Since the commission income has been estimated by the tax authorities as well as by us, the aggregate amount of net commission income finally assessed should be given deduction in order to arrive at completeness. Addition of balance value of Jewellery/cash found at the time of search over and above that surrendered by the assessee - Held that:- Though the entire value of jewellery has been assessed in AY 2010-11 in accordance with the provisions of the Act, however in practice, the jewellery is accumulated over the years. It is known to everyone that the rate of gold is rising consistently over the years. However, the value of jewellery has been assessed in AY 2010-11 by taking the rate prevailing in that year. Further, the Indian families normally own certain quantity of jewellery over the years. Considering all these facts, we are of the view that there is no justification in assessing the balance value of jewellery amounting to ₹ 10,29,020/-. With regard to the cash also, the assessing officer has not given credit for book balance. Considering the smallness of the amount, we are of the view that the addition of ₹ 30,200/- is also not warranted. Accordingly, we set aside the order of Ld CIT(A) on these two issues and direct the assessing officer to delete these additions. - Decided in favour of assessee.

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• Customs

• 2015 (5) TMI 406
  Suspension of custom clearance license - Misuse of CHA License - failure to obtain any authorization from the actual IEC holders - contravention of the various provisions of the CBLR - Penalty under Sec. 112(a) - Held that:- Show cause notice cannot be read hyper-technically, but it is to be read reasonably and that the Writ Court should be slow and circumspect in interfering at the show cause stage, unless it is successfully proved that the Authority issuing the show cause notice is not competent or the show cause notice is outcome of malice and de hors the provisions of law, but in the present case, the emphasized portion contained (cited supra) in the impugned show cause notice, would clearly indicate that the respondent has predetermined the issue. This Court would have appreciated the respondent if she could have added atleast the words, prima facie before the sentence starting it was concluded that the Customs Broker failed to . Therefore, as rightly contended by the learned counsel for the petitioner that from a reading of the impugned show cause notice, an overall impression one gets is that the respondent has predetermined the issue. Quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating the show cause proceeding. A show cause notice is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice. At the stage of show cause notice, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. At that stage, the authority issuing the charge sheet/show cause notice, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, as has been done in the present case, the entire proceeding initiated by the show cause notice gets vitiated by unfairness and bias and the subsequent proceedings become an idle ceremony. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subjected to it. Impugned show cause notice, wherein, the usage of the words, viz., it was concluded that the Customs Broker failed to as pointed out above, would clearly indicate predetermination by the respondent regarding the failure on the part of the petitioner in respect of the obligations cast upon them under the Regulations as well as committal of professional mis-conduct by the petitioner and therefore, on this ground, the impugned show cause is liable to be set aside.- respondent is hereby directed to proceed afresh by issuing show cause notice clearly indicating the alleged failures of obligations cast upon the petitioner as well as mis-conduct by ensuring that it does not indicate any premeditation or prejudgment by the respondent. In case any such fresh show cause notice is issued by the respondent, the petitioner shall be furnished with the material on the basis of which the show cause notice issued and also a reasonable opportunity to file their objections with supporting material apart from personal hearing and then pass a resoned order in accordance with law. - Decided in favour of appellant.

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• Corporate Laws

• 2015 (5) TMI 405
  Application for reduction in issued, subscribed and paid-up share capital under Sections 100 to 105 of Companies Act, 1956 and other applicable provisions of the Companies Act, 2013 read with Companies (Court) Rules, 1959 - Reduction of share capital by paying off the Non-Promoter Shareholders for extinguishment and cancellation of their subscribed and paid-up equity share capital, which will give a fair exit to the Non-Promoter Shareholders - Held that:- It is submitted that the petitioner that the Board of Directors of the petitioner company felt it imperative to separate the Promoter Group shareholder from the Non-Promoter Shareholders and re-emphasizing the control and ownership of the Promoter Group shareholder over the petitioner company, as previously held prior to Scheme of Amalgamation and preferential allotment. Accordingly, the company has proposed a selective reduction of share capital by paying off the Non-Promoter Shareholders for extinguishment and cancellation of their subscribed and paid-up equity share capital, which will give a fair exit to the Non-Promoter Shareholders. It is claimed by the petitioner that the proposed reduction is a practical and efficient available option which will help the Non-Promoter Shareholders in realizing the fair value of their investments in the petitioner company which can be gainfully deployed elsewhere. The Board of Directors of the petitioner company recommended payment of ₹ 675/- per equity share to the Non-Promoter Shareholders of the company as a part of the capital reduction process. It is submitted that the proposed reduction does not involve either diminution of any liability in respect of unpaid share capital or payment to shareholders of any paid up share capital. It is further submitted that the proposed reduction in capital does not violate or override or circumvent any provision of the Companies Act, 1956 and the Companies Act, 2013, as applicable or any rules or regulations made thereunder. It is further submitted that no investigation proceedings under Section 235 to 251 of the Companies Act, 1956 are pending against the petitioner company. Learned counsel also confirms that the petitioner company is engaged in a business/industry where there is no sectoral cap and a non-resident shareholder is permitted to hold upto 100% of the paid-up equity share capital of the petitioner company under the automatic route as per the provisions of Foreign Exchange Management Act and regulations made thereunder. In response to the notice issued, Mr. A. K. Chaturvedi, Regional Director, Northern Region, has filed his report dated 11th February, 2015 raising no objection to the proposed reduction of share capital of the petitioner company. Despite publication of notice, no objection has been received from any creditor or any member of the public. The petitioner company, in the affidavit dated 10th February, 2015 of Sh. N.P.S. Chawla, Advocate of the petitioner company has submitted that neither the petitioner company nor its counsel have received any objection pursuant to citations published on 8th December, 2014. Thus, there appears to be no legal impediment in allowing the present petition. In view of the averments made in the petition and there being no objection from any creditor or any member of the public, the petition is hereby allowed. The resolution passed by the petitioner company in its Extra Ordinary General Meeting held on 13th November, 2014 for reduction of its share capital is approved. The 'Form of Minutes' proposed to be registered under Section 103(1)(b) and annexed to the petition as Annexure ‘M’, is also approved. - Application for reduction in share capital approved.

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• 2015 (5) TMI 404
  Proposed scheme of Amalgamation - Dispensation of convening the meetings of their equity shareholders, secured and unsecured creditors - All the secured creditors give their consent in writing - The Unsecured creditors of the transferor company are running creditors - Company produce Chartered Accountant certificate to show liquidity position of the companies - Held that:- The transferor company has 07 equity shareholders and 01 secured creditor. All the equity shareholders and the only secured creditor have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and secured creditor of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. The unsecured creditors of the transferor company are running creditors who are paid-off in the normal course of the business of the company. A perusal of the audited balance sheet of the transferor company, as on 31st March, 2014, reveals that the company has reserves and surplus of ₹ 10,88,10,171/-. As per the certificate issued by M/s. Pawan Shubham & Co., Chartered Accountants, the post-amalgamation net worth of the transferee company will enhance to ₹ 22,19,15,399/- as compared to its pre-amalgamation net worth of ₹ 11,31,05,228/-. In addition, the applicants have placed on record the certificate issued by M/s. Pawan Shubham & Co., Chartered Accountant, determining the liquidity position of the companies, which shows that the liquid assets (including cash and bank balance) of the transferor company, pre-amalgamation, are to the tune of ₹ 37,18,61,504/- whereas the liquid assets (including cash and bank balance) of the transferee company, post-amalgamation, are to the tune of ₹ 41,31,76,317/-. Therefore, the rights of the unsecured creditors of the transferor company are not likely to be affected and the transferee company will be in a position to discharge all its liabilities, upon sanction of the Scheme of Amalgamation. In view of the above and the settled law on the subject, the requirement of convening and holding the meeting of the unsecured creditors of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. The transferee company has 08 equity shareholders and 03 unsecured creditors. All the equity shareholders and all the unsecured creditors have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditors of the transferee company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured creditor of the transferee company, as on 15th December, 2014. - Requirement to call meeting of shareholders, secured & unsecured creditors dispensed with.

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• Service Tax

• 2015 (5) TMI 417
  Waiver of pre-deposit - Tribunal in the case of appellant ordered to deposit entire amount of service tax with interest except penalty - appellant submitted that a coordinate bench (in which the Technical Member is common) in a similar case stay granted for entire demand - Held that:- Appellant is not similarly placed as in the case of Prem Kumar Maini (2013 (12) TMI 1376 - CESTAT NEW DELHI). In the present case, the appellant is collecting the amount on the basis of an agreement, inter se, in lieu of the costs incurred in the construction of the bus terminus and is also levying charges on various accounts on the buses which are entering the said terminus. The amounts which are being collected are prima facie on the basis of a contractual obligation whereas in the case which is being relied upon, there is a difference and the stay was granted on the ground that it was a statutory fees which was being collected. It was, in such circumstances, the discretion has been exercised in favour of the appellant therein and merely because the words used are similar, namely, the 'Adda Fees', would not be a ground to grant the benefit of exemption from pre-deposit, as has been rightly argued by counsel for the Revenue. Appellant is not alleged to be suffering from any undue hardship, as such. The discretion which has, thus, been exercised by the Tribunal in directing only payment of service tax demand besides remittance of interest, cannot be said to be unjustified, in any manner and the interest of the Revenue has also been protected by directing the deposit of the taxable amount. The initial order was passed on 13.11.2013 and the modification/review could not have been, thus, prayed for, in the absence of any illegality or irregularity in the first order and merely that it came to the notice of the counsel that allegedly, in similar circumstances, the interim benefit had been granted to another party, would not itself be a ground for review, as such. - Decided against assessee.

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• 2015 (5) TMI 416
  Denial of refund claim - Wrong entry of credit from the account of a different assessee - Held that:- while making e-payment, the petitioner company has wrongly mentioned its assessee code as AABCS5320JXM001 instead of AABCS5320HXM001 wherein one letter viz., "J" has been wrongly mentioned instead of "H". Therefore, the department has given credit of the said amount from the company which has the assessee code as AABCS5320JXM001 which is not in existence as of now. Apart from that, admittedly, the petitioner has made the payment twice. In view of the above said position, the petitioner is entitled to get refund of the payment wrongly made on 06.11.2014 - Decided in favour of assessee.

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• 2015 (5) TMI 415
  Indian subsidiary providing marketing support services for the products manufactured outside India - AAR held that service is not taxable in India - Held that:- No interference is called for with the order of the Authority which is impugned in this writ petition. An order which has been passed on a concession given by the Commissioner cannot be challenged by the Commissioner himself. It is not the case of the writ petitioner (Commissioner) that certain material and the relevant Circulars were placed before the Authority and were not considered. After considering the entire case on merits and deciding in favour of the respondent-Company, the questions raised were answered in favour of the assessee on merits and also on the basis of the concession given by the Commissioner that the case of the respondent- Company was covered by the Circular of the Department dated 24.02.2009. The Commissioner cannot be permitted to now turn around and challenge the said order which was passed by the Authority on the basis of his own statement. - Even on merits, what is being canvassed before this Court in the writ petition is something which was not raised before the Authority - Decided against Revenue.

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• 2015 (5) TMI 410
  Waiver of pre deposit - Commercial or Industrial Construction service - whether the construction of the various educational institutions would be treated as "commerce or industry" - held that:- Since in this mater the Bench has already granted waiver of pre-deposit of dues for assessees similarly placed, we grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal in this case also - Decision in the case of Chettinadu Constructions [2014 (4) TMI 687 - CESTAT CHENNAI] followed - Stay granted.

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• Central Excise

• 2015 (5) TMI 411
  Waiver of pre deposit - Denial of CENVAT Credit - final product is exempted under Sl. No. 11 of Notification No. 3/2006-CE dated 01.3.2006 - Held that:- Sl. No. 11 to Notification No. 03/2006-C.E. dated 1.3.2006 exempts 'all goods' falling under CTH 1517 9020 or 1518 (other than margarine and similar edible preparation).Chapter heading 1517 10 covers Margarine, excluding liquid margarine. Peanut butter is specifically covered Tariff 15179020 under the category "other". This is one of the grounds taken by the Revenue for differentiation between 'margarine' and 'peanutbutter' and to take the view that both are different. The appellant's stand is that both the products are interchangeable for end use and therefore, are to be treated as similar to each other. The Revenue has also taken a view that both the products are obtained from different origin; margarine is a butter derived from animal fats whereas the peanut butter is plant fat. - In any case, the entire exercise would have been revenue neutral but for the fact that in this case, there happened to be a higher rate of duty on the imported goods and the value addition is not sufficient and as a result, the amount of tax payable on the final product is less than the credit available. Even then it is seen that out of the credit taken, an amount of ₹ 83,01,243/- paid by the appellants has to be considered as amount reversed. Therefore, in any case, the demand could not have been more than ₹ 1.35 crores. Having regard to the complication involved and different interpretations involved, we consider that if the appellant deposits an amount of ₹ 10 lakhs, that would be sufficient for the purpose of hearing the appeal. - partial stay granted.

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• 2015 (5) TMI 409
  Classification of fixed dos combination of Vitamin B-1, B-6 and B-12 injectible as well as tablets form - Held that:- goods in question would be classified under Heading 3003.10 - Decision of Larger Bench of tribunal in the case of Micropure Parenterals Pvt. Ltd. vs. Commissioner of Central Excise, Mumbai-III [2005 (10) TMI 114 - CESTAT, MUMBAI] referred - - Decided in favour of assessee.

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• 2015 (5) TMI 408
  Interest u/s 11AB - Penalty u/s 11AC - Held that:- There is no dispute about the leviability of the duty. Respondent had already paid duty at the time of investigation itself. Penalty under Section 11AC is leviable where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. Keeping in view nature of the dispute as contended by the appellant as also his conduct right from the time of investigation and the nature of activities in which they are engaged, we do no find any ingredient as enumerated under Section 11AC is satisfied. In view of the said position we do not find any reason to levy the penalty under Section 11AC. We also find that the in this case demand is for the period 1998 onwards and at the relevant time provision under Section 11AB were similar to that 11AC. Accordingly, in our view for the same reasons, interest is also not chargeable - Decided against Revenue.

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• 2015 (5) TMI 407
  Denial of CENVAT Credit - Service tax paid on the invoices raised by the C&F agents on GTA outward transportation - Held that:- It is evident from the invoices that the C&F agents are registered with the Service Tax authorities and have paid service tax on the services rendered by them as C&F agents to the appellants. The services include freight, delivery charges, transportation charges, airway bill charges, surcharges, handling charges (both loading and unloading). It is clear from the invoices, the C&F agents have rendered the said services to the appellant not only on transportation but other charges and paid service tax. - Decision in the case of Commissioner of Central Excise, Ahmedabad-II Vs Cadila Healthcare Ltd. [2013 (1) TMI 304 - GUJARAT HIGH COURT] followed - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (5) TMI 414
  Levy of tax under Section 3(4) of the Tamil Nadu General Sales Tax Act - Tribunal sustained the levy of tax under Section 3(4) of the Tamil Nadu General Sales Tax Act in respect of turnover relating to stock transfer and deleted the levy of tax under Section 3(4) of the Act on the sales to exporters - whether the Tribunal was justified in deleting the turnover in terms of Section 3(4) of the Tamil Nadu General Sales Tax Act. - Held that:- Following decision of M/s.Tube Investments of India Limited V. State of Tamil Nadu [2010 (10) TMI 938 - MADRAS HIGH COURT] - no tax can be collected without the authority of law. Therefore, following the above-said decision, we find no question of law, much less any substantial question of law, for consideration in this revision - Decided against Revenue.

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• 2015 (5) TMI 413
  Denial of exemption claim - Assessing Officer under the CST disallowed claim of exemption of Sales Tax at High Sea Sales on the ground that the Respondent dealer did not produce bill of lading and other important documents to prove such a sale - Tribunal confirmed the tax levied on interstate sales, but set aside the levying of custom duty at 8% by the Additional Commissioner of Sales Tax - Held that:- Assessing Authority as also the Appellate Authority ought to have recorded a finding that there is no evidence to support the fact that the Custom Duty was paid by the Assessee before the delivery of the goods, namely "Quality Prime Tinplates to M/s. Raja Crown and Cans Pvt. Ltd. If there is no evidence pointed out to support this fact, then we do not see how the Tribunal committed any error in allowing the Appeals partly. The levy of Sales Tax at 8% on Custom Duty in the present case was not justified and rightly deleted. These are not findings which would raise any wider questions and particularly of law. In the peculiar facts and circumstances and looking into the documents produced, the Tribunal concluded that there is no evidence to support the concurrent finding as rendered by the Assessing Authority as well as the Appellate Authority. - finding does not raise any question of law for being answered and opined upon by this Court - Decided against Revenue.

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• 2015 (5) TMI 412
  Validity of assessment of order - Petitioner has not been afforded adequate opportunity to put forth their submissions stating that the proposal to reverse the ITC availed is incorrect - held that:- petitioner had stated that the proposal to reverse the ITC has been made without taking into consideration of adjustment of ITC towards future demands and that they wanted 30 days' time since they were collecting the details of adjustment of ITC. Therefore, the first respondent ought to have examined the issue in a more objective manner and should have taken note of the fact that opportunity to the Assessee should be a meaningful opportunity and it is not for the sake of mere satisfying or compliance of the statutory requirement. That apart, when the petitioner made a request for grant of 30 days' time, if the authority was not inclined to accept the request, then a separate order ought to have been passed prior to finalizing the assessment. Even in such a case, the Assessee should have been afforded an opportunity of personal hearing. Since all these above procedural illegalities have crept in, the impugned orders are liable to be quashed. - Decided in favour of assessee.

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• Indian Laws

• 2015 (5) TMI 403
  Liability of the agent of a ship owner to pay demurrage and port charges to the Board of Trustees of a Port - Held that:- While it is correct that the liability to pay demurrage charges and port rent is statutory, in the absence of any specific bar under the statute, such liability can reasonably fall on a Steamer Agent if on a construction of the provisions of the Act such a conclusion can be reached. - it is difficult to reconcile how custody of the goods for the purpose of rendering services under Section 42 can be entrusted to the Port Trust authority by the owner as provided therein under Section 42(2). At that stage the goods may still be in the custody of the ship owner under a separate bailment with the shipper or the consignor, as may be. Even de hors the above question the liability to pay demurrage charges and port rent would accrue to the account of the Steamer Agent if a contract of bailment between the Steamer Agent and the Port Trust authority can be held to come into existence under Section 42(2) read with Section 43(1)(ii) of the Act of 1963. - once the bill of lading is endorsed or the delivery order is issued it is the consignee or endorsee who would be liable to pay the demurrage charges and other dues of the Port Trust authority. In all other situations the contract of bailment is one between the Steamer Agent (bailor) and the Port Trust Authority (bailee) giving rise to the liability of the Steamer Agent for such charges till such time that the bill of lading is endorsed or delivery order is issued by the Steamer Agent. - Ordinarily and in the normal course if resort is made to the enabling provisions in the Act of 1963 to proceed against the goods for recovery of the charges payable to the Port Trust authority there may not be any occasion for the said authority to sustain any loss or even suffer any shortfall of the dues payable to it so as to initiate recovery proceedings against the ship owners. - Decided against appellant.

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