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TMI Tax Updates - e-Newsletter
May 4, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Since the nonresident overseas entities did not carry any activity or business operation in India, and they did not render any service in India, no portion of their business profits earned by them exclusively for services rendered outside India can be brought to tax in India, either u/s 9(1) or otherwise or at all. - AT
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Waiver of levy of interest u/s 234B - Application made u/s 119(2)(a) before CCIT - Chief Commissioners of Income Tax cannot exercise that power except in accordance with directions which are issued by the CBDT - HC
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Proceeding conducted by Settlement Commission - any direction issued to the Settlement Commission during the pendency of the proceedings before it would amount to dictating the manner in which the Settlement Commission should conduct the proceedings before it - HC
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LTCG - Benefit of indexation - beneficial owner - the cost incurred by the previous owner shall be adopted while computing capital gains in the hands of the assessee - benefit of indexation should accordingly be provided with effect from April 1, 1981 - AT
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TDS on the payment made to overseas entities for logistic services - no question of treating the relationship between the Appellant Company and the overseas entities as a business connection within the meaning of Section 9(1)(i) of the Income Tax Act, 1961 - Appellant Company was not required to deduct any tax at source either under section 195 and/or section 195A of the said Act - AT
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Penalty under section 271C - failure to deduct tax - assessee has not been treated as an "assessee-in-default" as per section 201 of the Act and is, therefore, neither liable to deduct nor pay any tax as per Chapter XVII-B nor any penalty imposed - AT
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AO was in error in disallowing the trade discount u/s 40A(2)(a) since trade discount allowed to sister concerns cannot be considered as an item of expenditure incurred by the assessee - AT
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TPA - addition of AMP expenses - TPO has failed to prove that the real intention of the assessee in incurring advertisement and marketing expenses were to benefit the AE's. and not to promote its own business. Transferring of profit from India, the basic ingredient to invoke the provisions of section 92 of the Act, remains unproved - AT
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Advance received in the nature of imprest money in the fiduciary capacity for overseas client - amount of professional advances received by the assessee accepting money from its clients on account to meet expenses for and on behalf of its clients and appropriating fees as per bill received against the client, then, the amount of advance cannot be treated as income in the hands of the assessee - AT
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Exemption on the principle of mutuality claimed - as the individual beneficiaries of the trust cannot be identified, therefore, there is no question of applying the concept of mutuality.- AT
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Entitlement to exemption u/s 11(2) - Since the assessee has followed the procedure for accumulation except for the technical lapse, which can be condoned and since the assessee has applied the accumulated funds for the objects of the trust in India, exemption allowed - AT
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Non granting of depreciation on earned tools used for the business - tools and machineries, which are purchased by the assessee, are not eligible for depreciation but they themselves are cost of construction of the hotel building - AT
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Treatment to commission income - commission income earned by the assessee is chargeable to tax under the head of "Profits and gains of the business" only. As business, income it specifically falls under the specific heads of income as provided under section 14 of the Income-tax Act it cannot be taxed under the residuary head of income - AT
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Addition u/s 40A(2)(a) - trade discount allowed by the assessee to its sister concerns - discount allowed to sister concerns were not unreasonable and cannot be excessive having regard to the market rate - AT
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Incomes received from leasing out of hotels - exploitation of a commercial asset - lease rental received by the assessee is to be taxed under the head "Income from business" - AT
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FBT - Concessional rate of tax prescribed under rule 8 of the Income-tax Rules to determine the taxable value of fringe benefits - Assessee-employer shall be entitled to claim relief at 40 per cent. of taxable value of fringe benefits as against 100 per cent. determined by the learned Assessing Officer - AT
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Exemption u/s 54F - the amendment to provision of section 54F is effective from April 1, 2015, which makes it clear that benefit of section 54F will be applicable to one residential house in India. Prior to the amendment it was clear that a residential house would include multiple residential units - AT
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Difference on account of exchange rate fluctuation is entitled to deduction under section 80IB - AT
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Deemed dividend addition u/s.2(22) - trade advance in relation to business transaction cannot be treated as deemed dividend - AT
Customs
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Import of baggage - Passenger brought dutiable goods into the country while leaving blank the relevant column in the disembarkation card ought not to be considered as an attempt at evading payment of customs duty - HC
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Goods in respect of which any prohibition is in force in the context of Section 112 would imply to goods which are prohibited from being imported and not goods which have been smuggled into the country in contravention of the procedure established by law for the import thereof - HC
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Suspension of CHA licence - If licence got renewed during continuation of suspension, the continuation of suspension is not legally sustainable - AT
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Revokation of CHA licence and forfeiture of security - As per Regulation 20, statutory time limit prescribed for issuance of show cause notice is 90 days of offence report - AT
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Having deposited full amount of duty, interest and 25% of penalty, no further proceedings were required to be continued in terms of the provisions of Section 28(1A) and its first proviso - AT
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Provisions of Section 28(1A) are applicable only in respect of proceedings under Customs Act, 1962 and provides for conclusion of proceedings under Customs Act only, not under all acts - AT
Service Tax
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The transport of chlorine through pipeline is done by the appellant in their own account and the delivery on sale is made to the buyer. The transportation charges are included as a consideration for sale and to discharge central excise duty - Demand of service tax set aside - AT
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Test of input being used in or in relation to manufacture is to be applied to consider allowance of CENVAT credit of the service tax paid on the input utilized and having relevance to the output manufactured - AT
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In the absence of any co-relation and linkage with the services and with the export of the goods, the refund cannot be granted in terms of Notification No. 17/2009-ST - AT
Central Excise
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Mandatory provision to deposit 7.5% of the demand of duty and penalty for entertainment of appeal - Court in exercise of its jurisdiction under Article 226 of the Constitution, cannot modify the mandatory conditions set out in Section 35F - HC
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Penalty u/s 11AC cannot be imposed if there is no suppression or misstatement by the assesseeu/s 11A - HC
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Clandestine removal - excess quantity - In the absence of clinching evidence regarding purchase of raw materials, use of extra electricity, sale of final products and realisation of sale proceeds, duty cannot be demanded - HC
VAT
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The invoking of the revisional power by the Deputy Commissioner u/s 46 of the DST Act was unjustified and unwarranted. The impugned SCN requires to be quashed on this ground alone - HC
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Refund of amount paid to get the goods released - truck not stopped at the checkpost - Insofar as a truck which has already entered the State is concerned, it is the provisions of section 69 of the GVAT Act which are applicable - demand from the owner u/s 68 is not correct - HC
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Amnesty Scheme - Additional Commissioner has no power to reject the application under Amnesty Scheme - Power only could have been exercised by the Commissioner, VAT Delhi - HC
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A quasi judicial authority should discharge the statutory discretionary powers independently and not under the dictation of superior officers - HC
Case Laws:
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Income Tax
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2016 (5) TMI 75
Proceeding conducted by Settlement Commission - breach of the principles of natural justice - Held that:- The petitioners are aggrieved by the manner in which the proceedings are being conducted by the Settlement Commission on the applications made by them under section 245C(1) of the Income-tax Act, 1961. Thus, in effect and substance the petitioners seek a direction to the Settlement Commission to comply with the principles of natural justice and afford an opportunity to cross examine certain persons and to provide documents or other material relied upon by the Principal Commissioner of Income-tax in his report under rule 9 of the rules. In the opinion of this court, any direction issued by it to the Settlement Commission during the pendency of the proceedings before it would amount to dictating the manner in which the Settlement Commission should conduct the proceedings before it. In the opinion of this court, while exercising powers under Articles 226 and 227 of the Constitution of India, it is not permissible for this court to dictate the manner in which the Settlement Commission should conduct the proceedings pending before it. If the procedure followed by the Settlement Commission is contrary to the principles of natural justice or contrary to law, it is always open for the petitioner to challenge the ultimate order passed by the Settlement Commission. However, at this stage, merely on an apprehension that there is likely to be a breach of the principles of natural justice, this court would not interfere with the conduct of the proceedings before the Settlement Commission. Under the circumstances, this court is not inclined to entertain these petitions at this stage as they are premature. For the foregoing reasons, without entering into the merits of the submissions advanced by the learned counsel for the petitioners, the petitions being premature are dismissed at this stage. However, all contentions raised in these petitions are kept open to be agitated in an appropriate petition at any appropriate stage.
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2016 (5) TMI 74
Waiver of levy of interest u/s 234B - Application made u/s 119(2)(a) before CCIT - Chief Commissioner Income Tax Rejected the application on the ground that there is no way to escape from that legal position - Held that:- The plea on behalf of the appellant that Ext.P3 (b) does not evidence an order under Section 119 (2)(a) is unsustainable for reasons more than one. Ext.P3(b) is an order shown to have been issued by the Central Board of Direct Taxes; 'CBDT' hereinafter; in exercise of the powers conferred under clauses 2(a) of Section 119 of the Act. It is wholly unacceptable to say that it is not an order under that provision but only a communication, unless, of course, reliable cogent material is produced by the appellant to denounce the credibility of Ext.P3(b). That document expresses the decision of the CBDT and contains directions to the Chief Commissioners and Directors General of Income Tax requiring compliance of the decision contained in that order. It is a statutory order. There is no way to escape from that legal position. Hence, we repel the plea of the appellant that it is not Ext.P3(b) that would apply. That Ext.P3(b) order of CBDT was communicated to the Chief Commissioner of Income Tax, Kochi, is beyond any pale of doubt because what the appellant has produced as Ext.P3(b) is nothing but the photostat copy of what would be available in the Office of the Chief Commissioner of Income Tax, Kochi. We cannot but infer so since Ext.P3 (b), at the top of its first page, contains the seal of that office, imposed on 31.7.2006. The Chief Commissioners cannot exercise that power except in accordance with directions which are issued by the CBDT. When the regulatory mechanisms in a fiscal legislation govern a situation; that cannot be visited in exercise of power under Article 226 and appellate jurisdiction through an intra-court appeal since that would be in defeasance of the statutory impact of a fiscal legislation in the nature of the Income Tax Act, 1961. An "equitable remedy" cannot be carved out in defeasance of; and eroding the statutory situation. No such plenary power rests with the High Court to criss-cross the impact of the relevant fiscal statutory provisions; more so since, in law, equity would be subservient to; and, cannot override; statute. For the foregoing reasons, we find no factual or legal infirmity in the impugned judgment warranting interference through this intra-court appeal under Section 5 of the High Court Act. - Decided against the assessee.
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2016 (5) TMI 73
Failure to deduct the TDS on the payment made to overseas entities for logistic services - concept of permanent establishment (PE) - Held that:- liability to deduct TDS arises ‘only if the tax is assessable in India’. Since tax was not assessable in India, there was no question of TDS being deducted by the assessee. With regard to countries in respect of which India has no DTAA, we find that It is an undisputed fact and law that the taxability of business profits earned by overseas countries in India would wholly depend upon the fact whether such non-resident overseas entities rendered any services in India or not. Only if the services are rendered in India, the deeming provisions contained in Section 9(1) of the Act would apply so as to tax the income deemed to accrue or arise in India. Since the nonresident overseas entities did not carry any activity or business operation in India, and they did not render any service in India, no portion of their business profits earned by them exclusively for services rendered outside India can be brought to tax in India, either under Section 9(1) or otherwise or at all. Therefore, there is no question of treating the relationship between the Appellant Company and the overseas entities as a business connection within the meaning of Section 9(1)(i) of the Income Tax Act, 1961. Since there is no business connection within the meaning of section 9(1)(i) of the said Act between the Appellant Company and the overseas entities, the overseas entities are not chargeable to tax in India on their profits, which wholly accrued and arose outside India and through rendering of services by them wholly outside India. None of the non-resident Entities had any permanent establishments in India. The Appellant Company as well as each of the nonresident entities were acting on Principal to Principal basis; and that none of them were agents of each other. The mere fact that the Agreements executed in between the Appellant Company and each of the different non-resident entities used the nomenclature “Reciprocal Appointment as Agents”, both ways, for Air / Ocean import and export transportation between India and the respective establishments in the overseas countries, it cannot and does not make the Appellant Company as the agent of the non-resident entities in any manner whatsoever, as is by now well settled in Super Poly Fabriks Ltd. v. Commissioner of Central Excise (2008 (4) TMI 31 - Supreme court ) the nature of operations and activities carried out by the Appellant Company as well as each of the non-resident entities clearly show that none of them are agents of each other; and that each of them are operating in their respective countries on Principal to Principal basis. As such, the Appellant Company can by no stretch of imagination be treated as the Permanent Establishment of any of the non-resident entities. in the circumstances mentioned hereinabove, the Appellant Company was not required to deduct any tax at source either under section 195 and/or section 195A of the said Act. The payment made by the assessee to the overseas entities is not chargeable to tax in India therefore the question of TDS deduction does not arise. The assessee is neither acting as an agent of the overseas entities nor its place of business can be regarded as PE of the overseas entities. Accordingly we reverse the order of the authorities below. Hence this ground of appeal of the assessee is allowed.
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2016 (5) TMI 72
Transfer pricing adjustment - sharing AMP expenses - Held that:- The fact-that the license agreements between the assessee and its AE. s were on principal to principal basis for payment of royalty for use of brands of the AE's was not challenged by the TPO. In our, opinion, observation of the DRP that royalty payment was not a relevant point to decide the issue is not proper. Because, royalty payment is one of the criterias to hold that the assessee is an independent unit. It is also not denied that the assessee is having a fully operational manufacturing, marketing and distribution system in India. The manufacturing unit of the assessee had shown a huge turnover(Rs. 631. 24 crores). Thus, we do not find force in the arguments of the TPO /DRP that AMP expenses incurred by the assessee were primarily or secondarily aimed to benefit the AE. s. and that it was entitled to a reasonable compensation for such AMP expenses. The expenses were incurred by the assessee to promote its own business interests. TPO has not brought on record any evidence to prove that the assessee had rendered any services to its AE. s under the head AMP. On the contrary, payment on account of advertisements etc. (Rs. 71. 04 crores)was made to unrelated domestic third parties. In our opinion, these basic facts compelled the TPO to hold that in the case under consideration the international transaction was not the actual AMP expenditure, but the benefit conferred by it to its AE. s in form of promotion and brand value augmentation of the brands owned by them. So, the fundamental question to be answered is to decide as to whether in absence of any agreement for payment of AMP expenses to the AE. s can it be held that there was an international transaction only on the basis that AMP expenditure, incurred by the assessee, would have benefitted the AE. s. , who owned the brands used by the assessee. In our opinion, the arguments suffers from the very basic flaw that an assessee does not incurs AMP to increase its sales, but to benefit the AE. s. In other words, the TPO has failed to prove that the real intention of the assessee in incurring advertisement and marketing expenses were to benefit the AE's. and not to promote its own business. The turnover of the assessee proves that during the year under consideration the assessee had done a reasonably good business, as state earlier. The resultant profit was offered for taxation in India. Therefore, transferring of profit from India, the basic ingredient to invoke the provisions of section 92 of the Act, remains unproved. The transaction in question was not an international transaction and that the TPO had wrongly invoked the provisions of Chapter X of the Act for the said transaction. - Decided in favour of assessee Disallowance u/s 14A - Held that:- We find that the assessee the AO had made disallowance of ₹ 45. 67 lakhs invoking the provisions of section 14 A of the Act, that it on its own, the assessee had made a disallowance of ₹ 5. 56 lakhs, that the DRP reduced the disallowance to ₹ 42. 11 lakhs. We find that the AO had applied the provisions of Rule 8D of the Rules in a mechanical manner. In each and every case disallowance @ half a percent of the average investment for that year cannot be applied. But, it is also a fact that the assessee itself had admitted that certain disallowance had to be made u/s. 14 of the Act. As an ad hoc disallowance is to be made, so, we are of the opinion that interest of just will meet if the disallowance is restricted to ₹ 10 lakhs - Decided in favour of assessee in part.
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2016 (5) TMI 71
Deemed dividend addition u/s.2(22) - Held that:- The provision is very clear that to become a beneficiary they must be registered as shareholder. We rely on the decision of CIT vs. Madurai Chettiyar Karthikeyan (2014 (4) TMI 825 - MADRAS HIGH COURT ) were held trade advance in relation to business transaction cannot be treated as deemed dividend within Sec.2(22) (e) of the Act - Decided in favour of assessee Addition being payment of foreign commission paid to foreign agent in procuring orders - non deduction of tds - Held that:- The assessee has not substantiate with the type of works undertaken by Foreign Agent and volume of business conducted by them in proportionate to total turnover and also there is no confirmation produced in respect of commission's by foreign agent. Considering the facts, we set aside the order of Commissioner of Income Tax (Appeals) and remit the issue to the Assessing Officer for limited purpose to verify the genuineness of transaction whether foreign agent have paid taxes in their country. Deduction u/s.80IB of the Act on job works treated as business income - Held that:- We considered the submissions and findings of the ld. Departmental Representative on the order of Commissioner of Income Tax (Appeals) which lacks clarity and the claim of job works by the ld. Authorised Representative does not specify the nature of work undertaken by the assessee company and the same was not reflected by the Assessing Officer in his order nor assessee has produced relevant materials on record to explain the nature of job works undertaken and job works charges takes the characteristic of business income. Even before us, the ld. Authorised Representative could not substantiate the working criteria of nature of job works with any supporting material in respect of particular product and further there is no discussion on the product used in job works by the Commissioner of Income Tax (Appeals). We are of the opinion that the matter has to be re-examined for limited purposes to verifying the nature of job works for captive consumption or for others. Therefore, we deem it necessary to set aside the impugned order of Commissioner of Income Tax (Appeals) and remit the file to the Assessing Officer to pass the order on above findings and Assessing Officer shall also provided adequate opportunity of being heard to the assessee. Allowability of Discount for computing deduction u/s 80-IB - Held that:- There is no nexus provided with respect to business activities. Prime facie the assessee enters into international business transactions and such foreign exchange gain should be part of the business activity. The activity of rate difference arised directly related to the sale transaction involving export of goods of industrial undertaking. We rely on the decision of Jurisdictional High Court in the case of CIT vs. Pentasoft Technologies Ltd (2010 (7) TMI 75 - MADRAS HIGH COURT ) were it was held that in order to allow a claim under section 10A what all is to be seen is whether such benefit earned by the assessee was derived by virtue of export made by the assessee. The exchange value based on upward or downward of the rupee value is not in the hands of the assessee. Therefore, when the fluctuation in foreign exchange rate was solely relatable to the export business of the assessee, and the higher rupee value was earned by virtue of such exports carried out by the assessee, the benefit of section 10A should allowed to the assessee in respect of such gain and also relied on Bombay High Court decision in the case of CIT vs. Rachna Udhyog [2010 (1) TMI 38 - BOMBAY HIGH COURT ] were it was held that exchange rate difference arises and is directly related to sale transaction involving export of goods of the industrial undertakings and, therefore, the difference on account of exchange rate fluctuation is entitled to deduction under section 80IB of the Act. Considering apparent facts we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) and dismiss the ground of the Revenue.
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2016 (5) TMI 70
Income recognition - Advance received in the nature of imprest money held in the fiduciary capacity for his overseas client Ace Step Management Ltd., UAE - as alleged by revenue that within two days of receipt of the so called advance amount, the assessee disbursed more than ₹ 2 crores for making payments to his own firm, Hindu undivided family, wife, son and daughter and remaining amount was used for making payments towards preferential share amount of Dhanlaxmi Bank - Held that:- Facts and circumstances are similar and synonymous to the facts and circumstances in the case of CIT v. Om Prakash Khaitan [2015 (7) TMI 785 - DELHI HIGH COURT ] and respectfully following the same, we hold that the amount of professional advances received by the assessee accepting money from its clients on account to meet expenses for and on behalf of its clients and appropriating fees as per bill received against the client, then, the amount of advance cannot be treated as income in the hands of the assessee. We may further point out that the assessee received the amount in question on April 9, 2008, pertaining to the financial year 2008-09 relevant to the assessment year 2009-10 and it was the first year of receipt and the assessee has shown the balance at the end of the financial year, i.e., ₹ 6,44,44,813 as sundry creditors, after adjusting the professional fees and amount paid towards reimbursement on behalf of the client, then this amount cannot be treated as income of the assessee for the assessment year 2009-10. Finally, respectfully following the proposition laid down by the hon'ble jurisdictional High Court in the case of CIT v. Om Prakash Khaitan [supra] we hold that the present issue raised is clearly covered on all four corners in favour of the assessee and therefore, we dismiss the view taken by the Assessing Officer and upheld by the learned Commissioner of Income-tax (Appeals) wherein the entire amount of advance has been treated as income of the assessee for the assessment year 2009-10. Before we part with the adjudication of this issue, we may point out that we are in agreement with the contentions of the learned Departmental representative that income earned by the assessee himself, by his own firm, by his Hindu undivided family and by his wife, son and daughter, from investments of funds, so received by them out of advance amount in question, may be added to their respective taxable income. - Decided in favour of assessee. Disallowance u/s 14A - Held that:- We are in agreement with the contention of the learned Departmental representative that the Assessing Officer, after recording satisfaction has invoked section 14A read with rule 8D and has computed disallowance under clause (iii) of sub-rule (2) in accordance with the relevant provisions of the Act. It is pertinent to note that the language used by the Legislature in section 14A as well as in rule 8D of the Rules mandates that the provisions of sub-section (2) of section 14A of the Act shall also apply in relation to a case where the assessee claims that no expenditure has been incurred by the assessee in relation to the income which does not form part of the total income under this Act. In the present case, undisputedly and admittedly, the assessee has not made any suo motu disallowance. Therefore, we may safely presume that the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of total income under this Act. Therefore, after recording satisfaction, the Assessing Officer rightly invoked the provisions of section 14A read with rule 8D(2)(iii) of the Rules and we hold that the disallowance made by the Assessing Officer and upheld by the learned Commissioner of Income-tax (Appeals) is based on proper invocation and application of the relevant provisions of the Act and Rules and thus, we uphold the same - Decided against assessee.
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2016 (5) TMI 69
Penalty under section 271C - failure to deduct tax - Held that:- In the present case, we find that the assessee has not been treated as an "assessee-in-default" as per section 201 of the Act and is, therefore, neither liable to deduct nor pay any tax as per Chapter XVII-B. In such circumstances, we find that the question of levy of penalty under section 271C does not arise. In view of the same we find no merit in the contention of the learned Departmental representative that the assessee had no reasonable cause for not deducting tax at source. Further, we hold that in lieu of the provisions of section 273B which states that no penalty shall be leviable in cases where reasonable cause for the default committed has been demonstrated, the penalty levied under section 271C is liable to be deleted. - Decided in favour of assessee
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2016 (5) TMI 68
Exemption on the principle of mutuality claimed - assessee-trust was not registered under section 12AA - Held that:- Admittedly, the assessee is a trust and it is not registered under section 12AA of the Act. The foremost object of the trust is to propagate the ideology of Sri Sathya Sai Baba by installing 108 padhugas. The trust deed also provides for installation of golden padhuga on 109th time. A bare reading of the trust deed clearly says that it is religious in nature and for the entire mankind of the world. The beneficiaries of the trust cannot be identified individually. The contention of the assessee is that a group of people are contributing for poojas and therefore, the benefits would go only to those persons who are contributing for the poojas. This Tribunal is unable to accept the contention of the assessee. Today 100 people may contribute for poojas and another day 200 people may contribute for the poojas. There is no restriction for the general public for participating in the poojas. There cannot be any identity among the people who are contributing for the poojas and the persons participating in poojas. The assessee is at liberty to receive donation or contribution from any individual across the society. In such a case, as rightly submitted by the learned Departmental representative, the individual beneficiaries of the trust cannot be identified, therefore, there is no question of applying the concept of mutuality. In fact, there is no mutuality in the transaction between the assessee and the individual beneficiaries. - Decided against assessee
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2016 (5) TMI 67
LTCG - Benefit of indexation - cost incurred by the previous owner - beneficial owner - CIT(A) directing to allow the cost of acquisition of the property as a market value as on April 1, 1981, and indexation allowed on that cost - rights in the impugned land in pursuance of a family arrangement - Held that:- In the given facts of this case, the assessee was the beneficial owner of the impugned asset, and in any case, on the event of family partition, there was at the best improvement in "title" of the assessee over the property, which the assessee was already having. Thus, from the above discussion, it is clear that the term "held", used in the context of section 2(42A) is of wide amplitude and scope. The asset need not be necessarily held as "owner" by the assessee. Thus, in view of the aforesaid legal position and facts of the case, it can be said that the assessee was holding this property since 1963. Even otherwise, the case of the assessee would fall in the situations envisaged in section 49(1). Therefore, in our view, in any case, the cost incurred by the previous owner shall be adopted while computing capital gains in the hands of the assessee, and also, the period of holding of the assets in the hands of the assessee should also be reckoned from 1963, and, accordingly, for the purpose of taking cost of acquisition, the value as on April 1, 1981, should be adopted in the hands of the assessee for the purpose of computing the taxable amount of capital gain. The benefit of indexation should accordingly be provided with effect from April 1, 1981. Therefore, we find that the findings of the learned Commissioner of Income-tax (Appeals) are correct as per law and facts, no interference is called for therein, and the same are upheld. - Decided against revenue
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2016 (5) TMI 66
Treatment to commission income - Profits and gains of the business or income from other sources - Held that:- We have perused the memorandum and articles of the company wherein object No. 1 is stated to be that of to manage, administrate, operate, maintain into carrying on the business of hotels and related properties and further to act and work as consultant commission agent for all over in India and abroad. We are of the view that commission income of ₹ 43,700 which has been generated from real estate business is widely covered under the object clause of the memorandum of association of the company. Further, the earning of commission income is itself a separate business of the company as it is an activity of arranging and helping in negotiation of real estate. It is an organised effort of the assessee-company to generate the revenue. According to section 2(13) of the Income-tax Act business has been defined as "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". According to us, commission income earned by the assessee is chargeable to tax under the head of "Profits and gains of the business" only. As business, income it specifically falls under the specific heads of income as provided under section 14 of the Income-tax Act it cannot be taxed under the residuary head of income Chargeability of interest on fixed deposit receipt as income from other sources - view of the assessee that it should be abated against capital work-in-progress - Held that:- Interest income earned by the assessee is also inextricably linked with the business of the company and therefore the Assessing Officer and the Commissioner of Income-tax (Appeals) both erred in applying the ratio of decision of the honourable Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997 (7) TMI 4 - SUPREME Court ]. Therefore, the same is required to be abated against the cost of work-in-progress of the hotel of the assessee. Therefore, we hold that the Assessing Officer and the Commissioner of Income- tax (Appeals) both yield in this case in taxing the interest income of fixed deposit receipt as income from other sources. Disallowance of claim of depreciation on earned tools used for the business - Held that:- According to us, the tools and machineries, which are purchased by the assessee, are not eligible for depreciation but they themselves are cost of construction of the hotel building. Therefore, we find no infirmity in the order of the Assessing Officer and the Commissioner of Income-tax (Appeals) in not granting the depreciation on the assets
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2016 (5) TMI 65
Entitlement to exemption u/s 11(2) - Held that:- There is no dispute that the funds accumulated were utilised for carrying out the aims and objectives of the assessee which was to work for the welfare of the economically weaker section of the society and to undertake projects for rural health and sanitation in the needy area. The assessee utilised the accumulated funds as per the minutes of the governing body dated April 22, 2011. This was accepted by the Revenue in the subsequent assessment year which shows that the assessee had utilised the accumulated funds for the aims and objects of the trust in India. Since the assessee has followed the procedure for accumulation except for the technical lapse, which can be condoned and since the assessee has applied the accumulated funds for the objects of the trust in India, we hold that it is eligible to get the benefit under the provisions of section 11(2). - Decided in favour of assessee.
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2016 (5) TMI 64
Exemption u/s 54F - whether the appellant had purchased two flats in two different buildings and location and only one flat is eligible for exemption under section 54F? - Held that:- The equivalent of 56.25 per cent of land transferred, equivalent to 43.75 per cent. of the built-up area received by the assessee. This built-up area can be translated into five flats. Hence, the transaction in this case was not with regard to the number of flats but with regard to the percentage of the built-up area vis-a-vis the undivided share of land. In this regard the learned authorised representative for the assessee submitted that prior to the amendment to section 54F effective from April 1, 2015 the assessee was entitled for the benefits of more than one flat as discussed above. It is pertinent to mention here that the hon'ble Madras High Court, in the case of CIT v. Smt. V. R. Karpagam [2014 (8) TMI 899 - MADRAS HIGH COURT ] has clearly held that the amendment to provision of section 54F is effective from April 1, 2015, which makes it clear that benefit of section 54F will be applicable to one residential house in India. Prior to the amendment it was clear that a residential house would include multiple residential units. Assessing Officer is directed to allow the claim of the assessee with respect to two flats purchased by the assessee as discussed above. Assessing Officer is directed to allow the claim of the assessee with respect to two flats purchased by the assessee as discussed above. - Decided in favour of assessee
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2016 (5) TMI 63
Incomes received from leasing out of hotels - whether are to be taxed under the head "Income from house property"? - Held that:- Deciding factor is not the ownership of land or lease but nature of activity of the assessee and nature of operation in relation to them. In the present case, the assessee is a company, and it is not involved in any activity other than leasing out of these hotels. The fact that the said activity is mentioned under other objects in the memorandum of association, of the company and not in the main objects, is immaterial to decide the issue in question. In a judgment of the hon'ble jurisdictional High Court in the case of Capital Foundry and Engineering Works v. CIT [1981 (11) TMI 42 - PUNJAB AND HARYANA High Court ] very clearly held that once the profits or gains are made from the exploitation of a commercial asset, then whether the assessee carries on business himself or it had been run by another person as a lessee, makes no difference. In the present case, similar is the situation. The judgment in the case of Dal Chand and Sons v. CIT [1967 (12) TMI 7 - PUNJAB AND HARYANA High Court] was later followed by the hon'ble jurisdictional Punjab and Haryana High Court in the case of Nauharchand Chananram v. CIT [1970 (10) TMI 12 - PUNJAB AND HARYANA High Court ] (P&H) also. Thus we hold that the lease rental received by the assessee is to be taxed under the head "Income from business" - Decided in favour of assessee
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2016 (5) TMI 62
FBT - Entitlement to avail of the concessional rate of tax prescribed under rule 8 of the Income-tax Rules to determine the taxable value of fringe benefits - Held that:- What has been allowed as the business expenditure (i.e. the expenditure that are subjected to fringe benefit tax) is only to the extent of 40 per cent. thereon in accordance with rule 8 of the Income-tax Rules, 1962. Hence logically the said business expenditure for the purpose of fringe benefit tax also should be considered at only 40 per cent. of the same as against 100 per cent. Assessee-employer shall be entitled to claim relief at 40 per cent. of taxable value of fringe benefits as against 100 per cent. determined by the learned Assessing Officer and accordingly we direct the learned Assessing Officer to recompute the value of fringe benefits in accordance with rule 8 of the Income-tax Rules. - Decided in favour of assessee
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2016 (5) TMI 61
Addition u/s 40A(2)(a) - disallowance of trade discount allowed by the assessee to its sister concerns - whether trade discount is not an expenditure as discount was not made in sale bill but only in the way of book adjustment - Held that:- The issue has been elaborately considered by the Commissioner of Income-tax (Appeals) with reference to the findings of the Assessing Officer and the submissions of the assessee and following the various High Court decisions including the decision of the jurisdictional High Court in the case of CIT v. A. K. Subbaraya Chetty and Sons [1979 (10) TMI 60 - MADRAS High Court ] held that discount allowed to sister concerns were not unreasonable and cannot be excessive having regard to the market rate. The Commissioner of Income-tax (Appeals) also held that the Assessing Officer was in error in disallowing the trade discount under section40A(2)(a) since trade discount allowed to sister concerns cannot be considered as an item of expenditure incurred by the assessee - Decided in favour of assessee Depreciation on windmills - AO while completing the assessment restricted the depreciation on windmill to 7.69 per cent. as against the claim of the assessee at 80 per cent. holding that the assessee has not exercised option for claiming higher depreciation - Held that:- Going through the decision of jurisdictional High Court in the case of CIT v. ABT Ltd. [2014 (10) TMI 788 - MADRAS HIGH COURT ] we find that the issue is squarely covered in favour of the assessee as the hon'ble High Court held that if the assessee exercised option in terms of second proviso to rule 5(1A) of the Income-tax Rules at the time of furnishing of return of income, it will suffice no further letter of request or intimation with regard to exercise of option is required. Since the returns were filed in accordance with section 139(1) of the Act and the form prescribed therein make a provision for exercising option in respect of the claim of depreciation, no separate procedure is required. In the case on hand before us, the assessee has claimed higher depreciation in the return filed under section 139(1) of the Act claiming higher depreciation at 80 per cent. on windmill which amounts to exercise of option for higher claim. Thus, respectfully following the said decision of the jurisdictional High Court, we uphold the order of the Commissioner of Income-tax (Appeals) on this issue and reject the grounds raised by the Revenue. - Decided in favour of assessee
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2016 (5) TMI 60
Validity of assessment u/s 153C - addition has been made in the absence of any seized documents - Held that:- From the orders of the lower authorities are that during the search conducted at the residence of Shri Prakash H. Savla, documents related to the firm, M/s. Mahavir Builders, were found and seized. Subsequently, Shri Prakash H. Savla and Shri Pankaj Gangar (husband of the assessee) gave some declarations offering undisclosed income of some connected persons including the assessee, as per the chart given in the order of the learned Commissioner of Income-tax (Appeals), wherein an amount of ₹ 24.30 lakhs has been offered in the name of the assessee for the assessment year 2007-08 on account of some undisclosed share purchase transactions. Subsequently, notices were issued to the assessee by the Assessing Officer under section 153C, in pursuance of which the assessee filed the return on August 28, 2009. In the return filed for the impugned assessment year, no disclosure was made by the assessee, as the same was made only for the assessment year 2007-08. During the course of assessment proceedings the Assessing Officer made additions of ₹ 2,00,000 on account of gift received by the assessee. The admitted facts on record are that the addition has been made in the absence of any seized documents. It is noted that the declaration was made by the assessee only for the assessment year 2007-08, and has been accepted as such by the Department. The facts on record suggest that nothing incriminating has been found indicating any undisclosed income for the year under consideration. Thus, the primary issue to be decided here by us is that whether an addition could be made under the law by the Assessing Officer in the absence of, or unconnected to, any material found during the course of search. It is noted by us that this issue is no more res-integra. Honourable co-ordinate Bench in the case of Vimal Kumar Rathi [2016 (1) TMI 215 - ITAT MUMBAI] held that no addition can be made in the absence of any adverse material found during the search. - Decided in favour of assessee Telescoping of the unaccounted brokerage and commission income against the amount offered in the return by the assessee - Held that:- In the assessment proceedings before the Assessing Officer, the assessee claimed that the entry of commission and brokerage of ₹ 6,00,000 received in cash is covered in the declaration made on account of amount spent on renovation of house of the assessee. This claim was not accepted by the Assessing Officer on the ground that no co-relation could be shown between the two by the assessee. But the learned Commissioner of Income-tax (Appeals) accepted it and granted the benefit of telescoping. It is noted by us that no reasoning has been given by the learned Commissioner of Income-tax (Appeals) as to how and in what manner the amount of ₹ 6,00,000 earned on account of some brokerage and commission income is covered within the offer of ₹ 30 lakhs made by the assessee. The learned Commissioner of Income-tax (Appeals) has discussed in detail the entire law on telescoping but failed to discuss that how and in what manner, the impugned amount was covered in the income offered by the assessee. We find that the grievance of the Revenue that the assessee was not able to establish any nexus between the two amounts is justified. We further find that no proper reasoning on facts has been given by the learned Commissioner of Income-tax (Appeals) while giving the benefit of tele scoping. Thus, the action of the learned Commissioner of Income-tax (Appeals) in deleting this addition is reversed and addition made by the learned Assessing Officer on this ground is upheld. - Decided against assessee Undisclosed expenditure under section 69C on the basis of jottings in seized material - Held that:- Scribbling has been made on page 16 of the aforesaid annexure GS4-A2, thus this document is half a dumb and half a speaking document. Before it could be used for making addition in the hands of the assessee, there was a legal obligation on the shoulders of the Assessing Officer, to make it as fully speaking document since he wanted to make addition on the basis of this document. There are no indications or observations in the assessment order showing that whether the Assessing Officer made any efforts to contact Mr. Arunbhai. It has not even been mentioned in the assessment order that whether he asked the asses see to produce Mr. Arunbhai. It is not even coming out that whether this amount has been received or given or whether this amount shall be received or shall be given. Whether it is income or expense ? Nothing is coming out from the perusal of this document, and, therefore, in our considered view, no addition could have been made simply relying on the basis of this document that too without bringing any material on record to explain and substantiate this document. Therefore, addition was wrongly made by the Assessing Officer, and, therefore, the same is hereby deleted.- Decided in favour of assessee Addition on account of unsecured loan - Held that:- The assessee has discharged its onus under section 68. Even otherwise, the impugned addition was made in the absence of incriminating material, and keeping in view all the facts and circumstances of the case, the addition being illegal, has rightly been deleted by the learned Commissioner of Income-tax (Appeals) - Decided in favour of assessee Unexplained jewellery treated as unexplained investment - Held that:- The learned Commissioner of Income-tax (Appeals) has given detailed findings accepting the claim of the assessee that the impugned investment in jewellery is covered under the offer made by the assessee under section 132(4) of ₹ 31,50,000 on account of diamond jewellery on the basis of seized documents. The learned Commissioner of Income-tax (Appeals) has taken holistic view of the matter while accepting the claim of the assessee. Before us nothing contrary could be brought on record by the learned Commissioner of Income-tax-Departmental representative and the reasons/findings given by the learned Commissioner of Income-tax (Appeals) could not be controverted. Therefore, keeping in view all the facts and circumstances of the case, we find that the order of the learned Commissioner of Income-tax (Appeals) is in accordance with law and facts, and, therefore, no interference is called therein - Decided in favour of assessee
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2016 (5) TMI 59
Computation of the income from house property - Held that:- Assessing Officer has not made any enquiry with respect to the computation of the income from house property with respect to the respective properties in accordance with sections 22 and 23 of the Act and the principles laid down by the hon'ble Bombay High Court in the case of CIT v. Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT ] to determine the prevailing market rent of these properties and rather computed annual letting value based on notional rent based on cost of properties. During the hearing, learned counsel for the assessee also contended that the assessee has produced additional evidences before the authorities below which has not been considered by the authorities and principles of natural justice are vitiated. In view of the above, we are of the considered view that the matter raised by the assessee in memo of appeal needs to be set aside to the file of the Assessing Officer for re-determination of the income from house properties Addition of professional income - liability to follow mercantile method of accounting in respect of income - Held that:- The law has given freedom to the assessee to regularly employ either cash basis of accounting or mercantile basis of accounting to compute correct income chargeable to tax and the plain, simple and natural language and words used in section 145 of the Act does not, in our humble opinion, cast any bar on the assessee to follow regularly either cash basis or mercantile basis of accounting by the assessee having more than one source of income within the head of income from "Profits and gains of business or profession" or "income from other sources" as in the instant case the assessee has two stream and sources of income under the head of income from "Profits and gains of business or profession", viz., his professional income and also income from production of films because by following either of the two methods of accounting regularly, there is not likely to be distortion in computation of correct income as per the provisions of the Act and it will be only timing difference which we have seen above due to following the above methods of accounting and no prejudice will be caused to the Revenue. The said income of ₹ 22,57,000 from the profession is also stated to have been offered to tax by the assessee in the year of receipt, i.e., immediately succeeding the financial year 2007-08 by following consistently and regularly cash basis of accounting for his source of income from profession. Thus, we hold that the assessee is not following the hybrid or mixed method of accounting and the assessee is following cash system of accounting for his income from profession and mercantile system of accounting for his income from film production which are permitted by section 145 of the Act. Based on our discussions and reasoning given hereinabove, we order deletion of the addition of ₹ 22,57,000 made to the income of the assessee by the Assessing Officer by setting aside the orders of the Commissioner of Income-tax (Appeals) and deleting the addition of ₹ 22,57,000 made to the income of the assessee by the Assessing Officer. Addition of unexplained cash credit - Held that:- Once the income is stated to be assessed in the hands of the assessee and the said accommodations C-18 and C-20 have been stated to be acquired out of the undisclosed income and treated as own property by the assessee, which has been brought to tax in the hands of the assessee and taxes due paid to the Revenue, then the capital gains arising on sale of these accommodations C-18 and C-20 owned by the assessee and held by the assessee in the name of close family members being sister and mother shall be chargeable to tax in the hands of the assessee although the accommodations are technically held in the name of close family members, i.e., mother and sister of the assessee and hence we order deletion of addition of ₹ 10 lakhs being advance on sale of these accommodations as made by the Assessing Officer and as confirmed by the Commissioner of Income-tax (Appeals) with the direction to the Assessing Officer to compute capital gains arising out of these two accommodations as per the Act which shall be brought to tax in the hands of the assessee in accordance with law after duly verifying and authenticating the claim of the assessee with respect to acquisition and ownership of the above accommodations C-18 and C-20 out of the undisclosed income of the assessee which has been brought to tax and taxes due paid to the Revenue as asserted by the assessee and the assessee is directed to appear before the Assessing Officer and file the necessary evidences before the Assessing Officer to support its claim and assertions for verification and authentication by the Assessing Officer. Needless to say that proper and adequate opportunity as per law shall be given by the Assessing Officer to the assessee in accordance with the principles of natural justice. Addition of cash deposit under section 68 - additional evidences before the Commissioner of Income-tax (Appeals) which are not admitted - Held that:- With lot of hard work, difficulty and moral support from the family, the assessee has come so far in his profession of choreography. Due to lack of financial support, the assessee could not even complete his basic education and as such he is not well versed with the terms of accountancy, tax and other laws and regulations. The assessee has once again hit as he had incurred huge losses in the film business. The assessee's accountant also left the job without even handing over the charge of the books of account. The assessee was not having the proper information about the books of account and the assessee was travelling while assessment proceedings were going on which was the main reason the assessee could not produce the evidence before the Assessing Officer and hence there was sufficient cause for not producing the evidence during the assessment proceedings and accordingly prayed before the Commissioner of Income-tax (Appeals) for admitting the additional evidence which the Commissioner of Income-tax (Appeals) declined to admit the same. We find that there was sufficient cause shown by the assessee which prevented the assessee from producing the additional evidence during the assessment proceedings, hence, we direct the admission of the additional evidences by the Assessing Officer. In our considered opinion, the interest of justice will be best served, if the orders of the authorities below are set aside and the matter is restored back to the file of the Assessing Officer with a direction to admit and examine the additional evidence filed by the assessee and decide the issue afresh on merits after giving sufficient opportunity of being heard to the assessee
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2016 (5) TMI 58
Deemed dividend u/s 2(22) - Loan / Advances received from public company cum NBFC - Held that:- The assessee before the Assessing Officer and the learned Commissioner of Income-tax (Appeals) has submitted that both these companies are public limited companies and they have produced evidences to substantiate that the STLL is a listed company at the Delhi Stock Exchange and Jaipur Stock Exchange and also the shareholding pattern as on March 31, 2008. And that section 2(22)(e) is not applicable to loans or advances by non-banking finance companies (NBFC). In order to substantiate that STLL is NBFC, it was submitted that they are registered with the Reserve Bank of India since 1998 in category of loan investment company and engaged in the activities of shares sale, financing activities, loan syndication activities and hypothecation activities. It is a well-settled principle of law that deeming provision has to be interpreted strictly and it cannot be stretched to more than that for which the deeming provision can be literally interpreted. Nothing can be added or implied while interpreting a deeming provision. One can only look at the language used. Therefore, we concur with the learned Commissioner of Income-tax (Appeals) that the lender company, i.e., M/s. STLL is a public limited company and so the loan/advance/ICD given to the assessee does not fall in the ken of section 2(22)(e) and moreover, the lender company is a NBFC which is also excluded from the said deeming provision, therefore, we do not find any merit in this ground of appeal and we uphold the learned Commissioner of Income-tax (Appeals)'s order and dismiss this ground. - Decided in favour of assessee. Disallowance of total interest - Held that:- We find that the assessee-company had sufficient free funds and that the assessee had stated before the Assessing Officer that the borrowed funds have been used for business purposes only and not for the investment, could not be controverted by both the authorities below. The Assessing Officer erred in concluding that since the assessee-company is incurring interest expenditure so no surplus fund is available to the assessee-company is erroneous on the fact that the total shareholder fund without interest burden is to the tune of ₹ 34.46 crores and, therefore, thus we have no hesitation to delete the disallowance. See East India Pharmaceutical Works Ltd. v. CIT [1997 (3) TMI 5 - SUPREME Court ] - Decided in favour of assessee.
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2016 (5) TMI 57
Addition u/s 68 - Held that:- Assessing Officer was not satisfied with the submissions of the assessee, he pointed out some discrepancy in the balance-sheet of M/s. Buniyaad Chemicals Ltd. and treated the amount of shares capital as unexplained cash credit under section 68 of the Act, and added the same to the income of the assessee. But before doing so, the Assessing Officer neither provided an opportunity of cross- examination of his witness, as was demanded by the assessee, nor he brought on record any other adverse material to controvert the evidences placed on record by the assessee. It is worth noting here that the Assessing Officer had made direct inquiries with M/s. Buniyaad Chemicals under section 133(6), in response to which confirmation was filed by the said company. But the learned Assessing Officer preferred to rely upon the "statement" of Mr. Mukesh Choksi and disregarded all the evidences filed by the assessee as well as evidences collected by him directly from the shareholder company which confirmed the claim of the assessee. Thus we find that in the peculiar facts and circumstances of this case, the addition made by the Assessing Officer is not sustainable as per the law and the same is directed to be deleted. - Decided in favour of assessee
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2016 (5) TMI 56
Levy of penalty under section 271 (1)(c) - claim of losses - Held that:- On perusal of the assessment order dated February 28, 2006, apparently, the assessee claimed losses with regard to the incomplete work which has not been allowed by the Assessing Officer and the said losses having been added to the income of the assessee. In our view, it is not a case of furnishing inaccurate particulars of income. Making incorrect claim, if any, does not amount to concealment of particulars because no information given by the assessee in its return of income is found to be incorrect. In this regard, we draw the support from the decision of the hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts P. Ltd. [2010 (3) TMI 80 - SUPREME COURT ]. In effect, we are of the view that the Assessing Officer was not justified in levying penalty on the amount disallowed since the said claim is supported by Accounting Standard-7 issued by the Institute of Chartered Accountants of India. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the penalty. - Decided in favour of assessee
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2016 (5) TMI 55
Reopening of assessment - addition u/s 68 and 69C - Held that:- Assessing Officer at the original assessment, applied his mind to the evidences and material on record including letter of the ADIT (Investigation), New Delhi and the investigation revealed that the assessee-company received genuine share capital money from these five companies. There was, thus, no fresh or tangible material within the knowledge of the Assessing Officer at the time of reopening of assessment. It is, therefore, a case of mere change of opinion for reopening of the assessment on the issue of share application money which was already examined and investigated into by the Assessing Officer at the original assessment stage. No specific material was provided by the Investigation Wing to show how the assessee has received accommodation entry from Shri Tarun Goyal. In the statement recorded on the date of survey did not indicate if the assessee received any accommodation entry from Shri Tarun Goyal. It may also be noted here that the Assessing Officer might not have received any fresh information from the Investigation Wing against the assessee because in the reasons for reopening of the assessment, the Assessing Officer has referred to the study of the assessment record of M/s. Kisco Castings Pvt. Ltd. from where it was revealed that Investigation Wing has made same reference against the assessee but there is no direct reference of receipt of any accommodation entry by the assessee-company. Considering the above discussion, it is clear that the Assessing Officer merely acted on suspicion against the assessee. It is a mere case of change of opinion and the Assessing Officer has not examined any material against the assessee for reopening of the assessment. The Assessing Officer was having no specific evidence or material against the assessee for reopening of the assessment. No fresh material has been brought on record to justify reopening of the assessment, therefore, the Assessing Officer has not validly assumed jurisdiction under section 148 of the Income-tax Act for reopening of the assessment in the matter. The decisions relied upon by the learned Departmental representative are not applicable to the facts and circumstances of the case. We, accordingly, set aside the reopening of the assessment and quash the impugned orders under section 147/148 of the Income-tax Act. - Decided in favour of assessee
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2016 (5) TMI 54
Application of average of the net profit of assessed income for the purpose of determining the profit of the assessee - Held that:- Since in the subsequent years, the Revenue Department accepted net profit rate in the case of the assessee at 2.53 per cent. and 2.99 per cent., therefore, the learned Commissioner of Income-tax (Appeals) was justified in applying the average of the net profit of assessed income of subsequent two years for the purpose of determining the profit of the assessee. The Assessing Officer was, therefore, not justified in adopting the gross profit rate of 51.08 per cent. for making addition against the assessee.
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2016 (5) TMI 53
Transfer pricing adjustment - MAM - whether comparable uncontrolled price method is appropriate? - Held that:- There is no error in the order of the learned Commissioner of Income-tax (Appeals) in considering the evidences produced at the appellate stage. The assessee was prevented by sufficient cause from producing additional evidences before the Transfer Pricing Officer/Assessing Officer because the accountant who was looking after the matter was not well at that stage and ultimately he expired. This explanation of the assessee have not been challenged by the Revenue through any material on record. The learned Commissioner of Income-tax (Appeals) on perusal of the transfer pricing study carried out by the assessee, came to the finding that prices charged from the uncontrolled enterprises are either equal or lower than the prices charged from the associate enter prises. The findings of fact recorded by the learned Commissioner of Income-tax (Appeals) has not been rebutted by the Revenue through any material on record. It would, therefore, clearly support the contention of the assessee that comparable uncontrolled price method was relevant to be applied in the case of the assessee. The learned Commissioner of Income- tax (Appeals) was, therefore, justified in holding that the comparable used by the Transfer Pricing Officer under transactional net margin method was functionally and substantially different from the study of the assessee, therefore, could not lead to correct determination of arm's length price. Therefore, addition made by the Assessing Officer on transactional net margin method would not be justified. In this background, the arm's length price determined according to the comparable uncontrolled price method as carried out by the assessee is correct arm's length pricing recorded in the assessee's books of account. The learned Commissioner of Income-tax (Appeals), therefore, on proper appreciation of evidences and material on record, correctly deleted the addition. - Decided in favour of the assessee Agricultural income - sale of poplar trees - assessee had not submitted the proof of ownership/possession of the land and cultivation - Held that:- mmissioner of Income-tax (Appeals), on perusal of the assessment record found that the assessee has filed copy of the lease deed and sapling of poplar trees was done in the year in which land was taken on lease. The record also shows that the assessee has filed copy of certificate issued by Wakf Board transferring the lease in favour of the assessee which was not considered by the Assessing Officer. It was also found that in earlier years, the assessee has shown agriculture income which is accepted. The land was same which was taken from Wakf Board. The learned Commissioner of Income-tax (Appeals), from the details on record found that no agriculture income in respect of the land taken on lease from Wakf Board has been reflected in the income which makes it clear that the assessee had been in possession of the land of the Wakf Board since 1996 and land had not been put to use for regular agriculture operations. The trees had been planted in the year 1996 and were later on sold in the assessment year under appeal. The amounts of sale of poplar trees were received through cheque. The learned Commissioner of Income-tax (Appeals) was, therefore, justified in deciding the issue in favour of the assessee
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2016 (5) TMI 52
Penalty under section 271(1)(c) - taxes were paid u/s 115JB on book profit - Details of capital loss to be disallowed u/s 94(7) - for the assessment year 2005-06 the form meant for filing the return of income did not contain column required for giving the particulars in respect of dividend stripping under section 94(7) or 94(8). - Held that:- In the present case the assessee has given the full and complete details of the short-term loss accrued to it and also dividend earned by him. The assessee has paid the tax on the book profit and was not assessed under the normal provisions of the Income-tax Act. If the assessee was to be assessed under normal provisions of the Act, there is no tax liability. The Assessing Officer while computing the tax liability has given the calculation under normal provisions of law as well as under minimum alternate tax. From the perusal of order it is crystal clear that the failure on the part of the assessee to give effect to section 94(7) has no bearing on the payment of tax to be paid, therefore no penalty can be imposed on the basis of tax sought to be evaded, as there is no evasion of any tax liability - Decided in favour of assessee
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2016 (5) TMI 51
Reopening of assessment - Disallowance u/s. 80-IB(10) - housing project was approved and commenced prior to 1998, therefore, not eligible for claim of deduction - Held that:- After considering the remand report sent by the AO, the CIT(A) has recorded a finding to the effect that on plot CTS No.261, 261/1 & 2, 263 various buildings were to be constructed and that assessee had constructed/developed building No.4 only. Even during the original assessment proceedings and appellate proceedings and also during the second appeal, it has been gathered that the assessee very well informed that he had constructed housing project namely building No.4 only. The copies 01 Municipality letter dtd.12.11.2000 addressed to its Consultants Shri Manoj Paresh, Municipality letter dtd.12.11.2001 addressed to its Consultants, Municipality intimation of disapproval dtd.7.11.2000, commencement certificate dtd.25.01.2001 with reference to assessee's application no. 3501 dtd.29.09.2000 shows that the subject matter was Building No.4 of CTS No. 261, 261/1 & 2, 263. The A.O. received commencement certificate dtd.19.06.1998, occupancy certificate on 29.10.2001 and other documents from the CIB Branch. However, all these documents were pertaining to Building No.3 on the aforesaid plot. The said building no.3 was never constructed by the assessee. Thus, we found that even reopening of assessment was not based on correct reasoning insofar as building No.4 constructed by the assessee was after receipt of approval letter from the municipality dated 25-1-2001 with reference to application No.3501, dated 29-9-2000. Thus, there was no reason to believe that there was any escapement of income with respect to building No.4. As per materials placed on record, we found that assessee was a developer of housing project as a whole and not merely a contractor, insofar as entire development was to be undertaken as per the approval given by municipal authority for development of entire housing project with basic service like sewerage, electricity etc. Thus, assessee is not adversely affected by the explanation inserted by Finance (No.2) Act, 2009, w.e.f.1.4.2001 below section 80IB(10). All the preconditions for availing benefit of section 80IB(10) had been complied with. The detailed finding recorded by the CIT(A) at para 3 of his appellate order are as per material on record. Accordingly, we do not find any reason to interfere in the findings recorded by the CIT(A) for allowing claim of deduction in respect of housing project at building No.4 undertaken by the assessee. Before parting with the matter, it is pertinent to mention that assessee’s claim for deduction u/s.80IB(10) in the first round has also been allowed by the CIT(A), ITAT and Hon’ble Bombay High Court - Decided in favour of assessee
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2016 (5) TMI 50
Disallowance u/s 10A - Held that:- The Authorized Representative furnished the comments on remand report vide letter dated 28.05.2010 and he had also furnished calculation of exempted amount and other amount as well. An amount of ₹ 1,75,93,582/- was not received within the period of 6 months as stipulated in the Section. Further ₹ 91,75,435/- on account of sales within zone, sales to EOU and sales 100% export were not received in time. Thus, the total amount of ₹ 2,67,68,997/- was not received by the company within the statutory time limit as prescribed under the Act. Therefore, the deduction claimed by the assessee u/s. 10A of the Act was directed to be revised proportionately. Before the CIT(A), the Authorized Representative of the assessee furnished the working vide letter dated 03.06.2010. As per the said working, on an amount of ₹ 30,05,70,495/-, if the claim amount was ₹ 5,82,65,233/-, then on ₹ 2,67,68,997/- the proportionate disallowance came to ₹ 51,89,138/-. Therefore, the said amount of ₹ 51,89,138/- was directed to be deducted from the total amount of claim of ₹ 5,82,65,233/-. Thus, allowable claim u/s. 10A of the Act was of ₹ 5,30,76,095/-. Therefore, the claim u/s.10A of the assessee-company was rightly allowed to the extent of ₹ 5,30,76,095/- and rest was rightly disallowed by the CIT(A). No interference is called for and we uphold the order of the CIT(A) in this regard.- Decided against revenue. Disallowance of interest expenses - Held that:- We find that that assessee has paid the interest on the borrowed fund and has also advanced loan but did not charge any interest on that because it was the business/commercial necessity to take and give the loan simultaneously for business purpose. As the assessee was having fund more than the amount of advance given without interest, it did not cause any adverse effect on the business prudence. Therefore, the disallowance made by the Assessing Officer was rightly deleted by the CIT(A) and these reasoned findings of the CIT(A) do not require any interference from our side.- Decided against revenue. Disallowance of Miscellaneous Expenses - Held that:- Assessing Officer, without put forth any cogent reasons, has made the ad-hoc disallowance in question. The Assessing Officer has also not recorded any specific reasons or evidences which can be categorized as that of personal nature; therefore, the CIT(A) has rightly directed the Assessing Officer to delete the disallowance in question.- Decided against revenue. Disallowance of depreciation on building - Held that:- CIT(A) allowed the claim on the ground that the assessee was fully eligible for the claim of depreciation as the evidences like deed of conveyance and light bill produced by the assessee signifies that the assessee had infact used the building in the year under consideration. The CIT(A) also observed that the when the building is ready and put to use by the assessee, there is no ground of disallowance. These reasoning findings of the CIT(A) do not require any interference from our side; we uphold the same.- Decided against revenue. Disallowance u/s 41(1) - Held that:- There are two conditions stipulated u/s. 41(1) of the Act which needs to be satisfied before disallowance u/s. 41(1) and therefore in the present case the provisions of the said section are not attracted. Moreover, before the CIT(A), the Authorized Representative for the assessee has produced confirmation of some of the parties in consideration of its claim. Agreeing to the contention of the assessee in this regard, the CIT(A) was justified in deleting the addition in question. For attracting provisions of sec. 41(1) of the Act, the liability of the assessee must have seized and there should not be any possibility of revival in future. The Assessing Officer though has held that sec. 41(1) of the Act was attracted but has failed to state any reasons for the same. Moreover when the confirmations of concerned parties were produced before the CIT(A), he rightly observed that liability is still in existence. Therefore, in view of the facts and circumstances of the case, the CIT(A) was justified in deleting the addition - Decided against revenue. Disallowance of staff welfare expenses, vehicle expenses and travelling expenses - Held that:- CIT(A), having considered the same, held that the assessee had already paid fringe benefit tax on these expenses and they could not be brought to tax once again. Thus, in our opinion, the CIT(A) has rightly deleted the disallowance made by the Assessing Officer on these counts as the assessee had already paid fringe benefit tax on these expenses. These reasoned and factual findings of the CIT(A) need no interference from our side - Decided against revenue.
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2016 (5) TMI 49
Disallowance u/s 14A - Held that:- We find that the assessee had not claimed any expenditure in its books of accounts for earning tax free income, that it had not earned exempt income during the year under consideration, that the investment was made in purchasing shares of one of the group concerns and of a cooperative bank, that such investments were made long back. In our opinion if the assessee had not claimed any expenditure, no disallowance can be made u/s. 14 A read with rule 8D of the rules. - Decided in favour of assessee Applicability of the provisions of section 41(1) / 28 - waiver of loan - Held that:- The nature of the loan is the touchstone on which the waiver is to be examined. In other words, if a loan was taken for acquiring a capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if the loan was for trading purpose and was treated as such from the very beginning in the books of account the waiver thereof may result in income more so when it was transferred to the profit and loss account. We find that in the case under consideration, this very basic aspect has not been looked into by the AO or the FAA. Before the AO the assessee had stated that there was no reduction of liability and that it was a capital restructuring exercise. The assessee had not produced the documents with regard to sanction or waiver of the loan and the AO had not called for such details. The FAA also did not deliberate upon the issue as to whether the loan was in the field of capital asset or was trading liability. Nomenclature given by the assessee/AO do not decide the real nature of any transaction until and unless the relevant documents are examined and looked into. It is true that cases relied upon by the AO/FAA laid down certain principles. But, how those principles were applicable to the facts of the case under consideration has not been discussed either by the AO/FAA. We are of the opinion, that provisions of section 28 are not applicable to the facts of the case. But, same cannot be held for the provisions of section 41(1)of the Act, as proper investigation about the real nature of the waived amounts have not been carried out. Considering the peculiar facts and circumstances of the case, we are of the opinion that the matter needs further verification . Therefore, in the interest of justice, matter is being restored back to the file of the AO to decide the issue afresh after considering the loan sanctioning and the loan waiver documents.
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2016 (5) TMI 48
Revision u/s 263 - estimation of net profit - Held that:- Unless the A.O’s order is erroneous, no action can be taken by the CIT u/s 263 of the Act. This is because, the twin conditions i.e. the order is erroneous and the same is also prejudicial to the interest of the revenue are co-exists. In the present case on hand, on examination of the records, we find that the A.O. has conducted enquiry on the issue of estimation of net profit. The assessing officer after verification of books of accounts and other relevant details has adopted 4% net profit on net purchases, which cannot be termed as erroneous. The contention of the CIT was that the A.O. has not applied the jurisdictional High Court judgments and also ITAT judgement while estimating the net profit. Therefore, the order passed by the A.O. is without application of mind. We do not see any merits in the arguments of the CIT, for the reasons that there is a distinction between lack of enquiry and inadequate enquiry, if there is an inadequate enquiry that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion. Therefore, we are of the opinion that in the present case on hand, there is no reason for the commissioner to revise the assessment order, as the A.O. has verified the issue and estimated the net profit.. In this case, there cannot be any dispute that A.O. has not discussed the issue at the time of completion of the assessment. The net profit adopted by the A.O. is correct or not is a debatable question. The Ld. CIT has not pointed out any mistakes in such estimation to say that it is erroneous and prejudicial to the interest of the revenue. Therefore, we are of the opinion that the assessment order passed by the A.O., in respect of estimation of net profit is not erroneous, in so far as prejudicial to the interest of the revenue. On examination of the assessment order and CIT order, we find that the issue of unsecured loans and capital introduction by the assessee were not examined by the A.O. at the time of completion of assessment. Therefore, we are of the opinion that the assessment order passed by the A.O., in respect of unsecured loans and capital introduction is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, we uphold the CIT order and set aside the assessment order passed by the A.O. u/s 143(3) of the Act, in respect of unsecured loans and capital account. Accordingly, the order passed by the CIT u/s 263 of the Act is modified, so as to reject the CIT order in respect of estimation of net profit and uphold the action of the CIT, in respect of unsecured loans and capital account is concerned. - Decided partly in favour of assessee
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2016 (5) TMI 47
Extension of stay of outstanding demand - Held that:- In the facts of the present case, stay for 365 days has already been granted by the ITAT and a further stay of six months beyond the said period is requested by the assessee. In order to decide the issue arising in the present stay petition, the specific provision invoked by the assessee and required to be considered by us in the present proceedings is section 254(2A). In detail in the earlier part of this order, we extend stay for a period of six months or upto disposal of appeal whichever is earlier. While so directing the assessee is put to notice that no adjournment except under exceptional and bonafide circumstances shall be sought lest the assessee runs the risk of stay being vacated. The said order was pronounced on the date of hearing itself.
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2016 (5) TMI 46
Addition on account of undisclosed net profit - difference in sales turnover - Assessment u/s 153C - Held that:- There was a bonafide mistake committed by the assessee in filing the original return of income of AY 2008-09 filed on 27.07.2009 which was rectified by it by filing revised return on 30.09.2009 even before receiving the notice u/s 153C dated 18.01.2010. Return of Income for AY 2009-10 declaring a total income of ₹ 4,75,47,402/- was filed on 30.09.2010 on the same day when the revised return of income was filed for AY 2008-09. The Assessing Officer simply relied upon the statement of third party recorded on 17.07.2009 during the search in the case of Royal group and on the basis of unaudited statements found with the third party. He has not challenged the audited accounts filed by the assessee along with the Return of Income. He has also not excluded the same sales proceeds in AY 2009-10, which amounts to double taxation of the same amount of income relatable to same sales proceeds. In view of above, the Assessing Officer was not justified in making addition of to the total income of the assessee for the year under consideration on account of difference in sales turnover in unaudited accounts and audited accounts, particularly when the assessee had already offered corresponding income in AY 2009-10 and assessed u/s 143(3) r.w.s. 153C by the same Assessing Officer. Thus, the addition was rightly deleted by the CIT(A). These factual and reasoned findings of the CIT(A) need no interference from our side - Decided in favor of assessee.
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Customs
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2016 (5) TMI 83
Constitutionality of amended Section 129E of the Customs Act, 1962 - Imposition of exemplary penalty under Section 112 of the Customs Act - Improper importation of gold bars of foreign origin - Appellant contended that penalty imposed on the basis of value of smuggled gold could not have been made as gold is not a prohibited item nor is the import thereof prohibited by virtue of any notification or order under the Act of 1962 or any other law for the time being in force. Held that:- there is a distinction between Section 111 and Section 112 of the Act. The former provides for confiscation of improperly imported goods and the latter prescribes the penalty for improper importation of goods. It is possible for a provision providing for confiscation of goods to be liberally interpreted, but when a provision provides for punishment it has to be strictly construed. The expression “goods in respect of which any prohibition is in force" in the context of Section 112 of the Act would imply goods which are prohibited from being imported and not goods which have been smuggled into the country in contravention of the procedure established by law for the import thereof. Thus, while the corresponding provision in Section 111 of the Act permits the confiscation of the goods on a broader construction of the relevant expression with reference to the definition of “prohibited goods”; the similar provision in Section 112 of the Act has to be strictly construed and confined to goods which are expressly prohibited from being imported into the country. Therefore, the order impugned in so far it imnposes the penalty on either petitioner based on the value of the goods, is set aside and the matter remanded for such limited purpose for the imposition of such other quantum of penalty that may be permissible. - Decided in favour of appellant to limited extent
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2016 (5) TMI 82
Suspension of CHA licence - Appellant acted in a irresponsible manner and failed to fulfill the obligation under Regulation 11(a), 11(d) and 11(n) of CBLR, 2013 - Held that:- though this suspension was confirmed on 24.4.2015, till now no proceedings by way of issue of show cause notice or inquiry has been initiated under CBLR, 2013 against the appellant, we find the impugned order cannot be sustained. It is also noted that the appellant got renewal of license during the continuation of suspension, so, the continuation of suspension is not legally sustainable and accordingly, the impugned order is set aside. - decided in favour of appellant
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2016 (5) TMI 81
Period of limitation - Regulation 20 of the Customs Brokers Licensing Regulation 2013 - Revokation of CHA licence and forfeiture of security - Illicit import of cigarette - Held that:- the offence report was dated 08.10.2012. The show cause notice was issued on 07.01.2014 and the enquiry report was dated 10.11.2014. The Regulation 20 stipulates that show cause notice has to be issued within 90 days of offence report. Even it is to be considered that the new Regulations came into effect only from 21.06.2013. The enquiry report also has been filed more than 10 months after the show cause notice, therefore, it is found that the statutory time limit prescribed by the relevant regulations have not been followed. By considering the decision of Hon’ble High Court of Madras in the case of A.M. Ahamad & Co. Vs. CC (Imports) Chennai 2014 [2014 (9) TMI 237 - MADRAS HIGH COURT] and in the case of Sanco Trans Ltd. Vs. CC Chennai [2015 (7) TMI 455 - MADRAS HIGH COURT], the time limit prescribed under Regulations are to be strictly adhered to. Hence, the impugned order cannot be sustained. - Decided in favour of appellant
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2016 (5) TMI 80
Legal interpretation of the provisions of Section 28 (1A) of the Customs Act - Deposit of entire duty liability along with interest and 25% of the penalties within a period of 30 days from the date of service of SCN, therefore no further adjudication requiring confiscation of seized jewelleries or imposition of penalty - Appellant receiving gold jewellery Shri Ajit Singh/Komal Jain, who were importing the same from Dubai free of duty, in violation of the SEZ Scheme. Held that:- the provision of Section 28(1A) cannot be interpreted to the effect that all the proceedings against the importer under all the Acts would be deemed to be concluded. The said provisions are applicable only in respect of proceedings under Customs Act, 1962 and provides for conclusion of the proceedings under Customs Act only. The original authority's presumption that closure of proceedings under Customs Act may conclude all proceedings under other Acts also is fallacious. He is acting under the powers vested under Customs Act, 1962. While may be vested with some powers under the provisions of allied Acts, his role comes from the Customs Act. Nothing prevents respective competent authority under other Act if there is any action warranted to be taken against any person for violation of provisions of specific law. Having deposited the full amount of duty, interest and 25% of the penalty, no further proceedings were required to be continued in terms of the provisions of Section 28(1A) and the first proviso to Section 28(1A). Therefore the impugned order has no leg to stand and is accordingly set aside. - Decided in favour of appellant with consequential relief
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2016 (5) TMI 79
Import of baggage - Non declaration of 16 Sony Digital HD Video Camera Recorders made in Japan along with accessories and two Black Magic Cinema Cameras - Confiscation of goods - CCESC reduced the fine and penalty on duty amount already paid - Held that:- the present case is not covered by any of the provisos to Section 127B (1) of the Act. In other words, it does not fall under any of the excluded categories of cases. The Court sees no reason why in the circumstances of the present case the Respondent's admission that he had brought dutiable goods into the country while leaving blank the relevant column in the disembarkation card ought not to be considered as an attempt at evading payment of customs duty. By following the decision of this court in the case of Commissioner of Customs v. Ashok Kumar Jain [2013 (8) TMI 317 - DELHI HIGH COURT], the provisions that confer jurisdiction on the CCESC should not be construed narrowly to exclude such type of cases from the purview of Section 127B. If that was the legislative intent, then there ought to have been a specific provision to that effect. The Court sees no reason to interfere with the impugned final order. - Petition disposed of
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Service Tax
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2016 (5) TMI 89
Admissibility of Cenvat credit - Service tax paid in respect of various service provided in relation to the maintenance of health of factory workers - Held that:- employees were working in a situation calling for medical necessity and safety, controlling of pollution and health hazards. Law need not necessarily codify each and every item as input used in or in relation to manufacture. The basic principle being use of input "in or in relation to manufacture”, such test is to be applied to consider allowance of CENVAT credit of the service tax paid on the input utilized and having relevance to the output manufactured. The present case is within such parameter of law for which the appellant deserves consideration. Therefore the service tax paid in respect of health care service provided to the factory workers shall be admissible as CENVAT credit. CENVAT credit claimed on guest house has no relevance to output service so the appellant shall not get any CENVAT credit of service tax if any on such count. Imposition of penalty - Held that:- as the appellant have succeeded on merits, there shall be no penlaty on health service. So far as guest house maintenance service is concerned, there appears no deliberate intention of appellant to cause any evasion. Therefore, penalty on such issue is also waived. - Decided partly in favour of appellant.
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2016 (5) TMI 88
Demand of Service tax alongwith equal amount of penalty - Provider of telecommunication services - Revenue submitted that applicant have short paid service tax in as much as they have not discharged service tax on the gross billed amount for their services, instead paid service tax on the amounts received only. Held that:- neither the show cause notice nor the impugned order had elaborated the reason for confirming the differential service tax against the appellant. Also no evidence was brought forward by the lower authority to substantiate that the appellant have realized consideration towards value of taxable services over and above what is declared by them in the statutory returns. In the absence of any such allegation or supporting evidence, the confirmation of demand for service tax by the impugned order is legally not sustainable. Period of limitation - Held that:- ST3 returns did indicate different amounts as billed and realized and on this basis it is found that the parties / appellants defense regarding the demand being time barred has as also not been considered even with respect to all details being available in the periodical returns filed by the appellant. Portion of the demands is contested as even beyond 5 years. There is no discussion or finding on this aspect. It is also found that the original authority failed in examining the factual claims made by the appellant regarding the reason for the difference between billed amount and realized amount for the purpose of discharging service tax. We take note that out of 11 half yearly period covered in the demand in respect of 3 half year periods the actual realized amount on which service tax is paid is much higher than the billed amount. No examination or findings has been recorded by the original authority on these details. Therefore, the impugned order cannot be sustained and set aside. - Matter remanded back.
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2016 (5) TMI 87
Demand of Service tax - Transport of gas through pipeline - Section 65(105)(zzz) of the Finance Act 1994 - Supply of chlorine through pipeline - Held that:- the appellants have rightly calculated the cost of transportation through pipeline in their assessable value of chlorine for central excise purpose as the place of delivery is pre determined as delivery point of pipeline at the recipient’s end. The appellants are selling chlorine and upon delivery of chlorine through pipeline at the buyers end, the transaction is concluded. The pipeline is laid and owned by the appellants. The said pipeline is used for transport and sale of chlorine to M/s. Gwalior Chemical Industries Limited. So, it is found that there is no services provider and service recipient with reference to transport of goods through pipeline for charging service tax. The transport of chlorine through pipeline is done by the appellant in their own account and the delivery on sale is made to the buyer. The transportation charges are included as a consideration for sale and to discharge central excise duty. Therefore, no justifiable legal basis found to sustain any service tax liability on the appellants. - Decided in favour of appellant
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2016 (5) TMI 86
Refund claim - Service tax paid on technical, inspection and certification service in respect of services utilized for export of the goods - Notification No. 17/2009-ST dated 09/7/2009 - Held that:- the invoice as also the shipping bills raised by the appellant were available at the time of raising of the bill by M/s Threads Incorporation Buying Services and could have been very well mentioned in the said invoice. However, the same was not referred in the bill for the services, for the reasons best known to the appellant. Also the particulars mentioned in the said bill so raised by the service provider only refers to the fees for inspection services. There are no other particulars provided in the said bill relating to the cargo, the place of inspection as also the date of inspection. In a nutshell there is nothing in the original invoice so raised by the service provider to link the service of inspection with the export cargo. In such a scenario, we fully agree with the lower Authorities that in the absence of any co-relation and linkage with the services and with the export of the goods, the refund cannot be granted in terms of Notification No. 17/2009-ST. Also the appellant interpolated the said bill raised by M/s Threads Incorporation Buying Services by introducing their invoice has alongwith the shipping bills, which in any case were available even at the time of issuance of the invoice but were not mentioned therein. This act of the appellant clearly is a malafide action to mislead the Authorities and is a fraudulent one. In the absence of any particulars having mentioned in the original invoices raised by M/s Threads Incorporation Buying Services, we really failed to understand as to how the said certificate stand issued by the service provider, probably on the basis of their memory. Even in the said certificate, apart from certifying that the invoices raised by them was for the export of the goods, there is no details as to how and at which place and in respect of which goods the said certification /inspection was done. As rightly observed by Commissioner (Appeals) that such a certificate can be used for filling up the gaps or as a corroborative material and cannot be made the sole basis for grant of relief to the assessee, especially when there is no such references either in relation to the kind of the goods, the date of inspection and the place of inspection or to any other documentary evidences to show that the said inspection was in relation to the exported goods. Therefore, no justifiable reasons found to interfere with the impugned orders passed by the Authorities below. - Decided against the appellant
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Central Excise
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2016 (5) TMI 85
Waiver of pre-deposit - Constitutional Validity of Section 35F of the CE Act - Mandatory provision to deposit 7.5% of the demand of duty and penalty for entertainment of appeal - No pre-deposit had been made till that date - Held that:- this Court is not inclined to entertain a challenge to the constitutional validity of Section 35F of the CE Act. As the petitioner having failed to comply with the statutory mandatory requirement, the CESTAT was right in dismissing the Petitioner's appeal by its order. This Court is unable to accede the request of the petitioner that it is great financial difficulty and only needs some more time to pay the pre-deposit amount. Also it is not possible for the Court, in exercise of its jurisdiction under Article 226 of the Constitution, to modify the mandatory conditions set out in Section 35F of the CE Act on any ground whatsoever. - Decided against the petitioner
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2016 (5) TMI 84
Clandestine removal - excess quantity of molasses - demand of duty is based on an assumption that declaration of excess quantity of molasses by the appellant is indicative that the appellant must have purchased and crushed the additional quantity of sugar cane and that corresponding quantity of sugar was manufactured and cleared clandestinely. - Held that:- mere fact that the volume of molasses has increased after the closure of the factory, i.e., after the manufacturing of sugar comes to an end cannot lead to a presumption of clandestine manufacture of sugar and consequently, removal of sugar without payment of duty nor can it lead to a presumption that a fraud has been played by the appellant. There should also be clinching evidence in the nature of purchase of raw material, i.e., sugarcane, use of electricity, removal of the final product, i.e., sugar and its sale but such evidence is missing. Also no investigation in this regard has been made by the Department. It is a known fact that if there was excess production in which case there would be excess consumption of electricity, which fact was not examined by the Department. Consequently, on the basis of presumption, a serious charge of clandestine manufacture and removal of sugar has been imposed, which is wholly erroneous. The charge of clandestine removal of sugar is required to be discharged by the Department by production of sufficient and tangible evidence, which in the instant case was lacking. In the absence of any evidence of extra consumption of electricity purchase of extra raw material, absence of evidence of extra goods being manufactured, we are of the opinion, that no case is made out for clandestine manufacture of sugar and its removal. By applying the judgment of Division Bench of this court in the case of Continental Cement Company vs. Union of India [2014 (9) TMI 243 - ALLAHABAD HIGH COURT], the demand of duty on the ground of clandestine removal cannot be recovered on the basis of presumptions and assumptions. Clinching evidence is required with regard to purchase of raw materials, use of extra electricity, sale of final products and realisation of sale proceeds before imposing any demand. As in the absence of any such evidence demand cannot be imposed. Therefore, the payment of duty, interest and penalty consequently cannot be sustained and are set aside. Once a finding has been given by the Tribunal that there has been no suppression or misstatement by the appellant under Section 11-A of the Act, consequently, imposition of penalty under Section 11-AC of the Act does not arise. The provision of Section 28(1) and Section 114-A of the Customs Act being pari materia with the provision of Section 11-A and Section 11-AC of the Act by applying the decision of Hon'ble Supreme Court in the case of ECE Industries Limited vs. Commissioner of Central Excise, New Delhi [2003 (3) TMI 136 - SUPREME COURT OF INDIA] and Commissioner of Customs, Mumbai vs. M.M.K.Jewellers [2008 (3) TMI 5 - SUPREME COURT]. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (5) TMI 78
Whether the rejection of the applications of the Petitioners by the Additional Commissioners acting as “Designated Authority” was without jurisdiction inasmuch as Clause 8 of the Amnesty Scheme envisages only the Commissioner VAT passing such orders - Held that:- the Court is satisfied that the impugned orders rejecting Petitioners” applications could not have been passed by an Additional Commissioner who has been declared as Designated Authority in exercise of the powers under Clause 8 of the Amnesty Scheme, which power only could have been exercised by the Commissioner, VAT and particularly in the absence of any order issued by the Commissioner under Section 68 (1) of the DVAT Act delegating such power to any other VAT officer. The Court also notes that under Clause 8(3) of the Amnesty Scheme, the SCN under Clause 8(1) would have to be issued within one year from the date of filing of the declarations by the applicants. Admittedly, that period of one year in all these cases has elapsed. Therefore, it is not possible for the Court to place the said applications before the Commissioner for a fresh decision. Therefore, the impugned orders issued by the Additional Commissioners rejecting the applications of each of the Petitioners in exercise of the power under Clause 8 of the Amnesty Scheme are hereby quashed. - Petition disposed of
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2016 (5) TMI 77
Seeking quash of impugned SCN - Deductions had been wrongly claimed by the petitioner under Rule (5) of DSTWC Rules - Invokation of revisional powers under Section 46 of the DST Act - Petitioner contended that the assessment proceedings had lapsed on account of the fact that no reassessment order was passed and suo motu power under Section 46 of the DST Act cannot be invoked on the same ground. The reasons supplied on the request by the petitioner for invoking the powers under Section 46 of the DST Act had revealed that the original assessment order was neither stated to be erroneous nor prejudicial to the interests of the Revenue so the reasons are not sustainable in law since they failed to point out how the deductions had been wrongly allowed. Held that:- the only reason for invoking the revisional powers under Section 46 of the DST Act is: “whereas it has come to the notice of the undersigned that in the assessment order for the year 2003-04 deductions have been wrongly allowed hence said order is erroneous and prejudicial to the interest of revenue.” In other words, the language of Section 46 of the DST Act has been reproduced. The reasons fail to specify how the original assessment order is erroneous or prejudicial to the interests of the Revenue and in what manner deductions had been wrongly claimed and allowed to the petitioner. While it is true that in its judgment the Court concluded that no assessment order could be passed on account of limitation, the fact remains that there had to be strong reasons even prima facie for the Deputy Commissioner to invoke revisional powers under Section 46 of the DST Act. It is found that there was no subjective satisfaction of the Deputy Commissioner for initiation of the revisional proceedings by applying objective criteria. The Petitioner had been allowed deductions in violation of Rule 5 of the DSTWC Rules. Thus the decision to invoke the revisional power under Section 46 of the DST Act was not made independently by the Deputy Commissioner. She was acting on the directions of her superior officers. It is well settled legal position that a quasi judicial authority should discharge the statutory discretionary powers independently and not under the dictation of superior officers. It is evident that in exercise of the power under Section 46 of the DST Act, the Deputy Commissioner did not bear in mind the previous history of the case where the Court had quashed the notice dated 5th July 2007 which sought to reopen the assessment for AY 2003-04 on the same ground viz., that the deductions had wrongly been allowed to the Petitioner. Therefore, the invoking of the revisional power by the Deputy Commissioner under Section 46 of the DST Act was unjustified and unwarranted. The impugned SCN dated 2nd February 2010 requires to be quashed on this ground alone. - Decided in favour of petitioner
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2016 (5) TMI 76
Refund of amount paid to get the goods released - truck not stopped at the checkpost - Held that:- the powers under section 68 of the Act can be exercised at the time when the truck passes through the check-post. The same does not apply to a truck which has already crossed the check-post and has entered the State. Insofar as a truck which has already entered the State is concerned, it is the provisions of section 69 of the GVAT Act which are applicable. Under subsection (1A) of section 69 of the GVAT Act, it is the liability of the driver or the person in-charge of the vehicle to pay the penalty as may be determined after giving him a reasonable opportunity of being heard. The action taken by the authorities under the GVAT Act of seizing the goods and detaining the truck for breach of the provisions of section 69(1) of the GVAT Act is without any authority of law inasmuch as under the provisions of section 69, the concerned officer has no power of authority to detain such truck. Consequently, the recovery of the tax and penalty from the respondent dealer for release of the goods which had been seized in the purported exercise of powers under sub-section (4) of section 68 of the GVAT Act was without any authority of law. The Tribunal in the impugned order has held that it is the transporter’s liability under section 69(1) to obtain a transit pass from the check-post authority at the time of entry of the vehicle in the State and not of the owner and hence, whatever may be the consequences of the lapses on the part of the transporter, the owner of the goods cannot be made answerable. Since the court is in agreement with the final conclusion arrived at by the Tribunal, it is not possible to state that the impugned order gives rise to any question of law, much less, a substantial question of law, warranting interference. - Decided against the revenue.
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Wealth tax
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2016 (5) TMI 45
Addition of urban land to the net wealth of the appellant-company - Held that:- It is assessee’s contention that assessee has incurred substantial expenditure on construction of factory building and in subsequent years the business of the assessee is being shown from that building. It is also assessee’s submission that it had furnished the details of the construction expenses of factory building which has not been considered by CIT(A). Before us, Revenue has not placed any material on record to controvert the submissions of ld. A.R. We further find that there is no finding of ld. CIT(A) on the issue of incurring of expenses by assessee on the construction of factory building. In such a situation, we are of the view that the issue needs to be re-examined by ld. CIT(A). We, therefore, restore the issue to the file of ld. CIT(A) to decide the issue afresh after considering the submissions of assessee and in accordance with law. Needless to state that ld. CIT(A) will grant adequate opportunity of hearing to both the parties. Assessee is also directed to furnish promptly all the details called for by the authorites. Thus, the issue is set aside to the file of ld. CWT(A) without deciding the issue on merit. - Decided in favour of assessee for statistical purposes
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