TMI Tax Updates - e-Newsletter
May 25, 2015

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. CALL OPTIONS OR PUT OPTIONS ARE TRANSACTIONS OF DERIVATIVE MARKETS AND CANNOT BE TERMED AS SPECULATIVE IN NATURE

   By: DR.MARIAPPAN GOVINDARAJAN

2. Taxability of newly taxable services from June 1, 2015

   By: Bimal jain

News

1. THE COMPANIES (AMENDMENT) Act, 2015 - dated 25th May 2015

2. Highlights of Finance Minister’s opening remarks at the Press Conference addressed by him in the National Capital on the occasion of completion of one year of the present NDA Government.

Notifications

Central Excise

1. 29/2015 - dated 22-5-2015 - CE

Seeks to further amend notification No. 6/2005-CE dated 1.3.2005 - Additional duty on Waters, including mineral waters and aerated waters, containing added sugar or other sweetening matter or flavoured withdrawn in consequence to increase in rate of duty from 12% to 18%

Customs

2. 22/2015 - dated 22-5-2015 - ADD

Seeks to levy definitive anti-dumping duty on imports of USB Flash Drives', originating in, or exported from, People's Republic of China and Chinese Taipei for a period of five years

3. 20/2015 - dated 22-5-2015 - ADD

Seeks to levy definitive anti-dumping duty on imports of Pentaerythritol' , originating in, or exported from,Russia for a period of five years

Circulars / Instructions / Orders

VAT - Delhi

1. 11/2015-16 - dated 22-5-2015

Filing of online return for the 4th quarter of 2014-15 - extension of period thereof

Highlights / Catch Notes

Income Tax

• Isolated Transactions: Comprehensive Evaluation Needed to Classify as Capital Gain or Business Income.

  Case-Laws - HC : Transaction in the nature of adventure - Capital gain or business income - Ordinarily an isolated transaction cannot be the sole criterion to test as to whether it is in the nature of trade or sale of investment. A holistic and overall view of the transaction has to be taken. - HC
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• Court Rules Fertilizer Bonds as Cash Subsidy Equivalents, Permits Deduction Claim Similar to Foreign Exchange Treatment.

  Case-Laws - AT : Disallowance of diminution in value of fertilizer bonds - the fertilizer bonds received by the assessee in lieu of cash subsidy also deserves to be given the same treatment as foreign exchange - claim of deduction allowed - AT
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• Software Revenue from Sri Lanka and Middle East Classified as Royalty; Not Taxable in India.

  Case-Laws - AT : Revenue earned from supply of software and rendering of maintenance and professional services to customers located in Sri Lanka and Middle East as “Royalty/ FTS/ FIS” - not taxable in India - AT
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• Inspector's Report Lacks Evidence to Reject Assessee's Books for Alleged Scrap Generation Inflation.

  Case-Laws - AT : Rejection of books of accounts - it is seen that the Inspector's Report cannot lead to any conclusion that the generation of Scrap was shown by the Assessee at any inflated figures - AT
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• Depreciation Claims on Hired Equipment: Section 43(1) and the Impact of Commercial Use on Acquisition Cost.

  Case-Laws - AT : Excess claim of depreciation - Equipments given on hire - cost of acquisition u//s 43(1) - It defies all the logics that any Equipment commercially exploited for at least three months by giving it on hire, after purchase, would fetch the same price at which it was acquired. - AT
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• Tribunal Upholds Revision u/s 263 Due to Lack of Supporting Material for AO's Deduction Decision.

  Case-Laws - AT : Revision u/s 263 - Contention of the assessee is that the AO had raised a specific query in this regard and after considering the facts, submissions and case-laws allowed the deduction. But no such material is placed on record of this Tribunal - revision upheld - AT
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• Allegations of cash embezzlement require concrete evidence to justify income additions; protective assessments need legal basis.

  Case-Laws - AT : Addition made on account of the cash embezzlements - Protective assessment - there is nothing more than an allegation of embezzlement by the assessee and such allegations, by itself, cannot be legally sustainable foundation for the addition being made in the hands of the assessee - AT
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• Indian-Origin Payments to Non-Residents for Services Abroad Not Automatically Taxed in India.

  Case-Laws - AT : Merely because payments have been made from India, the same cannot be made liable to be taxed in India insofar as payment was made to non-resident for the services rendered outside India - AT
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• Software Payments to Parent Company Deemed Royalty u/s 9(1)(vi) of Income Tax Act, Taxable in India.

  Case-Laws - AT : Royalty u/s 9(1)(vi) - Nature of amount received towards supply of software by the Parent company to (non-resident) to Intel Technology India Private Limited on account of software expenses - Not in the nature of re-reimbursement of expenses - taxable in India - AT
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Customs

• Confiscation Orders Must Be Based on Reasonable Discretion, Not Arbitrary Decisions, Ensuring Fairness and Justice in Enforcement.

  Case-Laws - HC : Validity of order of confiscation - procedure to be followed - With respect to the prohibited goods, the officer has a discretion. It is well settled that discretion has to be exercised according to rules of reason and justice - HC
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• Duty on Areca Nuts: 4% for Sri Lankan Origin, 108% for Others; Provisional Assessment Valid u/s 18(1)(c.

  Case-Laws - HC : Country of origin - rate of duty @4% if the areca nut is of 'Sri Lankan origin' or leviable at 108% - there is absolutely nothing wrong on the part of the respondents in having pursued the course under Section 18 (1) (c), ordering provisional assessment. - HC
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Service Tax

• High Court Grants Exemption Benefit for Exported Services Despite Missing Notification from March to November 2003.

  Case-Laws - HC : Export of services - Non-availabity of exemption notification during the period 1.3.2003 to 19.11.2003 - benefit of exemption allowed - HC
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• Service Tax Liability Stands Despite Revenue Neutrality; No Legal Basis for Nullification Under Reverse Charge Mechanism.

  Case-Laws - AT : Levy of service tax - Reverse charge mechanism - Revenue neutrality since cenvat credit is available - unable to locate any statutory or constitutional provisions which support the notion that in case of revenue neutrality the liability to tax abates. - Prima facie case is against the assessee - AT
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• Applicant Entitled to CENVAT Credit on Reinsurance Services u/r 2(l) of CENVAT Credit Rules, 2004.

  Case-Laws - AT : Denial of CENVAT Credit - Reinsurance business - prima facie applicant is entitled to avail Cenvat credit on the reinsurance service received by them as per Rule 2(l) of the CCR, 2004 - AT
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• Service Qualifies as Export: Exemption Granted for Services Delivered Abroad with Payment in Foreign Exchange.

  Case-Laws - AT : Export of service or not - service recipient is situated abroad and the payments for the services rendered was received in convertible foreign exchange and the service has been delivered to a person situated abroad - Benefit of exemption allowed - AT
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Central Excise

• Section 11D of Central Excise Act, 1944 does not apply to goods cleared at nil duty after 8% price reversal.

  Case-Laws - AT : Duty demand u/s 11D - Whether provisions of Section 11D of Central Excise Act, 1944 would apply to the impugned goods, which were cleared at nil rate of duty after the respondent-assessee reversed 8% of total price of such goods - Held No - AT
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Case Laws:

• Income Tax

• 2015 (5) TMI 728
  Transaction in the nature of adventure - Computation of capital gain - amount received pursuant to the tripartite agreement - Tribunal termed that the amount received pursuant to the tripartite agreement is assessable to tax under the head "Capital Gains" only - Held that:- The Tribunal concluded that having regard to the tests, it is clear that a solitary or single transaction may be termed as adventure in the nature of trade even though the assessee, in a normal course, is not engaged in such business. But there is no formula and which can be applied generally. Ordinarily an isolated transaction cannot be the sole criterion to test as to whether it is in the nature of trade or sale of investment. A holistic and overall view of the transaction has to be taken. Upon taking that and finding that the plot was allotted but could not be utilized by manufacturer of cotton and yarn that the subsequent developments took place. It is only in the year 2005 and for the first time the assignment of leasehold interest took place. It was not a sale or transfer of property by the assessee for a profit but since use could not be made, that initially a conversion permission was sought but even thereafter a utilization of the property for the assessee's purpose did not come through. It is in these circumstances that the assignment with the consent of CIDCO has taken place. Therefore, the Tribunal termed that the amount received pursuant to the tripartite agreement is assessable to tax under the head "Capital Gains" only. The reasons assigned in para 11 of the order under challenge and particularly that the revenue did not set up a case that the assessee was engaged in such activity in respect of any other piece of land or property that the single or isolated transaction was not termed as an adventure in the nature of trade. To our mind, such conclusion arrived at and consistent with the factual data does not raise any substantial questions of law. Tribunal's view as above, is not perverse or vitiated by any error of law apparent on the face of the record. - Decided against revenue.

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• 2015 (5) TMI 727
  Disallowance of diminution in value of fertilizer bonds - Held that:- The assessee company was compelled to receive fertilizer’s bonds in lieu of cash fertilizers subsidy by the Government of India. The AO has not brought out any allegation that the assessee company bought fertilizers bonds for the purpose of making investment and thus, the bonds were to be given the same treatment which was to be given to cash in hand, foreign currency or cash in bank as current trading assets. In this situation, we respectfully take cognizance of decision of Hon’ble Apex Court in the case of Patnaik & Company (1986 (7) TMI 6 - SUPREME Court) and CIT vs. D.S. Bisht, (2000 (2) TMI 83 - DELHI High Court ) wherein it was held that the loss on investments which were made under commercial expediency did not bring an asset of a capital nature and losses thereon, therefore, is allowable as business losses. The dispute remains on the loss booked by the assessee on diminution of fertilizers bonds which were remained unsold at the end of the year. Thus the fertilizer bonds received by the assessee in lieu of cash subsidy also deserves to be given the same treatment as foreign exchange because foreign exchange is also received in lieu of cash/Indian National Rupee (INR) and the same is also shown as current trading assets in the books of accounts as per well accepted accounting principles.CIT(A) was right in holding that the difference in the amounts of loss/profit on actual sale of points has been duly accounted for in the books of accounts of the relevant assessment year and the loss of Rs. 9.52 crores on account of diminution in the market value of the fertilizers bonds held at the end of the year as business assets cannot be disallowed and such disallowance cannot be sustained on facts or in law. - Decided against revenue. Disallowance u/s 14A on account of interest expenditure - Held that:- the Department has accepted this contention of the assessee that the assessee has not diverted his interest bearing funds for the purpose of investments or any other manner for making investment which accrue tax free income for the assessee. In the same manner, we are further inclined to hold that the Revenue authority has not brought out any fact to establish this fact that the assessee diverted his interest bearing funds for making investments for earning tax free income. In this situation, we are fully agree with the approach of the CIT(A) for A.Y. 2010-11, wherein the CIT(A) has made disallowance only u/s 14A read with Rule 8D(iii) of the I.T. Rules, 1962 by making total disallowance of .5% of aggregate of opening and closing value of investments and the CIT(A) was also right in directing the AO to deduct the amount of suomoto disallowance already made by the assessee. Hence, the sole ground of the assessee is allowed with a direction to the AO that the disallowance u/s 14A read with Rule 8D(iii) of the I.T. Rules should also be made for the year under consideration in this appeal i.e. for A.Y. 2008-09 and the AO is also directed to give set off of amount of suomoto disallowance already made by the assessee in the computation of returned income. - Decided in favour of assesse as directed

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• 2015 (5) TMI 726
  Revenue earned from supply of software taxed as “Royalty” - DTAA between India and USA - Held that:- Respectfully following the decision of Ericsson A.B. (2011 (12) TMI 91 - Delhi High Court) and Infrasoft Ltd. (supra), we hold that the consideration received by the Assessee for supply of product along with license of software to End user is not royalty under Article 12 of the Tax Treaty. Even where the software is separately licensed without supply of hardware to the end users (i.e. eight out of 63 customers), we are of the view that the terms of license agreement is similar to the facts of Infrasoft Ltd (2013 (11) TMI 1382 - DELHI HIGH COURT). Accordingly, we hold that there was no transfer of any right in respect of copyright by the assessee and it was a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article. Hence, the payment for the same is not in the nature of royalty under Article 12 of the Tax Treaty. The receipts would constitute business receipts in the hands of the Assessee and is to be assessed as business income subject to assessee having business connection/ PE in India Revenue earned from rendering of implementation services and maintenance services to customers in India as “Royalty/ FTS/ FIS - Held that:-In the present case, the undisputed fact is that the implementation service is inextricably and essentially linked to the supply of software. In view of our decision in Ground No 2 that the supply of software is not taxable as “royalty” under the Tax Treaty, the provision contained in clause (a) to Article 12 (4) would not apply to both Implementation and maintenance services. Further there is nothing to show that these services provided by the assessee actually made available to the End User/ Channel Partners any technical knowledge, experience, skill, know-how or processes so as to enable them to apply the said technology. Under these circumstances, we uphold the arguments of the learned Counsel of the assessee and allow the ground. Whether ACC constitutes the fixed place, Installation and Dependent Agent PE in India of Aspect US under the Tax Treaty? - Held that:- It is submitted that the assessee has not submitted information on sale of equipment and licensing of software that are done directly by Aspect India to customers and those done through channel partners. It is contended that the assessee has not demonstrated that it identifies customers and make sales. The statement recorded from the Director, sales of Aspect India is stated to be contrary to the claim of the assessee that Aspect India only acts as a communication channel between the assessee and the customers. Similarly, the assessee’s claim that majority of sales are made to channel partners is stated to be factually incorrect since information on all the channel partners, date of agreement and sales made through them is not submitted. It is argued that copy of ‘I Approve’ system has not been submitted by the assessee for factual verification. Considering these facts, we are of the view that both the revenue and the assessee have not been able to demonstrate the existence or otherwise of the ‘dependent agent PE’. In the absence of proper information in this regard, we are unable to decide whether the assessee has a ‘dependent agent PE’ in India. We accordingly, set aside the issue of ‘dependent agent PE’ and restore to the assessing officer for fresh consideration. Revenue earned from supply of software and rendering of maintenance and professional services to customers located in Sri Lanka and Middle East as “Royalty/ FTS/ FIS” - Held that:- to tax the income earned by Aspect US from customers located outside India under Sec. 9(l)(vi)(c)/ 9(1)(vii)(c ) of the Act, the Revenue must prove that the customers located in Sri Lanka / Middle East carry on business in India and that they have used Aspects US rights in the IPs/ services for the purposes of such business in India; or that they have used rights in the IPs/ Services for the purpose of making or earning income from a source in India. In the present case, the Revenue taxed the said income on the sole reason that these services are provided by Indian subsidiary of the asseseee and the asssessee is earning huge income from these customers. The AO has not brought anything on record to show that the customers located in Sri Lanka/ Middle East have used the rights in the IPs/ services for carrying on business in India or for the purpose of making or earning income from any source in India. We find it difficult to accept the arguments of the learned CIT-DR for taxing the said receipts. Thus we hold that the revenues earned from customers located in Sri Lanka/ Middle East are not taxable under the Tax Treaty. Even otherwise, we are of the opinion that the said revenue is not taxable under Sec. 9 of the Act. Attributing the income to the assessee’s PE in India - Held that:- Where a PE is held to exist, subject to the application of the force of attraction rule, only profits in relation to the assets and activities of the PE may be attributed to it and that an arm’s length payment to a subsidiary PE as per FAR analysis would be sufficient for such attribution.In view of the above, we agree with the learned counsel of the assessee that where an associated enterprise (that also constitutes a PE) is remunerated on arm’s length basis taking into account all the risk taking functions of the multinational enterprise, nothing further would be left to attribute to PE. For the other A.Ys under appeal, we direct the AO to refer the matter to the TPO wherever there is no existing reference either in the case of Aspect US or Aspect India. The TPO shall determine ALP and attribute the profits accordingly. In this regard, we place reliance in the case of Ranbaxy Laboratories Ltd. Vs. CIT (2011 (11) TMI 196 - DELHI HIGH COURT) wherein the validity of the instruction no.3 dt.25-5-2003 issued by the CBDT u/s 119 of the Income Tax Act was upheld and the reference to TPO for determination of ALP was considered mandatory. Claim for deduction of remuneration paid to the alleged P.E. from the profit attributed to the P.E - Held that:- As we have directed the AO to refer the matter to the TPO for determining the ALP and thus decide on attribution of profits, we are of the view that this issue should also go back to the AO for fresh adjudication in accordance with law Applicability of transfer pricing provisions and rejection of Transfer pricing analysis of Aspect India - Held that:- the functions identified in transfer pricing study are complete and exhaustive. Aspect India has been remunerated at arm’s length for functions provided by it. Accordingly, no further attribution is required to be made for Aspect US. She submitted that this is supported by the fact that tax return of Aspect India was picked up for scrutiny by the Transfer Pricing Officer (‘TPO’) for AY 2004-05, 2005-06 and AY 2008-09 and the TPO had accepted the value of international transaction declared by the assessee. In support of her submissions, she relied on the decision of the Hon’ble Supreme Court in the case of Morgan Stanley and Co. Inc (2007 (7) TMI 201 - SUPREME Court).Similar issues have been dealt with by us earlier in this order while dealing with attribution of profits to the PE. As the criteria for adjudication of both the issues is similar, consistent with the view taken by us we direct the assessing officer to accept the TPO analysis of Aspect India wherever the same is available. Levy of interest under Sec 234B - Held that:- The undisputed fact in the present case is that tax on the entire income received by the assessee was required to be deducted at appropriate rates by the respective payers under section 195(2). Had the payer made the deduction of tax at the appropriate rate, the net tax payable by the assessee would have been Nil.The interest obligation has arisen on account of the AO holding ACC as PE of asseseee in India which resulted in higher assessed income. Further, the Revenue has not brought anything on record to prove that the assessee has led the Indian payers to believe that tax was deductible at lower rates. Under these circumstances, we allow this ground in favor of the assessee.

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• 2015 (5) TMI 725
  Unexplained investment - addition u/s 69 - Held that:- Incidentally in the case under dispute, the AO had neither applied his mind nor formed a belief, but, merely came to the conclusion, based on the report of the approved valuer found during the search operation at the premises of Tinna Group of cases, that the value of the land under dispute was shown highly understated and, accordingly, initiated proceedings u/s 147 of the Act. Moreover, in the course of assessment proceeding of the seller, the impugned property was referred to the DVO of the Department for valuation and he arrived at the value of Rs. 1.64crores which was much below than the price mentioned in the sale deed of the impugned property. The valuation report being only an opinion, the same cannot be a sole basis for making an addition without any corroborative evidence to hold that there is an undisclosed payment in purchase of the impugned property, especially, when the sale prices mentioned in the sale deeds are much above the guideline/circle rate.Taking into account all the facts and circumstances we are of the view that the CIT (A) was not justified in sustaining the addition of Rs. 3,45,75,000/-made by the AO u/s 69 of the Act as the AO had solely placed reliance on the report of the approved valuer. It is ordered accordingly. Reopening of assessment - Held that:- In the course of original assessment proceeding, the AO was made aware of the purchase of the impugned property and the sale deed was duly enclosed in the assessee’s reply to the AO’s query. The only reason for the reopening of the assessment was the alleged seizure of the valuation report of the approved valuer from the premises of the sellers of the impugned property. The valuation report of the approved valuer was nothing but an opinion expressed by him. Therefore, when all the necessary details were filed and taken note of by the AO during the course of the original assessment proceeding pursuant to the search and seizure action conducted in the premises of the assessee, the reopening of the assessment was merely based on change of opinion of the AO. For taking the above view, we are fortified by the judgments of the Hon’ble Jurisdictional High Court in the cases of (i) Global Signal Cables (India) (P) Ltd v. DCIT (2014 (10) TMI 547 - DELHI HIGH COURT) and (ii) CIT v. Usha International Ltd reported in (2012 (9) TMI 767 - DELHI HIGH COURT). Also see Mahashay Chunnilal v. DCIT [2014 (2) TMI 950 - DELHI HIGH COURT]. - Decided partly in favour of assesse.

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• 2015 (5) TMI 724
  Disallowance of Prior period expenditure - Held that:- Ld. Counsel refers to page 20A wherein Cochin Customs receipt for miscellaneous charges is contained which is dated 30.01.2006 acknowledging the payment of Rs. 84,728/-. In this receipt, the bill of entry number is mentioned as 170028 dated 30.11.2005 from 16.11.2005 to 31.01.2006. This suggests that the demand note was received during the year under consideration and, therefore, this cannot be treated as prior period expenditure. Similarly, the details of interest for Rs. 7,04,233/- at page 20B of the paper book also clearly suggests that the liability is crystallized during the year under consideration and, therefore, this also cannot be treated as prior period expenditure. Further, both the impugned amounts are primarily compensatory in nature being on account of delayed payment of Custom Duty. Therefore, both the amounts are to be allowed being incurred wholly and exclusively for business purposes. However, in view of the submissions of the ld. DR, we restore this issue to the file of the Assessing Officer to verify when the demand was raised and if it was raised during the previous year under consideration then it is to be allowed - Decided in favour of assesse for statistical purposes. Disallowance of legal fee payment - denied on the ground of being relatable to prior period expenses - Held that:- keeping in view the smallness of amount and there being no dispute about genuineness of the expenditure and further the fee being relatable for the month of March, 2005, we are of the opinion that the claim should not be denied particularly when the bill has been received in the current assessment year and the payment has also been made in the current assessment year - Decided in favour of assesse. Disallowance of medi-claim policy of the Director of the company - Held that:- admittedly the mediclaim policy was for the benefit of director only and no benefit was derived by the assessee company from the said insurance policy in the name of director. This claim in no way was for the benefit of business interest of assessee company.,The assessee has not brought on record any evidence to infer that it was in any way under obligation to meet the expenditure on medi-claim policy in terms of service conditions. - Decided against assesse. Disallowance of interest not charged on capital expenditure booked as work in progress on behalf of plant owner FOSCL - Held that:- A bare perusal of the arrangement clearly shows that the whole arrangement has been made on account of commercial expediency because both the parties were benefited by the technical knowledge and know-how of each other. FOSCL was also the holder of intellectual property rights concerning the products and any other future added products and was entitled to these rights, therefore, it was in the interest of assessee to get benefit out of the same. We, therefore, considering the commercial expediency involved and terms of the agreement between the parties, did not find any reason to confirm the disallowance made by the lower revenue authorities on account of interest element on the amounts advanced to FOSCL being reflected as work-in-progress in the fixed assets. This ground is allowed - Decided in favour of assesse. Disallowance of Plant expenses - Held that:- the expenditure claimed is on the same footing as claimed by the assessee in ground no.5. Accordingly, we allow this ground of the assessee for the same reasons as recorded vide dealing ground no.5 above.- Decided in favour of assesse. Addition being interest not charged on business advances - Held that:- It is well settled law that no addition can be made on account of notional interest to be earned by assessee. This is against the very concept of real income theory. Be that as it may, the assessee had sufficiently owned funds to advance a sum of Rs. 18,96,035/-. We, therefore, do not find any basis for confirming the additions made by lower revenue authorities. - Decided in favour of assesse. Disallowing the expenditure for personal use under the head of Telephone, Vehicle Running & Maintenance - Held that:- It is not in dispute that assessee has paid fringe benefit tax on telephone and vehicle running expenses, therefore, no further disallowance on estimate basis is called for- Decided in favour of assesse. Addition on account of under valuation of closing stock - held that:- We are not convinced with the submission of ld. Counsel for the assessee that since, in earlier years, no such apportionment was made, therefore, the consistent method of valuation should be followed. The assessee’s approach is contrary to fundamental principle of accounting which require the matching of expenses with the revenue. If the revenue is to be realized by sale of stock in subsequent year then all the direct expenses attributable to the said stock can also be realized only when the stock is sold. Therefore, the direct expenses are to be allocated to the closing stock irrespective of the fact whether the same are debited to profit and loss account or trading account. We, therefore, set aside the order of the CIT (A) and restore that of the Assessing Officer. However, we are in agreement with the ld. Counsel for the assessee that if the closing stock of the current year is to be increased then simultaneously opening stock of subsequent year has also to be increased - Decided in favour of assesse for statistical purposes. Overdue interest charges - disallowed being prior period expenses and penal in nature - Held that:- we restore this matter to the file of the Assessing Officer for verification of assessee’s claim with regard to the details given by M/s. PEC Limited which is contained at page 48 of the paper book because the Assessing Officer has observed that assessee had not substantiated its claim whereas assessee’s contention is that the details were before the Assessing Officer - Decided in favour of assesse for statistical purposes.

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• 2015 (5) TMI 723
  Undisclosed Short Term Capital Gains from sale of Share - Held that:- The arguments of the learned Authorized Representative that the appellant had not sold the property cannot be accepted since it is judicially well known that in the case of a company the entire property held in the name of Company can be transferred through the mode of transfer of shares. This is approved by the Hon’ble Karnataka High Court in the case of Bhoruka Engineers Vs. DCIT, [2013 (7) TMI 543 - KARNATAKA HIGH COURT]. As noticed that M/s Smriti Buildcon Pvt. Ltd. owns only the property in question. Therefore, the underlying object of transfer of shares is only the transfer of property in question. It is well known settled principle of law that the substance of a transaction should be considered rather than the form of the transaction. This principle is reiterated by the Hon’ble Jurisdictional High Court in CIT Vs. EKL Appliances Ltd., [2012 (4) TMI 346 - DELHI HIGH COURT]. Therefore, the argument of learned counsel that the appellant had not transferred any property to the HBN Group of Companies cannot be accepted. Non availed the opportunity of cross examination - Held that:- The statements recorded from the witnesses are clear, categoric and they do not suffer from any contradictions are sufficient when read along with the fact of sale of shares in Smriti Buildcon Pvt. Ltd. held by the appellant with the underlying object of sale of property held by the said company. When the Assessing Officer is possessed of this information that raises a presumption that on money of 8.70 crores was paid to the appellant. The burden to rebut this presumption shifts to the appellant. The appellant failed to rebut the same. Therefore, that it stands corroborated. It is equally settled principle of law that strict technical rules of Evidence are not applicable in the income tax proceedings. The Assessing Officer may act on material which may not be accepted as evidence in a court of law as held in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT, (1954 (10) TMI 12 - SUPREME Court); Vasantlal & Co. (C) Vs. CIT (1962 (2) TMI 7 - SUPREME Court) and CIT Vs. East Coast Commercial Co Ltd., (1966 (10) TMI 37 - SUPREME Court). Addition made purely based on the photocopy of the agreement to sell - Held that:- This submission cannot be accepted because it is settled principle that Photostat copy can be taken as an evidence, if the circumstantial evidence justifies, please refer to Moosa S Madha & Azam S Madha Vs. CIT, (1973 (2) TMI 5 - SUPREME Court). In the present case, as held by us in supra, the presumption drawn by the Assessing Officer that the on money was paid to the appellant remains unrebutted, therefore, the Photostat copy of agreement to sell can very well form the basis for the addition. The argument advanced before us that the appellant had never signed such an agreement cannot be accepted at this stage of proceedings since he had not availed to rebut the same before the lower authorities knowing fully well that this was going to be used against him. Agitating on this issue, at later stage is not acceptable, since the appellant had chosen not to advance this argument before the lower authorities, when he was confronted with the information. Had the appellant chosen to advance this argument before the Assessing Officer, the Assessing Officer should have sent this document for examination by the Forensic Authorities to examine the veracity of this document and conveniently the appellant has chosen to avoid this offer and agitating on this ground before us does not help the case of the appellant. Hence, this ground of appeal filed by the appellant is dismissed. However the on money of Rs. 8.7 crores was paid in connection with the transfer of entire shareholding in the M/s Smriti Buildcon Pvt. Ltd. Therefore, the on money should be apportioned in the ratio of the shareholding held. Indisputably, the total shareholding in the said company was 2,94,700 shares. The on money paid per share comes to Rs. 295 per share. The number of shares held by the appellant were only 60,000 share therefore the on money paid to the appellant comes to Rs. 1,77,00,000/-. Apart from this the share of the on money paid on account of the shareholding held by the spouse of the appellant i.e. Mrs. Ritu Parwal is to be added in the hands of the appellant since she made categorical statement before the Investigation Wing that it was only her husband Mr. Sanjay Parwal who looked after all her financial affairs and the full control vested with him and the appellant had chosen not to rebut the same. Hence, the on money attributable to shareholding of Mrs. Ritu Parwal is taxable in the hands of the appellant. Mrs. Ritu Parwal was holding 58,000/- shares. The share of on money comes to Rs. 1,71,10,000/-. Therefore, the total addition in the hands of the appellant comes to Rs. 3,48,10,000/-. Hence, we confirm the addition in the hands of the appellant only to the extent of Rs. 3,48,10,000/-. Decided partly in favour of assesse.

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• 2015 (5) TMI 722
  Disallowance of the claim of bad debts - CIT(A) deleted the disallowance - Held that:- the present case, it is an admitted fact that the assessee had written off debts in its books of accounts and it is not the case of the AO that the debts written off were not related to the business of the assessee. On a similar issue the in the case of TRF Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] wherein held that After 1st April 1989, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assesse, do not see any valid to interfere with the findings of the Ld. CIT on this issue - Decided against revenue. Addition of expenses for earning dividend - Held that:- AO had included all the investment while working out the average investment for the purposes of calculating the disallowance u/s 14A of the Act read with Rule 8D of the ITA rules. He also included those investment on which no dividend income was received by the assessee during the year consideration. The Ld. CIT(A) also rejected the explanation of the assessee, without pointing out any defect in the amount of disallowance worked out by the assessee (copy of which is placed at page no. 111 of the paper book). In the present case it seems that neither the AO nor the Ld. CIT(A) considered the facts of the present case in right prospective. We, therefore, deem it appropriate to remand this issue back to the file of the AO to be decided afresh in accordance with law after providing due to a reasonable opportunity being heard to the assessee. He is also directed to consider the various case laws relied by the Ld. Counsel for the assessee while deciding the issue afresh. - Decided in favour of assesse for statistical purposes

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• 2015 (5) TMI 721
  Rejection of books of accounts - Held that:- As from the assessment order that it is not the case of the Assessing Officer that the respondent assessee failed to produce the information called for, nor is it the case that the books of account are defective. The Assessing Officer failed to give any specific reason for rejection of book results. It appears that the sole basis for rejection of book results is the assessment order of the immediate preceding year i.e. 2008-09 in which the books of account have been rejected by the Assessing Officer. This Tribunal in the assessee’s own case for the assessment year 2008-09, rejected this ground of appeal raised by the Revenue, which reads that in the Remand Report the contentions of the assessee that the AO was not justified in rejecting the books of accounts was accepted by the A.O. The A.O. also accepted the contention that he has not been able to point out any discrepancy in the books of account and stock record produced by the assessee before him. Thus, in our view, the First Appellant Authority had no other option but to reject the action of AO in rejecting the books of accounts. Decided against revenue. Addition on account of generation of scrap - CIT(A) deleted the addition - Held that:- the claim for generation of Scrap as per the Books of Account is significantly lower, not just for items at S. No. 4 and 5 i.e. 'Knife' and 'Pasta/Noodle-SM', as mentioned in Para 8.10 above, but also in case of the item at S. No. 3, i.e. 'Table Fork', for which the Assessee claims that the actual figure of generation of Scrap as per Books was 49.576% and not 54.99% as shown the Assessment Order, as against the Departmental figure of Scrap generation of 51.93%. In such a situation, it is seen that the Departmental figure for Scrap generation would be significantly higher than the Assessee's claim for 3 items and lower for 2 items. In any case, no conclusion can be drawn from the Inspector's Report regarding inflation of claimed Scrap generation as no trend for inflation of Scrap is seen from the Inspector's Report and though there are variations between the Inspector's Report and the claim of the Assessee but no definite conclusion of inflation or suppression can be suppression can be drawn when for 3 items a different trend is seen and for the other 2 items a different trend is seen.In any case, it is seen that the Inspector's Report cannot lead to any conclusion that the generation of Scrap was shown by the Assessee at any inflated figures - Decided in favour of assesse. Addition on account of closing stock - Held that:- The learned CIT(A) has taken G.P. rate at 4.63% while valuing the cost of the finished goods. The learned CIT(A) ignored the fact that by the addition of AY: 2009-10 Rs. 1,23,22,100/- the gross profit increases to Rs. 2,79,56,800/- and consequently the G.P. rate will be 8.28% not 4.63% applied by him. The assessee has disclosed the G.P. rate at 14.93%. It is settled principle of law that the closing stock should be valued at lower cost of sale price. As submitted by the respondent assessee, the cost should be arrived at after deletion of addition made in respect of sale of scrap. Accordingly, the cross objections are allowed.- Decided in favour of assesse.

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• 2015 (5) TMI 720
  Transfer pricing adjustment - exclusion of three comparables namely Larsen and Tourbo Infotech Ltd., Persistent Systems Ltd. and Mindtree Ltd.- Held that:- This issue is no longer res-integra. The Hon’ble High Court [2013 (7) TMI 696 - DELHI HIGH COURT] upholding the decision of Tribunal in the case of the appellant for A.Y. 2006-07 has held that a giant company in the area of development of software which assumed all risks leading to higher profits is not comparable with the assessee which was a captive unit of the parent company and assumed only a limited risk.Having regard to the factual position and respectfully following the judgment of the Hon’ble High Court we partly allow the ground raised by the revenue and uphold the exclusion of persistent system Ltd, and direct inclusion of Larsen & Toubro Infotech Ltd and Mind tree Ltd. Inclusion of the comparables namely ICRA Techno Analytic Ltd. and E2E Infotech Ltd. - Held that:- we agree in principle with the proposition laid down by the ld CIT(A), in excluding such companies from the list of comparables in which RPT are more than 25%. However we find no discussion in the assessment order about the determination of the percentage of RPT in the case of ICRA Techno Analytic Ltd. Under such circumstances we direct the AO to determine the RPT percentage of this company afresh as per law after giving opportunity to the assessee. In case if the RPT margin is less than 25%, the ICRA should be included and if it is more than 25% RPT it should be excluded.Also, it is not disputed that turnover of E2E Infotech Ltd. was 5.69 crores which is less than 50 crores and therefore there was no disclosure requirement of RPT under AS-18.Thus in light of the above we find no infirmity in the conclusion of the CIT(A) and reject the ground raised by the revenue. Bodhtree Consulting Ltd. (“Bodhtree”) exclusion - Held that:- this company was a comparable in assessee’s own case for Assessment Year 2008-09. At that time the assessee did not contest the inclusion of this company and allowed it to remain as a comparable. However this year, just because profit margin is higher, this company does not cease to become a comparable. Therefore we find no infirmity in the order of the ld CIT(A) and we uphold the same. Disallowance u/s 14A - Held that:- in the instant year though Rule 8D is applicable, yet since the AO has not recorded any satisfaction in terms of section 14A(3) of the Act therefore disallowance is invalid. Mere general observations without examining the accounts of the appellant does not satisfy the test of section 14A(3) of the Act. The disallowance is thus deleted.

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• 2015 (5) TMI 719
  Capital gain - CIT(A) deleting addition on account of capital Gain claimed as exempt which was never disclosed to the Department and treating revised computation of assessment proceedings after detecting the same by Department as revised return - CIT(A) observed that the case is righty covered u/s. 49(1) and cost of acquisition which is indexed is taken to be cost to the previous owner - Held that:- Keeping in view of the facts and circumstances and precedents, we find that Ld. CIT(A) has passed a reasonable order on this issue by deleting the addition of Rs. 26,85,470/-, which does not need any interference on our part, hence, we uphold the same by dismissing the ground raised by the Revenue.The assessee had made the total payment within the time frame u/s. 54F of and therefore, transfer should be deemed to have taken place. - Decided in favour of assesse. Unexplained cash deposit - CIT(A) deleted the addition - Held that:- CIT(A) has observed that the opening cash as on 1.4.2008 should be deemed as acceptable. He observed that gift from mother is fully substantiated as copies of her income tax returns of last and relevant year alongwith document evidence of source is rightly produced. Ld. CIT(A) further noted that the cash withdrawn from the bank is evidenced by the Bank statement. We find considerable cogency in the finding of the Ld. CIT(A) that gift from mother-in-law does not seem very excessive. Considering she owns a agricultural land as is substantiate with the documentary evidence. Therefore, the conclusion drawn by the Ld. CIT(A) is quite right in deleting the addition on account of unexplained cash.- Decided in favour of assesse. CIT(A) accepting additional evidence - Held that:- CIT(A) has concluded that the appeal be disposed off on the records available as it has been around 3 months and no report has been received fill date and further there does not seem to be any delay from the assessee during remand proceedings. From the above, we do not find any violation on the part of the Ld. CIT(A) under Rule 46A. In the background of the aforesaid facts and circumstances, we find that Ld. CIT(A) has passed a well reasoned order on the issue in dispute, which does not need any interference on our part, hence, we uphold the same by rejecting the ground no. 3 raised by the Revenue..- Decided in favour of assesse

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• 2015 (5) TMI 718
  Rejection of books of accounts - estimating the net profit @5% of the turnover - CIT(A) deleted addition - Held that:- CIT(A) rightly held that the rejection of books of accounts by the AO was not sustainable and the action of the AO in estimating the net profit at 5% as per section 44AF of the Income Tax Act, 1961 (for short the Act) was misplaced and misconceived as this provision relates to retail business having turnover of less than Rs. 40 lakh per annum. The CIT(A) also noted that the estimation of profit at 5% of total turnover is not in the line of GP declared by the assessee in AY 2007-08 of 0.72% and in AY 2009-10 of 1.71% of the total turnover. Therefore, we are unable to see any valid reason to interfere with the impugned order on this issue and we uphold the same - Decided against revenue. Capital Gain on the sale of truck - CIT(A) deleted the addition - Held that:- Main question is that whether the truck was purchased and used by the assessee for the purpose of his business and answer to this question can be gathered only when the issues of fuel, drivers and cleaners salary and other wear and tear expenses on the truck after purchase i.e. after 20.8.2009 is examined and verified at the end of the AO.The issue of registered owner prior to purchase and subsequent to purchase is also relevant to proper determination and evaluation of transaction of purchase of truck which also requires verification and examination at the end of the AO. Thus, we find it just and proper to restore this issue to the file of the AO for proper examination and verification in the light of aforesaid observations - Decided in favour of revenue for statistical purposes Exemption claimed by the assessee u/s 10(37) withdrawn - enhanced compensation - Held that:- The issue is squarely covered in favour of the assessee and the CIT(A) was right in granting relief for the assessee and we have no reason to interfere with the conclusion of CIT(A) on this issue. See Chura Ram Versus Income-tax Officer, Ward 3, Panchkula [2010 (9) TMI 411 - ITAT, CHANDIGARH] - Decided against revenue.

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• 2015 (5) TMI 717
  Addition on account of deemed dividend u/s 2(22)(e) - Held that:- After going through the provision of section 2(22)(e) and conditions thereof, we are of the considered view that the a provisions makes it clear that deemed dividend is to be brought to tax in the hands of the recipient company and not in the hands of the entity granting the loan. Under the facts and circumstances of the present case, we find that the Company had not received any loans from any of the persons falling within the ambit of sec 2(22)(e) of the Income-Tax Act, 1961 and accordingly the addition in dispute is not sustainable in the eyes of law. Therefore, we delete the addition in dispute made by the AO and confirmed by the Ld. CIT(A) - Decided in favour of assesse. Unaccounted cash credit - Held that:- The overall circumstances clearly indicate that the Bank A/c of the parties have only been utilized for justifying the loan of the assessee. Considering the specific direction of the ITAT for examining the credit worthiness of the parties, the A.R of the assesse has not provided any detail like Balance Sheet, regular source of income or the reason why such huge amount of loan was given, in some cases, interest free also. Thus find considerable force in the finding of the Ld. CIT(A) that assessee has not discharged the onus of establishing the creditworthiness of the parties. Accordingly, Ld. CIT(A), has rightly dismissed this ground of the assesse - Decided against assesse.

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• 2015 (5) TMI 716
  Disallowance of deferred revenue expenses - Held that:- Assessee has not placed any material on record to support its contention of it satisfying the principle of “matching concept” nor could controvert the observations by ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) and thus this ground of Assessee is dismissed - Decided against assesse. Disallowance made on account of gift and presentation expenses - held that:- On perusing the ledger account it is seen that the amount mainly paid to Mr. N. Gopinath for the purpose of gift. Apart from the narration of the entry, no details as called for by the A.O has been placed before us. However, considering that the Assessee is a public Ltd. Co. and considering the nature of the business of the Assessee and considering the totality of facts,we are of the view that the disallowance if made at 10% of the expenditure would meet the ends of justice as against 20% made by the A.O. - Decided partly in favour of assesse. Adhoc disallowance of miscellaneous expenses - held that:- The expenses in relation to the membership fees of American Express Credit Card was disallowed in the absence of the details. With respect to the adhoc disallowance at 10% we find that the action of A.O was upheld by ld. CIT(A). Considering the totality of the facts and the type of business which the Assessee is into, we are of the view that the ends of justice shall be met by making a lump sum addition and in such circumstances we direct that the addition be restricted to Rs. 50,000/- on adhoc basis Decided partly in favour of assesse. Addition of suppression of contract receipts on adhoc basis - Held that:- In the present case, the addition between the contract receipts shown as per the TDS certificate and the amount credited by the Assessee in its Profit and Loss account was considered as income of the A.O. A.O had noted that the Assessee could not reconcile the difference between the TDS certificates and the Profit and Loss account. We also find that ld. CIT(A) has also noted that Assessee could not reconcile the difference either before A.O or before him. Before us, ld. A.R. has submitted that the difference was on account of mobilization advance which has been offered to tax in subsequent years and it was further submitted that if the Assessee is granted one more opportunity it would be in a position to reconcile the difference. The ld. A.R. further submitted that aforesaid method of accounting has been consistently followed by the Assessee and has been accepted by the Revenue authorities. Considering the aforesaid submissions of the Assessee, we are of the view that in the interest of justice one more opportunity be granted to the Assessee so that the Assessee could reconcile the contract receipts before A.O - Decided in favour of assesse for statistical purposes.

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• 2015 (5) TMI 715
  Addition made by the AO u/s. 40(a)(i) - CIT(A) restricted disallowance - Held that:- The working submitted by the assessee show that the amount of discount given to the Collection Centre is Rs. 11,78,24,030/- as against the disallowance of Rs. 16,80,66,667/- made by the AO. We find that Ld. CIT(A) has rightly observed regarding the disallowance of Rs. 11,78,24,030/- the assessee has accepted this amount as discount given to the Collection Centre and there is no dispute regarding this amount of discount given by the assessee. The hospitals which act as Collection Centre have the same agreement, therefore, the discount given to them also falls within the purview of section 40(a)(ia) and has to be disallowed. Keeping in view of the Ld. CIT(A) has rightly held that total disallowance of Rs. 16,80,66,667/- made by the AO, a sum of Rs. 11,78,24,030/- (wrongly mentioned as Rs. 11,78,030/- in the CIT(A)'s order) is confirmed on this account, hence, we do not find any infirmity in the order of the Ld. CIT(A). - Decided against revenue. Disallowance u/s. 40(a)(i) read with section 195 - non-deduction of tax - CIT(A) deleted the disallowance - Held that:- for any amount on which tax has to be deducted u/s 195, one of the basic conditions is that the, said amount should be taxable in India. Ld. CIT(A) further observed that the parties who have rendered service to the assessee company outside India and are working as collection centres do not fall within the purview of section 195 because the amount of discount which is given to them are for rendering service outside India and hence these amount are not taxable in India. Keeping in view of the facts and circumstances explained above, we are of the view that it was not required on the part of the assessee to deduct tax on these discounts. Thus, the addition of Rs. 33,67,000/- made by the Assessing Officer U/S 40(a)(i) was rightly deleted by the Ld. CIT(A). - Decided against revenue.

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• 2015 (5) TMI 714
  Excess claim of depreciation - Equipments given on hire - cost of acquisition u//s 43(1) - CIT(A)directing to adopt value of the depreciated assets at Rs. 89,10,245 as against Rs. 22,45,000 taken by the Assessing Officer (AO) and consequently allowing relief of depreciation amounting to Rs. 16,66,311 - Held that:- It is manifest from the order of the ld. CIT(A) that he simply took on record the details from the assessee and proceeded to delete the disallowance without any independent appraisal. Such Equipments were purchased and commercially exploited by BBW for at least three months, earning rent of Rs. 11.77 lac from their hiring, before transferring them to the assessee. It defies all the logics that any Equipment commercially exploited for at least three months by giving it on hire, after purchase, would fetch the same price at which it was acquired. The Tribunal, being a final fact finding authority, cannot act as a mute spectator to the designs of the parties in arranging their affairs in such a manner so as to scuttle the legitimate tax due to the exchequer. A thing which can be seen with a naked eye, cannot be lost sight of on some unrealistic reasoning. It is not a case in which the AO has arbitrarily formed a view that the purchase price of the Equipments was declared higher and simply ignored it without any bedrock. Rather, he took pains in establishing that the case of the assessee was caught within the mischief of Expl. 3 to section 43(1).The order passed by the ld. CIT(A) in holding otherwise, is, therefore, overturned. Correctness of the amount substituted as actual cost - Held that:- assessee capitalized actual cost of Equipments purchased from BBW at a net of Rs. 63.22 lac, which has been held by us above to be unacceptable. The AO determined the actual cost of such Equipments at Rs. 20 lac, which is again devoid of rationality and is not more than an ad hocism. - The written down value of such Equipments in the hands of BBW at the time of sale to the assessee stood at Rs. 32.91 lac. No details of Installation charges etc. incurred by BBW has been made available. In our considered opinion, the ends of justice would meet adequately, if the total actual cost of such Equipments purchased from BBW is taken at Rs. 35.00 lac on all inclusive basis. The impugned order on this score is set aside and the AO is directed to allow depreciation by considering Rs. 35.00 lac as the actual cost of Equipments purchased from BBW as against his estimate of Rs. 20.00 lac.

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• 2015 (5) TMI 713
  Addition under section 41(1) - amount of creditors remained unpaid for more than 3 years - CIT(A) deleted the addition - Held that:- We find that no material was brought on record by the revenue to show that the liabilities ceased to exist and the assessee has obtained the benefits in respect of such liabilities by way of Remission or cessation thereof. Further it has been admitted by the Revenue that the assessee has not written off the outstanding liabilities in the books of account. In the above facts and circumstances of the case, the decision of the Hon’ble High Court of Gujarat in the case of CIT vs. Nitin S. Garg (2012 (5) TMI 30 - Gujarat High Court) squarely applies. Therefore, we confirm the order of CIT(A) - Decided against revenue. Addition on account of excessive payments made for purchase of metal from the person specified under section 40A(2)(b) - CIT(A) deleted the addition - Held that:- According to us, the lower authorities should have disallowed at the rate of 27% of purchase of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% on purchases of grit from M/s MRB Builders Pvt. Ltd. Thus, both the lower authorities were not justified in their action. We find that the bifurcation of total purchases of Rs. 14,45,366/- as to how much for metal and how much was for grit has not been brought on record by either of the lower authorities and by either of the parties before us. We, therefore, set aside the orders of the lower authorities, and restore the matter to the file of the AO with direction to restrict the disallowance under section 40A(2) (b) to the extent of 27% in respect of purchases of metal from M/s MRB Builders Pvt. Ltd. and at the rate of 10.42% in respect of purchases of grit from M/s MRB Builders Pvt. Ltd - Decided partly in favour of revenue for statistical purpose. Disallowance of gratuity payment, legal & professional fees and misc. expenses - CIT(A) deleted the addition - Held that:- in order to make sustainable disallowance, it must be shown on the basis of some material on record that the claim made by the assessee was incorrect or fraudulent. Accounts of the assessee are audited and the auditor has certified the correctness of the claim of the expenses. Hence, without any material, it would be incumbent on the A.O. to accept the claim. In the absence of any material defects in the claim, in his opinion, the A.O. was not justified in making the disallowance of Rs. 8,55,313/- and, therefore, he deleted the same. - Decided against revenue. Addition on retention money accrued to the assessee company - Held that:- It is not in dispute that the assessee had not included retention money in its income on the ground that the money will be received after satisfactory completion of work and removal of defects. Till that time the right to receive the amount did not accrue to the assessee. We find that the Hon’ble High Court of Gujarat in the case of the assessee itself in A.Y. 1992-93 held that where assessee was awarded a construction contract and in terms of contract certain amount was withheld by employer of contract towards retention money for satisfactory execution of contract by assessee, retention money was to be taxed in assessment year relevant to ‘previous year’ in which it became payable to assessee as per terms of contract i.e., after defect liability was over and after engineer-in-charge certified that no liability was attached to assesse. Thus addition deleted - Decided in favour of assesse.

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• 2015 (5) TMI 712
  Revision u/s 263 - deduction under section 54F wrongly allowed - Held that:- The assessee had obtained the permission for construction of farm house on 21/12/006 for construction of 582 sq.meters. and subsequent to the approval, assessee incurred expenditure of Rs. 1.78 crore upto 31/03/2009. This shows that the said asset/residential house was pre-existing and not “a new asset” constructed/purchased within the period as laid down in Clause (a) & (b) of Sub-section 1 to Section 54 of the Act. It was further observed that the land on which the farm house was constructed for claim of deduction u/s.54F of the Act was purchased in 10/11/2004 and 26/08/2005 and also obtained construction approval in Decembner-2006, i.e. even before the purchase of land (original asset – purchased in October-2006 & February2007) which was sold during the previous year to generate long term capital gain. It was observed by the ld.CIT that as per provisions of section 54F of the Act if the residential house is constructed after the date on which transfer took place only then the deduction u/s.54 is allowable for construction of new asset, i.e. residential house. Further, even if the provisions of section 54F are considered to be applicable to extension of existing house under construction, the allowable claim of exemption has to be restricted to the extent of investment/expenditure incurred in the said residential house subsequent to the transfer of original capital asset under consideration. So far this reasoning is concerned, we find that the AO has allowed deduction without examining this aspect. Contention of the assessee is that the AO had raised a specific query in this regard and after considering the facts, submissions and case-laws allowed the deduction. But no such material is placed on record of this Tribunal that the AO during the course of hearing raised query with regard to claim of deduction of u/s.54 of the Act. Therefore, in the absence of such material, we do not see any infirmity into the finding of ld.CIT that AO failed to examine the aspect of allowability of deduction u/s.54F of the Act. After considering the totality of facts, we deem it appropriate to modify the order of ld.CIT on this issue and restore the issue of allowability of deduction u/s.54F of the Act to the file of AO for decision afresh. - Decided in favour of assesse for statistical purposes.

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• 2015 (5) TMI 711
  Addition made on account of the cash embezzlements - Protective assessment - CIT(A) deleted the addition - Held that:- We find that there is no dispute that the addition has been made in this case purely on ‘protective basis’. On the facts of this case, it is also an incorrect assumption that in the event of embezzlement having actually taken place in Vam Airtex, the corresponding income must belong to this assessee. Even if one is to reach a conclusion that embezzlement has taken place in Vam Airtex, the assessee is not the only person needle of suspicion points to. It is a matter of record that allegations have been raised against Sunil Shah, one of the directors of Vam Airtex, and the Assessing Officer himself has taken note of these allegations. When the matter is sub judice and there are allegations and counter allegations by the assessee against the Vam Airtex as also against its directors and vice versa, it is premature to assume that this assessee could be the only beneficiary of the criminal activity of embezzlement. We have also noted that the Assessing Officer has not rejected the assessee’s explanation that he was operating the bank account concerned as a benamidar of Sunil Shah, a director of Vam Artex, but yet held taxability of income in the hands of the assessee that the assessee could not having been doing so without a consideration. As a corollary to the approach so adopted by the Assessing Officer, at best hawala commission could have been brought to tax in the hands of the assessee and not the entire amount of bank on account of alleged bogus purchases. However, the Assessing Officer has added entire bank credit as income of the assesse, which, by no stretch of logic, could be added to the income of the assessee on the basis of findings so far. There is thus an inherent contradiction in the approach of the Assessing Officer. In any case, there is nothing more than an allegation of embezzlement by the assessee and such allegations, by itself, cannot be legally sustainable foundation for the addition being made in the hands of the assessee. - Decided in favour of assesse.

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• 2015 (5) TMI 710
  Unaccounted deposits - CIT(A) deleted the addition - Held that:- Commissioner of Income-tax (Appeals) has correctly decided the issue because admittedly the assessee had disclosed a sum of Rs. 1.03 crores in the assessment year 2007-08, and a sum of Rs. 10 lakhs in the assessment year 2008-09. This amount was surrendered during the search and tax have been duly paid and the assessed income includes this amount of surrender. Further, cash is duly reflected in the wealth-tax return. Once the fact of having cash deposited by the Revenue during wealth-tax assessment proceedings, then later on the Revenue cannot challenge the existence of cash, therefore, we find nothing wrong with the order of the learned Commissioner of Income-tax (Appeals) and we confirm the same - Decided against revenue.

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• 2015 (5) TMI 709
  Disallowance of export Commission u/s 40a(i) r.w.s 195 - non deduction of TDS - Held that:- The non-resident brokers have not rendered any services in India, therefore, commission income neither accrued nor arose in India in view of the decision of the. Hon ble Delhi High Court in the case of CIT v. Eon Technology (P.) Ltd. [2011 (11) TMI 20 - DELHI HIGH COURT ]. Merely because payments have been made from India, the same cannot be made liable to be taxed in India insofar as payment was made to non-resident for the services rendered outside India as was held in the case of Dr. Reddy s Laboratory v. ITO [1995 (12) TMI 93 - ITAT HYDERABAD-A ] - Decided in favour of assessee.

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• 2015 (5) TMI 708
  Royalty u/s 9(1)(vi) - Nature of amount received towards supply of software by the Parent company to (non-resident) to Intel Technology India Private Limited on account of software expenses - DTAA between India and the USA - Held that:- In the absence of any evidence to the effect that the assessee has supplied software license to the Indian company and the Indian company was obliged under the agreement to reimburse the expenses of such software license, we are not inclined to accept the contention of the assessee that it is only reimbursement of expenses and not chargeable to tax in India. As regards the alternative contention that the said receipt is not chargeable to tax as royalty, we find that the issue is squarely covered against the assessee by the decision of the Hon’ble Karnataka High Court in the case of Samsung Electronics Co. Ltd ( 2011 (10) TMI 195 - KARNATAKA HIGH COURT) wherein held that payments to non-resident software supplies for purchase of shrink-wrapped software was in the nature of royalty - Decided against assesse. Re-imbursements of relocation expenses - Held that:- As find that the assessee has filed sample evidence relating to April and May 2004 in support of its claim of relocation and related expenses. From these details, it is clear that the Indian company has incurred expenses on account of employees who are deputed to Indian company. Whether these reimbursements are cost to cost basis and whether these also form part of the fees for technical services needs to be examined by the AO in the light of the evidence produced by the assessee. As the additional evidence filed before us goes to the root of the matter, we are inclined to admit the same and remand the same to the file of the assessing authority with a direction to reconsider the issue de novo. The assessee may file all the required details before the assessing authority. - Decided in favour of assesse for statistical purposes.

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• 2015 (5) TMI 707
  Disallowance of freight inward, freight outward and octroi expenses - CIT(A) allowed the claim - Held that:- Since, the facts of the case in the present appeal are similar to that of assessment year 2002-03 and 2004-05, which has been accepted by the learned AR and the learned DR and since on identical facts the Coordinate Bench of the Tribunal has already decided the issue in earlier years in favour of the assessee, we, following the decision of the Co-ordinate Bench cited supra dismiss this ground of appeal of the revenue. - Decided against revenue. Disallowance of suppressed conversion charges - CIT(A) allowed the claim - Held that:- We find that in the earlier years, the Coordinate Bench had taken a view and thereupon restored the matter to the file of the Assessing Officer to affirm the correctness of the assessee's claim of loss. We, thus, following the decision of the Coordinate Bench in the earlier years, restore the matter to the file of the Assessing Officer for examining it afresh after giving reasonable opportunity of hearing to the assessee. Thus, this ground of appeal of the revenue is allowed for statistical purposes.

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• Customs

• 2015 (5) TMI 733
  Validity of order of confiscation - procedure to be followed - seizure was initially made by Railway Protection Force and subsequently handed over to the Customs - Whether the order under challenge is bad because the order of confiscation was passed without considering the provisions of Section 125 of the Customs Act - Held that:- The object of the legislature appears to be that option shall be given under Section 125 in all those cases where the goods are not within the prohibited list. - With respect to the prohibited goods, the officer has a discretion. It is well settled that discretion has to be exercised according to rules of reason and justice - adjudicating authority appear to have been oblivious that they have been vested the discretion in him to be exercised judiciously and honestly - Therefore, the order of confiscation is wrong - Matter remanded to Commissioner - Decision in the case of U.P.S.R.T.C vs. Md. Ismail, reported in [1991 (4) TMI 437 - SUPREME COURT] relied upon - Decided in favour of assessee.

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• 2015 (5) TMI 732
  Country of origin - import of areca nuts - rate of duty @4% if the areca nut is of 'Sri Lankan origin' or leviable at 108% - Provisional assessment - Detention of goods - Demand of differential duty of 35% - Held that:- Particularly with reference to the contention that no incriminating circumstances are there to have doubted the transaction of the petitioners, it is to be noted that the respondents were proceeding with steps, to find out the origin of import with reference to the documents produced by the parties concerned, at different points of time, claiming it to be of Sri Lankan origin, in turn claiming the benefit of notification. It is to be borne in mind that the first petitioner herein was the petitioner in [2015 (4) TMI 686 - KERALA HIGH COURT], in whose case, a condition has already been imposed. The learned Judge of this Court directed to satisfy 35% of the differential duty. Similarly in [2011 (3) TMI 1338 - KERALA HIGH COURT], the case considered by the Division Bench, the second petitioner herein was arrayed as the 4th appellant. The antecedents of the said petitioners, with reference to the above case, show that there was every reason for the respondent Customs Department to have doubted or raised some suspicion as to the place of origin and the transaction concerned. As such, it is not merely with reference to the ongoing enquiry with reference to some other trader, that provisional assessment is ordered imposing condition, but also with reference to the ongoing enquiry, pertaining to the transaction/import done by the petitioners 1 and 2. This being the position, the matter requires to be considered in detail and there is absolutely nothing wrong on the part of the respondents in having pursued the course under Section 18 (1) (c), ordering provisional assessment. - Demand of diiferential duty reduced as per provisional assessment - Decided partly in favour of assessee.

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• Corporate Laws

• 2015 (5) TMI 731
  Application for Scheme of Amalgamation under Sections 391(1), 393 of Rs. 12,53,66,464/- in the transferee company; and the investment of Namyang Metals Company Limited of Rs. 17,57,05,920/- in the transferor company; and of Rs. 18,80,49,696/- in the transferee company for the purpose of conducting the valuation as on 30th April, 2014 and the consequent adjustments made in the deferred tax carried in the books. Therefore, the said investment does not have any adverse effect on the proposed Scheme of Amalgamation. In reply to second observation regarding Sectoral Cap of FDI policy, it was submitted by the petitioner companies that at present the foreign shareholders are holding 51% of paid-up share capital of the transferee company and remaining 49% is held by the resident shareholders, and the current shareholding held by the foreign shareholders are within the permitted sectoral cap under the provisions of Foreign Direct Investment Policy (FDI) issued by RBI i.e. upto 100% FDI under the automatic route. The transferee company undertakes that subsequent to sanction of the Scheme, the allotment of shares to the shareholders of the transferor company including allotment of shares to the foreign shareholders will continue to be within the permitted sectoral cap under the FDI. The Assistant Registrar of Companies has stated that after considering the reply of the petitioner, the Regional Director had no further objections. In view of the aforesaid, the observations raised by the Regional Director stand satisfied. Considering the approval accorded by the shareholders and creditors of the petitioner companies to the proposed Scheme of Amalgamation and the affidavits filed by the Regional Director, Northern Region, and the Official Liquidator not raising any objection to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 read with Section 100 of the Companies Act, 1956. - Application for scheme of amalgamation approved.

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• 2015 (5) TMI 730
  Application for Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956 - Observation of Official Liquidator regarding clerical error - Observation of Regional Director regarding FIPB approval duly addressed - Held that:- It is submitted that before incorporation of Petitioner Company, the parent company i.e. Acclipse Ltd. NZ had invested a sum of INR 18,82,617/- for the purchase of various assets and other day to day expenses of Indian office from October 2009 till the Company incorporation i.e. 21.12.2009. On incorporation of the company, the same were duly accounted in the books and the parent company was shown as the creditor for the same. Since due to FEMA regulations the funds could not be returned to the parent company and therefore it was reflected as creditors in the books. Further in October, 2013, due to shifting of office, most of these assets were sold at scrap value. Therefore, in order to knock off the outstanding amount of parent company this loss was transferred to the account of the parent company instead of claiming the same as a loss in the Income Tax Return. The Regional Director has made an observation with regard to securing the necessary FIPB approval on account of M/s Acclipse Limited being a foreign Company. That in response it is submitted that investment of M/s Acclipse Limited (Foreign Company) in Acclipse India Private Limited (Petitioner Company) does not required any approval from FIPB. As per the Clause 3.7 read with Clause 6.2 of Consolidated FDI Policy of 2014, if the sector/activities of Indian Company are not mentioned in the specified list, then it is permitted for a foreign entity to invest in Indian entity upto 100% of capital under automatic route. The Petitioner-Company is engaged in software services which does not fall under any of the sectors mentioned in aforesaid clause and hence does not require approval from FIPB. A copy of the relevant provision Consolidated FDI Policy of 2014 is annexed as Annexure P-B. For the reasons aforementioned and keeping in view the procedural requirements under Section 391 to 394 of the Companies Act, 1956 and as well as relevant affidavits and rules and due consideration to the report of the Regional Director, Ministry of Corporate Affairs, Noida and the Official Liquidator coupled with the affidavits filed by the authorized representative of the petitioner/Transferor Company No.1, the Scheme of Amalgamation of the petitioner-Transferor Company No.1 with the Transferee Company is hereby sanctioned and all the assets and liabilities of the of petitioner-Transferor Company shall merge into Transferee Company subject to the sanctioning of the Scheme filed by the Transferee Company in this Court. The Transferor Company No.1 shall be dissolved without being wound up. - Application for Scheme of Amalgamation approved.

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• Service Tax

• 2015 (5) TMI 742
  Export of services - Non-availabity of exemption notification during the period 1.3.2003 to 19.11.2003 - Contravention of the provisions of Section 68 - Penalty u/s 76 & 78 - exemption granted under Notification No. 21/2003-ST - Held that:- It is indisputable position that the respondent assessee was being allowed and had the benefit of exemption of service tax under Notification No.6/99 till it was rescinded on 1.3.2003. Also a circular had been issued clarifying that the service tax is not leviable on export of services. Subsequently exemption has been reinstated to the services wherein consideration was being received in convertible foreign exchange. - clients who were serviced were residents abroad, and as such the services rendered to them being export services can hardly be amenable to any debate. The service being exempted from payment of service tax is also clear from two exemption notifications No.6/99 and 21/03, consideration for the same being received by the respondent assessee in convertible foreign exchange in India - Decision in the case of Commissioner of Service Tax, Mumbai-III Versus M/s. SGS India Pvt. Ltd. [2014 (5) TMI 105 - BOMBAY HIGH COURT] followed - decision for the reasons given by the Tribunal can hardly be faulted with. - Decided against Revenue.

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• 2015 (5) TMI 741
  Waiver of pre deposit - Business Auxiliary Service - Reverse charge mechanism - Revenue neutrality - Held that:- CAI were providing the services to the customers of the appellants as per the agreement between CAI and the appellants and the payment for the same was made by the appellants to CAI. Thus, CAI was engaged in providing services in relation to provision of service on behalf of client which in this case is the appellants. Thus, prima facie the services received by the appellants are classifiable under BAS - what is of precedential value is not the judgement but the ratio of judgement. As regards the contention of the appellants that they Were receiving "Technical Testing and Analysis" service, it is seen that the said service is defined under Section 65 (105) (zzh) as "to any person by a technical testing and analysis agency, in relation to technical testing and analysis". It can be hardly anybody's case that the appellants were receiving services from CAI in relation to "Technical Testing and Analysis" because nothing belonging to appellants was subjected to technical testing and analysis. - unable to locate any statutory or constitutional provisions which support the notion that in case of revenue neutrality the liability to tax abates. Further whether there has been wilful mis-statement or suppression of facts on the part of appellants is to be determined with reference to the facts and circumstances of the case which requires detailed analysis which can be taken up only at the time of final hearing. - Partial stay granted.

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• 2015 (5) TMI 740
  Waiver of pre deposit - Denial of CENVAT Credit - Reinsurance business - Held that:- Prima facie, when the applicant undertake the insurance, i.e. the insurance date of commencement of risk by the insurance company for covering the insurance of Policy holder and that service has to be provided for a particular period of time as per the agreement. So, the output service is provided by the applicant till the termination of agreement, therefore, the service received by the applicant is a services received providing output service and qualify as input service as per rule 2(l) of the CCR, 2004. Therefore, the applicant is entitled to avail Cenvat credit on the reinsurance service received by them as per Rule 2(l) of the CCR, 2004. - Stay granted.

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• 2015 (5) TMI 739
  Export of service or not - Business Auxiliary Services or export transaction - Held that:- service recipient is situated abroad and the payments for the services rendered was received in convertible foreign exchange and the service has been delivered to a person situated abroad and such services were provided from India and used outside India. Thus all the conditions of export have been satisfied and therefore, we have no hesitation in concluding that the activity involved in the present case is one of exports which is not taxable. Even as per the place of Provision of Service Rules 2012, it is the place of service recipient which determines where the service has been rendered. In the present case, the service recipient is located outside India and therefore, the service has been rendered outside India. In other words, it is a export transaction. - decisions of this Tribunal in the case of Gap International Sourcing (India) Pvt. Ltd. [2014 (3) TMI 696 - CESTAT NEW DELHI] Paul Merchants Ltd. [2012 (12) TMI 424 - CESTAT, DELHI (LB)], Microsoft Corporation India Pvt. Ltd. [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)], etc. would squarely apply - Decided in favour of assessee.

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• Central Excise

• 2015 (5) TMI 738
  Clandestine removal of goods - evasion of duty - Held that:- department had demanded excise duty on MS. Rounds, alleging that the respondents have clandestinely removed the goods by relying on the oral statements and without any corroborative evidence either from the respondents premises or from the Customer, Trader's documents etc. Therefore, we find that the Commissioner (Appeals) has discussed issues at length and has given a detailed order while setting aside the order of the adjudicating authority. By respectfully following the Hon'ble High Court judgment [2008 (9) TMI 603 - PATNA HIGH COURT ], we hold that there is no infirmity in the impugned order. - Decided against Revenue.

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• 2015 (5) TMI 737
  Waiver of pre deposit - Denial of CENVAT Credit - Credit availed in respect of Storage Sylos - Held that:- appellant may have a case for the benefit of CENVAT credit in respect of steel and cement in view of the decision of the Hon ble High Court of Karnataka referred to above. As regards the Packing Plant, the appellants have already deposited the entire amount of CENVAT Credit with interest. Treating this as sufficient, the requirement of predeposit of balance dues is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

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• 2015 (5) TMI 736
  Duty demand u/s 11D - Whether provisions of Section 11D of Central Excise Act, 1944 would apply to the impugned goods, which were cleared at nil rate of duty after the respondent-assessee reversed 8% of total price of such goods cleared during the period from 1.3.2003 to 31.5.2004 - Held that:- However, after decision of Larger Bench of the Tribunal in the case of Unison Metals Ltd. (2006 (10) TMI 171 - CESTAT, NEW DELHI), the Board has examined the circular and clarified that in the case of payment made under erstwhile Rule 57CC(1) corresponding to Rule 6(3) of Cenvat Credit Rules, 2004, Section 11D of the Act is not applicable since the amount of 8% or 10% has already been paid to the Revenue and no amount is retained by the assessee. It was also stated by the Board that this decision has been accepted. At this stage, learned A.R. submitted that the customers might have taken credit of duty paid. However, there is no evidence to show such is the case and this is not a ground also and this cannot be a ground even after the Board's Circular. In view of above, appeal filed by the Revenue is devoid of merits and is rejected - Decided against Revenue.

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• 2015 (5) TMI 735
  Eligibility of the appellant for CENVAT credit on MS Angles, Beams, Sheets, etc. - Held that:- Whether the items used for maintenance and repair credit can be given or not is highly debatable, requires detail consideration of the actual usage. At this stage I consider that appellant need not deposit any amount to hear the appeal. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Stay granted.

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• 2015 (5) TMI 734
  Clandestine removal of goods - Clearance of goods without payment of excise duty and invoices - Held that:- Similar issue has come up in several other cases of similar nature like in the case of RA Castings Pvt. Ltd. Vs. CCE, Meerut-I [2008 (6) TMI 197 - CESTAT NEW DELHI] and [2010 (9) TMI 669 - ALLAHABAD HIGH COURT] and [2011 (1) TMI 1302 - Supreme Court of India] and in the case of Bhavani Shankar Castings Ltd. Vs. CCE Jallandhar [2009 (2) TMI 632 - CESTAT, NEW DELHI] [2009 (11) TMI 676 - KARNATAKA HIGH COURT] where it has been held the demand can not be sustained merely on the basis of allegation of high consumption of electricity in the absence of any other evidence to substantiate unaccounted production and clandestine removal. The ratio of these judgments are prima facie applicable to the present case. It is however seen that there is this evidence in the form diary entries referred to above atleast to the extent of 395 MT of steel having been removed clandestinely. The duty on this quantity of steel comes to about Rs. 11 lacs. In the case on M/s. Monu Steels, they have in effect admitted that they were indulging in facilitating clandestine clearances from M/s. Nibi Steels and also admitted that 395 MT of MS Ingots were received from M/s. Nibi Steels without invoices. - Partial stay granted.

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• Indian Laws

• 2015 (5) TMI 729
  Rejection of application for extension of time under Clause 10 of "New Package Scheme of Incentives for Tourism Projects, 1995-2000" - To make available all fiscal and non fiscal incentives, reliefs and concessions enjoyed by industries to ‘Tourism’ - Principles of Promissory Estoppel - Record indicates that the progress of the project of the appellants was greatly hampered as a result of major earth quake in the State on 26.01.2001 and large scale communal riots in the State in February 2002 - Held that:- Reading of the Scheme shows that to be eligible for the incentives under the Scheme, a new project ought to have obtained registration after 1.8.1995 and taken initial effective steps under Clause 4.7(a) which inter alia included effective possession of land free from all encumbrances and submission of Project Report. It is only thereafter that an intending unit could apply and be given provisional registration under Clause 10(a). Said clause indicates that such provisional registration "in the first instance" would be up to two years. If the unit was not in a position to start commercial operation during this initial validity period of two years, it would be entitled to apply with progress report to the State Level Committee for extension, which could be granted up to six months at a time or a total period of two years after examining the difficulties experienced in implementing the project. This first level of extensions for a total period of two years could be granted by the State Level Committee and even if a unit was unable to go into operation after availing such extensions, it could still apply to the Government for further extension. Clauses 8 and 8.1 dealt with incentives and period of eligibility which would go up to ten years after a unit was found to be fully eligible. These clauses clearly show that such stages or eventualities would survive even after the expiry of period of the operation of the Scheme. The reading of the Scheme further shows that no fresh application and TRCs could be granted after the period of operation but those who had crossed the threshold and were given TRC, could have the full benefit of the stages contemplated in Section 10. In our considered view, it would be incorrect to say that all the clauses including Clause 10 would cease to operate after the period of operation had come to an end. It being the clear intent that such stages and eventualities ought to survive even after the expiry of the Scheme, we reject the submission advanced on behalf of the State. The law on the subject of Promissory Estoppel was recapitulated and succinctly dealt with by this Court in State of Punjab Vs. Nestle India Ltd. [2004 (5) TMI 65 - SUPREME Court]. It found the foundation of the doctrine laid in the decision in Collector of Bombay Vs. Municipal Corporation of the City of Bombay [1951 (10) TMI 20 - SUPREME COURT OF INDIA], the principle built upon in Union of India Vs. Anglo Afghan Agencies [1967 (11) TMI 108 - SUPREME COURT ] and the superstructure of the doctrine, with its pre-conditions, strengths and limitations outlined in the decision in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of UP [1978 (12) TMI 45 - SUPREME Court]. This Court then dealt with the discordant note in Jit Ram Vs. State of Haryana [1980 (4) TMI 303 - SUPREME COURT] and how that was firmly disapproved in Union of India Vs. Godfrey Philips India Ltd. [1985 (9) TMI 90 - SUPREME COURT OF INDIA] by a bench of three judges. Coming to the facts of the present case, we find that the Scheme definitely promised incentives in the form of Tax holiday of 5-10 years in respect of exemptions from Sales Tax, Turnover Tax, Electricity Duty, Luxury Tax and Entertainment Tax upto 100 per cent of capital investment if a new unit was registered after 1.8.1995 and appropriate investment in fixed capital assets was made. It also promised an initial period of two years for going operational in the first instance, extendable by further period of two years subject to satisfactory progress to be found by the State Level Committee. Even thereafter, the Unit could still approach the State Government for further extension. This was part of the core of the Scheme, which invited investment in tourism units promising tax holiday as stated above. Based on such representation, various units including that of the appellants having come forward and altered their position, the State Government would certainly be bound by the principles of Promissory Estoppel. The State Government was thus estopped from going back on the promise so made in the Scheme and could not have curtailed the period and the opportunity specifically made available within which the project could be completed so as to avail the benefits under the Scheme. We find nothing in the present case on the basis of which there could possibly be room to say that it would be inequitable to hold the State Government to its promise. Out of 108 TRCs issued under the Scheme, the burden that the Government was well aware and thought that it could comfortably bear, only 19 or 20 units have been established and are functional. In any case, the impact of incentives so offered under the Scheme and the consequential burden must have been weighed carefully when such promise was made and the Scheme was formed. Furthermore, the Scheme as framed on 20.12.1995 formed the basis of a statutory notification under Section 29 of Act 16 of 1977 and as such the core components of the Scheme had acquired a statutory status. By virtue of said Section 29, the notification dated 14.2.1997 was required to be laid for not less than 30 days before the State Legislature. If the State Government was desirous of amending, varying or rescinding said notification dated 14.2.1997, the subsequent G.R. dated 28.06.2000 ought to have been translated in a statutory notification under Section 29 of the Act 16 of 1977. In the absence of such steps having been undertaken, G.R. dated 28.06.2000 could not in any way detract from or dilute the effect of the Scheme which had acquired statutory status. We therefore hold that the appellants were entitled to have full benefit and advantage of Clause 10 of the Scheme and the curtailment of the period and opportunity available under said Clause 10 of the Scheme by subsequent G.R. dated 28.06.2000 was bad and ineffective. The record indicates that the progress of the project of the appellants was greatly hampered as a result of major earth quake in the State on 26.01.2001 and large scale communal riots in the State in February 2002. The State Level Committee was satisfied that the commencement and continuation of the project was so affected as a result of these major difficulties and had granted initial extension of six months but the appellants had benefit of only few days out of such extension. The subsequent request for further extension which was backed with relevant certificate from the Chartered Accountant certainly persuaded the State Level Committee to find that the facts justified grant of further extension but it felt it had lost the power to grant such extension because of G. R. dated 28.06.2000. In the light of the view that we have taken, the State Level Committee was still competent to consider the request for grant of extension. - Decided in favour of appellants.

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