TMI Tax Updates - e-Newsletter
May 27, 2016

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• Penalty u/s 272A(2)(k) - e-TDS statements for the AY 2008-09 were submitted in Feb. 2013 only - Levy of penalty confirmed - HC

  ---

• MAT - AO cannot make adjustment due to transfer pricing addition to the profit in the P&L account for computing book profit u/s 115JB

  ---

• Rejection VCES since value of services as per P&L accounts is much higher than the value declared in VCES - Matter to re-adjudicated afresh

  ---

• No co-relation between two C-forms with matching invoices - Benefit of C-Forms allowed since substantial co-relation is established - HC

  ---

Articles

1. REPLY TO SHOW CAUSE NOTICE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Commerce Minister Smt. Nirmala Sitharaman meets Bahrain Minister of Industry, Commerce & Tourism

2. SAARCFINANCE Good policy has been essential to our stability: RBI Governor at Governors’ Symposium

3. RBI Reference Rate for US $

4. First of its kind survey on Passenger Satisfaction Survey at Chhatrapati Shivaji International Airport (CSI) Airport, Mumbai gives a positive feedback about quality of services etc

5. Extension of Scheme for E-assessment to Hyderabad and Kolkata during the Current Financial Year 2016-17

Notifications

Income Tax

1. F. No.173/237/2016-ITA-I - dated 6-5-2016 - IT

Opertionalization of section 9A of the Income-tax Act, 1961 - Notifies the Committee for the purpose of rule 10VA(4)

2. S.O.1541 (E) - dated 26-4-2016 - IT

CORRIGENDUM – Notification No. S.O. 1103(E) dated 15th March, 2016

3. S.O.1540 (E) - dated 26-4-2016 - IT

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

4. S.O.1539 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - National Association for the Blind, NIT, Faridabad

5. S.O.1538 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Amar Jyoti Charitable Trust, Greater Kailash-I, New Delhi

6. S.O.1537(E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Sense International (India), Ahmedabad

7. S.O.1536 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Social Action for Manpower Creation (SAMPARC), Pune

8. S.O.1535 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Bharati Vidyapeeth, Bharati Vidyapeeth Bhavan, Pune

9. S.O.1534 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Mohan Foundation, Anna Nagar, Chennai

10. S.O.1533 (E) - dated 26-4-2016 - IT

U/s. 35AC, IT ACT, 1961 - Eligible Projects or Schemes, Expenditure On - Childline India Foundation, Mumbai

SEZ

11. S.O. 1864(E) - dated 18-5-2016 - SEZ

Kandla Special Economic Zone Authority - Name of members notified - Amendment in Notification No. S.O. 378 (E) dated 6th February, 2014

Circulars / Instructions / Orders

Income Tax

1. 19/2016 - dated 25-5-2016

Jurisdiction of income-tax authorities

FEMA

2. 72 - dated 26-5-2016

Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)

3. 74 - dated 26-5-2016

Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of advance remittance for exports and migration of old XOS data

4. 73 - dated 26-5-2016

Foreign Exchange Management Act, 1999 (FEMA) Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules) - Compounding of Contraventions under FEMA, 1999

Customs

5. 49/2016 - dated 29-4-2016

Assign charge of the Posts of Chief Commissioners/Director General of Customs & Central Excise, Delhi

Highlights / Catch Notes

Income Tax

• High Court Confirms Penalty u/s 272A(2)(k) for Late e-TDS Filing for Assessment Year 2008-09 Despite No Revenue Loss.

  Case-Laws - HC : Penalty u/s 272A(2)(k) - non filing / delayed filing of e-TDS statement - e-TDS statements were submitted on 8.2.2013 and 9.2.2013 for the Assessment Year 2008-09 - it cannot also be urged that no penalty could have been imposed for non-filing of the e-TDS statements in time as it has not resulted in any loss to the revenue - Levy of penalty confirmed - HC
  Visit to Get Source

  ---

• Section 44AD: Separate Deductions Allowed for Interest on Capital and Partner Remuneration After Estimating Net Profit.

  Case-Laws - AT : Estimated profit u/s 44AD - remuneration to partners - the statute itself in section 44AD of the Act, allowed separate deductions towards interest on capital accounts and remuneration to partner’s, after estimation of net profit from the gross receipts. - AT
  Visit to Get Source

  ---

• Assessee can add a new claim u/s 11 for unintentional omissions in income returns without penalty.

  Case-Laws - AT : Exemption u/s 11 - assessee is entitled to raise additional ground not merely in terms of legal submissions but also an additional claim not made in the return of income inadvertently, cannot be faulted for more than one reason - AT
  Visit to Get Source

  ---

• Section 68 of Income Tax Act not applicable to opening balance of creditors if liabilities not credited in prior year.

  Case-Laws - AT : Addition u/s.68 - opening balance of creditors - liabilities which were not credited in the previous year relevant to the assessment year under consideration, the provisions of the section 68 cannot be applied - AT
  Visit to Get Source

  ---

• Section 54F of Income Tax Act: Liberal Application of Exemptions on Long-Term Capital Gains for Taxpayer Relief.

  Case-Laws - AT : Claim for deduction u/s.54F - Exemption from long term capital gain (LTCG) - The provisions of Sec. 54F are beneficial provisions and are to be considered liberally in the aspect of limitation period. - AT
  Visit to Get Source

  ---

• Taxpayers Can Offset Interest if Link Between Loan Received and Loan Advanced is Proven Under Income Tax Rules.

  Case-Laws - AT : Addition of interest received under the head “Income from other sources” - If the assessee is successful in establishing the link between the loan amount received by the assessee and the loan advanced, the assessee shall be entitled to the benefit of netting off of interest amount - AT
  Visit to Get Source

  ---

• Tax Authorities Fail to Disallow Chartered Accountant's Fee Due to Lack of Evidence u/s 40A(2)(b.

  Case-Laws - AT : Disallowance of professional fee paid to the Chartered Accountant who is also one of the directors of the assessee company - addition u/s 40A(2)(b) - monthly retainer fee paid - The tax authorities cannot question the choice exercised by the assessee without bringing any material on record - No disallowance - AT
  Visit to Get Source

  ---

• No TDS on Power Factor Rebate as It's Part of Tariff; Calculated from Energy Charge and Monthly Power Factor.

  Case-Laws - AT : TDS - power factor rebate allowed to any consumer is a part of tariff, and given effect in the energy bill. Power factor rebate is computed as a percentage of energy charge specified in the tariff Order and the monthly power factor of the consumer - No TDS is required - AT
  Visit to Get Source

  ---

• No TDS on Wheeling and Transmission Charges: Not Contractual Payments or Fees u/ss 194C/194J of Income Tax Act.

  Case-Laws - AT : TDS - wheeling charges and transmission charges are neither contractual payments nor fee for technical services u/s. 194C or 194J - No TDS required - AT
  Visit to Get Source

  ---

• Indian Company Exempt from Tax on Brazilian Dividends Under Article 23 of India-Brazil DTAA.

  Case-Laws - AT : Taxability of dividend received from brazilian company in India - India Brazil DTAA - assessee is a resident company of India within the meaning of Article 23 paragraph 3 of DTAA , such dividends shall be exempt from Indian Income Tax. - AT
  Visit to Get Source

  ---

• Hire Purchase Payments Not Considered Commission; No TDS Required u/ss 194A or 194H of Income Tax Act.

  Case-Laws - AT : The payments of hire charges to Tata Finance Limited under the hire purchase does not come within the ambit of commission or brokerage. - TDS is not required either u/s 194A or 194H - AT
  Visit to Get Source

  ---

• Assessing Officer's Contradictory Stance: Rejects Books Yet Accepts Taxpayer's Financial Results, Disallows Certain Expenses Only.

  Case-Laws - AT : AO after rejecting the books of account preferred to make disallowance on account of certain expenses only. - In a way he has accepted the books results shown by the assessee and had only disallowed the expenses. This shows the illusioned mind of the Assessing Officer - AT
  Visit to Get Source

  ---

• Assessing Officer Cannot Adjust Book Profit for Transfer Pricing Additions u/s 115JB of Income Tax Act.

  Case-Laws - AT : MAT - AO cannot make adjustment on account of transfer pricing addition to the amount of profit shown by the assessee in its profit and loss account, for the purpose of computing book profit u/s 115JB. - AT
  Visit to Get Source

  ---

Customs

• Importer Must Comply with FSS Labelling and Packaging Regulations for Legal Import Activities, Recent Case Law Confirms.

  Case-Laws - HC : Importer is required to mandatorily comply with the labelling requirements in terms of the FSS Regulations and FSS Packaging Regulations. - HC
  Visit to Get Source

  ---

• Importers Must Meet Dual Conditions for Exemption: Duty Paid Inputs and No CENVAT Credit Availment Required.

  Case-Laws - HC : In cases where the exemption Notification stipulates two conditions, namely that the inputs should have suffered duty and that no CENVAT credit should have been availed, then the benefit of the Notification will be available only if both conditions are satisfied. An importer will never be able to satisfy both these conditions and hence, he cannot claim the benefit. - HC
  Visit to Get Source

  ---

• Penalty Imposed Under Wrong Section Set Aside Due to Lack of Justification and Opportunity for Appellant Response.

  Case-Laws - AT : Sec 112 (a) of the Customs Act 1962 has been mentioned for imposing penalty in the SCN but Adjudicating authority has imposed penalty under Sec 114 without giving any justification/opportunity to the appellant as to why suddenly penalty under Sec 114 was imposed - penalty set aside - AT
  Visit to Get Source

  ---

• Customs House Agent license not sub-let by granting G Card; no violation of Regulation 10 found.

  Case-Laws - AT : Revokation of CHA licence - Whether the grant of G Card to Shri Naresh Makwana amounts to sub-letting of licence by the present broker so as to hold contravention of Regulation 10 against him - Held No - AT
  Visit to Get Source

  ---

Service Tax

• Entitlement to Claim Credit for Outdoor Catering and Staff Transport Services Confirmed as "Input Service" Under Service Tax.

  Case-Laws - AT : Both the services i.e. Outdoor Catering service as well as Staff Transport Service fall in the definition of "input service" and the credit taken by the appellant has wrongly been denied - AT
  Visit to Get Source

  ---

• Extended Limitation for Service Tax on Catering Deemed Unsustainable Due to Lack of Intentional Wrongdoing; Demand Set Aside.

  Case-Laws - AT : Extended period of limitation - Contract for outdoor catering services - The invocation of extended period is unsustainable as the non-registration and non-payment of tax is a mere omission not traceable to guilty mind, a pre-requisite for such invocation. - Demand set aside - AT
  Visit to Get Source

  ---

• VCES u/s 111 of Finance Act 2013 rejected for discrepancies in declared service value; case remanded for review.

  Case-Laws - AT : Rejection of Voluntary Compliance Encouragement Scheme, 2013 (VCES) u/s 111 of the Finance Act, 2013 - VCES was initially accepted - value of services as per P&L account/Income Tax return is much higher than the value of services declared under VCES - Matter to be re-adjudicated by the original authority - AT
  Visit to Get Source

  ---

Central Excise

• High Court invalidates demand in second show cause notice due to extended period of limitation issues.

  Case-Laws - HC : Validity of demand raised invoking Extended period of limitation in the Second Show Cause notice - Second SCN was issued for the earlier period than which was covered by the first SCN - demand set aside - HC
  Visit to Get Source

  ---

• Appellants Granted Cenvat Credit for Export Services Including GTA, CHA, and Wharfage; Port as Place of Removal Confirmed.

  Case-Laws - AT : Cenvat Credit - export of goods - the place of removal is the Port - the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. - AT
  Visit to Get Source

  ---

• Cenvat Credit on Capital Goods Removed Before November 13, 2007 Not Subject to Duty Payment.

  Case-Laws - AT : Reversal of Cenvat Credit availed on the capital goods and removed subsequently after use - prior to 13-11-2007, there was no duty payable in respect of capital goods which was used before it is removed. - AT
  Visit to Get Source

  ---

• Payment during investigation isn't admission of duty evasion; evasion must be proven with material evidence.

  Case-Laws - AT : Clandestine removal - Mere payment of some amount during investigation by itself cannot be held as admission of duty evasion which has to be decided based on material evidence collected during investigation. - AT
  Visit to Get Source

  ---

• High Court Examines Promissory Estoppel in Revocation of Tax Exemptions for Jarda Tobacco in North Eastern India.

  Case-Laws - HC : Revoking the area based exemption - North Eastern India region - Jarda scented tobacco/pan masala containing tobacco - The impugned Notification No. 11/2007-CE is hit by the doctrine of promissory estoppel - HC
  Visit to Get Source

  ---

• Exemption Granted for Taxis Registered for Five Years Under Notification No. 6/2006-CE; Registration Tenure Not Specified.

  Case-Laws - AT : Motor vehicles sold as taxis - the taxis were registered for a limited period of five years - notification no. 6/2006-CE do not stipulate the tenure of registration - benefit exemption / refund allowed - AT
  Visit to Get Source

  ---

• Acrylic Monomer-Based Products Classified Under 3906.90; No Technical Distinction from Acrylic Polymer for Classification.

  Case-Laws - AT : Classification - If the product of the appellant is based on Acrylic Monomers, the product merits classification under 3906.90, as there is technically no difference in respect of acrylic monomer or acrylic polymer. - AT
  Visit to Get Source

  ---

• Departmental Enquiry Stalls as Private Documents Halt Investigation; Demand Against Appellant Dismissed.

  Case-Laws - AT : Clandestine removal - Departmental enquiry did not even cross the preliminary stage and stopped with recovery of private documents from the transporter to conclude the allegation of clandestine removal by the appellant - demand set aside - AT
  Visit to Get Source

  ---

• Petitioner Challenges Denial of 4% Special Additional Duty Refund Amid Financial Struggles in Competitive Market.

  Case-Laws - HC : Eligibility of refund of 4% Special Additional Duty (SAD) - petitioner is put to financial hardship and because of the competitive market, the non-grant of refund would affect the business of the petitioner - HC
  Visit to Get Source

  ---

• Appellant avoids penalty by paying duty and interest without needing a demand notice. No penalty applicable.

  Case-Laws - AT : Since the appellant admittedly paid duty alongwith interest subject to correctness thereof, there was no need to issue notice for demand of such duty and appropriation thereof, consequently no penalty is imposable on the appellant - AT
  Visit to Get Source

  ---

• Authority's Reclassification of Goods and Denied Exemption Overturned Due to Lack of Clear Demand u/s 11A.

  Case-Laws - AT : The adjudicating authority proposed to change the classification and denying exemption, there should be a clear demand issued u/s 11A. Whereas, in the present case, neither SCN says so, on the contrary, the adjudicating authority after re-classifying the goods and denying exemption, straightaway confirmed the demand u/s 11A - Demand set aside - AT
  Visit to Get Source

  ---

• Goods Tested and Packed Qualify for CENVAT Credit as Part of Manufacturing Process, Court Rules.

  Case-Laws - HC : CENVAT Credit when the goods were subjected only to testing and packing - testing and packing were part of a series of steps undertaken by the assessee for the manufacture of the goods - credit allowed - HC
  Visit to Get Source

  ---

VAT

• Court Grants Benefit After Establishing Substantial Correlation Between C-Forms and Invoices Despite Initial Discrepancies.

  Case-Laws - HC : Rejection of C-forms - petitioner not been able to co-relate the two C-forms with matching invoices - Benefit allowed since substantial co-relation has been established - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2016 (5) TMI 1109
  Penalty under Section 272A(2)(k) - non filing of e-TDS statement - e-TDS statements were submitted on 8.2.2013 and 9.2.2013 for the Assessment Year 2008-09 - Held that:- It is necessary for the deductor to file e-TDS statements in time so as to enable the processing of the returns in time. The Assessing Authority has also emphasised this aspect in the order dated 22 April 2013. It has been stated that filing of e-TDS statements not only increases the reach of the department but also leads to creation of an audit trial that can be utilized as an effective tool against detection of tax evasion. It is for this reason that stringent action is required to be taken for non-compliance. In such circumstances, it cannot also be urged by learned counsel for the appellant that no penalty could have been imposed for non-filing of the e-TDS statements in time as it has not resulted in any loss to the revenue. We are of the opinion that adequate opportunity had been granted to the appellant but the appellant failed to utilize the opportunities that had been granted. In fact even when the appellant had appeared through a counsel, only an adjournment was sought and even thereafter no explanation was offered before the Assessing Authority. However, an explanation was offered before the Appellate Authority which was taken into consideration and the penalty amount was suitably reduced as the case of the appellant that a regular Principal assumed charge on 25 January 2010 was accepted and the penalty was imposed after that date.

  ---

• 2016 (5) TMI 1105
  Disallowance of lorry operational expenses - Held that:- There was no scope for making adhoc disallowance. The learned CIT(A) observed that from the perusal of the balance sheet of the assessee from A.Yrs. 2006-07, 2007- 08 and 2008-09 the total lorry expenses was 80%, 81% and 83% respectively of lorry income. The learned CIT(A) also observed that the AO had not brought any comparable cases in the same line of business to justify his estimated disallowance of 20%. However, the learned CIT(A) found that in the absence of evidence produced in and in the absence of supporting bills and vouchers produced by the assessee before the learned AO, the learned AO had no option but to resort to some estimation and hence going by the past history of the assessee he found that the disallowance of Rs. 2,50,000/- would meet the ends of justice and accordingly granted relief for the balance sum of Rs. 36,39,499/-. - Decided against revenue Disallowance u/s 40(a)(ia) - finance charges paid to Tata Finance Limited - Held that:- The payments of hire charges to Tata Finance Limited under the hire purchase does not come within the ambit of commission or brokerage. Hence we hold that the provision of section 194H would not be applicable. With regard to the applicability of the provisions of section 194A of the Act the reliance placed by the assessee on the CBDT Instruction No.1425 F.No.275/9/80 IT (B) dated 16-11-81 is well founded - Decided against revenue

  ---

• 2016 (5) TMI 1104
  TDS u/s. 194J / 194C - non-deduction of TDS on transmission charges and/or wheeling charges - invoking the provisions of section 40(a)(ia) - Held that:- The wheeling charges represent the charges for permitting use of state transmission utility for permitting use of state transmission utility by the person other than the distribution licensee. The transmission charges simply constitute a fee for availing of the transmission utility to be used by open asset concept for distribution of electricity, licensees and consumers. In our view, the wheeling charges and transmission charges are neither contractual payments nor fee for technical services u/s. 194C or 194J of the Act as contended by revenue because there is no human intervention or human interface and, therefore, this cannot be contractual payments or fee for technical services. Therefore, we are of the view that there is nothing on record to support the contentions of the revenue that the wheeling charges and transmission charges assumed the character of contractual payments and fee for technical services as noted by AO.- Decided against revenue Power factor rebate and power interruption charges - Held that:- As per terms and conditions of Tariff order of 2005-06, Power Factor Surcharge was payable by the High Voltage/Extra High Voltage Industrial consumers, whose monthly average power factor falls below 85%. On the other hand, if the monthly power factor was above 92%, he would get a power factor rebate. If the power factor is between 85% and 92%, there was neither any surcharge nor any rebate. So power factor rebate allowed to any consumer is a part of tariff, and given effect in the energy bill. Power factor rebate is computed as a percentage of energy charge specified in the tariff Order and the monthly power factor of the consumer. The AO was of the view that the payment for power factor rebate and power interruption charges was made by West Bengal State Electricity Board to Power Grid Corporation but this fact is incorrect. The power factor rebate is not paid to anybody. This rebate is granted to the high voltage industrial consumers for their energy consumption bills. Once this is the position, there is no payment made by assessee but this was a rebate adjusted against electricity consumption bills. This cannot be subject matter of TDS under any of the provisions of the Act whether Sec. 194C or 194J of the Act. Accordingly, CIT(A) has rightly deleted the disallowance made by AO by invoking the provisions of section 40(a)(ia) of the Act. - Decided against revenue Unscheduled Interchange (UI) - Held that:- UI charges do not fall within the purview of fee for technical services as defined in section 194J of the Act are not liable to TDS. Hence, we confirm the order of CIT(A) deleting the disallowance made by AO by invoking the provisions of section 40(a)(ia) of the Act.- Decided against revenue Fee payable to Regional Load Despatch Centre for Short Term Open Access and operating charges - TDS liability - Held that:- These are only fee paid and nothing else for operational work. Accordingly, this cannot be contractual payments or payments for fee for technical services and cannot come under the purview of sections 194C or 194J of the Act. Accordingly, this cannot be subject matter for TDS. In view of the above facts and circumstances, once these items are not liable for TDS disallowance u/s. 40(a)(ia) of the Act cannot be made and CIT(A) has rightly deleted the same - Decided against revenue Disallowance of payment towards license fee made by AO for non-deduction of TDS u/s. 194C - Held that:- The Government of West Bengal, Department of Power and Non Conventional Energy Sources, Kolkata notified the West Bengal Electricity (Fees for Application for Grant of Licence) Rules 2005 by Gazette notification dated 24th November, 2005. Rule 3(1) of the said rules provides that every application made to the commission for grant of licence under Section 14 of the said Act shall be accompanied by a fee of Rs. 2,00,000. Sub-rule (2) of Rule 3 further provides that every licensee shall pay to the commission an annual fee at the rate of 5 paise per hundred KWH of the energy that has been transmitted or distributed or traded as the case may be, by such licensee in the preceding financial year subject to a minimum annual fee of Rs. 5,00,000. In accordance with the aforesaid rules read with Section 14 of the said Act, WBSEB paid a licence fee of Rs. 67.74 lakhs to the West Bengal State Electricity Regulatory Commission. Payment of such licence fee does not fall within the purview of Section 194C of the said Act as held by the AO. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has rightly deleted the disallowance, because the assessee has not made any payment on which TDS is to be deducted rather license fee is paid by the parties is for granting of license and not for any expense, which was claimed by the assessee. Accordingly, we confirm the order of CIT(A) deleting the disallowance - Decided against revenue

  ---

• 2016 (5) TMI 1103
  Taxability of dividend received from brazilian company in India - India Brazil DTAA - Held that:- From the perusal of DTAA between India and Brazil vide Article 10 paragraphs 1 and 2 as well as Article 23 Paragraph 3 , since dividend is received from Brazil, wherein the same could have been taxed upto a rate not exceeding 15% as per DTAA but have been by Brazilian law declared to be not subject to income tax and the assessee is a resident company of India within the meaning of Article 23 paragraph 3 of DTAA , such dividends shall be exempt from Indian Income Tax. Hence we find no infirmity in the order of the Learned CIT(A) in this regard. - Decided against revenue

  ---

• 2016 (5) TMI 1102
  Exemption u/s 11 - whether CIT(A) was right in allowing the claim of deduction raised by the assessee by way of an additional ground u/s 11 & 12 - Held that:- Hon'ble Supreme Court in the case of Goetze India Ltd. (2006 (3) TMI 75 - SUPREME Court ) holds that if the Assessing Officer looks into a particular claim once the assessee has filed original return of income it is possible only by way of filing a revised return. There was no claim under law from the assessee to file the revised return to raise the claim of deduction u/s 11 & 12 before the first appellate authority who has coterminous powers with the Assessing Officer. Hon'ble Bombay High Court in the case of CIT Vs Pruthvi Brokers and Share holders (P) Ltd., (2012 (7) TMI 158 - BOMBAY HIGH COURT ) has held that the assessee is entitled to raise additional ground not merely in terms of legal submissions but also an additional claim not made in the return of income inadvertently, cannot be faulted for more than one reason. In view of above discussion, the ratio laid down by Hon'ble Supreme Court in various judgements and Hon'ble High Courts, we are inclined to dismiss the grounds raised by the Revenue. - Decided in favour of assessee

  ---

• 2016 (5) TMI 1101
  Addition u/s.68 - plea of the assessee that though certain credits would not be proved due to the circumstances beyond the control of assessee, at least the opening balance, which is carried forward from earlier previous year and it cannot be considered as income of assessee u/s.68 in the assessment year under consideration - Held that:- In view of the judgment of Mariam Aysha V. Commissioner of Agricultural Income-Tax [1971 (7) TMI 50 - MADRAS High Court ] wherein held that “that consent/acceptance given by assessee cannot give jurisdiction and a right to the assessing authority to make an addition, is an essential principle of law. The taxing authority can act only if there is power under the statute to do so”. Further, the addition was made by invoking the provisions of the section 68 of the Act. If the liabilities are old, no credit has been made in so far those credits in the books of accounts in the assessment year under consideration, Sec.68 cannot be applied. This view of ours is supported by the judgement of Delhi High Court in the case of Usha Stud Agricultural Farms Ltd.,[2008 (3) TMI 91 - DELHI HIGH COURT] wherein held that credit balance in the account of the assessee did not pertain to the year under consideration, the AO was not justified in making the addition u/s.68 of the Act. Hence, in our opinion, the liabilities which were not credited in the previous year relevant to the assessment year under consideration, the provisions of the section 68 cannot be applied and the AO is directed to exclude the same from the addition u/s.68 of the Act after duly verifying the same. It needless to say that opportunity of hearing to be given to assessee before deciding the same by AO. Regarding other credits, the assessee failed to adduce any evidence to prove the identity of parties, credit worthiness and genuineness of the transactions in spite of giving repeated opportunity to the assessee by the AO as well as by the Ld.CIT(A). Thus, the failure on the part of assessee is to place necessary evidence to prove the transactions u/s.68 of the Act, the lower authorities is justified in treating those credits as unexplained credit u/s.68 of the Act - Decided partly in favour of assessee for statistical purposes.

  ---

• 2016 (5) TMI 1100
  Claim for deduction u/s.54F - Held that:- The assessee has invested Rs. 68,00,000/- before due date of filing belated return i.e. 31.03.2007 and took the possession as per the findings of the Commissioner of Income Tax (Appeals) on 15.12.2007, being within three years from the date of transfer/sale of original asset being 14.02.2005. The assessee has not invested in Capital Gain Account Scheme before 139(1) of the Act but complied with the conditions u/s.54F(1) of the Act by purchasing and construction of residential property within three years from the date of transfer of original asset which is not disputed in the assessment proceedings or in appellate proceedings. The provisions of Sec. 54F are beneficial provisions and are to be considered liberally in the aspect of limitation period. But the investment in residential property is must which the assessee has proved with evidence and complied before the lower authorities. The ld. Commissioner of Income Tax (Appeals) relied on the legal provision and submissions of the assessee exhaustively with judicial decisions. Considering the factual aspects, genuiness of the transactions and beneficial aspects of the provisions, we are of the opinion that the Commissioner of Income Tax (Appeals) has rightly construed the findings and the explanation of the assessee with observation in his order and allowed the deduction u/s.54F of the Act - Decided against revenue

  ---

• 2016 (5) TMI 1099
  Addition of interest received under the head Income from other sources - Entitlement to claim benefit of netting off of interest - Held that:- The assessee in the present case has furnished the details of term loan disbursed to the assessee by PNB Housing Finance and advanced by the assessee to show the nexus between two. These details were not furnished by the assessee before the authorities below. In our considered opinion this issue needs a revisit to the file of Assessing Officer for verification of the loans received and same amount being advanced to other concerns. If the assessee is successful in establishing the link between the loan amount received by the assessee and the loan advanced, the assessee shall be entitled to the benefit of netting off of interest amount. Accordingly, the first ground of appeal of the assessee is allowed for the statistical purpose. Disallowance of claim of deduction u/s. 80IB(10) on income arising from sale of scrap - Held that:- Allowability of deduction u/s 80-IB in respect of income from machining charges and sale of scrap is decided in favour of the assessee. The assessee is eligible to claim deduction u/s. 80IB(10) in respect of income from sale of scrap. - Decided in favour of assessee

  ---

• 2016 (5) TMI 1098
  Transfer pricing adjustment - Held that:- As during the course of transfer pricing proceedings, it was shown by the assessee that assessee demonstrated that taking OP/OI as its PLI, the arithmetic mean margin of the comparables was 8.71% which was less than the margin shown by the assessee at 12.63%. The TPO suggested changing the PLI as OP/TC and if the PLI is taken as OP/TC the arithmetic mean margin of the comparables was 9.96% which was less than the margin shown by the assessee at 13.70%. Thus, undisputedly, on facts, the margin of the assessee was within the permitted range of ALP. We find that adjustment made by the TPO was contrary to law, and therefore, same is directed to be deleted. Since we have deleted the adjustment on primary grounds, we are not deciding other grounds - Decided in favour of assessee. Increasing the books profits for the purpose of section 115JB by the amount of transfer pricing adjustment while computing the total income of the assessee under the normal provisions of the Act - Held that:- Only those adjustments are permissible to the book profit as have been prescribed u/s 115JB. The adjustment/additions made under the transfer pricing regulations are governed by altogether different sets of provision as contained in Chapter X of the Act. There is no such provision under the law that permits the AO to make adjustment on account of transfer pricing addition to the amount of profit shown by the assessee in its profit and loss account, for the purpose of computing book profit u/s 115JB. The law in this regard is clear. Reference is made to the judgment of Hon’ble Supreme Court in the case of Apollo Tyres Ltd. vs CIT [2002 (5) TMI 5 - SUPREME Court] . It is noted from the perusal of the assessment order that the AO has simply made addition by an amount of Rs. 1,30,72,762/- to the amount of net profit as per profit and loss account for the purpose of computation of income u/s 115JB without even mentioning that under what provisions this addition was being made. Such an approach is highly unfair and brings undue and avoidable hardship to the tax payers and we recommend that such a casual approach should be avoided by the revenue officers, as it may tarnish image of the income tax department, which may in turn discourage voluntarily compliance by the taxpayers. Thus, we delete the addition made by the AO - Decided in favour of assessee.

  ---

• 2016 (5) TMI 1097
  Disallowance made u/s 14A - Held that:- A perusal of Balance Sheet as at 31-03-2008 shows that the assessee is having interest free funds of Rs. 4.25 crores and Rs. 5.81 crores as on 1.4.2007 and 31.3.2008 respectively. The investments held by the assessee stand at Rs. 2.11 crores and Rs. 2.00 crores as at the beginning of the year and end of the year respectively. These facts show that the own funds available with the assessee exceeds the amount of investments and hence the ratio of the decision rendered by the Hon’ble jurisdictional High Court in the case of HDFC Bank Ltd.(2014 (8) TMI 119 - BOMBAY HIGH COURT ) shall apply to the instant case. Accordingly, we hold that there is no requirement of making any disallowance out of interest expenditure. Besides the above, the assessee has also received dividend income and Capital gains. All these factors show that there has been some activity with regard to the investment portfolio and hence we are of the view that a portion of administrative expenses is required to be disallowed. Since the factual details relating to the investment activity of the assessee are available, we are of the view that there is no requirement to adopt the methodology provided in Rule 8D of the I.T Rules. Considering the details of investment activity, we are of the view that the disallowance out of administrative expenses towards the above said investment activity may be estimated at 5% of the dividend income. Accordingly, we modify the order of Ld CIT(A) passed on this issue for AY 2008- 09 and direct the AO to restrict the disallowance u/s 14A at 5% of the dividend income received during the year under consideration. Disallowance out of administrative expenses - Held that:- As we notice that the assessee has received dividend income of Rs. 2.25 lakhs and the fresh investment made was Rs. 48 lakhs. The assessee has redeemed investment to the tune of Rs. 41 lakhs. Thus, we notice that the level of investment activity has reduced during the year under consideration and the dividend income has also gone down considerably. Consistent with the view taken in the immediately preceding year, we direct the AO to restrict the disallowance towards administrative expenses to 5% of the dividend income. Inclusion of the amount disallowed u/s 14A of the Act to the Book profit computed u/s 115JB - Held that:- Clause (f) of Explanation 1 given below sec. 115JB(2) provides that the expenditure relatable to income exempt u/s 10 is required to be added to the Net profit for the purpose of computation of Book profit. Accordingly, we do not find any merit in the submissions of the assessee. Accordingly, we modify the order of Ld CIT(A) on this issue and direct the AO to add the amount of disallowance computed as per our order discussed in the preceding paragraphs u/s 14A of the Act in the computation of Book profit u/s 115JB of the Act in both the years under consideration. Disallowance of repair expenses - Held that:- Though the case of the assessing officer is that these expenses have enhanced the value of building and would give benefit of enduring nature, yet the fact remains that these expenses have not brought into existence any new asset. It is quite normal for a business man to carry out renovation expenses in new premises in order to suit his requirement of having good ambience and convenience. Hence, the purpose of incurring the renovation of expenses is to enable the assessee to carry on business operations smoothly. Since it is not shown that these expenses have brought any new asset and since the assessee has replaced old items with new ones and carried out repair/painting works, we are of the view that these expenses cannot be considered to be capital in nature. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the impugned disallowance. Addition relating to alleged suppression of sale value of property sold - Held that:- There is merit in the contentions of the assessee. We notice that the AO has drawn conclusions without bringing any material to support his view. Even though the reasons for giving higher amount of brokerage were explained, yet the AO refused to accept the same on the suspicion that the broker might have been tutored by the assessee. It was submitted that the market value of the property is lesser than the sale value disclosed by the assessee. We further notice that the AO did not carry out any enquiries either from the market or from the buyer. Thus, we notice that the AO has arrived at the conclusion purely on surmises. Accordingly, we are of the view that the Ld CIT(A) was not justified in confirming the addition. Addition of brokerage amount - Held that:- We notice that the property sold by the assessee is a depreciable asset falling in the block. Hence, the brokerage paid on the sale of the said asset requires to be deducted from the sale value of the asset. Accordingly, we are of the view that the AO was justified in disallowing the brokerage expenses and making necessary adjustments in the depreciation schedule. Disallowance of professional fee paid to the Chartered Accountant who is also one of the directors of the assessee company - addition u/s 40A(2)(b) - Held that:- C.A has been paid retainer fee on monthly basis. It is quite common in trade circles to engage a professional as a retainer on the payment of monthly retainer fee. As against the monthly payment of Rs. 1.25 lakhs, the AO has restricted the same to Rs. 20,000/-. The assessing officer has done so with the observation that the payment is in excess of prevailing market price for the services rendered by the C.A. However, it is pertinent to note that the AO has not brought any material on record to support his conclusions. It is in the common knowledge of every one that the fee of a professional would depend upon the knowledge and experience of the professional. For similar type of work, two professionals may charge two different rates. Generally the public approaches a professional by considering various criteria such as knowledge, experience, name & fame in the market, reliability, dependability etc. Hence a professional is chosen depending upon the choice of a business man and after agreeing to the terms and conditions of the professional, the work is entrusted to him. In this scenario, we are of the view that the AO was not justified in questioning the reasonableness of payment made to the C.A by the assessee, when the assessee has taken a conscious decision to pay the same. The tax authorities cannot question the choice exercised by the assessee without bringing any material on record. We have also noticed that the disallowance has been made without bringing any material on record. For these reasons, we are of the view that the disallowance made u/s 40A(2)(a) is not justified. Accordingly we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the disallowance. - Decide against revenue Disallowance relating to interest on FBT - disallowance u/s 40(a)(ic) - Held that:- The assessee did not show as to how the provisions of 40(a)(ic) of the Act are not applicable to the disallowance. Accordingly, we confirm the decision taken by Ld CIT(A) observing that no argument was advanced against the disallowance - Decided against assessee

  ---

• 2016 (5) TMI 1096
  Rejection of books of account - addition made on account of undervaluation of closing stock - Held that:- The books are rejected by the Assessing Officer solely on the basis of the fact that stock register has not been maintained by the assessee. The assessee is in the business of making sweets, etc. and he has given a plausible explanation as regards non-maintenance of stock register, without rebutting his explanation, the Assessing Officer has rejected the books. As regards inter branch transfer of stock, we are in agreement with the explanation of the assessee that since income of all the branches are assessed in the hands of the assessee, it does not make any difference as to which rate these stocks are transferred. Similarly, the expenses like packing material, consumables and air conditioning charged to Profit & Loss Account and not to trading account does not actually make any difference to the income taxable in the hands of the assessee, unless the Assessing Officer is able to bring on record any manipulation on G.P. rate of the assessee, which in this case, he has not been able to do. Rather, he has not even able to contradict the comparative G.P. rates as provided by the assessee even after taking into consideration these expenses as a part of trading account. Above all, the explanation of the assessee that all these expenses have nothing to do with the manufacturing of the products and are essentially a part of Profit & Loss Account, is also a correct explanation. Another glaring feature of the assessment order is that the Assessing Officer after rejecting the books of account preferred to make disallowance on account of these expenses only. We do not find this act of the Assessing Officer as per law. In a way he has accepted the books results shown by the assessee and had only disallowed the expenses. This shows the illusioned mind of the Assessing Officer - Decided against revenue Non- deduction of TDS under section 40(a)(ia) - Held that:- The undisputed facts are that the assessee has got certain packing material printed. The raw material for printing was not supplied by the assessee. The definition of contract as provided under section 194C, clause (vi) of the Act was introduced in the Statute to be applicable w.e.f. 11.10.2009. In view of this, no addition under section 40(a)(ia) can be made in this regard.- Decided against revenue Addition under section 36(1)(iii) - Held that:- No infirmity in the order of the learned CIT (Appeals) as it is a fact that the Assessing Officer has not doubted the genuineness of the agreements entered into with these two parties. The payments have been made in terms of the clauses of these agreements. The agreements have been entered into out of commercial expediency. Therefore, no addition under section 36(1(iii) of the Act can be made - Decided against revenue

  ---

• 2016 (5) TMI 1095
  Revision u/s 263 - enhancement of income in the form of deemed dividend u/s 2(22)(e) - Held that:- The assessee is holding more than 10% of the voting power in M/s. Ganesh Wheat Product (P)Ltd. It is not in dispute that the said company is having accumulated profits of Rs. 81,57,815/-. We find that the assessee had frequently drawn moneys from the said company and has also repaid moneys to the said company on several dates. Both the transactions are interest free and we also find that on several occasions that the balance outstanding is in favour of the assessee and also in favour of the said company. As relying on Pradip Kumar Malhotra vs CIT reported in(2011 (8) TMI 16 - CALCUTTA HIGH COURT) we find that the transactions in the form of current account should not be construed as loan or advances within the meaning of section 2(22)(e) of the Act. Accordingly grounds raised by the asessee are allowed and order of the ld.CIT u/s 263 of the Act is quashed. - Decided in favour of assessee

  ---

• 2016 (5) TMI 1094
  Penalty under section 271(1)(c) - assesse disclosed the income on the basis of declaration made in the statement under section 132 - Held that:- The assessee has demonstrated that the additional income declared in response to the notice received under section 153(A) and 153(c) of the Act are based on the declaration made in the statement under section 132(4) of the Act. Shri Mahendra B. Kataria has disclosed that income was earned for accepting on-money. Rs. 12 lakhs has been accounted for in the individual accounts. Similarly, in the case of Sarikha Jewellers, it was alleged that the income was on account of undisclosed stock of gold. These aspects have been discussed during the course of search, and the incomes have been offered. We allow the appeals of the assessee and deleted the impugned penalty. - Decided in favour of assessee

  ---

• 2016 (5) TMI 1093
  Rectification application regarding the credit of TDS rejected - Held that:- From going through the above decision of Hon’ble Karnataka High Court in the case of Digital Global Soft Ltd (2011 (9) TMI 206 - KARNATAKA HIGH COURT), we find that in the present appeal before us the issue is similar as the assessee has not claimed TDS in its regular return of income, because it was not in the possession of the TDS certificates and so much so, the deductor M/s. Bodal Chemicals Limited has not issued the TDS certificates to the assessee. It was only in January, 2011, i.e., after the end of the two years and nine months from the end of the relevant financial year that the assessee came into possession of the TDS Certificates issued by M/s. Bodal Chemicals Limited for Rs. 74,774/-. The appellant has submitted before the Assessing Officer that the amount on which TDS of Rs. 74,774/- has been deducted is duly shown in the financial statements submitted by it at the time of filing of return of income. We are, therefore, of the view that the assessee is very much eligible for getting credit of Rs. 74,774/- as the said amount was not a lawful amount to the Government and the assessee should not be deprived of the credit of TDS of Rs. 74,774/- for the mistake/delay made by the deductor. In the given circumstances, as the assessee was not having any possibility to revise the return u/s 139(5) of the Act, the only option left with him was to file an application u/s 154 of the Act which he did so; and therefore, ld. Assessing Officer using his inherent power u/s 154 of the Act for amending any mistake apparent on record should have examined the claim of the assessee by verifying the books of accounts of the assessee as well as the relevant ledger accounts wherein the impugned amount on which TDS of Rs. 74,774/- has been deducted, is duly reflected. We also observe that none appeared on behalf of the assessee during the appellate proceedings before the ld. CIT(A) and we are, therefore, of the view that the matter to be set aside to the file of the ld. Assessing Officer to allow the claim of TDS of Rs. 74,774/- after verifying the books of accounts and financial statements with regard to the receipt of reimbursement of expenses on which TDS of Rs. 74,774/- has been deducted by M/s.Bodal Chemicals Limited. Needless to mention that necessary opportunity of being heard to be given to the assessee to provide all necessary documents and supporting towards the claim of TDS of Rs. 74,774/-. Decided in favour of assessee for statistical purposes.

  ---

• 2016 (5) TMI 1092
  Penalty u/s 271(1)(c) - concealment of income of Short Term Capital Gain - Held that:- Respectfully relying on the decisions of Hon’ble Apex Court in the case of Price Waterhouse Coopers Pvt Ltd (2012 (9) TMI 775 - SUPREME COURT ) and T. Ashok Pai (2007 (5) TMI 199 - SUPREME Court ), we are of the view that as the purchases and sale transactions were duly reflected in the investment account shown by the assessee in its balance-sheet, but due to inadvertent error, the assessee while submitting its return failed to add the Short Term Capital Gain to its income and the same has already been subjected to tax; and therefore, under these circumstances, the assessee’s case is not a fit case for being visited with penalty u/s 271(1)(c) of the Act - Decided in favour of assessee.

  ---

• 2016 (5) TMI 1091
  Penalty under section 271(1)(c) - Held that:- Revenue has made additions and sustained the same only for the reason that the assessee could not convince the Revenue with respect to her claim though she had produced confirmation statements from the creditors and the Revenue on their part failed to ascertain the documentary evidence furnished by the assessee, we are of the view that the levy of penalty by the learned assessing officer is not justifiable. In the present case before us we find that the Revenue did not make any effort to verify the genuiness of the creditors of the assessee though the names, address and other particulars were before them by way of confirmation statement. For the above stated reasons, we are of the considered view that the penalty levied by the learned Assessing Officer is not maintainable - Decided in favour of assessee

  ---

• 2016 (5) TMI 1090
  Entitlement to exemption under Section 54E - Held that:- The capital gain computed by the assessee to the extent of Rs. 36,68,051/- on sale of 75% of his right in the immovable property was claimed exemption under Section 54E of the Act. The Assessing Officer found that what was deposited in IDBI bonds is only Rs. 15,00,000/-. Accordingly, he computed the exemption proportionately. It is obvious from the provisions of the Act that the assessee has to necessarily invest either in the capital asset or Capital Gains Bond as prescribed under Section 54E of the Act. For claiming exemption, the assessee has invested only Rs. 15,00,000/-. Therefore, the assessee is entitled for exemption proportionately. Accordingly, the CIT(Appeals) has rightly allowed the exemption proportionately. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed Computation of capital gains - Held that:- This Tribunal found that after the consideration received by the assessee, what was deposited in IDBI bonds within the prescribed time is only Rs. 15,00,000/-. Therefore, the Tribunal upholds the order of the Assessing Officer which proportionately allowed exemption under Section 54E of the Act. In this appeal, the CIT(Appeals) has further allowed 60% under Section 48(2) of the Act. The 60% might have been allowed for improvement, etc. made by the assessee to the property. Ultimately, the capital gains chargeable to tax was computed at Rs. 6,89,421/-. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

  ---

• 2016 (5) TMI 1089
  Additions u/s 68 - Addition of peak credit - Held that:- Several incriminating documents were found and impounded. The impounded documents disclose the unaccounted sales of the company. The Revenue authorities found deficit stock at the time of survey. It is not in dispute that the document found during the course of survey operation discloses the receipts and payment made by the assessee. Once the document discloses the payment and receipt, this Tribunal is of the considered opinion that the payments has to be set off against the receipts and thereafter the net income has to be arrived at for the purpose of taxation. The impounded document has to be accepted in toto or it has to be rejected in toto. In the case before us, the Assessing Officer has taken the payment made by the assessee in the impounded document, however, ignored the receipts totally. The Assessing Officer cannot choose one part of the impounded document for the purpose of assessment. The entire payment and receipt has to be taken into consideration in toto without ignoring any part of the impounded documents. This is what held by the CIT(A). However, after considering the alternative contention of the assessee, the CIT(A) found that peak credit needs to be calculated. Accordingly, he directed the Assessing Officer to calculate the peak credit for the purpose of making addition. As rightly found by the CIT(A), the payment made by the assessee needs to be set off against the receipts and taxable income needs to be computed only after giving set off. Addition of deficit stock - Held that:- The assessee itself filed working of deficit stock before the CIT(A). The CIT(A) after considering the working made by the assessee, found that the actual deficiency in stock is only at Rs. 71,61,652/-. The deficit stock was computed by the Assessing Officer by adding the manufacturing cost at 31% and gross profit at 16% to the opening stock. The Assessing Officer has also reduced the sales. The CIT(A) found that the method adopted by the Assessing Officer for computing the deficit stock is not correct. Accordingly, by accepting the working filed by the assessee, he restricted the deficit stock to Rs. 71,61,652/-. As rightly observed by the CIT(A), gross profit cannot be added to the closing stock. The gross profit may be taken as income on the presumption that the deficit stock was sold outside the books of account. Since the deficit stock was worked out on the basis of the working filed by the assessee, the CIT(A) has rightly restricted the deficit stock to Rs. 71,61,652/-. The profit element embedded on the sale of deficit stock alone can be considered for addition and not the deficit stock. This Tribunal is of the considered opinion that the CIT(A) has rightly estimated the gross profit at 16% on the deficit stock of Rs. 71,61,652/-. Hence, the order of the CIT(A) is confirmed. Addition of gross profit - Held that:- CIT(A) calculated the gross profit on the unaccounted sales after considering the deficit stock of Rs. 71,61,652/- at Rs. 11,45,864/-. Accordingly, the CIT(A) estimated the gross profit at Rs. 11,45,864/- instead of Rs. 26,27,200/-. Since the deficit stock was computed on the basis of the working filed by the assessee and the CIT(A) after considering the deficit stock, estimated the gross profit at 16% after taking the average gross profit of the earlier assessment years, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.

  ---

• 2016 (5) TMI 1088
  Validity of revision order u/s.263 - whether CIT-9 lacks jurisdiction as the assessment for assessment year 2011-12 was passed by the ITO,Ward No.VIII(1),Chennai, which falls in the jurisdiction of CIT-7 and not in CIT-9 ? - Held that:- In the present case, the notification is dated 15.11.2014 and the assessment order u/s.143(3) of the Act was passed on 24.03.2014 falls in the jurisdiction of the CIT-7 and not in other jurisdiction. We are convinced with the arguments of the ld.A.R and perused the findings and submissions of ld.D.R on the issue of jurisdiction. Considering the apparent facts, we are of the opinion that the Ld.CIT- 9 passed the revision order u/s.263 of the Act without jurisdiction as per the provisions of the Act. Therefore, we are inclined to quash the revision order passed u/s.263 of the Act on the ground of lack of jurisdiction and restore the order u/s.143(3) of the Act by the AO passed on 24.03.2014. - Decided in favour of assessee.

  ---

• 2016 (5) TMI 1087
  Addition on account of sales returns/warranty scraped at customers end - Held that:- The goods at the customers end who scrapped out the same and the assessee receives the net consideration. In this regard, the assessee had furnished confirmation from M/s. Vee Three North America, USA. After verifying the explanation of the assessee, the Learned CIT(Appeals) found that certain items which were shown as sales return, not shown in RGI registers at the end of the assessee itself supports the claim of the assessee that such items were not physically returned to the assessee keeping in view the high cost of shipping of the goods that were found defective and rejected were not physically returned to the assessee. The Learned CIT(Appeals) also found strength in the claim of the assessee on the basis that as a prudent businessman, the assessee considered it appropriate to not incur freight expenses and instead allowed the overseas customers to scrap the goods returned by them. Since necessary confirmation was also furnished by the assessee in support, we are of the view that the Learned CIT(Appeals) was justified in deleting the addition in question - Decided against revenue Addition made on account of excess depreciation on certain assets - Held that:- The claimed depreciation of the assessee was based upon its submission that it had not only installed but had also put to use the assets purchased in March 2009, which were considered as not having been used by the Assessing Officer while making the disallowance in question. The Learned CIT(Appeals) has, however, deleted the disallowance as the claim of user of the assets purchased in March 2009 was supported by copies of bills, GRN, PRR showing the testing and use of the assets. It was also submitted that the first appellate authority had already allowed the appeal on this ground in the assessment year 2006-07. We thus do not find infirmity in the first appellate order deleting the disallowance made on account of claimed depreciation. The same is upheld.- Decided against revenue Disallowance made under sec. 14A - Held that:- As per provisions of sec. 14A(2), the Assessing Officer was firstly required to record his dissatisfaction with the working of the assessee with cogent reason. The Learned CIT(Appeals) found that the assessee itself had made disallowance through the mechanism of Rule 8D in its return of income as per the details furnished before him. The contention of the assessee remained that the investment which had not resulted in tax exempt income ought to have been excluded from the terms “average investment” for calculating the disallowance under Rule 8D. The Learned CIT(Appeals) was of the view that interest on various borrowings that were relatable to specific purposes (other than earning of dividend income) ought not to have been considered for making disallowance under Rule 8D (2)(ii). Accordingly, he held that for making disallowance under Rule 8D(2))(ii) interest expenses of Rs. 3,88,932 alone is to be considered. He observed further that for the purpose of average investment, an amount of Rs. 71 lacs which was towards making investment resulting in taxable income are also to be excluded. He accordingly worked out disallowance under sec. 14A at Rs. 2,49,843 giving relief of Rs. 1,03,912 in this regard to the assessee. We thus find that the first appellate order on the issue is comprehensive and reasoned one. - Decided against revenue

  ---

• 2016 (5) TMI 1086
  Unexplained cash credit u/s 68 - Held that:- It is observed that when the affidavit was filed by the assessee before the ld. CIT(A) then same becomes an additional evidence and thus the ld. CIT(A) should have either accepted or rejected the same. It is emerges from the record that the assessee has been taking inconsistent plea i.e. first claiming the creditor to be dead and then claiming the creditor that she is residing in South Africa. Similarly, in the case of one Shri Mohan Lal Gupta, there seems to be various discrepancies which needs to be clarified. Thus by considering the facts and peculiar circumstances of the case and also in the interest of justice the issue of cash credit is set aside and restored back to the file of the AO to decide it afresh by providing reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

  ---

• 2016 (5) TMI 1085
  Income from House Property - ALV computation - Held that:- Whether the flat was habitable or not during the impugned assessment year is a question of fact and can be determined only after appreciation of evidences for which the authorities below may need to make necessary enquiries to appreciate the entire factual matrix. The computation of ALV is to be based on the provisions of Section 23 of the Act and Hon’ble Bombay High Court in the case of CIT v. Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT) has laid down the guidelines with respect there-to. In our considered view interest of justice will be best served if the orders of the authorities below are set-aside and issue is restored to the file of the AO for de-novo determination after considering the evidences and explanation submitted by the assessee in his defense on merits. Needless to say proper and adequate opportunity of being heard will be provided by the AO to the assessee in accordance with the principles of natural justice in accordance with law. We order accordingly. - Decided in favour of assessee for statistical purposes.

  ---

• 2016 (5) TMI 1084
  Disallowance being 20% of the payment made to sub-contractors - Held that:- We concur with the findings of the Ld. CIT(A) that no sub contract work was executed by the three sub contractors and infact excess payment was made to them. Further we concur with the Ld. CIT(A) in holding that though sub contract work has not been carried out by the three sub contractors, it has been carried out by some other parties and in the view thereof it is fair and reasonable to disallow 20% of the amount paid on account of subcontract work. - Decided against assessee Addition on account of sale of scrap - Held that:- The facts emerging in the present case are that undeniably during the carrying on of the business of construction some scrap of iron and aluminium pieces is generated as also empty bags. While the assessee’s contention is that this scrap is reused in the construction business and the empty bags are used by the labour for resting and other purposes and no scrap is therefore sold, the case of the revenue is that the explanation of the assessee is not plausible and some scrap must have been sold by the assessee. We find no infirmity in the order of the Ld. CIT(A) in this respect and agree with his findings that it is impossible to believe that no scrap was sold during the year and that the entire scrap is reused in the business of the assessee. We therefore uphold the order of the Ld. CIT(A) sustaining the addition made on account of sale of scrap - Decided against assessee

  ---

• 2016 (5) TMI 1083
  Fringe benefit tax - CIT (A) found that the expenditure on hiring of motor-car for meetings, inspection etc., as well as expenses on owned motor car at corporate office are subjected to FBT - Held that:- As per the provisions of Section 115WB(2) of the Act, what is to be considered as fringe benefit is the benefit given to the employee directly or indirectly. In view of the above facts and circumstances of the case and by following the earlier decision of this Tribunal we do not find any error or any irregularity in the impugned order of the CIT (A). We find that there is nothing on record to indicate that the assessee had filed any additional or fresh evidence before the CIT (A). Therefore we do not find any merits in the grounds raised by the Revenue.

  ---

• 2016 (5) TMI 1082
  Addition u/s 68 - unsecured cash credit - Held that:- As observed that the assessee has raised loans of Rs. 45,50,000/- from various parties during the instant assessment year 1998-99 under appeal and one Shri Surendra Khandhar has given statement u/s 131 of the Act against the assessee that he has floated various firms to give accommodation loan entries to various persons which also included the assessee . The said statement of Sh.Surender Khandhar was recorded by the Revenue at the back of the assessee. The said Shri Surendra Khandhar has not been subjected to cross examination by the assessee and hence the statement of Shri Surendra Khandhar cannot be used against the assessee until and unless the cross examination of the said Shri Surendra Khandhar by the assessee takes place. We find that the Tribunal in the first round of litigation [2013 (9) TMI 1119 - ITAT MUMBAI], set aside the matter to the file of A.O. with a direction to re-verify the loan transactions as per provisions of the Act after affording opportunity to the assessee, the Tribunal also holding that since Sh Surender Khandhar could not be offered for cross examination by the assessee , his statement cannot be used against the assessee. The said Shri Surendra Khandhar did not appear before the Revenue also. The A.O. also failed to make verification and enquiries on merits with respect to the loan raised by the assessee. The assessee, on the other hand, produced the copies of promissory note/hundi as loan confirmations. In the immediately preceding assessment year 1997- 98, the Tribunal in the second round of litigation deleted the addition with a direction to the A.O. to verify the contentions of the assessee regarding repayment of loan With respect to additions made on account of interest on these loans, we find that the AO has made additions based on notional interest being paid/payable by the assessee on these loans, we did not find any basis/justification for the same as per the facts emanating from the records. This issue is also set-aside to the file of the AO to be decided based on merits after bringing on record cogent material/basis for the said interest to be brought to tax as income of the assessee. - Decided in favour of assessee for statistical purpose.

  ---

• 2016 (5) TMI 1081
  Sale of shares - Short Term Capital Gain or Business income - Held that:- It is an admitted fact that around 90% of the total gains is from sale of the shares of FCS Softwares Solutions Ltd. It is also an undisputed fact that the assessee had applied in the shares of the IPO of the said company from borrowed capital. Merely because the shares were applied through borrowed capital cannot be a ground for treating the capital gains as business income. The IPO funding availed by the assessee was to get more allotment but the fact of the matter is that the assessee was an investor and the sole intention of applying in the shares through IPO was to get higher allotment of shares. We also find that there are no repetitive purchase and sale of the same script which means that there is no churning of shares. The total number of days utilized by the assessee for investment in shares is 32 days. Considering all these facts in totality, we do not find any reason to treat the assessee as a trader. We, therefore set aside the findings of the Ld. CIT(A) and direct the AO to treat the Short Term Capital Gain on sale of shares. - Decided in favour of the assessee

  ---

• 2016 (5) TMI 1080
  Deduction u/s 10A - interest receipts from FDRs - Held that:- There was no business exigency or condition to make short Term FDRs therefore, the investment in FDRs cannot be regarded as inextricably connected with business of the assessee. Accordingly, the interest receipts from such FDRs constitute income from other sources and are not eligible for deduction u/s 10A of Income Tax Act, 1961. Addition of excess payment u/s 40A(2)(b) r.w.s 92CA - Held that:- If the payment to Mr. Popp is unreasonably high then in the same proportion income earned is also high as the same is cost plus mark up. Therefore any disallowance will require corresponding correction in receipt also. Therefore, AO was directed to drop the proposed disallowance by the DRP. This finding of the DRP is proper as there is no correlation established by the Assessing Officer to the corresponding income as to the payment to Mr. Popp in the Assessment Order. Therefore, the ground of the Revenue that the addition of Rs. 1,90,00,000/- excess payment u/s 40A(2)(b) r.w.s 92CA of the Act should have been sustain by the DRP does not survive.

  ---

• Customs

• 2016 (5) TMI 1107
  Import of 'energy gel' and 'energy chews' - There are two broad issues that arise in this petition. The first concerns the question whether proprietary foods are outside the purview of the FSS Act, the FSS Regulations 2011 and the FSS Packaging Regulations 2011. The second issue is whether on the facts of the present case, the Petitioner can be said to have complied with the FSS Packaging Regulations 2011. - Held that:- The main object of the FSS Act is to lay down “science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import, to ensure availability of safe and wholesome food for human consumption.” The word ‘food’ has been defined under Section 2 (1) (j) of the FSS Act to include any substance, whether processed, partially processed or unprocessed intended for human consumption. It includes a variety of substances. The expression ‘food additive’ has been separately defined under Section 2 (1) (k) of the FSS Act. Importer is required to mandatorily comply with the labelling requirements in terms of the FSS Regulations and FSS Packaging Regulations. Although the Petitioner admitted to having affixed labels on the master boxes after they arrived in India, it is evident from the affidavit of the Customs authorities and the letter of the CWC that neither of them gave any permission to the Petitioner to do so. Further, it is evident that the FSSAI also permitted the affixation of the labels on imported food articles only to a limited extent. Commissioner of Customs will initiate an inquiry into the affixation of labels in the present case by the Petitioner on the master boxes after they arrived in India, and while they were at the CWC warehouse, without the permission of either the Customs or the CWC. The purpose of the enquiry would be ascertain where and how the lapses occurred, and what action requires to be taken against those involved including the importer and his CHA and other employees as well as officers/employees of the Customs and/or CWC. The enquiry will be completed within a period of three months from today. Appropriate action in terms thereof will be taken against all those found responsible for the lapse. - Decided against the petitioners.

  ---

• 2016 (5) TMI 1106
  Levy of CVD on import of silk fabrics - (i) Whether the imported goods are eligible for claiming benefits under the Central Excise Exemption Notification No.030/2004 dated 9.7.2004 when there was no compliance of the conditions as contemplated under the said Notification? and (ii) Whether the Central Excise General Exemption Notification No.030/2004 dated 9.7.2004 is applicable only for the indigenously manufactured goods or even for the imported goods manufactured abroad? - Held that:- in the absence of any material to show that the processes indicated above would involve inputs, none of which would attract duty of excise, it is not possible to conclude that the first respondent would satisfy both conditions namely (a) payment of duty on the inputs and (b) the non availing of CENVAT credit on the same. Though the Notification bearing No.030/2004 dated 9.7.2004 does not stipulate the first condition, we have held that the first condition is inbuilt into the second condition. Therefore, the first respondent cannot be taken to have fulfilled the condition stipulated in the proviso to the Notification No.030/2004 dated 9.7.2004, unless he had shown that in the entire process of manufacture of woven silk fabrics falling under Tariff Item No.5007, there are no inputs (used directly or indirectly and whether found in the final product or not), which attract any levy of duty under tariff items relevant to those inputs. In cases where the exemption Notification stipulates two conditions, namely that the inputs should have suffered duty and that no CENVAT credit should have been availed, then the benefit of the Notification will be available only if both conditions are satisfied. An importer will never be able to satisfy both these conditions and hence, he cannot claim the benefit. - Decided in favor of revenue.

  ---

• 2016 (5) TMI 1063
  Penalty under Sec 114 of the Customs Act 1962 - Held that:- As observed from case records that Sec 112 (a) of the Customs Act 1962 has been mentioned for imposing penalty in the SCN but Adjudicating authority has imposed penalty under Sec 114 without giving any justification/opportunity to the appellant as to why suddenly penalty under Sec 114 was imposed. A corrigendum was required to be issued to effect the change & principles of natural justice were required to be followed if adjudicating authority was of the opinion that Sec 112 (a) of the CA 1962 is not the correct Section applicable in the instant case. By not giving any such opportunity or following corrective procedure, Adjudicating authority has gone beyond the scope of show cause notice which is not permissible as per case laws relied upon by the appellant, which also include ratios laid down by Apex Court. Nowhere in the records it is coming out that appellant was required to supervise 100% stuffing & examination of the cartoons in the containers. Even if there was some negligence on the part of the appellant the same has been taken care of by departmental proceedings and no penalty could be imposed under the Customs Act 1962 as per the relied upon case laws. There is also no evidence on record that appellant was aware that second hand used clothes are being exported & that quantities actually being exported are much less than the quantities declared in the shipping bill. No statement has been brought on record indicating knowledge/connivance of the appellant regarding misdeclaration in the assessment documents. It is observed from the language of Sec 113 of the Customs Act 1962 and the case records that appellant was not required to make any entry/declaration in the shipping bill. Once he is not required to make any entry/declaration in the shipping bill then appellant cannot be visited with penalty under Sec 114 of the Customs Act 1962. - Decided in favour of assessee.

  ---

• 2016 (5) TMI 1062
  Review of application - mistake apparent on the record - Power of Tribunal to such review - Held that:- as it is evident, the ROM application is seeking the Tribunal to reopen the hearing of the appeal and to examine and re-appreciate the evidences and legal issues, which would amount to review of its own order, which is not permitted under the law by applying the decision of Hon'ble Supreme Court in the case of CCE, Belapur, Mumbai vs. RDC Concrete (India) Pvt. Limited [2011 (8) TMI 25 - SUPREME COURT OF INDIA]. Therefore, the subject ROM cannot sustain. - Decided against the appellant

  ---

• 2016 (5) TMI 1061
  Revokation of CHA licence - Whether the grant of G Card to Shri Naresh Makwana amounts to sub-letting of licence by the present broker so as to hold contravention of Regulation 10 against him - Held that:- when the law itself permits engaging a G Card holder for running an extended office of the CHA at any other place then the place of appellant's commissionerate and when such G card holder stands engaged, by following the due processes of law and with the knowledge and consent of the Customs authorities, it cannot be held to be sub-letting of the licence. Inasmuch as the said ground is the only ground adopted by the Commissioner for revoking the licence in question and having held that appointment of a G card holder does not amount to subletting of the licence, the impugned order is not sustainable and set aside. Also the appellant has been completely out of his business and losing his earnings and livelihood for about last three months on account of revocation of his licence (which has also been a punishment for him) and when there was no mens rea involved on the part of the appellant in mis-use of the licence in Mumbai and the decisions pronounced by the Hon'ble Bombay High Court in the case of Shri Venkatesh Shipping Services Pvt. Ltd. Vs. Union of India [2012 (9) TMI 425 - BOMBAY HIGH COURT], the present appellant deserves restoration of his Customs Broker Licence. Forfeiture of security - Held that:- there is nothing on record to arrive at the conclusion that Shri Naresh Makhwana paid Rs. 35,000/- per month to the appellant as consideration for sub-letting his license. There is no document evidencing the sub-let or the payment or promise to pay monthly consideration. The bank account of Shri Naresh Makhwana or the appellant have not been placed on record to show that there was any such monthly payment made by Shri Naresh Makhwana to appellant. Not even a single instance of payment of Rs. 35,000/- is proved. Thus the retracted statement of the appellant is not corroborated by any independent evidence. The department has failed to establish the flow of consideration from Shri Naresh Makhwana to appellant and the sub-let of license. The Hon'ble Member(Technical) has ordered forfeiture of security on the finding that there is subletting of license and that appellant violated Regulation 10 of Customs Brokers License Regulations, 2013 but I disagree with the view of Member (Technical). On this point, I agree with the Member(Judicial) that the revocation of license and forfeiture of security amount has to be set aside in toto and the appeal has to be allowed fully. - Decided in favour of appellant with consequential relief

  ---

• 2016 (5) TMI 1060
  Period of limitation - non-maintainance of time limit in terms of Regulation 22 of CHALR, 2004 - Revokation of CHA licence and forfeiture of security deposit - clearance of undeclared high value items and also several discrepancies in the description as well as quantity of goods imported - Delay of more than one year in completion of enquiry - Held that:- the decision of Hon’ble High Court of Mumbai in A.M. Ahamed & Co. Vs. CC (Imports), Chennai [2014 (9) TMI 237 - MADRAS HIGH COURT] is applicable to the facts of the present case on both the grounds of time limit as well as implication of settlement of case by the main importer. It is found that Hon’ble High court of Madras in a recent order in Saro International Pvt. System Vs. C.C. [2015 (12) TMI 1432 - MADRAS HIGH COURT] after detailed examination of various decided cases held that the time limit prescribed in CBLR 2013 are to be strictly followed by the authorities taking action under the said Regulation. It is also found that there is a substantial delay of more than a year in completion of the enquiry and also in issue of the present impugned order. Therefore, the delay which is beyond the prescribed limits of CHALR / CBLR will make the impugned order legally unsustainable. The various decisions including the ones cited above are clear about legal position. - Decided in favour of appellant

  ---

• 2016 (5) TMI 1059
  Pre- deposit - Non- deposit of mandatory requirement of deposit of 7.5%/10% - Demand in terms of amended provisions of Section 129E of the Customs Act, 1962 - Held that:- the issue of pre-deposit stands finally decided by the Hon’ble Delhi High Court in the case of Anjani Technoplast Ltd. Vs. Commissioner of Customs [2015 (10) TMI 2446 - DELHI HIGH COURT] and Hon’ble Allahabad High Court in the case of Ganesh Yadav Vs. Union of India [2015 (7) TMI 304 - ALLAHABAD HIGH COURT]. As against the above decisions, the appellants have not put on record any decision of the Division Bench or any other judgement supporting their stand that pre-deposit is not required. Consequently there is no sufficient force in the appellants’ stand that the deposits are not required to be made. - Decided against the appellant

  ---

• 2016 (5) TMI 1058
  Revokation of CHA licence, forfeiture of security deposit and imposition of penalty - Regulation 22 of the CBLR, 2013 - exporters attempted to claim huge amount of drawback by resorting to over valuation - Held that:- we really fail to find out any lapses on the part of the CB so as to impose him with a lifelong ban from conducting the business. By referring to the Hon’ble High Court of Delhi’s order in the case of Ashiana Cargo services Vs Commissioner of Customs [2014 (3) TMI 562 - DELHI HIGH COURT], vide which the minority order of the Tribunal was upheld by setting aside the majority order. The said decision of the Delhi High Court further stands approved by the Hon’ble Supreme Court reported in [2015 (8) TMI 435 - SUPREME COURT]. Also it is found that in the case of Rajiv Suri Vs. CCE New Delhi, Tribunal has set aside the order of suspension on the ground that there was favourable findings of the Commissioner (A) in respect of penalty imposed upon the CHA under the Customs Act. Therefore, the impugned order is required to be set aside and also revocation of his license, the order of forfeiture of the deposit made by him and the penalty imposed are set aside. - Decided in favour of appellant with consequential relief

  ---

• Service Tax

• 2016 (5) TMI 1079
  Extended period of limitation - Contract for outdoor catering services - non-registration and non-payment of tax - Held that:- The show cause notice merely states that the appellant had willfully suppressed the facts of provision of taxable service without elaborating as to what was the suppression. In para 8 of the notice, with regard to the proposal for penalty under section 78, it has been alleged that the appellant willfully suppressed the taxable value with an intention to evade payment of service tax. There is no elaboration or finding substantiating the said allegation. It is settled law that mere allegation unsupported by reasonable evidence thereof is per se unsustainable. The demand made under cover of extended period of limitation deserves to be set aside. This principle is equally applicable to the imposition of penalty under section 78 of the Finance Act. The invocation of extended period is unsustainable as the non-registration and non-payment of tax is a mere omission not traceable to guilty mind, a pre-requisite for such invocation. - Demand set aside - Decided in favor of assessee.

  ---

• 2016 (5) TMI 1078
  Rejection of Voluntary Compliance Encouragement Scheme, 2013 (VCES) - VCES was initially accepted - Jurisdictional Commissioner invoking the powers under Section 111 of the Finance Act, 2013 initiated proceedings against the appellant alleging that they have made a substantially false declaration to avail the benefit under VCES. - Held that:- what is lacking is that the Department is not able to clearly bring out what are all the construction activities liable to service tax and to whom such services were rendered. The proceedings concluded by the impugned order could not bring out the details of taxable services except to state that the value of services as per P&L account/Income Tax return is much higher than the value of services declared under VCES. Apparently, this assertion by itself will not lead to the conclusion of non-payment of service tax and also to correct quantification of such non-payment, if any. At the same time it has to be noted that the appellants made simply assertions regarding non-taxable services without submitting any supporting evidence. They also claimed various abatements during the material period which requires to be justified with supporting evidence. The matter requires to be re-looked keeping in view the above observations for a fresh decision. - Matter remanded back.

  ---

• 2016 (5) TMI 1077
  Entitlement to the credit of service tax paid on Outdoor Catering Services and Staff Transport Services - Held that:- Since both the services on which cenvat credit has been denied by the impugned order are held to be input services by decisions of various High Courts, therefore in view of the settled position of law both the services i.e. Outdoor Catering service as well as Staff Transport Service fall in the definition of "input service" and the credit taken by the appellant has wrongly been denied by the respondent. See CCE Vs. Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT]

  ---

• 2016 (5) TMI 1076
  Valuation of taxable services where the benefit of abatement claimed - inclusion of value of the free supplies provided by the service recipient in the assessable value of the taxable service - claim of abatement of 67% in terms of Notification No. 18/2005-ST/ 1/2006-ST - cenvat credit on capital goods availed - benefit of Composition Scheme under works contract service on-going from prior to 01.06.2007. - Held that:- switch over to Composition Scheme w.e.f. 01.06.2007 is not permitted in respect of projects on going from before 01.06.2007 - In the light of the analysis above, we set aside the impugned demand to the extent it arises as a consequence of denial of benefit of abatement of 67%. However the demand on account of the appellant not being eligible for the composition scheme (under WCS) in respect of projects which were ongoing from prior to 01.06.2007 is sustainable - Matter remanded back for quantification of tax liability - Decided partly in favor of assessee.

  ---

• Central Excise

• 2016 (5) TMI 1108
  Validity of demand raised invoking Extended period of limitation in the Second Show Cause notice - Second SCN was issued for the earlier period than which was covered by the first SCN - Held that:- Department was indeed aware of the fact that the Petitioner was clearing PAA, made from captively consumed BeCN cleared by paying nil duty and further that PAA was also being cleared upon payment of nil duty. The fact that it asked the Petitioner to reverse the MODVAT credit on inputs purchased from outside and the Petitioner complied, belies the Department's case to the contrary. Secondly, a comparison of the two SCNs shows that the second SCN for the extended earlier period 1st March 1986 till 31st December 1989 is a virtual repeat of the first SCN dated 19th February 1991 except for one paragraph extracted hereinbefore. This merely sets out the language of the proviso to Section 11 A (1) and makes no reference to material that was not already available with the Department when the first SCN was issued. In such circumstances, the ratio of the decision in Nizam Sugar Factory [2006 (4) TMI 127 - SUPREME COURT OF INDIA] applies. - in the present case, the conditions for invoking the extended period of limitation in terms of the proviso to Section 11 A (1) of the CE Act were not fulfilled and that the demand raised in respect of the BeCN used in the manufacture of PAA for the extended period of 1st March 1986 till 31st December 1989 was barred by limitation. - Decided in favor of assessee.

  ---

• 2016 (5) TMI 1075
  Eligibility of refund of 4% Special Additional Duty (SAD) - Notification No.102/2007-Cus, dated 14.09.2007, as amended by Notification No.93/2008 dated 1.8.2008 - Sale of goods - Refund rejected as the petitioner has not paid VAT/CST on the said goods - Appeal is pending before CESTAT - Held that:- the first respondent is directed to dispose of the appeals preferred by the petitioner as early as possible, preferably within a period of four months from the date of receipt of a copy of this order as petitioner is put to financial hardship and because of the competitive market, the non-grant of refund would affect the business of the petitioner. - Petition disposed of

  ---

• 2016 (5) TMI 1074
  Revoking the area based exemption - North Eastern India region - Jarda scented tobacco/pan masala containing tobacco - Validity of the Notification No. 11/2007-CE dated 1-3-2007 - notification taking away the benefits allowed to the appellant-firm under the Notifications No. 32/1999-CE and 33/1999-CE both bearing dated 8-7-1999 - applicability of doctrine of promissory estoppel - Held that:- The impugned Notification No. 11/2007-CE is hit by the doctrine of promissory estoppel for the following reasons: (a) By the North East Industrial Policy, 1997 implemented by the Notifications No. 32-1999-CE and No. 33-1999-CE, a promise was held out by the respondent authorities that excise and additional excise exemptions would be given to those investors who started production of identified goods for a period of ten years; (b) The appellant believed that the promise was true and, if acted upon, would be entitled to a refund of excise duty, and had, therefore, acted upon such promise; and (c) While acting upon such promise, the appellant altered its position by investing sixty-nine crores of rupees in land, buildings, plants and machineries, office equipments, vehicles and stocks. (d) The authority issuing the Notifications Nos. 11/04-CE and 28/04-CE acted within the scope of his authority. (e) The impugned Notification No. 11/07-CE is ultra vires Section 5A of the Excise Act and is, therefore, not operative; there is thus no difficulty in invoking the doctrine of promissory estoppel. Detail averments were made by the respondent authorities as to the effect that between 25-8-2003 and 21-1-2004, which is known as the pre-escrow account period, the appellant was shown to have invested an amount of rupees one hundred crores out of which only rupees 34 crores was certified by the Investment Appraisal Committee by way of investment in plants and machineries and social infrastructure project, whereas the balance remained un-invested which was subsequently appropriated by the respondent authorities. The respondents also point out that the Commissioner had initiated recovery measures against the appellant by issuing demand notices under Section 11A of the Excise Act for the period of 25-8-2003 to 8-7-2004 as it defaulted in paying back duty to the public exchequer on its own. It is further pointed out by the respondents that during the period from 25-8-2003 to 8-7-2004, the appellant availed of duty exemption to the order of Rs.96,61,11,858/- which required it to invest the equivalent amount. It was also required to produce investment certificates for the said amount, but it produced the investment certificate only to the tune of rupees thirty-four crores. According to the respondents, the balance amount of rupees sixty-three crores not so invested in the manner specified in the notification is required to be deposited back with the public exchequer. Instead, the appellant resorted to litigations causing inordinate delay to the respondents in recovering public money. In our opinion, these specific averments made by the respondent authorities have not received satisfactory response from the appellant despite establishing a case of promissory estoppel thereby creating hurdle to its case for complete relief from this Court. No copies of the judgments relied upon by it are also annexed to the writ petition or the memo of appeal. In this view of the matter, the Investment Appraisal Committee shall have to take a call on these issues again. Be that as it may, the impugned judgment is not sustainable in law, and is, therefore, liable to be set aside. Thus the impugned judgment dated 10-12-2010 passed by the learned Single Judge is, accordingly, set aside.Consequently, the impugned Notification No. 11/2007-CE dated 1-3-2007 is hereby quashed. The Investment Appraisal Committee is, therefore, directed to give an opportunity of hearing to the appellant to prove that it has actually invested Rs.96,61,11,858/- in the specified items for availing of the benefits made available under the Notifications No. 8/04-CE and 28/04-CE dated 21-1-2004 and dated9-7-2004 respectively within a period of two months.If the appellant can prove that it has actually invested Rs. 96,61,11,858/- or less, the Committee shall issue an Investment Certificate to that effect whereupon the respondent authorities shall refund to the appellant so much of the excise duty, which may become due to it, within a period of three months thereafter.

  ---

• 2016 (5) TMI 1073
  Whether the input procured solely for the purpose of export by the assessee is entitled to CENVAT Credit when the goods were subjected only to testing and packing - Held that:- the facts of the case show that before the goods were handed over to KTTM, the assessee had undertaken a series of processes. Steel scrap, pig iron and chemicals are received as inputs by the assessee and castings are manufactured. It is only after such a manufacturing activity is undertaken, the goods are sent to one job worker for machinisation. That job worker sends the machinised goods to KTTM Ltd. Therefore, the question of law raised by the Department proceeds to a wrong presumption that the assessee had done nothing except testing and packing. Therefore, the question of law is thoroughly misconceived as it does not arise out of the facts of the case. The questions of law raised in other appeal also proceed on the premise that whatever has been done before the goods are received from the KTTM Ltd., have to be completely forgotten. This is not a case where the assessee is attempting to claim CENVAT Credit twice over. Whatever credit was claimed by them before they sent it to KTTM Ltd., was actually reversed. Therefore, the credit was still available for the assessee to take. The Tribunal was therefore, right in this regard in holding that testing and packing were part of a series of steps undertaken by the assessee for the manufacture of the goods. - Decided against the revenue

  ---

• 2016 (5) TMI 1072
  Un-sustainability of the charge of clandestine removal of excisable goods against the respondent - Held that:- While statements given before the excise officers are admissible evidence, the contents of such statements should clearly bring out the nature of offence with specific details which can be cross verified also. In the present case specific details and such cross verification and corroboration is lacking. Mere payment of some amount during investigation by itself cannot be held as admission of duty evasion which has to be decided based on material evidence collected during investigation. Perusal of the detailed opinion given by the hand writing expert brings out the fact that detailed reasoning has been given by the expert and the opinion cannot be brushed aside lightly.

  ---

• 2016 (5) TMI 1071
  Valuation - Goods manufactured by M/s.TCIL on job-work basis for M/s.TISCO - Whether valuation of goods manufactured on job-work basis are required to be done @ 115% of the cost of manufacture of FHCR Coil under Rule 8 of the Central Excise Valuation Rules during the period 01.07.2000 to 09.02.2001 - Held that:- job-worker M/s.TCIL is not a sister concern of M/s.TISCO and the goods manufactured by the job-worker are not used captively by him or on his behalf (job-worker's behalf) in the production or manufacture of other articles. In view of the observations and the settled proposition of law duty on manufacture by job-worker M/s. TCIL cannot be demanded @115% of the cost of manufacture for the said period, under Rule 8 of the Central Excise Valuation Rules. Whether demand of Rs. 17.00 Lakhs (approx.) calculated by the Adjudicating authority by taking the yield percentage as 92% was correct - Held that:- as per the conversion agreement between M/s.TCIL and M/s.TISCO minimum yield has been considered to be 92% but at the same time the contract also mentions it clearly that yield shall be calculated on actual basis. Appellant has brought on record the documents conveying that yield during the relevant period of demand varies from 94.86% to 95.42%. Accordingly quantification of demand, if any, has to be done by taking into consideration the percentage of actual yield during the period under consideration. However, such a quantification is required to be done by the Adjudicating authority for which this aspect is required to be remanded back to the Adjudicating authority for quantification purpose only. Whether outward freight incurred by M/s.TCIL on transporting finished goods from the factory is required to be included in the assessable value - Held that:- Adjudicating authority has observed that Appellant M/s.TCIL has not given the required data as to how much freight shown in his books of account pertain to inward freight on raw materials and how much pertain to outward freight on the finished products. On merits it is held that outward freight incurred by the Appellant from the place of removal is not required to be added to the assessable value of the goods manufactured on job-work basis which are cleared on payment of duty from the factory gate of the job-worker. However, the quantum of such outward freight incurred by the Appellant is required to be substantiated by the relevant record maintained by the Appellant and also supported by a Cost Accountant's Certificate. For this quantification also the matter is required to be remanded back to the Adjudicating authority for quantifying the demand, if any, based on Cost Accountant's Certificate to be produced by the Appellant before the Adjudicating authority. Imposition of penalties - Held that:- it is observed that Appellant M/s.TCIL was aware of the fact that cost of raw materials supplied by M/s.TISCO was on a higher side. M/s.TCIL took up the matter with M/s.TISCO regarding calculating duty liability based on higher value of raw materials supplied. This correspondence regarding payment of duty at higher cost of raw material supplied with M/s.TISCO was also initiated only after department started investigating into the matter. At that stage Appellant M/s.TCIL was required to approach the department as soon as they realized higher cost of raw material supplied. Accordingly penalty is required to be imposed upon the Appellant only under Rule 173Q of the Central Excise Rules, 1944. Bench is of the considered view that excess duty, if any, paid by the Appellant would be admissible as Cenvat Credit to M/s.TISCO, therefore, there cannot be any intention to evade payment of duty for attracting imposition of penalty under Section 11AC as held by CESTAT Delhi in the case of Agarwal Pharmaceuticals vs. Commissioner of C.Ex., Delhi-I [2001 (11) TMI 162 - CEGAT, NEW DELHI]. So far as imposition of penalties upon Appellant M/s.TISCO, Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts of M/s.TCIL is concerned, it is observed that Shri B.Muthuraman, MD and Shri M.K.Jha, Dy.Controller of Accounts were the employees of M/s.TISCO and M/s.TCIL and were not to gain financially on account of short payment for which credit was also admissible. Similarly M/s.TISCO has not dealt directly with the manufacture and clearance of goods on which duty has been demanded. Accordingly, it is held that no penalty is imposable upon Appellants M/s.TISCO, Shri B.Muthuraman and Shri M.K.Jha. - Appeals allowed by way of remand

  ---

• 2016 (5) TMI 1070
  Reversal of Cenvat Credit availed on the capital goods and removed subsequently after use - Cenvat Credit of the Central Excise duty paid on the capital goods and used the same in the factory premises - Held that:- Till the law was amended as on 13-11-2007 in respect of used capital goods, there was no liability to pay duty. In fact, this is evident from the fact that in Cenvat Credit Rules, 2004, the proviso was added making the position clear which was not there in the earlier orders. The proviso was added by a Notification No. 39/2007 dated 13-11-2007. therefore, prior to 13-11-2007, there was no duty payable in respect of capital goods which was used before it is removed. In that view of the matter, second question of law is answered in favour of the assessee and against the Revenue. See Solectron Centum Electronics [2014 (10) TMI 596 - KARNATAKA HIGH COURT ]

  ---

• 2016 (5) TMI 1069
  Demand of excise duty only on the basis of certain private records maintained by the transporters - Clandestine removal of MS Ingots - Held that:- it is apparent that the presumptive conclusion in the impugned order that wherever invoice details were not available the clearances were clandestine removals without payment of duty by the appellant are based solely on private record maintained by transporters cannot be the basis for demanding Central Excise duty from the manufacturer. As forcefully contended by the appellant it is not clear as to why no verification was attempted for corroboration either with the appellant's records of premises and/or with the buyers of such ingots. The whole investigation in the case refers to only single source of evidence namely the transporters record confirming by the proprietors of such transport companies without any sort of corroboration from any other source. It is seen that in the present case there is not even an enquiry to bring out any collaboration so that the evidence can point out preponderance of probability of such possible clandestine removal by the appellant. This is not a case of various evidences if not conclusively establishing, at least pointing out a serious probability of clandestine removal of excisable goods. As already noted that the Departmental enquiry did not even cross the preliminary stage and stopped with recovery of private documents from the transporter to conclude the allegation of clandestine removal by the appellant. Reference has been made to various cases. Hence, the impugned order cannot be sustained and is set aside. - Decided in favour of appellant

  ---

• 2016 (5) TMI 1068
  Eligibility to take credit of service tax on the freight expenses incurred towards export outward transportation of goods manufactured - recovery of the credit availed on input services such as outward freight - Held that:- By following the ruling of this Tribunal in the case of Hyundai Motors [2016 (1) TMI 519 - CESTAT CHENNAI], to hold that the appellants are eligible for credit. By also following the ruling of this Tribunal in the case pertaining to M/s Lucas TVS Limited cited [2016 (4) TMI 189 - CESTAT CHENNAI], the credit availed by the appellant on outward transportation of export of goods is eligible. In view of the settled legal position and in view of the above case laws and the Circular, it is of the view that Port is to be construed as the "place of removal" for the purpose of exports. As regards customs house agent service and wharfage charges, the same are eligible for cenvat credit in view of the nexus in existence between the goods manufactured and the services under dispute which are essential for export, the same is qualified for credit. Having decided that the place of removal is the Port, hold that the appellants are eligible for cenvat credit on GTA, CHA and wharfage charges. Since credit is held to be eligible for the appellants, levy of penalty is also set aside. - Decided in favour of assessee

  ---

• 2016 (5) TMI 1067
  Confiscation in lieu of redemption fine - Rule 25 of the Central Excise Rules - Default in payment of duty on due date during the period 2009-10 - Appellant suo moto calculated the short paid duty and discharged the same without pointed out by the department alongwith interest and intimated to the department - Held that:- as per the said act of the appellant no show cause notice should have been issued for any demand for the reason that after payment of duty and their declaration in their letter no short payment of duty exist. Therefore, as per the provisions of Section 11A(2B), it is very clear that if duty and interest is paid on the ascertainment by the assessee the case should be concluded and no show cause notice should be issued. As per the given fact of the case, we do not see any reason why the appellant's case is not covered under the provisions of Section 11A(2B). Demand of duty alongwith interest and imposition of penalty - Utilization of Cenvat credit - Held that:- the issue has been settled by the Hon’ble Gujarat High Court judgment in case of Indsur Global Ltd Vs. Union of India [2014 (12) TMI 585 - GUJARAT HIGH COURT], wherein provision of bar of utilization of Cenvat credit in certain circumstances has been held ultravirus, accordingly the appellant is free for utilization of the Cenvat credit even during the default period of payment of duty. However, provision of consignment wise payment of duty still exist, therefore, to this extent there is non compliance of provisions, as a result appellant is require to pay interest from the date of clearance till date of payment of duty and not from the due date of monthly payment of duty. Therefore the appellant is required to pay the interest which is to be calculated from the date of clearance of the goods till the date of payment of duty. Since the appellant admittedly paid duty alongwith interest subject to correctness thereof, there was no need to issue notice for demand of such duty and appropriation thereof, consequently no penalty is imposable on the appellant. Consequential confiscation of the goods is also set aside. Decided partly in favour of appellant

  ---

• 2016 (5) TMI 1066
  Demand of duty alongwith interest - Re-classification of certain mis-classified lubricating oils and denial of exemption notification - No SCN issued for demanding excise duty under Section 11 A of Central Excise Act - Held that:- the SCN is vague and issued for re-classification of the goods and no demand was raised. Whereas, under Section 11 A, it is mandatory for any recovery of duty not paid or short paid. There shall be a SCN demanding the recovery of duty under Section 11 A. Here, under no stretch of imagination, the alleged SCN can be construed as SCN issued under Section 11 A as the said SCN was primarily issued for re-classifying and denying exemption notification as per the classification list filed by the appellant under the erstwhile Rules. The adjudicating authority proposed to change the classification and denying exemption, there should be a clear demand issued under Section 11 A. Whereas, in the present case, neither SCN says so, on the contrary, the adjudicating authority after re-classifying the goods and denying exemption, straightaway confirmed the demand under Section 11 A. Therefore, by respectfully, following the Apex Court decisions in the case of Metal Forgings Vs. UOI [2002 (11) TMI 90 - SUPREME COURT OF INDIA] and in the case of Gujarat Machinery Manufactures Ltd. Vs. CCE, Baroda [1996 (9) TMI 121 - SUPREME COURT OF INDIA], we find there is no demand in the SCN issued under Section 11 A for recovery or any short levy of duty on account of re-classification. The demand is not sustainable and is set aside. - Decided in favour of appellant

  ---

• 2016 (5) TMI 1065
  Classification - Whether the product “Super Micro Binder 20” would be appropriately classified under Chapter Heading 3906 or 3911 and whether product “Triton AE” is correctly classifiable under Heading 3911 as claimed by the appellant or 3906 as claimed by the Revenue - Held that:- it is found that the product which answers to the description of Acquous Polymer in primary form are covered under heading 3906. Also the Dy. Chief Chemist’s report, categorically states that the product Super Micro Binder 20 is a resin based on Acrylic Monomers. If the product of the appellant is based on Acrylic Monomers, the product merits classification under 3906.90, as there is technically no difference in respect of acrylic monomer or acrylic polymer. Our finding is based upon a published literature which indicated that a polymer can be made up of thousands of monomer. Hence, acrylic polymer which are covered under Heading 3906 are nothing but acrylic monomer linked up by a process called polymerization. The Tribunal has held in respect of similar products in the appellant's own case reported in [2001 (4) TMI 358 - CEGAT, MUMBAI], that similar product containing copolymer resins were held merit classification under chapter Heading 3906.90. The said order was affirmed by the Apex Court Therefore, we do not find any difference in the products in question before us as against the product which is classified under CETH 3906.90 by our order dated 30-4-2001. Since the classification of the product “Super Micro Binder 20” is upheld under Chapter Heading 3906.90, the quantification of the demand would be recalculated by the lower authorities in accordance with the findings recorded in this order. The entire issue being of classification dispute, in our view, there is no necessity to impose any penalty on the appellant. - Appeals disposed of

  ---

• 2016 (5) TMI 1064
  Allowability of refund claim - motor vehicles sold as taxis- partial exemption allowed by notification no. 6/2006-CE dated 1st March 2016 - conditions of the exemption notification had been complied with except that the taxis were registered for a limited period of five years - Held that:- in view of the decision of Tribunal in the case of Maruti Udyog Ltd. v. Collector of Central Excise New Delhi [1998 (8) TMI 399 - CEGAT, NEW DELHI] which has been upheld by the Hon'ble Supreme Court reported in [1999 (7) TMI 661 - SUPREME COURT], concessional rate of duty is subject to 'registration for use solely as taxi' without any reference to the period of registration; it was, therefore, improper on the part of the lower authorities to insist upon a tenure that is not expressly stated there. The lower authorities should have borne this in mind considering that all other conditions stipulated for eligibility of the concessional rate have been complied with. - Decided in favour of appellant with consequential relief

  ---

• CST, VAT & Sales Tax

• 2016 (5) TMI 1057
  Rejection of C-forms - petitioner not been able to co-relate the two C-forms with matching invoices - adding two components of a bill to arrive at a sum carrying the difference of a rupee has resulted in two C-forms of combined value in excess of Rs. 61 lakh - Held that:- once the State does not suspect that the petitioner was trying to pass off a sales tax C-form in respect of a transaction without justification and when the arithmetical error is to the extent of Re.1, the Board ought to have allowed the petitioner the latitude and accepted the co-relation of the invoices with the relevant C-forms. It is true that in matters of accounts, the figures should tally up to the last digit on either side and chartered accountants burn their midnight all over such details, but when it comes to a matter of adjudication as to whether the relevant bill was relatable to the amounts claimed in the two C-forms, the Board ought to have shown a greater degree of flexibility and accepted the same. Therefore, the petitioner is entitled to the benefits in respect of C-forms bearing nos.2116542 and 2116543 since all the invoices pertaining thereto have been identified and there is substantial co-relation which has been established. - Decided in favour of appellant

  ---