Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 19, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Adobe India is assessed on its income determined at ALP and, therefore, there is no occasion for the AO to assume that Adobe India constitutes the Assessee's PE under Article 5(5) of the Indo-US DTAA - HC
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Tribunal has erred in law in upholding the deletion of the additions made by the Assessing Officer on the basis of the notebook and the Bank passbook - HC
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Disallowance of additional depreciation - AO is directed to allow the balance 50% depreciation namely 10% of additional depreciation during the year under consideration - AT
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Deemed dividend addition u/s 2(22)(e) - assessee tried to circumvent the alleged loan and advances by furnishing an unregistered sale agreement, which was later not acted upon by both the parties even now - additions confirmed - AT
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Assessment proceedings u/s 153A - claim of deduction u/s 80GGB and 80G(5) because it was not claimed in the original return - deduction claimed before completion of assessment allowed - deduction not claimed before completion of assessment disallowed - AT
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Withholding of refund - scrutiny assessment was pending - By the device of issuing an instruction in purported exercise of its power u/s 119, the CBDT cannot proceed to interpret or instruct the income tax department to "prevent" the issue of refund. - HC
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TPO and DRP have committed a fallacy, firstly, by considering the AE as a “tested party” and secondly, relying upon USD Corporate Bond Rates to benchmark the ALP of the interest rate because the interest rates for bonds or loan has to be seen from the point of view of borrowers creditworthiness and not the lender’s creditworthiness. - AT
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Deduction u/s 80IB - assessee produced technical expert opinions before the Tribunal in second round of litigation - additional evidences admitted - these additional evidences are to be subjected to verification and scrutiny by the Revenue authorities - AT
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Deeming provision of Section 292BB - distinction between the issuance of notice and the service of a notice - Failure to issue a notice within the prescribed period would result in the AO assuming jurisdiction contrary to law - HC
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Expenses pertaining to closed down Thane unit incurred after closure of unit - The closure of Thane unit was out of business necessity arising out of statutory compulsion - allowable u/s 37(1) - HC
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Determination of interest on receivables which assessee was failed to report in the form 3CEB - the account payables are more than the account receivables from AE. Hence, charging of notional interest does not arise. - AT
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Reopening of assessment - receipt of accommodation entries - Such profit has been duly accounted, disclosed and assessed. Therefore the AO could not form a belief at the time of issue of notice that income to that extent has escaped assessment. - AT
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Disallowance of expenses - inability of the assessee to provide direct evidence to establish that these expenses wholly and exclusively incurred for the purpose of business. - disallowance has been restricted to 20 per cent. without any rhyme and reason - disallowances restricted to 5% only - AT
Customs
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Valuation - no import duty can be levied on the goods lost, pilfered or destroyed during transportation and it is the actual quantity received at the shore which would attract duty. - AT
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Relinquishment of goods - Import of electric goods during 1995-96 - cleared under warehousing bill of entry and kept in warehouse - appellant's request for relinquishment of the goods deserves acceptance - AT
Corporate Law
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Merely because certain cheques issued by the respondent have been dishonoured for want of funds, that does not mean, that the respondent company has to be wound up. - HC
Service Tax
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Extended period of limitation - Photography Service - bona fide belief is the belief of a reasonable person operating in an appropriate environment and is not some sort of hallucinatory belief. - Demand confirmed invoking the extended period of limitation - AT
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Nature of activity of Payment Gateway services provided to client in USA - As all the ingredients enlisted under Rule 6A ibid are satisfied, said service will qualify as export of taxable service - AAR
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Nature of activity of Payment Gateway services provided to client in USA - by providing the payment processing services to WWD US, the applicant is not providing any service to the customers of WWD US in India. - Activity is not subject to service tax - AAR
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Service tax payable on the services provided by the specified organisations in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement, from 1.7.2012 to 19.8.2014, but for the said practice, shall not be required to be paid
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The services provided by the appellant to public for facilitating receipt by them of licenses/permissions/registrations issued by the State Govt. do not fall within the ambit of any integer of Business Auxiliary Service as defined in Section 65(19) - AT
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Classification - Advertisement services or Business Auxiliary services - all the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. - Held as Advt. services and not BAS - AT
Central Excise
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Cenvat Credit to the job-worker, on inputs directly purchased and used in the manufacture of finished/intermediate goods, will be admissible even if duty is discharged by the principal manufacturer. - AT
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Admissibility of Cenvat credit - Two different orders passed by the Tribunal by admitting the Cenvat credit in one and denying in another - matter to be reheard by the tribunal - HC
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Once an assesse takes a stand that Modvat credit with respect to inputs is not availed, then onus is shifted to the Revenue to establish that credit is taken by an assessee. - AT
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Cenvat Credit on the basis of invoices having hand-written serial numbers cannot be denied to the Appellant. - AT
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Entire facts related to the bus body builders and the movement of goods and manufactured of goods under job work was very much in the knowledge of Central Excise authorities of both the jurisdiction - Extended period of limitation cannot be invoked - AT
Case Laws:
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Income Tax
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2016 (5) TMI 728
Reopening of assessment - existence of PE in India - Indo-US DTAA - Held that:- AO's view that Adobe India constituted the Assessee's PE in terms of paragraph 1 of Article 5 of the Indo-US DTAA is palpably erroneous and not sustainable on the basis of the facts as recorded by him. We also find that there is no material to hold that the Assessee's employees constitute a Service PE in terms of Article 5(2)(l) of the Indo-US DTAA. The Assessee has denied that any of its employees has rendered any service in India. There is no material available with the AO that would contradict the same. The AO has concluded that the Assessee has a PE in India in terms of Article 5(2)(l) of the Indo-US DTAA, only on the basis that the Assessee has a right to audit Adobe India and that the agreement between the Assessee and Adobe India entails that the Assessee would provide specifications, assistance and supervision for the R&D services procured by the Assessee. The said terms of the agreement do not in any manner indicate that the Assessee has been providing services in India. Clause 5.5 of the agreement referred to by the AO indicates that the Assessee is authorized to audit the Indian subsidiary (Adobe India), so as to ensure that Adobe India adheres to the standards required by the Assessee. AO's view that Adobe India constitutes the Assessee's PE under Article 5(5) of the Indo-US DTAA is also wholly unsustainable. Article 5(5) of the Indo-US DTAA provides for an exclusion to Article 5(4) of the Indo-US DTAA. In terms of Article 5(4), where a person acts in a contracting state on behalf of an enterprise of the other contracting state, the enterprise shall be deemed to have a Permanent Establishment in the first mentioned state. In other words, a dependent agent of an enterprise would constitute its PE. In the present case, there is no material to form a view that Adobe India acts as an agent for and on behalf of the Assessee. Further, there is no allegation that any of the other conditions specified under clauses (a), (b) or (c) of paragraph 4 of Article 5 of the Indo-US DTAA are applicable to Adobe India. One of the necessary conditions for holding that an agent constitutes a PE of an enterprise is that the agent must have an authority to conclude contracts or should have been found to be habitually entering into or concluding contracts on behalf of the enterprise. In the present case, there is no allegation that Adobe India is authorised to conclude contracts on behalf of the Assessee or has been habitually doing so. In the present case, apart from the AO stating so, there is no reason to assume that Adobe India is an agent of the Assessee; there is neither any agreement which states so nor any material which indicates that Adobe India acts as such. More importantly, it is not disputed that Adobe India is assessed on its income determined at ALP and, therefore, there is no occasion for the AO to assume that Adobe India constitutes the Assessee's PE under Article 5(5) of the Indo-US DTAA. - Decided in favour of assessee
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2016 (5) TMI 727
Search and seizure operation under Section 132 - addition on the basis of the notebook and the Bank passbook - validity of documents seized - addition to undisclosed income - Held that:- Section 158BB of the Act empowers the Assessing Officer to frame assessment of the block period on the basis of evidence found as a result of search. As discussed above, the diary, KPS-5 and undisclosed passbook of the S.B. A/C No.9266 though recovered from the survey of the premises of Sujata Hotel Pvt. Ltd., but not only the assessee had made a statement that his passbook and the cheque book are kept in the Sujata Hotel Pvt. Ltd but had also relied upon them while submitting his Block Return and had taken the said stand in his reply to the questionnaire. Still further, the Assessing Officer can take into consideration the other materials or information as are available with the Assessing Officer and relatable to such evidence recovered during the search operation. Therefore, such documents can be taken into consideration by the Assessing Officer. The documents taken into consideration are related to the search operation at the premises of the assessee on the own admission of the assessee while replying to the questionnaire to explain the basis of his undisclosed income declared by him. Thus, we find that not only the survey was not illegal but also that the material collected was relied upon by the assessee himself to explain the basis of undisclosed income for assessment years 2001-02 and 2002-03 shown in his block return, and therefore clearly relatable to evidence found as a result of search, etc. and, thus, was rightly made basis to frame block assessment by the Assessing Officer. Assessing Officer could take into consideration the note book KPS-5 and passbook of S.B. A/C No.9266 recovered from the premises of Sujata Hotel Pvt. Ltd. but from the office cabin which was in the control of the assessee. Tribunal has consequently erred in law in upholding the deletion of the additions made by the Assessing Officer on the basis of the notebook and the Bank passbook - Decided against assessee
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2016 (5) TMI 726
Agricultural land - distance measure - Held that:- The distance is more than 9 kms and treating the land sold as agricultural land and, thus, no substantial question of law is arising in this appeal.
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2016 (5) TMI 725
Deeming provision of Section 292BB - distinction between the issuance of notice and the service of a notice - notice after expiry period - Held that:- Section 292BB uses the words 'service of notice'. The Division Bench after taking notice of the same has clearly came to the conclusion that the issuance of notice is a sine qua non within the prescribed limits of six months. The same cannot be cured as if the issuance of notice itself is after six months then it is an incurable defect and for that reliance has been placed by the Division Bench on the apex court judgement in the case of Assistant Commissioner of Income Tax and another v. Hotel Blue Moon, (2010 (2) TMI 1 - SUPREME COURT OF INDIA). The interpretation given by the Division Bench in the judgement of Salarpur Cold Storage [2014 (8) TMI 732 - ALLAHABAD HIGH COURT] Section 292 BB of the Act cannot come to the aid of the revenue in a situation where the issuance of a notice itself was not within the prescribed period, in which event the question of whether it was served correctly or otherwise, would be of no relevance whatsoever - Failure to issue a notice within the prescribed period would result in the AO assuming jurisdiction contrary to law. - Decided in favour of assessee.
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2016 (5) TMI 724
Withholding of refund - Instruction No. 1 of 2015 dated 13th January 2015 issued by the Central Board of Direct Taxes challenged - refunds were declined for the reason that the case was pending scrutiny and that in the light of Section 143(ID) and the Instructions of the CBDT, refund could not be processed for the said AYs - Held that:- The Court finds that it is this very impugned instruction which is being relied upon by the Department to deny refund, where notice has been issued under Section 143(2) of the Act. This is evident from the impugned letter dated 8th September 2015, addressed to the Petitioner. The power of the CBDT to issue such instructions can be traced only to Section 119 of the Act. Therefore, such 'instruction' also has to adhere to the discipline of Section 119 of the Act. The real effect of the instruction is to curtail the discretion of the AO by 'preventing' him from processing the return, where notice has been issued to the Assessee under Section 143(2) of the Act. If the legislative intent was that the return would not be processed at all once a notice is issued under Section 143 (2) of the Act, then the legislature ought to have used express language and not the expression “shall not be necessary”. By the device of issuing an instruction in purported exercise of its power under Section 119 of the Act, the CBDT cannot proceed to interpret or instruct the income tax department to "prevent" the issue of refund. In the event that a notice is issued to the Assessee under Section 143 (2) of the Act, it will be a matter the discretion of the concerned AO whether he should process the return. Consequently, the Court is of the view that the impugned Instruction No.1 of 2015 dated 13th January 2015 issued by the CBDT is unsustainable in law and it is hereby quashed. It is directed that the said instruction shall not hereafter be relied upon to deny refunds to the Assessees in whose cases notices might have been issued under Section 143(2) of the Act. The question whether such return should be processed will have to be decided by the AO concerned exercising his discretion in terms of Section 143 (1D) of the Act.
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2016 (5) TMI 723
Pre commencement interest on capital borrowed for a new glass manufacturing unit - Revenue or capital expenditure - ITAT allowed as revenue - Held that:- CIT (A) and the Tribunal have rendered a finding of fact that the Respondent–Assessee was carrying on business of glass manufacturing plant at Jambusar in Gujarat and setting up the new business was a mere expansion of its existing business. Further, both the Authorities also found that as a matter of fact there was a functional integrity between all the three business viz. Pharma business, bulk drugs business and glass manufacturing business with interlinking of management and funds. This finding of fact rendered by the Tribunal has not been shown to be perverse or arbitrary. Moreover the finding of fact rendered by the CIT(A) and the Tribunal about glass manufacturing being existing business and commonality of management and funds not being shown to be perverse, the question as formulated does not give rise to any substantial question of law. Thus, not entertained. Expenses pertaining to closed down Thane unit incurred after closure of unit - ITAT allowed the claim u/s 37 - Held that:- CIT (A) and the Tribunal have rendered a concurrent finding of fact that the closure of the manufacturing unit at Thane was on account of statutory compulsion. Further, the business of manufacturing at Thane had not ceased but had been shifted to other locations/units of the RespondentAssessee. Moreover the CIT (A)as well as the Tribunal had by applying the decision of the Apex Court in K. Ravindranathan Nair (2000 (11) TMI 3 - SUPREME Court ) concluded that the business of manufacturing drugs at different units constituted a single business and closing down of one unit and shifting its activity to other units, would be expenditure incurred was for the purposes of business. The closure of Thane unit was out of business necessity arising out of statutory compulsion. Thus the expenditure was incurred with regard to carrying on its business and thus allowable under Section 37(1) of the Act. Investment in tax free bonds out of the own funds - non utilization of borrowed funds - Held that:- We find that the CIT(A) as well as the Tribunal have come to concurrent findings of fact that the investment made in the shares, mutual funds and tax free bonds were not made out of borrowed funds but out of the RespondentAssessee's own funds. The Revenue has not been able to show that the aforesaid finding of fact is in any manner perverse.In the above view, the question as formulated does not give rise to any substantial question of law
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2016 (5) TMI 722
Deemed dividend addition u/s 2(22)(e) - Held that:- Though assessee claims that she had given her personal property to the company to be used as a collateral security for the purpose of borrowings from banks and financial institutions failed to furnish any relevant proofs in support of her arguments. We further noticed that in the present case on hand, the agreement entered by the assessee with the company gives rise to so many unanswered questions. Therefore, we hold that the claim of the assessee that she had entered into a sale agreement with the company towards sale of property is not supported by any valid evidence and hence, the amount received from the company attracts deeming provisions u/s 2(22)(e) of the Act. Therefore, in our opinion, the assessee is trying to circumvent the alleged loan and advances by furnishing an unregistered sale agreement, which was later not acted upon by both the parties even now. Hence, we hold that the A.O. is right in treating the loan received by the assesse as deemed dividend under the provisions of section 2(22)(e) of the Act. The CIT(A) has considered the issue elaborately and upheld the additions made by the A.O. Therefore, we upheld the order of the CIT(A) - Decided against assessee
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2016 (5) TMI 721
Assessment proceedings u/s 153A - claim of deduction u/s 80GGB and 80G(5) because it was not claimed in the original return. - whether deduction which had not been allowed while processing the return can be allowed in the return furnished in response to the notice u/s 153A? - Held that:- The assessee had already claimed the deduction before completion of the assessment and also filed rectification petition before the AO much before initiation of search and seizure operation. In our considered view, the assessee is eligible to claim the above deduction even in 153A assessment even though the same was not considered by the AO. Since the above deduction was legitimately claimed by the assessee much before initiation of the search and seizure operation, the claim should be allowed as deduction in 153A assessment also. Accordingly, AO is directed to allow this deduction. With regard to other deduction u/s 80G(5), the assessee has not claimed before the AO even though it is the assessee’s claim that there was some hitch in claiming the above deduction while filing the return of income and also assessee has valid documents to prove that the deduction is legitimate. Since, assessee failed to claim this deduction before completion of the regular assessment, assessee cannot claim the same in assessment proceedings u/s 153A - Decided partly in favour of assessee
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2016 (5) TMI 720
Disallowance of additional depreciation - asset put to use - Held that:- The Parliament by Finance Act, 2015 introduced third proviso to Section 32(1)(ii) of the Act providing for carry forward of the balance 50% of depreciation in the immediately succeeding previous year in respect of the asset. Probably, the Parliament might have taken the decision to incorporate third proviso to Section 32(1)(ii) after considering the conflicting judicial opinions on the subject. Whatever may be the reasons, in view of the decision of co-ordinate Bench of this Tribunal in Automotive Coaches & Components Ltd. (2016 (4) TMI 34 - ITAT CHENNAI ), this Tribunal is of the considered opinion that the assessee is eligible for remaining 10% of depreciation during the year under consideration. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to allow the balance 50% depreciation namely 10% of additional depreciation during the year under consideration. - Decided in favour of assessee
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2016 (5) TMI 719
Transfer pricing adjustment - whether the arm’s length interest rate arrived at by the TPO and endorsed by the DRP by adopting USD Corporate Bond Rate and LIBOR interest rate based on external commercial borrowing is justified in the present case or not? - Held that:- The TPO and DRP in our opinion have committed a fallacy, firstly, by considering the AE as a “tested party” and secondly, relying upon USD Corporate Bond Rates to benchmark the ALP of the interest rate because the interest rates for bonds or loan has to be seen from the point of view of borrowers creditworthiness and not the lender’s creditworthiness. Thus, the entire approach of the TPO/DRP in applying USD Corporate bond rates to benchmark the interest transaction in a blanket manner is not correct. We reject the TPO’s application of USD Corporate Bonds Rate as well as the LIBOR rate for benchmarking the interest transaction in this case. Though the assessee was required to benchmark its transaction by taking the financial year data for year 2009-10, but, if such a data were not available then it cannot be held that such a tenor adjustment for taking into time period cannot be made under CUP, if it has been made quite accurately taking into account the material factors relating to time of the transaction affecting the price. We though agree that, a high degree of comparability is required under CUP, but in absence of such a comparable data, a minor adjustment can be made to eliminate the material effect of time difference for arriving at a comparable uncontrolled price. Now before us, the assessee had filed two comparable transactions for the year 2009, that is, for the same financial year in the case of Shriram Transport Financial Company Ltd. and Tata Capital Ltd., wherein, for credit rating of AA Enterprises the coupon rate of interest per annum was between 11% to 12% for a tenor of 60 months. The yield on redemption is also around 11.25% to 12%. If for a credit rating company AA or AA(+) the interest rate is ranging between 11% to 12%, then in the case of the assessee which is admittedly BBB(-) credit rating company, 11.30% interest paid by the assessee to its AE is much within the arm’s length rate. This data/ document from public domain now made available before us is worth relying to benchmark and analyze the current transaction of coupon rate of interest paid/payable on CCDs issued by the assessee. Accordingly, we hold that 11.30% interest rate is at arm’s length price. Thus, in our conclusion, the transfer pricing adjustment made by the TPO and as confirmed by the DRP stands deleted - Decided in favour of assessee Disallowance under section 14A - Held that:- It is an admitted fact that assessee has not earned any exempt income. Once that is so, now in the wake of decision of Hon’ble Delhi High Court in the case of Cheminvest Ltd. (2015 (9) TMI 238 - DELHI HIGH COURT ), no disallowance under section 14A can be made - Decided in favour of assessee Addition on account of interest accrued in respect of non-performing assets (NPAs) - Held that:- There is no infirmity in treating the interest income on NPAs on realization basis by the assessee qua the three parties, which is in conformity with the RBI guidelines. It is also admitted fact that assessee has shown this income in the subsequent year, hence the dispute is only with regard to timing. As regards interest component, on account of Kitply Industries Ltd, (fourth party) the assessee had submitted that the said portfolio was sold at a huge loss whereby the recovery was only ₹ 1 crores as against principal of sum of ₹ 120 crores in financial year 2012-13, that is, in subsequent financial years. If such a contention of the assessee is correct then no interest income can be taxed simply on the basis of accrual. On this account also the RBI guidelines will apply. Since, this aspect of the matter has not been considered either by the AO or by the DRP, therefore, same needs verification from the end of the AO to see whether the contention of the assessee is correct that the portfolio was sold at a huge loss in the financial year 2012-13 and no interest has been recovered. Thus, in view of our finding the decision of the AO in compliance with the direction of the DRP is reversed and the ground as raised by the assessee is treated as partly allowed for statistical purposes.
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2016 (5) TMI 718
Reopening of assessment - receipt of accommodation entries - Held that:- In the instant case, the AO received information that the assessee has received accommodation entries in the nature of share capital/capital gains. He has not verified the same before issuing the notice. The assessee has not received any amount by way of share capital or by way of capital gains. As already explained the assessee has carried out share trading transactions during the year and received the payment thereof by cheques. Such profit has been duly accounted, disclosed and assessed. Therefore the AO could not form a belief at the time of issue of notice that income to that extent has escaped assessment. Therefore the reassessment notice is invalid and void ab initio. - Decided in favour of assessee
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2016 (5) TMI 717
Deduction u/s 80IB - claim of assessee was denied due to noncompliance of provisions of Section 80IB(2)(iv) - AO held that the assessee has also failed to establish correctness of deduction u/s 80IB of the Act, that it carried out its manufacturing activity by use of electricity and also not employing twenty or more workers to carry out his business without electricity, hence, deduction u/s 80IB of the Act was denied - Held that:- The Tribunal in the first round has clearly indicated that in absence of technical expert opinion and other relevant material on record , it is not able to give finding as to whether the manufacturing process carried on by the assessee is with the aid of power or not. The assessee has not in the first round of litigation produced the technical expert opinion about the reasons and justification for no or low usage of electricity and also whether the manufacturing is carried on with the aid of the power. The assessee has produced these technical expert opinions before the Tribunal in second round of litigation and has explained that in the interest of substantial justice and equity, the same should be admitted and has contended that due to ailments and advanced age of the assessee the same could not be adduced earlier before the authorities below. We are inclined to accept and admit the additional evidences submitted by the assessee in the interest of substantial justice as these evidences are vital and essential for resolving the controversy and go to the root of the matter for resolving the dispute, despite the fact that this is the second round of litigation and the assessee has failed to produce these evidences earlier, due to the various reasons cited by the assessee in its application for admission of additional evidences and also to advance substantial justice in deciding the case of merits vis-ŕ-vis technicalities involved in admitting the additional evidences. By admitting these additional evidences, the case will at best be decided on merits instead of rejecting the matter at threshold which in our considered view will not advance justice. But at the same time we are equally conscious of the fact that these additional evidences are to be subjected to verification and scrutiny by the Revenue authorities in accordance with the principles of natural justice which demand that the Revenue need to be accorded an opportunity to verify these additional evidences now submitted by the assessee before the Tribunal in second round of litigation. Thus we set aside the matter to the file of the AO for de-novo determination of the issue after considering the additional evidences submitted by the assessee. - Decided in favour of assessee for statistical purposes.
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2016 (5) TMI 716
Reduction of written down value of plant and machinery by reduction of subsidy amount - Held that:- The hon'ble apex court in the case of CIT v. P. J. Chemicals Ltd. [1994 (9) TMI 1 - SUPREME Court] have stated that the Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment directly or indirectly, to meet any portion of the "actual cost". After careful consideration, we find that the case of the assessee is squarely covered by the decision of the hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. [supra]. We, therefore, reverse the order of the learned Commissioner of Income-tax (Appeals) for all the assessment years. - Decided in favour of assessee Disallowance of expenses - Held that:- The Assessing Officer and the learned Commissioner of Income-tax (Appeals) in their orders have disallowed 20 per cent. with regard to advertisement, sales promotion and product development expenses under section 37(1) for the assessment year 2004-05 for the inability of the assessee to provide direct evidence to establish that these expenses wholly and exclusively incurred for the purpose of business. We find that the disallowance has been restricted to 20 per cent. without any rhyme and reason. Therefore, the disallowance of expenses is not apparently clear. Under these circumstances, in the interest of justice and fairness, we feel it deem and proper to restrict the disallowance to 5 per cent. of the above disallowances made by the authorities below. We, accordingly, set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to restrict the disallowance to 5 per cent. only - Decided in favour of assessee partly Denial of benefit of MAT under clause (vii) of section 115JB on the ground that the assessee has himself paid MAT - Held that:- This issue squarely covered by the decision of the Income-tax Appellate Tribunal Cuttack Bench in the assessee's own case for the assessment year 2005-06 wherein, it has been held that the assessee is not liable to be taxed under section 115JB. We further appreciate the judicial pronouncements put forth by the assessee which suggest that the assessee is not liable to pay tax even if the tax is paid wrongly or under any mistake of law, then such tax may be refunded. In view of this, we allow this ground in favour of assessee.
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2016 (5) TMI 715
Reopening of assessment - Held that:- The series of reassessment proceedings were initiated by the AO on the back drop of Satyam episode without applying mind or without cogent evidence on record. It was done mechanically, as it is evident from the fact that the earlier years reopening assessments were dismissed by the coordinate bench of this Tribunal. Moreover, the findings and conclusion drawn in the final assessment orders are nothing but same findings of the AO in the original assessment order. Merely certain enhancement were made on the same findings gives the impression that this is only change of opinion rather than escapement of income, which warranted AO to reopen the assessment. We observe that this is merely change of opinion by referring to the chart which highlights the final outcome of the reassessment proceeding. Hence, considering the above findings, we quash the order passed by the AO. Determination of interest on receivables which assessee was failed to report in the form 3CEB - Held that:- Assessee has not charged any interest to AE as well as non-AE entities. Moreover, the TPO has considered only the account receivable of AE without considering the account payable to AEs. It is pertinent to note that account payable to AE and its affiliates are ₹ 28,58,98,204 compared to account receivables from AE and its affiliates of ₹ 26,88,97,856. We find that the account payables are more than the account receivables from AE. Hence, charging of notional interest does not arise. Therefore, we are inclined to remit the issue back to the file of DRP to give their findings clearly in this matter after going through the material available on record and give their findings according to the provisions of the Income-tax Act.
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2016 (5) TMI 714
Transfer pricing adjustment - MAM - comparability - Held that:- As the assessee has been admitted by the TPO himself as a `contract manufacturer’, we fail to see as to how the CPM can not be considered as the most appropriate method in the given circumstances. No contrary view has been brought on record by the ld. DR holding CPM as not the most appropriate method in the case of receipt of job charges by a contract manufacturer. Even otherwise, we find that the CPM, like the CUP method, is a transaction specific method striving to determine ALP on a micro level thereby lending more credibility, rather than the TNMM having a non-transaction specific generalized approach aiming to compute profit on a macro level. In view of the foregoing reasons, we are of the considered opinion that the Cost plus method is the most appropriate method in the given circumstances. As the TPO proceeded to determine the ALP by applying TNMM, which has not been approved by us hereinabove, we are of the considered opinion that it will be just and fair if the impugned order is set aside and the matter is restored to the file of AO/TPO for re-deciding the ALP of the international transaction of job charges of the Pune unit under Cost plus method. It is made clear that we have not examined the comparability or otherwise of the companies chosen by the assessee as comparable. This aspect also needs to be decided at the TPO/AO’s end. Care should be taken to select comparables which are rendering job charges in the capacity of a contract manufacturer alone assuming minimal risks and not the fullfledged manufacturers purchasing raw materials and then selling similar finished goods at their own assuming all the manufacturing risks as well. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Addition in respect of amount written off under the head ‘Fixed assets written off’ - Held that:- As the loss on revaluation of fixed assets is in capital field, the same cannot be allowed as deduction. We, therefore, approve the impugned order on this score by dismissing the assessee’s ground. We are in agreement with the alternate prayer made by the assessee through the additional ground that such amount of ₹ 22.17 lac should be added to the purchase price of fixed assets. It is so for the reason that once the amount written off is not deductible, it will naturally add to the cost of assets purchased so that the actual purchase price constitutes addition in the respective block of assets during the year thereby allowing depreciation on the full purchase price of the assets. Thus, the additional ground is allowed and the AO is directed to examine the facts on this score and restore the purchase price of such fixed assets in the block of fixed assets and allow depreciation accordingly. Disallowance of amount claimed under the head ‘Provisions for obsolete goods' - Loss suffered on the valuation of closing stock - Held that:- In support of determining the market price and the resultant loss from obsolescence, the assessee furnished Manual of Swarovski Group laying down mechanism for the write off of crystal products. It is not the case of the Revenue that the valuation done by the assessee does not accord with the method of valuation given in such Manual or such a global policy is defective. It is observed that the assessee purchased en bloc stock from SPA Agencies Ltd., which consisted of both good and obsolete stocks. It was a package deal for purchase of stock. The Revenue has not doubted such purchase transaction of stock as a whole. Once the entire transaction of stock purchase from SPA Agencies has been accepted as genuine and it is found that some of the items out of such purchase were fully or partly obsolete, there cannot be any bar in writing off such obsolete stock in the books of account to bring the same at its market value. In our considered opinion, the loss suffered by the assessee on the valuation of closing stock has to be and is hereby allowed as deduction Disallowance of `Provision of doubtful debts’ and `Provision for doubtful advances’ and `Advance written off’ - Disallowance u/s 36(1)(vii) - Held that:- In so far as the first amount is concerned, this represents the amount of debtors acquired by the assessee from SPA Agencies Pvt. Ltd. and written off during the year itself. This amount has never been taken into account in computing the income of the assessee in the current year or any earlier year. Such debts might have been considered in the computation of income of SPA Agencies Ltd. in earlier years, but that does not satisfy the condition in the hands of the assessee. Thus, there is failure on the part of the assessee to fulfill the condition of section 36(2) which is a pre-requisite for allowing deduction u/s 36(1)(vii). The next amount is a provision for advances written off. It is clear and also accepted by the ld. AR that it is the amount of advances and not the debts written off. Firstly, it is not a case of provision for bad debts as these are advances and not any debtors. Once it is so, there can be no question of compliance with the condition set out in section 36(2). The ld. AR’s contention for treating this amount as a `Business loss’, is again sans merit. Unlike bad debt, no amount can be allowed as a business loss on a mere write off. The assessee is required to expressly prove the occurrence of loss. Here is a case in which the amount due from Customs Department has been written off. No amount recoverable from the Government can under any circumstance be considered as loss. This amount in our considered opinion has been rightly disallowed. The assessee has tendered no explanation on the last amount written off by it. We, therefore, approve the action of the ld. CIT(A) in sustaining the disallowance of the above three amounts. Disallowance out of advertisement and publicity expenses - Held that:- The disallowance sustained by the ld. CIT(A) is in two parts. The first is 10% of total expenditure on advertisement and publicity treated as a capital expenditure to that extent. In this regard, we find that there is no dearth of decisions from various High Courts holding that the expenditure incurred on advertisement should be allowed as deduction in entirety as revenue expenditure in the year of incurring and no part of the same can be considered as capital expenditure or deferred revenue expenditure. The Hon’ble Delhi High Court in CIT vs. Citi Financial Consumer Fin. Ltd. (2011 (3) TMI 622 - Delhi High Court ) has also held to this extent. We, therefore, hold that the ld. CIT(A) was not justified in sustaining the disallowance @ 10% amounting to ₹ 19,99,098/- on account of advertisement expenditure treated as capital by the AO, which is hereby deleted. Disallowance of 10% on account of brand building of Swarovski brand - Held that:- There is a reference in the assessment order to the fact that Swarovski AG would make direct sales to customers in the territory of India and the assessee would be paid commission @ 15% of the net value of the direct sales to the listed customers. Such income from commission in the hands of the assessee during the year under consideration stands at ₹ 15,06,754/-. We do not find much discussion in the assessment order about the reasons leading to such conclusion of brand building on behalf of the AE. In our considered opinion, it would be in the fitness of the things if the impugned order on this issue is set aside and the matter is restored to the file of AO for deciding it afresh as per law, after giving detailed reasons.
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2016 (5) TMI 713
MAT - Computing income under section 115J - ITAT making addition to the book profit in respect of assessment years 1997-98 and 1998-99 respectively and directing for deletion of the said amounts while computing the book profit of the assessee for the purpose of section 115J - Held that:- Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J.” Once there is no dispute that the books of account were maintained in accordance with law and were duly certified, the assessing officer’s limited jurisdiction is as indicated by Their Lordships in the case of Apollo Tyres (2002 (5) TMI 5 - SUPREME Court). It was therefore not open to the assessing officer to disallow the debit entry of a sum of ₹ 120.39 crores. Therefore, the order passed by the learned Tribunal is a perfectly justified order. In that view of the matter, the first question is answered in the affirmative and in favour of the assessee. It is, however, clarified that similar disallowance was there by the assessing officer of a sum of ₹ 325.15 crores for the assessment year 1998-99 which has also been set aside by the learned Tribunal and we confirm that order. Addition on account of provision for doubtful debt on account of provision for diminution in value of investment while computing book profit of the assessee - Held that:- All the ingredients should be satisfied to attract item (c) of the Explanation to section 115JA. In our view, item (c) is not attracted. There are two types of “debt”. A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case, the “debt” under consideration is a “debt receivable” by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of the asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for a liability, because even if a debt is not recoverable no liability could be fastened upon the assessee. In the present case, the debt is the amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore, in our view, item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the Assessing Officer was not justified in adding back the provision for doubtful debts under clause (c) of the Explanation to section 115JA of the 1961 Act. - Decided in favour of the assessee.
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2016 (5) TMI 712
Determination of Long term capital gain - Reference to Valuation Office u/s.55A - Held that:- AO was not justified in referring the matter to the DVO u/s.55A of the Act especially when the value of the capital asset declared by the assessee was more than the fair market value estimated by the AO. It is only when the value adopted by the assessee is less than the fair market value that the AO has power to refer the matter to the DVO u/s.55A of the Act prior to 01-07- 2012. Since the assessment year involved in the instant case is A.Y. 2010-11 and since the value adopted by the assessee as on 01-04-1981 is more than the fair market value, therefore, the AO has no power to refer the matter to DVO u/s.55A of the I.T. Act. The argument of the Ld. Departmental Representative that the amendment will apply to pending cases in our opinion is also not correct - Decided in favour of assessee
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2016 (5) TMI 711
Income attributed to the PE - rate of tax applicable to bank - Held that:- The assessee bank is incorporated in Netherlands and is engaged in banking operations across the globe through various branches worldwide, including India. In India, the assessee (branches / permanent establishment) is registered as a Scheduled Bank in terms of Schedule II of the Reserve Bank of India Act, 1034. Article 7 of the Double Taxation Avoidance Agreement (DTAA) provides for taxation in India of a foreign enterprise in respect of profits attributable to its Permanent Establishment (PE) in India. Since the assessee (The Royal Bank of Scotland ) is having a PE in India, the assessee is liable to tax in respect of income attributed to the PE. The assessee charged tax at 36.5925% on its profits on the ground that in view of Article 24 of DTAA with Netherlands, the tax rate applicable to it is the rate applicable to domestic companies i.e at 36.5925%. However, the Learned AO held that assessee being nonresident foreign company, the applicable tax rate as per the relevant Finance Act would be 40% plus surcharge. This action was upheld by the Learned CIT(A) in first appeal.This issue is covered against the assessee by the order of this tribunal in assessee’s own case for Asst Year 2004-05. Disallowance of offshore remuneration to the expatriate employees rendering services in Indian branches of the assessee - Held that:- Identical issue has been decided by the ITAT , Kolkata Bench in assessee’s own case pertaining to the Assessment Years 2002-03 and 2003-04 respectively, wherein the ITAT by following earlier order of the Tribunal has allowed the claim of the assessee subject to verification whether the expenditure was included for the purposes of section 44C. In this view of the matter, by following the earlier orders of the Tribunal (supra), we remit this issue back to the file of the Assessing Officer to allow the claim of the assessee subject to verification whether the expenditure was included for the purposes of section 44C of the Act. Deduction on interest payments made by the assessee (Indian Branch) to its Head Office - Held that:- We find that the Hon’ble Calcutta High Court had held in asesssee’s own case [2010 (12) TMI 340 - CALCUTTA HIGH COURT] that no tax need to be deducted on interest payments made by the assessee (Indian Branch) to its Head Office and various branches outside India. We feel that the assessee had duly made out of a case for admission of its additional ground and hence the same are admitted herein for adjudication. However, in case the assessee had deducted taxes thereon and remitted to the account of Central Government, then the assessee is rightly entitled for refund of the same. However, as conceded by the Learned AR, this limited aspect requires factual verification by the Learned AO as Learned DR had raised a doubt about the same. Hence we deem it fit and appropriate to set aside this issue to the file of the Learned AO for the limited aspect of verification of deduction of tax at source and remittance thereon by the assessee. Thus we hold that there is no need to deduct tax at source on interest payments made by the assessee Computing profits attributable to PE in India - Held that:- Interest paid to Head office and various branches outside India are allowable as deduction while computing the profits attributable to PE in India Depreciation on ATM machines - Held that:- Depreciation at the rate of 60% on ATMs allowed Deduction towards lease rentals - Held that:- There was a clause in the lease agreement giving an option to the lessee to buy back the asset on termination of the lease agreement. In the instant case, the assessee (lessee) falls in a better footing , in as much as there is no clause in the lease agreement, enabling the lessee to buy back the assets on termination of the lease arrangement. In view of the aforesaid facts and findings we hold that the assessee is entitled for deduction towards lease rentals.
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2016 (5) TMI 710
Penalty u/s 271(1)(c) - disallowance or setting up of the business of manufacturing and export of garments - Held that:- By applying the parameters laid down by Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory ( 2013 (7) TMI 620 - KARNATAKA HIGH COURT ), it appears that there was full disclosure by the assessee, however the expenditure claimed was inadmissible in law. Respectfully following the ratio laid down above we are of the opinion that the disallowance of the claim of expenses would not amount to furnishing of inaccurate particulars by the assessee. We therefore delete the penalty levied in respect of the disallowance of claim of expenditure. In respect of depreciation claimed by the assessee, it is observed that the assessee has shown the income earned from renting of the property under the head “Income from House Property”. The assessee has wilfully shown the rental income under the head “Income from House Property” and further claimed depreciation. The assessee in such a situation has filed wrong particulars of income, which is apparent from the face of the record. We, therefore, confirm the penalty levied by the ld. AO on the disallowance of the depreciation. - Decided partly in favour of assessee
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2016 (5) TMI 709
Depreciation on the capital asset of trust disallowed - AO allowed exemption under Section 10(23C)(vi) - Held that:- The fact remains that the Director of Income Tax (Exemptions) granted registration under Section 12AA of the Act after considering the object of the Sangam and the purpose for which it was established. The CIT(Appeals) by letter dated 17.03.2015 asked the assessee to furnish its objection, if any, for disallowing the claim under Section 11 of the Act or Section 10(23C) of the Act. The assessee now claims before this Tribunal that the letter dated 17.03.2015 was not served on it and the working said to be provided to the assessee by the CIT(Appeals) was also not furnished. Admittedly, the CIT(Appeals) passed the order on 26.03.2015. Therefore, from the date of issue of letter and the date of passing the order, the time limit available was only 9 days. If the CIT(Appeals) dispatched the letter dated 17.03.2015 by post, then the same would have been received after two or three days. Then, the available time would be only 5 or 6 days. If for any reason, the letter could not be served on the assessee within two or three days, then the time limit available to the assessee for furnishing objection would be reduced proportionately. Therefore, this Tribunal is of the considered opinion that even assuming for argument sake, the letter dated 17.03.2015 was served on the assessee, the time given to the assessee for filing objection is not sufficient enough. Therefore, the matter needs to be reconsidered by the Assessing Officer. - Decided in favour of assessee for statistical purposes.
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2016 (5) TMI 708
Sundry balances written off - AO disallowed the same on the ground that assessee could not establish the genuineness of the amount written off - CIT(A) allowed the claim relying on the decision of Hon’ble Supreme Court in the case of TRF Ltd.[2010 (2) TMI 211 - SUPREME COURT ] - Held that:- Held that:- No infirmity in the order of the CIT(A). We find before CIT(A) the assessee had submitted that the amounts were taken into account while computing the profit of earlier year. In the assessment order although the AO has asked the assessee to prove the genuineness of the claim of bad debt, he has never put any question regarding taking of the amounts written off as bad debt as income of earlier years. Therefore, the grounds raised by the revenue at this juncture on the issue of taking the amount as income in preceding years in our opinion is without any merit. Nothing has been brought on record by the revenue that assessee has not taken into consideration the said amounts in the income of the preceding assessment order. Since the assessee in the profit and loss account has written off the amount, therefore, in view of the decision of Hon’ble Supreme Court in the case of TRF Ltd. (Supra) assessee is not required to establish that the debt has become irrecoverable. Therefore, the Ld.CIT(A) is justified in deleting the disallowance. - Decided against revenue
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2016 (5) TMI 707
Addition made on account of bogus purchases - Held that:- As decided in M/s Kolte Patil Developers Ltd Versus Dy. Commissioner of Income Tax [2015 (3) TMI 363 - ITAT PUNE] once the assessee had prevented the Assessing Officer from carrying on any exercise of any kind of verification, then on a later date, the assessee cannot take the stand that no such addition is warranted in the absence of any verification exercise carried out by the Assessing Officer. The assessee has failed to furnish the confirmation from the parties and the Sales Tax Department has not been able to trace the said parties. In the absence of any confirmation being filed by the said parties or the evidence of the bank statement of the said parties having been placed on record by the assessee to prove its case, merely because such view has been taken in any other decision, the same cannot be applied where the assessee has not discharged its onus. Even before us, the assessee has not furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof, we find no merit in the said stand of the assessee. Thus we reverse the order of CIT(A) and uphold the addition made by the Assessing Officer on account of bogus purchases - Decided against assessee. Addition made on account of commission expenses - Held that:- The said amount was added as income of the assessee on the surmise that it was due as on close of the year. The assessee has furnished before the CIT(A) and also before the Assessing Officer sufficient evidence to prove that the liability of ₹ 1,50,000/- has been discharged in the succeeding year. In the totality of the above said facts and circumstances, where the amount of commission is claimed to have been paid after realization of the amount due to the assessee by the said commission agent, we find no merit in the grounds of appeal raised by the Revenue and the same are dismissed - Decided against revenue
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2016 (5) TMI 706
Disallowance of written off as bad debts under section 36(1)(vii) - AO had denied the claim on the ground that the debt had not become bad and also that the assessee was otherwise dealing with the said concern - Held that:- The assessee has placed copy of the ledger account of the said party in its books at page 6 of the Paper Book. The Assessing Officer had denied the claim on the ground that the debt had not become bad and also that the assessee was otherwise dealing with the said concern. The learned Departmental Representative for the Revenue during the course of hearing pointed out that write off was premature as sum of ₹ 1 lakh was received by the assessee in the next year. The assessee had written part of the specific bill which was due from M/s. Goodwill Engineering Services. The assessee was otherwise engaged in the business of manufacturing, hiring and trading activities and had only sold one machinery to M/s. Goodwill Engineering Services on 30.11.2005 i.e. during the preceding year. However, the payment against the said machinery could not be realized by the assessee in full and only sum of ₹ 1 lakh after negotiations was paid by the said concern that too in assessment year 2008-09. At the close of the year, the assessee had written off of ₹ 68,750/- i.e. amount in question by treating it as irrecoverable and such act of write off of irrecoverable amount cannot be faulted with and the claim of assessee against writing off of such amount is to be allowed as deduction under section 36(1)(vii) of the Act. See Nichrom India Limited case [2016 (3) TMI 317 - ITAT PUNE ] - Decided in favour of assessee Disallowance made under section 14A - Held that:- The assessee has filed on record the copy of Balance Sheet as on 31.03.2007, in which the said investment is reflected at ₹ 2,80,000/- and even as on 31.03.2006, the investment was ₹ 2,80,000/-. Admittedly, the aforesaid investment has not been made in instant assessment year and is brought forward from the preceding year. In the earlier years, no disallowance under section 14A of the Act was made in the hands of assessee. The assessee admittedly, has not received any income on the said investment which is exempt from tax. The year under appeal before us is assessment year 2007- 08 and the provisions of Rule 8D of the Income Tax Rules, 1962 were not on Statute in the said assessment year. In view thereof, we find no merit in the aforesaid disallowance made under section 14A of the Act - Decided in favour of assessee
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2016 (5) TMI 705
Grant of higher rate of depreciation @80% on Civil work and portion of installation and commissioning work included in the block of assets of windmill - Held that:- Civil work comprising of foundation of the windmill is an integral part of windmill erection. Therefore, the same is eligible for depreciation at the same rate as is applicable in the case of windmill. Similarly, the cost of commissioning and erecting windmill cannot be said to be separate from the windmill as it is directly related to the functioning of the windmill. Therefore, the same rate of depreciation will apply on the cost of commissioning of the windmill. Deduction in respect of cost of civil work which was required for foundation of windmill @ 80% i.e. expenditure incurred on erection and commissioning, including foundation work. The assessee had incurred cost for electrical work including supply and installation of electrical items, labour charges for testing and commissioning out and contribution towards power evacuation infrastructure cost, which were incurred exclusively for running and maintenance of windmill installed and proper functioning of windmill. No infirmity in the order of CIT(A) in allowing the claim of higher depreciation to the assessee - Decided in favour of assessee. Revenue v/s capital expenditure - expenditure on account of mobiles written off - Held that:- We find that the Tribunal in Inductotherm (India) Ltd. Vs. DCIT (1999 (6) TMI 45 - ITAT AHMEDABAD-C) had held that unless and until scrap value of the machinery which has been discarded, demolished or destroyed during the previous year is ascertained the same cannot be reduced for the purpose of computing depreciation. In the instant case, the machinery in question was only scraped during the year, that meant it had not been used during the previous year. The scrap value of the same had not been ascertained as yet which would be possible only after selling the same. Therefore, nothing could be reduced at present from the written down value of the block assets and the Tribunal thus, directed the Assessing Officer to allow depreciation as claimed by the assessee on the aforesaid assets. The issue arising before us is similar to the issue before the Ahmedabad Bench of Tribunal in Inductotherm (India) Ltd. Vs. DCIT (supra) and following the same parity of reasoning, we hold that the assessee is entitled to the claim of depreciation on the assets - Decided in favour of assessee. Disallowance on account of interest expenditure - Held that:- Though the assessee had during the course of assessment proceedings agreed to the aforesaid addition, but in view of the facts being brought to the notice of CIT(A) and also before us, we find merit in the claim of assessee. Following the same line of reasoning as in assessment year 2008-09, we direct the Assessing Officer to re-compute the interest expenditure in relation to the projects undertaken by the assessee and such interest which is relatable to project, revenue of which has been recognized by the assessee in the year under appeal, then the same is to be allowed as deduction. However, the balance interest expenditure is to be allocated to the projects under construction and the interest has to be capitalized.
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2016 (5) TMI 704
Disallowance u/s. 40A(3) on account of unaccounted cash purchases - making an addition of outstanding liability u/s. 41(1) - Held that:- We find from the facts of the case that the assessee has entered into cash transactions as per seized registers seized from the premises of the assessee which clearly revealed that there is cash transaction of the purchases and the A.O. has made estimation from these seized materials for all these seven years. We further find that even the outstanding liabilities and the provisions made are based on seized registers and balance-sheet filed by the assessee as per old returns. The CIT(A) confirmed the computation of unaccounted cash purchases calculated and estimation of disallowance based on seized material and on the basis of the reasonable projection made out of the entries recorded in the seized Annexure A1 and A 4 found during the course of search u/s. 142(1) of the Act on the premises of the assessee on 13.3.2008. Further, the CIT(A) also confirmed the outstanding liabilities and provision for the reason that no confirmation for such creditors was furnished by the assessee and genuineness of such liabilities was not proved to the satisfaction of the A.O. In view of these facts and circumstances we find no infirmity in the orders of the lower authorities and hence, the order of CIT(A) is confirmed. Similar are the facts in other years and additions are also on identical grounds, hence taking a consistent view, we dismiss all these seven appeals of the assessee. - Decided against assessee.
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2016 (5) TMI 703
MAT applicability - CIT(A) directing the AO to give benefit of unabsorbed depreciation and recomputed the book profits as per the provisions of section 115JB - Held that:- The aggregate of business loss or depreciation, whichever lower is to be considered for reduction out of the book profit. See Amline Textiles P.Ltd. Vs. ITO [2008 (11) TMI 438 - ITAT MUMBAI ]
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2016 (5) TMI 702
Addition towards capital gains - invoking provisions of section 50C - Held that:- AO had simply disregarded the stand of the assessee by observing that a single unit (i.e Unit No. 407) cannot be divided as capital asset and stock in trade as shown by the assessee. We find that this observation is totally contrary to the order of amalgamation approved by the Hon’ble Calcutta High Court , wherein the manner of treatment of assets by M/s Nice View Properties Private Limited were simply carried over by the assessee at book values pursuant to amalgamation with effect from 1.4.2000. It is not in dispute that M/s Nice View Properties Private Limited had held 284 Sq. ft amounting to ₹ 8,56,122/- (book value) as on 31.3.2000 as Fixed Assets comprising of Unit No. 407A. The same treatment was followed by assessee in its books of accounts post amalgamation period. Hence the gains arising on transfer of the same would only result in capital gains. It is also not in dispute that M/s Nice View Properties Private Limited had held 850 Sq. ft amounting to ₹ 10,48,320/- as closing stock of commercial flats as Stock in Trade as on 31.3.2000 comprising of Unit No. 407B. The same treatment was followed by assessee in its books of accounts post amalgamation period. Hence the gains arising on transfer of the same would only result in business income. The same treatment was followed by assessee in its books of accounts post amalgamation period. It is well settled that prior to introduction of provisions of section 43CA in the Statute Book by the Finance Act 2013 w.e.f. 1.4.2014, the provisions of section 50C of the Act could not be made applicable for assets held as stock in trade. The case relied on by the Learned AR in this regard on the decision of the Hon’ble Madras High Court in the case of CIT vs Thiruvengadam Investments Pvt Ltd reported in (2009 (12) TMI 48 - MADRAS HIGH COURT ) is very well placed. We also find from the balance sheet of the assessee for the financial year 2007-08, that the assessee had duly reflected the value of Unit No. 407B at ₹ 10,48,320/- as stock in trade as on 1.4.2000. Hence there is no question of treating the same as capital asset and invoking section 50C for the purpose of computing capital gains on sale of the same. - Decided against revenue Addition towards alleged bogus construction expenses - Held that:- Revenue had not brought any evidence on record to prove that the development work on the property was never carried out by the assessee through these parties. It only alleged that the parties had not done any development work in the past and had done only for the assessee during the asst year under appeal. This observation of the Learned AO had been found to be irrelevant consideration by the Learned CITA which has not been controverted by the Learned DR before us. With regard to the non-availability of Mr.Anup Kumar Shukla at the time at which Inspector visited his premises, we find that the Learned CIT(A) had observed that no person could be expected to always remain available at his place of work and secondly it is not the case of the Inspector that there was no such person at the place. This aspect also has not been controverted by the Learned DR before us. In view of the aforesaid facts and findings, we hold that the assessee had duly bifurcated the development expenses of ₹ 11,44,634/- towards Unit No. 407A (capital asset) at ₹ 2,86,664/- which is to be granted deduction while computing capital gains and balance sum of ₹ 8,57,970/- towards Unit No. 407B (stock in trade) which is to be granted deduction while computing business income. - Decided against revenue Addition u/s 68 - Held that:- Learned DR prayed that the additional evidences admitted by the Learned CIT(A) were never submitted before the Learned AO and hence prayed for set aside of this issue to the file of the Learned AO, for which the Learned AR fairly agreed. Hence we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of the Learned AO, to decide this issue afresh, in accordance with law, in the light of evidences and documents submitted by the assessee before him. Disallowance of expenses - Held that:- We have held in the previous ground no.1, that the sale of Unit No. 407B which was held as stock in trade should be treated as income from business and had also given relief to the assessee in ground no. 2 with regard to grant of deduction towards development expenses against the sale consideration of stock in trade. Hence it is not in dispute that the assessee is indeed engaged in business activities. It is not in dispute that the aforementioned expenditure are not business expenditure. We hold that these expenditures are regularly incurred for the purpose of business of the assessee in its normal course. - Decided against revenue Disallowance u/s 14A - Held that:- The total value of investments included investment in commercial flats amounting to ₹ 58,25,442/- wherein, the resultant income would definitely not fall under the ambit of exempt income. The legislature never wanted to consider the entire investments for making disallowance u/s 14A. It only contemplated expenditure incurred for earning any income which do not form part of total income. Admittedly, the income that would arise out of investment in commercial flats would only result in taxable income and therefore outside the scope of primary intention of section 14A of the Act. Hence we hold that the Learned CIT(A) had rightly reduced the same while computing 0.5% of average value of investments. - Decided against revenue
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2016 (5) TMI 701
Penalty u/s. 158BFA(3)(e) - penalty order within the time allowed - Held that:- Standing Counsel has to be treated as the recognized agent of the Commissioner or the Income Tax Department and the date of receipt of the order of the Hon’ble High Court by him has to be treated as the date of receipt of the order by the Commissioner or the Income Tax Department. Accordingly, the penalty order should have been passed on or before 31/03/2010 or 31/08/2010, which in fact had been passed on 27/09/2010 which is beyond the limitation period as prescribed in the Income Tax Act. Therefore, the penalty order passed by the Assessing Officer is barred by limitation and is liable to be quashed. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) who has rightly quashed the penalty order passed by the Assessing Officer. - Decided in favour of assessee.
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2016 (5) TMI 700
Disallowance u/s 14A - Held that:- We have observed that Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ) has held that Rule 8D of Income Tax Rules, 1962 is applicable only from the assessment year 2008-09 , while the relevant assessment year under appeal is 2006-07. Section u/s 14A of the Act is applicable for the relevant assessment year and the disallowance has to be made in respect of the income which does not from part of the total income . The assessee company has mixed pool of funds which are deployed for earning the taxable income and tax free income and it is for the assessee company to show with the cogent material/evidences that interest free funds are deployed in making investments which yield tax free income . In our considered view , the interest of justice will be best served if the matter is restored to the file of the AO for de-novo determination of the issue with the directions to the assessee company to produce on record cogent material/evidences to substantiate its claim that the interest free own funds are deployed for making the investments which yield tax free income and then accordingly the disallowance be worked out . The AO shall also keep in view the presumption as laid down by Hon’ble Bombay High Court in the case of HDFC Bank Limited (2014 (8) TMI 119 - BOMBAY HIGH COURT ) and also other case laws relied upon by the assessee company while de-novo determination of the issue. Needless to say that the AO shall grant proper and adequate opportunity of hearing to the assessee company in accordance with law in compliance with principles of natural justice. We order accordingly. Delayed payments in respect of Employees’ Contribution towards PF and ESIC - Held that:- We have observed that the assessee company has made payments towards Employee’s PF contribution beyond the time stipulated i.e. due date under the relevant PF Act but however the assessee company has made the afore-stated payments of PF before the due date of filing of return of income u/s 139(1) of the Act. We have observed that this issue is squarely covered by the decision of Hon’ble Bombay High Court in Ghatge Patil Transport Ltd [2014 (10) TMI 402 - BOMBAY HIGH COURT] and also Hon’ble Supreme Court in Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] in favour of the assessee company and hence the deduction is allowable with the respect to employee contribution towards PF if payment although made beyond the due date as prescribed under the PF Act but are made before the due date of filing of return of income u/s 139(1) of the Act which shall be treated as in compliance with Section 36(1)(va) of the Act read with Section 43B of the Act. - Decided in favour of assessee.
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Customs
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2016 (5) TMI 739
Valuation - Whether the ullage survey report has to be taken into consideration for the purpose of calculating the Customs duty or is it the actual quantity of imported oil at the shore which is to be considered - Held that:- the issue stands decided in favour of the assesse by a recent decision of the Hob’ble Supreme Court in the case of Mangalore Refinery & Petrochemicals Ltd. Vs. C.C. [2015 (9) TMI 245 - SUPREME COURT]. Therefore, by relying on the same, no import duty can be levied on the goods lost, pilfered or destroyed during transportation and it is the actual quantity received at the shore which would attract duty. Valuation - Whether the ship demurrage charges paid by the assesse is required to be included in the transaction value or not - Held that:- the issue stands decided by the Larger Bench decision of the Tribunal in the case of Commissioner of Customs, Jamnagar Vs. Grasim Industries Ltd. [2013 (10) TMI 246 - CESTAT AHMEDABAD]. Therefore, by relying on the same, the ship demurrage charges were includable in the assessable value for discharge of Customs duty only with effect from the date of coming into force of 2007 Valuation Rules. Inasmuch as in the present appeals, the period is much prior to the above date, so, we hold in favour of the assessee. - Decided in favour of appellant with consequential relief
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2016 (5) TMI 738
Relinquishment of goods - Import of electric goods during 1995-96 - cleared under warehousing bill of entry and kept in warehouse - Seeked permission for re-export of goods after paying the penalties imposed - Appellant contended that Customs all along have been careless and the result has been that their part goods have been auctioned without any intimation to them and that remaining goods of 12 consignments were also not in the condition to be re-exported as they had all been opened as the goods were being readied to be auctioned. Held that:- the request of the appellant deserves to be accepted as there cannot be any purpose served by re-exporting such goods as these goods are electric goods which have become obsolete by now. There has not been any default on the part of appellant as a reason for not allowing them relinquishment of the title of the goods, when the appellants had paid all the rents, interest and other charges and penalties which are payable as per provisions of Section 68 of the Customs Act 1962. - Decided in favour of appellant
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2016 (5) TMI 737
Imposition of Redemption fine and penalty - Re-determination of assessable value - Proper classification of goods i.e. Indian Hand knotted Woollen Carpet - No intention to evade any duty or violate any license prohibitions - Held that:- the issue of proper classification of goods is to be decided and it is seen that the department has done so on physical examination of the sample drawn, and on the basis of an earlier test report of similar goods. As regards valuation, it is observed that the Dept. has made market inquiries and the final value was re-determined on the basis of local prices and ECDB data. It is observed that ECDB data relied upon is not for identical goods. It is for similar goods of 50% wool, and/or 80% jute and 20% cotton. Hence, the case not found to be fit to warrant imposition of redemption fine under Section 125 or penalisation under the provisions of Section 114 of the Customs Act 1962. - Decided in favour of appellant
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2016 (5) TMI 736
Refund - Entire set of documents with the correlation of the goods sold as per goods arrived submitted but not considered by either of the authorities below - Held that:- once the documents stated above are on record it is the duty of the authority to give proper finding on each document which is claimed to be supporting document for the refund and pass appropriate order. When that is not done that has resulted in violation of natural justice. Violation of natural justice goes to the root of the matter which is incurable at the appellate stage. Learned Commissioner (Appeals) is directed to afford reasonable opportunity of hearing to the appellant and upon hearing on each document available on record, shall pass appropriate order. Also learned Commissioner (Appeals) having co-extensive and co-terminus power shall examine the entire matter threadbare and shall pass the order without sending the matter back to the adjudicating authority.
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Corporate Laws
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2016 (5) TMI 732
Winding up - cheques dishonored - Held that:- Merely because certain cheques issued by the respondent have been dishonoured for want of funds, that does not mean, that the respondent company has to be wound up. Perusal of the balance sheet does not indicate that the company deserves to be wound up for non-payment of lesser amount of ₹ 2,11,799/- allegedly due, from 27.05.2013 nor the respondent could be termed as commercially insolvent warranting appointment of a Provisional Liquidator under the provisions of the Companies Act, 1956. Company Petition dismissed
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2016 (5) TMI 731
Scheme of amalgamation - change of the name of the company - Held that:- this Court while dispensing for the convening of the meeting of transferor and transferee company has taken note of the fact that 100% equity shareholders of both the companies have filed their consent affidavits. Thus, the scheme of amalgamation consented by the 100% equity shareholders also containing the clause for change of name of the transferee Company under clause 16 therein, makes it abundantly clear that there is no necessity for repeating the exercise once again for the purpose of change of the name of the company. The Scheme states that there is no objectionable feature in the scheme of amalgamation which is detrimental either to the employees of the transferor company or of the transferee company. The said scheme is not violative of any statutory provisions. The scheme is fair, just, sound and is knot against any public policy or public interest. No proceedings are pending under sections 231 to 237 of the Companies Act, 1956. All the statutory provisions are complied with.
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2016 (5) TMI 730
Winding up - auction sale proceeded under the SARFAESI Act - Held that:- Sale of the assets of the company for realisation of the loan amount to State Bank of Patiala, Syndicate Bank and M/s. LIC Housing Finance Limited, Chennai. Company sought to be wound up has also now filed an affidavit dated 18.01.2016, undertaking that they would handover physical possession of the secured assets upon completion and confirmation of the auction sale to be proceeded under the SARFAESI Act. All the parties before this Court have consented for sale of the property by Edelweiss Asset Reconstruction Company, Mumbai under the provisions of the SARFAESI Act, and for distribution of the amounts due and payable to the abovesaid three creditors viz., State Bank of Patiala, Syndicate Bank and M/s. LIC Housing Finance Limited, Chennai. In the light of the consensus, this Court directs that Edelweiss Asset Reconstruction Company, Mumbai, the 2nd respondent, shall take measures in the manner known to law, under the provisions of the SARFAESI Act to sell the assets of the company and take steps to get the sale confirmed as expeditiously as possible. No sooner the sale is confirmed, M/s.Riverside Infrastructure (India) Private Limited, Chennai, shall handover the possession of the assets as per the affidavit of undertaking dated 18.01.2016, without demur or objections. The whole exercise has to be completed within four months from the date of receipt of a copy of this order.
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FEMA
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2016 (5) TMI 740
Confiscation of foreign currency and imposition of penalty - Clauses (d), (e) and (i) of Section 113 of the Customs Act, 1962 - Seizure of US dollars - Import of currency as advance payments towards supply of diamonds - absence of requisite permission of Reserve Bank of India - Held that:- the greater significance and important is the absence of any special or general permission as contemplated under Section 8(1) of FERA. No such permission is produced or relied upon. In fact, that is not even the case that Jatin Jhaveri had applied for and got such permission. For the purpose of Section 8(1) of FERA, “acquisition” of foreign exchange must be with general or special permission of the Reserve Bank of India. Even if the matter of ‘bringing into India’ of the currency in question, as submitted by Mr. R.P. Bhatt, learned Senior Advocate, is taken to have been established, though that part of the matter itself is not free from doubt, the question regarding ‘acquisition’ of currency must be independently established in the light of requirements under said Section 8(1). The assessment in that behalf by the Appellate Authority under FERA and the High Court is completely incorrect. Mr. Bhatt, attempted to rely on Notification No.FERA-81/89-RB dated 09.08.1989 as amended upto 09.03.1999, but the said notification is in relation to Section 13 of FERA and not in relation to Section 8(1) thereof. Secondly, this notification was not adverted or referred to at any stage and in any case does not deal with acquisition as contemplated under Section 8(1) of FERA. Therefore, the orders passed by the Appellate Tribunal, FERA and by the High Court while accepting the view taken by the Special Director are set aside. The order of confiscation is upheld. Since the amount of ₹ 1,83,09,525/- was refunded and credited to the account of Jatin Jhaveri during the pendency of the proceedings subject to his undertaking to return the same with interest, he is directed to refund the amount with interest @ 10% per annum within six weeks from the date of this judgment. - Appeals disposed of
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Service Tax
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2016 (5) TMI 751
Refund - Transfer of burden to discharge of service tax liability to another person - bondafide belief - Sale of space or time for advertisement service to several advertising agencies - High Court held that in terms of the statutory provisions it is the appellant which is to discharge the liability towards the Revenue on account of service tax. Undoubtedly, the service tax burden can be transferred by contractual arrangement to the other party. But, on account of such contractual arrangement, the assessee cannot ask the Revenue to recover the tax dues from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors reported in [2015 (4) TMI 705 - DELHI HIGH COURT] - Apex Court dismissed the special leave petition filed by the petitioner
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2016 (5) TMI 750
Nature of activity of Payment Gateway services provided to client in USA - Whether the place of provision of payment processing service by the applicant, is outside India in terms of Rule 3 of Place of Provision of Services Rules, 2012 - Held that:- applicant is providing this service to WWD US on his own account for a fee equal to the operating costs incurred by the applicant plus mark-up of 13% on such costs. Therefore it cannot be inferred that the applicant would be providing payment processing service to the Indian Customer, for the service rendered by WWD US to them. If that was the case, applicant would not receive any fees from WWD US in respect of payments by the Indian Customer remitted directly through International Credit Card to their service provider i.e., WWD US. But that is not the case. Further, the definition of “intermediary” as envisaged under Rule 2 (f) of POPS does not include a person who provides the main service on his own account. In the present case, applicant is providing main service i.e. “business support services” to WWD US and on his own account. Therefore, applicant is not an “intermediary” and the service provided by him is not intermediary service. Thus, the place of provision of service would be location of recipient of service i.e. WWD US under Rule 3 of POPS. Therefore, the place of provision of payment processing service by the applicant, is outside India in terms of Rule 3 of Place of Provision of Services Rules, 2012. Whether the services to be provided by the Applicant to WWD US that fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of taxable services in terms of Rule 6A of the Service Tax Rules, 1994 (inserted vide Notification No. 36/2012-S.T. dated 20.6.2012) and therefore remain non-taxable for purpose of payment of service tax under the Finance Act - Held that:- the place of provision of service would be outside India. It is observed that in this case, provider of service i.e. the applicant, is located in India, which is the taxable territory; recipient i.e. WWD US is located in USA; the service to be provided by the applicant i.e. business support services, is not specified under Section 66D i.e. Negative List Services; applicant would receive payment for said services in convertible foreign exchange and applicant and WWD US are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of Section 65B of the Finance Act, 1994. As all the ingredients enlisted under Rule 6A ibid are satisfied, said service will qualify as export of taxable service. In facts and circumstances of the case, by providing the payment processing services to WWD US, the applicant is not providing any service to the customers of WWD US in India.
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2016 (5) TMI 749
Extended period of limitation - Photography Service - Wilful misstatement and suppression of facts - Appellant admitted that it was engaged in the activity of image editing but did not give any printed photograph to the customers and only loaded the images on a CD which was given to the customers for getting the photos printed elsewhere, therefore there was no photography services rendered. Held that:- it is not even necessary to quibble much over the scope of the word photography because the appellants clearly were engaged in taking or processing of photographs and were clearly covered under the scope of definition of photography studio or agency and they clearly provided service in relation to photography. Indeed the position is so unambiguous that there was no scope for any possibility of a reasonable person operating in an appropriate environment to entertain any confusion, leave alone belief, that the impugned service was not covered under photography service. It is pertinent to mention that bona fide belief is the belief of a reasonable person operating in an appropriate environment and is not some sort of hallucinatory belief. - Demand confirmed invoking the extended period of limitation - Decided against the assessee.
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2016 (5) TMI 748
Classification - Advertisement services or Business Auxiliary services - all the cricket players are engaged through the appellant in providing advertisement and promotion of the product of M/s. Hero Honda Motors Ltd. The appellant are paid the consideration towards advertisement performed by the celebrities. - Period involved is 1-4-2000 to 30-6-2003 - Appellant submitted that they are not advertising agency and their services were rightly classifiable under Business Auxiliary Services which became taxable only w.e.f. 1-7-2003 therefore on the BAS, since there was no tax liability prior to 1-7-2003 no demand can be raised since the services admittedly covered under BAS and they have been paying service tax under such head w.e.f. 1-7-2003. Held that:- from the tripartite agreement, it clearly shows that It is also undisputed that the payment consideration towards advertisement performed by the celebrities are received by the appellant, therefore appellant is legally liable for payment of service tax under the category of advertising services during the period involved in the present case. As regard the contention of the appellant that the services are of promotion of sale of goods of M/s. Hero Honda Motors Ltd. and therefore the same is classified as Business Auxiliary Service which became taxable only from 1-7-2003, we do not agree with this contention for the reason that services of celebrities are nothing to do with the promotion of the sale whether sale is promoted or not, the service of celebrities is confined to display of brand and advertise the product of M/s. Hero Honda Motors Ltd., therefore, services are clearly of ‘advertising services’ and not of BAS. By applying the decision of Madras High Court in the case of of M/s. Adwise Advertising Pvt. Ltd. Vs. Union of India [2001 (3) TMI 1 - HIGH COURT (MADRAS)], locating or selecting a particular media would be a “Service”, by the advertising agency “in relation to the advertisements”. Appellant, as the service provider, were legally bound to collect and pay service tax, and a clause in the agreement cannot absolve the Appellant of their responsibility for paying the service tax on the taxable advertising services, rendered by them during 1-4-2000 to 30-6-2003. Imposition of penalty - Section 76 and 78 of that Act - Held that:- by applying the decision of Hon'ble Kerala High Court in the case of Asst. CCE & Ors. Vs. Krishna Poduval & Ors. [2005 (10) TMI 279 - Kerala High Court], despite providing taxable advertising services, during the period 1-4-2000 to 30-6-2003, they had suppressed the fact that the amount realized by them was for the said taxable services provided by them during the relevant period. Therefore, penalty is imposable as a person who is guilty of suppression deserve no sympathy. Invocation of extended period of demand - Non-disclosure of advertising services to the department and despite possessing the registration also not disclosed to the department, the provisions of services and collection of amount thereagainst - Held that:- it is a clear case of suppression of facts on the part of the appellant. Moreover in some of the agreements, the clause related to payment terms contains the liability of payment of Service Tax. Therefore the larger period of demand was rightly invoked. Since there is suppression of facts, the appellant was legally liable for penalties under Sections 76 and 78. The impugned order does not require any interference, hence the same is maintained. - Decided against the appellant
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2016 (5) TMI 747
Waiver of pre-deposit in full and stay of further proceedings for realisation of liability assessed - Business Auxiliary Service - Appellant acting as an intermediary to facilitate citizens to obtain various licences, permissions and registrations which are statutorily regulated and collected a stipulated fee in return from individuals and organisations who apply for such licences/permission or registrations. Held that:- the services provided by the appellant to public for facilitating receipt by them of licenses/permissions/registrations issued by the State Govt. do not fall within the ambit of any integer of Business Auxiliary Service as defined in Section 65(19), including within the ambit of service provided as a commission agent, since the public from whom the appellant had received consideration cannot be said to be providing any service to the State while receiving the statutorily mandated permissions/licences/registrations. Therefore, waiver of pre-deposit in full is granted and all the further proceedings for recovery of the assessed liability under the impugned order are stayed. - Waiver granted in full
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Central Excise
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2016 (5) TMI 746
Demand of duty and imposition of penalty - Rule 25 of CCR read with section 11 AC of the Act - Restriction on utilisation of Cenvat credit as provided under Rule 8 (3A) of CER - Held that:- the issue is no longer res integra as it is evident that Hon'ble Gujarat High Court in the case of Indsur Global Limited Vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT], the portion of the Rule "without utilising the Cenvat credit" of sub Rule 3(A) of Rule 8 of Central Excise Rules, 2002 as invalid and ultra-vies under article 14 & 19 (1)(g) of the Constitution of India. Therefore, by following the same, the appellant succeeded. - Decided in favour of appellant with consequential relief
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2016 (5) TMI 745
Period of limitation - Job-work basis - Demand of excise duty - carrying out the process of lamination on job work basis on the material supplied by Bus Body Builders - Held that:- the period involved in the show cause notice is 1991-92 to March 1995 whereas the show cause notice was issued on 31.7.1996 accordingly entire demand is beyond one year of normal period. On perusal of the records and submissions,it is found that for the purpose of movement of goods from bus body builders to the respondent, manufacture of goods on job work basis , return of goods back to bus body builders and use thereof in the bus body buildings were undertaken in terms of Rule 57F(2) and/or Notification No. 214/86-CE dt. 25.3.1986. In this regard, the bus body builders filed intimation along with undertaking to the Central Excise Authority of job worker. The material was supplied under the cover of Annexure II challan. The said Annexure II challan was pre-authenticated by the Central Excise authorities of the jurisdiction of bus body builders. In the classification list also whereby notification No. 214/86-CE dt. 25.3.1986 was clearly declared. The jurisdictional excise authority of the body builders despite knowing that the bus body building is exempted, pre-authenticated the Annexure II challans. Therefore entire facts related to the bus body builders and the movement of goods and manufactured of goods under job work was very much in the knowledge of Central Excise authorities of both the jurisdiction therefore we do not see any suppression of fact on the part either of bus body builder or of respondent. Therefore the Commissioner has rightly held the demand as time bar. - Decided against the revenue
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2016 (5) TMI 744
Eligibility of Cenvat credit - Invoices in which serial numbers are hand-written and not pre-printed - Revenue contended that pre-printed serial numbers on the invoices is a mandatory requirement and hand-written serial numbers will not be acceptable - Held that:- as per Rule 11(2) of the Central Excise Rules, 2002, it is not mandatory that the invoices issued under Central Excise Rules, 2002 should be pre-printed. At the same time it is also observed that under Rule 9(2) of the Cenvat Credit Rules, 2004, Cenvat Credit shall not be denied on the grounds that any of the documents mentioned in sub-rule 1 does not contain all the particulars required to be contained under these Rules. In case there is any discrepancy then the same can be verified from the jurisdictional Central Excise Officer, having jurisdiction over the supplier of the inputs, to ensure that the appropriate Central Excise duty has been paid on inputs. In the light of the above observations, under the provisions of existing Central Excise Rules 11(2) it is not mandatory to have pre-printed invoices. It is not the case of the Revenue that the duty-paid inputs have not been received by the Appellant and further not utilized in the manufacture of the finished goods. It is now a well settled legal proposition that minor procedural lapses cannot be made the basis for denying Cenvat Credit. Accordingly Cenvat Credit on the basis of invoices having hand-written serial numbers cannot be denied to the Appellant. Demand and imposition of penalty - Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Plastic crates - Appellant argued that no Education Cess was payable when plastic crates and glass bottles were received for the first time on payment of duty for which credit was taken - Held that:- once a stand was taken by the Appellant before the adjudicating authority then it has to be established by the Revenue that Cenvat Credit of Education Cess in fact was taken by the Appellant. By applying the ratio laid down by the Apex Court in the case of Commissioner of Customs vs. Auto Ignition Ltd. [2008 (4) TMI 43 - SUPREME COURT], once an assesse takes a stand that Modvat credit with respect to inputs is not availed, then onus is shifted to the Revenue to establish that credit is taken by an assessee. Accordingly the demand of is not sustainable. - Decided in favour of appellant
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2016 (5) TMI 743
Job worker - Eligibility of Cenvat credit - Inputs directly purchased and used in the manufacture of goods under job-work - Cleared goods without payment of duty as per the provisions contained in Notification No.214/86-CE - Held that:- by following the various case laws, the Cenvat Credit to the job-worker, on inputs directly purchased and used in the manufacture of finished/intermediate goods, will be admissible even if duty is discharged by the principal manufacturer. - Decided in favour of appellant
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2016 (5) TMI 742
Admissibility of Cenvat credit - Two different orders passed by the Tribunal by admitting the Cenvat credit in one and denying in another - Held that:- the order passed by the Tribunal initially is set aside where the Member Judicial and Member Technical disagreed with each other. We would highly appreciate that instead of the appeal going to a third Member and for being heard in its entirety, it is now reheard by the Tribunal's West Zonal Bench afresh. They should, uninfluenced by the earlier findings in the matter, pass fresh order on merits and in accordance with law after hearing both sides. It is clarified that we express no opinion on the rival contentions. - Decided in favour of petitioner
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2016 (5) TMI 741
Grant of benefit of Small Scale Industry exemption - Notification No.08/2003-CE dated 1 March 2003 - total value of clearance of excisable goods for home consumption exceeded ₹ 3 crores during the preceding financial years 2002-03 and 2003-04 without payment of central excise duty - Held that:- for a long period of seven years, the appellant did not take up any plea that the declarations dated 14 April 2003 and 12 April 2004 which the assessee claimed to have filed were actually not filed and only photostat copies were filed. This plea was also not taken up during the process of adjudication or during the pendency of the appeal before the Tribunal and it was only after a period of six months after the final order was passed by the Tribunal that the original receipt registers were forwarded on the basis of which the department concluded that the order was obtained on the basis of fraud and interpolations. No explanation whatsoever has been given as to why such a plea was not taken up at the first instance. Therefore, there is no substantial question of law arises. - Decided against the revenue
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CST, VAT & Sales Tax
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2016 (5) TMI 735
Demand of interest - Period of limitation - Assessment of sales tax for the year 2001-2002 - Assessment not made till the last date i.e. 30th April,2005 - Held that:- amendment was made by the State Legislature vide Punjab General Sales Tax (Amendment and Validation) Act, 2005 whereby Section 11-CC was added after Section 11-C. This amendment was retrospective in nature and covered the period in question. As per the aforesaid amendment, the period of limitation got extended from three years to five years. In the instant case, assessment order was made on 10.07.2006 which was within the limitation as was provided by amended Section 11-CC Therefore, in view of the statutory provision, the judgment of the High Court holding that the assessment was validly made within the period of limitation is clearly unsustainable. Since the assessment is saved by the subsequent amendment and that too by making it retrospective, the assessee shall pay only principal amount of sales tax and no interest or penalty shall be paid. Decided in favour of revenue
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2016 (5) TMI 734
Seeking quashment of assessment order and auction notice - Arbitrariness in making an order by an authority and violation of principle of natural justice - Petitioners were thrice accommodated by the learned Assessing Authority and they waited till the last date of limitation for passing the final assessment order and fixed the case for 28/02/2015 but on that date Shri Narendra Bam, learned CA, who was engaged by the petitioners failed to appear nor he pointed out the authority that Shri Radheshyam Carpenter, learned Senior CA was appointed on his behalf or he is assisting Shri Radheshyam Carpenter, learned Senior CA and he is sick and was advised for bed-rest. Held that:- no material has been produced by the petitioners that the assessment order dated 28/02/2015 is contrary to the statutory provisions or principle of law, but looking to the huge liability against the petitioners in the interest of justice, we grant one more opportunity to the petitioners to appear through their counsel before the respondent No.2. Accordingly, the impugned order dated 23/07/2015 by which his application under Section 34 of VAT Act, 2002 has been rejected is set aside, subject to depositing 10% of the amount in question within two weeks from the date of this order and on producing the material/evidence. The learned authority thereafter shall consider the material produced by the petitioner and pass the order afresh on application under Section 34 of VAT Act, 2002. - Decided partly in favour of petitioner
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2016 (5) TMI 733
Imposition of penalty - Detention of goods - Non-issuance of excise invoice in respect of 3910 Kgs of TMT Bar nor any information by way of e-trip as required under Rule 64-B of the Punjab Value Added Tax Rules was furnished - Goods released on furnishing of bank guarantees - Held that:- it appeared that the goods carried by the assessee from Mandi Gobindgarh to Jalalabad through the truck were covered by the proper and genuine documents. The confusion was created on account of the fact that these were two consignments and the Designated Officer doubted that the bill issued by the assessee in favour of Vikram Enterprises was fictitious. It was further observed by the Tribunal that the said doubt was just a camouflage in order to pass incorrect order of penalty. The Tribunal on appreciation of material on record had deleted the penalty imposed by Assistant Excise and Taxation Officer. Learned State counsel was not able to demonstrate that the approach of the Tribunal was erroneous or perverse or that the findings recorded were based on misreading or misappreciation of evidence on record. Therefore, the view of the Tribunal is a plausible view and deletion of the aforesaid penalty could not be faulted. - Decided against the revenue
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Indian Laws
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2016 (5) TMI 729
Negotiable Instrument Act - denial of chance to summons an officer from the Income Tax Department - Held that:- The cross-examination undertaken by the petitioner and the complainant was also thoroughly considered and there does not appear to be any pointed question in relation to ledger account. It is not the case for the cross-examination of the petitioner that this is concocted document. Matter is still to be adjudicated, as the revisional Court has pointed out. The trial Court is required to see the ingredients of Section 138 of the Negotiable Instrument Act while deciding the case of the complainant. Eventually, it is for the trial Court to decide as to what reliance is to be placed upon such document which is already proved and deserves appreciation at the time of final adjudication. If the Court comes to a conclusion that such document is concocted, the course is open to prosecute the concerned person for production of such document. Petitioner in any case can argue before the court concerned in that regard. Moreover, if such document is relied upon by the Court, the petitioner shall be at liberty to challenge the same before the Appellate Forum as well. However, at this stage, in absence of any specific cross-examination being made in relation to 6th page of the ledger account. No case is made out for interfering with the orders of both the Courts below. Hence, this petition stands dismissed .
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