TMI Tax Updates - e-Newsletter
May 26, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Computation of interest on service tax to be done after adjustment of service tax payable in the import of services under reverse charge

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• Donation received against management quota seats spent for the purpose of education - exemption u/s 11 allowed - Tri

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Articles

1. INDIRECT TAX DISPUTE RESOLUTION SCHEME (PART-2)

   By: Dr. Sanjiv Agarwal

2. Indirect Tax Dispute Resolution Scheme, 2016: Overview

   By: Bimal jain

News

1. Minister of Railways launches three more Budget Announcement 2016-17 namely (1) Extension of newly introduced cancellation facility for PRS counter tickets through 139 or IRCTC website for all confirmed, RAC and waitlisted PRS Counter tickets (2) Release of Handout on ‘Railway initiatives for Ease of Doing Business’ and Nomination of ‘Key Customer Managers’ and (3) Flagging off of Roll-On-Roll-Off(Ro-Ro) train Ex.-Bihta to Turki in Bihar

2. Customer Service in Banks: Caveat Venditor (Shri S. S. Mundra, Deputy Governor - May 23, 2016 - at the Conference of the PCCOs organized by BCSBI, Mumbai)

3. Financial restructuring of Hindustan Fertilizer Corporation Limited for faster revival of Barauni Unit

4. Cabinet gives ex-post facto approval to the proposal of M/s Yes Bank Ltd. for increase in the foreign investment limit from 41.87% to 74%

5. RBI Reference Rate for US $

Notifications

Companies Law

1. G.S.R. 540 (E) - dated 23-5-2016 - Co. Law

Companies (Corporate Social Responsibility Policy) Amendment Rules, 2016

Customs

2. 76/2016 - dated 18-5-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

3. 75/2016 - dated 18-5-2016 - Cus (NT)

Appoints the Commissioner of Customs Nhava Sheva Raigad, Maharashtra

4. 74/2016 - dated 18-5-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

5. 73/2016 - dated 18-5-2016 - Cus (NT)

Appointment of Common Adjudicating Authority

FEMA

6. 368/2016-RB - dated 20-5-2016 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Seventh Amendment) Regulations, 2016

Income Tax

7. S.O.1532 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Haroa Al-Jamiatul Islamia Darul Uloom Kalikapur, West Bengal

8. S.O.1531 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Barasat Anweshan, West Bengal

9. S.O.1530 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Shree Panchmahal Anusuchit Jati Education Trust, Panchmahal, Gujarat

10. S.O.1529 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Udavum Karangal, Chennai

11. S.O.1528 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Madras Egmore Lions Blood Bank & Research Foundation, Chennai

12. S.O.1527 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Surat Manav Seva Sangh, Surat, Gujarat

13. S.O.1526 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - “Iskcon Food Relief Foundation, Mumbai

SEZ

14. S.O. 1806(E) - dated 17-5-2016 - SEZ

De-notification of certain area for High tech Engineering products and related goods and services at Padubidri, District Udupi in the State of Karnataka

Highlights / Catch Notes

Income Tax

• Court Rules Loss on Demerger Can Be Debited to Profit and Loss Account u/s 115JB, Not Against Reserves.

  Case-Laws - AT : Allowability of loss on demerger in the computation of book profit u/s 115JB - MAT - the observation of the AO that such loss could not be debited to the profit and loss account and ought to have been adjusted against the reserve of the assessee company is not Correct - AT
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• Income Tax Act Section 221(1): Discretionary Penalties for Non-Compliance; Assessing Officers Consider Circumstances Before Imposing Penalties.

  Case-Laws - AT : Levy of penalty u/s. 221(1) - Reading of Sec. 221 shows that the Explanation wherein as “may” not “shall” which is subjective of the fact that imposition of penalty is neither automatic nor mandatory. The discretion is left with the A.O to decide whether to impose penalty or not, by considering the explanation of the assessee. - AT
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• Consultancy Charges for Managing Director Reclassified as Professional Income, Not Salary, per Board Minutes and Form 16A.

  Case-Laws - AT : Salary income or professional income - Amount received by the managing director as consultancy charges - the assessee is a consultant to the company as per the minutes of Board of Directors and form no.16A was issued on such terms and conditions agreed between them - AO directed to exclude the professional income clubbed in salary income - AT
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• Profits from Slot Hire in International Traffic Taxed Only in Indonesia u/s 172(4) for Non-Resident Shipping Businesses.

  Case-Laws - AT : Assessment u/s 172(4) - Shipping business of non-residents - The profits earned by the assessee in respect of the slot hire operations, or for that purpose any other part of the business of operations of ships or aircraft in international traffic, are taxable only in the country of its fiscal domicile, i.e. Indonesia. - AT
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• Section 11 Exemption Denied: Organization's Land Auctions Deemed Non-Charitable, Disqualifying Tax Benefits.

  Case-Laws - AT : Exemption u/s 11 denied - charitable activity or not - It has been making money by putting the land on auction after taking a reserve price. This activity cannot be said to be a charitable activity - AT
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• Capital Gain from Cooperative Housing Flat Classified as Long-Term Since Share Certificate Allotment Date.

  Case-Laws - AT : Since the assessee has acquired the right in the flat in the CGHS from the date of allotment of share certificate in his favour, the capital gain accrued to the assessee is in the nature of long term capital gain - AT
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• CIT's Revision u/s 263 Invalidated Due to Lack of Record Examination in Accommodation Entries Case.

  Case-Laws - AT : Revision u/s 263 - providing accommodation entries - Section 263 requires the CIT to consider the order erroneous after examining the records of the proceedings. Here in this case no record of the assessee has been called and examined for holding the order erroneous - Revision is not valid - AT
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• Anonymous Donations to Religious Trusts Exempt from Section 115BBC of Income Tax Act.

  Case-Laws - AT : Anonymous donations made to religious trust will not come within the purview of the provisions of sec.115BBC of the Act. - AT
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• Revised Income Tax Return Fails to Comply with Section 115JB MAT Conditions; Original Return Was Compliant.

  Case-Laws - AT : MAT - the profit declared in the original return of income was as per the requirement of section 115JB of the Act and the profit declared in the revised return does not meet the conditions laid down in the said section. - AT
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• Penalty Confirmed for Assessee u/ss 271D and 271E for Failing to Justify Cash Borrowing as Business Commitment.

  Case-Laws - AT : Penalty passed u/s.271D and 271E - assessee has not brought on record any material to show that due to business commitment, the assessee has borrowed money in cash - levy of penalty confirmed - AT
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• Payments to Retail Concessionaires Not Commission, Section 194H of Income Tax Act Not Applicable.

  Case-Laws - AT : TDS - the amount paid by the assessee to its retail concessionaires is not in the nature of commission which attract the provisions of section 194H - AT
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• Tax Penalty Cannot Be Imposed Without Clear Default u/s 271(1)(c) in Notice to Taxpayer.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Mere mentioning of the default in the assessment order may not be sufficient. Notice issued to the assessee does not specify the default of the assessee - No penalty - AT
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• Exemption u/s 11 Upheld: Donations for Management Quota Seats Used Solely for Educational Purposes, Not Trustee Benefit.

  Case-Laws - AT : Denial of exemption u/s. 11 - Donation received against management quota seats - donations are spent only for the purpose of education and no part of the funds of the trust has been diverted for the personal benefit of any of the trustees - exemption cannot be denied - AT
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Customs

• High Court Approves Cross-Examination of Key Witnesses in Customs Case to Ensure Fairness and Uphold Natural Justice.

  Case-Laws - HC : Seeking cross-examination of two persons whose statements were relied upon while issuing the SCN - Cross-examination allowed - HC
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FEMA

• Amendment to Foreign Exchange Regulations Streamlines Security Transfers by Non-Residents in India, Enhancing Transparency and Compliance.

  Notifications : Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Seventh Amendment) Regulations, 2016 - Notification
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Corporate Law

• Amendment Enhances Corporate Social Responsibility Rules: Companies Must Align CSR Activities with Social Welfare and Sustainable Development Goals.

  Notifications : Companies (Corporate Social Responsibility Policy) Amendment Rules, 2016 - Notification
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Wealth-tax

• Residential Building Not Taxable Under Wealth Tax Act Due to Letting Period Less Than 300 Days.

  Case-Laws - AT : Scope of Assets u/s 2(ea) of Wealth Tax Act, 1957 - inclusion of residential building let out and only for brief period the property was vacant - Letting out period is less than 300 days - it was legally in existence only for a period of 92 days - Not a taxable assets - AT
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Service Tax

• High Court Upholds Tribunal's Decision: No Demand Against Assessee Due to Unclear Show Cause Notice and Order.

  Case-Laws - HC : SCN as well as the Adjudication Order are vague as to the taxable service performed by the Assessee - No demand - Order of Tribunal in favor of assessee sustained - HC
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• Interest on Unpaid Service Tax Can Be Adjusted if Reconciled with Imported and Output Services in Same Cycle.

  Case-Laws - AT : Computation of interest on service tax not paid or delayed paid - adjustment of service tax payable in the import of services as well as paid on the output service can be permitted as long as the liability is adjusted within the same service payment cycle.- AT
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Central Excise

• Grey fabric classified as intermediate products u/r 16(B) affects excise duties and obligations for appellants.

  Case-Laws - AT : Whether grey fabric manufactured by the appellants and sent by them to the job worker is required to be treated as intermediate products so as to invoke provision of rule 16(B) - Held Yes - AT
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• Interest Payment Required Under Central Excise Act Section 11A; No Penalty Imposed Despite Interest Upheld Per Section 11AB.

  Case-Laws - AT : Recovery of interest and imposition of penalty - Valuation - The duty was confirmed u/s 11A of the Act. As per Section 11AB when the duty is determined u/s 11A interest is required to be paid consequently u/s 11AB - levy of interest confirmed - no penalty - AT
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• Cenvat Credit Allowed on Debit Note if Rule 4A Service Tax Rules, 1994 Information is Included.

  Case-Laws - AT : Cenvat credit can be allowed in the debit note if it contains the informations as required under Rule 4A of Service Tax Rule, 1994. - AT
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• Appellant Granted Cenvat Credit for Security, Fettling, and Architectural Services Used Outside Registered Factory Units.

  Case-Laws - AT : Entitlement of Cenvat credit - Input Services not received in the registered unit - appellant is entitled for the Cenvat Credit in respect of Security Services, Fettling Contract Service & Architectural Services used outside the factory of the appellant in their own Hinjewadi & Wai unit - AT
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VAT

• Bitumen Emulsion Classified as Bitumen for 5% Tax under Entry 14, Part-I, Schedule C of WBVAT.

  Case-Laws - HC : Whether bitumen emulsion should be regarded as bitumen and covered by Entry 14 of the list of goods taxable at five per cent in Part-I of Schedule C to the WBVAT - the bitumen emulsion is more relatable to the entry covered by bitumen rather than the residuary entry in Schedule CA - HC
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• TNSEZ Act Sec 12(1)(a) exempts developers from sales and purchase taxes, aiding inter-state stock transfers in SEZs.

  Case-Laws - HC : Liability of purchase tax - Inter-state stock transfer - Section 12(1)(a) of TNSEZ Act, 2005 exempted a developer or entrepreneur from the levy of taxes both on the sale as well as the purchase of goods, under the Tamil Nadu General Sales Tax Act, 1959 - HC
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Case Laws:

• Income Tax

• 2016 (5) TMI 1035
  Addition for claiming the loss without the support of audited accounts - losses are claimed by the assessee on the investigation report carried out by KPMG - CIT(A) deleted the addition - Held that:- Supreme Court in the case of Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME Court ) we find that income tax should be levied on the real profits. The real profit should be worked out on the basis of accounting principles and in the ordinary course of commercial trading. The accounting entries made in the books of accounts which are not in the conformity with accountancy principles cannot be regarded as conclusive evidence with regard to the actual profit or loss of the company. What is necessary to consider is the true nature of transaction whether resulting in profit or loss. In the instant case, we find that there were several financial irregularities as reported by KPMG but the AO rejected the same instead of verifying the genuineness of the report by holding that the matter is pending in the court of law. In our considered view the real income should be brought to tax and the AO should not merely rely on the data submitted by the assessee. Therefore we do not find any infirmity in the order of Ld CIT(A) - Decided against revenue Addition on account of excess depreciation claimed in the revised return of income - Held that:- AO disallowed the excess depreciation claimed by the assessee in the revised return of income on the ground that the revised return of income was not supported with the Tax Audit Report. However, we further find that the AO did not point out any defect in the working of excess depreciation claimed by the assessee. Now in our view, it is not appropriate on the part of the AO to disallow the excess depreciation without giving any findings in the claim of the assessee. - Decided against revenue Addition on account of provisions written back without having the supporting evidence - Held that:- The remand report of the AO that in the earlier years the provisions were disallowed by the assessee in the computation of income. Accordingly, in our view, the provision written back should be allowed as deduction from the total income of the assessee - Decided against revenue Profit declared in the original return of income held as book profit for the purpose of Section 115JB by CIT(A) - Held that:- Section 115JB of the Act starts with nonobstante clause ‘Notwithstanding anything contained in any other provision in this act, meaning thereby that the Section 115JB shall be applicable notwithstanding anything contained in any other provision of the Act and shall have overriding effect upon other provisions of the Act. The Section 115JB stipulates payment of Minimum Alternate tax based upon the book profit computed as per provisions of Section 115JB(2) of the Act. Book Profit shall be computed as per Section 115JB(2) of the Act which stipulates that Book Profit means net profit as shown in Profit and Loss Account prepared for financial year in accordance with Part II and III of Schedule VI to the Companies Act, 1956, also complying with other conditions as stipulated in Section 115JB(2) of the Act. Such book profit has to be increased by item Nos. (a) to (k) of the Said Explanation 1 to Section 115JB of the Act if they are debited to the Profit and Loss Account and from such profit item Nos. (i) to (viii) of the Explanation are to be reduced. The figure arrived at after the above exercise is the book profit of the assessee for the relevant previous years. In the instant case the profit declared in the original return of income was as per the requirement of section 115JB of the Act and the profit declared in the revised return does not meet the conditions laid down in the said section. Therefore we are of the view that there is no infirmity in the order of Ld. CIT(A) - Decided against the assessee.

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• 2016 (5) TMI 1034
  Applicability of section 115BBC to the donations received by the appellant trust by way of pooja and hundi collections - Held that:- Anonymous donations made to the wholly charitable and religious trust, institution with a specific direction that donations is for any university or educational institution or any hospital or other medical institution run by them can only be treated as anonymous donations. Anonymous donations made to religious trust will not come within the purview of the provisions of sec.115BBC of the Act. Thus, the order of the CIT(A) is in consonance with the plan provisions of the Act holding that 115BBC is not attracted to the donations received by the appellant trust by way of pooja and hundi collections. - Decided against revenue

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• 2016 (5) TMI 1033
  Gain arising from transfer of flat in National Co-operative Group Housing Society as Short term or long term in nature - Held that:- Since the assessee has acquired the right in the flat from the date of allotment of share certificate in his favour, the capital gain accrued to the assessee is in the nature of long term capital gain, whereas computation of the same varies on account of payments made by the assessee on different dates towards acquisition of the flat. Accordingly, we set aside the order of the CIT(Appeals) and restore the matter to the Assessing Officer with a direction to recompute the long term capital gain as per law. - Decided in favour of assessee for statistical purposes.

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• 2016 (5) TMI 1032
  Allowability of loss on demerger in the computation of book profit u/s 115JB - MAT - Held that:- The claimed loss was disclosed by the assessee in the profit & loss account as an extraordinary item and such loss was arrived at by reducing the same from the book value of the asset transferred and further the treatment as given by the assessee to the loss, arose on demerger is in accordance with part II & III to schedule VI of the Companies Act and such demerger was approved by the Hon’ble High Court vide order dated 19/09/2008. Even otherwise, as mentioned earlier, the statutory auditors have accepted the book treatment in respect of loss arose on account of demerger, thus, we are not in agreement with the observation of the Ld. Assessing Officer that such loss could not be debited to the profit and loss account and ought to have been adjusted against the reserve of the assessee company. The starting point for computation of book profit u/s 115JB of the Act is the net profit as shown in the profit & loss account for the relevant previous year In the present case, such amount is the loss of Rs. 66,86,13,773/-. There is no concept like multiple profit in the profit & loss account. It is well settled proposition of law that, as per explanation-1 below section 115JB(2) of the Act, only adjustment as permitted to the book profit are those as provided in the said explanation. The purpose of section 115JB of the Act is to provide an alternative method of computation of tax by accepting the book profits as shown by the assessee, albeit with certain adjustment as specified in Explanation-1 to section 115JB(2) and levying tax thereon as alternative to the tax computed under the other provisions of the Act. Assessing Officer wrongly disputed the correctness of the accounts of the assessee. - Decided in favour of assessee.

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• 2016 (5) TMI 1031
  Levy of penalty u/s.221(1) - default of non-payment of self-assessment tax - Held that:- Reading of Sec.221 of the Act shows that the Explanation wherein as “may” not “shall” which is subjective of the fact that imposition of penalty is neither automatic nor mandatory. The discretion is left with the A.O to decide whether to impose penalty or not, by considering the explanation of the assessee. This fact is evident from the provisions of section itself that mandatory opportunity of being heard has to be given to the assessee before imposition of penalty. Thereafter, the A.O considering the explanation of assessee have discretion to impose penalty. As seen from the discussion in earlier para, assessee explained the reasons. In our opinion, there exists good and sufficient reason not levy penalty. The AO was not going by any of the explanation given by the assessee with non-speaking order to impose penalty at 10% of self-assessment tax including interest. The Ld. CIT(A) enhanced it to 25% of that one. The action of both the Authorities is not appropriate. Since the assessee show cause for delay in payment of self-assessment tax, accordingly, we delete the penalty u/s.221(1) of the Act. - Decided in favour of assessee

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• 2016 (5) TMI 1030
  Penalty passed u/s.271D and 271E - borrowing the money in cash - Held that:- For the asst. year 2008-09, the assessee borrowed Rs. 20 lakhs and deposited by the assessee in bank account No.32 with UCO Bank. Thereafter the amount was transferred to M/s. ICICI Bank account. Similarly for the asst. year 2009-10, the assessee borrowed Rs. 20 lakhs and deposited with UCO Bank and M/s. ICICI Bank. For the asst year 2010-11 also, the assessee borrowed Rs. 20 lakhs in cash and deposited by him in UCO Bank and M/s. SBI. For the asst. year 2001-12, the assessee borrowed Rs. 20 lakhs and Rs. 50 lakhs and deposited in the account of SBI. Though the assessee is having bank account, he borrowed the money in cash and later deposited the same in the bank accounts. The ld. AR pleaded that due to urgency and compulsion, money was repeatedly borrowed in cash. The assessee has not explained the nature of urgency or compulsion. The provisions of sec.273B of the Act comes to the rescue of the assessee, if the assessee show reasonable cause for borrowing the money in cash. This is the case, where the assessee is having bank account, repeatedly borrowing the money in cash with gross violation of the Act. The plea of the ld. AR is that the creditors are genuine and confirmed by the parties and there was no revenue loss to the Department. Had it been, the creditors are not genuine, the AO would have invoked the provisions of sec.68 of the Act. The question of revenue loss is not a reason to consider the levy of penalty u/s.271D of the Act. The provisions of sec.269SS of the Act is constitutionally valid in view of the judgment of ADIT v. Kum A.B.Shanthi (2002 (5) TMI 4 - SUPREME Court ). Further, business exigencies shall be supported by evidence. The assessee has not brought on record any material to show that due to business commitment, the assessee has borrowed money in cash. There was no sufficient balance on the date of borrowing of cash and he has not placed any evidence to establish that there was bank balance on the date of borrowing. Thus we are inclined to reverse the order of the CIT(Appeals) in deleting the penalty and confirming the penalty levied u/s.271D of the Act for all these assessment years. - Decided against assessee

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• 2016 (5) TMI 1029
  Salary income or professional income - Amount received by the managing director as consultancy charges - TDS was deducted u/s 194J - Disallowance of expenditure land and professional income is treated on par with salary income of the assessee - Held that:- The assessee is eligible to receive consultancy fees and claim expenditure. The nature of expenditure being travelling, lodging, conveyance incurred at various places of Thermal power station, refinery and such expenditure was incurred wholly and exclusively for the purpose of profession and due to expertise opinion of the assessee, the company could fetch export orders and improved the brand image which is not disputed by the Assessing Officer The assessee being professional and employees are below the limit for applicability of ESI and PF provisions. The assessee most of time is out stations and electricity bills are meagre and claimed in his personal account. At the time of hearing ld. Counsel drew our attention to the statement of salary and professional income received for assessment year 2006-07 and 2007-08 explaining with comparable turnover of the company and export turnover. The assessee is rendering service for past several years and connected with the company and due to his efficient advice the company could able to increase its turnovers. We found as per the provisions of section 17 of the Act which includes certain items of receipts as salary but in order that a particular receipt is treated as salary, it is fundamental requisite that employee and employer are related by agreement and any income derives from connection is treated as salary. But in receipt of professional income of B21,66,939/-, the assessee is a consultant to the company as per the minutes of Board of Directors and form no.16A was issued on such terms and conditions agreed between them. Therefore, we are of the opinion that the assessee has provided expertise in product management of the business due to national and international experience in the field of Boilers and has rightly offered the income under the profession and claimed establishment expenditure. Therefore, we direct the Assessing Officer to exclude the professional income clubbed in salary income and we allow the appeal of the assessee.

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• 2016 (5) TMI 1028
  TDS u/s 194H - whether amount to retail concessionaires is in the nature of commission to attracts TDS provisions? - Held that:- Respectfully following the decision of Hon’ble High Court of Delhi in the case of CIT Vs. Mother Diary India Ltd.(2008 (12) TMI 436 - ITAT DELHI ), we are of the opinion that the arrangement between assessee and its retail concessionaire is not in the nature of principal to agency basis and which is principal to principal basis. Therefore, the amount paid by the assessee to its retail concessionaires is not in the nature of commission which attract the provisions of section 194H of the Act. The CIT(A) has rightly deleted the additions made by the A.O. We do not see any reasons to interfere with the order passed by the CIT(A) - Decided in favour of assessee

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• 2016 (5) TMI 1027
  Revision u/s 263 - assessee providing accommodation entries - Held that:- The first reason was that the AO could not verify the genuineness of the assessee in accordance with the query raised from the office of income tax- Delhi. The query was raised that the assessee might be engaged in providing accommodation entries to M/s Skyline engineering contracts India private Limited. So it was required by Delhi income tax office to verify genuineness of assessee’s business by making field enquiries but it was not made by the AO. In our view this cannot be the reason to make an opinion that the order passed by the AO is erroneous and prejudicial to the interests of the revenue. This is because section 263 requires the Commissioner of income tax to consider the order erroneous after examining the records of the proceedings. Here in this case no record of the assessee has been called and examined for holding the order erroneous, therefore we disagree with the view of the ld. CIT. Assessee has claimed sales promotion expenses and repair & maintenance expenses without proper enquiry and examination of the records - Held that:- It is settled law that the commissioner of income tax can exercise his jurisdiction u/s 263 of the Act only in cases where no enquiry is made by the Assessing Officer. In the instant case, it is admitted by the Income Tax Department that the Assessing Officer had made some enquiries though according to them it was not a proper enquiry. In view of the above we find no reason to hold the order of the AO erroneous and prejudicial to the interest of the Revenue. Non disclosure of sale of property - Held that:- As from the provision of the section 263 of the Act we find that the CIT is bound to make necessary enquiry before arriving at the conclusion that order is erroneous and prejudicial to the interest of Revenue. In the instant case the CIT should have enquired from the office of sub registrar jitaran, Rajasthan to ascertain whether there was any transaction of sale of the property. In our view the CIT held the order of AO erroneous and prejudicial to the interest of revenue without making necessary enquiry. Accordingly we are inclined to reverse the order of the CIT passed under section 263 of the Act. - Decided in favour of assessee

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• 2016 (5) TMI 1026
  Exemption u/s 11 denied - non charitable activity - Held that:- Huge profits have been made by the assessee in these years. If that be so, where is the element of charity? The activity of developing roads, park or laying of sewerage land are not to be seen representing a charitable act. These are just to demonstrate that the assessee shall perform the activity of advancement of any other objects of general public utility. But auction of land to the highest bidder is an activity, which is specifically, keeping in view, the profit in mind. As far as other circumstances are concerned, we are in agreement with the contentions of Shri G.C. Srivastava, which have been noticed by us by taking cognizance of the written submissions filed by the Revenue in para 16 of this order. There are surplus and reserves which are continuously swelling. These are generated by the assessee by way of this activity sale/lease of land and charging fees. The assessee has not been charging nominal fees or selling the land at a nominal rate. It has been making money by putting the land on auction after taking a reserve price. This activity cannot be said to be a charitable activity. In view of the above discussion, we do not find merit in the contentions of the assessee that there was no profit intention in the activities of the assessee. Therefore, it is not entitled for charitable status. The income has to be assessed under the normal provisions i.e. under sections 28 to 44 of the Income Tax Act. The assessee is not a “charitable institution”, therefore, it is not entitled for the alleged deduction at 15% from the receipt provided in section 11(1)(a). In other words, benefit of section 11 is not available to the assessee. Quantification of income of the assessee - Held that:- Keeping in view various discrepancies in determination of total income by treating the assessee as business entity and the stand of the respective parties, we deem it appropriate to set aside all the impugned orders and restore the issues to the file of the AO. The ld.AO shall treat the assessee as an “AOP” and determine the taxable income of the assessee under sections 28 to 44 of the Income Tax Act. The ld.AO shall compute the income under the normal provisions of the Income Tax Act, as if applied on a regular business entity. He will re-compute all the claims of the assessee with regard to the depreciation etc., after providing an opportunity of hearing to the assessee.

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• 2016 (5) TMI 1025
  Assessment under section 172(4) - Shipping business of non-residents - Taxability of income in a situation in which transportation of goods has been done by using the slot charter - Held that:- The assessee is entitled to treaty protection, under article 9, from source taxation of income arising from transportation of goods by operation of ships in international traffic- irrespective of whether or not such ships were owned or chartered by the assessee The profits earned by the assessee in respect of the slot hire operations, or for that purpose any other part of the business of operations of ships or aircraft in international traffic, are taxable only in the country of its fiscal domicile, i.e. Indonesia. Therefore, uphold the grievance of the assessee on merits. The demands raised on the assessee by the impugned assessment order, accordingly, hereby stands vacated. - Decided in favour of assessee

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• 2016 (5) TMI 1024
  Denial of exemption u/s.11 - nature of activities - non-submission of 12A registration certificate - Donation received against management quota seats - Held that:- Since in the instant case nothing has been brought on record that the certificate u/s.80G was not granted to the assessee in the past and since registration u/s.12A is one of the prerequisite for granting of certificate u/s.80G and the 80G certificates produced by the assessee for the past several years are not found to be false or untrue, therefore, it has to be held under the facts of the instant case that there is registration u/s.12A of the I.T. Act. The first issue on which the AO has denied the benefit of section 11 for non submission of 12A registration certificate is accordingly rejected. Regarding Donation received against management quota seats - Held that:- donations are spent only for the purpose of education and no part of the funds of the trust has been diverted for the personal benefit of any of the trustees - Nothing has been brought on record that the donations received from various persons has not been entered the books of the assessee or has been utilized by any of the trustees or their relatives or has been utilized for purposes other than education and since neither any of the donor nor the AO has lodged any complaint before the Government authorities for violation of the Act, therefore, the revenue authorities in our opinion are not justified in denying the exemption u/s.11 of the I.T. Act to the assessee on the ground of violation of provisions of section 11(1)(d) of the I.T. Act. We accordingly set aside the order of the CIT(A) and direct the AO to allow the claim of exemption u/s.11 of the I.T. Act. - Decided in favour 0f assessee

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• 2016 (5) TMI 1023
  Penalty u/s 271(1)(c) - Held that:- It is imperative for the AO to show in the notice the default of assessee. Mere mentioning of the default in the assessment order may not be sufficient. Notice issued to the assessee does not specify the default of the assessee. In our opinion, notice u/s.274 r.w.s.271 of the Act, issued for the impugned assessment year was invalid. Exconsequenti the penalty order is set aside. - Decided in favour of assessee.

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• 2016 (5) TMI 1022
  Computation of long term capital gain - whether value as on the date of sale as estimated by the DVO should be taken as full consideration received on transfer? - Held that:- The claim of the assessee made before CIT(A) and the manner of computation of long term capital gain has to be accepted. We hold and direct the AO to accept the said computation in view of the above conclusion that there is no necessity to decide on the correctness of the fair market value as on 01.04.1999 because the fair market value as on 01.04.1999 and also the value of the property as on the date of sale as given by the DVO is being accepted in toto. - Decided partly in favour of assessee

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• 2016 (5) TMI 1021
  Allowance of carry forward of unabsorbed depreciation - Held that:- Gujarat High Court in the case of.General Motors India Pvt. Ltd. -vs.- DCIT (Guj.) (2012 (8) TMI 714 - GUJARAT HIGH COURT ) wherein held that unabsorbed depreciation from AY. 1997-98 up to AY. 2001-02 got carried forward to AY. 2002-03 and became part thereof and it came to be governed by the provisions of sec. 32(2) as amended by the Finance Act, 2001 and were available for carry forward and set off against income of subsequent years without any limit. - Decided against revenue

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• 2016 (5) TMI 1020
  Reopening of assessment - Addition u/s 68 - Non issue of notice - Held that:- Whenever a reassessment is sought to be made u/s 147, issuing and serving of a valid notice u/s 148 is a mandatory precondition. The onus lies on the Revenue authorities to prove that the notice was served on the assessee within the stipulated period. It is only if the said notice is served on the assessee that the assessing officer would be justified in taking up proceedings against the assessee. If no notice is issued, or if the notice issued is shown to be invalid, then the proceedings taken up by the assessing officer would be illegal and void. In this case, it is very much apparent that the notice u/s 148 had not been served on the assessee within the stipulated period. The Assessing Officer can assume jurisdiction to complete the assessment only after valid and legal service of the notice in accordance with law. Unless such notice has duly been served, the Assessing Officer cannot be said to have been clothed with the jurisdiction to pass the assessment order. Thus in the present case we hold that in absence of valid service of notice u/s 148 of the Act within the stipulated period, the reassessment proceedings are void ab initio - Decided in favour of assessee

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• 2016 (5) TMI 1019
  Revision u/s 263 - understatement of fair market value for the purpose of stamp duty - Held that:- . Nothing has been brought on record that the Ld.CIT had some material before him that the assessable value is more and that the stamp valuation authorities have raised additional demand on account of stamp duty/additional stamp duty till the date of passing of the order although substantial time has elapsed from the date of registration (25-02-2010) and passing of the order u/s.263 (25-03-2015). The revenue authorities have raised additional demand on account of stamp duty/additional stamp duty after a lapse of more than 5 years the order of the CIT setting aside the assessment to the file of the AO, in our opinion, is not in accordance with law. In our opinion, the CIT cannot set aside the order to the file of the AO to make phishing and roving enquiries. We therefore quash the order passed u/s.263 by the Ld.CIT and the grounds raised by the assessee are allowed.

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• 2016 (5) TMI 1018
  Validity of assessment u/s 153C - Satisfaction note to initiate proceeding u/s. 153C r.w.s.153A - Held that:- There is no material placed on record before us that the Assessing Officer had kept the case files of the searched party and that of the assessee together before drawing the impugned satisfaction note. It is made clear that the Revenue’s contention based on Kolkata bench decision of the tribunal puts a heavy onus on the department to positively prove that the same Assessing Officer in case of searched assessee as well as the third party had collectively examined the case files before recording a satisfaction note contemplated under section 153C of the Act. Needless to say, this burden stands un-discharged. We hold in these peculiar facts and circumstances that the Revenue’s arguments justifying the impugned satisfaction note are devoid of merits being not supported by any evidence much less in the nature of substantive material. We conclude in view of the above stated legal position, board’s circular and our discussion hereinabove that the Assessing Officer has not recorded a valid satisfaction before initiating section 153C proceedings in question. The impugned assessment is accordingly quashed. - Decided in favour of assessee

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• 2016 (5) TMI 1017
  Disallowance u/s 14A - contention of ld.D.R being the restriction of interest component as per Rule 8D(2) is not viable and supported with the arguments relying on the various decisions - Held that:- Assessee being the NBFC and it is regular practice to make investments in the shares and securities and assessee also disallowed amount suo moto under Rule 8D. So considering the provisions and submissions of Counsels we are of the opinion that the Ld.CIT(A) had dealt with the issue in detail and also considered the submissions and explanations of the assessee, Therefore, we are not inclined to interfere with the order of the Ld.CIT(A) and confirm the same. On the issue of notional interest considering the fact of the case is that assessee has provided interest free advances to its sister concern, which is not disputed by the lower authorities and during the assessment proceedings, the assessee provided the particulars of income of the assessee for giving interest free loan and on perusal of the statement revealed that the assessee has surplus funds and loans are advanced out of internal accruals and profits made from sale of shares and were reflected in the balance sheet. The Ld.D.R though accepted the contention, did not accept the notional interest, which has not arised to the assessee’s case. Therefore, the findings of Ld.CIT(A) in deleting the addition is proper and accordingly,we upheld the order of Ld.CIT(A) on this ground. - Decided in favour of assessee.

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• 2016 (5) TMI 1016
  Addition of bad debts/advances written off - Held that:- We find that the advances were given to the farmers before start of the farming season for buying back trial seeds produced by them in their farm lands. On perusal of the records and submissions of the assessee, the same seeds were not suitable for sale in the market and hence, were not procured from the farmers. Therefore, the assessee has written off to the advance in the ordinary course of business, relating to such non-saleable seeds at the end of the year. Therefore, it fit to be allowed as business expenditure of Rs. 6,59,193/-. However, as far as the remaining amounts of Rs. 6,01,457/-, Rs. 3,80,303/- and Rs. 3,09,503/- are concerned, it is evident from record that the AO has given sufficient opportunities to the assessee to furnish basic details as to in which year, the entries were passed to substantiate the claim. The books of account of the assessee are audited by the Chartered Accountant. Therefore, the assessee could substantiate its claim before the AO, but he failed to do so. Therefore, in our considered opinion, the AO has rightly disallowed these amounts out of the claim of assessee and the findings of the ld. CIT(A) in this regard are liable to be reversed. Depreciation on UPS - Held that:- Computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, UPS are the part of the computer system, they are entitled to depreciation at the higher rate of 60%. [2010 (8) TMI 58 - DELHI HIGH COURT] Provision for sale return - Held that:- Accountancy principle of conservatism, which has been duly recognized by the Courts, mandates that anticipated losses are to be provided for in the computation of income but it does not permit anticipated profits to be taken into account till the profits actually arise. Even an anticipated loss, even if it may not have crystallized in the relevant previous year, is to be allowed as a deduction in the computation of business profits. There is no dispute that sales have been returned in the subsequent year and this fact is known before the date of finalization of accounts. Therefore, there is no point in first taking into account income on sales, which never reached finality, and then accounting for loss on sales return in the subsequent year i.e. in which sales return did take place. In our considered view, the approach of the assessee is in consonance with the well settled accountancy principles and the Assessing Officer was not justified in rejecting the same. The disallowance for provision for sales return is, accordingly, deleted. Allowable business expenditure - advances given - Held that:- We find that the advance was given to A+E Consultants for setting up a construction of green house. This project was not materialized and the advance given to the architects for setting up of the project, could not be recovered. In view of this, the assessee has written off the same in the books of account as bad debts/advances written off in the ordinary course of business. In presence of these facts this expenditure was allowable as business expenditure and cannot be treated as capital expenditure as observed by the ld. CIT(A) Expenditure towards payment as license fees - Held that:- Once the addition made by AO of Rs. 25 lacs under reference, stands deleted by the ld. CIT(A) in appeal for A.Y. 2005-06, as submitted by assessee itself, the ground of assessee praying for accepting the same claim in the present appeal becomes infructuous.

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• 2016 (5) TMI 1015
  Revision u/s 263 - Claim of long term capital loss - Held that:- It is the responsibility of the AO to bring on record any incriminating material to support the view that fair market value is the full value of the consideration of the transferred asset. In the case of bargain transactions and in the absence of any such material, the addition made by the AO by relying on the fair market value is unsustainable in law. Thus, in our view, the AO examined this issue of claim of loss of Rs. 20.23 Crs in the regular assessment proceedings made u/s 143(3) of the Act. Further, we have no confusion in our mind to mention here that AO has gone through the specific issues relating to the cost of acquisition of shares of CESC; SAREGAMA and PHILIPS CARBON BLACK LTD. The documents cited above would contain the invoice of the purchase and sale transactions confirm our decision. In any case, the fair market value related additions are unsustainable in law. CIT cannot recommend such unsustainable additions as the case of revenue loss while revising the order of the AO. CIT can assume jurisdiction only when the AO assumed the law erroneously ie incorrect assumption of law. CIT has not made out any such erroneous assumption of law in this case either in matters of cost of acquisition or in matters of sale transactions. We also dismiss the CIT / CIT-DR s vehement argument that AO failed to apply his mind and AO failed to conduct meaningful inquiries into these aspects. There is an evidence for raising this issue in the regular assessment proceedings, there is a volume of letters between the AO and the assessee on this issue and the above extracts are heavily relied. Therefore, in our opinion, it is not a case of non-application of mind by the AO to the various aspects of this issue of loss of Rs. 20.23 Crs Premium of Rs. 715/- per share – If AO failed to make a any inquiry - Held that:- Issue of share premium was the subject matter of scrutiny by the AO in the regular assessment proceedings. AO is also aware of the undisputed fact of the assessee calculating premium at Rs. 715/- per share from SSL. It is not clear from the record what is the revenue loss on this issue from the CIT s point of view? If the premium is excessive from the Department s point of view, it is the gain f the assessee. In our opinion, there is no revenue loss on this issue to the assessee. Further, it is obvious that capital loss cannot be the ground for the CIT to assume jurisdiction u/s 263 of the Act. The capital receipt on this kind is tax neutral so for as this assessee is concerned. Amended provisions of section 56(2)(vii)(b) of the Act do not apply to the AY 2011-12 under consideration. Thus, assessment order cannot be invalid on the ground of erroneous assumption of law or fact. What would AO do even if he probe this issue further, when there is no revenue implications legally? Therefore, as argued by the Ld Counsel for the assessee, this issue of premium falls in the capital field with no revenue implication on the income assessed by the AO. On these facts, we are of the opinion that the arguments of the CIT / CIT-DR is misplaced qua the provisions of section 263 of the Act. In assessment, AO accepts various claims of the assessee made in the returns after scrutinizing or auditing the accounts of the assessee and made few additions / disallowed few claims. Not all such acceptances fall in the category of "inadequate inquiry or improper inquiry or perfunctory inquiry". Therefore, Principal CIT cannot resort to "hit and run" approach. He is under legal obligation to enlist the details of inquiries not done by the AO, the manner of conducting such inquiries etc and quantify or demonstrate the revenue in clearly expressed language in his order. Therefore, on the facts of the present case and the settled legal propositions in force, we are of the opinion that the Principal CIT wrongly assumed jurisdiction u/s 263 of the Act on all these issues raised by him. Considering the inquiries done by the AO clearly made out in the records above, we are of the opinion that this is not the case of "inadequate inquiry or improper inquiry or perfunctory inquiry" - Decided in favour of assessee.

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• 2016 (5) TMI 1014
  Deduction u/s 80HHE - Held that:- Since the assessee has maintained separate books of accounts, in our considered view, there is no need, as per law, to aggregate accounts of all the businesses for computing amount of deduction allowable u/s 80HHE. Since all the amounts required for computing deduction u/s 80HHE i.e. profit of the export business (i.e. eligible business), its export turnover and its total turnover are separately available, therefore, the deduction has to be computed on the basis of these amounts only. Thus, these should not be clubbed with the corresponding amounts of the other business(es) for computing amount of deduction allowable u/s 80HHE. But the AO had decided this issue without examining the correctness of amount of profit of the eligible business, export turnover and total turnover; therefore, principally accepting the claim of the assessee, we send this issue back to the file of the AO to find out whether these amounts have been correctly computed by the assessee. Thus, for the limited purpose of verification of these facts, this issue is sent back to the file of the AO for which adequate opportunity of hearing shall be provided to the assessee. The assessee is free to raise all legal and factual issues before the AO. The AO shall pass the order afresh after taking into account all the details and evidences as may be brought on record by the assessee. License paid for Logistics Tracking Software (LTS) - revenue v/s capital expenses - Held that:- In view of these findings of Ld. CIT(A) as well as submissions of both the sides, we find that there is nothing wrong in the findings of Ld. CIT(A) and the impugned expenses have been rightly held to be revenue expenditure in the hands of the assessee company. Disallowance on account of deferred revenue expenditure - Held that:- The treatment of these expenses under the income tax law cannot be decided merely on the basis of manner of recording by the assessee in its books of accounts. The income has to be assessed and expenses are to be allowed under the income tax proceedings in view of the provisions of Income Tax Act, 1961, as explained by the courts as well as Central Board of Direct Taxes by way of its circulars/ instructions as have been issued time to time. It is well settled law that entries in the books of accounts are not determinative of the character of income or expenses. No case has been made out by the AO that these expenses are capital in nature. Thus, we find these expenses to be revenue nature expenses as has been held by the Ld. CIT(A) correctly. Contention of the AO for making the disallowance is that assessee has claimed the same as deferred revenue expenditure. We find that there is no concept of deferred revenue expenditure under the income tax Act except under specific sections i.e. where amortization is specifically provided e.g. u/s 35D of the Act. It has not been disputed that these expenses were incurred during the year under consideration and pertain to the same year and these have been incurred for the purpose of business of the assessee. Under these circumstances we find no reason to disallow these expenses. Allowably of deduction of interest - Held that:- This issue as covered in favour of the assessee in view of judgment of Hon’ble Supreme Court in the case of DCIT vs. Core Health Car [2008 (2) TMI 8 - SUPREME COURT OF INDIA ] wherein held An assessee is entitled to claim interest paid on capital provided that the capital is used for business purpose irrespective of what may be the result of using the capital which the assessee has borrowed. "Actual cost" of an asset has no relevancy in relation to section 36(1)(iii). Disallowance of miscellaneous and other expenses holding the same as non-business expenses - Held that:- CIT(A)corectly deleted the disallowance, as according to him ad-hoc disallowance was not permissible under the law.

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• 2016 (5) TMI 1013
  Estimation of net profit from the contract receipts - Held that:- The assessee declared a net profit of 9.12% for the previous financial year. The A.O. has estimated net profit of 10% on gross contract receipts. The CIT(A) has scaled down the net profit to 8%. The CIT(A) after considering the facts and circumstances of the case, rightly scaled down the net profit to 8%. There is no error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the order passed by the CIT(A) and reject the ground raised by the revenue. - Decided against revenue. Separate additions towards ‘Income from Other Sources’ being interest on fixed deposits and other miscellaneous receipts - Held that:- No merits in the arguments of the assessee for the reason that interest received from bank deposits cannot be considered as business receipts received on account of carrying out the business activity of the assessee. The assessee earned interest from bank deposits which are kept as margin money for obtaining bank guarantees. Though these bank guarantees are furnished for obtaining contract works, the interest earned from these deposits cannot be at any stretch of imagination considered as business receipts for the purpose of estimation of net profit. There is no direct nexus between the earning of interest and works contract, except for the fact that it is kept in bank for obtaining bank guarantee. There should be direct nexus between business activity and earning of income so as to treat the receipt earned from the business. If these interest receipts arise from the works contract, then definitely the interest forms part of contract receipts. But, in the present case on hand, interest earned on fixed deposits is having no direct nexus between the business activities of the assessee. Just because, the bank deposits are kept as margin money towards obtaining bank guarantee, interest earned on such deposits would not alter the characteristics of income. Therefore, we are of the opinion that the A.O. has rightly assessed the interest earned on fixed deposits and other miscellaneous receipts under the head ‘Income from Other Sources’. The CIT(A) has rightly upheld the additions made by the A.O.- Decided against assessee. Deductions towards interest on capital and remuneration to partners - Held that:- Interest on partner’s capital account and remuneration to partners is allowable deductions even after estimation of net profit from the contract receipts. The CIT(A) after considering the facts and circumstances of the case, has rightly directed the A.O. to allow remuneration to partners and interest on partner’s capital account. We do not see any error in the CIT(A) order, hence, we inclined to uphold the order of the CIT(A) - Decided against revenue. Additions towards receipts from arbitration award and miscellaneous income under the head income from other sources - contention of the assessee that these receipts are forms part of contract receipts, therefore, should be considered for the purpose of estimation of net profit from the business - Held that:- We find force in the arguments of the assessee for the reason that the arbitration amount received from the clients towards works contracts. The arbitration amount received from clients towards contract works is certainly a business receipt which cannot be assessed under the head income from other sources. However, the assessee has failed to furnish any details with regard to the amount received from arbitration and also miscellaneous receipts received from Jagadalpur works. Therefore, we are of the opinion that this issue needs to be re-examined by the A.O. to ascertain whether arbitration amount and miscellaneous receipts from Jagadalpur works is towards works contracts or not. Therefore, we set aside the issue to the file of the A.O. and direct the A.O. to verify whether the arbitration award received by the assessee is towards execution of works contract or not. In case the arbitration award is received towards execution of works contract, the same should be considered as part of gross receipts for the purpose of estimation of net profit. Hence, we set aside the issue to the file of the A.O. and direct him to examine the issue in the light of the discussions above. Additions towards chit dividend - A.O. made separate additions towards chit dividend under the head ‘Income from Other Sources’ - assessee contended that chit dividend should be considered as part of gross contract receipts for the purpose of estimation of net profit - Held that:- We do not find any merits in the arguments of the assessee for the reason that there is no direct nexus between contribution to chit and business activity of the assessee. The dividend received from chits cannot be considered as part of business receipts for the purpose of estimation of profit. Therefore, we are of the opinion that the A.O. has rightly assessed the chit dividend under the head ‘Income from Other Sources’. - Decided against assessee

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• 2016 (5) TMI 1011
  Penalty u/s 271(1)(c) - revised computation of income filled - Held that:- The assessee already revised computation of income and paid the taxes before being noticed or detected by the Assessing Officer and further the assessee could not revise return because the original return was filed belated. Thus, in our considered view, the assessee has offered explanation for the mistake of not offering the income in the return of income filed and substantiated the explanation, which is also found to be bonafide. Thus, the Explanation- 1 to the section 271(1)(c) of the Act is not attracted and no penalty for concealment of income or inaccurate particulars of income is leviable in the case of the assessee. - Decided in favour of assessee

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• 2016 (5) TMI 1010
  Addition made on account of holding the security deposit written off as capital loss - Held that:- The AO cannot step into the shoes of the assessee for defining the best possible ways of the business. Accordingly we opined that the assessee has written off the security deposits in the interest of the business organization. Therefore the question of recovery or irrecovery does not arise under the present conditions and situations. The AO in the present case has not doubted the genuineness of the loss claimed by the assessee but the loss was merely disallowed by holding them as capital loss. As the loss was arising from the writing of the trading assets which was classified as current assets in the books of accounts addition made are deleted - Decided against revenue Addition made on account of contingencies representing the sales tax paid under protest - Held that:- The aforesaid loss has business connection with the assessee and is claimed on revenue accounts. Therefore we uphold the order of Ld. CIT(A) in delting the addition and dismiss this ground of appeal of the Revenue. - Decided against revenue Addition made on account of excess depreciation claimed by the assessee - Held that:- here was no maintenance of the building as the factory was closed down. We also find from the valuer’s report dated 8th December 2000 issued by M. Chaudhry and associates that the market value of the building near to the date of sale was at Rs. 51,09,800/-. In the instant case, assessee has declared the sale consideration higher than the market value which is Rs. 52,85,030/- being book value of the building as per accounting records. We further observed that the AO has not doubted the market value of the assessee building as per valuer’s report. The learned DR has also not brought anything on record contrary to the finding of the learned CIT(A). In view of above and considering the facts of the case, we find that the market value of the building as determined by the valuer is the correct value of the sale consideration of the building. Since the building in question is very old so there is no reason to take the current cost of construction of building as sale consideration for the computation of long term capital gain. The value given in the valuation report is correct value of the building as the same has not been challenged by the AO. Accordingly in our considered view, we have no hesitation in upholding the order of learned CIT(A) in deleting the addition.- Decided against revenue Addition on account of electricity expenses pertaining to the earlier year’s - failure to claim the electricity expenses due to non-receipt of the bills - Held that:- Assessee failed to claim the electricity expenses due to non-receipt of the bills as the Delhi factory was closed in November 1996. We find force in the argument of the Ld. AR that these expenses were made known to the assessee and accordingly settled in the year under consideration. Therefore in our considered view these expenses were exclusively incurred in connection with the business only and eligible for deduction under section 37 of the Act. In holding, so we relied in the case of Saurashtra Cements and Chemicals Industries [1994 (10) TMI 30 - GUJARAT High Court] where held that the expenses pertaining to the transactions of earlier years do not become liability payable in earlier year unless it can be said that liability was determined and crystallized in the year on the basis of maintaining account of mercantile basis. In view of above, we have no hesitation in upholding the order of learned CIT(A) in deleting the addition.- Decided against revenue Addition on account of failure on the part of the assessee to furnish details of disputed Labour cases - Held that:- AO has disallowed the labour expenses by treating it as capital in nature. However we find from the facts of the case that the liability towards the labour expenses was determined and crystallized in the year under consideration so it should be allowed as deduction under section 37 of the Act. We also find that the liability towards the labour expenses was on the revenue account so holding it on capital account is not appropriate. Moreover, the decision of the Hon'ble Supreme Court K. Ravindranathan Nayeras (2000 (11) TMI 3 - SUPREME Court) is entirely applicable to the facts of the assessee as the instant case also relates to the labour dispute. The learned DR also failed to bring anything on record to controvert the finding of the Ld CIT(A). Therefore taking a consistent view in the judgment of Hon'ble Supreme Court and we have no hesitation in upholding the order of Ld CIT(A)n deleting the addition.- Decided against revenue Addition of port charges written off against deposits lying with Calcutta Port Trust - Held that:- Any liability, though pertaining to earlier year, depends upon making a demand and its acceptance by the assessee. If such liability has actually been claimed during subsequent year, it cannot be disallowed merely on the ground that the accounts are maintained on mercantile basis and it relates to transactions pertaining to an earlier year. Further reliance is also placed on the decision of ITAT Delhi Bench in the case of Kumar Aerosoles (P) Ltd. Vs. ACIT (1995 (9) TMI 107 - ITAT DELHI-A ) wherein expenses relating to electricity, telex, typewriter rent and telephone though relating to earlier years, are allowable in the year in which the demand is raised. Any liability which may be considered to have been arisen only in a subsequent year has to be allowed as deduction even if the same may be attributable to the business conducted by the assessee in an earlier year. In view of the above we reverse the orders of the lower authorities and ground of appeal raised by the assessee is allowed. Cash discount treated as the income of the assessee - Held that:- As full value of consideration’ as defined under section 48 of the Act cannot be said to mean apparent consideration’ as envisages in Chapter XXC of the Act. In view of the above we hold that the cash discount given by the assessee cannot be treated as income. Accordingly the addition made by the lower authorities stands deleted. Hence this ground of appeal of the assessee is allowed.

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• 2016 (5) TMI 1009
  Reassessment u/s 153A/153C - Held that:- We are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-05 to 2007-08, were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2004-05 to 2007-08 in the absence of any incriminating materials. Hence, we delete the additions made by the A.O. for the assessment year 2004-05, 2005-06 & 2007-08. - Decided in favour of assessee Estimation of net profit from the business - Estimation of net profit of 10% on trading turnover and 15% on contract receipts - Held that:- CIT(A) has rightly estimated the net profit of 10% in respect of trading business and 12.3% in respect of contract receipts by taking into account the net profit declared by the assessee for the assessment year 2006-07. We do not see any error or infirmity in the order passed by the CIT(A) as far as estimation of net profit for assessment year 2008-09 and 2009-10. Hence, we inclined to uphold the order of the CIT(A) and rejected the ground raised by the assessee as well as revenue for the assessment year 2008-09 & 2009-10. Additional income towards inflation of labour charges at the time of search - Held that:- CIT(A) held that the assessing officer is not correct in estimating the net profit of 15%. On over all appreciation of facts, such as disclosure of additional income on estimate basis, actual turnover achieved by the assessee, the disclosure made by the assessee is quite reasonable and do not require any interference. Therefore, the action of the A.O. in estimating the 15% on the total turnover is rejected and business profit admitted by the assessee are directed to be accepted. The facts remains before us. The assessee has not brought on record any evidences to prove that the findings of the fact recorded by the CIT(A) is incorrect. The CIT(A) after considering the relevant facts has directed the A.O. to accept the return filed by the assessee. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the order passed by the CIT(A) for the assessment year 2010-11 and reject the ground raised by the assessee as well as revenue. Separate additions towards interest income, miscellaneous receipts and foreign exchange gains - Held that:- No merits in the arguments of the assessee, for the reason that just because fixed deposits are kept for the purpose of obtaining bank guarantee, the interest earned on such fixed deposits cannot be held as part of business receipts for the purpose of estimation of net profit. Similarly, in respect of miscellaneous receipts, the assessee has not made out any case by on record that these miscellaneous receipts are part of main business activities of the assessee. In the absence of any records, the A.O. has rightly treated the miscellaneous receipts as income from other sources. Therefore, we are of the opinion that the A.O. has rightly treated the interest on fixed deposits and miscellaneous receipts under the head income from other sources. Coming to the foreign exchange gain we do not see any merits in the arguments of the A.O., for the reason that the foreign exchange gain or loss arises in the course of business of the assessee. The assessee is involved in the business of import of machinery spare parts which resulted in foreign exchange gain. As per the principles of accounting, the assessee at his option can either reduce the cost of materials or shown the gain separately in the financial statements. Though, these items are considered as incidental to the activity of the assessee, the foreign exchange gain is essentially a part of business receipts for the purpose of estimation of net profit. Therefore, we are of the opinion that the A.O. was not correct in making separate additions towards foreign exchange gain, when the net profit is estimated on gross receipts. The CIT(A) without appreciating the facts has upheld the order of the A.O. Therefore, we direct the A.O. to delete the additions made towards foreign exchange gain. Accordingly, the ground raised by the assessee is partly allowed. Claim of depreciation on assets - CIT(A) held that in the absence of credible evidences, the claim of the assessee in respect of depreciation cannot be entertained - Held that:- The assessee has failed to brought on record any evidences to prove that the findings of the fact recorded by the CIT(A) is incorrect. Therefore, we are of the opinion that the CIT(A) is rightly rejected the claim of the assessee. We do not see any error or infirmity in the order passed by the CIT(A) with regard to the deduction of depreciation. Hence, we inclined to uphold the order of the CIT(A) and reject the ground raised by the assessee. Charging of interest u/s 234A & 234B - Held that:- The A.O. without adjusting the seized cash, has computed the interest u/s 234A& 234B of the Act. Though, the assessee claims that the A.O. has not adjusted seized cash for the tax liability, the assessee has not furnished any details with regard to the quantum of amount to be adjusted for each assessment years. In the absence of any details, we are of the opinion that the issue needs to be re-examined by the A.O. in the light of the above discussions. Therefore, we set aside the issue to the file of the A.O. and direct the A.O. to examine the issue in the light of the above discussions and re-compute the interest in accordance with law.

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• 2016 (5) TMI 1008
  Claim of depreciation on the purchases of computers - Held that:- In our considered opinion, the circumstantial evidences are in favour of the assessee. The revenue’s rejection of the claim of depreciation is only based on the statements of Parikh couple who were not allowed to be cross examined by the assessee; therefore, their statements are in complete violation of principles of natural justice. On the basis of circumstantial evidences mentioned elsewhere, we are of the opinion that the assessee had purchased computers and is eligible for the claim of depreciation. We accordingly set aside the findings of the ld. CIT(A) and direct the A.O to allow the claim of depreciation - Decided in favour of assessee. Disallowance of interest expenses - Held that:- There is no dispute that the disallowance is based upon the findings given in the first round of litigation. Since we have held the purchase of computers to be genuine as per our detailed decision/discussion qua first grievance of this appeal. We have no hesitation to hold that the money has been borrowed for the purposes of business and, therefore, any interest paid thereon has to be allowed as business expenditure - Decided against assessee. Disallowance of deffered revenue expenditure - Held that:- We find that the assessee has strongly contended that it has not floated any public issue nor invited any share application from anybody, neither during the year under consideration nor in the subsequent years. Therefore, there is no question of incurring expenditure on increase of the share capital. We do not find any adverse inference/findings by the lower authorities in so far as this claim of the assessee is concerned. Since the assessee is a body corporate it has to incur various expenditures before the Registrar of companies. There is no adverse finding by the lower authorities that the expenditure was not incurred for the purposes of business. We, therefore, do not find any reason/basis for disallowing the same. We accordingly direct the A.O to delete the addition - Decided in favour of assessee Disallowance of foreign travelling expenses - Held that:- There is no dispute that the assessee did not furnish complete details of the claim of foreign travel expenditure which it claimed through its computation of income. Even before us no demonstrative evidences have been brought on record to justify the claim in the computation of income. In the absence of any demonstrative evidence, the claim of the assessee is rightly denied by the revenue authorities - Decided in favour of assessee. Disallowance of octroi payment - Held that:- We fail to understand why the amount has been disallowed in the present litigation. Once, it has been accepted that it is a capital expenditure forming part of the cost of the Hardware; the A.O should have allowed depreciation on it. We, accordingly direct the A.O to allow depreciation on the additional octroi duty of Rs. 1,71,000/- being treated as capital expenditure Disallowance of bad debts - Held that:- No doubt that as per the ratio laid downin the case of TRF Ltd [2010 (2) TMI 211 - SUPREME COURT ] the assessee need not give the reasons for the write off but at the same time the assessee has to demonstrate that the debt has been taken on the income side in the earlier years as per the provisions of Section 36(2) of the Act, no such demonstrative evidence has been furnished, neither before the lower authorities nor before us. We, therefore, decline to interfere with the findings of the ld. CIT(A)- Decided against assessee. Disallowance of payment of PF/ESI - Held that:- We direct the A.O to delete the additions after verifying that employees contribution were paid before the due date for filing the return of income as decided by the Tribunal in assessee’s own case for A.Y. 2002-03 - Decided in favour of assessee by way of remand.

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• 2016 (5) TMI 1007
  Registration granted to the assessee u/s. 12AA cancelled - approval granted u/s. 80G(5) withdrawn - Held that:- The assessee stated at the Bar that the assessee trust has amended the trust deed by deleting/amending the objects of the assessee trust on which the Commissioner of Income Tax had raised objection. The amended trust deed could not be placed before the Commissioner of Income Tax as the amendment was carried out after the impugned order was passed. In view of the matter, we deem it appropriate to remit the file back to Commissioner of Income Tax for considering the amended trust deed and thereafter pass the order, in accordance with law. The consequent order passed by the Commissioner of Income Tax in withdrawing the approval u/s. 80G(5) is also set aside and the file is remitted back to the Commissioner of Income Tax for reconsideration in the light of our above findings. - Decided in favour of assessee for statistical purpose.

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• 2016 (5) TMI 1006
  Addition on account of interest on loan accrued to subsidiary companies - Held that:- In view of the earlier decision of Co-ordinate Bench of ITAT on the identical issue, we find no merit in the grievance of the Revenue raised as in our considered opinion, the stand of the Revenue to the effect that interest accrued to the assessee cannot be upheld merely because the loan agreement with the subsidiary companies continued to exist. It is imperative that all the attendant facts, circumstances and realities of the situation have to be considered in their proper commercial perspective before it can be evaluated as to whether interest income really accrued in the hands of the assessee. The facts noted are not in dispute. It is also not in dispute that the assessee company has not recovered any dues from the two subsidiaries till now, as asserted by the learned Representative before us. After considering the entire gamut of facts and circumstances, it is an inescapable conclusion that the realization of the interest income in question is highly suspect and therefore, there cannot be said to be any real accrual of income. Thus, having regard to the legal position and the facts and circumstances of the case, we are inclined to hold that the lower authorities have faulted in concluding that interest income accrued to the assessee-company during the year under consideration. Thus, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition - Decided in favour of assessee Disallowance being expenses on account of power and fuel expenses - Held that:- Identical issue has been decided in favour of the assessee by the Pune Bench of the Tribunal in assessee’s own case relating to assessment year 2002-03 wherein held part of power and fuel expenses were incurred on providing lights to the residential colony and also to the common facilities provided by the assessee to its employees, which was the obligation of the assessee company and hence, expenditure incurred towards discharge of said obligation is business expenditure of the assessee company and is duly allowable in the hands of assessee. Further, the expenditure relatable to residential quarters is no doubt to be recovered from the employees or is to be included as perk in the hands of employees of the assessee company, but merely because no such exercise was carried on, does not merit the disallowance of expenditure in the hands of assessee - Decided in favour of assessee

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• 2016 (5) TMI 1005
  Disallowance of software expenses - revenue v.s capital expenditure - Held that:- We find that the expenses relate to computer software. From the details of the expenses it is clear that these software expenses are incurred by NSEIL for the common benefit of NSEIL and the assessee and both have shared these expenses. We further find that all such expenses are periodical in nature and mainly incurred for software upgradation charges, subscription, annual licence fee etc. These software equipments has short life span having no enduring benefit and it requires often change and in such circumstances, the expenditure incurred for purchase of these software is called as revenue expenditure and not capital in nature. See CIT Vs. Raychem RPG Ltd. (2011 (7) TMI 953 - Bombay High Court) - Decided in favour of assessee Disallowance of excess liability written back (debit balances) - Held that:- As explained by Ld. Counsel, the assessee in its board meeting finally, after reconciliation of facts and figures came to know that as on 31.03.2007 an amount of Rs. 21.26 lacs is to be written off as a one-time corrective action to match the balances of member wise records, it rectified the same. We also find that this excess amount was reconciled with the accounts of the members and one-time payment was made to them after finding the reconciliation. For this we have gone through the reconciliation statement filed wherein he has reconciled the entire figure. In view of the above we find that the assessee made this claim u/s 41(1) of the Act. As explained by Ld. counsel for the assessee, in view of these facts, that this is neither a claim of expenditure nor remission of liability u/s. 41(1) of the Act. Ld. counsel for the assessee stated that this is clearly a business loss allowable u/s. 28 of the Act being differential liability on account of mismatch with assessee and NCSS system, And this reinstatement of liability by the assessee being payable to members is allowable as a business loss u/s. 28 of the Act. We are of the view that this differential liability in the debit balances of the assessee has occurred in the normal course of carrying on business and is incidental to the business and this has a direct and proximate nexus between the business operation and the liability. This view of ours is supported by the judgment of Hon’ble Bombay High Court in the case of Lord’s Dairy Farm Ltd. Vs. CIT (1955 (2) TMI 13 - BOMBAY HIGH COURT ), wherein it is held that the deductions permissible u/s. 10(2) of the act (under old Act of 1922), if there is any loss which from the commercial point of view can be considered to be a trading loss, then that lost must be deducted before the true profit can be ascertained. If a loss caused to a businessman by any reason which can be proved by evidence that the claim is genuine, then assessee would be entitled to deduct that loss although such a loss may not fall within the ambit of any of the deduction mentioned in section 10(2) of the Act. It was further held by Hon’ble High court that when a businessman writes off an amount as a loss, there is prima facie evident that amount is irrecoverable. The department can rebut the prima facie inference by drawing attention to the circumstances or by leading some evidence to suggest that the position taken up by the assessee was not correct. - Decided in favour of assessee

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• 2016 (5) TMI 1004
  Unexplained cash credits u/s. 68 - Held that:- There is no dispute about the fact that the assessee’s HDFC bank account stands credited with 14 payments of Rs. 49,000/- each followed by another one involving Rs. 14,000/-. This gross figure of Rs. 7 lacs forms subject matter of section 68 addition. The assessee’s endeavour seeks to treat the same as repayment of loans/old advances. A co-ordinate bench has already directed the Assessing Officer to verify the same from the material on record. The assessee files before us her ledger account maintained in case of above stated 15 parties right from 01-04-2003 to 31-03- 2008 stating outstanding closing balances of Rs. 49,000/- and Rs. 14,000/-. This is not the Revenue’s case that these accounts are not genuine or improper maintained. There is hardly any dispute that the same stands accepted as correct in the relevant intervening assessment year. Ld. DR fails to rebut this factual position. We do not find any observation in Assessing Officer’s consequential order alleging that he ever summoned these creditors for the purpose of conducting verification and they did not turn up to confirm assessee’s stand. We take into account totality of all these facts and circumstances to hold that the assessee has successfully proved her case of having received repayment of earlier loans and advances given to the above stated 15 creditors in financial year 2003-04. The Revenue’s arguments strongly supporting Assessing Officer’s action making the impugned addition stand rejected. We accordingly delete the impugned section 68 addition - Decided in favour of assessee.

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• 2016 (5) TMI 1003
  Grant of Registration under section 12AA rejected - time period prescribed for disposal of the application - whether the condition for grant of Registration are not met by the Society as the applicant is not engaged in any charitable activity as such? - Held that:- Assessee has filed an application for registration on 19.6.2015, but the ld. Commissioner of Income Tax (Exemption) did not opt to initiate proceedings for grant of registration by making necessary enquiries. The time period prescribed for disposal of the application is six months and the ld. Commissioner of Income Tax (Exemption) has issued first notice on 26.11.2015 for the appearance of the assessee on 15.12.2015 along with certain documents. On 15.12.2015, the ld. counsel for the assessee appeared and filed written submissions and also filed relevant evidence, but the ld. Commissioner of Income Tax (Exemption) did not ask anything further from the assessee and on the same very day he dismissed the application for registration only for the simple reason that the assessee could not produce the books of account and activities could not be verified. Whereas from the record, it is evident that the assessee has filed complete details of its activities, bylaws, audit report, balance sheet and various other evidence to establish the activities undertaken by the assessee. All these evidences were not looked into by the ld. Commissioner of Income Tax (Exemption). If the ld. Commissioner of Income Tax (Exemption) feels that he has to make necessary enquiries into the activities, he should have initiated proceedings for grant of registration in time after receipt of application for registration, but he has not done so. He has issued only one notice to the assessee, which was duly complied with by the assessee by filing relevant evidence. The ld. Commissioner of Income Tax (Exemption) did not look into it and has denied registration. Therefore, we are of the view that denial of registration under section 12A of the Act is not correct. Since the assessee has filed all the relevant evidence on record wherefrom it is established that it is engaged in charitable activities, the registration ought to have been granted to the assessee. We accordingly set aside the order of the ld. Commissioner of Income Tax (Exemption) and direct him to grant registration under section 12A(a) of the Act within a period of one month from the receipt of this order. - Decided in favour of assessee.

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• Customs

• 2016 (5) TMI 1042
  Seeking release of bank guarantee - furnished at the time of provisional release of goods - Consignment seized - Mis-declaration and under-invoicing under Panchnama - Fine and penalty deposited - Respondent stated that he is not sure whether any writ petition has been filed challenging the orders of the Customs and Central Excise Settlement Commission - Held that:- the said lack of information should not lead to an adjournment as this Court only intends to direct the respondent to dispose of petitioner’s representation by way of a speaking order within one week. - Petition disposed of

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• 2016 (5) TMI 1041
  Seeking cross-examination of two persons whose statements were relied upon while issuing the SCN - Cross-examination denied by the order that "there is no such direction in the above referred order of Hon’ble High Court of Delhi and also the same was also never sought by you at the time of adjudication proceedings held earlier in the said matter.” - Held that:- the reason given is plainly untenable apart from the fact that the AC who passed the above order is not the AA himself. It is pointed out by the Respondents that the order passed by the AC was approved by the Commissioner and, therefore, it could not be said that it was without jurisdiction. The Court is unable to accept the above submission. Once the adjudicating proceedings are conducted by the Commissioner, it is he alone who was to pass orders in relation to any aspect of the adjudication and that cannot be delegated to any subordinate authority. Therefore, the Court finds no justification for denying the request for cross-examination of the two persons whose statements have been relied upon by the Customs Department. The impugned order is quashed with a direction to AA to permit the Petitioner to cross-examine the two persons within a time schedule to be fixed by the AA. - Petition disposed of

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• 2016 (5) TMI 1040
  Seeking cross-examination of two persons whose statements were relied upon while issuing the SCN - Cross-examination denied by the order that "there is no such direction in the above referred order of Hon’ble High Court of Delhi and also the same was also never sought by you at the time of adjudication proceedings held earlier in the said matter.” - Held that:- the reason given is plainly untenable apart from the fact that the AC who passed the above order is not the AA himself. It is pointed out by the Respondents that the order passed by the AC was approved by the Commissioner and, therefore, it could not be said that it was without jurisdiction. The Court is unable to accept the above submission. Once the adjudicating proceedings are conducted by the Commissioner, it is he alone who was to pass orders in relation to any aspect of the adjudication and that cannot be delegated to any subordinate authority. Therefore, the Court finds no justification for denying the request for cross-examination of the two persons whose statements have been relied upon by the Customs Department. The impugned order is quashed with a direction to AA to permit the Petitioner to cross-examine the two persons within a time schedule to be fixed by the AA. - Petition disposed of

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• 2016 (5) TMI 1039
  Seeking amendment in the petition to challenge the order passed by the Respondents subsequent to the filing of the writ petition imposing the conditions for release of the goods - Held that:- as rightly pointed out by the Respondents, under Section 128 of the Customs Act, 1962 even such an order is appealable. Consequently, the Petitioner would have to file an appeal against the said order before the Commissioner (Appeals). It is directed that in such event the period during which the present petition was pending would be taken into consideration by the Commissioner (Appeals). - Petition disposed of

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• Corporate Laws

• 2016 (5) TMI 1036
  Transmission of shares - rectification of register of members - validity of the refusal of the company to transmit 726 and 128 shares jointly held by Mehboob and Yasmin, respectively, with Ayub upon the latter's death - Held that:- In the present case, the resolution of the Board of Directors dated 12 September 2011 does not stand the scrutiny of these tests. During the brief period, i.e. between 4 April 2011 and 23 November 2011, when the Appellants were on the Board of the Company, they appear to have passed this resolution acting in their own interest. Their suit, challenging the will of Ayub, was pending before this Court. So also, was their petition challenging the joint holdership of Mehboob and Yasmin pending before the CLB, Principal Bench. They were clearly aware that the entries of joint holdership of the two had to be rectified by seeking an appropriate order from the Court or the CLB. And yet, when they got an opportunity to be on the Board, they unilaterally proceeded to cancel the entries, acting in their own interests and on a wrong principle. The conclusion of the CLB, in the premises, of the resolution of 12 September 2011 being vitiated by mala fides is, thus, clearly sustainable. There is no error of law in it. There were two contests on merits :(i) the locus of the Petitioners, Mehboob and Yasmin, to present the petition in the face of the subsequent Board resolution of 12 September 2011 omitting their names; and (ii) whether the board had sufficient cause to refuse the transmission. On the first question, the CLB found, and rightly so, that once the resolution of 12 September 2011 was held to be contrary to the provisions of law and set aside, the earlier resolution of 9 May 1992 stood restored and therefore, there is no question of the locus of the Petitioners to apply for transmission by survivorship. (I have already held the decision of the CLB to set aside the resolution of 12 September 2011 to be valid.) On sufficient cause so far as the refusal to transmit is concerned, the CLB rightly relied on Article 25 of the Articles of Association of the Company, under which, in case of death of one or more joint holders, the survivor/s is/are the only person/s recognized as having title to or interest in the shares. In the case of a will, Article 28(f) of the Articles came into play. The CLB held that the company was bound to follow its Articles and could not have denied transmission / registration of the shares in the sole names of Mehboob and Yasmin. The CLB further noted that by a further resolution passed on 23 November 2011, the Company had decided to annual the resolution of 12 September 2011 and this position was not contested by the company before the CLB. On the other hand, the Company had categorically expressed its willingness to comply with the order to be passed by the CLB on the application of the Petitioners. The CLB, in the premises, held that the Petitioners were entitled to the relief of rectification of register, by entering their names as sole shareholders in respect of 726 and 128 shares. The conclusion is clearly in order. No error of law can be said to vitiate it.

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• Service Tax

• 2016 (5) TMI 1055
  Validity of SCN and adjudication order - Held that:- as rightly pointed out by the CESTAT, the Department itself is unclear whether the service performed by the Respondent was “management maintenance or repair service” or “Erection, Installation and Commissioning Services”. This vagueness goes to root of the matter. Therefore, the court concurs with the CESTAT that the SCN as well as the Adjudication Order are vague as to the taxable service performed by the Respondent and, therefore, no substantial question of law arises for determination by the Court. - Decided against the revenue

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• 2016 (5) TMI 1054
  Waiver of pre-deposit - Demand of Service tax - Construction Service - contravention of the Circular dated 24th August, 2010 issued by CBEC clarifying that the activity had to be treated as a works contract - Issue pointed out of the exigibility of the works contract executed by the Petitioner to service tax by wrongly classifying it as ‘construction service’, has not been taken note of by the CESTAT - Held that:- in a similar appeal before this Court by an entity of the Appellant Group, this Court by an order reported in [2015 (10) TMI 2484 - DELHI HIGH COURT] noted a similar contention and remanded the matter to the CESTAT for consideration of the Appellant’s application for waiver of the pre-deposit afresh in accordance with law. Therefore, in view of the fact that the above contentions have not been considered by the CESTAT when it passed the impugned order, the impugned order is set aside and revives the stay application before the CESTAT for a fresh decision in accordance with law. - Appeal disposed of

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• 2016 (5) TMI 1053
  Refund claim - Allowability of input service Cenvat credit - Claim was not in accordance with foreign exchange realisation - Held that:- Learned Commissioner (Appeals) has not at all examined what was the issue before him in Appeal No.21/2013 but has abruptly come to the conclusion on a different premise holding inadmissibility of certain input credit. Therefore, the matter is remanded to him re-examine the controversy before him as emanated from the Order-in-Original and upon hearing the appellant shall pass appropriate order. Clearing & Forwarding Agency Services and Membership Fees - Held that:- by considering the necessity of Carrying & Forwarding Agency Service, in the course of import and export, the appeal is allowed on this count disallowing CENVAT credit on Membership Fees, which has no connection to the output service provided and appellant is entitled to the refund which shall be recalculated by the adjudicating authority, taking the disallowance aspect hereby ordered. Air Travel Agency Service, Chartered Accountant's Service, Insurance (Motor Vehicle) and Customs House Agents Service - Held that:- So far as the Air Travel Agency and Chartered Accountant's service is concerned, there shall be no denial of CENVAT credit, for the reason that the appellant being an importer and exporter of services, would be requiring service of Air Travel Agency and also certification by Chartered Accountant in respect of the foreign exchange receipts as well as other aspects. So far as the insurance on the motor vehicle is concerned, the period in question being Apr.-12 to Jun.-12 and amendment to the law has been made from 01.04.2011. Learned adjudicating authority shall re-examine the admissibility of CENVAT credit on such services in accordance with law. Since no finding has been made by both the authorities below, in their orders, appeal is remanded on this limited count to examine that aspect. Management, maintenance or repair service - Held that:- the adjudicating authority noticed that the same relates to supply of foods and ineligible tangible goods. He did not examine this aspect thoroughly for which he himself was under confusion without specifying the amount of credit allocable to this service and evidence if any before him. However, considering that remanding back the matter for a small amount of credit shall serve no useful purpose but shall result in waste of time and public money, the appeal on such count is allowed. Disallowance of Cenvat credit - Invoice carried the defective address - Held that:- It is relevant for the law that if the service has been utilized, the authority should cause enquiry as to the genuineness of the service provider and allow the same provided the tax paid by appellant had gone into the treasury. Therefore, it is left to the authority to enquire who was the service provider in respect of credit of Rs. 38,811/- and result of the enquiry confronted to the appellant for rebuttal. Upon hearing the appellant, appropriate order shall be passed. Works contract service - Held that:- Learned adjudicating authority did not examine what was the works contract service availed by the appellant. Therefore, he has to examine the relevancy of such service and hearing the appellant thoroughly shall pass appropriate order. Business auxiliary service (membership fee) - Held that:- it does not appeal to common sense as to relevancy thereof to allow CENVAT credit. Accordingly, no claim thereon shall be admissible. Insurance auxiliary service (motor car) - Held that:- the authority has not at all examined as to relevancy and evidence thereof to declare that ineligible input. Therefore, he should examine the relevancy of the services and its nexus as well as integral connection to the output service and hearing the appellant shall pass appropriate order. Defective invoices - Held that:- the authority has not at all examined any aspect thereof. The disallowance being limited to Rs. 444/- on two counts, the authority shall grant opportunity to the appellant to rectify the defect and pass appropriate order upon hearing the appellant. Validity of adjudicating authority order - not at all examined the justification for disallowance of CENVAT credit on the respective services - Held that:- in absence of any examination by the adjudicating authority it is premature to pass any order as to justification for eligibility thereof. Therefore, learned adjudicating authority shall rehear the appellant on each and every aspect of the disallowance and hearing the appellant both on facts and evidence, shall apply the law and pass a reasoned and speaking order. Maintenance and repair service (gardening) - Held that:- it does not appeal to common sense as to relevancy thereof to the output service. Therefore, no CENVAT credit thereof shall be admissible. Common area / parking charges and supply of food and tangible goods - Held that:- for no description and examination of evidence and application of law, those items shall receive scrutiny of the adjudicating authority for passing reasoned and speaking order granting fair opportunity of hearing to the appellant. Legal consultancy service - Held that:- CENVAT credit thereon cannot be denied since that is permissible being inextricably connected with the business operation. Business auxiliary service (not used for output service) - Held that:- shall receive the scrutiny of the adjudicating authority for no examination done by that authority and hearing the appellant, he shall pass appropriate order. Parking charges, supply of foods and tangible goods and interior decoration service, civil work - Held that:- it would be necessary for the adjudicating authority to say the reason for his disallowance since the order is cryptic and unreasoned. Therefore, appellant is entitled to reasonable opportunity of hearing and considering the appellant's pleading as well as evidence, the authority shall pass order in the re-adjudication proceeding. Business Auxiliary Service - Held that:- for no reasoning stated, learned adjudicating authority shall scrutinise the same and hearing the pleading of the appellant shall pass appropriate order in accordance with law. - Appeal disposed of

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• 2016 (5) TMI 1052
  Computation of interest on service tax not paid or delayed paid - Revenue contended that Commissioner ought not to have adjusted the service tax payable on the import with that paid on the output service. - Held that:- no serious infirmity is found in the view taken by the Commissioner that adjustment of service tax payable in the import of services as well as paid on the output service can be permitted as long as the liability is adjusted within the same service payment cycle. However, we feel that the computation needs to be factually checked to arrive at the correct value of import of software services and the total service tax liability on such import. The liability of payment of interest under Section 75 also needs to be re-checked in the light of the Revenue's appeal. For this purpose, we consider it necessary to remand the matter to the adjudicating authority who is directed to pass orders expeditiously. The issue of classification of the imported software can also be considered in the light of decision of CESTAT Bangalore brought to our notice by the appellant-assessee. - Appeals disposed of by way of remand

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• 2016 (5) TMI 1051
  Waiver of pre-deposit - Business arrangement between DDA and applicant - Construction of residential complex - Service tax liability along with penalties - Section 77 and 78 of the Finance Act, 1994 - Held that:- the whole issue of tax liability and exact quantification requires a close scrutiny and detailed examination at the time of deciding the appeal, the discussion leads to the conclusion that the appellant could not make out a case for full waiver of pre-deposit of adjudicated dues for admitting the appeal. No financial hardship has also been pleaded at the time of hearing. Hence, keeping in view the factual and legal position, we find that it will be fit and proper to direct the appellant to make a pre-deposit Rs. 30,00,00,000/- (Rupees Thirty crores only) within a period of 8 weeks to consider the admission of appeal in terms of Section 35 F of the Central Excise Act, 1994 read with Section 83 of Finance Act, 1994. On payment of such pre-deposit within time, there shall be a stay of recovery of remaining dues as adjudicated by the original authority. - Waiver not granted, stay petition disposed of

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• Central Excise

• 2016 (5) TMI 1050
  Whether grey fabric manufactured by the appellants and sent by them to the job worker is required to be treated as intermediate products so as to invoke provision of rule 16(B) - Held that:- the issue is no more res integra. By following the decision of Tribunal in the case of M/s. Valentino Syntex Pvt. Ltd. Vs. CCE Jaipur [2008 (2) TMI 806 - CESTAT, NEW DELHI], the grey fabric manufactured by the assessee out of duty paid yarn and cleared to the job worker for further processing and subsequently received and cleared on payment of duty are required to be extended the benefit of Rule 16(B) of Central Excise Rules by considering the same as intermediate goods. The said decision stands subsequently followed by the Tribunal in the case of Sangam Spinners Vs. CCE Jaipur [2015 (11) TMI 1029 - CESTAT NEW DELHI]. - Decided in favour of appellant

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• 2016 (5) TMI 1049
  Eligibility of Cenvat credit of NCCD - paid on input panmasala received by the appellant from the suppliers who availed the benefit of Notification No. 27/2001-CE dated-11/5/2001 - Rule 3(1)(v) of the CENVAT Credit Rules - Held that:- the contention raised by the appellant, that NCCD duty credit utilized by debiting the CENVAT Credit account, cannot be denied for units not availing area based exemption, is acceptable as these amounts are not hit by the CENVAT Credit Rules. The amount of such NCCD Credit rejected, if any is required to be quantified by the Adjudicating authority and the same will be admissible to the appellant. Invokation of extended period - Rule 14 of the Cenvat credit Rules, read with Section 11A of the Central Excise Act, 1944 - NCCD credit taken by appellant was duly reflected in their periodical returns filed with the department alongwith a list of raw materials supplied with their address and registration numbers - Held that:- as it is observed from the ER-1 return copies for the month of March, 2002, March, 2003 and March, 2004 that appellant has indicated the NCCD CENVAT Credit taken by the appellant. Appellant has also given a list of all the input materials and their registration numbers. It is also observed from the covering letters filing ER-1 returns that even photo copies of Cenvatable invoices were also submitted to the department by the appellant. Therefore, five year’s extended period of demand cannot be invoked against the appellant. However, the entire demand is not time barred as the period of demand is 11/5/2001 to 31/3/2006 and the show cause notice is issued on 10/08/2006. The CENVAT credit taken within the normal period of limitation is not admissible to the appellant and is required to be paid alongwith appropriate interest under Section 11AB of the Central Excise Act, 1944. Imposition of penalty - Held that:- the issue involved in the present appeal was a case of interpretational dispute. All the relevant facts and provisions of CENVAT Credit Rules were known to the department also. Periodical audits of the appellant’s unit were also done by the Internal Audit parties of the department. If department could not raise doubts about the admissibility of credit then Appellant cannot be held responsible for taking a deliberately wrong credit for imposing penalty. Accordingly, it is held that penalty under Rule 15 of the CENVAT Credit Rules, 2004 cannot be imposed and is set aside. - Appeal disposed of

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• 2016 (5) TMI 1048
  Demand of duty - equivalent to duty foregone on the inputs (diesel/furnace oil) procured availing benefit of Notification 22/03-CE dated 21.03.2003-CE thereof - Waste of sesame seeds cleared without payment of duty although the same resulted from use of diesel/furnace oil - sesame seeds among others are allowed clearance on payment of nil rate of duty vide Notification No.23/2003-CE dated 31.03.2003. This confirms that waste of sesame seeds is not a non-excisable item. As the above quoted proviso to para 6 of Notification 22/03-CE is applicable only when the articles are not excisable, the said proviso is not applicable to the impugned goods.

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• 2016 (5) TMI 1047
  Entitlement of Cenvat credit - Security services, Fettling Contract Services and Architectural Services - Services not received in the registered unit - Held that:- Cenvat Credit in respect of the input service cannot be denied merely for the reason that the services were received and used outside the registered premises. There is no prohibition for availing the Cenvat Credit in such cases, the Cenvat Credit on input service is admissible so long the services are used in or in relation to the manufacture of final product or for providing output service irrespective of the location where the services were received and used by applying the ratio of Tribunal decision in the case of M/s. Aurobindo Pharma Ltd. Vs. Commissioner of Central Excise, Chennai-III - [2015 (3) TMI 1186 - CESTAT, CHENNAI]. Therefore, the appellant is entitled for the Cenvat Credit in respect of Security Services, Fettling Contract Service & Architectural Services used outside the factory of the appellant in their own Hinjewadi & Wai unit. - Decided in favour of appellant

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• 2016 (5) TMI 1046
  Entitlement for Cenvat credit - debit notes issued by the service provider in respect of service - Ld. Commissioner raised some shortcomings in the debit notes denying the credit - Held that:- whatever informations required in terms of Rule 4A in the document, more or less all the informations are appearing in the debit notes, therefore the debit notes can be accepted for allowing Cenvat Credit. Therefore, this Tribunal has taken a consistent view that Cenvat credit can be allowed in the debit note if it contains the informations as required under Rule 4A of Service Tax Rule, 1994. The various decisions cited by the appellant are squarely applicable. - Decided in favour of appellant

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• 2016 (5) TMI 1045
  Extended period of limitation - Valuation - Inadmissibility of deduction of transportation charges on equalized basis - Rule 5 of Central Excise Valuation Rules, 2000 - Duty demanded alongwith penalty - Revenue contended that assessee did not disclose any vital facts to the Department that they were not including freight and insurance charges in the assessable value while making the delivery at FOR destination - Held that:- the respondent assessee have filed the paper book enclosing the two letters dated in 11.09.2001 and 30/11/2001 along with annexure for copies of purchase contracts. Therefore, I hold that the respondent assessee have sufficiently disclosed the facts to the Revenue. - Decided against the revenue

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• 2016 (5) TMI 1044
  Refund claim - excess duty paid as regards to abatement - refund claim sanctioned but credited to consumer welfare fund under the provisions of 11B(2) of Central Excise Act, 1944 - No evidence produced regarding unjust enrichment - Held that:- it is found that appellant had submitted detailed reply along with various documents and explanation of documents. In the Order-In-Original, the adjudicating authority credited the sanctioned refund amount to the consumer welfare fund only on the basis of judgments in cases of Beckon Electronics Pvt. Ltd Vs Commissioner of Central Excise, Rajkot [2004 (2) TMI 431 - CESTAT, MUMBAI] and CCE Mumbai Vs Allied Photographics India Ltd [2003 (11) TMI 91 - SUPREME COURT OF INDIA] whereas the Adjudicating authority did not whisper anything about the documents submitted by the appellant. This clearly shows that no verification in respect of unjust enrichment was carried out by the Adjudicating authority.Therefore, the impugned order is set aside and appeal is allowed by way of remand to the Adjudicating authority. The appellant shall produce all the documents necessary to verify that incidence of refund amount has not been passed on to any other person. - Appeal disposed of by way of remand

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• 2016 (5) TMI 1043
  Recovery of interest and imposition of penalty - Rule 25 and Section 11B respectively - Differential duty has already paid - Assessee have not followed the procedure of provisional assessment as laid down under Rule 7 of the Central Excise Rules, 2002 - No malafide intention as the assessee was discharging duty under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. Held that:- the assessable value of their goods is to be determined under Rule 8 of the Central Excise Valuation Rules, 2000, according to which the valuation has to be done on the basis of 110% of the cost of production and the cost of production can be derived on the basis of CAS4. The CAS4 can be made only after completion of the financial year when the Balance Sheet is finalized. In such a situation, it cannot be expected from the assessee to deposit the correct duty at the time of clearance of the goods. There is no dispute that the assessee have been clearing the goods on payment of duty and they were supposed to pay the differential duty on the basis of the CAS4. The assessee have without contesting the duty liability, paid the duty which has been confirmed and appropriated in the adjudication order. The duty was confirmed under Section 11A of the Act. As per Section 11AB when the duty is determined under Section 11A interest is required to be paid consequently under Section 11AB. Therefore in the present case also the assessee is liable to pay the interest. As regards penalty, this is not the case of clandestine removal or intentional avoidance of payment of duty. The differential duty arises only for the reason that as per the valuation under Rule 8 of the Rule the final value of the goods cannot be determined at the time of clearance. Therefore, the lower authority has rightly dropped the penalty and the same is maintained. - Appeals dismissed

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• CST, VAT & Sales Tax

• 2016 (5) TMI 1038
  Whether bitumen emulsion should be regarded as bitumen and covered by Entry 14 of the list of goods taxable at five per cent in Part-I of Schedule C to the West Bengal Valued Added Tax Act, 2003 - Held that:- while matching goods against the entries in schedules under the sales tax and VAT laws, ought to be the test of a product’s relatability to a particular entry based on its commercial identity, use and the common parlance test. If any commodity is capable of being covered by several specified entries – as distinct from the residuary entry – the best fit would be on a combined assessment based on the commercial identity, common parlance and user tests. The positive co-relation between the concerned goods and the specified entry, based on such three broad tests, ought to provide the answer. But when the choice is between a particular specified entry and the non-descript residuary entry, the assessment should be founded on a negative test: whether the goods are more non-relatable than relatable to the entry on a reasonable application of the three criteria, before they are parked under the residuary entry. There can be no mathematical formula for such an exercise, but there must be a pronounced doubtful co-relation between the goods in question and the specified entry on all three counts before such goods can be banished to the residuary entry, irrespective of whether the residuary entry carries a higher or lower rate of tax. A further consideration would be that since an indirect tax as sales tax is passed on to the consumers, whether a dealer should be penalised and made to pay the tax by upsetting an interpretation that has been accepted for a few years. If such are the tests, bitumen emulsion would pass muster to find itself in the company of bitumen in Entry 14 in Part-I of Schedule C to the Act of 2003. therefore, the bitumen emulsion is more relatable to the entry covered by bitumen rather than the residuary entry in Schedule CA to the Act. - Petition disposed of

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• 2016 (5) TMI 1037
  Liability of purchase tax - Inter-state stock transfer made to their own branches located in other States effected from the warehouse located in the Special Economic Zone - Appellant contended that they have an exemption by virtue of Section 12(1)(a) of TNSEZ Act, 2005. Such exemption as every developer or entrepreneur is entitled to exemption from the levy of taxes both on the sale as well as the purchase of goods, if such goods are meant to carry on the authorized operations. Held that:- it is clear from the Letter of Approval that the appellant was obliged primarily to export the goods procured for trading and services. But, since the appellant was obliged to achieve positive net foreign exchange, only over a period of time, the Letter of Approval specifically permits the appellant to supply/sell goods or services in the DTA. Condition Nos.(i) and (v), if read harmoniously, would show that an export obligation is imposed upon the appellant, not with the idea of making the appellant a 100% export oriented unit. The appellant is entitled to apportion their exports and domestic sales in such a manner that they achieve a positive net foreign exchange within the stipulated period. Therefore, the inter state stock transfer made by the appellant to its own branches located outside the State, is very clearly authorised by Condition No.(v) of the Letter of Approval. Hence, the Department as well as the learned Judge were in error in thinking that an inter-state stock transfer would not come within the purview of the expression authorised operations. Whether the right conferred upon a developer or entrepreneur under Section 12(1) is circumscribed by the provisions of Section 15(a) of the TNSEZ Act, 2005 - removal of goods from the SEZ to the Domestic Tariff Area - Held that:- a direct export from a unit located in a SEZ to a foreign country cannot take place without the goods being removed from the SEZ to the Domestic Tariff Area, unless an airport or seaport is also located within the SEZ. Similarly, a direct sale to a local purchaser within the State cannot also take place without the goods being removed from the SEZ to the DTA. Likewise, an inter-state sales in terms of the Central Sales Tax Act cannot also take place without the goods being removed from the SEZ to the DTA of the State, within which, the SEZ is located. The expression "removed from a SEZ to a DTA" appearing in Section 15(a) has to be correlated to a taxable event. This is made clear by the rider contained in the last part of Section 15(a). This rider reads as "where applicable as leviable on such goods when imported". The fallacy in the interpretation given by the respondents to Section 15(a) could be understood very easily by looking at it from another angle. The respondents agree that if an export takes place from a unit located in SEZ to a foreign country, Section 15(a) does not get attracted even if the goods are removed from the SEZ to a DTA. The respondents also agree that even in cases where an inter-state sales takes place from a unit located in a SEZ, Section 15(a) does not have any application, despite the goods being removed from the SEZ to a DTA. Whenever a direct sale takes place from a unit located in SEZ to a local purchaser within the State, the chargeability of tax arises not because of the removal from SEZ to DTA, but because of the taxable event namely sale. Therefore, if the expression "removed" has to be understood in one particular manner in respect of three contingencies namely (i) export (ii) direct sales and (iii) inter-state sales, it cannot be understood differently in the context of inter-state stock transfer alone. Therefore, Section 15(a) does not actually circumscribe Section 12(1)(a) of the Act. We have already indicated four possible scenarios. At least in two out of those four scenarios, namely in the case of export and in the case of inter-state sales, the State, in which, SEZ is located is deprived of its revenue. - Decided in favour of appellant

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• Wealth tax

• 2016 (5) TMI 1056
  Scope of Assets u/s 2(ea) of Wealth Tax Act, 1957 - inclusion of residential building let out and only for brief period the property was vacant - Letting out period is less than 300 days - Held that:- It could be appreciated that the ‘asset’ which was taxed u/s 2(ea)(i) of the Act was legally in existence only for a period of 92 days during FY 2005-06. In the circumstances, it was not possible to let the said property for period of at least 300 days in FY 2005-06 so as to qualify for exemption provided in section 2(ea)(i)(4) of the Act. In view of the aforesaid findings and adopting purposive interpretation of the legal provisions of the Act in consonance with the Explanatory Memorandum to Finance (No.2) Bill, 1998 , residential property let out being a productive asset, we deem it fit to grant benefit of exemption envisaged by clause (4) since for the entire duration of the previous year during which the property was in legal existence, was let for residential purposes. The subject mentioned property which has been let out would not fall within the ambit of taxable asset u/s 2(ea) of the Act - Decided in favor of assessee. Inclusion of jewellery without giving effect to debts owed in relation to jewellery - Held that:- During the year in which Jewellery was owned, there was no increase in share capital and reserves and surplus during those relevant assessment years - on the contrary, we find that the loan funds have increased - which enables us to safely conclude that the jewelleries have been obtained only out of borrowed funds and hence the same requires to be deducted from the value of jewelleries. - No addition. - Decided in favor of assessee. Valuation of motor Cars - Held that:- 80% of the insurance value of motor car should be considered as the market value in terms of Rule 20 of Schedule III of Wealth Tax Act. - Decided in favor of assessee.

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