TMI Tax Updates - e-Newsletter
May 25, 2016

Case Laws in this Newsletter:

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

TMI SMS

• TDS - professional charges claimed along with reimbursement of expenditure in the same invoice - TDS u/s 194J to be deducted on Gross Amount

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Articles

1. EXEMPTION TO SERVICES BY REGULATORY BODIES

   By: Dr. Sanjiv Agarwal

News

1. India signs loan agreement with world bank for IBRD loan of US$ 100 million for ‘Karnataka Urban Water Supply Modernization project’

2. Quarterly Report on Debt Management for the Quarter January-March 2016 (Q 4 FY 16) released; Gross and Net Market borrowing requirements of the Government for FY16 were revised lower to ₹ 5,85,000 crore and ₹ 4,40,608 crore, which were lower by 1.18 per cent and 2.75 per cent respectively than ₹ 5,92,000 crore and ₹ 4,53,205 crore in FY15

3. EASE OF DOING BUSINESS - ACHIEVEMENTS OVER THE PAST TWO YEARS

Circulars / Instructions / Orders

VAT - Delhi

1. 07 of 2016-17 - dated 23-5-2016

Filing of online return for fourth quarter of 2015-16 extension of period thereof

Income Tax

2. 18/2016 - dated 23-5-2016

Relaxation for Furnishing of UID in case of Form 15G/ 15H for certain quarters

3. F No 142/26/2015-TPL - dated 23-5-2016

Manner of determination of fair market value and reporting requirement for Indian concern-Indirect transfer provisions-section 9(1) of the Income-tax Act, 1961-Draft Rule

DGFT

4. 11/2015-2020 - dated 24-5-2016

Inclusion of Regional Office. Joint DGFT. Rajkot in the jurisdiction of Committee on Quality Complaint & Trade Dispute (CQCTD) in Chapter-8 of Hand Book of Procedures, 2015-2020.

5. 12/2015-2020 - dated 24-5-2016

Amendment in Appendix - 1A and 6J of Appendices and Aayat Niryat Forms of 1-1-1) 2015-20 Jurisdiction of Special Economic Zones under Para.6.34 of Handbook of Procedure of 2015-2020

6. 6/2016 - dated 23-5-2016

Modification in Importer Exporter Code (IEC)

Highlights / Catch Notes

Income Tax

• Taxpayers Get Relief in Form 15G/15H UID Requirement for Certain Quarters, Easing Compliance Burden.

  Circulars : Relaxation for Furnishing of UID in case of Form 15G/ 15H for certain quarters - Circular
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• Section 194C TDS Rules Not Applicable: No Contract Exists Between Assessee and Lorry Operators for Vehicle Hire.

  Case-Laws - AT : TDS u/s 194C - there was no oral or written contract the assessee had with lorry operators as vehicles were hired whenever the need arose - provisions of section 194C cannot be made applicable - AT
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• Income Not Taxable Until Earned: No Right to Receive Due to Unmet Contract Terms and Service Levels.

  Case-Laws - AT : Accrual of Income - Addition towards service fees received - Income can be recognized only when it is earned or accrued i.e. there is a right to receive. In the present case, neither the assessee had achieved the level of service i.e. to supply 300 manpower nor the terms of contract commenced, resulting in no right to receive. - not taxable since not accrued - AT
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• High Court Confirms Interest on Income Tax Refunds as Interest Under Article 12.4 of Double Taxation Agreement.

  Case-Laws - HC : Interest payable on the refund of income tax under Section 244-A - whether falls within the definition of the term interest under Article 12.4 of the Double Taxation Avoidance Agreement or not? - Held Yes - HC
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• TDS Applies to Both Professional Fees and Reimbursed Expenses u/s 194J of the Income Tax Act.

  Case-Laws - AT : TDS u/s 194J - the reimbursement was paid to professionals, who had met some expenditures - the professional charges are claimed along with the reimbursement of expenditure in the same invoice. The TDS provision will apply in this case on the gross amount - AT
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• Recruitment Agency Services Subject to TDS u/s 194J of the Income Tax Act as Professional Services.

  Case-Laws - AT : The services of recruitment agencies are in the nature of professional services rendered and hence, it will be charged to TDS u/s 194J. - AT
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• Exgratia Payments Deductible u/s 37 of Income Tax Act; Not Considered Bonuses for Tax Purposes.

  Case-Laws - AT : Provision for exgratia - claim of deduction u/s 37 - exgratia cannot be regarded as bonus and requirement of the provisions of section 37 are fully satisfied. - AT
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• Income received by the assessee for letting out of Malls is assessable under the head “Income from...

  Case-Laws - AT : Income received by the assessee for letting out of Malls is assessable under the head “Income from profits and gains of business or profession” - Income received from letting out of fit-outs is assessable under the head “Income from other sources” - AT
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• Tax Authority Cannot Change Taxpayer's Accounting Method from Project Completion to Percentage Completion Based on Irrelevant Factors.

  Case-Laws - AT : Method of accounting and accounting standard has been regularly followed - assessing authority could not change the method regularly adopted by the assessee from Project Completion Method to Percentage Completion Method on irrelevant considerations - AT
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• Interest u/s 234B Applies From Original Return Filing to First Assessment u/s 147.

  Case-Laws - AT : Charging interest u/s. 234B - determination of period - As intimation u/s.143(1) is obviously not an assessment and it is the case of “Assessment ” for the first time in the hands of assessee u/s.147, the case will fall under sub-section(1) of section 234B. - AT
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• Dividend Not Eligible for Deduction u/s 80IC of Income Tax Act Due to Lack of Direct Link to Profits.

  Case-Laws - AT : Dividend received by the assessee has no direct nexus with the profits and gains derived from the manufacturing activity and industrial undertaking - Not eligible for claiming deduction u/s 80IC - AT
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• TDS Not Applicable on Development Charges u/s 194I; Charges Not Considered Rent for Tax Purposes.

  Case-Laws - AT : TDS u/s 194I - TDS liability on payment development charges, lease charges and other charges paid to RIICO - the development charges can not be considered as rent - AT
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• Court Allows Expenditure Claim After AO Fails to Prove Service Charges to 'Nova' Were Unjustified or Returned.

  Case-Laws - AT : Disallowance of Service Charges paid - where professional services were not rendered by ‘Nova’ or whetger any money in respect of the payments to ‘Nova’ had flown back to the assessee - AO filed to prove its case - claim of expenditure allowed - AT
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• Assessment u/s 153C Quashed Due to Lack of Recorded Satisfaction Before Proceedings Initiation.

  Case-Laws - AT : Correctness of assessment made u/s. 153A r.w.s. 153C - essential requirement of recording the satisfaction prior to initiate the proceedings u/s. 153C has not been fulfilled - Assessment quashed - AT
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• Assessee Accused of Inflating Agricultural Income Using Dubious Methods; Authorities Confirm Income Additions as Unjustified.

  Case-Laws - AT : Inflation of agricultural income - artificial boosting of income by the assessee - there was no real income - assessee had claimed agricultural income which was not possible from the type of holding it had, and had adopted dubious methods for this - additions confirmed - AT
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• AO's Failure to Verify Loan Genuineness u/s 68 Leads to Revision u/s 263 Upheld.

  Case-Laws - AT : Revision u/s 263 - AO neither examined the genuineness of loans, its creditworthiness, in the light of applicability of section 68 of the Act. Taking fresh loan by the assessee was not even contradicted by the assessee - Revision upheld being the order is erroneous and prejudicial to the interest of the Revenue - AT
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• Detailed Analysis Needed to Classify Expenses as Capital or Revenue; Grouping Under Fixtures Not Sufficient.

  Case-Laws - AT : Treatment of expenditure - capital or revenue in nature - merely there being grouped under fixtures, it could not be concluded that they were capital in nature. - AT
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• Software Sale Proceeds Not Taxed as Royalty, Including Equipment or Process Royalties.

  Case-Laws - AT : Consideration received by the assessee on sale of software is not chargeable to tax as royalty such as equipment royalty, process royalty etc - AT
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Customs

• Exemption on Mobile Handset Parts Extends to CDMA Fixed Wireless Terminals per Notification No.21/2005.

  Case-Laws - AT : The benefit given under Notification No.21/2005 which exempts parts, components and accessories of mobile handsets including cellular phones will have to be extended to parts and accessories of CDMA FWT. - AT
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• EPCG Licence Scheme Dispute: Geological Survey Confirms Exported Goods as Limestone, Essentially Marble, Not Silicified Limestone.

  Case-Laws - AT : Goods exported under EPCG Licence Scheme - Whether to be declared as Marble Blocks as per appellants or Silcified Limestone as per revenue - the Geological Survey of India report reflects upon the goods to be limestone, which is nothing but marble. - AT
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Service Tax

• Court Rules: Cenvat Credit Refund Claims Valid Even Before Registration if Genuineness Confirmed.

  Case-Laws - AT : Period of limitation - Entitlement of refund claim - Cenvat credit on input Service tax paid prior to its registration - assessee may not be denied such credit subject to scrutiny of genuiness thereof - AT
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• Tribunal Confirms Refunds Governed by Section 11B, No Leeway for Time Limit Extensions Under Excise/Customs Act.

  Case-Laws - AT : Since refund of any amount is covered by Section 11B and there no other provision, this Tribunal being a creature under the Central Excise/Customs Act cannot go beyond the statute and therefore cannot relax the time limitation provided under the statute - AT
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Central Excise

• Cenvat Credit Recovery in Sponge Iron Fire Loss Case Relies on Appellant's Statutory Records for Evidence.

  Case-Laws - AT : Recovery of Cenvat credit - sponge iron not used in the manufacture of final product as they were lost in fire - In the absence of categorical assertion of total loss with evidence, the statutory records maintained by the appellant are to be relied upon - AT
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• Cenvat Credit Rule 3(5A): Credit Can't Be Invoked Without Confirming Waste Originated from Capital Goods with Initial Credit.

  Case-Laws - AT : Cenvat Credit - without ascertaining that wast / scrap items have been emerged from the Capital goods on which credit has been taken, Rule 3(5A) of Cenvat Credit Rules, 2004 cannot be invoked - AT
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Case Laws:

• Income Tax

• 2016 (5) TMI 979
  TDS u/s 194C - non deduction of tds - whether the said payments made by the respondent-assessee to KHB and RITES Ltd. are in the nature of consideration paid for works contract? - Held that:- CIT(A) correctly held that the entire payment made by the appellant to KHB and Rites are not in the nature of income of the payees, and such entire amounts could not be said to be liable for deduction of tax u/s 194C. In fact, the payment to the extent of remuneration payable to KHB and RITES as percentage of the project cost is in the nature of income of professional/technical and managerial nature liable to deduction of tax u/s 194J. The Assessing Officer is therefore directed to compute the amounts out of payments made by the appellant to KHB and RITES which are remuneration or income in the hands of the payees, and work out the tax deductible u/s 194J. The question is answered accordingly - Decided against revenue

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• 2016 (5) TMI 978
  Treatment of Foreign Exchange Fluctuation Gain - revenue or capital gain - Held that:- The foreign exchange fluctuation gain to the extent it relates to foreign currency loans utilised for purchase of indigenous plant and machinery in the assessee’s wind power units did not attract the provision of section 43A of the Act. Section 43A of the Act only makes a reference to acquisition of asset from a country outside India and in consequence of the change in the rate of exchange after the acquisition there is an increase of reduction in the liability of the assessee as expressed in Indian currency at the time of making payment and compared to the liability existing at the time of acquisition of the asset. The section is not attracted where the asset is not acquired from a country outside India. This aspect has been considered and accepted by the Hon’ble Ahmedabad Bench in the decision referred to by the ld. Counsel for the assessee. Besides the above as is clear from the chart given in the earlier part of the order such gain or loss has been consistently neither offered to tax nor claimed as deduction by the assessee while computing the total income. In the light of the facts and circumstances stated above, we are of the view that the claim made by the Assessee deserves to be accepted. AO is directed to exclude the foreign exchange fluctuation gain to the extent of Rs. 5,79,10,209/- from the total income of the assessee as it is a capital receipt not chargeable to tax. Disallowance of 'Net Present Value' (NPV) - Held that:- As decided in assessee's own case this issue has been considered by this Co-ordinate Bench decision to held that NPV paid by assessee is held to be revenue expenditure, thus liable u/s 37(1) of the Act. Disallowance u/s 14A - Held that:- Computation of 1% of exempt income as disallowance u/s.14A of the Act was proper

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• 2016 (5) TMI 977
  Penalty u/s 271(1)(c) - defective notice - Held that:- In the order of the assessment the AO has not initiated penalty proceedings u/s 271(1)(c ) of the Act. As rightly pointed out by the ld. Counsel for the assessee even in the assessment proceedings the AO has not made any reference to the provision of section 271(1)(c) of the Act in the show cause notice issued before making the impugned additions in respect of which penalty was imposed. The AO has merely observed that appropriate penal proceedings was proposed to be initiated. Thereafter there has been no actual initiation of penalty proceedings in the order of the assessment. The requirements of levying of penalty u/s 271 (1)(c) of the Act is the satisfaction of the AO in the course of any proceedings under the Act that any person has concealed particulars of his income or furnished inaccurate particulars of such income. Such satisfaction can emanate only from initiation of penalty proceedings while concluding the assessment. In the absence of initiation of penalty proceedings in the order of assessment the proceedings u/s 271(1)(c) of the Act have to be held illegal and invalid and are liable to be quashed. Also in the show cause notice issued before imposing penalty u/s 271(1)(c) of the Act, the AO has not struck off the irrelevant portions namely whether the penalty is sought to be levied for furnishing inaccurate particulars of income or for concealing particulars of income. This Tribunal in the case of Suvaprasanna Bhattacharya vs ACIT (2015 (12) TMI 43 - ITAT KOLKATA) has held that imposition of penalty on such defective show cause notice is improper and liable to be cancelled - Decided in favour of assessee.

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• 2016 (5) TMI 976
  TDS u/s 194C - Disallowance u/s. 40(a)(ia) - non deduction of tds - CIT(A) deleted the disallowance - Held that:- In respect of payments made to Air Transport Corporation (Assam) Ltd., the Ld. CIT(A) had recorded a categorical finding that there was no oral or written contract the assessee had with lorry operators as vehicles were hired whenever the need arose. This finding has not been controverted by the revenue before us. Hence, we hold that the provisions of section 194C of the Act cannot be made applicable to the payments made to Air Transport Corporation (Assam) Ltd. In respect of payment made to Rayana Paper Board Ltd. towards freight charges, we find that the same are merely reimbursement of expenses incurred by the said party on behalf of the assessee. We have perused the contents in pages 10 to 70 of the paper book containing details of freight charges including bills and money receipt from various parties. In view of the same, we are convinced that the provisions of section 194C of the Act cannot be made applicable to the facts of the instant case. In respect of payments made to Samsuddin Pailan, we find that no specific arguments were advanced by the Ld. DR by controverting the findings of ld. CIT(A) and hence, we find no infirmity in his order in this regard. In respect of payments made to Das Enterprise, it is established by the assessee that the payment is made towards purchase of material and not for any contract. Hence, the provisions of section 194C of the Act could not be made applicable to the facts of this case. We find that the Learned DR was not able to advance any specific arguments before us against the order of Ld. CIT(A). Hence, the ground no. 1 of revenue appeal is dismissed . We also find that the assessee was not able to advance any specific arguments before us against the order of Ld. CIT(A) in respect of this addition and accordingly the assessee’s Cross Objection is dismissed. Disallowance u/s. 40A(3) - Held that:- We find that the AO adjudicated this issue in detail with regard to payment made to each party. The Ld. AR before us was not able to prove that the case falls under the exception provided in rule 6DD of the I. T. Rules. Hence, we confirm the addition made by the Ld. AO. - Decided against assessee. Disallowance on account of bogus purchases - estimation of gross profit by increasing it by 4% on the bogus purchases - Held that:- Inflation of gross profit by 4% made by ld. CIT(A) would meet the ends of justice in the facts and circumstances of the case and accordingly, we do not find any infirmity in the order of the CIT(A) in this regard. Disallowance towards donation - Held that:- We find that the assessee has produced ledger account of donation and subscription account together with the supporting bills and evidences. From the same it can safely be concluded that the payments were made towards subscription to various puja committees and payments to Chamber of Commerce and Industry. Hence, we find that the reliance placed by the Ld. AR on the decision of Hon’ble Calcutta High Court in the case of Bata India ltd., supra is well founded. [1993 (3) TMI 89 - CALCUTTA High Court ] - Decided in favour of assessee

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• 2016 (5) TMI 975
  Accrual of Income - Addition towards service fees received - Held that:- The assessee was able to supply the man power starting from 20 numbers in Nov’07 and managed to increase this level to 112 nos. by Mar’08, not even 50% mark to the agreed level of service. No doubt assessee agreed to supply the manpower and as understand assessee is a new entrant to this field. The assessee was in the process of setting the business. Our understanding is that the assessee will have right to claim the service charges only when he reaches the level of service agreed and as per the agreement or as per terms of agreement with regard to commencement of the agreement period. In the given case, the assessee neither reached the level of service expected nor the agreement has commenced. Hence, assessee is not in a position to claim any professional fees during the period of 01/11/2007 to 31/03/2008. It is clear that the income has not accrued to the assessee. Income can be recognized only when it is earned or accrued i.e. there is a right to receive. In the present case, neither the assessee had achieved the level of service i.e. to supply 300 manpower nor the terms of contract commenced, resulting in no right to receive. We must interpret the situation in the normal course of business i.e. in a situation where the holding company has to deal with outsiders. Just because the assessee is dealing with holding company, it will not get a right to receive. Even in dealing with the outside party, the right to receive would not have arisen simply because the assessee had not achieved the expected service level nor the terms of agreement has commenced. The business decisions are done purely on commercial basis. When assessee has not achieved the expected level of services it has no right to claim any service charges. Income has to be realized or there has to be a right to receive the income, in absence of such right, income cannot be recognized. Hence, the addition made by the Assessing Officer in this case needs to be deleted. Hence, the addition made by the Assessing Officer is hereby deleted. - Decided in favour of assessee.

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• 2016 (5) TMI 974
  Fringe benefits - Assessment u/s 115 WE(e) - addition to the value of fringe benefits on account of relocation expenses and conveyance expenditure - Held that:- In the case of relocation expenses, the expenditure is incurred by the employee and later on the same is reimbursed to the employee by the assessee. It is not a case of the assessee company paying an amount directly to a third party. In the case of conveyance expenditure it is a payment made by the assessee company to a third party and not to the employee. Hence in the case of relocation expenses, no FBT can be levied, as it is a direct payment to a specific employee against bills submitted by him. In case of conveyance expenditure incurred for travel of the employee from place of residence to place of work and vice versa the payment is made to a third party. Applying the propositions laid down in the case of T.V. Today Net Work Ltd. (2013 (7) TMI 690 - ITAT DELHI) to these facts, we have to hold that FBT is not leviable on this payment also. Regarding expenditure incurred on advertising and sales promotion, it is clear from the order of the Ld.CIT(A) that the assessee has provided 75% of the details. The assessee claims that it had submitted given the entire details before the revenue authorities. As the dispute is whether the requirement documents and details were furnished to the AO or not, we deem it fit and proper to set aside this issue to the file of the A.O. for fresh adjudication in accordance with law.

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• 2016 (5) TMI 973
  Rectification of mistake - charging interest u/s.234B is wrongly calculated as per the provisions of section 234B (1), whereas, it should have been calculated as per the provisions of section 234B (3) - Held that:- Determination of “total income” under sub-section (1) of section 143 was made on 21.02.2012. No regular assessment was made u/s.143(3) of the Act. Notice was issued u/s.148 of the Act on 02.01.2014 and assessment was made u/s.143(3) of the Act read with section 148 on 27.06.2014 for the first time. This re-opened assessment was resulted in demand of Rs. 1,23,150/-. A demand notice u/s.156 was served on the assessee on 08.07.2014. The assessment made for the first time u/s.143(3) read with section 147 of the Act fits into Explanation-2 to section 234B(1) of the Act, which is to be regarded as “Regular Assessment” for the purpose of sec.234B of the Act. As intimation u/s.143(1) is obviously not an assessment and it is the case of “Assessment ” for the first time in the hands of assessee u/s.147, the case will fall under sub-section(1) of section 234B. We Therefore,, hold that the AO is justified in coming to the conclusion that the starting point for charging interest u/s.234B have been as First April 2011 and end point of the same is 27.06.2014 and as such there is no error in the assessment order so as to rectify u/s.154 of the Act. More so, the issue raised by the assessee herein cannot be considered u/s.154 of the Act as the issue in dispute is highly debatable. Under section 154 of the Act, only mistakes apparent on record could be rectified by the Authorities. The issue in dispute is not a mistake apparent from record. It is required long process of reasoning and points on which there may be conceivably two opinions possible. As such the issue in dispute cannot be considered u/s.154 of the Act. - Decided against assessee

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• 2016 (5) TMI 972
  Addition on account of disallowance out of various expenses of textile division - Held that:- As per Section 170(1), where a person carrying on any business or profession has been succeeded therein by any other person who continues to carry on that business or profession, the predecessor shall be assessed in respect of the income of the previous year in which the succession took place upto the date of succession and the successor shall be assessed in respect of income of the previous year after the date of succession. From the aforesaid provision of Section 170 of the Act, it is clear that the expenses incurred upto the date of conversion or succession shall be allowed in the hands of the firm and expenses incurred after the conversion of succession shall be allowed in the hands of succeeding company. We find that the professional expenditure pertains to earlier period. Therefore, in respect of disallowance towards CA’s bills is justified. In respect of disallowance of wages to workers and packing credit bank loan interest, we find no merit into the contention of the assessee. Proportionate disallowance with regard to packing credit loan interest for 11 days comes to Rs. 1,29,154/-, whereas the Assessing Officer computed the same as on 31.12.2007. Accordingly, we direct the Assessing Officer to restrict this disallowance to the extent of Rs. 1,29,154/- and the rest of the disallowance is deleted. With regard to wages to workers, the liability of wages to workers for the month of December 2007 arose in the end of the month, i.e., 31st December 2007. Since the wages are paid on daily basis, the Assessing Officer was justified in disallowing the expenditure pertaining to 11 days, i.e., the period before succession; therefore, the contention in this regard is rejected. - Decided partly in favour of assessee. Disallowance out of various expenses of Power Division - Held that:- Disallowance of expenses of Rs. 7,24,700/-, only Rs. 7,09,780/- is contested before us; i.e., Rs. 5,55,210/- out of interest on term loan and Rs. 1,54,570/- on account of preliminary expenses. With regard to disallowance on account of interest on term loan amounting to Rs. 5,55,210/-, the contention of the assessee was that the interest for Rs. 15,65,807/- on term loan was debited on 31.12.2007. Therefore, the liability of bank loan interest arose when the bank debits the interest amount in the bank account. In this case, the bank had debited Rs. 15,65,807/- on 31.12.2007 and therefore, the liability arose on 31.12.2007. We do not find force in this submission of the assessee as the interest is debited on daily basis but not on monthly basis. Therefore, the contention of the assessee in this regard is rejected, being devoid of any merit. With regard to preliminary expenses amounting to Rs. 1,54,570/-, it is submitted that the preliminary expenses of Rs. 11,09,260/- actually pertained to the company itself and therefore, 20% of Rs. 11,09,260/-, which amounts to Rs. 2,21,852/- was debited to the profit and loss account u/s 35D of the Act. We find that the preliminary expenses are in respect of incorporation of the company; however, the Assessing Officer assumed the expenses for the whole year and disallowed proportionately. Therefore, no disallowance is called for in this case and the Assessing Officer is directed accordingly.- Decided partly in favour of assessee.

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• 2016 (5) TMI 971
  Search action u/s 132(1) - jewellery found from the bed room of the assessee’s son and locker of his daughter-in-law - Held that:- The search was conducted at the residential premises of the assessee in House No. 34, First Floor, Greater Kailash-I, New Delhi, wherein all the family members were living jointly, albeit in separate rooms. It is an admitted position that no separate assessments have been made for the other family members. It is further seen that the assessee at no stage admitted that the entire jewellery belonged to him alone. Au contraire, he specifically submitted that the jewellery belonged to all the family members. The factum of the assessee’s daughter-in-law, a working woman, having her own separate locker, amply goes to prove that she was keeping her jewellery separate from that of the larger family. Presently, we are dealing with the assessment of the assessee. It is, but, natural that the unexplained jewellery, if any, belonging to the assessee’s son and daughter-in-law, both of whom are separately assessed to tax, cannot be taxed in the hands of the assessee. In our considered opinion, the ld. CIT(A) was fully justified in excluding from consideration the value of jewellery found in the bed room and locker of the assessee’s daughter-in-law. Applicability or otherwise of Instruction No.1916 dated 11.5.1994 - no seizure of jewellery can be made upto 500 gms belonging to a married lady, 250 gms. belonging to unmarried girls and 100 gms belonging to males - CIT(A) deleted the addition to the extent of 1100 gms from the total jewellery belonging to the assessee by relying on this Instruction - Held that:- We are unable to countenance the contention of the ld. AR for treating the remaining 136.90 gms jewellery as also explained because the assessee has not led any evidence to demonstrate the source of investment in jewellery to this extent. Moreover, when we apply the mandate of Instruction No.1916 and treat jewellery to the tune of 1100 gms. as explained without there being any positive evidence, any jewellery over and above that can be treated as explained only if the assessee leads some positive evidence about the declared source of such excess investment in gold jewellery. We, therefore, affirm the view taken by the ld. CIT(A) in treating jewellery to the extent of 136.800 gms as explained. In the ultimate analysis, the impugned order is upheld.

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• 2016 (5) TMI 970
  Broken period interest - Disallowance on account of amortization of premium expenses - Held that:- Both these issues are squarely covered in vaour of the assessee by the decision of Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT ] - Decided against revenue

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• 2016 (5) TMI 969
  Addition of AMP expenses - TPA - Held that:- In the case under consideration, the AO/TPO has not brought anything on record that there existed and agreement, formal or informal, between the assessee and the AE to share/reimburse the AMP expenses incurred by the assessee in India. In absence of such an agreement the first and primary precondition of treating the transaction-in-question an IT remains unfulfilled. Conducting FAR analysis or adopting an appropriate method is the second stage of TP adjustments. The first thing is to find out whether the disputed transaction in is IT or not. Without crossing the first threshold second cannot be approached, as stated earlier. In the case under consideration, we are of the opinion that AMP expenditure is not an IT and therefore we are not inclined to restore back the issue to the file of the AO. Considering the facts and circumstances of the case under consideration, we are of the opinion that the FAA was not justified in upholding the order of the TPO. Therefore, reversing his order, we decide second ground in favour of the assessee. Disallowance of deduction in respect of payment for additional excise duty payable by third-party manufacturers - Held that:- provision made by the assessee for the amount payable to third party manufacturers/convertors on account of excise duty payable by them as per the agreement had not been crystallised or ascertained during the year under consideration as the sum was not paid by the third party manufacturers/convertors but was disputed by them, which dispute was not settled in the year under consideration. The said liability was a contingent liability and it was not while computing the business income of the assessee for the year under consdiration. In that view of the matter, we uphold the impugned order of the ld. CIT(A) confirming the disallowance made by the A. O. - Decided against assessee Disallowance of appreciation on marketing know-how (in pursuance of worldwide stock and asset purchase agreement entered into by Pfizer US and the parent company of the assessee) - Held that:- When the AO has accepted the payment in question for goodwill then in view of the judgment of the Hon’ble Supreme Court in the case of M/s SMIFS SECURITIES LTD (2012 (8) TMI 713 - SUPREME COURT ), the depreciation is allowable on the marketing knowhow Disallowance made u/s. 14A - Held that:- Disallowance should be restricted to 2% of the exempt income

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• 2016 (5) TMI 968
  Addition on written off valuation of work in progress under the head computer kit - Held that:- It is undisputed fact that in IT industries technology becomes obsolete frequently, accordingly, the assessee has to take decision to use the items. The assessee is engaged in manufacturing of hybrid micro circuits by upgrading the technology. It is a business decision of the assessee after considering the report from the surveyor, which has been filed before the lower authorities but has not judiciously appreciated by them. In subsequent year, the ld Assessing Officer allowed the identical write off on account of obsolete FCT kits, computer. Therefore, we delete the addition confirmed by the ld CIT(A) - Decided in favour of assessee

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• 2016 (5) TMI 967
  Income received from letting out of Malls - assessable under the head “Income from business or profession” or under the head “ Income from house property” - Held that:- There should be no consideration of primary and secondary lettings in construing the section 12(4) of 1922, which has analogy to 56(iii) of IT Act of 1961. In this case, the letting of building is along with letting machinery, plant or furniture required for ancillaries services and therefore, we hold that the alternative plea of the appellant that in case the income is not to be assessed under the head “income from house property” then it is required to be assessed under the head income from other sources” this is without prejudice to our basic finding that in the instant case, the income from Mall is assessable under the head “income from business”. Income received from letting out of fit-outs is assessable under the head “Income from other sources” Disallowance of compounding fees - Held that:- We have considered the submissions of the assessee and orders of the authorities below. At the time of hearing, the ld. DR submitted that the very same issue has been decided against the assessee in assessee’s own case for the assessment year 2009-10. Thus we upheld the disallowance of compounding fees. Deduction u/s 80-IB(10) - Held that:- Any disallowance of expenditure would certainly enhance the profits of eligible business. If assessee is carrying on eligible business, then, the total profits of the business shall be eligible for deduction under the provisions of Act. In the present case, there is dispute about the activity of the assessee which is eligible for deduction under sec.80-IB(10) of the IT the Act, 1961. However, the assessee has raised the issue before the Tribunal for the first time. The lower authorities have not had an occasion to consider the plea of the assessee in the light of the provisions of sec.80-IB(10) of the Act. Therefore, we deem it appropriate to remit the issue to the file of the AO and direct the AO to examine the claim of assesee in the light of the provisions of sec.80-IB(10) of the IT Act, 1961. Accordingly, we set aside the issue to the file of the AO and direct the AO to re-compute the deduction available u/s 80-IB(10) of the Act, in accordance with the provisions of the Act. Disallowance u/s 14A - whether the interest and other indirect expenditure relatable to earning exempt income is disallowable u/s 14A - Held that:- AO was not correct in disallowing the proportionate interest by invoking provisions of Rule 8D of IT Rules, 1962. As regards the disallowance of administrative expenditure, the AO has disallowed proportionate administrative expenditure by invoking the provisions of Rule 8D (2)(iii). Although, the assessee contended that it has not invested borrowed funds for the purpose of investments in earning exempt income, the assessee cannot get away with the plea it did not incur any administrative expenditure for day today management and monitoring such investment portfolios. Therefore, we are of the view that once there is exempt income relatable administrative expenditure should be disallowed in proportion to the exempt income. The AO after considering the relevant facts, disallowed the administrative expenditure by invoking provisions of Rule 8D(2)(iii) of IT Rules, 1962. Therefore, we upheld the disallowance made by the AO in respect of administrative expenditure

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• 2016 (5) TMI 966
  Rejection of books of accounts - Method of accounting and accounting standard - Held that:- It is neither proper nor justified to hold that the books of account maintained by the assessee did not present true and complete picture of its accounts and financial transactions. It is a case where accounts of the assessee are correct and complete. Method of accounting and accounting standard has been regularly followed. True and correct profits of the business of the assessee could be deduced from such books of accounts. In this view of the matter the assessing authority could not change the method regularly adopted by the assessee from Project Completion Method to Percentage Completion Method on irrelevant considerations. We are, therefore, satisfied that provisions of section 145(3) are not attracted in this case. The Ld. CIT (A), is found to have erred in upholding the decision of Ld. Assessing Authority to invoke section 145(3) of the Act and making assessment in the manner provided under section 144 of the Act. We, therefore, set aside the decision in this regard - Decided in favour of assessee

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• 2016 (5) TMI 965
  TDS u/s 194I - TDS liability on payment development charges, lease charges and other charges paid to RIICO - Held that:- Lease document has used the "Development charges" and "Economic rent" to be payable by the assessee. As the document has used two different phrases to connote different obligation therefore in our view development charges can'not be read as rent within the purview of the section 194 I. further lease document has provided the consequences of nonpayment of the development charges by the assessee, if the assessee failed to pay the development charges, as mentioned in the agreement, the possession was liable to be taken over by the RIICO, therefore the development charges can not be considered as rent. See M/s Gupta Fabtex Pvt Ltd Versus Deputy Commissioner Of Income Tax (TDS) , Jaipur [2016 (1) TMI 664 - ITAT JAIPUR ] - Decided against revenue

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• 2016 (5) TMI 964
  Disallowance of Service Charges paid - where professional services were not rendered by ‘Nova’ or whetger any money in respect of the payments to ‘Nova’ had flown back to the assessee - Held that:- Respectfully following the decision of the Hon'ble Bombay High Court in the case of CIT vs. Nikunj Eximp Enterprises (P) Ltd. (2013 (1) TMI 88 - BOMBAY HIGH COURT ) and CIT vs. Mundra Port and Sez Ltd. (2014 (1) TMI 1594 - GUJARAT HIGH COURT ) we hold in favour of the assessee and direct the AO to delete the disallowance of Rs. 48,49,624/- claimed by the assessee as payment for professional services rendered by Nova Corporate Services P. Ltd. and consequently allow the assessee’s claim. - Decided in favour of assessee Interest under section 234A, 234B, 234C and 234D - Held that:- The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H. Ghaswala (2001 (10) TMI 4 - SUPREME Court ) and we therefore uphold the action of the AO in charging the said interest

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• 2016 (5) TMI 963
  Revision u/s 263 - Held that:- In the assessment order, merely, it has been mentioned that the details/explanation called for have been examined and placed on record and further that the receipt on account of sale of wind power, sale of flats from projects and stock of unsold projects. Next issue discussed in the assessment order is with respect to disallowance of depreciation on motor car and no discussion has been made with respect to section 36(1)(iii) along with explanation 8 to section 43(1), while allowing the interest on borrowing. Likewise, no discussion has been made with respect to investment of Rs. 5.31 crores in UTI mutual funds, wherein, dividend of Rs. 2.53 lakhs was claimed as exempt. It is also noted that during the year, fresh interest free unsecured loans were raised, amounting to Rs. 3.74 cores from Om Prakash and Company and Rs. 7.19 crores from Reshma Kukreja. The Ld. Assessing Officer neither examined the genuineness of loans, its creditworthiness, in the light of applicability of section 68 of the Act. Taking fresh loan by the assessee was not even contradicted by the assessee. In view of this factual matrix, we agree with the finding of the ld. Commissioner that the assessment order is erroneous as well as prejudicial to the interest of Revenue. The Assessing Officer neither conducted proper enquiries nor applied his mind on the issues, thus, the order is erroneous and prejudicial to the interest of the Revenue - Decided against assessee.

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• 2016 (5) TMI 962
  Correctness of assessment made u/s. 153A r.w.s. 153C - Held that:- On pertinently questioned about the satisfaction of the Assessing Officer in the case of searched person i.e. Garden Group of Surat, revenue is unable to point out any such satisfaction of Assessing Officer in case of Garden Group. It had been emphatically argued before us that the Assessing Officer is the same person, such satisfaction when recorded in case of the present assessee should be considered and construed as a due compliance under the provisions and there would not be any occasion to hand over the materials to himself being the very officer. However, the vital and mandatory requirement of recording the satisfaction u/s. 153C is concerned, such satisfaction is absent as far as Garden Group of Surat is concerned in whose case searched u/s. 132 of the Act has been carried out by the Department. As such an essential requirement prior to initiate the proceedings u/s. 153C has not been fulfilled. It would be appropriate and as per the ratio laid down in case of Assistant Commissioner of Income-tax v. A.R. Enterprises reported in (2013 (1) TMI 345 - SUPREME COURT ) to quash the notice issued against the assessee and the assessment order passed pursuant thereto. As the order of the First Appellate Authority is not in consonance with the law laid down by the Hon’ble Supreme Court (supra), we set aside the same and quash the assessment order.

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• 2016 (5) TMI 961
  Claim of deduction u/s. 80IB(4) - Held that:- If the valuation of closing stock made by the ld. CIT(A) is accepted, there is a net loss as computed by the ld. CIT(A) and, therefore, the claim of deduction u/s. 80IB(4) would be only of academic interest Addition u/s 68 - Held that:- The additions made by the A.O, being difference between the profit credited by the assessee and the loss determined by the A.O as per his own valuation of closing stock is illogical and without any reasoning. Merely because as per the computation of the A.O, there is a loss and the assessee has shown profits in its statement of account, the difference would not become unexplained cash credit which can be added u/s. 68 of the Act. The ld. CIT(A) has rightly deleted the impugned addition, we do not find any error or infirmity in the findings of the ld. CIT(A). Excise Duty refund - capital or revenue receipt - Held that:- As we find that in earlier years, the Excise Duty refund has been treated as a capital receipt which has been confirmed by the Hon’ble High Court of J therefore, no interference is called for.

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• 2016 (5) TMI 960
  Addition on account of ESOP - Held that:- The Hon’ble High Court of Madras in the case of PVP Ventures Ltd. [2012 (7) TMI 696 - MADRAS HIGH COURT] has allowed such claim as business expenditure and the Hon’ble High Court of Delhi in the case of Lemon Tree Hotels Ltd. [2015 (11) TMI 404 - DELHI HIGH COURT] has followed the decision of the Hon’ble High Court of Madras held that cost of ESOP could be debited in Profit and Loss account of the assessee. Treatment of entertainment tax exemption in respect of multiplexes as capital receipt - Held that:- Treatment to the entertainment tax exemption in respect of Multiplexes as capital receipt, not eligible to tax confirmed. Disallowance of expenditure on prints treating it as capital expenditure - CIT(A) directed to treat the print cost as revenue expenditure - Held that:- We have given a thoughtful consideration to the orders of the authorities below. Rule 9B of the Income Tax rules clearly and specifically provides that cost of prints cannot be included in the cost of acquisition of the exhibition rights in the film. Therefore, what can be carried forward are the cost of acquisition and not the cost of prints. In our considered opinion, the cost of prints has to be allowed in the year in which the expenditure is incurred. It is irrelevant as to what treatment the assessee has given in its books of accounts as held by the Hon’ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. [1997 (7) TMI 4 - SUPREME Court].

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• 2016 (5) TMI 959
  Treatment of expenditure - whether CIT (A) deleting addition made by the AO by capitalizing expenses on Furniture (ii) plasma ion nitriding; and (iii) sub zero treatment. From the assessee’s submissions, reproduced above, it is evident that heating of items in furnace was done at a temperature up to 1200 and also at sub zero temperature. The ld. CIT(A) has very rightly observed that it is obvious that the items loaded in the furnace can suffer major damage due to the extreme temperature. It was explained before ld. CIT(A) that the fixtures were mostly those items on which the products whose heat treatment were to be carried out were loaded and then both the fixture and the product were put inside the furnace. In such a situation ld. CIT(A) has rightly observed that fixtures would suffer major damage and, therefore, the assessee’s claim that they could be used only for 2-3 times, could not be brushed aside. Under such circumstances, merely because assessee had used not only stainless steel, but mild steels and graphite items, could not be a basis for concluding that fixtures would have a very long life, because the life of the item would depend upon the use to which it was put. Ld. CIT(A) has also pointed out that ten items of fixtures listed at page 3 of the assessment order, showed that these were mostly cables, pipes, thermocouple, MCB etc., which did not have any independent existence and would be a part of other machineries. Therefore, merely there being grouped under fixtures, it could not be concluded that they were capital in nature. All these facts noted by ld. CIT(A) have not been controverted by the department and, therefore, we do not find any reason to interfere with the findings of ld. CIT(A). Accordingly, order of ld. CIT(A) is upheld. - Decided in favour assessee.

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• 2016 (5) TMI 958
  Revision u/s 263 - CIT(A) directing the AO to pass fresh assessment order which is completed u/s.153A r.w.s.143(3) - Held that:- Commissioner of Income Tax has not independently arrived satisfaction with the order of the Assessing Officer as erroneous and prejudicial to the interest of the Revenue. The Commissioner of Income Tax u/s.263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment The taxing authority can act only if there is power under the statute to do so. Being so, the contention of the Departmental Representative cannot be accepted that before the Commissioner of Income Tax, the assessee has conceded that the statement of affairs needs to be examined, so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a fit case for revision u/s.263 of the Act and we are cancelling the order passed u/s.263 for the year 2006-07. The revision order passed for the assessment years 2007- 08, 2008-09, 2009-10, 2010-11 and 2011-12 were mere aftermath to the order passed u/s.263 for the assessment year 2006-07. The Commissioner of Income Tax himself agreed that findings for assessment year 2006-07 having cascading effect on the subsequent assessment years i.e from 2007-08 to 2012- 2013. Since, we have cancelled the revision order for the assessment year 2006-07 on the basis on which revision order for the other assessment year was framed, these orders cannot stand on their own leg, in view of the cancellation of the revision order of the assessment year 2006-07. Thus, all the other orders passed u/s.263 by Commissioner of Income Tax are annulled - Decided in favour of assessee

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• 2016 (5) TMI 957
  Rectification of mistakes - Procedure of Appellate Tribunal - Whether on a proper interpretation of sub-section (4) of section 255 the order proposed by the Learned AM while giving effect to the opinion of the majority consequent to the opinion expressed by the learned Third Member, can be said to be a valid or lawful order passed in accordance with the said provision? Held that:- The presence or absence of the “consent” of the parties will not change the decision rendered by the Special bench on various grounds on the basis of majority view in terms of sec. 255(4) of the Act. Since we are considering the miscellaneous petitions filed by the revenue u/s 254(2) of the Act and since we have noticed that the presence or absence of “consent of parties” does not affect the decision rendered by the Special bench on various grounds in terms of sec. 255(4) of the Act, we are of the view that the order passed by the Special bench cannot be held to be suffering from mistakes, warranting rectification within the meaning and scope of the provisions of sec. 254(2) of the Act. Accordingly, we are of the view that the said observations do not require any modification in terms of sec. 254(2) of the Act, as the appeals have been disposed of by the Special bench strictly in accordance with the provisions of sec. 255(4) of the Act. Hence we are of the view that the order passed by the Special Bench does not require rectification in terms of provisions of sec. 254(2) of the Act nor it curtails the right of the revenue to contest the orders passed by the Tribunal in accordance with the majority view in terms of sec. 255(4) of the Act by filing appeals before the Hon’ble High Court. The revenue contention that it had argued against the constitution of Special Bench and the same was not considered by the Special Bench, the matter relating to the constitution of Special Bench is required to be represented before the Hon’ble President, who had constituted the same and hence, even if the Revenue had argued against the same during the course of hearing before the Special Bench, the said contentions could not have been taken cognizance of by the Special bench. Accordingly, we are of the view that this contention of the revenue also does not give rise to any mistake apparent from record. The power given to the Tribunal u/s 254(2) of the Act is confined to the correction of mistakes apparent from record and the Tribunal is not entitled to review its own order under the garb of rectification of mistakes apparent from record. The above said contentions of the Ld D.R would result in review of the order passed by the Special bench in accordance with the majority view of the members. Accordingly, we decline to entertain the said contentions of the Ld D.R. - Decided against revenue

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• 2016 (5) TMI 956
  Inflation of agricultural income - artificial boosting of income by the assessee - Held that:- When an assessee asserts that the income raised by it is on account of sale of agricultural produces, onus is on the assessee to prove such agricultural income. In our opinion, assessee before us has failed to discharge this onus. Despite number of opportunities given by the AO assessee was unable to establish how it could raise so much plants and saplings from five hectares of green house area. As for the claim of the Ld. AR that even if the agricultural income is found to be incorrect, it would not warrant addition since there was no real income, we are afraid we cannot accept. This for the reason that a sum of Rs. 12 crores out of the dues shown by the assessee as receivable from its subsidiary has been converted by the assessee to share capital or treated as share application money. Whether converted to share capital or to transferred to share application money, there is an infusion of capital which is not a fictitious, but a real one. CIT (A) in our opinion was oblivious to the date of accounting of the supplementary invoice by the assessee which was on the very same day when it had raised original invoice. He was also oblivious to the ALP of the goods relating to the supplementary invoice fixed by the auditors at zero. He considered the raising of bogus invoices to inflate the agricultural income as mere non-compliance with procedures of the RBI or Customs. What we observe is that assessee had claimed agricultural income which was not possible from the type of holding it had, and had adopted dubious methods for this. Nothing was brought on record to show that there was any industrial practice in floriculture where two invoices were raised on the same day, on purportedly for a notional value and other purportedly based on subsequent realization. To be precise there cannot be any industrial practice of that sort at all. We are of the opinion that CIT (A) fell in error in deleting the addition made by the AO. We reverse the order of CIT (A) and reinstate the addition. - Decided in favour of Revenue.

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• 2016 (5) TMI 955
  Receipts from transfer of shrink wrapped software - whether amount to business income or royalty under section 9(1) (vi) and DTAA - Held that:- Terms and conditions of software license in the decision before honorable Delhi high court in Director of Income Tax Versus Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT] and in the impugned case before us. We found them similar to the issue decided by honourabel Delhi High court. They are similar as to non-exclusive, non-transferable and user restrictions of the software i.e. the software has to be used in accordance with the Agreement, all the intellectual property rights in the form of patent, copyright, trademark etc. are the property of the seller only and at no point of time same has been transferred to either the buyer/ customer, the rights acquired in relation to the copyright are limited to those necessary to enable the user to operate the program, for example, where the transferee is granted limited rights to reproduce the program. The Agreement categorically restricts the user to copy, publish, display, disclose, modify, merge etc. the software except for archival purposes and not allowed to exploit the computer software commercially. On identical facts and circumstances, honourable Delhi high court has held that what is transferred is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article, which is clearly distinct from the rights in a copyright. The right that is transferred is not a right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty income and would be chargeable to tax as business income. Therefore respectfully following the decision of Honourable Delhi high court we hold that that consideration received by the assessee on sale of software is not chargeable to tax as royalty such as equipment royalty, process royalty etc. Under Article 12 of DTAA but as business income under article 7 of the INDO Finland DTAA. - Decided in favour of assessee.

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• 2016 (5) TMI 954
  Addition u/s 43B - Held that:- The assessee had paid ESIC payment of Rs. 10158/- before filing the return of income. The Hon’ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT ] held that the amendments to section 43B brought out by the Finance Act, 2003 with effect from 01/04/2004 are retrospective in nature and would operate from 01/04/1988. Various benches of ITAT and coordinate benches of this Tribunal have followed the above decision and held that the amendment to section 43B brought out by the Finance Act, 2003 is retrospective in nature and justified in deleting the additions made on account of delayed payment of Provident Fund of employees contribution. Since, PF & ESI are same, we respectfully follow the decisions of coordinate benches of this Tribunal and direct the AO to delete the addition made on account of ESI Payment With regard to other issue, the assessee has created a provision for exgratia to the extent of Rs. 15.73 lakhs and paid Rs. 13.62 lakhs before filing of the return. AO has treated the above provision of expenses as statutory due to the employees u/s 43B of the Act, whereas, this is not statutory obligation on the part of the assessee, but, it is a contractual and voluntary expenditure for which assessee has created the provision. Respectfully following the decision of this Tribunal in the case of Novopan Industries Ltd. Vs. DCIT, [2013 (9) TMI 377 - ITAT HYDERABAD ] and others wherein it was held that the exgratia cannot be regarded as bonus and requirement of the provisions of section 37 are fully satisfied. Hence, respectfully following the said decision, we delete the addition made invoking section 43B on exgratia. Disallowance made u/s 40(a)(ia) in respect of fee payable to the advocate - Held that:- M/s Bajaj Hindustan Ltd., who deducted the TDS and remitted the same properly. Therefore, we do not find any default on the part of the assessee and hence, we delete the addition made on this count. Disallowance made u/s 40(a)(ia) towards payment for purchase of printing material - Held that:- There is no doubt that the assessee has procured printing labels to its specification. The payment was made accordingly. In this connection, the Hon’ble P&H High Court in the case of CIT Vs. Markfed Khanna Branch [2008 (2) TMI 260 - PUNJAB AND HARYANA HIGH COURT], held that where assessee purchased printed packing material from manufacturer for the purpose of packing to its finished products and no raw material was supplied by it to manufacturer, for manufacturing of such packing material, transaction was a contract of sale and not as works contract. Held, it was outside the purview of section 194C. In the present case before us also squarely false on the facts of the above judgment. By following the above ratio, we delete the addition made on this count. Reimbursement to C&F agents - Held that:- As clarified in Circular No. 1 of CBDT, the TDS provision will not be charged on service tax as the same was collected on behalf of central govt. Coming to the other issue of re-imbursement of expenditure to the C&F agents, it is pure reimbursement of expenses, without any profit elements, the C&F agents are acting as agents for the principal. Hence, TDS will not be applied on such reimbursements Services of recruitment agencies - TDS liability - Held that:- We are of the view that as per Circular No. 714, dated 03/08/1995, the services of recruitment agencies are in the nature of professional services rendered and hence, it will be charged to TDS u/s 194J. Hence, the assessee is liable to pay TDS on such payments u/s 194J. Accordingly, we sustain the disallowance made by the AO. Payment to professionals - Held that:- As contended by the assessee that out of Rs. 2,46,487/- disallowed by the AO, Rs. 74,900/- is mere reimbursement of expenses. On analyzing the case laws submitted by the AR, we observe that all the cases were relating to reimbursement of expenses relating to payments to sister concerns or to agents. Whereas in the present case, the reimbursement was paid to professionals, who had met some expenditures. We understand that the professional charges are claimed along with the reimbursement of expenditure in the same invoice. The TDS provision will apply in this case on the gross amount as per Circular No. 714, dt. 03/08/1995. We, therefore, sustain the addition made by the AO. Disallowance made in respect of annual and quarterly discounts paid/payable to stockiest u/s 40(a)(ia) - Held that:- The above payments are in the nature of trade discounts and not commission on which provisions of section 194H will apply. Accordingly, the additions made on this count are deleted. Disallowance made u/s 40(a)(ia) for payments made to stockiests - Held that:- The Assessee has already made TDS payments on the similar payments and termed these as commission. It cannot contest that these are incentives to dealers and could not substantiate its claim. We conclude that these are in the nature of commission only. Also, the provision made for Rs. 1,94,000/- will attract TDS as per the provisions of TDS, and TDS has to be remitted as soon as payment is made or credited, whichever is earlier. In the present case, the assessee cannot identify the parties to whom commission payment was to be made. The liability cannot be created without identifying the actual liability as well as identifying the creditor. In our view, the assessee has no option but to reverse it.

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• 2016 (5) TMI 953
  Deduction u/s. 80IB - whether the other income consist of freight export received, interest, DEPB received and foreign fluctuation are definitely derived from the Industrial undertaking on which assessee is eligible for deduction U/s. 80IB? - Held that:- In respect of “interest received" while considering the factual matrix of the case the assessee has not proved the direct nexus with the eligible activity, hence we hereby affirm the finding of learned CIT(Appeals) and dismiss this part of the ground. For “DEPB received” our attention has been dawn on a decision of Hon’ble Bombay High Court pronounced in the case of CIT vs. Rachana Udhyog [2010 (1) TMI 38 - BOMBAY HIGH COURT ] wherein it was held that the law declared by the Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT] the deduction u/s 80IB in respect of duty draw back is not entitled for claim of deduction u/s 80IB. Respectfully following this decision, this part of the ground is dismissed. For “foreign exchange fluctuation" this issue is to be decided in favour of the assessee following that very decision of Bombay High Court pronounced in the case of Rachana Udyog (supra) wherein it was observed that when the sale proceeds of goods exported are received in India in convertible foreign exchange the rupee equivalent of the sale proceed is liable to vary, consequent upon the fluctuation in the rate of foreign exchange. The Court has, therefore, held that the exchange rate fluctuation was directly related to the export of goods, hence eligible for deduction u/s 80IB Deduction U/s. 10B - Held that:- DEPB while calculating deduction u/s 10B stood covered in favour of the assessee Foreign exchange fluctuation gain is intimately connected to the export business. As a result, this part of the ground is allowed in favour of the assessee. “Miscellaneous income” - in the absence of any evidence on record that such type of alleged income had any bearing with the business income of the undertaking therefore, the Revenue authorities were justified in not granting deduction u/s 10B on this income. Even if it was related to the cenvat credit, as alleged by the assessee, the same is required to be adjusted against the excise duty payment. Otherwise also a Cess cannot form a part of the business profit of an undertaking. Distribution of Head Office expenses in the ratio of turnover thereby restricting the claim of the Assessee U/s. 80IB and 10B - Held that:- Director’s remuneration was debited to an amount of Rs. 54 lakhs in Excel Controlinkage Pvt. Ltd. and Rs. 4,80,000/- debited to G-Three-M Technologies but no amount at all was debited to Vaav Engineers Products Pvt. Ltd. Directors are responsible to look after the business activity of all the three units, therefore, their remuneration is required to be allocated as per the turnover of the three units. As a result, this part of the contention of the assessee is rejected. For travelling expenses of Directors to foreign country, the unit which is in export business is required to share the burden of travelling expenses. In respect of that unit only the travelling expenses (foreign) is required to be allocated on the basis of the turnover. However, in respect of the other unit, no such allocation is required. The reason behind this view is that the facts of the case have revealed that ‘Unit Vaav’ had participated in an exhibition at Amsterdam, therefore allocation is justifiable. However, in the Unit G-Three-M only regular sales; as per past years, have been executed for which no travelling was claimed to have been undertaken. We, therefore, hold that allocation is required in Unit Excel and Unit Vaav. In support we place reliance on the judgment of Zandu Pharmaceuticals (2012 (9) TMI 620 - BOMBAY HIGH COURT ). As a consequence this part of the ground is partly allowed. Rest of the expenditure such as staff training, recruitment, pollution control, miscellaneous expenses have rightly been debited to the account of Excel Controlinkage Pvt. Ltd. being the head office. We direct not to reallocate these expenses to the other units. Non calculation of deduction u/s 10B of the I.T. Act sub section 7A - according to which the learned authorities are bound by law to allowed the deduction in case of amalgamation of the companies and the authorities has no right to recalculate the deduction u/s 10B sub section 7A. - Held that:- Reason for dismissing this ground is that there is no mandate u/s 10B(7A) to grant deduction u/s 10B without looking into the merits of the claim. This sub section (7A) only provides that where an undertaking is amalgamated then the provisions of section 10B shall as far as may be, applied to the resulting amalgamated company. It is clearly prescribed that the provisions would apply as it is to the resulting company as if the amalgamation had not taken place. Even in section 80IB(12), the Statute had drafted the same language. This is not a case that the Revenue Department had not granted claim u/s 10B or u/s 80IB on the ground of amalgamation taken place. There was no such objection of the AO that due to the amalgamation the amalgamated company should not get the benefit of those deductions. Rather as seen from the above foregoing discussion, it is very much evident that the merits of the deduct ions were duly deliberated upon by the AO and only re-captured the quantum of deduction. It appears that the provisions of the Act have not been correctly interpreted. Therefore, the additional ground raised is not as per law that the Revenue Authorities are bound by law to allow the claim of deduction u/s.10B or u/s.80IB without considering the merits or demerits as well as the correctness of the claim.

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• 2016 (5) TMI 952
  Disallowance of expenditure on computer software - Held that:- The assessee during the year also claims to have purchased similar computer software i.e. application software for upgrading its systems, hence the same is to be allowed as revenue expenditure in the hands of assessee, in line with order of Tribunal in assessment year 2002-03 in appeal filed by the Revenue. We also find support from ratio laid down by the Hon ble Bombay High Court in CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court ). The Assessing Officer is directed to allow the expenditure in totality and depreciation already allowed should be withdrawn. Disallowance of deduction under section 10(33) on dividend income earned on Master shares and other units of UTI - Held that:- The issue is decided against the assessee by the Tribunal in assessment year 1998-99. The Tribunal (supra) had taken note of the fact that up to assessment year 1999-2000, income received in respect of units of UTI were eligible for deduction under section 80L of the Act. Thus, the dividend income was not taxable. Computation of deduction under section 80HHC - Held that:- The issue arising before us is identical and we hold that receipts of income i.e. Interest on IT Refund, NSC Interest, Bank Interest and Other interest are not eligible for claim of deduction under section 80HHC of the Act. It may be clarified here that the assessee had raised issue of computation of book profits under section 115JA of the Act consequent to reworking of deduction under section 80HHC of the Act. Entitlement to claim of deduction under section 35AB @ 1/6 th of the total know-how fees paid allowed Disallowance of deduction claimed of appropriate part of exchange fluctuation loss - Held that:- The claim of the assessee before us is identical as claimed in assessment year 1998-99. Following the same parity of reasoning, we remit this issue also back to Assessing Officer, who shall determine the amount, which is to be allowed in the hands of assessee in the present year on account of exchange fluctuation loss Claim of deduction under section 80HHC - whether unabsorbed depreciation of Titex India Pvt. Ltd. is to be adjusted or not? - Held that:- The amalgamation of the said company was on 01.01.2001 i.e. during the financial year ending 31.03.2001 and after amalgamation, profits and losses of the said company gets merged with the profits and losses of the assessee before us. All the assets were taken over also get amalgamated. The said concern had carried forward unabsorbed depreciation relating to earlier years and after amalgamation, the assessee was entitled to claim set off of such unabsorbed losses of Titex India Pvt. Ltd., against its own business profits. Once such a claim is allowable in the hands of assessee, then the profits of assessee stand reduced on account of claim of unabsorbed depreciation. In order to work out the deduction under section 80HHC of the Act, such reduced profits after set off of unabsorbed depreciation of Titex India Pvt. Ltd. are to be considered for computing deduction under section 80HHC of the Act. Admittedly, the said losses relate to amalgamated company. However, unabsorbed depreciation becomes part of current depreciation of the assessee company after amalgamation and hence, the profits are to be re-computed and the profits as computed under the provisions of sections 28 and 29 of the Act are the eligible profits to be considered while computing deduction under section 80HHC of the Act. The Hon ble Supreme Court in CIT Vs. Shirke Construction Equipment Ltd. (2007 (5) TMI 194 - SUPREME Court ) had held that while determining the business profits for deduction under section 80HHC of the Act, unabsorbed business losses of earlier years under section 72 of the Act should be set off. Treatment of scrap sales in the total turnover while computing deduction under section 80HHC - Held that:- We find that the issue is squarely covered in favour of the assessee. While computing deduction under section 80HHC of the Act since the assessee has not shown export of scrap as such, scrap sales would not form part of total turnover, while computing deduction under section 80HHC of the Act. Hence, the scrap sale is excludable from both the export and total turnover for calculating deduction under section 80HHC of the Act. Setting off of loss from export of trading goods against profits from export of manufactured goods while computing deduction under section 80HHC - Held that:- This issue stands covered against the assessee by the ratio laid down by the Hon ble Supreme Court in IPCA Laboratories Ltd. Vs. DCIT reported in (2004 (3) TMI 9 - SUPREME Court ), wherein it has been held that before computing deduction under section 80HHC of the Act, losses from trading activity are to be adjusted against profits, if any, of the manufactured goods and then balance profits are eligible for claiming deduction under section 80HHC of the Act. Allowance of claim of VRS expenditure - Held that:- The assessee had incurred the aforesaid expenditure on VRS Scheme floated by it in order to reduce number of its workforce for smooth and efficient running of its business operations and hence, the said expenditure had business expediency and where the expenditure was incurred wholly and exclusively for the purpose of running business, the same is allowable as revenue expenditure. Eligible profits while computing deduction under section 80HHC - whether interest on customers and hundies, interest on MSEB/MIDC were part of business income ? - Held that:- We find that the Tribunal in assessment year 1996-97 had held that the interest received on deposits with MIDC/MSEB customers and Inter-corporate deposits part take the nature of business and hence, assessable under the head Profits and Gains of Business . Accordingly, these amounts shall be included in the business income for the purpose of relief under section 80HHC of the Act. Where there was no nexus between income earned and business activity of the assessee, the said amounts were held to be assessable as income from other sources. We find that the issue arising before us is in respect of interest on customers and hundies, interest on MSEB/MIDC and the same are to be included as profits and gains of business and are eligible for claiming deduction under section 80HHC of the Act. Loss set off against 90% of sum referred in clause (iiia), (iiib) and (iiic) in the same proportion as the export turnover as bears to the total turnover of the business - Held that:- CIT(A) had held that considering the provisions of section 80HHC(1) of the Act, that in case of loss, the effect of proviso to section 80HHC(3) of the Act would be to allow set off of loss by 90% of sum referred to in clauses (iiia), (iiib) (iiic) in the same proportion as the export turnover bears to the total turnover of business. Otherwise, it would tantamount to allow deduction under section 80HHC of the Act more than the profits derived by the assessee from export of said goods or merchandise. Therefore, the claim of the assessee was rejected by CIT(A). Accordingly, we hold that ground of appeal No.3 raised is mis-placed and hence, the same is dismissed. Exclusion of sales tax and Excise duty collected from the total turnover for the purpose of computing deduction under section 80HHC of the Act - Held that:- The present issue is squarely covered by the order of Hon ble Supreme Court in CIT Vs. Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME Court ), wherein it has been held that while computing deduction under section 80HHC of the Act and while computing total turnover, both sales tax and Excise duty cannot form part of turnover and such taxes have to be excluded from total turnover under section 80HHC(3) of the Act. Disallowance of liquidated damages by treating them as payment for infraction of law - Held that:- The assessee has furnished one set of documents. However, the assessee has failed to furnish majority of evidences justifying his claim. Though the assessee has stated that it is difficult for him to dig out the details for earlier years, however, following the principles of natural justice, we deem it fit to restore the issue to the file of Assessing Officer and direct the assessee to furnish requisite details before the Assessing Officer in order to establish its claim. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee Disallowance of set off of interest paid against interest received - Held that:- The interest paid under sections 220, 234B and 234C of the Act cannot be set off against interest received under section 244 of the Act. Whether interest under section 244A received for assessment year 1999-2000 is to be assessed in assessment year 1999-2000 itself as the assessment proceedings for the year were in progress? Held that:- The interest was computed by the Assessing Officer on 30.06.2000 and consequently, the same is includable in the hands of assessee in the year ending 31.03.2001, which has been so included by the authorities below. Further, there is no merit in the plea raised by the assessee that only interest as finally determined could be assessed in the hands of assessee

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• 2016 (5) TMI 951
  Deduction u/s.80IB denied - Held that:- Commissioner of Income-tax(Appeals) is justified in rejecting the claim of the assessee u/s.80IB of the Act as the assessee is ceased to be a small industrial undertaking. Accordingly, this ground of appeal of the assessee is dismissed. - Decided in favour of revenue

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• 2016 (5) TMI 950
  Claim of deduction u/s 80IC - Assessing officer restricted the claim of deduction u/s 80IC @ 25% as against 100% claimed by the assessee - Held that:- As relying on Hycron Electronics case [2015 (6) TMI 725 - ITAT CHANDIGARH ] assessee is entitled to only 25% of deduction during the present year because the assessee has already availed the period of full deduction @ 100% in the earlier five years - Decided against assessee Claim of Other Income being eligible for deduction U/s 80IC - Held that:- Interest received on margin money is not entitled for deduction u/s 80IC and Accordingly we uphold the order of CIT(A) to this extent. We may also observe here that the issue relating to Misc. receipts and sundry credit balances returned back -was not seriously argued and pressed before us. Accordingly, to the above extent, we uphold the order of C IT(A). As regards the issue of foreign exchange fluctuation, we are following the order of the Tribunal passed in assessment year 2010-11 and set aside the order of C IT(A) and remand the issue to the file of the Assessing officer to decide the issue as per the directions and guidelines given by the Tribunal in assessee's case in assessment year 2010-11. As regards the dividend we agree with the findings of the CIT(A) that dividend has to be specificall y charged under the head "income from other sources" u/s 56 of the Act. Furthermore, in view of the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd Vs. CIT (2003 (11) TMI 23 - MADRAS High Court ), and Liberty India Ltd. Vs. C IT (2009 (8) TMI 63 - SUPREME COURT ), the dividend received by the assessee has no direct nexus with the profits and gains derived from the manufacturing activity and industrial undertaking. Hence, this amount is not allowable for computation of profits for claiming deduction u/s 80IC of the Act. Disallowance u/s 14A - Held that:- Hon'ble Punjab & Haryana High Court in the case of C IT v Deepak Mittal (2013 (9) TMI 764 - PUNJAB & HARYANA HIGH COURT)held that the disallowance u/s 14A requires findings of incurring of expenditure where it is found that for earning exempt income, no expenditure has been incurred, disallowance u/s 14A cannot stand. When the assessee claims that he had not made any expenditure on earning exempt income, the Assessing officer in terms of sub section (2) of section 14A is required to collect such material evidence to determine, expenditure if any, incurred by the assessee in relation to earning of exempt income.In view of the above discussion, we think it appropriate to set aside the findings of the CIT(A) on this issue and remand the matter to the Assessing officer with a direction to decide the issue afresh in accordance with law after affording due and reasonable opportunity of being heard to the assessee.

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• 2016 (5) TMI 949
  Disallowance u/s 14A - whether the observations in the decision of Maxopp Investment (2011 (11) TMI 267 - Delhi High Court ) to the effect that the AO has to record reasons as to why the claim of the Assessee in respect of the expenditure incurred for making the investment for the purposes of Section 14A should be discarded was only obiter dicta and therefore not a binding precedent as far as the ITAT was concerned? - ITAT deleted the disallowance - Held that:- Decision of the Maxopp Investment (supra) specific to the issue of AO having to record reasons prior to making a disallowance under Section 14-A of the Act has been consistently followed not only by this Court in subsequent decisions but by the ITAT as well. In any event, the Court is informed that the Revenue's Special Leave Petition against the decision in Maxopp Investment (supra) is pending consideration in the Supreme Court. Apart from the fact that no specific question in that regard has been raised in the memorandum of the present appeal, the Court finds that the AO applied Rule 8D of the Rules after being unable to determine what expenditure was incurred by the Assessee for the purposes of Section 14A. Therefore, remanding the issue to the AO would have served no useful purpose.No substantial question of law arises.

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• 2016 (5) TMI 948
  NRI challenging the assessment order u/s 144 - Held that:- The Assessing Officer has recorded a categorical finding of fact that the return was filed by the petitioner as a "resident" on 31 March 2014 and the claim of the petitioner that he was a Non Resident Indian on the basis of a passport could not be substantiated by him. In this regard information was sought from the Foreigners Regional Registration Office and the department informed that the records maintained at the Indra Gandhi Airport, New Delhi, were got checked but they do not substantiate the claim of the petitioner. The Income Tax Officer, therefore, concluded that the claim of the petitioner of being a 'Non Resident Indian' remains unsubstantiated and the status of the petitioner would be that of a 'resident'. Be that as it may, we are not inclined to entertain this petition as the petitioner has an alternative remedy of filing an appeal under Section 246 (1) (a) of the Act. Section 246 (1) provides that subject to the provisions of sub- section (2), any assessee aggrieved by any of the orders mentioned therein the Assessing Officer may appeal to the Deputy Commissioner (Appeals). The orders include an order where the assessee denies his status as that of a 'resident' and claims to be 'Non Resident'. The impugned order is, therefore, clearly appealable. We, therefore, as the petitioner has a statutory right of filing an appeal under Section 246 (1) (a) of the Act, decline to entertain this petition.

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• 2016 (5) TMI 947
  Deduction under Section 80IB - denial of claim as audit report was not furnished with the return of income - Held that:- In the present case, the return of income under Section 153-A of the Act was filed on 8 April 2010 and the audit report was filed on 19 July 2011 before passing of the assessment order. The requirement, therefore, stood satisfied and the benefit of Section 80IB of the Act could not have been denied to the assessee merely for the reason that the audit report was not furnished with the return of income. It needs to be remembered that the audit report had been submitted earlier by the assessee with the return of income submitted on 18 January 2006 for the assessment year 2005-06 and only the additional benefit of Rs. 18,45,552/- under section 80IB was subsequently claimed in the return filed on 8 April 2010 as the income had increased. - Decided in favour of assessee. Entitlement to deductions under Section 40A(3) for deduction under Section 80IB - Held that:- No infirmity in the view taken by the CIT Appeals and the Tribunal nor illegality any has been pointed out by learned Counsel for the appellant. If deductions under sub-section (3) of Section 40A of the Act is not allowed then the same would have adjusted to the profits of the undertaking as a result of which it will be entitled to seek deductions under Section 80IB of the Act.- Decided in favour of assessee.

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• 2016 (5) TMI 946
  Entitlement to claim deduction under Section 80-IA - Held that:- The assessee is an individual having income from salary, business and other sources and is generating power through windmills and has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised his option and his losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills [2010 (3) TMI 860 - Madras High Court]. - Decided in favour of the assessee

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• 2016 (5) TMI 945
  Interest payable on the refund of income tax under Section 244-A - whether falls within the definition of the term interest under Article 12.4 of the Double Taxation Avoidance Agreement or not? - Held that:- Subsection (1) of Section 244-A uses two important expressions, namely (i) becomes due, and (ii) be entitled to. The expression "becomes due" is a clear indication that an assessee will be entitled to the benefit of Section 244-A only if the refund of any amount has become due. If a refund has become due, interest on the refund is also automatic subject to the satisfaction of other conditions. Anything that is due and which a person is entitled to collect, is naturally in the nature of a debt claim. Therefore, we do not think that the Supreme Court made a very stray observation in paragraph 38 of its decision in Tata Chemicals, without realising what they were actually indicating. The statement found in paragraph 38 of the decision in Tata Chemicals to the effect "refund due and payable to the assessee is debtowed payable by the revenue" is actually a perfect statement of law. It is certainly a theorem, but not Euclid's theorem. Therefore, the law as we see is well settled to the effect that what was due as a refund and what was payable as interest on such refund are debt claims within the meaning of Article 12.4. As a consequence, they satisfy the parameters of Article 12.3(a).- Decided in favour of the assessee.

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• Customs

• 2016 (5) TMI 989
  Eligibility for exemption benefit of Customs Notification No.21/2005-Cus. dt. 1.3.2005 - Import of various parts, such as PCB, Plastic casings etc. for the manufacture of Fixed Wireless Terminal - Held that:- Apex Court has settled the issue once and for all that the equipments working on FWT technology can be considered to be on par with cellular phones. This decision has also been followed by this Tribunal in many of its cases, such as in the case of Teracom Private Ltd. Vs CC Goa [2007 (10) TMI 47 - CESTAT, MUMBAI] where the matter has been discussed at very great length. Therefore, CDMA FWT equipments are on par with cellular phones and mobile handsets as held by the Apex Court. Hence the benefit given under Notification No.21/2005 which exempts parts, components and accessories of mobile handsets including cellular phones will have to be extended to parts and accessories of CDMA FWT. - Decided against the revenue

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• 2016 (5) TMI 988
  Valuation - SS Utensils exported under DEPB Scheme - Goods overvalued to claim higher DEPB benefit - Held that:- the issue stands covered by the majority decision of the Tribunal in the case of Sitaram Ramdhan & Co. Vs. Commissioner of Central Excise, Jaipur [2015 (4) TMI 1072 - CESTAT NEW DELHI] whereas it was observed that when the goods are examined by the Customs and found as per the declaration and when realization of the export proceeds in full is not disputed and when there is no evidence to show flow back from the exporter to the foreign buyer, DEPB benefit has to be extended on the basis of FOB value and not on PMV, Accordingly, by holding that restricting DEPB benefit to PMV is totally wrong, when especially there is no wrong declared in the FOB value. In as much as the said decision covers the issue in full, we by following the same, set aside the impugned order. - Decided in favour of appellant with consequential relief

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• 2016 (5) TMI 987
  Classification - Goods exported under EPCG Licence Scheme - Whether to be declared as Marble Blocks as per appellants or Silcified Limestone as per revenue - Held that:- the Geological Survey of India report reflects upon the goods to be limestone, which is nothing but marble. The said report is not available on record in as much as the same was not handed over to the assessee. We are not aware as to what were the questions put to Geological Survey of India at the time of sending all the samples. There being admittedly another report on record holding the goods to be marble and GSI's report not clearly saying that the goods were not marble, therefore the goods have to be held as marble. - Decided in favour of appellant with consequential relief

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• 2016 (5) TMI 986
  Seeking provisional release of goods - Confiscated as mis-declaration of description of goods and transaction value - Held that:- it is stated by the Respondents that if an application is made by the Petitioners in that regard not later than one week from today, the said application will be dealt with and decided by the Respondents in accordance with law not later than two weeks thereafter and the decision communicated to the Petitioners forthwith. - Petition disposed of

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• 2016 (5) TMI 985
  Refund of Terminal Excise Duty (TED), which was erroneously paid to the excise department - goods were exempted absolutely vide Section 5A - Held that:- Director General of Foreign Trade (DGFT) is directed to consider the application of the writ petitioner for refund in terms of provisions of Foreign Trade Policy (FTP) 2009-2014 and pass an appropriate order in accordance with law uninfluenced by the impugned order dated 19th February, 2013. Also he is directed to consider the orders passed in the case of M/S Gammon India Limited and in the case of M/s Vlotamp Transformers Limited. - Petition disposed of

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• Corporate Laws

• 2016 (5) TMI 983
  Application for grant of probate - Application filed by the predecessor-in-interest of the present plaintiffs who, as executor and/or propounder applied for grant of probate of the Will published by one Priyamvada Devi Birla in short P.D.B on 18th April, 1999 along with the codicil dated 15th April, 2003 to the said Will - Held that:- Board of Directors of a company is authorized to exercise its power on behalf of the company by means of resolution passed in a meeting of the Board to take over a company or acquire a controlling or substantial stake in another company even by borrowing money subject to the restriction imposed under Section 180(1)(C) of the Companies Act. There is no allegation in the petition that even the decision for implementation of the said project by borrowing money was taken by the Board of Directors contravening the provision of Section 180(I)(C) of the Companies Act, 2013. As informed that the application filed by the applicants for making “APL” functional is awaiting consideration before the Appeal court. In our view the parties should approach the Appeal Court for making the “APL” functional immediately, so that “APL” can exercise its power of control over the management of the B.C.L by following the provisions prescribed under the Companies Act and in case the “APL” fails to discharge its duty, Probate Court can pass necessary direction upon “APL” for taking steps in accordance with law, whenever such direction needs to be passed for preserving the estate of the deceased. This Court has no hesitation to hold that the Probate Court cannot pass any injunction order against a third party as third party who has no caveatable interest in the probate proceeding cannot be allowed to be added as party in the probate proceeding and also for the reason that no order can be passed effecting the right of the stranger without adjudicating his right and adjudication of his rights in the probate proceeding is impossible as Probate Court cannot decide any foreign issue unconnected with the probate proceeding. Respectfully agree with the submission of Mr. Mitra, learned Senior Counsel appearing for the plaintiffs/ Lodhas that Probate Court cannot pass any injunction order against any person who is not a party to the proceeding. However, without discussing the other contention of Mr. Chidambaram cannot arrive at this ultimate conclusion. If the averment made in the application is read conjointly with the statements made in the supplementary affidavit which were made part of these applications, this Court cannot hold that the application is devoided on any cause of action. That apart find much substance in the contention of Mr. P. Chidambaram, learned Senior Counsel that at the stage of considering the demurrer of this application, the party objecting to the maintainability of such application should demonstrate before the Court that the application is not entertainable by the Court even by accepting all the statements made in the said application as true and correct. Thus, cannot agree with the submission of Mr. Mitra, learned Senior Counsel, that the applications are devoided of any cause of action. To conclude, hold that since the decision of the Board of Directors in taking over four cement manufacturing units of Reliance Infrastructure is not subject to the control of the promoters’ controlling power over the management of the said company and further since the Probate Court cannot pass any direction and/or injunction order against any person who is not a party to the probate proceeding and further since no adjudication of a foreign issue is possible before the Probate Court in the absence of any party who has no caveatable interest in the probate proceeding, this Court holds that the reliefs claimed by the applicants in these applications, cannot be granted. The applications are thus, rejected with the observation that the estate of the deceased cannot be left uncontrolled and since the “APL” has now become defunct, the parties may approach before the appropriate forum for making such “APL” functional so that whenever the Probate Court feels necessary, the probate Court can pass appropriate direction upon the “APL” for safeguarding and/or protecting the estate of the deceased. All the applications filed by the defendants and the demurrer applications filed by the plaintiffs are, thus, disposed of with the above observation.

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• PMLA

• 2016 (5) TMI 981
  Provisional attachment order challenged - entire basement and ground floor of the property situated at E-14/3, Vasant Vihar, New Delhi belonging to Smt. Alka Rajvansh has been attached considering it as proceeds of crime - Held that:- Deputy Director, Directorate of Enforcement – the concerned officer who passed the impugned order – would require to have sufficient cause to believe that the property sought to be attached would be transferred or dealt with in a manner which would frustrate proceedings relating to confiscation of such property. Further, the officer was also required to record the reasons for such belief. However, there is nothing in the impugned order, which indicates that the concerned officer had any cause to so believe. In the present case, there is no material that could suggest that the property sought to be attached was likely to be dealt with in a manner which would frustrate the confiscation of the property under the Act. The impugned order records that the concerned officer has reason to believe that the property in question is likely to be concealed, transferred or dealt with in a manner, which may result in frustrating the proceedings relating to confiscation of the said proceeds of crime, there is no reference to any fact or material in the impugned order which could lead to this inference. A mere mechanical recording that the property is likely to be concealed, transferred or dealt with would not meet the requirements of Section 5(1) of the Act. Consequently, the impugned order is likely to be set aside. In view of the above, the petition is allowed and the impugned order is set aside. The writ petition alongwith pending application stand disposed of. The parties are left to bear their own costs.

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• Service Tax

• 2016 (5) TMI 1002
  Period of limitation - Entitlement of refund claim - Cenvat credit on input Service tax paid prior to its registration - no time limit prescribed by Rule 5 of Cenvat Credit Rules, 2004 to refund the un-utilized cenvatable credit - Held that:- so far as the grant of Cenvat credit which pertains to the pre-registration period is concerned, Hon’ble High court of Karnataka in the case of mPortal India Wireless Solutions Pvt. Ltd. Vs. CST, Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT] has laid the law. Therefore, Respondent may not be denied such credit subject to scrutiny of genuiness thereof. The Hon’ble High Court in its judgment has held that the registration is not mandatory to fulfil the statutory grant in absence of any provisions to the contrary. In so far as the conditions of grant of refund is concerned, Rule 5 prescribes certain conditions which are safeguard in nature. We have no difference to state that the Notification No. 5/2006-CE (NT) dated 14.03.2006 as amended by Notification No. 13/2007 -CE (NT) dated 01.03.2007 shall be applicable to the case of Respondent. The condition prescribed by 3(b) in the appendix of Notification is necessarily to be fulfilled along with other conditions prescribed therein. Therefore, the Ld. adjudicating authority upon remanded of this matter shall carry out scrutiny of refund claim on above terms as well the conditions prescribed by Notification concerned. - Matter remanded back

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• 2016 (5) TMI 1001
  Availment of Cenvat credit - Telephone/mobile phone and courier service - period involved is August 2013 to March 2014 - Held that:- the issue stands already decided by this Bench in the appellant's own case reported in [2016 (5) TMI 906 - CESTAT CHENNAI], therefore, by following the same the appellants are entitled to credit on telephone/mobile phone and courier services for the subsequent period also. Hence, the demand and penalty is set aside. - Decided in favour of appellant with consequential relief

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• 2016 (5) TMI 1000
  Waiver of pre-deposit - Demand of Service tax - Errection, commissioning and installation service (65 (105) (zzd) of Finance Act, 1994 - Non-eligibility for abatement under Notification No. 1/2006 inasmuch as it did not supply any plant, machinery or equipment nor had it erected, commissioned or installed such plant, machinery or equipment - Held that:- col.3 of the table appended to Notification No. 1/2006-ST providing for 67%, covers erection commissioning or installation under a contract for supplying a plant, machinery equipment and also erection, commissioning or installation of such plant, machinery or equipment. Thus, it covers erection, commissioning or installation of plant machinery and equipment even if not supplied by the service provider and 67% abatement will be available if the value of such plant/machinery equipment is included in the assessable value in accordance with Col.4. It is seen prima facie the appellant's contention gains traction that the insulation becomes part of the equipment in asmuch as without such insulation the plant or machinery or equipment cannot function and that is the reason why as per column 4 not only value of plant, machinery or equipment but also value of parts and other material sold is to be included in the assessable value for the purpose of abatement. In addition, prima facie the appellant's contention that the demand is time barred because there was no willful misstatement of suppression of facts and the appellant had included the value of the material in the assessable value before claiming abatement is not without basis. Thus, prima facie, the appellant has a fairly strong case in its favour and therefore deserves complete waiver of pre-deposit. - Decided in favour of appellant

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• 2016 (5) TMI 999
  Refund claim - Rule 5 of the Cenvat Credit Rules, 2004 - quarter July 2012 to September 2012 - Air Travel Agent's Service, Rent-a-cab Scheme Operator's Services and Telecommunication/Internet Telecommunication services - Cenvat Credit availment of July to September 2012 was wrongly shown in the S.T.3 Return for the quarter April to June 2012 for which no revised claim was filed - Held that:- even though the receipt of input is in the different period and credit was availed in the subsequent period, the period when the credit was availed is the relevant period and not the period when input/input service was received. In the present case also, it is a claim of the appellant that the Cenvat Credit was availed in July 2012 to September 2012 and not prior to that. The issue of Cenvat Credit/refund in respect of Air Travel Agent Service and Rent-a-cab service, the issue is kept open however the credit/refund in respect of telecommunication service was denied on the ground that the appellant have taken credit twice and the appellant is not contesting the same, hence the same is upheld. The matters are remanded to the adjudicating authority to pass a fresh de novo adjudication by taking into consideration my above observations. - Appeals allowed by way of remand

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• 2016 (5) TMI 998
  Period of limitation - Refund claim - filed after one year from the relevant date - Service tax paid on the output service - Business Auxiliary Services (Visa Services) - Held that:- in view of the Hon'ble Supreme Court judgment in the case of Assistant Collector of Customs Vs. Anam Electrical Manufacturing Co. [1997 (1) TMI 80 - SUPREME COURT OF INDIA] and jurisdictional Bombay High Court judgment in the case of Andrew Telecom (I) Pvt. Ltd. Vs. Commissioner of Customs & Central Excise Goa [2014 (4) TMI 507 - BOMBAY HIGH COURT, refund claim is covered by Explanation (B) (f) of Section 11B (1) of Central Excise Act 1944, as applicable to service tax vide Section 83 of the Finance Act, 1994, refund claim is not sustainable as it was filed beyond 1 year from the date of payment of service tax. Since refund of any amount is covered by Section 11B and there no other provision, this Tribunal being a creature under the Central Excise/Customs Act cannot go beyond the statute and therefore cannot relax the time limitation provided under the statute. As per my above discussion and settled legal position, I am of the considered view that the refund claim being filed after one year is hit by limitation and therefore correctly rejected by the lower authority. - Decided against the appellant

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• Central Excise

• 2016 (5) TMI 997
  Recovery of interest - excess inadmissible Cenvat Credit inappropriately taken was reversed as soon as issue brought to the notice. Also no interest is payable as Cenvat Credit Rules prevalent at the relevant time never prescribed payment of interest - Held that:- it was observed by the department that Appellant has taken credit on Ingot Moulds in the very first year to the extent of 100% when as per Rule-4 of the Cenvat Credit Rules credit was required to be taken in the first year to the extent of 50% of the total credit admissible on capital goods. Appellant paid the excess credit taken but argued that remaining credit of 50% was admissible to them in the next financial year. It is correct that Appellant was eligible to take 50% Cenvat Credit on Ingot Moulds in the next financial year but taking of 100% credit in the very first year was improper in view of the Cenvat Credit Rules. Appellant has utilized credit of Rs. 1,44,669/- in the very first year which was paid on being pointed out by the department. Appellant has, therefore, utilized the amount of Rs. 1,44,669/- from the date of taking Cenvat Credit till it was reversed/paid. This act of utilizing this amount without the authority of law, will attract interest of Rs. 6,759/- as calculated by the Adjudicating Authority. Imposition of penalty - Rule 15(1) of the Cenvat Credit Rules, 2004 - Held that:- for violation of the Cenvat Credit Rules and taking excess credit in violation of Cenvat Credit provisions a penalty of Rs. 2000/- imposed upon the Appellant is justified and appropriate. - Decided against the appellant

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• 2016 (5) TMI 996
  Recovery of Cenvat credit - sponge iron not used in the manufacture of final product as they were lost in fire - received amounts through insurance claim against loss due to fire - Held that:- no evidence or verification has been discussed to support the case of denial of Cenvat credit by the Revenue. As per the statutory records of raw materials and as per claim of the appellant the said raw materials have been used for intended purpose. The compensation of insurance company is for damage to the quality of the raw material. Though the appellant did not produce any documentary evidence to substantiate such claim it is also a fact that Revenue did not produce any evidence of total loss of the said raw materials except referring to the claim and payment with reference to insurance. In the absence of categorical assertion of total loss with evidence, the statutory records maintained by the appellant are to be relied upon. The impugned order is not sustainable and set aside. - Decided in favour of appellant

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• 2016 (5) TMI 995
  Imposition of penalty - Rule 25 (1) (a) and (d) of Central Excise Rules, 2002 - Availed value based SSI exemption under Notification No. 8/2003-CE dated 1/3/2003 - Appellant deposited entire amount of short levy alongwith interest as soon as mistake was pointed out - Held that:- there is nothing on record to suggest as to why appellant was under the impression that SSI benefit under Notification No. 8/2003-CE was admissible to them during the financial year 2009-2010. Only the appellant was aware that value of clearances during the financial year 2008 & 2009 have crossed Rs. 4.00 crores and that appellant is not eligible to SSI exemption during 2009-10. By not discharging the appropriate Central Excise duty, the Central Excise Rules have been violated as per the penal provisions contained in Rule 25 (1) (a) & (d) of the Central Excise Rules, 1944. The conduct of the appellant by not resorting to payment of Central Excise duty during the relevant period indicates intent to evade Central Excise duty which could have escaped had it not been detected by departmental officers. Therefore, the provisions contained in Section 11A (2B) of the Central Excise Rules, 1944, applicable at the relevant time were not applicable to the case of the appellant. At the same time it is observed that penalty imposed by the lower authorities is not equivalent to the 100% of the duty sought to be evaded by the appellant. Penalty imposed is roughly 25% of the duty sought to be evaded and is justified. - Decided against the appellant

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• 2016 (5) TMI 994
  Confiscation in lieu of redemption fine and imposition of penalty - raw material, semi-finished goods and finished goods available inside the premises, not fully accounted for - Small scale unit involved only in drawing of copper wire, claiming small scale exemption under Notification No. 8/2003-CE dated 01/3/2003 - Held that:- before seizure it is necessary to have a prima facie opinion regarding dutiable nature of the goods. The appellant was not registered with the Department. The point of their liability to Central Excise duty has not yet been established. Further, it is not clear as to which of the private records recovered were scrutinized and compared with the physical stock of various goods seized after the search of the premises. As such, it would appeared that the confiscation of the goods without even ascertaining the dutiable nature of the goods is not sustainable. Since the penalty followed on such confiscation, the same also cannot be sustained. - Decided in favour of appellant

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• 2016 (5) TMI 993
  Correctness of confirmation of recovery of an amount as duty - Rule 3(5A) of Cenvat Credit Rules, 2004 - Waste and scrap of Iron and Steel cleared - Scrap items have emerged during the miscellaneous construction activity inside the factory and on these items credit was never taken as capital goods - Held that:- I find that to counter the categorical assertion of the appellant that these scrap materials were not connected to any capital goods on which credit has been availed no enquiry or finding has been recorded by the lower Authorities. To apply above-mentioned Rule, it is necessary to give a finding that the capital goods on which the credit was availed are cleared as waste and scrap. Such assertion with supporting evidence is not available in the impugned order. Accordingly the same could not be sustainable. - Decided in favour of appellant

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• 2016 (5) TMI 992
  Extended period of limitation - Demand of consequential duty and imposition of penalty - Denial of discount - Non-compliance of prescribed condition of Notification No. 245/83 - Appellant while claiming the discount of the price list have withheld vital information in as much as they have not submitted the documents showing the medicines has been specified in the DPCO 1987 and not declared at the footnote of the price list that the medicines figured in DPCO - Held that:- Member (J) found that there is no suppression of the fact on the part of the appellant in as much as they have correctly declared all the details required in their price lists. Therefore it was only normal period of one year available to the department to re-open the approval of price list which the department failed to do so and therefore entire demand raised for the extended period is time barred. Member (T) held that in absence of evidence to substantiate the claim that the prices are approved under DPCO, the assertion made on the price list submitted to revenue under Central Excise Law amounts to mis-declaration with intent to fraudulently avail the exemption. Therefore, the extended period of limitation has been rightly invoked. Difference of opinion - The Registry is directed to put up the file before the Hon'ble President to resolve the issue, by reference to a third Member.

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• 2016 (5) TMI 991
  Valuation with respect to deductions/additions of Bank charges, Interest in Excess of CSD, Advertisement & Sales Promotion, Below the line expenses (BTL) & interest on Trading and quantification of duty - Cigarettes and smoking mixture - assessments were kept provisional due to pending post manufacturing expenses (PME) - excess recovery of amounts by wholesale Dealers a part of which was also reaching the appellant. Held that:- it is observed from the case records that issues of valuation dispute relating to Bank charges, Interest in Excess of CSD, Advertisement & Sales Promotion, Below the line expenses (BTL) & interest on Trading have been decided by Jurisdictional Adjudicating authorities at Bangalore, Parel, Saharanpur & Kidderpore factories in the light of ratio laid down by Apex Court . It is submitted by the Advocate of the appellant that orders passed by the above adjudicating authorities have been accepted by the department on these deductions/additions and also the method of quantification. This fact can be verified by Adjudicating authority of Munger factory and if what is stated by the Learned Advocate of the appellant is found to be true then the same ratio laid by other jurisdictional adjudicating authorities has to be followed by AC/DC in charge of Munger factory, including the method of quantification of differential duty. This bench has not made any observations on the merits of the case. The same has to be decided by the Adjudicating authority on the basis of orders passed by adjudicating authorities at Bangalore, Parel, Saharanpur and Kidderpore factory and also the ratio laid by Apex Court on these deductions. - Appeals allowed by way of remand

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• 2016 (5) TMI 990
  Ineligibility for availment of Cenvat credit and imposition of penalty - Goods sent to the job-worker without payment of duty - not received back before the expiry of 180 days therefore paid duty - Held that:- there is no dispute that the amount paid by the manufacturer on capital goods sent to the job worker, was duty. As a consequence, a recipient of the goods was entitled to avail the duty paid as credit. However, the entitlement under Rule 4(5)(a) is restricted only to a period of 180 days. Since the job worker did not return it within the period stipulated, the manufacturer reversed the Cenvat credit and raised revised invoices upon the job worker and the Tribunal thought there was nothing wrong. The fact remains that duty has been paid and the Cenvat Credit is claimed only once. Therefore, the twin components that are required to be satisfied are satisfied in this case. Hence, nothing found wrong with the order of the Tribunal. - Decided against the revenue

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• CST, VAT & Sales Tax

• 2016 (5) TMI 984
  Applicability of Section 50 of the GVAT Act, 2003 - Movement of goods post-delivery to the CSA - Liability of tax - Tax already deposited under protest and CSAs have also sought further installments to pay such amount - Held that:- the respondents shall provide all the books of account to the petitioners as well as any of the hard-disks seized by them to enable the petitioners to respond to any of the queries raised by the Value Added Tax Department. No coercive steps shall be taken against the petitioners like provisional attachment or recovery till the finalization of all the assessments and till the statutory time limit for such payment post passing of such assessment orders has elapsed. In case the assessments are made beyond the statutory limits as per section 34 of the GVAT Act, the rights of the petitioners to challenge any of the proceedings on the ground of jurisdiction or limitation shall be left open. - Petition disposed of

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• Wealth tax

• 2016 (5) TMI 980
  Valuation of immovable properties - matter refereed to Department Valuer for determining the fair market value - Held that:- While deciding the issue in favour of assessee ld.CWT(A) has given a finding that identical issue about the valuation of same property arose in assessee’s case for AYs 1987-88 & 1988-89 and that the Co-ordinate Bench of Tribunal had decided the issue in favour of assessee. Accordingly, the claim of the appellant that the valuation proposed by it on the basis of registered valuation report should be accepted appears to be justified and is acceptable. The valuation made by the AO is therefore, set aside and that filed by the appellant is directed to be adopted

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• Indian Laws

• 2016 (5) TMI 982
  Debt Recovery order - sale of property was ordered to be cancelled and was set aside - Held that:- No question of limitation arises either. Article 127 of the Limitation Act is premised on the case falling under Order 21 Rr 89-91 of the Code of Civil Procedure, 1908. Those provisions are inapplicable to a case where a sale has been set aside on account of a default on the part of the purchaser in complying with the terms and conditions of the sale. Further, it appears to us that the sale would be governed primarily by Clause 21 of the Terms and Conditions read with Rule 57 of the Second Schedule to the Income Tax Act, 1961. The issues about ‘non-disclosure’ of UPSDIC dues and the consequences of a workers’ agitation are, to our mind, nothing but a diversion. The sale terms are clear. It was on an ‘as is where is’ and ‘as is what is’ basis, coupled with a ‘no complaint’ and ‘no recourse’ condition. Clause 25 of the approved Terms and Conditions of sale made it the absolute and sole obligation of the Petitioner to obtain UPSIDC consent and to clear all dues. The sale was sanctioned in favour of the Petitioner on 16th October 2007. For the next five years, till 18th February 2011, the Petitioner failed to clear those dues. It can hardly be heard to complain now. The fact that there were several workmen of Daewoo was also known to all. Those workmen had intervened in the Appeals filed by unsuccessful bidders before the Presiding Officer of the DRT. They supported at first the Petitioner’s offer. This finds mention in the order of 28th September 2009. We must observe that this does not appear to us to have been attempt to revive the unit or a genuine offer to rehabilitate the unit and provide employment to the workmen of Daewoo. It appears to us to have been little more than an attempt to get possession and control of a huge tract of land and turn it to real estate development. The record indicates that at no point was any attempt made to run the plant. The existing facilities were totally gutted, down to the wiring and window frames being removed and the entire structure being stripped bare and rendered unusable. Significant too is the fact that the Petitioner sought change of user from industrial to residential, another factor that is not brought out in the Petition at all. The Petitioner took the property under an order of a Court, without then questioning it. It took it subject to terms and conditions. It accepted those conditions. It sought time, repeatedly, to fulfil those conditions. It did not. It says that Consent Terms filed in that very Court were binding, but also now says that that very Court had no jurisdiction ab initio. If there is an estoppel, it must run against the Petitioner, not in its favour. In the facts and circumstances of the case, we believe we would be utterly remiss in our duty if we failed to impose costs in a matter such as this. We cannot escape the finding, established by this voluminous record, that the Petitioner has played fast and loose not only with the Recovery Officer, the DRT and the DRAT but also with this Court. The Petition is wanting in candour. Wholly incorrect statements were made include about the issuance of the necessary debentures and about the property being kept insured, as also of the so-called ‘investment’ made by the Petitioner in the unit. What emerges from this is a picture of the Petitioner trying by every means possible to grab this enormous tract of land, turn it to a residential development project, no doubt at a huge profit to itself, without satisfying workers’ dues or the dues of UPSIDC and without satisfying the Recovery Certificate in execution of which the sale was conducted in the first place. The atempt seems to have been to get this land at nothing but the initial upfront price. We believe it is about time that litigants learnt the price of dishonesty in court, and learnt, too, that the days when this Court would, for whatever reason, take a lenient view are very firmly in the past. We have our eyes to the future. That includes the economic, financial and developmental future of the country. That concern is ill-served by litigants who clog up the courts and consume judicial time pursuing false cases. There is no merit in the Petition. It deserves to be dismissed, and it is. It also deserves to be visited with costs, and it is. These costs quantified at Rs. 10 lakhs payable to ARCIL. This is over and above the costs payable to Mr. Talekar.

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