TMI Tax Updates - e-Newsletter
May 18, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Deemed sale/ VAT - Transferable Development Rights/TDR - handing over/ construction of tenements to SRA amounts to sale under MVAT Act - HC

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• Tax on benefit or perquisite received - section 28(iv) would not apply when the amount received is cash or is considered in terms of money

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• Transfer of right to use the goods - buses given on hire - Levy of Tax (VAT) confirmed as deemed sale - HC

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Articles

1. COMPLIANCE ON CANCELLATION OF REGISTRATION UNDER REVISED GST LAW:-

   By: Pradeep Jain

2. Input tax Credit under CGST Act,2017 and Rules thereof

   By: Sanjeev Singhal

3. INTRA-STATE SUPPLY OF GOODS SECTION 8

   By: Amit Sharma

News

1. NITI Aayog holds the first Samavesh meeting

2. Cabinet approves signing of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting by India

3. The 18th Session of India-Sweden Joint Commission for Economic, Industrial and Scientific Cooperation

4. Cabinet approves Agreement between India and Tajikistan on Cooperation and Mutual Assistance in Customs Matters

5. RBI Reference Rate for US $

6. 91 lakh persons come under tax net post note ban: FM

Notifications

Central Excise

1. 8/2017 - dated 16-5-2017 - CE

seeks to amend notification no. 12/2012-Central Excise dated 17.03.2012 extending the time period for furnishing the final Mega power project certificate from 60 months to 120 months and extending the period of validity of security in the form of Fixed Deposit Receipt or Bank Guarantee from 66 months to 126 months, in case of provisional mega power projects

Customs

2. 23/2017 - dated 16-5-2017 - ADD

Seeks to levy definitive anti-dumping duty, on imports of Aluminium Foil originating in or exported from China PR

3. 22/2017 - dated 16-5-2017 - ADD

Seeks to amend notification No. 23/2016-Customs (ADD) dated 06.06.2016 vide which anti-dumping duty was imposed on imports of Polytetraflouroethylene (PTFE) originating in or exported from Russia so as to revise of the amount of anti-dumping duty applicable from US$ 739.77/MT to US$ 874.56/MT

4. 21/2017 - dated 16-5-2017 - ADD

Seeks to levy definitive anti-dumping duty on import of Amoxycillin originating in or exported from China PR for a period of five years (unless revoked, superseded or amended earlier) in pursuance of final findings of the Directorate General of Anti-Dumping and Allied Duties

5. 20/2017 - dated 16-5-2017 - Cus

Seeks to amend notification no. 12/2012-customs dated 17.03.2012 extending the time period for furnishing the final Mega power project certificate from 60 months to 120 months and extending the period of validity of security in the form of Fixed Deposit Receipt or Bank Guarantee from 66 months to 126 months, in case of provisional mega power projects

6. 19/2017 - dated 16-5-2017 - Cus

seeks to amend notification No. 101/2007 – Customs dated 11th September 2007 so as to notify the expanded schedule of tariff preferences under the India-Chile Preferential Trade Agreement (PTA)

7. 48/2017 - dated 16-5-2017 - Cus (NT)

Determination of Origin of Goods under the Preferential Trading Agreement between the Republic of India and the Republic of Chile (Amendment) Rules, 2017

DGFT

8. 07/2015-2020 - dated 16-5-2017 - FTP

Export Policy of Fertilisers - Updation of List of Manufactures/ Units of Single Super Phosphate (SSP), DAP and NP/NPK

Circulars / Instructions / Orders

Companies Law

1. 04/2017 - dated 16-5-2017

Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956 -reg.

2. 05/2017 - dated 16-5-2017

Transfer of Shares to IEPF Authority

Highlights / Catch Notes

Income Tax

• Adhoc 3% Addition to Work in Progress Challenged; AS-7 Standards Inapplicable to Pre-April 1, 2003 Contracts.

  Case-Laws - AT : Method of accounting - development agreement - Adhoc addition of 3% of work in progress - assessee is regularly following project completion method of accounting for computation of its income - AS-7 is not applicable where contracts commenced prior to 1.4.2003 - AT
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• Family Trust Denied Tax Exemption: Educational Institution Operates with Profit Motive, Fails Section 10(23C)(iii)(ad) Requirements.

  Case-Laws - AT : Denial of exemption u/s. 10(23C)(iii)(ad) - assessee is AOP - the Assessee is a family Trust and earning profit/benefits and not achieving the objects of the Trust - assessee organization is an educational institution being run for profit and thus ineligible for the exemption - AT
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• Section 28(iv) Income Tax Act: Cash Benefits from Customers Not Taxable as Perquisites or Benefits.

  Case-Laws - AT : Taxability of benefit or perquisite received from customers - section 28(iv) would not apply when the amount received is cash or is considered in terms of money - the phrase "whether convertible into money or not" would normally mean something else than money - AT
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• No Penalty for Incorrect Property Valuation: Assessee and Revenue Equally at Fault u/s 271(1)(c.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - wrong valuation of the property - assessee as well as the Revenue have been found to be at equal fault in evaluating the land in question - assessee cannot be penalized for such an act and conduct of valuation of the property - no penalty - AT
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• TDS Exemption: Section 194H Does Not Apply to Discounted SIM Card or Recharge Coupon Sales to Distributors.

  Case-Laws - AT : TDS u/s 194H - TDS provisions under section 194H are not applicable in respect of sale of SIM cards/recharge coupons at discounted rates to the distributors. - AT
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• Lease Transaction Deemed Sham; Payment to Assessee Classified as Dividend Income from Company.

  Case-Laws - AT : Nature of activity - dividend received - taking land from the company on lease - sham transaction - amount received by the assessee to be treated as dividend income due from the company. - AT
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Customs

• Customs Notification N/N. 1/2013 Not Enforced on 21.01.2013 Due to Publication Delays in Official Gazette.

  Case-Laws - HC : Effective date of notification - the N/N. 1/2013 Customs dated 21.01.2013 was received by the government press on 21.01.2013 at 9.45 p.m., printed on 01.02.2013 and sent to Kitab Mahal on 04.02.2013. Clearly, therefore, the N/N. 1/2013Customs, though issued on 21.01.2013, was neither published in the official gazette nor was offered for sale on the said date, and therefore, would not come into force and be operative from 21.01.2013 - HC
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• No Limestone Cess on Imported Goods Under Customs Tariff Act & Limestone Mines Labour Welfare Fund Act.

  Case-Laws - AT : Levy of Additional duty of Customs - Limestone Cess - mining of lime stone - no Additional Duty of Customs in the form of Lime Stone Cess u/s 3 of the Customs Tariff Act, 1975 read with Section 3 of Lime Stone and Dolomite Mines Labour Welfare Fund Act, 1972, for the subject import goods is leviable - AT
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• Customs Classification of Imported Copper Sulphate Technical Grade Reviewed; Section 38(1)(b) Exemption May Apply to Duties.

  Case-Laws - AT : Classification of imported “copper sulphate technical grade” - copper sulphate technical grade is used by the appellant for manufacturing of zinc concentrate. - the exemption under Section 38(1)(b) of the Insecticides Act will directly apply in the case in hand. - AT
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• Goods Not Confiscated Post-Final Assessment Due to Unavailability, Says Adjudicating Authority.

  Case-Laws - AT : The goods which were cleared earlier were cleared on final assessment of the bills of entry and the goods are not available for confiscation. In the absence of any goods, the adjudicating authority was correct in not confiscating the said goods - AT
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Service Tax

• Shifting minerals and removing overburden within mining areas not considered "Cargo Handling Service" for tax purposes.

  Case-Laws - AT : Cargo handling service - shifting of minerals from pithead to a specified area located within the mines and also removing over burden at mining sites to other location within mining area - cannot be taxed under “Cargo Handling Service” - AT
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• Refund Approved for Export Service Commissions u/r 3; Agent Facilitated Orders for Indian Railways in Foreign Exchange.

  Case-Laws - AT : Refund claim - commission received in convertible foreign exchange - the appellant was the agent of Electro Motive Diesel (EMD), who obtained the orders from the Indian Railways - the activity carried on by appellant comes within the scope of export of the service u/r 3 of the Export Service Rules, 2005 - refund allowed - AT
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Central Excise

• Court Urges Investigation into Illegal Forced Duty Recovery by Central Excise Using Undated Cheques.

  Case-Laws - HC : Forced recovery of duty / collection of undated cheques - This illegal practice adopted by the Anti-Evasion Department of Central Excise requires a deeper investigation. The Court has every reason to believe that this has come to light only because the Petitioner has approached this Court. This practice is perhaps being adopted in a number of instances which are yet to come to the notice of the Court. There will be serious ramifications if this practice is allowed to continue unchecked. - HC
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• Unbranded Soft Drink Concentrates Classified Under 2106.9019 for Central Excise; Uniformity Ensured by Case Law.

  Case-Laws - AT : Classification of goods - Soft Drink Concentrates - there cannot be two opinions regarding the classification of the item Soft Drink Concentrates (unbranded) and, therefore, its correct classification is 2106.9019 only - AT
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• Orthopaedic Heating Pads Classified Under CTH 9021 10 00 as Appliances, Supported by HSN Explanatory Note.

  Case-Laws - AT : Classification of Orthopaedic Heating Pads/Belts/Bands - classifiable under CTH 9021 10 00 or under CTH 3005 90 40? - the belts would fall under Orthopaedic appliances - the HSN explanatory note also supports the case of the assessee for the classification the product under Chapter Heading No. 9021 - AT
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• No Duty on Returned Goods: Cenvat Credit Case Decides Returned Goods Not Considered Input Removal.

  Case-Laws - AT : Cenvat Credit - Removal of goods as such - the quantity which has come back to the appellants cannot be considered as removal of input and no duty can be demanded on that quantity - AT
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• CENVAT Credit Case: No Interest or Penalty If No Duty Liability Exists, Even If Duty Initially Paid by Assessee.

  Case-Laws - AT : Interest - penalty - reversal of CENVAT credit - if the duty liability does not arise, the question of payment of interest and imposition of penalty will not arise, merely because the duty was paid by the assessee - AT
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• Single Cenvat account allowed for all units under one registration; credit on capital goods can't be denied.

  Case-Laws - AT : Cenvat Credit - There is no requirement in the Cenvat Credit Rules that prohibits a common Cenvat account for all the units comprised in one registration - there is no reason to deny the credit on capital goods availed for installing and setting up of MGU prior to grant of single registration. - AT
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VAT

• High Court Upholds VAT on Deemed Sale of Buses Hired by PMT in Pune u/s for Transfer of Use Rights.

  Case-Laws - HC : Deemed Sale - Transfer of right to use the goods - buses given on hire - The hired buses will be registered with the RTO, Pune in the name of the PMT as lessees and will be operated as stage carriages within the operational area of the PMT. - Levy of Tax (VAT) confirmed as deemed sale - HC
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• Court Examines if Tenement Transfer to SRA is a Sale under MVAT; Considers Market Price for Tax Liability.

  Case-Laws - HC : Sale / Deemed sale - Transferable Development Rights (TDR) - whether handing over and construction of tenements to SRA amounts to sale within the meaning of MVAT or not? - To say that what they have obtained is an immovable property in exchange or in lieu of the cost of construction incurred by them means not presenting a true and complete picture - on the strength of that prevailing price in the market, the tax liability can be computed - HC
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Case Laws:

• Income Tax

• 2017 (5) TMI 730
  Method of accounting - development agreement - Adhoc addition of 3% of work in progress - assessee is regularly following project completion method of accounting for computation of its income - Held that:- AO tried to invoke AS-7 of the accounting standard which is applicable to the contracts entered into during accounting period commencing on or after 01-04-2003. In the present case, the contract was entered in 1993 by way of development agreement and the assessee has returned the working progress from AY 1999-2000 and department has accepted consistently. In view of these facts, we direct the AO to compute the income on the basis of completed project method and not on percentage completion method of accounting. The appeal of the assessee is allowed.

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• 2017 (5) TMI 729
  Section 36(1)(iii) interest disallowance - CIT-A deleted the addition - Held that:- CIT(A) has followed his preceding assessment year’s reasoning in granting relief to the assessee on identical lines. No distinction on facts has been pointed out in the course of hearing pertaining to the two assessment years. Learned co-ordinate bench observes therein that the Assessing Officer has not brought anything on record to indicate interest bearing funds utilized in the capital work in progress. We accordingly adopt the same view herein as well to decline this first substantive ground against revenue Excess depreciation disallowance - CIT-A deleted the addition - Held that:- The relevant figures involved in the impugned assessment year qua this depreciation issue are only consequential to those involved and decided in the immediate preceding assessment year since there is no new addition herein. His case therefore is that the preceding assessment years findings not modified in any manner so far shall apply mutatis mutandis herein as well. The Revenue fails to rebut this crucial factual position. We thus find that the CIT(A) has rightly deleted the impugned disallowance. The Revenue’s second substantive ground is accordingly rejected. Transfer pricing adjustment - CIT(A) treated foreign exchange fluctuation gain/loss as an operating item not to be excluded for the purpose of computing arm’s length price - Held that:- The Revenue fails to rebut application of the extracted judicial pronouncements holding identical foreign exchange fluctuation gains/losses as operating item under the transfer pricing parlance. We thus affirm CIT(A)’s findings on this third issue as well. Non considering windmill income as an operating income for the purpose of determining the arm’s length price in question - Held that:- CIT-A held that it was a universal practice followed under transfer pricing regulations to exclude interest from the operating revenue for computing the net profit from the operating activity except where the earning of interest itself was the main activity. In this view he held that the interest income cannot be considered as the assessee’s operating income. He also found that the interest income in the present case was not so interwoven with the international transaction that it cannot be separated. No reason to disturb learned CIT(A)’s conclusion excluding assessee’s windmill income in computing the arm’s length price in question. Mr. Dhinal Shah then invites our attention the above extracted portion clause (g) not only excluding the said assessee’s interest income but also the corresponding interest expenditure. We find merit in this alternative plea as even the above judicial precedent has adopted the very course of action. The Transfer Pricing Officer is accordingly directed to re-finalize consequential computation treating both windmill income and expenditure as non operating for computing the arm’s length price in question after affording adequate opportunity of hearing to assessee. The instant cross objection is partly accepted for statistical purposes.

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• 2017 (5) TMI 728
  Disallowance in regard to expenses relatable to exempted income by invoking the provisions of section 14A of the Act read with rule 8D - Held that:- We find that in case the assessee is able to explain that no expenditure has been incurred for earning this income, AO will look into the facts and decide the case accordingly. Orders of the lower authorities are set aside and the matter remanded back to the file of the AO for fresh adjudication. The appeal of assessee is allowed for statistical purpose.

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• 2017 (5) TMI 727
  Denial of exemption u/s. 10(23C)(iii)(ad) - assessee is AOP - Held that:- All the Trustee are belonging to the family of Sh. Balwant Rai Satija and the motto of the Trust is to run the Educational school and to earn profit and creating a assets. Therefore, the Trust has not fulfilled the conditions of section 10(23C)(iii)(ad) of I.T. Act and therefore, the Trust is not eligible for exemption u/s 10(23C)(iii)(ad) of the I.T. Act and the same was rightly denied. We further note that the case laws cited by the Ld. Counsel of the assessee are not applicable because the assessee is earning profit year by year and purchasing the property, making FDRs and also earning interest thereon and most importantly, the Assessee is a family Trust and earning profit/benefits and not achieving the objects of the Trust. Accordingly the income of the Trust was assessed as AOP and exemption u/s. 10(23C)(iii)(ad) was rightly not allowed and the addition i.e. surplus of profit shown by the assessee was made to the income of the assessee and exemption u/s. 10(23C)(iii)(ad) which was rightly been confirmed by the Ld. CIT(A), by holding that assessee organization is an educational institution being run for profit and thus ineligible for the exemption as claimed, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the assessee. - Decided against assessee.

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• 2017 (5) TMI 726
  Addition u/s 41 - Held that:- Mere outstanding balances for many years would not justify the conclusion that there was cessation of liability u/s 41(1) of the Act. The appellant has also acknowledged the credits and shown them in the balance sheet. Thus we set aside the order of the ld.CIT(A) and direct the AO to delete the addition - Decided in favour of assessee Addition being advances received from the customers - amount held on behalf of principal and monies received from Kenyan Government u/s 28(iv) - Held that:- It is only if the benefit or the perquisite is not in cash or money but is non-monetary benefit or non-monetary perquisite that the question of including the value of such benefit or perquisite would ever arise. Under these circumstances the Tribunal was right in rejecting the contention urged on behalf of the revenue that the amount of 15,964 should be brought to tax as value of any benefit or perquisite within the meaning of section 28 (iv). The Tribunal doubted whether the amount of 15 964 was any benefit-" It may or may not be a benefit". Another question is whether the phrase "whether convertible into money or not" would normally mean something else than money. In our opinion, the conclusion of the Tribunal that section 28(iv) would not apply when the amount received is cash or is considered in terms of money, is correct, and the provisions of s 28 (iv) can never be made applicable to the facts of the present case, where excise refund was received by the assessee. - Decided in favour of assessee.

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• 2017 (5) TMI 725
  Search u/s 132 - undisclosed commission income - clandestine activities / accommodation entries - Held that:- There is a finding supported by document seized during the searches conducted by Revenue u/s 132(1) wherein it is mentioned that commission ranging from 1.5%- 2.45% on transaction value is paid on accommodation entries . The assessee has admitted to be involved in these clandestine activities. The assessee may be a part of the chain of persons who are beneficiary of these clandestine activities but since the document is seized from the assessee, the assessee has to demonstrate that the entire income as is reflected in the seized document marked as 101 is brought to tax albeit in the hands of other persons who were part of common conspiracy in these clandestine activities and the entire income suffered taxation. No such cogent material and evidences has been brought on record by the assessee. Mere statement recorded of Sh. Tejas J Shah u/s 131 is not sufficient as it is merely material obtained during search, while the document seized during the search speaks loudly of commission to the tune of 1.5% to 2.45% being paid on these accommodation entries. In-any case , learned CIT(A) has factored for expenses to be allowed for meeting various expenses which are likely to had been incurred by the assessee in undertaking these clandestine activities of being facilitator of accommodation entries. We donot find any infirmity in the appellate order of the learned CIT(A) which we are inclined to affirm/sustain. The assessee fails in this appeal.

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• 2017 (5) TMI 724
  Reopening of assessment - non permission from competent authority - Held that:- In the earlier first round proceedings before ITAT, the Tribunal while deciding the departmental appeal and cross objections of assessee vide order dated 30th January, 2012 restored the matter back to the file of Assessing Officer to redeciding objections of the assessee u/s 147 of the I.T. Act and addition on merit. The assessee filed objections to the reopening of the assessment before Assessing Officer. However Assessing Officer did not decide the objections of the assessee in the set aside proceedings. Therefore the reassessment orders are liable to be quashed. The issue is covered in favour of the assessee by order in the case of M/s. Shiva Rubber Industries vs. ITO [2017 (5) TMI 416 - ITAT DELHI ] wherein held competency of ITO cannot be doubted and challenged as the assessment drafted by the ITO is final assessment and the CIT(A) making the approval regarding assessment is not valid. - Decided in favour of assessee.

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• 2017 (5) TMI 723
  Penalty u/s. 271(1)(c) - valuation of the property - long term capital gains addition being re-computed by the Assessing Officer reducing assessee’s rate from 2050/- per sq.mtr. to 250/- per sq.mtr. only as on 01.04.1981 as modified in quantum lower appeal as well as in this tribunal - Held that:- There can hardly be any dispute about the settled law that quantum and penalty proceedings are separate wherein each and every addition made in course of former does not ipso facto result in levy of latter penal action. The Revenue’s argument that the assessee’s valuer intentionally did not highlight the fact of the land in question to be industrial is entirely misconceived as the said valuer makes it crystal clear at the bottom of the page that assessee’s land sold is situated in mixed commercial and industrial area. He thereafter certifies in the next page that there are no sale instances commensurating with the land sold on account of location, size, shape and other factors. This report very well considers all other advantageous factors of civic as well as industrial amenities to arrive at the valuation in question claimed at assessee’s behest. There is no dispute that the Assessing Officer thereafter reduced this valuation by citing sale instances of the relevant era i.e. in the years 1981 and 1982 to drastically reduce the assessee’s rate of 2050/- per sq.mtr. to 250/- only. The fact however remains that he has not considered even a single sale deed pertaining to any commercial or industrial plot as is the one involved in the instant lis. We further repeat that the said reduced rate stands enhanced to 550/- per sq.mtr. in quantum lower appeal and to that @Rs.980/- per sq.mtr. in this tribunal (supra). It is thus crystal clear that both the assessee as well as the Revenue have been found to be at equal fault in evaluating the land in question. We thus are of the considered opinion that the assessee only cannot be penalized for such an act and conduct of valuation of the property in these peculiar facts and circumstances by terming it as an instance of either concealment of income or furnishing of inaccurate particulars of income u/s.271(1)(c) of the Act. We accordingly direct the Assessing Officer to delete the impugned penalty of 5.33crores as partly confirmed in the lower appellate proceedings. - Decided in favour of assessee.

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• 2017 (5) TMI 722
  Deduction u/s. 80P - eligibility to co-operative bank for deduction u/s 80P - interest income as fixed deposit - Held that:- We noticed that the assessee was not operating u/s. 5(b) of the Banking Regulation Act as the assessee was not allowed to accept deposit of money from the public and do other banking activities as defined in the section 5(b) of the Banking Regulation Act. We further noticed that the assessee was a co-operative society registered under Registrar of Co-operative Society Mehsana, Mehsana, Gujarat State engaged in taking deposits from its members and providing advances to its members with the object of promotion and development of its members. In view of the above facts and the detailed findings provided by the ld. CIT(A) in his findings as supra we considered that the assessee is not a co-operative bank u/s. 80P(4) of the act. No merit in the contentions of the ld. counsel for considering the interest income as fixed deposit as business income. We find that it is to be considered as income from other sources as held in the case of Totgors Co-operative society Ltd. Vs. ITO Karnataka [2010 (2) TMI 3 - SUPREME COURT] wherein it was held that investing surplus funds in short term deposits would fall under the head income from “other sources” taxable u/s. 56 of the Act and it cannot be attributable to the activities of the society, therefore, the interest as fixed deposit received would not qualify for deduction u/s. 80P(2)(5)(a)(i) of the act. We also do not find any merit in the ground of the assessee to allow expenditure out of interest income from fixed deposit as after perusal of paper book, and order of the lower authorities we find that the assessee has not substantiated that there was any particular expenditure incurred on earning interest income from the fixed deposit kept with the bank as elaborated above in this order. Accordingly, the appeal of the assessee is dismissed.

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• 2017 (5) TMI 721
  Addition of income from other sources - Transfer Fees in excess of limit prescribed by the Notification of Govt. of Maharashtra i.e. 25,0001- per flat - concept of Mutuality - taxability of the receipts of the society on account of Repairs 25,000/-, and the balance contribution was received towards repairs and maintenance funds, Members Lift Funds etc. CIT (A) also observed that funds so received was used for betterment of society for common benefits. Department could not controvert these finding of the CIT (A) by bringing any positive material on record. Thus, while granting relief to the assessee, CIT (A) discussed the issue i.e. taxability of the receipts of the society on account of Repairs & Maintenance Fund Members Lift fund and transfer fee, at length and relied on the precedents and decided the issue in favour of the assessee. Therefore, we are of the considered view that the decision of the CIT (A) is fair and reasonable and it does not call for any interference. - Decided against revenue

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• 2017 (5) TMI 720
  Existence of PE in India - income accrued in India - Attribution of entire management fee to the alleged PE in India - Held that:- As per section 9(1) of the Act all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, shall be deemed to accrue or arise in India, however, Explanation (1) to section 9(1) makes it clear, in case of a business of which all operations are not carried out in India, only such part of the income as is reasonably attributable to the operations carried out in India shall be deemed to accrue or arise in India. Therefore, the income of the assessee has to be determined keeping in view the aforesaid legal principle. In view the aforesaid facts, since the assessee’s contention with regard to the exact profit attributable to PE in India has not been properly analysed/examined, therefore, we are inclined to remit the issue to the file of the AO for fresh adjudication. It is open for the assessee to furnish all material/evidences to justify its claim that profit worked out as per the chart submitted before us is the income actually attributable to the PE in India. Due opportunity must be given to the assessee to produce any other evidences and material before the AO on this account. The AO is directed to properly consider and examine the submissions of the assessee in the light of the evidences and material brought on record and decide the issue as per law. It goes without saying, the AO must afford reasonable opportunity of being heard to the assessee before deciding the issue. Ground no.2 and 3 are allowed for statistical purposes. Levy of interest u/s 234B for non-payment of advance tax - Held that:- The assessee being a non-resident, the liability is on the payer to deduct tax at source u/s 195 of the Act at the time of payment and there is no liability on the assessee to pay advance tax. This view of ours is supported in the case of Director of Income-tax (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]. In view of the above levy of interest u/s 234B of the Act is unsustainable. This ground is allowed.

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• 2017 (5) TMI 719
  Addition on account of Arm's Length Price - rejection of TNM Method - selection of MAM - sale of television programmes and film rights to ATL Mauritius - Held that:- Transfer Pricing Officer has not brought out any justifiable reasons to depart from adopting the TNM method, which has otherwise been found to be applicable in the assessments of past as well as subsequent assessment years upto to the assessment year 2012-13, as stated before us by the Ld. Representative for the assessee before us. Therefore, on the principle of consistency also, we are unable to uphold the selection of RPM method as the most appropriate method by the Transfer Pricing Officer in preference to the TNM method selected by the assessee. It would be inappropriate to factually conclude that the Transfer Pricing Officer has not verified the TNM method applied by the assessee company . In fact, in terms of page 108 of the Paper Book, wherein is placed a copy of assessee’s communication to Transfer Pricing Officer dated 07/10/2011, the assessee had submitted a working to demonstrate that even if the concerns which were selected by the Transfer Pricing Officer for assessment year 2007-08 are taken as comparables for the instant year also, the transactions with ATL-Mauritius would still to be at arm's length price. All this goes to show that the Transfer Pricing Officer was fully aware of the manner in which the TNM method was applied by the assessee company and there is no adverse observations in this regard. The material on record, in our view, clearly belies the averment of the Revenue that the matter be restored back to the file of Transfer Pricing Officer for verifying the application of TNM method. Rather, in our view, the fact-situation clearly points to the contrary inasmuch as the assessee had fully explained its position in the course of proceedings before the Transfer Pricing Officer and no justifiable fault has been pointed out by the Transfer Pricing Officer; and, even before us the same position continues on behalf of the Revenue. Under these circumstances, in our view, the plea of the Ld. Departmental Representative is untenable and is hereby rejected. In the final analysis, it is held that the action of the Transfer Pricing Officer in determining the transfer pricing adjustment of 24,91,59,200/- with regard to the sale of television programmes and film rights to ATL-Mauritius deserves to be set-aside. - Decided in favour of assessee Addition of arm’s length fee for corporate guarantee given by the assessee to the bank on behalf of its associated enterprise, ATL-Mauritius for the loan facility availed by it from the bank - Held that:- We are inclined to uphold the rate of 0.5% for the purposes of determining arm’s length rate of the corporate guarantee commission/fee. Thus, on this aspect, we set-aside the order of CIT(A) and direct the Assessing Officer to recompute the addition as per our aforesaid direction. Thus, on this aspect assessee partly succeeds. Disallowance under section 14A - Held that:- Following the ratio in the case of Reliance Utilities & Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT) it has to be presumed that the investments are out of own interest free funds. The said proposition is also applicable in the context of section 14A of the Act as held by the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. vs. DCIT (2014 (8) TMI 119 - BOMBAY HIGH COURT). Therefore, considering the aforesaid fact-situation, we find no reason to uphold the disallowance made under section 14A of the Act on account of interest expenditure. So far as the disallowance out of overhead expenses Assessing Officer has adequately brought out that during the year assessee has undertaken activities, which involve taking investment decisions and, therefore, some amount of management/administrative costs are liable to be attributed to such activity. Considering the entirety of circumstances, in our view , in so far as the administrative expenses is concerned, the application of Rule 8D(2)(iii) of the Rules to compute disallowance under section 14A of the Act is quite justified. Thus, on this aspect, we hereby affirm the stand of the Revenue. Addition of write off of advance given to the Board of Control for Cricket in India (BCCI) - allowable deduction u/s 37(1) - Held that:- In the assessment year 2007-08 assessee has asserted that part of the amount paid to BCCI has been debited in the Profit and Loss account and there is no dispute on this count. In this background, in our view, the plea of the Assessing Officer to say that the impugned loss was capital in nature is not tenable. At this stage, it may also be relevant to mention that the Assessing Officer has only made a bald assertion and not given reason to justify as to why the acquisition of media rights in terms of the agreement dated 12/04/2006 has to be treated as capital in nature. Therefore, considering the entirety of the facts and circum stances of the case, in our view, the assessee made no mistake in treating the amount forfeited by BCCI as a deduction allowable while computing the income for the year under consideration. Thus, on this aspect assessee succeeds. Structured interest swap loss - treated as a speculation loss as against business loss treated by the assessee - Held that:- In order to treat the impugned interest rate swap arrangement to be ‘speculative’ in terms of section 43(5) of the Act, the Revenue would have to demonstrate that an interest rate swap arrangement was a tradable commodity. This crucial aspect has not been addressed by the lower authorities and infact the assessee has been consistently arguing that instant arrangement do not qualify to be a commodity for the purposes of section 43(5) of the Act. No doubt, before us the Ld. CIT-DR has attempted to show that interest rate swap arrangements are akin to. tradable derivates, but no such aspect is emerging from the respective orders of the lower authorities. Infact, the order of the Assessing Officer is quite inconsistent because at one place he says that “the present transactions are not derivative transactions”, while at other place he says that the “transaction of interest rate swap is a derivative falling within the meaning . . . .”. Thus, in our view, the said issue requires to be revisited by the Assessing Officer to bring out why the impugned transaction falls for consideration as a speculative transaction for the purposes of section 43(5) of the Act so that the assessee can meet the point in an appropriate manner. Therefore, we setaside the order of the CIT(A) on this aspect and restore the issue back to the file of the Assessing Officer for a de novo consideration

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• 2017 (5) TMI 718
  Penalty u/s 271AAA - additional income on account of incriminating document found during the course of search - Held that:- The search took place on 11.02.2010. The assessee offered income of 12,48,85,000/- in his statement recorded u/s 132(4) during the course of search on 12.02.2010. The assessee filed his original return of income for the A.Y. 2010-11 on 31.07.2010 offering income of 22,00,00,000/- for taxation. In the upshot, as the assessee admitted the undisclosed income of 12,48,85,000/- during the course of search on 12.02.2010, he is liable to penalty u/s 271AAA @ 10% on the balance amount of Rs. 9,51,15,000/- only (Rs. 22,00,00,000/- minus 12,48,85,000/-). The A.O. is directed to impose penalty u/s 271AAA @ 10% on the balance amount of 9,51,15,000/- in place of 2,20,00,000/- computed by him. - Decided partly in favour of assessee.

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• 2017 (5) TMI 717
  Addition u/s. 69C on account of alleged unaccounted expenditure - Held that:- The contention of the assessee is that the difference in question has occurred due to the reason that cheque dated 19.5.2004, 20.7.2004 and 12.5.2005 for 4,850, 2,50,000/- and 10,161/- were not honoured and one bill was accounted in the name of some other party. The assessee has pointed out that the authorities below have not considered this aspect while deciding this issue. We also notice that the assessee has explained the said reason in its written submissions dated 19.10 2012 made before the Ld. CIT(A). Under these circumstances we are of the considered view that this aspect is required to be considered afresh in the interest of justice. We, therefore, set aside the findings of the Ld. CIT(A) and send this issue back to the AO with the direction to decide this issue afresh in the light of the aforesaid contention, after affording a reasonable opportunity of being heard to the assessee.

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• 2017 (5) TMI 716
  Set off of unabsorbed depreciation pertaining to A.Y. 2000-2001 and A.Y 2001-02 from income under the head “income from other sources” - Held that:- It is the amended section 32(2) of the Act that shall apply in relation to unabsorbed depreciation pertaining to A.Y. 2000-01 and A.Y 2001-02 and the restriction of 8 years which was in force till the law was amended by the Finance Act 2001 does not apply. In the instant case, it is not in dispute that the unabsorbed depreciation pertaining to A.Ys 2000-01 and 2001-02 have not been set off in the earlier years and the same is being carried forward to the year under consideration for being set off. In light of above, ground taken by the Revenue is dismissed. Maintainability of appeal - Held that:- It cannot be said that issue relating to set off of unabsorbed depreciation doesnt arise from the assessment order. At the same time, as far as governing law relating to set off for the year under consideration is concerned, the same is allowed as we have held above that it is the amended section 32(2) as amended by the Finance Act 2001 that will apply. In the result, ground no. 2 of assesses’s cross objection is partly allowed. Interest income earned - ‘Income from Business’ OR ‘Income from other sources’ - Held that:- What is relevant to examine is whether advancing of funds by way of interest bearing loan is one of the activities which has been regularly carried by the assessee as part of its business activities or not. And where such activities are not part of the regular business activities carried on by the assessee, what is the business expediency of advancing funds to the third parties. The next question that arise for consideration is the funds that have been advanced and whether the same have been advanced from borrowed funds as claimed by the appellant or internal surplus funds as available with the assessee and how the necessary nexus is established between the two. The ld AR has submitted that these advances were made in earlier years as is evidenced from copy of accounts submitted herewith along with Bank statement showing source of advance being from C.C A/c of Bank and thus they are not short term advances but are long term advances. There is no such finding of fact by the lower authorities in this regard. In our view, these are the matters which required further examination and we deem it fit to set aside the matter to the file of the AO to examine the same afresh.

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• 2017 (5) TMI 715
  Denying exemption u/s 54F - assessee has not constructed a residential house on plot of land purchased for on 87.50 lakh before the expiry of 3 years prescribed time limit from date of transfer of original asset - alternative ground by A.R. that if the long-term capital gain is to be taxed in the A.Y. 2010- 11, then the AO therefore, be directed to reduce the long-term capital gains declared by the assessee in A.Y. 2013-14 - whether amount of capital gain can be charged to tax in the third year? The learned counsel has not been able to show that the assessee had complied with the said requirement of sub-s. (4) of s. 54F of the Act. Mere purchase of residential plot is not sufficient compliance of provisions of section 54F. What was expected from the assessee was to prove on record that the assessee had purchased or constructed a house within the period specified under section 54F, which the assessee had failed to prove on record. The AO rightly rejected the claim of the assessee and order of learned CIT (A) is on the correct footings, which requires no interference. Therefore, the above ground of appeal of the assessee are rejected. The assessee has offered long-term capital gain in A.Y. 2013-14 and paid taxes thereon. This means that the said amount of long-term capital gain is being taxed twice, which cannot be intention of the Legislature. Therefore, we direct the AO to verify the claim whether the assessee has disclosed this long-term capital gain amount in A.Y. 2013-14, and if found correct, the AO should reduce then the said amount be reduced from taxable long-term capital gain of A.Y. 2013-14, and resultant refund of tax if any would be adjusted against the demand of assessment year under consideration i.e. A.Y. 2010-

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• 2017 (5) TMI 714
  Unexplained expenditure - addition in assessment orders under section 153A - Held that:- Assessing Officer merely contended in the remand report that copies of the account submitted by the assessee do not clearly substantiate his claim. The learned counsel for the assessee prepared a chart as per the contents of the seized documents and each entry is explained through entries in the day book journal voucher and ledger account of advances (land). It therefore, supports the explanation of the assessee that all the expenditure mentioned in the seized papers are duly reflected in the regular books of account of the assessee. The learned Departmental representative did not file any objection to the documents filed in the paper book were part of the record of the learned Commissioner of Income-tax (Appeals). Therefore, the explanation of the assessee that all the expenditure mentioned in the seized papers are reconciled through regular books of account stands established and proved. Therefore, there is no justification to make or sustain the addition against the assessee. We, therefore, set aside the orders of the authorities below and delete the addition - Decided in favour of assessee.

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• 2017 (5) TMI 713
  Addition under section 40A(2) - excessive or unreasonable expenditure - onus on the AO - Held that:- The hon'ble Supreme Court in the case of Upper India Publishing House P. Ltd. v. CIT [1978 (12) TMI 2 - SUPREME Court] held that before section 40A(2) of the Act is applied, the Assessing Officer should have proved expenditure is excessive or unreasonable. The assessee has explained before the authorities below all the facts and circumstances that reasonable payments have been made to the sister concern and there is nothing unreasonable in this regard. In any case, even for applying the provisions of section 40A(2), it is for the Assessing Officer to make out a case that the expenditure incurred is excessive or unreasonable having regard to the fair market value of such services. However, nothing has been done by the Assessing Officer in this case, therefore, considering the totality of the facts and circumstances as explained above, there is no justification for the Assessing Officer to invoke the provisions of section 40A(2) of the Income-tax Act to make the addition. We, therefore, do not find any justification for making the above addition. - Decided in favour of assessee Addition under section 40(a)(ia) - non deduction of tds - Held that:- Assessee has specifically pleaded before the authorities below that on brokerage and forwarding and handling charges, TDS has been deducted and paid in the Government account. As regards freight, customs house agent loading and unloading charges, it was pleaded that since it was for railways indent, therefore, no TDS was required to be deducted. The learned Commissioner of Income- tax (Appeals) found the contention of the assessee to be correct that TDS has been deducted on most of the items and deposited in the Government account, therefore, there is no question of disallowance of the same. As regards the transportation through railways indent, no TDS is required because it is a payment made to the Government undertaking. The findings of the fact recorded by the learned Commissioner of Income-tax (Appeals) has been supported by TDS return, tax challans filed in the paper book, therefore, finding of the fact arrived at by the learned Commissioner of Income-tax (Appeals) have not been disputed through any evidence or material on record, therefore, part addition deleted by the learned Commissioner of Income-tax (Appeals) is wholly justified and no interference is called for - Decided against revenue TDS on amount reimbursed by the assessee to the agents - Held that:- in the seized papers details of payments made to these agencies have been mentioned, therefore, we are of the view one more chance should be given to the assessee to explain this issue before the Assessing Officer, whether the amounts paid to these persons are reimbursement of expenses incurred on behalf of the assessee. In this view of the matter, we set aside the orders of the authorities below to that extent in which the addition is confirmed by the learned Commissioner of Income-tax (Appeals) and restore part of the issue to the file of the Assessing Officer with a direction to redecide this issue by providing reasonable opportunity of being heard to the assessee. The assessee is directed to produce sufficient material before the Assessing Officer to explain whether it was reimbursement of expenses and why no TDS was required to be deducted on these payments made to J. D. Prasad and Sons Pvt. Ltd. and Sukhvinder Singh through Leaf. - Decided in favour of assessee for statistical purposes. Unexplained cash credits under section 68 - Held that:- The assessee has explained the circumstances in which the amount of 4.60 crores was received in the bank account of the assessee which was paid by M/s. Adani Exports Limited through M/s. Nav Bharat Enterprises. The confirmations of accounts and bank statements support the explanation of the assessee and ultimately the amount of 4.60 crores has been transferred to M/s. Lakshmi Overseas Industries Ltd. immediately. Since the amount in question belongs to M/s. Lakshmi Overseas Industries Ltd. therefore, there was no justification to make any addition in the hands of the assessee. The assessee has filed copies of the bank statement and copies of the accounts of Nav Bharat Enterprises and Adani Exports Ltd. in the paper book in support of the above explanation. The learned Commissioner of Income- tax (Appeals), therefore, rightly found that the explanation of the assessee is correct, therefore, no addition can be made against the assessee. - Decided in favour of assessee Unexplained cash credit received from Smt. Vijay Lakshmi - Held that:- No merit in this ground of appeal of the Revenue. The assessee filed complete details and evidences before the authorities below to prove the identity of the creditor, her creditworthiness and genuineness of the transaction in the matter. The confirmation of Smt. Vijay Lakshmi, her ledger account, shareholding and receipt of dividend are filed in the paper book, which proves her creditworthiness to advance genuine loan to the assessee. The learned Commissioner of Income-tax (Appeals) had properly appreciated all the evidence and material on record and correctly deleted the addition Deemed dividend addition under section 2(22)(e) - Held that:- The chart given by the assessee to the Commissioner of Income-tax (Appeals) shows that shareholding pattern did not exceed 10 per cent. of the total shareholding, therefore, the condition of section 2(22)(e) of the Act have not been fulfilled. Thus as the assessee-firm was holding less than 10 per cent. shareholding of the voting power and any amount advanced by closely held company to the assessee-firm was not to be treated as deemed dividend under the provisions of section 2(22)(e). It appears that the Assessing Officer has clubbed all the shareholdings of the Uppal group for applying the provisions of section 2(22)(e) of the Act. The intention of section 2(22)(e) is to tax dividend in the hands of the shareholders. The learned Commissioner of Income-tax (Appeals) therefore, on a perusal of the shareholding pattern upheld in the impugned order correctly found that the assessee and its shareholders, while they may be registered shareholders are not beneficiary holders of shares. Therefore, the learned Commissioner of Income-tax (Appeals) has correctly deleted the addition - Decided in favour of assessee

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• 2017 (5) TMI 712
  Nature of activity - dividend received - taking land from the company on lease - sham transaction - addition under the head "Income from other sources" rejecting the claim of the assessee to treat it as agricultural income - Held that:- The transaction of lease of agricultural land between the assessee and the land holding companies cannot be termed as illegal, however it appears to be sham because of the following reasons : "(1) The lease rent paid to the land holding companies/HUF by the assessee and the other individuals who had taken the land on lease is only 500 per acre per annum, which is too low and not in parity with the agricultural income earned by the lease holders. (2) All the shareholders of the land holding companies are the lease holders of the land owned by the companies which is in proportion to the shares held by them. (3) The decision of the company to lease the land is not in the interest of the company which is a distinct legal entity for profit but a modus operandi to pass on the income derived from agricultural operation from the land owned by the companies to the shareholders of the company directly. (4) The entire transaction is aimed to circumvent the provisions of the Act because dividend income is taxable in the hands of the asses see. (5) There is also no cogent evidence to prove that the assessee had cultivated the land and earned agricultural income individually because it appears that the agricultural operations were collectively performed by all the shareholders by engaging staff. The documentary evidences created are in connivance with all the parties to make believe the transaction entered in papers to be genuine. (6) It is crystal clear that all the shareholders of the company had performed agricultural activities under the name of Barwood Estate instead of in the name of the companies which is only to avoid the distribution of profit by the companies as dividend." Because of the above mentioned reasons, we are of the considered view that the learned Assessing Officer and the learned Commissioner of Income-tax (Appeals) are right in their decisions for holding the amount received by the assessee to be treated as dividend income due from the company. Hence we hereby refrain from interfering with the orders of the Revenue authorities. - Decided against assessee.

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• 2017 (5) TMI 711
  Non-compliance with the provisions of Sec. 245D(2D) - Order of Settlement Commission - Revival of appeal after abatement of proceeding - Held that:- It is quite clear that the words “Under exceptional circumstances” used by our coordinate Bench is in relation to passing or non-passing of the order by the Settlement Commission and not in relation to the revival of proceeding before the income-tax authorities which, even according to our coordinate Bench, gets revived “automatically”. Therefore, on the point of law as manifested by Sec.245HA(2) of the Act as well as on the reading of the order of Tribunal dated 13.4.2010 (supra), we find that the CIT(A) has mis-directed himself in refusing the revival of appeal after abatement of proceeding before the ITSC. Under these circumstances, we, therefore, deem it fit and proper to accept the preliminary plea of assessee for remanding the matter back to the file of CIT(A) for consideration afresh since he has not passed any order on the merits of the dispute before him. As a consequence, we set-aside the impugned order of CIT(A) and restore the matter back to his file for a decision afresh in accordance with law. We may clarify here that our decision to remand the matter back to the file of CIT(A) is no reflection on the merits of the assessment, which shall be decided by the CIT(A) as per law. In the result, appeal of assessee for Assessment Year 1986-87 is allowed as above.

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• 2017 (5) TMI 710
  Levy of penalty under section 271C - violation of the provisions of section 194H - non deduction of tds on sale of SIM cards/recharge coupons at discounted rates to the distributors - Held that:- The appeal of the assessee for the assessment year 2007-08 was allowed, as the order passed by the Assessing Officer under section 201(1) and 201(1A) of the Act was barred by limitation. In respect of the other assessment years i.e. the assessment years 2008-09 to 2012-13, the Tribunal held that sale of SIM cards/recharge coupons at discounted rate to the distributors is not commission and therefore, not liable to the TDS provisions under section 194H of the Act. Although the Tribunal has remitted the matter back to the file of the Assessing Officer to verify the manner in which the books of account are maintained and whether the sale discount is reflected in the books. However, in principle the Tribunal has deleted the addition holding that there is no payment of commission, hence, the provisions of section 194H are not attracted. Various Benches of the Tribunal in the assessee's own case have taken a consistent view holding that the TDS provisions under section 194H are not applicable in respect of sale of SIM cards/recharge coupons at discounted rates to the distributors. Once, the substratum for the levy of penalty has eroded there is no question for sustaining the penalty. Since the co-ordinate Bench of the Tribunal has deleted the quantum addition in all the assessment years under appeal, under such circumstances there is no question of levy of penalty. Accordingly, the impugned orders are set aside and all the appeals of the assessee are allowed.

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• 2017 (5) TMI 709
  Levy of penalty u/s 158BFA(2) - assessment u/s 158BC - whether the penalty is not legally tenable as the expenses were not covered in the definition of undisclosed income prior to the amendment of undisclosed income in section 158B(b) of the Act by the Finance Act, 2002, retrospective from July 1, 1995? - Held that:- In sub-section 158B(b) of the Act, the last phrase inserted by the Finance Act, 2002 with retrospective effect from July 1, 1995, "or any expense, deduction or allowance claimed under this Act which is found to be false", whereas the block return was filed by the assessee only on June 7, 2000 when the definition of undisclosed income did not include any item pertaining to expense, deduction or allowance which is found to be false. These items got included in the undisclosed income only by the Finance Act, 2002 though retrospective from July 1, 1995, but on the day the assessee filed its return of income the amended provision did not exist. According to us the amended provision will not apply to the present case. As at the time of filing of the block return by the assessee, the assessee was not obliged to declare the expenses in the return particularly when no material or evidences was found relating to these expenses (except the statement of the CEO which was retracted) in the course of search on the business premises of the assessee. Thus we reverse the orders of the lower authorities and the penalty levied under section 158BFA(2) of the Act on this jurisdictional issue. - Decided in favour of assessee.

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• 2017 (5) TMI 708
  Addition on account of deferred revenue expenditure - effective date for setup of business - whether the expenditure which were incurred before the commencement of business can be allocated to cost of fixed assets, if it was directly required for the purpose of bringing the asset to put to use situation? - Held that:- Respectfully following the decision of the Hon’ble High Court in the case of Omniglobe Information Tech India P. Ltd. (2014 (9) TMI 6 - DELHI HIGH COURT ), we are of the opinion that the business of the assessee was set up in the immediately preceding year. Further, in view of the decision of the Hon’ble High Court in the case of CIT v. Samsung India Electronics Ltd. [2013 (7) TMI 335 - DELHI HIGH COURT] the expenses incurred after set up of the business and before the actual commencement of the business are allowable. Accordingly, we hold that the expenses claimed by the assessee are revenue in nature and incurred after setting of the business and before actual commencement of the business, hence, allowable under section 37 of the Act. This ground No. 1 of the appeal of the Revenue is rejected. Capitalization of professional charges - Held that:- We find that the learned Commissioner of Income-tax (Appeals) has analysed the party-wise list of expenses of 76,43,892 treated by the Assessing Officer as capital expenditure and concluded that only 15,27,790 was claimed by the assessee as professional charges in the profit and loss account and the balance expenses out of 76,43,892 were treated by the assessee as capital expenditure and, thus, cannot be disallowed again as the same has not been claimed as revenue expenditure. In respect of the expenses of 15,27,790, the learned Commissioner of Income-tax (Appeals) has held the same are incurred for running and operation of the assessee's business and accordingly he allowed the amount of 15,27,790 as revenue expenditure. The order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is comprehensive and well reasoned and thus no interference on our part is required - Decided against revenue TDS u/s 195 - treating the payment of International Private Leased Circuit (IPLC) to M/s. Kick Communication Inc., USA and connectivity charges to M/s. IGTL Solution Inc. USA chargeable to tax in India as "royalty" under section 9(1)(vi) and article 12 of the DTAA between the USA and India - P.E. in India - disallowance under section 40(a)(i) - Held that:- On a perusal of Explanation 2 as well as the illustrative examples of business connection given in CBDT Circular No. 23, we are of the opinion that the non-resident parties in the case of the assessee are not having any business connection as no such facts of business activity carried out through a person acting on behalf of the non-resident or through a broker or agent have been brought forward before us by the Revenue. The undersea cable for providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party M/s. Kick Communication in India. It was responsible for restoring connectivity and managing faults in connectivity etc. in respect of data transmitted through undersea cable only. Similarly, the operations carried out by M/s. IGTL Solutions are also in the USA and not in India. Since the operations by both the non-resident parties are carried out beyond the territory of India, we thus hold that section 9(1)(i) of the Act is not attracted in the case of the above two non-resident parties. Payments in the hands of the recipient as income by way of royalty - Held that:- We find that the service in substance is for providing connectivity facility to the assessee to generate and cater to outbound public switch telephone network (PSTN) calls within the USA. Thus, clause (iii), (iv) or (iva) are not applicable for consideration paid to M/s. IGTL Solutions by the assessee.In view of above, we are of the opinion that the consideration paid to the non-resident parties does not fall under the term "royalty" in terms of section 9(1)(vi) of the Act. In the case of instant assessee, the control of equipment was with the non-resident parties and they have not leased the equipment, i.e. the undersea cable etc. to the assessee. The equipment were owned and used by the non-resident parties only and therefore it cannot be said that the consideration paid was for use of equipment by the assessee. Similarly the non-resident parties have not provided use of any process to the asses see, which are of patentable nature having exclusive ownership rights. The assessee was not concerned with any of the process involved in transmission or connectivity of call data. The only concern of the assessee was transmission of call data beyond the boundaries of India to the person in the USA to whom call was made. Thus we hold that the payments made by the assessee are not in the nature of royalty either under the domestic law or relevant DTAA. No disallowance could have been made under section 40(a)(i) of the Act for non-deduction of tax on the payments to non-resident parties, namely, M/s. Kick Communication and M/s. IGTL Solutions. Accordingly, ground No. 1 of the appeal is allowed. Payments in the nature of fee for technical services (FTS) - Held that:- For service of transmission of call data from end of the Indian territory to the person in the USA to whom call is made the payment in question cannot be considered as fee for technical services (FTS) in terms of section 9(1)(vii) read with Explanation 2 of the Act. Since in the call connectivity and transmission from end of the Indian territory at Mumbai to the termination of call in the USA, no technical knowledge has been made available to the assessee, respectfully following the decision of the Tribunal in the case of Bharti Airtel Ltd v. ITO (TDS) (2016 (3) TMI 680 - ITAT DELHI ), we hold that the payment for the services of call transmission through dedicated bandwidth provided by the non-resident parties to the assessee, cannot be termed as fee for technical services under the Treaty also, in the hands of the recipients. - Decided in favour of assessee.

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• 2017 (5) TMI 707
  Disallowance of deduction under section 80-IB(10) - proportionate disallowance - Held that:- Merely because the same units sold or allotted during the financial year are not complied with the conditions of section 80-IB(10) of the Act, the entire claim of the assessee for the entire project cannot be dismissed at the threshold. We are of the considered opinion that the claim of the assessee under section 80-IB of the Act cannot be dismissed in entirety and the proportionate disallowance in respect of units are not complied with conditions of section 80-IB(10) of the Act is quite justified and correct. Therefore, we direct the Assessing Officer to restrict the disallowance proportionately in respect of allotment and sale transactions which are not complied with the conditions of section 80-IB(10) of the Act as applicable for the assessment year 2010-11 and to allow the remaining deduction as claimed by the assessee for eligible units allotted or sold to the assessee. Accordingly, we confirm the conclusion of the learned Commissioner of Income-tax (Appeals) with the directions as given to the Assessing Officer in the earlier part of this paragraph. Since both the rival representatives agreed that the facts and circumstances for the assessment years 2011-12 and 2012-13 are identical, therefore, we further hold that our conclusion noted for the assessment years 2010-11 is applied to the assessment years 2011-12 and 2012-13 mutatis mutandis and the Assessing Officer is directed to make proportionate disallowance in respect of the units allotted and sold during this period keeping in view the amendments in section 80-IB(10) of the Act which are applicable with effect from April 1, 2010. - Decided partly in favour of assessee.

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• 2017 (5) TMI 706
  Revision u/s 263 - disallowance of provision for standard assets holding that such provision is not allowable as provision for bad debt allowable under section 36(1)(viia) - Held that:- As referring to a copy of a letter by the Principal Commissioner of Income-tax-1, Jodhpur it is absolutely clear that the very basis of order under section 263 of the Act is the assessment order which was not available in the file. That therefore the order under section 263 of the Act passed by the learned Commissioner of Income-tax cannot sustain in law and at the very outset the said order becomes invalid because of the fact that the order of the Assessing Officer whether it is erroneous or prejudicial to the interests of the Revenue has not been determined in this case in the very absence of the assessment order. Furthermore the issue with regard to the allowability of the provision for standard assets is covered by the decision of co-ordinate Bench of the Income-tax Appellate Tribunal, Jodhpur in the case of Nagaur Urban Co-operative Bank Ltd. v. Asst. CIT [2013 (11) TMI 1696 - ITAT JODHPUR]] and is in favour of the assessee wherein held The terminology "Reserve for NPA" has been used by the assessee in accordance with the RBI directions. As is evident from the assessment order the assessee has indeed created "Reserve for NPA". For claiming the benefit under the provisions of section 36(1)(viia)(a) the conditions to be satisfied is ; that the provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction. Co-operative banks do not strictly follow the provisions of the Banking Regulation Act for the purpose of maintaining their books of account. In our considered opinion, the assessee has created provisions for bad and doubtful debts may be under different nomenclature. This will not disentitle the assessee for claiming deduction under the provisions of section36(1)(viia)(a). The purpose of creation of reserve for NPA is same i.e., creating provision towards bad and doubtful debts. In view of the above, we find that the assessment order is neither erroneous nor prejudicial to the interests of the Revenue - Decided in favour of assessee

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• Customs

• 2017 (5) TMI 743
  Maintainability of petition - case of assessee is that the cancellation of proceedings ab initio by the DGFT had been set aside in the appeal proceedings and this petition is not maintainable since the order of the Settlement Commission has been passed after scrutiny of evidence on record and taking into consideration the due submissions of the parties - jurisdiction to file appeal against order of Settlement Commission about after 7 years - Held that: - During the proceedings when the locus standi of the petitioner was questioned, they impleaded the Commissioner of Customs, ICD Tuglaqabad, which was allowed on 12.11.2013, about 7 years after the writ petition was filed. However, the same would not validate the filing of the petition when such powers were not specifically conferred upon the DRI. Therefore, in the absence of a specific jurisdiction of the petitioner to have preferred this writ petition against the order of the Settlement Commission, the writ petition would not be maintainable. Valuation - declared FOB, acceptable or not? - Held that: - the Court is of the view that in the absence of sufficient proof being led, Revenue's doubt about the FOB value of the goods cannot be sustained. It has not substantiated its contention that the exported goods were overpriced. Furthermore, there was nothing on record to conclude that there were business interests between Padmini and its importers in Singapore, United States and USA so as to doubt that the transactions between them were not in the normal course of trade or that it was not a transaction at arms’ length. Hence, the declared FOB would have to be accepted. Since Revenue has not led any evidence to indicate either a 'Hawala' transaction or a back flow of money to Padmini through illegal means regarding the value of the exported goods, the export transaction cannot be viewed with suspicion. There is no reason to interfere with the impugned order of the Settlement Commission - petition dismissed - decided against petitioner-Revenue.

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• 2017 (5) TMI 742
  Effect of N/N. 1/2013 Custom dated 21.01.2013 - prospective effect or retrospective effect? - import of gold - case of petitioner is that the customs duty at the prevailing rate of 4.12% in terms of N/N. 12/2012 Cus dated 17.03.2012 was already deposited, and the N/N. 1/2013 Customs dated 21.01.2013 cannot be applied retrospectively to the goods already cleared - Held that: - On plain reading of sub-section (4)(a) of section 25 of CA, it can be inferred that the notification comes into force from the date it is issued by the Central Government for publication in the Official Gazette; but it is equally obligatory that the same shall also be published and offered for sale on the date of issue by the Directorate of Publicity and Public Relations of the Board. Thus, the legislature had envisaged a common date of coming into force of the notification and date of publication and sale, and hence, the expression “the date of issue” is required to be construed accordingly, viz. when the notification is issued and is published and offered for sale - the respondents cannot be heard to contend that sub-section (4)(b) of section 25 of the Act is only directory and not mandatory. The facts emphasized in the present case, reveal that the N/N. 1/2013 Customs dated 21.01.2013 was received by the government press on 21.01.2013 at 9.45 p.m., printed on 01.02.2013 and sent to Kitab Mahal on 04.02.2013. Clearly, therefore, the N/N. 1/2013Customs, though issued on 21.01.2013, was neither published in the official gazette nor was offered for sale on the said date, and therefore, would not come into force and be operative from 21.01.2013. Under the circumstances, the said notification cannot be made applicable to the goods imported by the petitioner which were cleared on 21.01.2013. Petition allowed - decided in favor of petitioner.

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• 2017 (5) TMI 741
  Levy of Additional duty of Customs - Limestone Cess - mining of lime stone - whether ADC is not leviable in the form of Limestone Cess by virtue of Section 3 of Limestone and Dolomite Mines Labour Welfare Fund Act, 1972, as the mere mining of lime stone did not constitute manufacture or production? - Held that: - reliance placed in the case of Lucky Minmat Pvt. Limited. vs. Commissioner of Income Tax, Jaipur [2000 (8) TMI 6 - SUPREME Court] where it was held that mere mining of limestone and marble blocks and cutting the same before it was sold will not constitute manufacture or production - no Additional Duty of Customs in the form of Lime Stone Cess u/s 3 of the Customs Tariff Act, 1975 read with Section 3 of Lime Stone and Dolomite Mines Labour Welfare Fund Act, 1972, for the subject import goods is leviable - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 740
  Rectification of mistake - import of CD s - valuation - Held that: - the goods in this case were sold only to the persons who were having agreement with the owner of licence i.e M/s Microsoft. Hence in such case the value can be determined under Rule 8 by giving reasonable flexibility towards expenses, taxes and profit margins. Thus the Rule 7 has got no application. Extended period of limitation - Held that: - it is only after detailed investigation by the department, the arrangement of payments made in complex manner was unearthed. Since the facts were suppressed and wrongful declaration was made consequentially the extended period has been rightly invoked. Redemption fine - penalty - Held that: - the goods were imported by wrongful declaration. The facts were concealed from the department - redemption fine and penalty upheld. ROM application dismissed.

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• 2017 (5) TMI 739
  Confiscation of goods - penalty - misdeclaration of addresses - case of appellant is that postal staff cannot ensure the correctness of address given by the consignors of any postal articles as there is no provision under any instruction issued by the Department of Posts for verification of genuineness of the addresses - Held that: - The fact that these are incomplete addresses can be inferred even by a lay man and fail to understand how Md. Riyajuddin, who is a staff of the Department of Posts accepted articles for booking without an iota of doubt when the consignors of such huge volume of goods furnished these addresses. Under the circumstance, his connivance with the owners/consignors of the illegally imported foreign goods for transportation of the same through India post cannot be refuted with conviction - Md. Riyajuddin knowingly booked the animal hides as Logistic post so as to enable Md. Jaidur Rahman to transport the same illegally to Kolkata - confiscation upheld. Regarding the imposition of penalty on Shri Riyajuddin and the submissions made by the Ld. Advocate, the penalty reduced to the tune of 25,000/- on Md. Riyajuddin. In the case of Md. Abdus Sattar, no option has been given by the Adjudicating authority to redeem the confiscated goods and considering the habitual offences committed by the appellant, penalty upheld. Appeal allowed - decided partly in favor of appellant.

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• 2017 (5) TMI 738
  Valuation - loading of value of imported goods - Revenue claimed that the goods imported by the appellant needs to be valued by loading the same by 153.50% for the purpose of assessment under Rule 4(3) of the Customs Valuation Rules, 1988 on the ground that the importer-appellant having cross holding of shares with the exporter of the goods - Held that: - both the appeals, filed by the appellant-importer as well as by the Revenue, are shorn of any facts - the adjudicating authority has clearly recorded that there was a licence agreement between the importer-appellant and the supplier in respect of textile machinery, designs and patents, electric sample cutting and pinking machine polytex type etc., but there is no finding as to whether the appellant has imported the designs or machine itself or the products themselves - appeal allowed - decided in favor of importer.

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• 2017 (5) TMI 737
  Classification of imported “copper sulphate technical grade” - Appellant filed bill of entry dated 10.1.2006 claiming classification under CTH 28332500 - Revenue claims classification under CTH 3808 on the ground that the said goods find mention in the Schedule to the Insecticides Act and there being a requirement of an import permit to be procured from Central Insecticides Board - whether goods are liable to be classified under CTH 2833 or CTH 3808? - Held that: - the adjudicating authority has not given any reason whatsoever for reclassification of the goods imported by the appellant. Section 38 states that exemption is granted from application of Insecticides Act for the sub-clauses mentioned therein. It can be noticed that sub-clause (1)(b) specifically talks about if the substance, even if it is mentioned in the Schedule to the Insecticides Act - the adjudicating authority has himself held that copper sulphate technical grade is used by the appellant for manufacturing of zinc concentrate. In our considered view, the exemption under Section 38(1)(b) of the Insecticides Act will directly apply in the case in hand. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 736
  Import of Witlink 2000 system including IDU 2002 S/N PIN 22161 ODU4-1-1-13/ODU 4-1-3-13” with frequency of 13 GHz - notification provides exemption applicable for Base Transreceiver Stations - benefit of N/N. 21/2002-Cus. (serial No.239) applicable or not? - Held that: - The goods as declared by them, were subjected to examination by the Department of Telecommunications, Government of India and vide letter No.TBVV/F/VAS-GEN/01.TEC/05 dated 31.5.2005 specifically stated that the goods imported do not seem to be Cellular Repeater or Router. The benefit of N/N. 21/2002 (serial No.239) is only for Cellular Repeater or Router - benefit not applicable. Confiscation of goods - Held that: - the goods which were cleared earlier were cleared on final assessment of the bills of entry and the goods are not available for confiscation. In the absence of any goods, the adjudicating authority was correct in not confiscating the said goods - claim of Revenue rejected. Appeal dismissed - decided against appellant-importer and also against Revenue.

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• PMLA

• 2017 (5) TMI 731
  Pre-arrest bail - Prevention of Money Laundering -Nmain allegations in the complaint are against Chunni Lal Gaba who is father of the petitioner and Gurjit Kumar Gaba who is another son of Chunni Lal Gaba - cases under the NDPS Act have also been registered and there are specific allegations of manufacturing and sale of illicit drugs/contrabands against them - Held that:- The present Petitioner even though he is not a Director in M/s Medcare Remedies Pvt. Ltd., nevertheless stands on a different footing from his uncle, Harmesh Kumar Gaba. It has transpired from the reply of the Respondent that the Petitioner had purchased a plot in Jalandhar after an amount of 5 lacs was transferred through RTGS from the Bank Account of the accused Company M/s Medcare Remedies Pvt. Ltd. by the principal accused Gurjit Kumar Gaba. Besides, the petitioner is also stated to be the actual brain behind laundering of proceeds of crime, by way of having received a huge amount of 2,27,30,000/- in cash from his brother/Principal accused Gurjit Kumar Gaba in the year 2012-13. The Petitioner also has an influential Political Profile and happens to be President of the Municipal Committee, Goraya. He is thus stated to have provided protection to his father and younger brother for indulging in Drug Trafficking while holding such influential Office. For the aforesaid reasons, we do not consider it to be a fit case for grant of anticipatory bail to the Petitioner as was done in the case of his brother Harmesh Kumar Gaba. The petition is therefore, rejected.

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• Service Tax

• 2017 (5) TMI 768
  Maintainability of appeal - Catering services - taxability - Held that: - appellant would withdraw the appeal and prefer a review petition before the Tribunal - the captioned appeal is dismissed as withdrawn, as prayed for, with a liberty to prefer a review petition before the Tribunal - appeal not maintainable.

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• 2017 (5) TMI 767
  Service of order - respondent claims that petitioner was already served with the said order on 22.12.2016 through postal department - Held that: - I do not think that there will be any difficulty for the 3rd respondent to furnish such copy, however, without prejudice to the contention of either parties on the question of limitation, if an appeal is sought to be filed by the petitioner against the order in original - petition allowed - decided in favor of petitioner.

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• 2017 (5) TMI 766
  Penalty - Services rendered from abroad - payment of tax on being pointed out - Held that: - In the case of Adecco Flexione [2011 (9) TMI 114 - KARNATAKA HIGH COURT], the Karnataka High Court has held that once the duty along with interest is paid before issue of SCN, in that case, SCN shall not be issued - in this case, the appellant had paid more service tax than it was required and he had a bona fide belief that he is not liable to pay service tax on Business Auxiliary Service and Goods Transport Agency and paid the same on being pointed out by the Department - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 765
  Penalty u/s 76 - commercial training or coaching services - advertising agency services - Held that: - it is a settled law that the imposition of the penalty is a discretion which has been exercised judicially in this case - the question of taxability on the two services is an interpretational one and hence by invoking provisions of Section 80 of the FA, 1994, the penalty is set aside - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 764
  100% EOU - Refund claim - Advertising Agency Service - Business Auxiliary Services - Commercial Training and Coaching Service - and Chartered Accountancy Services - rejection on account of nexus - Held that: - the services are used in providing services which were exported by the appellant - similar issue came before the Tribunal in the case of WNS Global Services [2016 (10) TMI 135 - CESTAT MUMBAI], where it was held that assessee are eligible for availment of CENVAT credit and the refund was sanctioned - refund allowed - decided in favor of appellant.

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• 2017 (5) TMI 763
  Franchise arrangement - The appellant is submitting that they are representing and acting as a state agency and this is to be considered at the time of deciding the merits of the case - Held that: - the agreement between the appellant and the Operators of Airport does not constitute a franchise arrangement for service tax purpose in terms of Section 65 (47) of FA, 1994 - the Misc. Application for taking additional grounds and for early hearing can be allowed. - Stay granted.

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• 2017 (5) TMI 762
  Levy of service tax - construction of Dilli Haat under Commercial or Industrial Construction - demand dropped on the ground that the activity was not covered under CIC since the building constructed is not intended primarily for Commerce and Industry - Revenue on the other hand has pleaded that the building constructed is being let out in the form of various stalls for brand promotion and hence, the constructing activity is to be covered under CIC and liable to payment of Service Tax - Held that: - there can be no levy of service tax for the period upto 31.05.2007 if the contracts executed are in the nature of composite works contract as claimed by the respondent. However, this fact will need verification by going through the Original contracts. For this purpose, we considered necessary to remand the matter to the Original adjudicating authority. Appeal allowed by way of remand.

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• 2017 (5) TMI 761
  Penalty - failure to discharge tax liability in time - works contract service - Held that: - there is no dispute as to the fact that the appellant has discharged the entire service tax liability with interest, prior to the issuance of the SCN, which calls for non-issuance of the SCNe by the department as per the provisions of Section 73(3) of FA, 1994 - penalties set aside - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 760
  Cargo handling service - shifting of minerals from pithead to a specified area located within the mines and also removing over burden at mining sites to other location within mining area - the appellant have been paying service tax under mining services, which became taxable from 01.06.2007 - whether assessee is liable to pay for above service under the head cargo handling services or not? - Held that: - the issue is no more res integra and is covered by the decision in the case of M/s. Thriveni Earthmovers Pvt. Ltd. Versus Commissioner of Central Excise, Salem [2009 (4) TMI 9 - CESTAT CHENNAI], where it was held that movement of limestone in the mining area will be covered by the entry of “Mining of mineral, oil, gas service” which cannot be taxed under “Cargo Handling Service” for the period prior to introduction of the levy under the category of mining w.e.f. 01.06.2007 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 750
  Refund claim - commission received in convertible foreign exchange - the appellant was the agent of Electro Motive Diesel (EMD), who obtained the orders from the Indian Railways - whether the activity carried on by appellant comes within the scope of export of the service u/r 3 of the Export Service Rules, 2005 - Held that: - in the assessee appellant’s case NATIONAL ENGINEERING INDUSTRIES LTD. Versus COMMR. OF C. EX., JAIPUR [2011 (9) TMI 759 - CESTAT, NEW DELHI], such service was considered as the export of service u/r 3(ii)(i) (a) and 3(ii)(i) (b) of Export of Services Rules, 2005 read with Section 65(105)((zzb) of the FA, 1994 - the services are considered as export of services and refund allowed on same - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (5) TMI 759
  Forced recovery of duty / collection of undated cheques - Anti Evasion of duty - Rate of duty - mobile phone batteries - mobile phone charger - LED bulbs - the unit was paying duty @ 2% ad valorem on mobile phone battery and mobile phone charger, and 6% on LED bulbs - According to the Respondents, the tariff rate of duties on these products is 12.5% ad valorem - benefit of N/N. 12/2012-CE dated 17th March, 2012 - Held that: - The ADC has been unable to point out any provision of law or any notification or any circular that permitted the officers who visited the Petitioner’s business premises to collect undated cheques which purportedly constitute the differential duty. He is further unable to explain how these undated cheques were kept with the Department and why indulgence was shown by the Department to the Petitioner when the Petitioner requested for some time to arrange for the duty amount. This illegal practice adopted by the Anti-Evasion Department of Central Excise requires a deeper investigation. The Court has every reason to believe that this has come to light only because the Petitioner has approached this Court. This practice is perhaps being adopted in a number of instances which are yet to come to the notice of the Court. There will be serious ramifications if this practice is allowed to continue unchecked. In the first place, it must be realised that the officers of the Anti Evasion Wing of the Central Excise Department have to function within the four corners of the law. They are bound by not only the CE Act and the Rules made thereunder but all the notifications/circulars/instructions issued from time to time including those issued by the CBEC. There is no scope at all to collect duty and that too without even quantifying the extent of duty evasion. The Court would like the matter to be carried out to its logical conclusion - the writ petition is kept pending to ensure compliance of the directions mentioned.

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• 2017 (5) TMI 758
  Rectification of mistake - principles of natural justice - SSI Exemption - clubbing of clearances - extended period of limitation - personal penalties - Held that: - having found that all other firms / units are dummy and therefore, the adjudicating authority confirmed the demand of duty on clubbing of the clearances value of of other units / firms (which were found to be dummy) with that of the assessee. The order passed by the authorities below cannot be said to be contrary to evidence on record and / or finding recorded by the authorities below cannot be said to be perverse and therefore, no interference of this Court is called for. Natural justice - Held that: - it is required to be noted and it is not in dispute that no documents / bills were produced either before the Adjudicating Authority nor even before the Commissioner (Appeals). The same came to be produced for the first time before the learned Tribunal. Even the said documents were not produced at the time of search. Thus, the said documents were produced for the first time before the learned Tribunal at a belated stage. It is not the case on behalf of the assessee that those documents were not available and / or misplaced at the time of adjudication - Order In Original came to be passed in the year 2008. No such documents were produced till than and as observed herein above the same came to be produced for the first time before the learned Tribunal, which can be said to be an afterthought and to get out of the findings recorded by the authorities below that other units / firms were not having their independent, separate plant and machineries. Under the circumstances, the learned Tribunal has rightly rejected the Rectification Application. Penalties: - Held that: - no error has been committed in imposing the penalty upon Shri Babubhai Mistry, Director, and Smt. Jasuben Mistry, the proprietor - penalty amount was reduced. Appeal dismissed - decided against appellant.

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• 2017 (5) TMI 757
  CENVAT credit - capital goods - Department felt that they wrongly calculated the duty/payment on the basis of depreciation at the rate of 2.5 percent for each quarter for the entire period instead of 50% depreciation of credit availed in the first year and the balance 50% percent on the credit availed in the subsequent year - Held that: - Commissioner in her order has given no reasoning for rejecting the method of depreciation given in Rule (3) (5A) of the CCR, 2004 - the portion of the order pertaining to first demand is completely non-speaking. Besides, the adjudicating authority has given no finding on the significant pleadings made by the appellant - the matter needs to be remanded back to the Commissioner for giving proper findings after carefully examining the contentions of the appellants. Goods destroyed during the testing - non receipt of foreign exchange against Export - RBI Master Circular - demand - Held that: - there is no finding given by the adjudicating authority on main contention of the appellant - the matter requires to be remanded back to the Commissioner on this issue also with the direction that the Adjudicating Authority should give findings on all the contentions of the appellants. Appeal allowed by way of remand.

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• 2017 (5) TMI 756
  Classification of goods - Soft Drink Concentrates - admissibility of benefit of N/N. 3/2005-CE, dt.24.02.2005 - For Soft Drink Concentrates , there are only two sub headings one for Sharbat which is covered by Heading 2106.9011 and second one is Other category which is covered by Heading 2106.9019 - under what sub-heading the Soft Drink Concentrates will be classified? - Held that: - there cannot be two opinions regarding the classification of the item Soft Drink Concentrates (unbranded) and, therefore, its correct classification is 2106.9019 only - the assessee is pleading the classification of their goods under Central Excise Tariff Sub Heading 2106.9099 for which there is no basis as per the material given by them especially when there is specific entry for Soft Drink Concentrates in the Tariff as mentioned above. Therefore, the appellant's pleading for the said classification is rejected. Benefit of N/N. 3/2005-CE, dt.24.02.2005 - Held that: - the goods have already been sold to the customers and there is no likelihood of further recovery from the past consumers of any duty of Central Excise, if levied and confirmed against the appellant now - Hon'ble Supreme Court in the case of CCE Delhi Vs Maruti Udyog Ltd [2002 (2) TMI 101 - Supreme Court] has held that the sale price realized by an assessee should be regarded as the price inclusive of excise duty as the purchaser has no obligation to pay any amount in excess of what has already been paid as the price for the goods purchased - the Appellant is entitled to cum duty benefit for the sales made during the period under dispute and the liability of duty of Central Excise against them is to be computed accordingly, for which the matter is being remanded to the Adjudicating authority. Appeal allowed by way of remand.

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• 2017 (5) TMI 755
  Penalty u/r 26 of CER - fraudulent and wrong availment of huge amount of CENVAT Credit - fake transfer, only paper transactions - Held that: - The appellant has been found to be an important facilitator for M/s Akai, the main noticee, for fraudulent and wrong availment of CENVAT Credit when M/s Jagdamba entered into only paper transactions with M/s Akai without physically delivering the goods to M/s Akai - There are no redeeming facts which could in any way reduce the gravity and seriousness of the contraventions of law of Central Excise of the appellant M/s Jagdamba making them liable for penalty under the provisions of Rule 26 of CER 2002 - penalty upheld - appeal dismissed - decided against appellant.

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• 2017 (5) TMI 754
  Classification of manufactured goods - Orthopaedic Heating Pads/Belts/Bands - classifiable under CTH 9021 10 00 or under CTH 3005 90 40? - Held that: - It can be seen from the HSN explanatory note to Chapter Heading No. 9021, at Sr. No. 111, it indicate that the belts would fall under Orthopaedic appliances which are used for the purpose of diagnosis - the HSN explanatory note also supports the case of the assessee for the classification the product under Chapter Heading No. 9021. We also find support in the dictionary meaning of the words orthopaedic and appliances - If orthopaedic appliance has to be understood in a common sense, it would be an appliance which is used for prevention or correction of disorders of the muscles, joints, ligaments which in the given case, is not disputed that the orthopaedic heating belts are used for the purpose of treating or giving relief from swelling, pain, etc. Classification of Bandages - the Department's stand is that the item is classifiable under Tariff Entry No.3005 90 40 of Central Excise Tariff and is chargeable to duty. On the other hand, the appellant's stand is that they are not manufacturing such bandages but are trading in the same in the ordinary course of resale trade - appellant's contention is that since they do not manufacture the subject goods on which the duty has already been paid, the question of demand of duty on such bandages does not arise - Held that: - On this issue also, the Tribunal has given the decision in same case of Ascent Meditech Ltd. [2015 (8) TMI 1122 - SUPREME COURT], where it was held that the submission of ld. counsel that they are not doing any activity seems to be correct as the adjudicating authority has not recorded any finding to indicate that the appellant herein was undertaking further activity in his factory premises on the bandages which are received from the job worker in duly packed form. In the absence of any activity on such finished goods, in our view, the said product cleared from the factory premises as such cannot be subjected to any duty as Central Excise duty is on manufacture. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 753
  Clandestine removal - excess production and clearance of 1295.77 MT of finished goods is admitted in the Audited Balance Sheet but have not been reflected in their E.R.-1 Returns - Held that: - the Revenue had not disputed the finding of the Commissioner in so far as, no charges have been framed in the SCN as to the difference in the value as declared between the Balance Sheet and AR-1 Return of 2002-03 accepting the excess quantity of 1295.77 MT of finished goods - The Tribunal in the case of NSP Electronics Ltd. vs. Commissioner of C.Ex.,Bangalore [2009 (11) TMI 797 - CESTAT BANGALORE] observed that entries in the Balance Sheet did not constitute adequate evidence for clandestine removal. It should be based on positive evidence - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 752
  CENVAT credit - duty paying invoices - denial on the ground that the input service credit availed on the basis of the invoice issued by their Head Office as Input Service Distributor - it is also alleged that the Head Office as ISD had distributed the service tax paid for the activities/services provided to their units other than the actual manufacturing unit of finished excisable goods - Held that: - it is clear that the various input service credit as availed by the appellant are covered within the inclusive part of the definition of Input Service under Rule 2 (l) of CCR, 2004 - the appellant availed on the basis of the Input Service Distributor invoices. The various input services are related to the business of the appellant company. Hence, there is no reason to deny the credit - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 751
  Benefit of N/N. 67/95-CE dated 16.3.95 - denial of benefit on the ground that MS channels, MS angles, joist etc. were not covered under the definition of ‘capital goods’ as defined under CCR, 2004? - whether or not the appellant is entitled to exemption from excise duty in respect of MS angles, MS channels, joist etc. manufactured by him and captively consumed in the factory of production? - Held that: - the coal elevator, chamber separator and coal gasifier are essential component of the production unit of the appellant - the goods have been used in relation to the manufacture of final product of the assessee - identical issue decided in the case of S.K.S. Ispat & Power Limited Versus C.C.E., Raipur [2016 (10) TMI 479 - CESTAT NEW DELHI], where it was held that From the language of the Notification, prima facie, it appears that the appellant is entitled to the benefit of Notification No.67/95-CE as the iron and steel items like angles, channels, beams etc. have been claimed to be captively consumed in the fabrication of structure of capital goods, and matter remanded for fresh decision - matter is remanded to the original adjudicating authority who will decide the issue de novo after examining all the records of evidence of use and consumption of subject items - appeal allowed by way of remand.

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• 2017 (5) TMI 749
  Value based exemption - reversal of CENVAT credit - Rule 57AG(2), Rule 9(2) and Rule 11(2) - Held that: - in relation to the payment provided under these rules, there was no machinery provision for recovery of the said amount even subsequently also unlike rule 57CC no retrospective provision was brought in the statute - ld. Commissioner has made a clear distinction that wherein the government intend to even bring a machinery provision from retrospective effect it was done so in case of Section 11D and Rule 57CC. However, in the case of Rule 57AG(2), Rule 9(2) and Rule 11(2), no similar machinery provision was brought. Therefore, the finding of the Commissioner (Appeals) is absolutely correct - credit remains allowed - appeal dismissed - decided against revenue.

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• 2017 (5) TMI 748
  Cenvat Credit - Removal of goods as such - Goods cleared to sister unit was returned back - The case of the department is that the duty should have been paid on the quantity which was supplied by the appellants but subsequently returned back to them - recovery mechanism under Rule 3(4) - time limitation - Held that: - the duty is payable only on the net quantity which has been supplied by the appellants. The quantity which has come back to the appellants cannot be considered as removal of input and no duty can be demanded on that quantity - demand not sustainable - issue of limitation not taken up as demand set aside - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 747
  Rectification of mistake - duty drawback - Held that: - Error apparent on the face of record means an error which strikes on mere looking and does not require long drawn process of reasoning where there may be conceivably two opinions. The mistake must be patent that its’ discovery does not need elaborate arguement. At present the arguments put forward by the Ld. Counsel in this application for rectification of mistake is only repetition of the contentions noted in the Final Order. Further, it necessitates detailed hearing and reasoning process. This infact would tatamount to review of the Final Order for which the Tribunal does not have any powers. There is no error apparent on the face of the record which needs rectification - ROM application dismissed.

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• 2017 (5) TMI 746
  Interest - penalty - reversal of CENVAT credit availed on the inputs which were cleared as such to sister concern - Revenue authorities during the period were of the view that central excise duty needs to be discharged after arriving at the assessable value as per Section 4 of the Central Excise Act on the inputs, considering them as if manufactured by the appellant - Held that: - the law of the land is, an appellant when he removes the inputs on which cenvat credit availed, he has to only discharge the amount of duty which is availed as cenvat credit on the said quantity of the inputs. This position cannot be called in for any deliberations. Since during the relevant time the appellant had paid differential duty on being convinced by the Revenue, he definitely can take a plea for non-discharge of interest and non-imposition of penalty before the judicial forum. It is the settled law that in the first place if the duty liability does not arise, the question of payment of interest and imposition of penalty will not arise. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 745
  Cenvat Credit - Registration of new unit - Mangalam Grinding Unit (MGU) - manufacture of Cement - The appellant set up a second unit that is Mangalam Grinding Unit (MGU) within a distance of two Km from the Original Unit. When the MGU was nearly completed the appellant approached the department for including the MGU in the registration already granted to the Cement Manufacturing unit - denial of CENVAT credit in respect to new unit - The Cenvat credits are have been denied also for the reason that the credits have been availed prior to registration of the MGU - Held that: - There is no requirement in the Cenvat Credit Rules that prohibits a common Cenvat account for all the units comprised in one registration - there is no reason to deny the credit on capital goods availed for installing and setting up of MGU prior to grant of single registration. Denial of Credit also on the ground that the credits pertain to the period prior to the issue of a common registration on 31.01.2014 - Held that: - The stand taken by the adjudicating authority for denying the Cenvat credit on input services was not taken in the relevant Show Cause Notice and to this extent the Order-in-Original has travelled beyond the scope of Show Cause Notice, which is illegal - In any case the adjudicating authority has not given specific findings as to which are the input services for which credit has been availed and which get hit by the amendment in the definition of “Input Services” w.e.f. 01.04.2011 - denial of credit not justified. Denial of Cenvat credit amounting to about 1.3 lakhs in respect of inputs used in the generation of power supplied to MGU - Held that: - we find no reasons to deny the Cenvat credit by taking the view that the two units were separate prior to the date of common registration. In this view of things, we find no justification for denial of such Cenvat credit. Demand of duty on clinker cleared to MGU - Held that: - the two units have to be considered as a single factory with common registration, clearances of clinker from the main unit to MGU will be entitled to the Notification No. 67/95 available to captive consumption. Consequently, the demand on this ground also merits to be set aside. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 744
  CENVAT credit - Loss by spillage or leakage - manufacture of liquid oxygen gas - whether the loss by spillage or leakage during the course of manufacturing process of liquid oxygen gas can be considered as waste, residue or by-product in terms of Rule 57D of the erstwhile CER, 1944? - Held that: - in the appellant's own case COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-I Versus BOC (INDIA) PVT. LTD. [2003 (12) TMI 111 - CESTAT, MUMBAI] on an identical issue the Tribunal dismissed the revenue's appeal and held that It is clearly incorrect to say because a product has no visible identity it cease to exist. A simple example would be metal lost in burning during manufacturing operations. There has been a consistent practice of extending the provisions of Rule 57A to such loss - credit of the duty paid on entire quantity of used by the assessee would be taken notwithstanding some quantity was not actually contained in the finished product - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (5) TMI 769
  Deemed Sale - Transfer of right to use - buses given on hire - MVAT Act - dealer within the meaning of Section 2(8) of the MVAT Act - transaction between Appellant and PMPTL amounts to sale or not? - whether amounts to sale or provision of service? - Held that: - it is the PMT alone which can use the hired buses. They cannot be put to use by the appellant privately nor he can divert the user in contravention of the directions of the PMT. The exclusive possession is with the PMT. All the licences, permissions and the benefit thereof is transferred to the PMT. Nothing insofar as the hired bus is concerned remains within the control of the appellant. Thus, the PMT has effective and complete control of the vehicles and the earmarked buses are in exclusive possession of the PMT. The appellant stands totally excluded from the use, possession and control thereof. The hired buses in complying with the specifications enumerated in Annexures A and B for a period of five years will ply on PMT permit granted by the Regional Transport Office, Pune. The hired buses will be registered with the RTO, Pune in the name of the PMT as lessees and will be operated as stage carriages within the operational area of the PMT. This is not a case of a sale of transport vehicle or purchase thereof nor a case of sale of parts, components or accessories of such transport vehicles or purchase thereof. This is a case where the legislature has made the transfer of the right to use any goods for any purpose a deemed sale. The question is whether there is a transfer of right to use any goods and within the meaning of subclause (iv) of the Explanation to clause (24) of section 2 of the MVAT Act. It is in these circumstances that we do not think that given the factual backdrop the appellant can take assistance of the third exception to clause (8) of section 2 of the MVAT Act, 2002. When the burden of the tax has to be borne actually by the PMT and the appellant can pass on the same by including it in the sale price, then, all the more we do not think that any relief should be granted based on this alternate plea. We have also noticed that the appellant has obtained a registration under the MVAT Act and so long as that registration is in force, he cannot escape the incidence of tax qua the subject transaction. It is not just a dealer, but every person who is liable to pay tax under this Act, shall pay the same. That is how taxes are payable within the meaning of section 4. The tax or taxes thus are leviable on every person who is liable to pay tax under the MVAT Act. It is only those transactions which are covered by section 8 of the Act on which the MVAT is not payable. Appeal dismissed - decided against appellant-assessee.

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• 2017 (5) TMI 735
  Levy of VAT - unmanufactured tobacco - Effect of the clarification - retrospective or prospective - neither the manufacturer collected the tax from the petitioners, nor the petitioners have collected the same from its customers - case of petitioners is that as per the provisions of the Act of 2002, the manufacturer shall levy the VAT on sell and collect it from the petitioners and then the petitioners shall in turn recover the same from its customers - Held that: - the addition of explanation to Entry No. 45­A under notification dated 31.03.2012 is substantive provision and it is not merely clarificatory, as such would operate prospectively. It will have to be held that, unmanufactured tobacco sold in packets under a brand name would not be taxable from 01.04.2007 to 31.03.2012. The impugned trade circular 9T dated 30.06.2012 stating that explanation is merely clarificatory is held to be erroneous to that extent - The explanation to Entry 45­A of the Maharashtra Value Added Tax would operate prospectively and not retrospectively - matters are remanded to the Tribunal for deciding it afresh - appeal allowed by way of remand.

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• 2017 (5) TMI 734
  Sale / Deemed sale - receipt of Transferable Development Rights (TDR) - whether handing over and construction of tenements to SRA amounts to sale within the meaning of MVAT or not? - whether the issue and receipt of the TDR amounts to other valuable consideration? - Held that: - in the instant case, what is brought within the purview of the Act is a 'sale' as defined in section 2 clause (24). It means a sale of goods made within the State. Such sale must by for cash or deferred payment or other valuable consideration, but does not include what is spelt out in the first part and preceding the explanation of clause (24). Then, the Explanation follows and it is for the purpose of section 2 clause (24) itself. This explains that not only a sale within the State, including a sale determined to be inside the State in accordance with the principles formulated in section 4 of the Central Sales Tax Act, 1956 - For our purpose we have to see whether transfer of property in goods or in some other form involved in the execution of a works contract and which includes an agreement for carrying out for cash, deferred payment or other valuable consideration the works set out in subclause (ii) of clause (b) and all the other sub-clauses, namely, delivery of goods on hire purchase, the transfer of right to use any goods for any purpose, the supply of goods by any association of a body of persons etc and supply by way of or part of any service. Each of these are deemed to be a sale. Therefore, a transfer of property in goods whether as goods or in some other form involved in the execution of a works contract, including the works specified in an agreement for carrying out for cash, deferred payment or other valuable consideration and enumerated in sub-clauses of clause (b) are deemed to be a sale. The developer will be entitled to transfer or assign the TDR and/or DRC which may become available to him under this agreement as the developer may desire, without reference or recourse to or consent and concurrence of the SRA. If the very concept is understood as generating a right in favour of the developer-appellant which can be transferred for money in the open market, then, it is evident that both this agreement and also the Deed of Conveyance separately executed enable the petitioner-developer to earn consideration in the form of money. If this is a transferable property and commanding a price in the market, then, on the own showing of the petitioner-appellant, there is a money component clearly involved. The other valuable consideration for which the works are to be carried out under the works contract and which involves transfer of property in goods, therefore, is nothing but money - this is a clear transaction where the petitioner-developer has for other valuable consideration which is nothing but money, agreed to construct the number of tenements specified above and handing them over free of cost to the SRA. In return of the same, it has obtained the above monetary benefits. To say that what they have obtained is an immovable property in exchange or in lieu of the cost of construction incurred by them means not presenting a true and complete picture. The DRC by itself has been sold for a price in the market depending upon demand and supply conditions. Thus, we have no hesitation in holding that this is to be understood as a valuable consideration and equivalent to money. Petition fails and is dismissed - decided against petitioner-assessee.

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• Indian Laws

• 2017 (5) TMI 733
  Contempt of court - Held that:- We find that the allegations against Respondent No.3 of committing of contempt are on two counts, in that - a) He is guilty of disobeying the Orders passed by this Court in not disclosing full particulars of the assets as was directed by this Court. b) He is guilty of violating the express Orders of Restraint passed by the High Court of Karnataka in the same Cause from which the present proceedings have arisen. Though the contempt on the second count is theoretically of the orders passed by the High Court of Karnataka since those orders pertain to the very same Cause and the actions on part of Respondent No.3 in not disclosing the account in question through which the transfers were affected also fall with respect to contempt on first count, we proceed to exercise our contempt jurisdiction even with regard to the second count. As stated above, Respondent No.3 was adequately put to notice and no prejudice has been caused as a result of such assumption of jurisdiction by this court. We find that Respondent No.3 is guilty of having committed contempt of court on both the counts. At this stage it must be stated that in terms of Rule 6 (1) of Rules to Regulate Proceeding for Contempt of Supreme Court 1975, Respondent No.3 was obliged and duty bound to appear in person in response to the notice issued by this Court in Contempt Petition. Instead, he chose to file application seeking recall of the orders issuing notice. Having considered the matter, we see no reason to recall that order and dismiss I.A. Nos.1 to 4 of 2016 preferred by Respondent No.3 in Contempt Petition Civil No.421-424 of 2016. Respondent No.3 is therefore duty bound to appear in person in the present contempt proceedings. Since Respondent No.3 has not filed any reply to the Contempt Petition nor did he appear in person, though we have found him guilty of having committed contempt of court, we deem it necessary to give him one more opportunity and also hear him on the proposed punishment. We therefore adjourn matter to 10.07.2017 for hearing Respondent No.3 in person on matters in issue including one regarding the proposed punishment to be awarded to him for contempt of court. The instant contempt petitions and connected cases shall now be listed at 2 o clock on 10.07.2017. Respondent No.3 may keep his affidavit ready to be tendered on the same day by stating mitigating circumstances, if any and any other submissions he chooses to advance. We direct the Ministry of Home Affairs, Government of India, New Delhi to secure and ensure presence of Respondent No.3 before this Court on 10.07.2017. A copy of this Judgment be sent to the Ministry of Home Affairs for compliance.

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• 2017 (5) TMI 732
  Guilty and conviction for the offence punishable under Section 15 (c) of NDPS Act - period of sentence - whether punishment awarded by the learned Judge, Special Court, Karnal is disproportionate to the act committed by the appellant? - Held that:- The instant case, the accused-appellant has pleaded simple false implication in his statement recorded under Section 313 Cr.P.C. He has not given any explanation as to how he came to be present in the fields where the three bags containing poppy-straw were lying and he has brought one bag out of those to the Kacha path. Thus, the conduct of the appellant establishes that he was fully aware about the nature and substance in those bags. So, there is no escape from the conclusion that appellant was in conscious possession of all the three gunny bags containing poppy-straw. As per the custody certificate, accused-appellant has undergone the total sentence of eight years nine months and nineteen days including remission as on 24.01.2017. He is in custody since the date of his arrest. It cannot be disputed that the accused-appellant has two daughters and also had responsibilities towards his family. Thus, he deserves leniency in the matter of sentence. Therefore, in view of our aforesaid discussion, the appeal of the appellant against conviction has no merits. The same is hereby dismissed. The conviction of the accused-appellant recorded by the learned Judge, Special Court, Karnal under Section 15 (c) of the NDPS Act is hereby maintained. However, the sentence is modified from imprisonment of 14 years and pay a fine of 1,50,000/- and in default thereof to undergo rigorous imprisonment for two years, to undergo rigorous imprisonment for a period of ten years and to pay a fine of 1,00,000/- for committing the offence under Section 15 (c) of the NDPS Act. The fine shall be recoverable in terms of Section 421 Cr.P.C.

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