Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 23, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Assessment u/s 153A - pre-condition justifying the invocation of the power of search u/s 132 (1) against the Petitioner - The Respondent's search of the Petitioner was a classic case of a ‘false start’. It was without legal basis. What were the options available to the Respondents when they came across the locker key when they searched another person - HC
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Income from share transactions - the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain - the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth ₹ 5/of a little known company would jump from ₹ 5/to ₹ 485/. - Additions confirmed - HC
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Validity of order passed u/s 142(2A) for special audit - Though proviso is silent about reasonable opportunity, it refers opportunity to both the petitioner as well as the respondent, depending upon the complexity of the cases to provide reasonable opportunity. Reasonable opportunity is to be exercised by the respondent - HC
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Leased rental received - Income from house property - During the first year of lease he has agreed to receive the 60% profit of the business as annual rental income but subsequently the annual rent has been prescribed in clause 3 of the lease deed. Therefore, by any stretch of imagination it cannot be said that the assessee was doing business with the lasee on profit sharing basis. - AT
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The case of the assessee can be easily summarised in a Hindi proverb- “Chitt bhee meri Pat bhee meri. ”To save itself from the penal provisions, it claimed that it was a cooperative bank and for claiming deduction u/s. 80P now it claims that it is not a cooperative bank. - AT
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We are aware that morality and ethics are not part of the tax jurisprudence and we are also not deciding a moral issue. But, it does not mean that assessee can take a stand as per its convenience resulting in depriving the Sovereign of its due taxes. - AT
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Section 10B being an exemption provision, income of the 10B unit has to be excluded at the source itself before arriving at the gross total income and since this income is not at all to be in the income of the assessee, there is no occasion to set off of brought forward loss of the assessee in respect of its other business against the profits of the exempted units. - AT
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Exemption u/s 10(23C) (iiiad) - If the corpus fund is excluded, the balance aggregate annual receipt of the assessee’s educational institution would be less than ₹ 1 crore. Therefore assessee would be entitled for exemption u/s 10(23C)(iiid) - AT
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TPA - ALP - interest on delayed realization of receivables is a separate international transaction and, therefore, requires separate benchmarking. It has nothing to do with the operations of the assessee company being with the debt free funds only. - AT
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Taxable income - forfeiture of share warrants - whether treated as capital receipt in nature? - if the initial receipts of a business are not trading receipts in the hands of the recipient, subsequent operations cannot turn them into trading receipts. - AT
Customs
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Foreign Trad Policy - Despite absence of any power under Section 5 of the FTDR Act, 1992 for any retrospective amendment, several such amendments/instructions are being issued by respondent no.2 and are being arbitrarily applied in a retrospective manner, leading to unwarranted litigation and making an adverse impact on growth of export business - HC
Service Tax
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Interpretation of statute - GTA service - Exemption - the individual consignment transported in a single lorry had freight amount exceeding ₹ 750/-, thereby clearly attracting provisions of Clause (ii). Clause (i) will apply where the gross amount charged on consignments transporter in a goods carriage does not exceed ₹ 1,500/- - admittedly, there is no multiple consignments - AT
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The Department cannot proceed to recover the interest u/s 87 without issuing a SCN and determination of the amount due and payable by the appellant as provided under sub-Section (1) of Section 73 of the FA, 1994 - AT
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The demand u/s 73 (1) of the FA, 1994 has to be issued within the period with reference to relevant date as stipulated in the said Section. There is no provision to determine ‘relevant date’ based on the date of knowledge acquired by the Department - AT
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Export of services - the procurement of orders in the Indian market, on behalf of the foreign principal for which payment is received in foreign exchange from the principal, would not be taxable as no service is considered to have been provided in India - AT
Central Excise
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Refund of cenvat credit - Duty under protest - closer of factory - Rule 5 in no way prohibits the payment of the refund amount in cash - HC
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Valuation - raw material supplied free of cost by the buyers - the value of the materials, components, parts supplied free of cost by the buyer to the appellants for use in the machinery manufactured on their behalf, was additional consideration flowing directly or indirectly form the buyer to the appellant and should have been added in the transaction value of the said machinery - AT
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Mere a prescription of Chapter Note in the tariff will not create the duty liability on the waste and scrap of metal goods arisen during the course of repair and maintenance of plant and machinery - AT
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Valuation - related party transaction - Pfizer is merely a service provider to the appellant - In the absence of any proof of mutuality of interest, it cannot be said that the parties are related - AT
VAT
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Deemed sale - Transfer of right to use - Franchise agreement - royalty - The Appellant and the Petitioners grant a non-exclusive license to the franchisees, which can be revoked upon non-compliance of the terms and conditions as stipulated in their franchise arrangement. Clearly, this does not amount to a transfer of the right to use goods - not liable to sales tax / VAT - HC
Case Laws:
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Income Tax
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2017 (5) TMI 993
Reopening of assessment - payments received by the Assessee pursuant to the O&M Agreements - Held that:- As during the course of the original assessments under Section 143 (3), the AO did serve upon the Assessee a detailed questionnaire. The AO examined the nature of the transactions involving the Assessee and the payments received therefor. The reopening was not based on any fresh material. By revisiting the same materials the successor AO now concluded that the payments received by the Assessee pursuant to the O&M Agreements should be treated as FTS. In the circumstances, the view taken by a successor AO on the same material was indeed nothing but a mere change of opinion. It is a well-settled legal proposition, as explained in Calcutta Discount Co. Ltd. v. ITO [1960 (11) TMI 8 - SUPREME Court] that once an Assessee has discharged the burden of not only producing the account books and other documents, but also the specific material relevant to the assessment, "it is for the Income-tax Officer to draw the proper inferences of fact and law therefrom and the Assessee cannot further be called upon to do so for him." Here the Assessee had discharged its burden of disclosing fully and truly all the material facts before the AO during the original assessments. There was no basis for the successor AO to conclude that "no opinion with regard to taxation" of the payments received for the services rendered had been formed by the AO - Decided in favour of assessee.
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2017 (5) TMI 992
Initiation of proceedings against the Assessee u/s 153C - cash payments from unaccounted sources - whether document belonged to the Assessee? - Held that:- It is nobody’s case other than the Revenue that the document found in the premises of Mr. Lalit Modi belongs to the Assessee. Mr. Shivpuri referred to Section 292 C of the Act for the purposes of drawing two presumptions (i) the one contained in Section 292 C (1) (i) to the effect that the document found in possession of a person should be presumed to belong to such person. As far as this is concerned, clearly, since the document was found in possession of Mr. Modi, the presumption, if at all, is attracted only qua Mr. Lalit Modi and not the Assessee herein. There is, therefore, nothing to contradict the categorical finding of the ITAT that the document which formed the main basis for initiation of the proceedings under Section 153C of the Act does not belong to the Assessee. One of the principal conditions for attracting Section 153C of the Act is, therefore, not fulfilled in the present case. The detailed interrogation of Mr. Modi revealed the source of the document and the fact that Mr. Modi was not the author of the document. Mr. Modi had suggested that it was some other broker who had given him the said document as a ‘proposal’. There appears to have been no attempt made by the AO to enquire into the matter further to find out if at all there was any such other broker who had prepared the document. Further, there is no attempt also made to ascertain whether the prevalent market value of the space purchased by the Assessee could at all fetch the value indicated in the document which is ₹ 32,85,37,354. This was too fundamental an issue to be left un-investigated. The AO appears to have proceeded purely on conjectures as regards what the document has stated without noticing the internal contradictions and inconsistencies. For instance, the document talks of rent payable for a period from 2006 onwards where in fact even according to the Revenue the Assessee purchased the property on 13th May, 2009. The shifting of the burden on the Assessee without making these basic enquiries to unearth the truth of the document could not have been accepted and was rightly commented upon by the ITAT. The attempt at making additions on the basis of Annexure A-1, without any further investigation on the above lines, is bound to be rendered unsustainable in law. Therefore, even as regards the merits of the additions made by the AO, the Court funds no error having been committed by the ITAT in deleting them. - Decided in favour of assessee.
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2017 (5) TMI 991
Validity of assessment - Non-compliance with the mandatory provision contained in Section 144C(1) requiring the AO to first frame draft assessment orders - Held that:- The failure by the AO to adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings. For the aforementioned reasons, the final assessment orders dated 31st March, 2015 passed by the AO for AYs 2007-08 and 2008-09, the consequential demand notices issued by the AO and the initiation of penalty proceedings are hereby set aside. - Decided in favour of assessee.
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2017 (5) TMI 990
Block assessment u/s 158BC - Genuineness of purchase transactions - claim of deduction u/s 80HHC - Did the ITAT fail to adhere to the specific mandate issued to it by this Court in the previous order in CIT v. Arun Malhotra (2013 (11) TMI 1493 - DELHI HIGH COURT )? - Held that:- If one peruses the impugned order of the ITAT in the present case, it is unmistakable that large portions of it have been virtually lifted verbatim from the order of the Assessing Officer (‘AO’) as well as the order of this Court by which the matter was remanded to it. Worse still, these portions are not placed in quotation marks. Contrary to what was expected to be done, as explained by the Supreme Court in CIT v. P.V. Kalyanasundaram (2007 (9) TMI 25 - SUPREME COURT OF INDIA), there is no attribution by the ITAT in the impugned order to the source from which the said portions have been lifted. There was a specific mandate before the ITAT that had been spelt out in para 24 of this Court’s previous order. The ITAT was to consider afresh all the issues and contentions that arose before it. That the ITAT simply failed to do. It has chosen to adopt a shortcut by verbatim reproducing the portions of the order of the assessment order or the order of this Court whether for the purposes of setting out the facts or even the reasoning and conclusion. It is one thing the ITAT to quote from an order of the AO or the CIT (A) and then explain whether the ITAT agreed with or differed from the said portion. It is another to simply incorporate into the order those very words and passages without any attribution to the source leaving the reader wondering if that could be the actual reasoning of the ITAT. The present impugned order of the ITAT falls in the latter category. Looking at it from any point of view, the Court is unable to accept the impugned order of the ITAT as having satisfied the mandate of this Court, as spelt out in para 24 of its earlier order extracted hereinbefore.Consequently, the question framed is answered in the affirmative i.e. in favour of the Assessee and against the Revenue
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2017 (5) TMI 989
Unaccounted investments - investment in the stock relating to undisclosed sales - Held that:- Yearly production reveals that on an average 68 MT of production is being made by the appellant daily. If we translate the quantity of undisclosed sales of 1570 tons, it gives an average of 23 days of production cycle/stock. The undisclosed sales of ₹ 6.11 crore is for a period of 91 days (January to March 2008). Accordingly, the investment in the stock relating to undisclosed sales comes to ₹ 1,54,51,743/(Rs.6.11 crore x 23 days/91 days). Therefore, the addition of ₹ 2 crore made by the AO is restricted to ₹ 1,54,51,743/-. Thus, the appellant gets a relief of ₹ 45,48,257/- by CIT-A When the matter travelled up to the ITAT it decided to give further relief to the Assessee beyond what was given by the CIT (A). The production cycle was reduced from 23 days to an average of 15 days resulting in more relief being granted to the Assessee. The Court is certainly not inclined to grant any further relief to the Assessee as the basis on which the CIT (A) proceeded to arrive at the conclusion, as extracted hereinbefore, was rational and could not be said to be based on surmises and conjectures. No substantial question of law arises from the impugned order of the ITAT.
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2017 (5) TMI 988
Abatement of proceeding before Settlement Commission - recovery of demand - Held that:- Section 245 HA (2) makes no distinction between instances where an order has already been passed by the authority before whom the proceedings were pending on the date of the making of the application before the ITSC and a situation where no such order has been passed. It does not state, that the revival of the proceedings by assuming that no application had been filed under Section 245C of the Act as a result of the abatement of such application, would take place only where no order had already been passed by the income tax authorities before whom such proceedings were pending. The expression 'shall be disposed of' in Section 245 HA (2), when viewed in the context of the entire provision together with Section 245 HA (3), cannot but be interpreted to mean a futuristic action. The option available to the AO or other authority to look into materials, by reviving the proceedings that were pending, that were not earlier available but emerged during the proceedings before the ITSC cannot be foreclosed. The net result is that notwithstanding that the AO in the present case may have passed assessment orders on 28th March 1995, in relation to the aforementioned AYs in respect of which a demand notice has been served on the Petitioner, the proceedings before the AO should be held to have revived on the date of the abatement of the Petitioner’s application before the ITSC, i.e., 31st March, 2008. As rightly pointed out by the Petitioner the AO is bound thereafter to pass fresh orders disposing of the assessment proceedings in accordance with the law. For the reasons best known to the AO, such order was passed only in respect of one AY, i.e. 1993-94 and for the other AYs a demand notice was served by treating the assessment orders dated 28th March, 1995 as still being valid. That was plainly a mistake and was impermissible in terms of Section 245 HA (2) of the Act. Thus the Court has no hesitation in setting aside the assessment orders dated 28th March 1995 passed in respect of the AYs 1986-87; 1989-90 & 1992-93 and the proceedings for recovery of demand raised on the basis of such assessment orders.
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2017 (5) TMI 987
Assessment u/s 153A - pre-condition justifying the invocation of the power of search u/s 132 (1) against the Petitioner - satisfaction note indications - Held that:- There is nothing in the Satisfaction Note to indicate that there was any credible information available with the Department that the Petitioner belonged to the "Nanda Group" who were being searched. It must be recalled that the Petitioner is a regular Assessee. The information needed to trigger the search action against the Petitioner had to be such that would show that she is linked in some manner to the business or other activities of the „Nanda Group‟. Secondly such information had to have a nexus to the belief that could be reasonably formed that she is in possession of any money, jewellery or valuable representing her income which has not been or would not be disclosed by her. The mere fact that the key to the locker which she was operating was found during the search of her uncle Mr. Suresh Nanda would not constitute 'information' leading to the reasonable belief that the locker would contain jewellery, or other valuable articles which she would not have disclosed in her returns. There obviously had to be something more. Therefore the jurisdictional pre-condition justifying the invocation of the power of search under Section 132 (1) of the Act against the Petitioner, was not fulfilled in the present case. Satisfaction Note does not throw any further light on how the authority could form a reasonable belief that the Petitioner was connected with the Nanda Group and that her locker would contain money, jewellery etc that constituted her undisclosed income. The Respondent's search of the Petitioner was a classic case of a ‘false start’. It was without legal basis. What were the options available to the Respondents when they came across the locker key when they searched Mr Suresh Nanda? - For the aforementioned reasons, question (a) is answered in negative. It is held that search conducted on Locker No. 4979 by issuing an authorization dated 27th February, 2012 under Section 132 of the Act against the Petitioner was invalid. The said authorisation is hereby quashed. Consequently, question (b) is also answered in the negative by holding that there was no legal justification for the issuance of the impugned notice dated 22nd October, 2012 to the Petitioner under Section 153 A of the Act for the AYs 2006-2007 to 2011-2012 - Decided in favour of assessee.
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2017 (5) TMI 986
Entitlement for deduction under Section 80-IA - notional income from generation of electricity which was captively consumed by the assessee itself in another unit of the same company - Held that:- Generation of electricity by setting up a fully independent and identifiable industrial undertaking and use of that captive power for its own other unit is also required to be dealt with as per provisions of Section 80-IA and is entitled for the deduction in the same terms. See COMMISSIONER OF INCOME-TAX, DELHI Versus M/s. DCM SHRIRAM CONSOLIDATED LTD. [2015 (2) TMI 759 - SUPREME COURT ] Tribunal rightly declared the assessee entitled to claim deduction as prescribed under Section 80-IA and even for the purpose of computing the books of account as per Section 115-JA of the Income Tax Act, 1961. - Decided in favour of assessee.
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2017 (5) TMI 985
Entitlement to get benefit of section 12AA - proof of charitable activities - Held that:- Similar substantial questions of law have been considered and decided against revenue in Commissioner of Income Tax (Exemption)), Lucknow Vs. M/S Yamuna Expressway Industrial Development Authority [2017 (4) TMI 1154 - ALLAHABAD HIGH COURT] wherein held as observations made in para-11 of the order passed by CIT (E), in our view, are nothing but an irrational, illogical and misconceived approach so as to exclude respondents-authorities from the ambit of definition of "charitable purposes". - Decided in favour of assessee.
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2017 (5) TMI 984
TDS u/s 194C - expenses under head "Payment made of lorry hire charges' - applicability of Section 40(a)(ia) - TDS liability - Held that:- Tribunal rejecting Revenue's appeal on this ground, has recorded a finding that Section 194-C does not apply and in absence of anything to show otherwise, the said findings of fact are confirmed. Learned counsel for the appellant could not show that A.O. while taking a view against Assessee by reference to Section 194-C recorded its findings based on any evidence whatsoever and we find that it was only on assumption. It is for this reason A.O.'s findings have been reversed by C.I.T. (A) and Tribunal. These are concurrent findings of fact and when vouchers otherwise were verifiable, we find no reason to take an otherwise view in the matter. The question formulated above is answered against appellant, i.e. Revenue.
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2017 (5) TMI 983
Income from share transactions - AO, CIT annd also ITAT held that the assessee had traded in shares and the income was liable to be taxed as 'business' income. - Held that:- The authorities found that though the shares were purchased by the assessee at ₹ 5.50 Ps. Per share and ₹ 4/per share from the two companies in the year 2003, the assessee was able to sell the shares just within a years time at ₹ 486.55 Ps and ₹ 485.65 Ps per share. The broker through whom the shares were sold by the assessee did not respond to the assessing officer's letter seeking the names, addresses and the bank accounts of the persons that had purchased the shares sold by the assessee. The authorities have recorded a clear finding of fact that the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. While so observing, the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth ₹ 5/had jumped to ₹ 485/in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth ₹ 5/of a little known company would jump from ₹ 5/to ₹ 485/. The findings recorded by the authorities are pure findings of facts based on a proper appreciation of the material on record. - Decided against assessee.
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2017 (5) TMI 982
Order invalid on the ground of violation of the principles of natural justice - revision u/s 263 - Held that:- The very fact that the adjournment petition was received after the hearing was concluded at best could imply that the assessee was seeking re-hearing, and we do not think such a plea was justified. No application for adjournment was made on the day the hearing was scheduled to take place before the Commissioner. If the noticee does not turn up before the authority before whom he has to respond to the notice, but seeks adjournment of hearing after two days, the noticee cannot complain of violation of the principles of natural justice. The Commissioner did not commit any error of law warranting interference from a superior appellate forum under the circumstances in deciding the case on merit. Moreover, the assessee had full opportunity to deal with the issue on merit before the Tribunal. Commissioner had outlined the manner in which the enquiry was to be carried out. There is no specific direction in the order stipulating in what way the case was to be decided. The Assessing Officer has been directed to pass a speaking order after providing reasonable opportunity to the assessee and upon verifying the source of share capital including the share premium of all the subscribers and rotation of money through various hands so as to ascertain the true nature of transaction which would bring to the fore, the reality of the transactions. The Commissioner's order gives a guideline on how the Assessing Officer shall proceed with the enquiry. The order, as we have already observed, does not contain a mandate in which manner the assessing officer shall pass the order. In our opinion, such a direction does not attract the prohibitory provisions of section 119. The said provision deals with power and jurisdiction of the Board to issue instruction on subordinate authorities. We do not think the Commissioner's order with which the assessee is aggrieved has been passed in breach of such principles. No substantial question of law.
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2017 (5) TMI 981
Validity of order passed u/s 142(2A) for special audit - reasonable opportunity should have been given to the petitioner - Held that:- Notice Annexure-AC issued to the petitioner on 20th March 2015 asking to appear on 23rd March 2015. In that case, the petitioner is left with only two days for preparing itself for answer. Since, 20th March 2015 is the date on which the communication addressed and the petitioner to report before the respondent on 23rd March, 2015, the petitioner was left with only two days, i.e. 21st and 22nd March, 2015 to get itself prepared. That cannot be said to be a reasonable opportunity that is provided to the petitioner, as it is stated by the petitioner that the matter is of complex nature and it would be reasonable on behalf of the respondent to grant some more time. As in the case of SAHARA INDIA (2008 (4) TMI 4 - Supreme Court ) observed that an order under Section 142(2A) entail civil consequences, even after the obligation to pay auditor’s fees and incidental expenses has been taken over by the Central Government, and therefore the rule of audi alteram partem, is required to be observed and assessee has to be provided a reasonable opportunity of being heard. In the light of the above judgment, it is very clear that unless the aggrieved party is provided fullest opportunity in compliance of principle audi alteram partem, it would not make the fullest opportunity as provided under Section 142(2A) of the Act. Though proviso is silent about reasonable opportunity, it refers opportunity to both the petitioner as well as the respondent, depending upon the complexity of the cases to provide reasonable opportunity. Reasonable opportunity is to be exercised by the respondent depending upon the case and also on the basis of the request made by the party considering the above aspect. In the case on hand, thus feel what has been given to the petitioner is contrary to the principles of audi alteram partem and has not followed the principles of natural justice. - Decided in favour of assessee.
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2017 (5) TMI 979
Advance ruling application under Section 245Q - the assessment proceedings in respect of the petitioner were concluded pursuant to the income tax return filed - whether the Advance Ruling Authority to decide the application on merits once it is admitted and it could not have been dismissed for default? - Held that:- There cannot be any second opinion on the aspect that the purpose of the Advance Ruling Authority is to have certainty about the liability to pay tax and to avoid further litigation, but at the same time, if by conduct of the petitioner, it was not desirous to invoke such power, but was rather keen to have the assessment proceedings go on and also to have conclusion of the assessment proceedings and by conduct, the petitioner has not objected to the assessment proceedings, we do not find that the purpose of advance ruling mechanism can be stretched to the extent of diluting the voluntary conduct on the part of the petitioner as sought to be canvassed. Hence, the said contention cannot be accepted. Further, in the present case, as reproduced hereinabove, the Advance Ruling Authority itself when found that it cannot sit in appeal over the order of the Assessing Authority while deciding the matter, it has disposed of the application as having become infructuous. Such a view cannot be said to be as unreasonable, which may call for interference.Petition dismissed.
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2017 (5) TMI 978
Revision u/s 263 - firstly the AO has not examined short term capital gain arising on the sale of various assets during the assessment proceedings; secondly, the AO has not obtained form 3CEA and has not examined the assessee’s claim regarding slump sale despite mentioning in the assessment order; and thirdly, the AO has not examined whether assets added during the financial year qualified for benefit u/s. 50B - Held that:- When the AO having gone through the MOU and contract after having made enquiries and after considering the replies of the assessee regarding the said transaction from the assessee, having accepted the transaction as a ‘slump sale’, which fact he acknowledges it in different paragraphs of the draft assessment order, then makes rectification u/s. 154 regarding the very same fact and finds mention of it in the final assessment order is a plausible view which cannot be termed as a finding unsustainable in law. The Ld. CIT, DR’s objection that the AO has not elaborately discussed about the slump sale makes it erroneous cannot be accepted for the simple fact that the assessee cannot dictate the AO how to write the assessment order. The assessee can only answer to the queries and place evidence before the AO in support of its averment, which in this case has been done by the assessee. All the records were furnished before the AO and the AO has called for details from the assessee regarding slump sale and has applied his mind and has decided to accept the claim of the assessee that the transaction in question is ‘slump sale’ which cannot be termed as erroneous simply because the AO has not made any detailed discussion about it in the assessment order. Since we find that the AO has made enquiries into slump sale transaction which took place in the relevant assessment year and the action of AO in accepting the claim of assessee that the transaction in question was a slump sale after detailed enquiry is a plausible view, so , we do not find that the twin conditions required for exercising the jurisdiction u/s. 263 of the Act is found missing/ existing/absent and, therefore, the Ld. CIT ought not to have exercised his revisional jurisdiction - Decided in favour of assessee.
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2017 (5) TMI 977
Disallowance of claim of depreciation of the assessee-trust - when the capital expenditure itself was allowed as application of income then the allowance of depreciation would amount to double deduction - Held that:- CIT (Appeals) has correctly allowed the claim of the assessee by following the decision in the case of CIT Vs. Society of Sisters of St. Anne [1983 (8) TMI 44 - KARNATAKA High Court ]. Also see DCIT Vs. Manipal Academy of Higher Education [2015 (12) TMI 1365 - ITAT BANGALORE ] wherein held if the mercantile system is followed, the depreciation allowance in respect of the trust property should be allowed - Decided in favour of assessee Carry forward of excess application of income under Section 11(1)(a) - Held that:- CIT (Appeals) has decided this issue correctly by following the decisions of this Tribunal including the decision in the case of CIT Vs. Manipal Academy of Higher Education [2015 (12) TMI 1365 - ITAT BANGALORE ] as held The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. Also see Deputy Director of Income-tax (E) , Circle -17 (1) , Bangalore Versus Karnataka Food and Civil Supplies Ltd [2016 (1) TMI 396 - ITAT BANGALORE] - Decided against revenue
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2017 (5) TMI 976
Condonation of delay - reason to delay - Held that:- Right of filing an appeal is a statutory right and hence it is the duty of an Assessee to file an appeal within the time stipulated and any time taken beyond that has to be properly explained. In these cases, there was no reason given by the parties. The courts have time and again brought out a distinction between a short delay of one week or two weeks and abnormal delay of more than one year by cautioning that strict approach is warranted when the delay is substantial. In these cases, there was a delay of more than one month even from the date on which Assessees have taken a decision to prefer appeals and in such cases, the explanation has to be strictly construed, whereas in all these cases no explanation was forthcoming under these circumstances, we are of the firm view that the delay in filing the appeals is not supported by sufficient cause and therefore they deserve to be dismissed as unadmitted as they are barred by limitation.
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2017 (5) TMI 975
Addition on accommodation entries - cross examination of person on whose statement addition is made not allowed - Held that:- As during the course of search conducted upon the Mukesh Choksi group, statement of Mukesh Choksi was recorded and in his statement he has admitted that he was providing accommodation entries to those who were interested to earn capital gain. On a careful perusal of the assessment order, I find that there is no finding with regard to the supply of statement of Mukesh Choksi to the assessee. Moreover, nothing is available on record, wherefrom it could be inferred that assessee was ever allowed to cross-examine Mr. Mukesh Choksi. It is settled position of law that statement or the evidence which is being relied upon by the AO for making the addition in the hands of assessee, the same should be confronted to the assessee and the assessee should be allowed to cross-examine the witness in this regard. It is quite evident that statement of Mr. Mukesh Choksi was relied on for making the addition, but assessee was never allowed to cross-examine him. In these circumstances, the AO was not justified in making addition in the hands of assessee, without allowing the assessee to crossexamine Mr. Mukesh Choksi, whose statement was relied upon for making the above additions. Thus restore the matter to the file of AO with a direction to first confront the statement of Mr. Mukesh Choksi to the assessee and allow him to cross examine - Appeal of assessee is allowed for statistical purposes.
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2017 (5) TMI 974
Leased rental received - Income from house property or business income - Held that:- We find that through lease deed, the assessee has leased out the entire property to M/s. Prathibha Housing and Finance (Pvt) Ltd., vide lease deed dated 31.01.2011. Through this lease deed, the possession of the property was given to the lessee and the lessee has exclusive right over the entire property for its use and also to sublease any portion of premises to the tenant for a period within the lease agreement period. Day to day maintenance of leased premises shall also be the responsibility of the lessee. We have carefully perused the other terms of the lease deed and we find that the assessee has simply leased out its property to M/s. Prathibha Housing and Finance (Pvt) Ltd. During the first year of lease he has agreed to receive the 60% profit of the business as annual rental income but subsequently the annual rent has been prescribed in clause 3 of the lease deed. Therefore, by any stretch of imagination it cannot be said that the assessee was doing business with M/s. Prathibha Housing and Finance (Pvt) Ltd., on profit sharing basis. It was simply a case of leasing out of property to M/s. Prathibha Housing and Finance (Pvt) Ltd. Therefore the leased rent received by the assessee is chargeable to tax as income from house property. - Decided against assessee.
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2017 (5) TMI 973
Non-deduction of TDS on certain payments - assessee-in-default - levy of interest u/s 201(1A) - Held that:- Assessee in his computation of income has suo-moto made the disallowance of said expenditure u/s 40(a)(ia). Further, the nature of expenses is Rent & Professional Expenses. Therefore, so far as the argument that these were mere provisions is difficult to accept since the assessee is making suo-moto disallowance against the same u/s 40(a)(ia) which is related with addition / disallowance consequent to failure of deduction of tax at source by the assessee. AR, during proceedings before us, stated that the assessee reversed the provisions in subsequent years and deducted TDS from actual payment as per law and deposited the same. If this is so, the assessee could not be required to deposit the same again by raising this demand. Therefore, we direct Ld. AO to verify the fact that whether the assessee, in subsequent years, has reversed the said amounts and deducted the due TDS at the time of actual payment and deposited the same to the credit of central government. If so, the said demand of ₹ 3,12,776/- raised u/s 201(1) shall stand deleted. So far interest u/s 201(IA) is concerned, we find that the assessee is liable to pay the same since we have already noted that the expenses against which TDS was deductible was not mere provisions and the payees were identifiable and the assessee himself disallowed the same u/s 40(a)(ia). Therefore, the interest demand raised u/s 201(IA) stand confirmed against which the interest, if any, already paid by the assessee shall be adjusted.
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2017 (5) TMI 972
Disallowance u/s.14A - Held that:- As per the decision of Reliance Utilities And Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT], no disallowance of interest is warranted where own funds are sufficient to cover the value of investment. As per the judicial pronouncements by Delhi High Court in case of Cheminvest. Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT], disallowance u/s. 14A should be restricted to exempt income. Recently Bombay High Court in the case of Ballarpur Industries Ltd.[2016 (10) TMI 1039 - BOMBAY HIGH COURT] approved the propositions that has disallowance u/s.14A should not exceed the exempt income. Thus we direct the AO to restrict the disallowance u/s.14A to the extent of exempt dividend income earned by the assessee. Disallowing setting off business loss which pertains to foreign currency Forward Action Contracts by treating the same as ‘Speculation Loss’ - Held that:- Foreign currency transactions are incidental to the assessee’s diamond business. Thus, foreign currency transactions were entered by the assessee for the purpose of meeting the requirement and for nothing else or for no other purpose. Thus, assessee’s business and sources of borrowings are effectively in foreign currency and thus the assessee is exposed to adverse movements in foreign exchange which it receives and pays as part of its business. All these transactions entered by the assessee are incidental to its business activity of import and export and to protect against adverse movements in foreign exchange in a highly volatile global market. Thus, foreign exchange fluctuation is a risk which assessee has to face and therefore, it is prudent for it to mitigate it. No merit for not allowing the setting off loss arising out of cancellation of foreign exchange / forward contract. Disallowance of interest for IPO funding, to reiterate the shares allotted in such IPOs - Held that:- The incurring of interest expenditure is not in doubt, it may be allowed in the year of incurring or can be capitalised to the cost of acquisition of shares. The assessee has asked for allocation on this interest expenditure for allowing the same against the respective shares for which it was incurred, therefore, re-working the short term capital gain on sale of shares, we do not find anything wrong for such a claim of assessee. Accordingly, we restore this issue back to the file of the AO for working out revised short term capital gain by allocating the respective interest expenditure to the shares for which it was actually incurred. After re-working, the AO should allow the respective interest against the short term capital gain so offered by the assessee.
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2017 (5) TMI 971
TPA - selection of comparable - Held that:- As assessee is engaged in the business of providing Engineering consultancy services in the field of Chemicals, Petrochemicals, Fertilisers, Cement, Pharmaceuticals and allied industries, the companies with dis-similar functional activity need to be deselected from final list of comparable. The assessee followed TNMM method to benchmark the international transactions entered with its AEs. Government Companies cannot be taken as Comparable. There is merit in the contentions of the Ld A.R that the turnover filter of 1/4th to 4 times adopted by TPO was arbitrary in nature. Accordingly we direct the AO/TPO to adopt turnover filter at 1/10th to 10 times of turnover of the assessee and accordingly re-examine the comparables. Company with Related Party Transactions was more than 25% need to be excluded
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2017 (5) TMI 970
Penalty u/s.271(1(c) - Held that:- As decided in own case of assessee there is no concealment of any fact nor have any additional facts been discovered proving the earlier disclosure in the return to be false or wrong. The findings recorded by the CIT(A) are just and proper and after consideration of various judicial pronouncements. Respectfully following the order of the Tribunal in assessee's own case, which has been upheld by the Hon'ble Bombay High Court as well as the judgment of the Hon'ble Supreme Court in the case of Reliance Petroproducts Ltd. (2010 (3) TMI 80 - SUPREME COURT) we see no reason to interfere in the findings of the CIT(A) deleting the penalty so levied by the AO. - Decided in favour of assessee.
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2017 (5) TMI 969
Penalty u/s 271(1)(c) - specification of charge for which the assessee was being penalized - Held that:- The penalty has been levied for filing of inaccurate particulars of income and hence concealed particulars of income which shows inconsistent thinking on the part of AO. Undisputedly, the AO was required to specify the exact charge for which the assessee was being penalized which he has failed to do so and the same has resulted into taking away assessee’s valuable right of contesting the same and thereby violates the principles of natural justice. The notice issued under Section 274 must reveal application of mind by the Assessing Officer and the assessee must be aware of the exact charge on which he had to file his explanation. It was further observed that vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity to contest the same. Therefore, we are inclined to conclude that the penalty proceedings stood vitiated for want of principles of natural justice and hence liable to be quashed. Accordingly, we delete the same. - Decided in favour of assessee.
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2017 (5) TMI 968
Reopening of the assessment - Held that:- We find that in this matter the original order was passed u/s. 143 (1). The AO had issued a notice within the time u/s.148 after regarding the reasons for reopening. We find that the CIT(A)has upheld the re-opening, as it was based on justifiable reasons. Certain facts about the reopening would be dealt with in the subsequent paragraphs. Considering the totality of the facts of the case, we are of the opinion that there is no need to interfere with the order of the CIT (A). Hence, we dismiss the ground raised about reopening. Deduction u/s. 80P - Held that:- No affidavit of the CA concerned has been filed to prove that he had made the claim before the then FAA on his own and not as per the instructions of the assessee. The case of the assessee can be easily summarised in a Hindi proverb- “Chitt bhee meri Pat bhee meri. ”To save itself from the penal provisions, it claimed that it was a cooperative bank and for claiming deduction u/s. 80P now it claims that it is not a cooperative bank. As per the settled principles of taxation jurisprudence, as discussed in the earlier paragraphs, assessees and the AO. s are not allowed to approbate and reprobate. Rule of consistency is applicable to both the parties. The assessee has not filed any application before the then FAA requesting him to cancel the penalty order and claiming that submissions made by it were factually wrong. In the case under consideration, the assessee itself has claimed that it was a cooperative bank and the reopening is also based on the claim made by it before the FAA during the penalty proceedings. A person coming to judicial forums is supposed to come with clean hands. We are aware that morality and ethics are not part of the tax jurisprudence and we are also not deciding a moral issue. But, it does not mean that assessee can take a stand as per its convenience resulting in depriving the Sovereign of its due taxes. In our opinion, considering the peculiar facts and circumstances of the case under consideration, the order of the FAA does not suffer from any legal or factual infirmity. Therefore, confirming the same, we decide second ground of appeal against it. Audit fees and provision for gratuity - Held that:- FAA has given a categorical finding of fact that the assessee did not file any submission with regard to both the issues, before him, during the appellate proceedings. Before us also no documentary evidence was produced about payment of audit fees. In these circumstances, in our opinion, the FAA was justified in rejecting the claim made by the assessee. Grounds 2. b. and 2. c. stand dismissed.
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2017 (5) TMI 967
Benefit of deduction u/s 10B - whether the brought forward losses/unabsorbed deprecation is to be set off against profit of unit first and thereafter compute deduction u/s 10B of the Act or vise-versa? - Held that:- Hon’ble Karnataka High Court in the case of M/s Yokogawa India Ltd reported in [2011 (8) TMI 845 - Karnataka High Court] had categorically held that exemption u/s 10B is to be calculated prior to the setting off brought forward losses and unabsorbed deprecation. It was held by the Hon’ble High Court that the profits of the eligible unit, is to be calculated on stand-alone basis. It was further held by the Hon’ble High Court that section 10B being an exemption provision, income of the 10B unit has to be excluded at the source itself before arriving at the gross total income and since this income is not at all to be in the income of the assessee, there is no occasion to set off of brought forward loss of the assessee in respect of its other business against the profits of the exempted units.
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2017 (5) TMI 966
Deduction u/s 10(23C) (iiiad) disallowed - assessee has not been granted registration u/s 12AA nor registered u/s 10(23C)(vi) - Held that:- Corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of educational institution, even if no registration u/s 12AA have been granted. If the corpus fund is excluded, the balance aggregate annual receipt of the assessee’s educational institution would be less than ₹ 1 crore. Therefore assessee would be entitled for exemption u/s 10(23C)(iiid). In this view of the matter I set aside the orders of authorities below and direct the Assessing Officer to grant exemption to assessee u/s 10(23C)(iiid) of I.T. Act. - Decided in favour of assessee
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2017 (5) TMI 965
Determination of ALP of the international transaction of interest on receivables from AEs - working capital adjustment - Held that:- Interest for credit period allowed as per the agreement is given in the price charged for rendering of services. Whereas the non-realisation of invoice value beyond the stipulated period is a separate international transaction whose ALP is required to be determined. Granting of working capital adjustment is confined to the international transaction of rendering of services, whose ALP is separately determinable. On the other hand, the international transaction of interest receivable from its AEs for late realization of invoices beyond such stipulated period is a separate international transaction. Allowing working capital adjustment in the international transaction of rendering of services can have no impact on the determination of ALP of the international transaction of interest on receivables from AEs beyond the stipulated period allowed as per agreement. Also if an invoice is raised during the year and the proceeds are realized within the year, but, beyond the stipulated period of agreement, then, the same will not come within the working capital adjustment because working capital adjustment is made with reference to the opening and closing balances as on 1st April and 31st March. Therefore, respectfully following the decision of Ameriprise India Pvt. Ltd. (2015 (8) TMI 652 - ITAT DELHI) and, again, in the case of Mckinsey Knwledge Centre Pvt. Ltd. [2017 (5) TMI 830 - ITAT DELHI] we reject the assessee’s contention that the interest on delayed payment of receivables get subsumed in the working capital adjustment allowed to the assessee. Also argument that since it was debt free fund company, which finding is not disputed, therefore, no interest could be attributable on the late realization of receivables is to be rejected at the threshold because, as noted earlier, interest on delayed realization of receivables is a separate international transaction and, therefore, requires separate benchmarking. It has nothing to do with the operations of the assessee company being with the debt free funds only. Selecting of ad hoc interest rate of LIBOR+400 bps while computing the addition - Held that:- We find that the ld. DRP has directed to compute the adjustment using the rates of six months LIBOR + 400 bps on receivables which are to be paid to the assessee in US $ in accordance with the decision in Cotton Naturals (2015 (3) TMI 1031 - DELHI HIGH COURT) wherein it has been held that it is the current year in which the loan is to be repaid which determines the rate of interest and, hence, the prime lending rate should not be considered for determining the interest rate. We, therefore, do not find any reason to take a different view on this issue.
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2017 (5) TMI 964
Accrual of income - forfeiture of share warrants - whether treated as capital receipt in nature? - Held that:- In the instant case, the share warrant money was forfeited as per the terms of the issue. This fact is not in dispute. It is settled position of law that by charging provisions of section 4 and 5, the general liability to tax is imposed upon income but the Income Tax Act does not provide that whatever is received by the assessee must be regarded as income chargeable to tax. Besides, if the initial receipts of a business are not trading receipts in the hands of the recipient, subsequent operations cannot turn them into trading receipts. Therefore, the addition made by AO on account of forfeiture of share warrants as capital receipt in nature, needs to be deleted. - Decided against revenue
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Customs
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2017 (5) TMI 1008
Maintainability of petition - Duty Free Import Authorization (DFIA) scheme - duty free import of 'Pesticides' - validity period of DFIA licence - Held that: - the petitioner was denied of his valuable right to utilize the DFIA for duty free import of Insecticide. Therefore, I do not find any merit in the objections regarding maintainability of the instant writ petition, the same is hereby rejected. Respondents cannot blame the transferee of latches or negligence or for not utilizing the DFIA within validity period, for, that by putting up the DFIA for debating in respect of imported goods at any port despite the instructions issued by respondent no.2, the petitioner would unnecessarily have incurred losses in the form of continued interest, demurrage and detention charges, apart from blocking investment on costs of such goods only to fight cumbersome litigation with the hope of getting due legitimate entitlement. Resultantly, the objection of delay and latches raised by the respondents in the above stated peculiar fact situation is hereby repelled. In the interest of justice, the instant petition merits a decision on merits. Retrospective applicability of the said Notification and Public Notice - Held that: - the DFIA would be governed by the FTP in force on the date on which DFIA was issued. Any subsequent amendment in the FTP or HBP cannot govern the entitlement under the DFIA as it existed as per the FTP on the date of issuance of DFIA. Therefore, discharge of export obligation, transferability and utilization of DFIA would necessarily be governed by the policy in force is vague on the date of issuance of DFIA. The benefit of DFIA ought to have been given its actual meaning to include materials that are required in order to produce the export product, in essence, the duty free import under DFIA cannot be confirmed to only such goods which are actually used or physically incorporated in the production of the export product, but would also include goods which, though not used in the production of the export goods, are required in order to produce the same. Once the DFIA licence, when issued, permitted duty free import of any Insecticides with Technical characteristics, specifications and quality as per Schedule of Insecticide Act, 1968, no further requirement can be insisted upon on this score based on any subsequent development or amendment or instructions to deny duty free import of any of such Insecticides mentioned in the said Schedule to Insecticides Act, 1968. Duty Free import under the said DFIA of any of the Insecticides mentioned in the decision of the Norms Committee, recognized as 'required for' cotton farming, if in Schedule of Insecticide Act, 1968 shall necessarily permitted under the DFIA, subject to the quantity restriction mentioned in the Licence as per SION J-373. The Shipping Bills filed while making exports were to be seen at the time of export in the light of the details specified in the DFIA. It would not wholly erroneous and incorrect to insist on specifications of Pesticides used by farmers after the exports. Despite absence of any power under Section 5 of the FTDR Act, 1992 for any retrospective amendment, several such amendments/instructions are being issued by respondent no.2 and are being arbitrarily applied in a retrospective manner, leading to unwarranted litigation and making an adverse impact on growth of export business - I am therefore inclined to request the learned Attorney General of India to look in the aspect and to suitably advise the respondents for remedial action as soon as possible - petition allowed by way of remand.
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2017 (5) TMI 1007
Revocation of CHA licence - forfeiture of security deposit - inordinate delay in completion of the process of revocation of the license - Held that: - compliance with the time-frame stipulated in the Regulations is an essential pre-requisite for the proceedings to be accorded legality and sanctity - the inordinate delay in completing the inquiry proceedings has vitiated the detriment visited upon the appellant - the revocation of the license and forfeiture of the security deposit is held to be violative of the Regulations and is set aside - appeal allowed - decided in favor of appellant-CHA.
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2017 (5) TMI 1006
Revocation of CHA licence - forfeiture of security deposit - inordinate delay in completion of the process of revocation of the license - Held that: - compliance with the time-frame stipulated in the Regulations is an essential pre-requisite for the proceedings to be accorded legality and sanctity. There is no doubt that the charge-sheet was issued within the stipulated period but the inquiry did take an inordinately long time for completion - the inordinate delay in completing the inquiry proceedings has vitiated the detriment visited upon the appellant - revocation of the license and forfeiture of the security deposit is held to be violative of the Regulations and is set aside - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 1005
Revocation of CHA licence - forfeiture of security deposit - inordinate delay in completion of the process of revocation - Held that: - The law is well-settled that compliance with the time-frame stipulated in the Regulations is an essential pre-requisite for the proceedings to be accorded legality and sanctity - There is no doubt that the charge-sheet was issued within the stipulated period and the revocation order was issued within the period prescribed for disposal between receipt of inquiry report and action thereon but the inquiry did take an inordinately long time for completion - the inordinate delay in completing the inquiry proceedings has vitiated the detriment visited upon the appellant - revocation of licence and forfeiture set aside - appeal allowed - decided in favor of appellant-CHA.
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2017 (5) TMI 1004
Penalty on CHA - though the NOC was filed by CHA but the same was filed after a gap of 37 days which the CHA cannot explain - Held that: - such delay in filing NOC cannot be adopted as a ground for imposition of penalty u/s 112(b) of the CA - the fact that appellant did not bring the matter to the Customs about their doubt regarding the consignment also cannot be adopted as a reason for imposition of penalty inasmuch as it was the Customs own alert about the Bill of Entry which created the doubt in mind of the CHA and not vice versa - In the absence of any independent evidence showing any malafide intention on the CHA or his employee, the view that penalty imposed upon them is required to be set aside - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 1003
Limitation period - refund of SAD - N/N. 102/07-Cus dated 14.9.07 - application for reund made within limitation period or not? - Held that: - unless there is application for refund of SAD, Revenue would not make general inquiry about the assessee's payment of VAT - Though, there is nothing in the said letter to connect inquiry with the refund application of appellant and inasmuch as there was no refund application prior to the present refund application, the appellants stand has to be appreciated and examined - the matter should be remanded to the original adjudicating authority for verifying the appellants stand that prior to 26.8.08, no refund application was filed by them - appeal allowed by way of remand.
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2017 (5) TMI 1002
Refund claim - territorial jurisdiction - whether the appellant was correct in claiming that the goods entered into territorial water in India and vessel was assigned a berth on 24.02.1999 hence it is the date of import of the goods or 01.03.1999? - Held that: - the goods were allowed to be discharged on 27.02.1999 customs duty came into force on such goods from midnight of 27/02/1999. It is also undisputed that Entry Inward of the goods was made in the records on 01.03.1999 for all practical purpose and noted that the goods have been imported into India - the issue is no more res integra as the Apex Court in the case of Apar Pvt. Ltd. [1999 (7) TMI 69 - SUPREME COURT OF INDIA] has held that Duty has to be paid with reference to the relevant date as per Section 15 of the Customs Act - appeal dismissed - decided against appellant.
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2017 (5) TMI 1001
Violation and misuse of DEEC scheme - confiscation - redemption fine - goods could not be confiscated as not available - Held that: - the imported goods are released to the respondent on the condition that the same will be used for the specified purpose and a Bond is executed by the appellant. In these circumstances, it cannot be said that the goods are unconditionally released to the respondent - it cannot be said that the goods could not be confiscated - matter is remanded to the adjudicating authority for determination of redemption fine in lieu of confiscation of the goods - appeal allowed by way of remand.
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2017 (5) TMI 1000
Valuation - royalty - technical collaboration agreement - condition of sale - Held that: - the Order-in-Original states that there is no condition of sale in the agreement it does not specifically state what provisions of the agreement have been examined - the conclusion that there is no condition of sale does not appear to be supported by evidence on record - matter remanded to the original adjudicating authority for fresh adjudication - appeal allowed by way of remand.
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Corporate Laws
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2017 (5) TMI 994
Compounding of offence - composition fee declined - Held that:- Considering the default in filing the annual returns and the balance sheets which amount to the offences punishable under Section 162/220 (3) of the Companies Act, applying the doctrine of proportionality, negligible imposition of composition fee would also not serve the purpose. It cannot be held that the composition fee of ₹ 8,00,000/- on each of the petitioners imposed by the learned Additional Sessions Judge was not a fair and just exercise of the discretion. This Court in a petition under Section 482 Cr.P.C. or Article 226 of the Constitution of India would interfere in the order of the Court below only if the same results in failure of justice or the discretion is exercised contrary to the settled principles of law. Considering the fact that the composition fee has been brought down considerably by the learned Additional Sessions Judge, this Court finds no merit in the petition.
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Insolvency & Bankruptcy
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2017 (5) TMI 995
Application for restoration of the company in the register - Jurisdiction of this Court to entertain an application for recalling the order passed under Section 560(6) of the Companies Act - Held that:- Admittedly, the original proceeding originating from a Company Petition filed under Section 560 of the Act is neither reserved for orders for allowing nor otherwise pending as on this date and therefore the application for recalling the order cannot come within the purview of Rule 3 of the said Rules. The power of recalling the order is a vested power upon the Company Court and emanates from Rule 9 of the Company Court Rules. it originates and / or arise from the original proceeding and there was no intention of the legislature to include such applications within the periphery of Rule 3 thereof. This Court therefore does not find any substance in the preliminary objection raised by the Director of the company and is therefore answered in negative. Whether the order was obtained by suppressing the material facts and by committing fraud on the Court? - Held that:- The application for restoration of the company in the register contains the simplicitor statements that the company was active but because of the person responsible for filing the annual return and the balance sheet, the same could not be filed. In the instant petition, the present applicants disclosed that the company applied for voluntary winding up under EES (Easy Exit Scheme)-2011 before the Registrar of Companies and wanted the company to be wound up under Section 484 of the Companies Act, 1956 by passing a special resolution. A declaration duly verified by affidavit was also filed in compliance with Section 488 of the said Act declaring that the company had been inoperative since past three years. The said declaration contains the categorical statement that there is no litigation pending against or involving the company when in fact the Complaint Case being No. 5939 of 2003 was pending before the learned Metropolitan Magistrate at Kolkata involving the said company. It is further stated that the said application was filed under the said scheme disclosing that there are two Directors namely Subhas Dutta and Partha Dutta when it would appear that they were not the Directors. The aforesaid facts having been specifically denied in the opposition. It is no longer res-integra that the Court can recall its order if obtained by suppression of the material fact or by practicing fraud. The Company Petition was silent on the above aspect and there is no hesitation to say that there was a conscious and deliberate suppression of those facts
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Service Tax
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2017 (5) TMI 1031
Educational institution - refund claim of Security Services - N/N. 25/2012-ST dated 20.06.2012 - scope of SCN - Held that: - in the SCN, there is no such allegation against the respondent that they have not provided service to an educational institution in terms of N/N. 25/2012-ST dated 20.06.2012 - the grounds taken by the Revenue in the appeal are beyond the scope of the SCN - appeal not maintainable - decided against Revenue.
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2017 (5) TMI 1030
Proceedings against deceased - demand/recovery - whether deceased should be issued a SCN and a proceeding under that SCN is legal and correct or otherwise? - Held that: - the proprietor of the appellants firm Shri Ramesh R. Shewale died on 02.01.2014 and the SCN was issued on 15.12.2014 - There is no provision under the CEA and Rules made thereunder to issue a SCN to a dead person. The SCN issued to the proprietary concern is ab initio illegal. The entire proceedings flowing from the SCN is also vitiated - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 1029
Valuation - Management, maintenance and repair service - the appellants did maintain the residential complex in which there were various occupants - non-payment of service tax during the period 16.06.2005 to 30.09.2009 - The Revenue entertained a view that the appellants have rendered service of management maintenance and repair of the said dwelling units/ complex and are liable to pay service tax - Held that: - the appellant did provide taxable service to various occupants of the complex under tax entry of “management, maintenance and repair service” which specifically talks about management and maintenance of immovable properties. Regarding the valuation of such taxable service, A portion of the building is still under the control/maintenance of the appellants themselves. We find that while tax liability of the appellant has to be upheld, the method of arriving at the tax value has to be in terms of Rule 3 (b). For applying the provision of Rule 3 (b), the stipulation is that the value shall not be less than the cost of provision of such taxable service. The equal money value has to be arrived at based on the documents and supporting evidence to be submitted by the appellant. For applying the provision of Rule 3 (b), the stipulation is that the value shall not be less than the cost of provision of such taxable service. The equal money value has to be arrived at based on the documents and supporting evidence to be submitted by the appellant. In case, no separate supporting evidences are available, a value, not below minimum benchmark value of cost of provision of such taxable service should be arrived at - we remand the matter to the Original Authority, who will examine the evidences to be submitted by the appellant to arrive at a proper value - appeal allowed by way of remand.
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2017 (5) TMI 1028
Interpretation of statute - GTA service - Reverse Charge Mechanism - demand of service tax on GTA services, where the freight paid exceeded ₹ 750/- but did not exceed ₹ 1,500/- per consignment - N/N. 34/2004-ST - The Commissioner interpreted the said notification to the effect that when the goods carriage carried only a single consignment clause (i) can be made applicable, to allow exemption - Held that: - The gross amount charged on an individual consignment transported in a goods carriage is specifically mentioned in Clause (ii) of the notification - In the present case, the individual consignment transported in a single lorry had freight amount exceeding ₹ 750/-, thereby clearly attracting provisions of Clause (ii). Clause (i) will apply where the gross amount charged on consignments transporter in a goods carriage does not exceed ₹ 1,500/- - admittedly, there is no multiple consignments. We find no need to take a single consignment, with no other consignment in the same lorry, to be covered under the category of clause (i). Such interpretation will be against the plain reading and also will make the operation of the notification difficult in different situations, of individual consignments having freight of below ₹ 750/-/above ₹ 750/- and also above ₹ 1,500/- - where an assessee incurred freight upto ₹ 1500/- per consignment the assessee is not eligible for exemption. Appeal allowed - decided in favor of Revenue.
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2017 (5) TMI 1026
Manpower Recruitment Agency service - Labour contractor - supply of manpower - taxability - time limitation - Held that: - the ultimate use of labour by the client is not a criteria to decide the tax liability under service tax provision - the demand u/s 73 (1) of the FA, 1994 has to be issued within the period with reference to relevant date as stipulated in the said Section. There is no provision to determine ‘relevant date’ based on the date of knowledge acquired by the Department - appeal dismissed - decided against appellant.
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2017 (5) TMI 1025
Commercial or industrial construction service - Abatement - N/N. 1/2006-ST - Held that: - the appellant assessee is entitled to the abatement of 67 % under N/N. 1/2006-ST as per the CESTAT decision in the case of M/s Bhayana Builders Pvt Ltd VSC CCE [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)], where it was held that Value of free supplies by service recipient do not comprise the gross amount charged under N/N. 15/2004-ST, including the Explanation thereto as introduced by N/N. 4/2005-ST - What would be the quantum of the liability of service tax against the assessee appellant, once benefit of 67% abatement is given to them, is required to be computed - appeal allowed by way of remand.
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2017 (5) TMI 1024
Jurisdiction o Commissioner (Appeals) - power to remand - Held that: - reliance was placed in the case o in the case of World Vision [2009 (11) TMI 452 - CESTAT, NEW DELHI], wherein it has been held that in Service Tax matters, the Commissioner (Appeals) has the power to remand the matter to original adjudicating authority as Section 85(4) of the FA, 1994 is differently worded than Section 35A of the CEA, 1944 - appeal dismissed - decided against Revenue.
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2017 (5) TMI 1023
Manpower Recruitment and Supply Agency Services - activity of cutting of sugarcane and loading the same and conveying it in bullock carts and delivery at the sugar factory, and also unloading the same at the sugar factory - Held that: - Identical issue was considered by this bench in the case of Shri Samarth Sevabhai Trust [2015 (3) TMI 1170 - BOMBAY HIGH COURT], where it was held that the activity undertaken is of harvesting, loading and unloading in a package deal to a sugar factory would not be covered under Manpower Recruitment or Supply Agency Service - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 1022
Providing marketing services to their foreign principals - Business auxiliary services or export of services - commission received from foreign principal in convertible foreign currency - taxability - Held that: - marketing operations in India were not at the behest of any Indian customer and the same were being provided to foreign recipients, the same has to be treated as export of services and not liable to service tax - the procurement of orders in the Indian market, on behalf of the foreign principal for which payment is received in foreign exchange from the principal, would not be taxable as no service is considered to have been provided in India - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (5) TMI 1021
Refund of cenvat credit - Duty under protest - closer of factory - Held that: - Taking into consideration, the Rule 5 of the CENVAT Credit Rules 2002, we are of the view that the Tribunal was not correct while relying upon the judgment of the Larger Bench in Gauri Plasticculture (P) Ltd. [2006 (8) TMI 225 - CESTAT, MUMBAI] as Rule 5 in no way prohibits the payment of the refund amount in cash and more particularly when after a proper adjudication of matter an amount of ₹ 63,001/- is said to have been sanctioned in favour of assessee (appellant) and the factum of their manufacturing unit having been closed, we are of the considered opinion that the present appeal deserves acceptance, the same is, therefore, allowed - Decided in favor of the assessee.
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2017 (5) TMI 1020
CENVAT credit - capital goods - job-work - denial on the ground that the capital goods received were used exclusively in the manufacture of goods on job work basis, which were cleared without payment of duty under N/N. 214/86-CE and hence the provisions of Rule 6(4) of CCR, 2004 would become applicable - Held that: - if the appellant is manufacturing the exempted goods, they are not entitled to take credit on the capital goods - It is admitted position in this case that the goods have cleared by the appellant on job work basis and such goods are dutiable or otherwise. The said goods job worked goods supplied to principal manufacture which have been cleared on payment of duty. In that circumstance, it cannot be said that the appellant is engaged in the manufacturer of exempted goods - In fact the said goods are dutiable. In that circumstance, also the credit cannot be denied to the appellant. Credit allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 1019
Valuation - raw material supplied free of cost by the buyers - includibility - Whether the raw material was supplied free of cost by the buyers is required to be added in the assessable value or not? - Held that: - As per value Valuation Rules, the value of the components/parts supplied free of cost to the appellants, was required to be added in the transaction value of the goods - the value of the materials, components, parts supplied free of cost by M/s.Jindal Stainless Steel Limited, Hissar (the buyer) to the appellants for use in the machinery manufactured on their behalf, was additional consideration flowing directly or indirectly form the buyer to the appellant and should have been added in the transaction value of the said machinery for the purpose of payment of central excise duty in terms of Rule 6 ibid of the valuation Rules and by not doing so, the appellants had certainly undervalued their goods, resulting into short payment of duty of ₹ 8,31,667/-. Therefore, the demand of duty of ₹ 8,31,667/- is legally sustainable and does not suffer from any legal infirmity - There was certainly suppression of facts on the part of the appellants and hence the extended period of limitation is rightly invokable - equal penalty u/s 11AC also confirmed - demand upheld. Whether the inputs which have been cleared as such without being any activity by the appellant are entitled for the benefit of exemption N/N. 58/03-CE dated 22.7.2003 or not? - Held that: - it is admitted fact that the appellant has cleared the inputs as such, and availed Cenvat credit thereon against domestic procurement certificate under N/N. 58/03-CE dated 22.7.2003. To avail the benefit of the said notification, the goods shall be produced or manufactured by the appellant which is not done in the instant case - the benefit of N/N. 58/03-CE dated 22.7.2003 is not available to the appellant. Appeal dismissed - decided against appellant.
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2017 (5) TMI 1018
SSI exemption - use of brand name of others - N/N. 8/99-CE - denial of benefit of N/N. 67/95-CE dated 16.3.1995 on the ground that the black and White TV which is final product manufactured by the appellant is exempted from payment of duty and these TV cabinets have been captively consumed by the appellants which are dutiable - Held that: - As the adjudicating authority has not examined the issue on the basis of existing law or existing N/N. 8/99-CE dated 29.2.1999. Therefore, impugned order is contrary to the law - matter is remanded back to the adjudicating authority for fresh adjudication to examine the issue in terms of N/N. 8/99-CE dated 29.2.1999 - appeal allowed by way of remand.
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2017 (5) TMI 1017
Refund claim - reversal of credit held to be ineligible - re-credit of the reversed CENVAT valid or not? - Held that: - one of the specified circumstances wherein, instead of transfer to the Fund the amount is paid to the claimant of refund, is the refund of CENVAT credit enabled by a specific rule or notification made under the CEA, 1944. This circumstance is an obvious reference to the refund provision in the CENVAT Credit Rules, 2004 that envisages a cash transfer to the claimant - unless such a cash transfer is occasioned, the provisions of section 11B of CEA would not apply - appellant not entitled to refund - appeal dismissed - decided against appellant.
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2017 (5) TMI 1016
Penalty - SSI exemption availed wrongly though used Brand name of others - case of Revenue is that the appellant mis-represented and suppressed the facts and intentionally used brand name of other company, and did not pay the duty of Central Excise during the relevant period, the appellant cannot be given the benefit of ‘non issue of SCN and non charging the penalty’ as provided under sub clause 2(B) of the then Section 11A of Central Excise Act, 1944 - Held that: - this is a clear case where appellant did not bother to pay duty of Central Excise all along though the same was payable, when they were knowingly using brand name of other manufacturer - The appellant’s argument that CBEC Circular No. 71/71/94-CX. allows use of brand name on the ‘castings’ as a trade practice and also allows benefit of SSI exemption is of no consequence - It is on record that the Order-in-Original No. 46/2011 dated 18.3.2011 passed in this case gave the option to the appellant of reduced penalty of 25% as per the proviso to Section 11AC of Central Excise Act, 1944. However, the appellant did not make use of the said option which was statutorily available as per the provisions of Section 11AC ibid - penalty upheld - Appeal dismissed - decided against appellant.
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2017 (5) TMI 1015
CENVAT credit - sale of waste and scrap of various metals arising within the factory including used capital goods - non-payment of central excise duty - Held that: - an identical issue has come up before this Tribunal in the assessee-Respondents’ own case M/s Ultra Tech Cement Ltd. vs CCE&ST, Raipur [2016 (9) TMI 1234 - CESTAT NEW DELHI], where it was held that in view of the settled principles of law, we are not in agreement with the findings of the lower authority that prescription of Chapter Note in the tariff will create the duty liability on the waste and scrap of metal goods arisen during the course of repair and maintenance of plant and machinery - demand set aside - appeal dismissed - decided against Revenue.
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2017 (5) TMI 1014
Valuation - related party transaction - It was alleged that since the appellant had entered into an agreement regarding the sales promotion of “Cardiovit” with Pfizer Ltd. and is paying service charges to them, the appellant and M/s.Prizer Ltd. are related persons - Held that: - the onus of establishing that the appellants are related to Duchem Laboratories Ltd. is on the Revenue - No evidence has been produced to show that by virtue of being interconnected undertaking, Duchem Laboratories Ltd. and Pfizer become a single entity - no evidence has been produced to establish that the appellants and Pfizer Ltd. have any interest in the business of each other - From the terms of the agreement it appears that Pfizer is merely a service provider to the appellant - In the absence of any proof of mutuality of interest, it cannot be said that the parties are related - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 1013
SSI exemption - dummy units - use of brand name - It was alleged that appellant were manufacturing and clearing the goods with brand name of DIGI - Held that: - investigations did not yield any direct evidence linking the products bearing the brand name of M/s.Digicontrols with the clearances made from LEC or KEC and that the goods cleared by the assessee to DIGI clearly mentioned the brand name as "LG 301 Ultra" - the adjudication order not sustainable for the allegation that LEC had cleared goods under the brand name of DIGI. Floating of dummy unit - Held that: - The investigation has miserably failed to establish any financial flow back among the constituent units in the instant case, in these circumstances, the allegation that M/s.KEC is a dummy unit floated by M/s.LEC is not sustainable - M/s.LEC and K/s/KEC are independent entities eligible for their respective SSI exemption limits - penalties also set aside - exemption of SSI allowed. Appeal dismissed - decided against Revenue.
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2017 (5) TMI 1012
100% EOU - clandestine manufacture and removal - Held that: - It is not the case that adjudicating authority has turned a blind eye to the evidences brought out in investigation and reflected in the SCN - appeal dismissed - decided against Revenue.
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2017 (5) TMI 1011
Valuation - royalty - includibility - case of appellant is that the order passed by the adjudicating authority relying on the earlier Tribunal order is not proper as subsequently the said order was appealed against before the Hon’ble Supreme Court. The Hon’ble Supreme Court judgment has set aside the order of the Tribunal order therefore now the case deserves to be decided on the basis of Hon’ble Supreme Court judgment - Held that: - the matter needs to be remanded to the adjudicating authority to pass a fresh order and quantify the demand in accordance with the principle laid down by the Hon’ble Supreme Court - appeal allowed by way of remand.
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2017 (5) TMI 1010
CENVAT credit - capital goods used in setting up of a paint shop - Held that: - In appellant's own case for the earlier period [2013 (8) TMI 301 - CESTAT NEW DELHI], the issue came up before this Tribunal, where it was held that The purpose for which the goods were used and whether after use the goods became part of plant and machinery fixed to/embedded to the earth is not relevant - the appellant is entitled to avail cenvat credit - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 1009
Restoration of appeal - Doctrine of merger - failure to make pre-deposit - Held that: - the said Miscellaneous Application is hit by doctrine of merger as the appellant had moved before the Hon'ble Allahabad High Court, and Hon'ble High Court in its final order dated 03/02/2010, have dismissed their appeal for non making of pre-deposit, However the said fact of Detention Memo is a fact prior to dismissal by the Hon'ble Allahabad High Court - appeal not mainatainable - decided against appellant.
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CST, VAT & Sales Tax
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2017 (5) TMI 999
Deemed Sale - Transfer of right to use - Franchise agreement - royalty - levy of VAT - DVAT authorities stated and took the position that royalty payments were liable to levy on the ground that they constituted consideration for the transfer of rights to use the trade mark “McDonald’s” - whether the royalty payable under the franchise agreements signed, is liable to sales tax or VAT under the Delhi Value Added Tax Act, 2004 and under the DSTRTUG Act, 2002? - Whether the Tribunal was right in holding that consideration received under the franchise agreement was for transfer of right to use the goods, i.e., the trade mark, under the Delhi Sales Tax on Right to Use Goods Act, 2002 and under the Delhi Value Added Tax Act, 2004? What is intended to be transferred in the franchise and trade mark licensing agreements? - Held that: - when a trade vendor, distributor, establishment or anyone else permitted to sell articles or offer services the trade marks (or brand) which belongs to another, it is incorrect to state that the brand or mark, associated with the product, constitutes the sale rather than from sale of the underlying goods or services that are the subject of the trade mark (dishes in a restaurant) themselves. It would be incorrect, therefore, to conclude what is involved is not the sale of the product, but the intangible property or mark connected with the reputation of the mark, though that reputation guarantees a high demand for the product, from which the seller benefits. Likewise, in the case of distribution, a distribution agent is under an agreement with the manufacturer to sell its good; it also possesses the right to advertise the goods and brands of the manufacturer. This implies a license of the manufacturer’s trade mark. In such an event, the distributor need not pay for the right to use the intellectual property under which the goods are sold; he merely pays for obtaining the commercial right to sell the goods he buys from the manufacturer for enabling onward sale. For a transaction to constitute a transfer of the right to use goods, there should mandatorily be a transfer of the exclusive right to use the goods being transferred - The Appellant and the Petitioners grant a non-exclusive license to the franchisees, which can be revoked upon non-compliance of the terms and conditions as stipulated in their franchise arrangement. Clearly, this does not amount to a transfer of the right to use goods. The distinctiveness of a mark, earned through dint of continuous use and brand building, results in the trade mark which is classically known as “a badge of origin” that assures the user of the products the constancy of the quality associated with it. Only ensuring that others who do not own it are prevented from using or appropriating it ensures its enforcement - In the case of the franchise agreements involved in the present case, none of the franchisees or in the case of the trade mark licensee, are empowered to safeguard violation of the mark, through enforcement mechanisms, such as filing suits for injunction or damages. This underlines that the most important attribute of ownership or transfer (even in the most evanescent sense) is absent. The franchise agreement permit a limited right to use the composite system of the business of the Appellant and the Petitioners to the franchisors/licensee, and the dominant intention, as well as the specific provisions arising from the franchise agreements are not of a transfer of the right to use goods. The Tribunal erred in holding that consideration received under the franchise agreement was for transfer of right to use the goods, i.e., the trade mark, under the Delhi Sales Tax on Right to use Goods Act, 2002 and under the Delhi Value Added Tax Act, 2004 - petition allowed - decided in favor of petitioners.
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2017 (5) TMI 998
Vires of Clause 12 of the Assam Industries (Sales Tax Concessions) Scheme, 1995 - refund of sales tax - Held that: - Admittedly, Industrial Policy of Assam, 1991, nowhere says that industries involved in the manufacturing, processing, blending or packaging of tea will be exempted from payment of sales tax. Therefore, the petitioner’s plea of promissory estoppel is wholly unacceptable - Admittedly, Industrial Policy of Assam, 1991, nowhere says that industries involved in the manufacturing, processing, blending or packaging of tea will be exempted from payment of sales tax. Therefore, the petitioner’s plea of promissory estoppel is wholly unacceptable - petition dismissed - decided against petitioner.
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2017 (5) TMI 997
Validity of assessment order - denial of opportunity of being heard - principles of natural justice - Held that: - Giving an opportunity of hearing is not merely a ceremony to be performed, but an opportunity of hearing has to be given to the petitioner in order to ensure that the petitioner is satisfied that justice has been done to it - the contention raised by the learned counsel for the respondents that since no new facts were submitted, and since the respondent had relied upon its original position, there was no need to give right of rebuttal to the petitioner, the said contention is unacceptable - The learned Commissioner is directed to hear both the parties simultaneously, and to give ample opportunity to the petitioner to meet out the case of the department - appeal allowed by way of remand.
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2017 (5) TMI 996
Maintainability of petition - Validity of reassessment order - KVAT Act - sub-contract - deductions under the provisions of Rule 3(2) of KVAT rules - Form VAT 180 - demand of tax, interest and penalty - there is a reassessment order after notice to the petitioner. The petitioner appeared before the Assessing Authority produced registers maintained by it and raised similar contentions that all goods, which were procured or purchased were consumable goods, consumed in the service contract, and therefore no VAT is payable by it - Whether the writ petitions filed by the petitioner is maintainable in view of alternative remedy provided in Section 62 of the Act? Held that: - when an alternative remedy is available and petition is entertained by this Court, the petitioner later cannot approach the appellate authority by way of appeal or revision as the case may and thus petitioner would be to its disadvantage. For this reason also, entertaining this writ petition without allowing the petitioner to avail the alternative remedy, is not in the best interest of the petitioner. The constitutional issues have to be decided exclusively by the High Court. This is a case where alternative remedy has to be availed by the petitioner and accordingly, the writ petitions are not maintainable - petition dismissed being not maintainable.
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Indian Laws
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2017 (5) TMI 980
Disbursement of the additional remuneration as per Fundamental Rules 49, within the prescribed period - need for sanction of the higher authority for giving additional charge to a particular officer - Held that:- For the purpose of payment of additional pay beyond the period of three months, sanction is required. It does not speak for non-entitlement, on account of the holding charge exceeding a period of three months. In our view, the entitlement for the additional charge allowance/remuneration is one thing and the disbursement aspect is another thing. FR 49(iii) expressly provides for the charge allowance for holding the charge of another post. Once the entitlement is proved, merely because for disbursement, the sanction is required of the higher authority is no ground to deny the benefit for the additional charge allowance. The interpretation as canvassed by the learned counsel that in the absence of any sanction granted by the higher authority, one is not entitle d for the charge allowance for the period exceeding three months is not correct and the same cannot be accepted. When proviso to FR 4 9(iii) expressly provides for sanction of the competent authority for payment, it cannot be mixed with the sanction to be granted at the time when charge is to be handed over. In any case, it was not contended on behalf of the petitioner before the Tribunal nor any material is shown to this Court that the respondent held charge of the additional post unauthorisedly. Under these circumstances, once the charge of additional post is held in lawful manner, the employee concerned would be entitled for additional charge allowance. The disbursement thereof is a procedural aspect which cannot nullify the entitlement of the employee concerned.
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